In the middle of the 20th century, antitrust and fair trade regulations kept a tight rein on how much power any one company could gain over its markets, its competitors, and its surrounding supply chains. Monopolies were not just a threat to customers, but to the very fabric of democracy, or so the thinking went. The triumph of free market ideology in the 1980s then scaled those rules way back, essentially blessing all mergers, vertical integrations, and massive companies so long as they didn't blatantly gouge customers — a posture that has enjoyed nearly unanimous bipartisan assent in mainstream American politics ever since.

But that question — how big should U.S. corporations and businesses be? or how small? — submerged in U.S. politics for decades, is beginning to reassert itself on the national stage. In the last few years, a group of economists and activists have started trying to revive the old New Deal-era regulatory regime, and that enthusiasm seems to be bleeding into growing congressional hostility to big tech, for example.

The new arguments also cut across the typical left-right polarization. Some more conservative thinkers concerned with hard-nosed economics still embrace bigness as a driver of innovation and productivity: Economists Robert Atkinson and Michael Lind published a book in 2018 literally titled Big Is Beautiful. Yet some radical leftists are championing large companies as well, both because they ostensibly deliver higher wages and more benefits to workers, and because the worker takeover of the means of production may be strategically easier when facing down a small number of large companies than a large number of smaller ones. On the other end, the belief that smaller scales and more local institutions are better for both the economy and the social fabric of democracy unites different strands of progressives and conservatives, though the push is largely represented right now by reformers like Lina Khan, Barry Lynn, Matt Stoller, and others.

Is there a way to synthesize and reconcile these competing philosophies? Perhaps. Poke through the specifics of the arguments, and a possible paradox arises — that America has become too tolerant of excessive bigness and excessive smallness at the same time.

Perhaps we need to both raise the floor and lower the ceiling.

The case against bigness

There's little doubt at this point that America's economic activity is increasingly dominated by a small population of gigantic firms — or firms whose power extends through vast networks of franchises or contract workers, well beyond the ostensible boundaries of the ruling companies themselves. That development has its defenders, and some of their arguments have a fair amount of bite. (We'll get to those in a minute.) But the most fundamental and important claims made by the champions of bigness are arguably also the most wrong: Namely, that greater size and market clout results in more innovation, more productivity, and better pay for employees.

Back in 1980, workers at big companies did indeed earn 50 percent more than their equivalent peers at smaller companies. But that "wage premium" has collapsed to just 20 percent today. Even more dramatically, for workers in the bottom half of the income distribution, there is no pay advantage at all for working at a bigger company — the wage premium is driven entirely by more privileged workers. There are probably several causes for this, but a big one is likely the modern "fissuring" of the workplace: the tendency of big companies to slough off all but their core workers, while relying on independent contractors or outsourcing to other firms to handle the remaining labor, such as logistics, janitorial staff, or workers lower down the supply chain. It's proven a tried-and-true method to suppress the pay of the workers operating under contract.

As for productivity itself, this can be a tricky thing to measure: If a company has disproportionate market power, it can drive down the costs of the inputs it buys from other firms, leaving it with more profits — and, hence, with more productivity, by some bog standard metrics. Atkinson, for example, argues that disproportionate market power is good, because it allows firms to either drive down the prices they pay or drive up the prices they charge, and pump more of the resulting earnings into research and development. But firms can use market power to increase their profits in lots of ways that don't involve innovation or adding value to society — by suppressing worker compensation or by skimping on quality, for example.

We also shouldn't make raw economic productivity the end-all-be-all. To take just one example: green energy is generally more "labor intensive" than fossil fuels — which is to say, producing one unit of energy from wind or solar generally creates more jobs than producing an equal unit of energy from oil or natural gas or coal. You could see that as a good thing, but it also means green energy is by definition less productive — more inputs are required to get the same output. Yet a world run on fossil fuels is rather obviously less desirable than a world run on renewables.

The most basic problem with the pro-bigness argument regarding productivity and innovation, however, is this: Even if we take standard economic measures of productivity at face value, the speed at which America invents new ways to create wealth with less cost and effort was higher back in the post-WWII heyday of aggressive antitrust enforcement. Since the early 1980s, when antitrust regulation took a much friendlier approach to bigness, real gross domestic product growth, productivity growth, and even growth in real incomes for most Americans have all slowed down dramatically (or even ground to a halt, in the latter case). Correlation is not causation, but there is growing research evidence that our more sclerotic and vastly more unequal economy can be blamed at least in part on this rising concentration of power. At a bare minimum, the rollback of the old antitrust regime completely failed to deliver the boom of innovation and prosperity that was promised.

