The Myth of Capitalism: Monopolies and the Death of Competition

by Jonathan Tepper and Denise Hearn

Quick Summary

A deeply researched polemic arguing that American capitalism has been fundamentally corrupted by the unchecked growth of monopolies and oligopolies across virtually every major industry, from airlines and banking to technology and healthcare. Tepper and Hearn demonstrate that declining competition leads to higher prices, lower wages, reduced innovation, and surging inequality, and they propose concrete policy reforms to restore genuine market competition.

Detailed Summary

Jonathan Tepper and Denise Hearn's "The Myth of Capitalism" presents a comprehensive, data-driven argument that the United States economy has drifted far from genuine free-market capitalism into a system dominated by monopolies, duopolies, and oligopolies that extract rents from consumers and workers while stifling innovation and entrepreneurship.

The book opens with a striking observation that both Warren Buffett and Silicon Valley billionaires agree on one thing: monopolies are highly desirable businesses to own. Buffett has openly extolled the virtues of "economic moats" -- barriers that protect companies from competition -- while tech entrepreneurs like Peter Thiel have argued in "Zero to One" that competition is for losers. The authors trace the collapse in the number of U.S. public companies since 1996, the dramatic decline in IPOs, and the disappearance of words like "competition" and "competitors" from corporate annual reports as evidence of a systemic trend.

The empirical core of the book documents industry concentration across the American economy. In airlines, four carriers control 80% of domestic capacity following decades of mergers. In banking, the largest five banks hold nearly half of all U.S. banking assets. In beer, two companies (Anheuser-Busch InBev and MillerCoors) dominate. In healthcare, pharmacy benefit managers and hospital systems have consolidated to the point where consumers face pseudo-markets with no genuine choice. In technology, Google controls over 90% of internet search, Facebook dominates social networking, and Amazon commands an ever-growing share of e-commerce and cloud computing. The authors show how network effects, intellectual property protections, and regulatory capture create self-reinforcing cycles of concentration.

The consequences of this concentration are traced through multiple channels. Workers face monopsony labor markets where a single dominant employer in a region can suppress wages. The spread of non-compete agreements -- affecting nearly 20% of American workers, including fast-food employees -- further restricts labor mobility. The authors document the correlation between rising industry concentration and falling labor share of national income, declining business dynamism (fewer startups per year), and lower productivity growth. Investment has significantly lagged profitability, suggesting that dominant firms are extracting rents rather than investing in productive capacity.

The historical analysis draws parallels between today's concentration and earlier eras of trust and monopoly power. The authors trace the arc from the robber barons of the Gilded Age, through the Progressive Era antitrust reforms of Theodore Roosevelt and Woodrow Wilson, the aggressive antitrust enforcement of the mid-20th century, and the dramatic reversal under the Reagan administration when the Chicago School's consumer welfare standard effectively neutered antitrust enforcement. Robert Bork's "The Antitrust Paradox" (1978) is identified as the intellectual foundation for this retreat, which redefined monopoly harm narrowly as consumer price increases while ignoring effects on wages, innovation, and political power.

The chapter on "Morganizing America" examines the role of passive index investing through the "Big Three" asset managers (BlackRock, Vanguard, and State Street), which collectively own significant stakes in competing companies across industries, potentially reducing incentives for vigorous competition. The authors cite research by economists Azar, Schmalz, and Tecu showing that common ownership is associated with higher prices in the airline industry.

The concluding chapters link rising monopoly power to political dysfunction and social instability, arguing that inequality driven by market concentration has fueled populist backlash across the political spectrum. The authors propose a comprehensive reform agenda including reinvigorated antitrust enforcement, limits on mergers, reduction of patent abuse, elimination of regulatory barriers to entry, restrictions on non-compete agreements, strengthened worker rights, reforms to passive investing, and increased transparency in political lobbying.