The United States is plagued by large corporations with outsized political power. They are “too big to fail.” So if they are about to fail, they get rescued. Many are so big that they can block the laws needed to stop them from destroying the economy or the environment.
We need to replace them with smaller companies, but U.S. antitrust law is inadequate. It exists, but has been weakened over the past decades. Consider the proposed “Volcker Rule,” which would make many banks split into two companies, one for risky investments and one for loans based on savings, as the old Glass-Steagall law required. This would address some problems, but would not make banks small enough. Eliminating “too big to fail” banks means making sure that each is small enough that regulators, prosecutors and elected officials won’t hesitate to let it suffer the consequences of its own decisions.
Using anti-trust law now to split up a company requires a lawsuit, and many large companies can make that costly – as Microsoft did each time it was convicted. Corporations can also use their political influence to avoid being split, as Microsoft did when last convicted.
It is clear that the larger companies get, the harder it is to enforce antitrust laws against them. Yet, a business-friendly government can vitiate the law simply by launching no antitrust cases – as the Bush administration did.
When the government wins such a suit, the court splits up the company to remedy the specific anti-competitive behavior proved. It can’t split the company into 50 parts just to ensure they are all small enough. We can’t fix the problem of too-big-to-fail companies this way.