Sanjukta Paul, an assistant law professor at Wayne State University who specializes in these topics, writes often about a basic double standard built into modern antitrust law: essentially, "what is illegal outside a corporation is legal within it." If a bunch of third-party sellers on Amazon all tried to coordinate prices together, that would be illegal. Yet it's fine for Amazon to use its market power as a platform to push all of them to sell at uniform prices. The same double standard applies to, say, Uber drivers or truck drivers who work as independent contractors, versus Uber itself and the other companies they contract with. Indeed, the very existence of labor unions is "anti-competitive," in the sense that workers are allowed to coordinate and set their prices as a cohesive unit. Early 20th-century law had to be adjusted to permit this form of coordination — even though no one bats an eye at firms setting uniform pay schedules for their workers within their walls.

"Markets and economic activity can be coordinated in a variety of ways — in fact, economic coordination of one kind or another is inevitable," Paul argues. The scope and amount of coordination that occurs under the umbrella of a single firm has gradually increased, because we've allowed firms to grow in size and merge more often. At the same time, the other forms of coordination that occur outside of single firms, and that could counterbalance their power, have been largely dismantled: Unions had far more membership and reach in the post-WWII era than they have today, thanks to union busting, retaliation from rising business power, and government attacks like "right to work" laws. Similarly, other mid-century policies such as fair pricing allowed smaller producers to set their own prices, which much larger middle-men couldn't bargain down — laws that had to be gutted before something like the modern incarnation of Walmart could arise.

The old way of doing it resulted in a more democratic economy, in which the power to set prices and the terms of commerce was much more decentralized and widely distributed. But that old way is no more. "The courts have made the large corporation the principal means of economic coordination and excluded other forms," Paul continues. "At its root, this special treatment reflects a preference for economic coordination through hierarchical authority."

How to lower the stakes in the size dispute

Champions of scale and size make other points that raise a different set of challenges, however: Matt Bruenig observed in Jacobin that big companies are better able to provide job benefits like health insurance and retirement plans, that bigger companies pay their workers more, and — particularly critical for those on the left — that bigger companies are easier to unionize. These arguments are not necessarily wrong, but they're complicated by the fact that these are not inherent strengths of bigness. Rather, they are products of subjective choices American lawmakers made about how to design various policies. Different and arguably better choices could render many of these questions moot.

First off, there's the United States' choice to rely on private employers to provide things like health coverage and retirement plans. This does indeed mean that working for a big company is often a better experience for employees; the more revenue and resources a business has, the more it's able to shoulder those added costs or negotiate for better rates. But among the developed western nations, America's decision to rely so heavily on private employers to provide those needs is pretty unusual.

For instance, if we implemented a Medicare-for-All system, the question of what health benefits companies provide — and thus whether bigger companies do a better job providing them — would simply be irrelevant. The matter would be taken care of by another policy route entirely. Similarly, if we expanded the scope and generosity of Social Security benefits, we would diminish the need for companies to offer retirement plans. Lastly, we typically rely on companies to provide things like paid vacation, paid family leave, and paid sick leave, out of their own pocket (and many do not do so at all). But those benefits could also be provided through national systems, which would spread the financing burden across the entire economy, and which all workers at companies of all sizes could tap into as needed.

The situation for unionization and labor bargaining is slightly different. Labor rights by definition are obligations imposed on firms, rather than benefits that can be provided by different policy setups. Nevertheless, there are changes that could be made to U.S. labor law that would help return power to workers.

"Under U.S. labor law, unions are organized on the establishment level, meaning employer by employer and worksite by worksite," Bruenig writes. "Because union representation has a lot of fixed costs, it is not economically feasible in many cases to represent small units of workers." But there's no particular reason we have to do it this way. In fact, many other countries do it differently. Sectoral bargaining, for example, brings in union representatives and other stakeholders to hash out agreements on wage standards and other conditions for whole segments of industry, top to bottom. That's why, in many other advanced countries, the terms set by union bargaining agreements cover far more workers than are actually members of unions.

