This week, Nick And Goldy are joined by Faiz Shakir, Executive Director of A More Perfect Union, to discuss the shocking revelation of an international oil price-fixing conspiracy. Their conversation explores how the collusion between American oil companies and the foreign nations that make up OPEC significantly contributed to inflation, costing American families between $500 and $1,000 annually. Shakir explains how the Federal Trade Commission uncovered this conspiracy and highlights the urgent need for increased regulatory oversight and harsher penalties to protect consumers from corporate malpractice.
Faiz Shakir is the Executive Director of the nonprofit education, advocacy, and journalism organization, More Perfect Union, and former campaign manager of Senator Bernie Sanders’ 2020 Presidential Campaign. Prior to his work with Senator Sanders, Shakir held various leadership positions within the Democratic Party and progressive organizations, working to advance social and economic justice issues.
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Further reading:
An Oil Price-Fixing Conspiracy Caused 27% of All Inflation Increases in 2021
A 2024 Timeline of Big Oil Greed
House Democrats investigate whether Big Oil colluded with OPEC to inflate gas prices
The Truth Behind the Latest Oil Price-Fixing Scandal
Gas Price Fixing Scandal Grows as Another US Oil Exec ‘Caught Colluding With OPEC’
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Nick Hanauer:
The rising inequality and growing political instability that we see today are the direct result of decades of bad economic theory.
Speaker 2:
It’s time to build our economy from the bottom up and from the middle out, not the top down.
Nick Hanauer:
Middle-out economics is the answer.
Speaker 2:
Because Wall Street didn’t build this country. Great middle class built this country.
Nick Hanauer:
The more the middle class thrives, the better the economy is for everyone, even rich people like me.
Speaker 3:
This is Pitchfork Economics with Nick Hanauer, a podcast about how to build the economy from the middle out. Welcome to the show.
Goldy:
This episode will be coming out after the election, Nick. But if Harris wins, I think it’s safe to say she’ll have won on the economy. And if she loses, she’ll, I mean, have lost on the economy. A lot of other factors there, but you don’t win the White House without winning on the economy. And if she loses on the economy, it’s because people are still very angry about that spike of inflation earlier in the Biden administration. And if you are angry about inflation, a lot of that inflation has to do with prices at the pump.
Nick Hanauer:
Yeah. And we’ve, over the last year or so, learned a lot more about that, and we’ve learned in particular that approximately $1,000 of extra cost per year for every American was due to a conspiracy by the oil companies.
Goldy:
A conspiracy? That sounds very Trumpian.
Nick Hanauer:
It does. It does.
Goldy:
This is like you’ve gone full QAnon here. There’s conspiracies. You must be able to back that up with evidence, Nick.
Nick Hanauer:
Well, it turns out we do have evidence. It turns out, among other things, we have the texts of the CEOs of the oil companies revealing the fact that they were participating in this conspiracy, and no one knows more about this than our old friend, Faiz Shakir, who’s executive director of A More Perfect Union, because he’s involved in this fight on a day-to-day basis and has been super at the center of this controversy.
Nick Hanauer:
I keep on using words like shocking and unbelievable, and you keep on correcting me and saying, “No, dude, it’s actually not very shocking or unbelievable,” but it is still kind of an incredible thing that has unfolded. But I really think we should just talk to Faiz and let him take us through the whats and the wherebys of how this all occurred.
Faiz Shakir:
My name is Faiz Shakir. I’m founder and executive director of More Perfect Union, an advocacy journalism organization focused on covering economic justice issues from the perspective of the working class in this country, and then I also managed Bernie Sanders’s campaign in 2020.
Nick Hanauer:
So, Faiz, you’re here to talk about a thing, which is kind of… Well, I keep on using the word unbelievable, and Goldy keeps correcting me. He’s like, “No, dude, it’s not unbelievable at all.” But this ridiculous oil price-fixing conspiracy involving U.S. shale producers and the Saudi government that pushed prices up a lot during the pandemic. And I know you and a lot of folks have been sort of at work uncovering all of this and trying to publicize it, but kind of lay out the story for our listeners. What happened?
