The term “premature anti-fascist” was a wry and cynical take from the first group of Americans to oppose Adolf Hitler. From 1936-1939, the Italian and German government sponsored a fascist in Spain, Francisco Franco, in a civil war between his forces and those of the motley disorganized left, some of whom were Soviet-aligned Communists and some of whom were not. Leftists from all over the world, like George Orwell, volunteered to fight Franco, and just a few years later, World War II was the same ideological conflict, but worldwide.

You’d think the people who were right early on would be feted as wise, but in fact, the opposite occurred. In the 1950s, the FBI and Senator Joe McCarthy went after liberals and leftists across a host of industries, in what was known as the “Red Scare.” Among the most targeted groups were those who volunteered to fight against fascism in the Spanish Civil War. It was important to be against Hitler, but not too early. Hence the term “premature anti-fascist.”

Today, we are in a similar moment with anti-monopoly arguments. Two days ago, Treasury Secretary Scott Bessent laid out that the U.S. government is going to be setting minimum price floors across a host of industries, to thwart unfair pricing by the Chinese state. China has a smart industrial policy, the government subsidizes its industries so that they can charge below-cost rates, driving everyone else out of business and ensuring that the Chinese industry then has the scale and knowledge to become more efficient. In many areas, such as electric vehicles, the government fosters markets that are brutally competitive. The result is a set of world-class firms that have dominant market shares and can project Chinese geopolitical power, in everything from rare earth magnets to battery-grade cobalt and lithium processing to batteries to high quality graphite.

Over the past eight months, the Chinese government has started to use this power explicitly. It created an elaborate set of rules for who can get access to rare earth magnets and materials, which are critical components that go into everything from electronics to medical devices to cars to weapons, with hard-to-pronounce names like dysprosium, gadolinium, lutetium, samarium, scandium, terbium and yttrium. It won’t allow rare earths to be used in foreign militaries. To prevent smuggling, it is requiring firms seeking to purchase magnets to submit drawings and blueprints for how they will use them. It will grant these firms access to the materials on a case-by-case basis.

China’s export controls are not just targeted at the U.S., but are global.

“They’re installing what you might call a tap system, where they can turn that tap on and off,” says German rare earth expert Louis O’Connor, remarking on China’s recent policy.

In other words, the Chinese monopoly over critical inputs has given it massive power to decide which countries and industries get to participate in the modern economy. Even those few entities outside of China, who do process rare earths, license Chinese technology, and China has said that these controls apply to anyone who uses Chinese intellectual property. So whether or not you live in China, you are now subject to the rules of the Chinese state.

Now, I’m not making a moral condemnation of China. The West has used its leverage over key technology in reckless ways - refusing to share Covid vaccine knowledge, as Germany, Switzerland, and the U.S. did, is a case in point. America throws around financial sanctions and military might. Frankly, all countries engage in these kinds of games; Taiwan captured control of chip manufacturing through unfair trade practices, and keeps a monopoly of high end chip tech as a matter of national policy. Chinese leaders have been intelligently exploiting the self-destructive tendencies of Western bankers. I’m just observing that China is using its market power in coercive ways.

In fact, many people predicted we’d be in this situation. In 2019, I co-authored an article with Lucas Kunce called “America’s Monopoly Crisis Hits the Military,” and in it, we described a host of dependencies the U.S. has on Chinese monopolistic power, including rare earth magnets. Years earlier, there were warnings, including by the Japanese, who were cut off from Chinese rare earths in 2010. In fact, the first people to offer the warning were union workers in America making the rare earth magnets developed by the U.S. military in the 1990s. They warned as ann investment banker, Archibald Cox, promised to retain domestic production, and then illegally sold the tech and company to the Chinese government . “Archie Cox and his company are committing a criminal act,” says Mike O’Brien, an organizer with the UAW in Indiana. “He’s a traitor to his country.”

Cox is actually a great illustration of the failure of modern liberalism and Wall Street. The son of a famous Watergate prosecutor lauded for his political courage, Cox sold out his country for money, and got a bonus for his troubles. After the sale of this company to Chinese government interests, he went on to be chair of Barclays, and lives a fine life in a $12 million NYC luxury residence. It’s a good payoff for Cox, but the Chinese government got a much better deal.

Over the past decade, anti-monopolists have made the argument that market power is fundamentally dangerous, not just bad for consumers and workers. Lina Khan, for instance, gave a speech on the national security implications of monopoly. During World War Two, New Deal officials routinely discussed the threat to America from global cartels, and one of the key strategies in post-war Germany and Japan was to break up the industrial empires that had supported those authoritarian states. Breaking up I.G. Farben, for instance, decentralized German politics, and increased innovation. As I noted in my piece “Monopolies and Fascism,” a host of policymakers, like Thurman Arnold, noted the dangers of global cartels and monopolies. Even Franklin Delano Roosevelt told Secretary of State Cordell Hull that “Defeat of the Nazi armies will have to be followed by the eradication of these cartel weapons of economic warfare. I hope you will keep your eyes on this whole subject of international cartels.”