Another issue is that the National Labor Relations Act (NLRA), which currently governs those obligations, is a federal law, and like all other federal law it's ostensibly limited by the Constitution to regulating "interstate commerce." In theory, only companies whose business is broad enough to cross state lines can be forced to abide by the NLRA, and the obligations it brings to respect unions and worker rights. In practice, though, courts have interpreted the "interstate commerce" clause so broadly that the national government can often regulate any firm of any size if it wishes. Sectoral bargaining would itself be a form of federal labor law, so it wouldn't necessarily solve the problem of small firms that escape through the "interstate commerce" constitutional exception, but as long as fiscal and monetary policy do a good job of keeping the economy at full employment, raw competitive pressure from firms covered by sectoral bargaining would probably force those other small firms to mimic the union-bargained contacts anyway.

On the more fundamental level of first principles, Paul points out the U.S. labor movement and the U.S. anti-monopoly tradition share similar roots: contesting "the consolidation of control over the process of production in the hands of a few" and contesting "the consolidation of power and control over economic life more generally." Casting the interests of labor as naturally in tension with the goal of reducing size and centralization among firms does not do justice to the history and motivating goals of either movement; both are pushing overlapping parts of the same democratizing project.

When smallness is indulged too much

That bigness and market power are major problems does not mean that companies can never be too small. Like all things, this is a question of balance. The defenders of bigness are on the firmest ground, not when they argue for size itself, but when they argue that American politics often fetishizes smallness to a destructive degree.

Even as U.S. lawmakers fret about giant corporations and lament the death of the small proprietor, they remain wedded to the free market doctrines that dismantled the tools we used to fight concentration and market power directly. The only remaining route to defending small businesses is to essentially exempt them from regulations: from environmental laws, from workplace safety requirements, from anti-discrimination rules, and more. This creates a race to the bottom, in which smaller companies are permitted to exploit workers, defile the environment, and violate all sorts of other minimum standards, all in the name of allowing them to preserve some meager amount of remaining market share. Paradoxically, our indulgence of bigness has led policymakers to defend smallness in the worst possible way.

As Bruenig details (along with Atkinson and Lind) federal laws that forbid discriminating against workers based on race, gender, religion, or disability only apply to businesses with 15 or more workers; for laws against age discrimination, it's 20 or more workers. The federal minimum wage exempts employers with gross annual revenue under $500,000, as well as employers that don't do business in multiple states. The list of exemptions for small firms goes on to include all sorts of other regulations, from worker safety to environmental rules and more.

Once again, in theory, these federal regulations are limited from applying to smaller businesses by the Constitution's interstate commerce clause. But in practice, jurisprudence hasn't been that much of an obstacle. These exemptions are most often choices that Congress has freely written into law, as opposed to necessities enforced by the courts. And they are choices driven solely by a subjective preference for smallness — or, arguably, by cynical rhetorical performance driven by the recognition that paeans to the beauties of smallness sell — even when smallness means degraded conditions for workers.

This makes no sense. The point of creating new businesses and competing in the market is to make society better and more prosperous. If a particular business model cannot provide its workers with a $15-per-hour living wage, or if it cannot treat its surrounding ecology with respect, why should that business model exist? Is it not failing the very aims we are trying to achieve through market-based experimentation? Yes, companies that possess greater scale and resources will find it easier to meet these sorts of strict minimum standards, and some of their mom-and-pop competitors will be wiped out. But enforcing these floors without exception is not going to kill every business but Walmart and Amazon.

There is a common narrative that small companies are the engine of job creation in the economy, but this is also wrong: More or less by definition, small businesses fail as often as they start, and that ongoing churn of failure destroys roughly as many jobs as small business startups create. This is not necessarily to say that big companies are the real job creators; it's more that, when it comes to job creation, concerning yourself with size misses the point. How many jobs are out there and how well they pay is ultimately a function of the economy's aggregate demand for labor versus the aggregate supply of workers. That, in turn, is primarily a product of national fiscal and monetary policy. Blowing holes in the minimum standards we demand of employers in an effort to juice job creation is a fool's errand.