Faiz Shakir:
So when you go back, Nick, I mean, to your point of where American people feel they’re getting screwed, I tend to think most people felt like there was a conspiracy at play to raise prices on them from the gas pumps during the pandemic, and they would be correct. And now we’ve learned how that happened. That’s what has changed, Nick, is we figured out, “Oh, this is what was going on.”
Faiz Shakir:
So behind the scenes, some of the major oil producers in America, in the Permian Oil Basin in Texas, they were restricting output, working with OPEC countries, which are Iraq, Iran, Saudi Arabia, to restrict the flow of oil into markets at a time when more oil would have brought down the cost for consumers. Why, Nick? Why would they want to restrict the flow of oil? What possible reason?
Faiz Shakir:
Well, their profits went through the moon during that period of time. In fact, the richest companies in the world are these companies, Chevron, Exxon, Hess, you name Occidental Petroleum. The amount of free cash flow that they are sitting on, you and I cannot even fathom. They can’t spend it in many, many, many, many, many lifetimes.
Goldy:
I think that’s tremendously ungenerous of you. Maybe the oil companies were restricting the flow because they were concerned about climate change.
Faiz Shakir:
I would suggest what we learned through the FTC investigation of this is that that was not the case. Yes, there were actual facts, unfortunately.
Goldy:
That’s right. There was an investigation.
Nick Hanauer:
Yeah.
Faiz Shakir:
Yes. That’s right.
Goldy:
Okay.
Faiz Shakir:
Yes. Yes.
Nick Hanauer:
So can you lay out kind of what they did and who did what in a little bit more detail?
Faiz Shakir:
So in recent years, in the last year or two, there has been a desire on some of the biggest oil companies in the world to merge. Exxon has wanted to merge with Occidental, and, sorry, Pioneer and Exxon wanted to merge, and then there was also Chevron wanting to merge with Hess, and just become these huge, giant conglomerates.
Faiz Shakir:
And so, their review, their merger review had to go through the Federal Trade Commission, and Lina Khan and her team, Federal Trade Commission chair, said, “Okay. Let’s look at the merger.” And in the course of the merger review, they did something that FTCs in the past have never done. They said, “We want to look at the communications of your CEOs. As part of this review, we want to know what you guys have been doing with your business models.”
Faiz Shakir:
And they looked into the CEOs’ communications and found that they had been explicitly coordinating behind the scenes with OPEC to say, “Let’s restrict the output of oil during this period of time so we can keep a high oil price and all make a ton of money.” And that was all in text, in correspondence, in phone calls, and some of it was even public. They were holding conferences together at a place called CERAWeek in Texas, where they were breaking bread for the first time and discussing how to restrict oil flow. So some of this was public. Some of it was private.
Faiz Shakir:
And so, the FTC finds this in the course of its investigation of the merger review and says, “Listen, we’re doing a couple things here. If this merger is going to go through some of these people,” namely Scott Sheffield, who was the CEO of Pioneer; John Hess, who is the CEO of Hess, “you guys are not going to sit on boards in the future, because what we have learned is you guys were corresponding to screw Americans on the price of oil, and you no longer deserve a seat on a corporate board.” And so, that’s what they did, and it’s in record-breaking kind of actions by the FTC standing up for American consumers all over the place.
Goldy:
So let’s be clear about this for the listeners. When the OPEC nations collude with each other to raise the price of oil, that is perfectly legal, because they are sovereign nations that can do as they please. When Exxon and other U.S. oil companies collude with OPEC to raise the price of oil, that is definitely illegal.