So it’s not as if this tradition wasn’t known. Now, the two tactics used by the Chinese state to seize market power are also well-understood. The first is underpricing to capture market share and the second is strict intellectual property controls. Both are worth discussing.

Underpricing to monopolize, when done by a domestic firm, is known as “predatory pricing.” That tactic was a classic tool of most of the big monopolists, starting with Standard Oil. And traditionally, antitrust law barred predatory pricing. But the Supreme Court legalized the practice in the 1980s, convinced that rules against it were counter-productive. “There is a consensus among commentators that predatory pricing schemes are rarely tried, and even more rarely successful,” said the court in 1986. What happened as a result was the roll-up of a bunch of different industries. After all, if a rival is pricing below cost, and then asks to buy you out, your choice is to go out of business, or sell out.

When a foreign entity underprices, it’s not necessarily antitrust law that kicks in, but countervailing duty trade law, which is just anti-monopoly policy against foreign monopolists. That too was weakened by the U.S. corporate trade decisions over the 1990s. So various industries got rolled up by allowing predatory pricing and more mergers domestically, and then sold off to Chinese interests. Sometimes China would underprice to capture a market, sometimes they would just buy the domestic industry outright, as they did with rare earths.

The other important change was to our intellectual property regime. In 1970, an antitrust official named Bruce B. Wilson laid out what became known as the “Nine No-No’s” of patent law, which basically said that you couldn’t use patents to control an industry unless you were willing to build lots of factories yourself. Over the course of the next twenty five years, as Erik Peinert detailed, the U.S. changed intellectual property law to concentrate power in the hands of the patent holder. We then globalized it with the WTO. That’s why Apple can now control factories with millions of workers across a supply chain, but do so via contract, instead of direct ownership through risking capital. This model worked quite well for U.S. financiers, who got to organize global production without putting capital at risk.

Despite some problems, like the great financial crisis, this system stuck. As long as it was Wall Street doing the predatory pricing and strict IP control, it was all good. But now, it turns out the Chinese are the ones with the monopolies and the technology. The result is that Bessent has no choice but to partially revert back to earlier anti-monopoly frameworks. A few months ago, the Pentagon put a minimum guarantee of $110 per kilogram for 10 years for neodymium-praseodymium oxide, an important rare earth oxide. That’s a classic way to stop predatory pricing from abroad, and help create the incentives for non-Chinese processing. Moreover, there is no way the U.S. will allow new producers to license Chinese technology on terms that would allow Chinese export controls, meaning that the U.S. will have to re-examine, in part, our strict intellectual property regimes.

Now, if we hadn’t gone down the pro-monopoly path from the 1980s onward, we’d never be in this situation. And it’s not like Bessent is trying to change the rules for American monopolists, only parry what the Chinese controls imply. But try as they might to avoid it, the Trumpers are being forced to deal with market power. It’s not just in rare earths. A few weeks ago, I noted that MAGA farmers are demanding antitrust action in agricultural input markets, and Trump responded with pledges to investigate. A consolidated economy means that policy will have to operate through and against monopolies.

Indeed, what we’ve seen for the last five years is industrial policy on chips, pharmaceuticals, batteries, solar panels, rare earths and critical minerals, and now a host of other as-yet-unnamed industrial materials. And these policies are creating two American economies. One of them involves non-essential stuff still run by consolidated, inflexible, and bloated anti-production tactics. The other economy includes the stuff we’ve decided is critical, like rare earths. And that one is full of government action to mitigate the coercive power coming from China, using tools such as price supports, direct injections of capital, tariffs, and limits on tech licensing.

You can see this dual structure in the scoffing at Zohran Mamdani for doing some pilot programs for government-run grocery stores. Whether a good idea or not, that is a far less intrusive but similar approach to what Trump and Bessent are doing with key industrial parts of the economy. It’s just that Mamdani’s approach is in ‘non-essential’ areas, which is to say, what we haven’t yet decided is important.

It would be better if we just reimplemented anti-monopoly rules across society, rather than picking some sectors where the government will structure healthier markets because we’ve decided they matter. Predatory pricing and foreign dumping should just be illegal everywhere, in addition to minimum price guarantees on specific industrial goods and critical stockpiles. But we’re not there yet. Anyway, New Dealers always understood that a consolidated corporate sector isn’t just bad on its own terms, but has a host of dangerous geopolitical implications. Scott Bessent and Trump are acting in ways that suggest they are being forced to reckon with foreign monopolies threatening America. BIG readers have always know that such entities are dangerous. But then, perhaps we’re just prematurely anti-fascist.

Thanks for reading! Your tips make this newsletter what it is, so please send me tips on weird monopolies, stories I’ve missed, or other thoughts. And if you liked this issue of BIG, you can sign up here for more issues, a newsletter on how to restore fair commerce, innovation, and democracy. Consider becoming a paying subscriber to support this work, or if you are a paying subscriber, giving a gift subscription to a friend, colleague, or family member. If you really liked it, read my book, Goliath: The 100-Year War Between Monopoly Power and Democracy.

cheers,

Matt Stoller