A better approach to market power

None of this means we should simply start smashing large companies left and right. Both Stoller and some of his critics, for example, not that the post-New Deal order was a hodgepodge of occasionally contradictory impulses; sometimes relying on trust-busting, and sometimes on accepting giant companies' existence while regulating them to the hilt and forcing them to bargain with the big unions.

Stoller's book Goliath describes a multi-tiered approach depending on the nature of the industry: First, there was the large sweep of sectors where scale isn't intrinsically necessary — banking, retail, farming, small-scale manufacturing, pharmacies, restaurants. In those sectors, the government enforced limits on market power aggressively, breaking up companies that attained as much as 7.5 percent market share in some cases. Second, there are companies where some amount of scale and large upfront investment in physical capital is a necessity — Stoller uses heavy industries like aluminum as an example. In those instances, players were allowed to get much bigger, but regulators still made sure a handful of competitors remained to keep one another in check. Finally, industries with significant network effects or aspects of natural monopolies — think railroads, airlines, trucking, telecommunications, or utilities — were permitted their size, but tightly regulated as public utilities. (The modern challenge of what to do with big tech platforms probably most resembles this latter group.)

One of Stoller's primary focuses in his book is big finance. Thanks to their unique powers as the creators and providers of credit, the big banks arguably present the biggest danger to the rest of the economy, threatening to bring the rest of the economy under their direct control. The New Deal era of market regulation attacked Wall Street ferociously; busting up the banks, limiting them to modest regional powers, and strictly regulated their dealings. With that purpose achieved, the matter of size throughout the rest of the economy could be approached on a more case-by-case basis.

Indeed, once you move away from a simple "bigness is good versus bigness is bad" framework, at least some overlap can be found between the two sides. As Atkinson notes, the New Deal-era government ultimately focused less on breaking up behemoths like U.S. Steel and Pennsylvania Railroad and more on imposing tight new regulatory strictures upon them. But while Lind likes to cite the fact that about half of all Americans today work for a firm employing 500 people or more — a portrait of pervasive bigness — only 32-to-42 percent of Americans back in 1937 worked at companies with 300 or more employees. And the numbers were probably even lower after World War II. Previous eras really were less concentrated. And furthermore, America's modern abandonment of antitrust and anti-bigness politics also went hand-in-hand with its abandonment of strict regulations and oversight for powerful market actors.

As for the pro-bigness left, they're right that one way to deal with this problem is to rebuild workers' coordination power (through rebuilt unions and new labor law and sectoral bargaining and such) until they are big enough to counteract the power of big firms. But we could also try to cut down on the coordination power of the big guys (by breaking them up or regulating them), while increasing the coordination power of both workers and smaller firms alike. Reformers like Stoller may treat anti-monopoly as the Rosetta Stone for understanding U.S. politics, but the left tends to do the same with the conflict between capital and labor. Yet stating that the people will replace capitalists as the owners of the means of production says nothing about how that ownership is actually carried out in practice: Who makes the decisions? At what level and jurisdiction? What is the process? How is authority structured and enforced?

Life under the giant nation-bestriding private goliaths of modern American capitalism may be an alienating and anti-democratic mess, but there's no intrinsic guarantee life would improve under giant nation-bestriding socialist institutions. And one strength of the anti-monopoly tradition is it deals with the nitty-gritty of these questions, like the design of institutions and the structure of power relations — questions which, in a socialist world, would make the difference between Soviet-style tyranny and genuine democracy and freedom.

What's ultimately at stake is not simply material economic matters of growth and incomes. It's also the shape and experience of American life. The social, political, and economic realms cannot be cleanly disentangled from one another. As Lina Khan, another member of the new antitrust movement, put it: "For most people, their everyday interaction with power is not with their representative in Congress, but with their boss. And if in your day-to-day life you're treated like a serf in your economic relationships, what does that mean for your civic capabilities — for your experience of democracy?" The question applies equally to your experience as a customer, or as a smaller proprietor in a web of vast supply chains.

A capitalist or socialist society in which a small number of giant institutions are able to set the terms of commerce for everyone else — workers, business owners, and customers alike — is, in a real sense, no longer a functioning democracy. Staying on the straight and narrow path will require both breaking up and taming our massive corporate overlords, while also seeing to it that no company, no matter how modest, can escape the obligations of decency and dignity owed to all workers everywhere.

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