New York Times columnists Protess and Scott report that Barclays Bank is paying some US$450 million to regulators in the US and UK to “resolve accusations” surrounding its manipulation of a key interest rate, the London Inter-Bank Offer Rate (Libor), during the first years of the ongoing global financial crisis. According to the article, the Libor rate is used as a benchmark rate to price some US$350 trillion in financial products worldwide each year, from credit cards to derivatives and student loans.
The Financial Times reports that the investigation now spans 12 regulators—from the US to Europe and Japan—and 20 banks, including the multinational giants JP Morgan, Citigroup, Bank of America, UBS and Deutsche Bank. The general idea is that the big banks—so far only Barclays has admitted wrongdoing—misreported the rates at which they borrowed from other banks, influencing the LIBOR rate so as to profit the banks. Barclays has also admitted to allowing consultations between various bank departments, and between itself and other banks, before reporting its rates to Libor, an illicit practice.
In most accounts, blame for such unsavory practices are spread around from bank managers and employees seeking higher profits and lower losses, to regulators who were asleep at the wheel, to the secretive and opaque process by which the Libor rate is set. Yet, behind the regulators and the greedy bankers, lies the ‘m’ word that no one dares utter in the business presses—monopoly. The global financial system is increasingly run by a few big firms operating in a highly uncompetitive market place and wielding enormous power, often behind a veil of secrecy, (intentional) regulatory blindness, and technical complexity.
As any introductory economic textbook shows, imperfectly competitive marketplaces (e.g. monopoly, monopsony, oligopoly and oligopsony) are defined by the ability of a few firms, or only one firm, to manipulate prices and other exchange terms. As markets concentrate, and free competition is replaced by collusion and superprofits, firms gain the market power to influence market rules and prices in their own interest. Indeed, any college freshman in an traditional economics department could foresee that growing concentration in global credit markets would result in price distortions, to the detriment of consumers and other less powerful actors. And, some might also be able to cite a few examples of the manner in which market power confers political power, another dangerous dimension of monopolistic market structures frequently noted in the Marxist tradition, among others (think, say, of Goldman Sach’s ability to staff the US Treasury and Federal Reserve).
Reintroducing the concept of monopoly into public discourse is critical for seeing patterns of injustice in the global economy, continuities that are otherwise obscured by national, geographic, partisan and sectoral distinctions. And not just in the financial context. The word “monopoly” helps to understand why it is that Greek citizens suffer austerity even as financial institutions get rescue packages, just as it helps us to understand how it is that Starbucks could rake in record profits from its coffee sales even as world prices fell to record lows during 1998-2002. The word “monopoly” helps us to see why our pigs and cattle are raised in confinement with antibiotics and without any trace of humanity, just as it helps us to see why small farmers in India are killing themselves by the tens of thousands. The word “monopoly” untangles the Mexican tortilla crisis, just as it unravels the overthrow of Arbenz in Guatemala and Mossadeq in Iran. The word “monopoly” helps us to understand why it is that Presidents Bush and Obama have such a similar economic agenda, despite their playing for two different political teams. And, just today, the word “monopoly” helped me to understand how it is that it is illegal for me to collect rainwater in my backyard here in Denver.
Justice demands that we call things what they are—indeed, we must name the system to change it. In this context, the “m” word allows clarity of thought and analysis in the face of often overwhelming economic complexity. The “m” word allows us to strip the economy of its competitive veil, allows us to de-robe the trusts and combines of the 21st century. The “m” word prevents us from lapsing into the view that all of these injustices—from antibiotic resistance to farmer suicide to coup d’etat—must be treated separately by different movements and different peoples. The “m” word allows us to see the architecture of the global economy for what it is—a playground for the new robber barons, a collection of corporate fiefdoms, an integrated system of monopolies, with all of the typical injustices that such arrangements usher forth.