How National Monopolies Drain Rural Economies

Dilapidated buildings along Main Street in Pamplin City, Prince Edward County. Photo credit: OnlyInYourState.com.

Virginia’s rural communities suffer from huge disadvantages when competing for job-creating corporate investment. Low density makes it expensive to install high-bandwidth Internet service. The small size of rural communities makes it difficult to support the amenities that skilled, educated workers are looking for. And, most important, corporations prefer locating in metropolitan areas with “deep” labor markets where they can tap employees with specialized skills.

Perhaps we can add one more disadvantage to the list: a national economy increasingly dominated by monopolies and cartels. So suggests Lillian Salerno, a former Texan who served as deputy under secretary for rural development in the Obama administration.

“For decades,” she writes in a Washington Post op-ed, rural America has been punished by bad policy that places too much power in the hands of distant financiers and middlemen through the formation of monopolies, which undermines small, local businesses and drains communities of resources.”

New business formation has plunged since the Great Recession, and nowhere more dramatically than in counties with fewer than 100,000 people. Why? Because, Salerno says, the federal government stopped enforcing monopoly laws.

This slow-rolling wave of corporate mergers has left almost all major markets — airlines, telecommunications, health care, retail, milk, seeds for growing crops, hardware, even cowboy boots — dominated by a cluster of mega-corporations, cloaked behind a plethora of brand names. These behemoths now hold unprecedented power over thousands of once-thriving community economies.

Corporate concentration has hit farmers, ranchers and agricultural workers especially hard, she writes. Many markets are monopolized by a single company that dictates the terms of business to suppliers. The seed industry has dwindled from 600 independent companies two decades ago to six today. Similar levels of concentration exist in the pork, chicken and dairy industries.

I don’t know if Salerno is right or not — I would like to see more specifics — but her argument is worth close examination. If her theory holds up, it is discouraging indeed for rural economies, for a decades-long drift toward a cartel-dominated economy is not easily reversed. If it’s any consolation, monopolies are not good for most metropolitan economies either.