Faiz Shakir:
Yes. And this is the challenge for the merger review, because FTC does not govern sovereign nations. So you can’t really restrict the kind of merger of some of these companies. So what they did was that, “Well, I know what behavior you guys were engaging in. And therefore, we’re going to restrict the CEOs from sitting on boards here in America.” So John Hess, Scott Sheffield, they’re really pissed off. You look at how the oil CEO land is so angry about what the FTC is doing, so angry that they went into Donald Trump fundraisers.
Faiz Shakir:
There’s a number of them who have gone into fundraisers with Donald Trump, raised money on his behalf, and pleaded with him. In fact, the Occidental CEO pleaded with him and said, “I’ve got Biden’s FTC looking at my text messages. This is really unfair. What can you do about it, Donald Trump?” And Donald Trump said, “Can you just hold out a few more months? Once I become president, I will get this burden off your back. We will not be investigating you any further.”
Faiz Shakir:
He literally made that claim, and it was in the story of The Washington Post in late May. I urge people to check it out. And it just goes to show the choice of the election and the differences of what each side wants to do with respect to oil collusion that’s at play in this election.
Goldy:
This wasn’t a little bit of price inflation. Let’s talk a little bit about the real-life impact on consumers, how much this raised costs for the typical American, and what portion of the inflation we saw in 2021 was actually due just to this?
Faiz Shakir:
Yes, that’s right. I mean, because the first inflation that we witnessed during the pandemic came from energy prices. And in fact, if you look at Donald Trump’s rhetoric now, he’s talking about reducing energy costs as a way to address inflation. He’s not incorrect about suggesting that that could be a way to do it. What he’s incorrect about is suggesting that drill, baby, drill is the solution. That’s what we learned doesn’t work. Right?
Faiz Shakir:
We did drill it. We were producing more than we’ve ever produced. We’re producing more than any country during the pandemic, even to now. Why is it then that the price of oil is so high? It isn’t drilling. It isn’t supply. It was restriction on a production and flow of oil to American consumers. So how did that happen? Well, during the pandemic, they all coordinated. They colluded. They said, “We’re going to restrict the flow.”
Faiz Shakir:
Why? Because at the time, they realized that the price of oil was going to start to go up as the American economy was restarting. They said, “Let’s kind of pass along a higher cost and see how much we can get away with.” As they increased those costs, Nick, you know this, that that energy cost, as they increase it at the pump, starts to affect the Amazon delivery drivers, starts to affect the bag of chips and everything else throughout the economy.
Nick Hanauer:
That’s right. But also, they had cover, which was Ukraine.
Faiz Shakir:
Yes. Well, exactly. So the start of the price hike, if you look at it, it starts in 2021 as the economy started to reopen, starts to go up. When Russia invades Ukraine, we get to record levels, and it started to come a little bit back down, but has still remained high. And for all the economists out there who love to talk about supply and demand curve charts, this doesn’t compute, because supply has been very high.
Faiz Shakir:
And demand should dictate that some of this should drive a lower price for consumers, because we were laying off with… More people were not driving and were reducing their oil expenditures. And so, they should have seen a lower price, but it wasn’t happening, because oil CEOs in America were colluding with OPEC countries abroad and saying, “Let’s keep the flow of oil at a certain level that keeps the price high so that our wealthy shareholders can make tons and tons of money.”
Goldy:
And so, the numbers I’m looking at suggests that this price-fixing conspiracy was responsible for about 27% of all inflation increases in 2021. And between gas at the pump and its impact on groceries and utilities, it costs the typical American family between 500 and $1,000 per year.
Faiz Shakir:
Yes. And that’s probably a conservative estimate, to be honest with you, because it’s so hard to assess when you get downstream of this, and you say, “Okay. I ordered my Amazon package. How much of that did I see in inflation cost? Oh, I went to the burger shop. Their input costs, due to higher gas costs, were higher. So my price of a burger might have been higher.”
Faiz Shakir:
All of those things were certainly going up. And so, it’s very hard to compute all the downstream effects. But what we all certainly know is just if you look at how much the energy consumption of Americans was tabulated with the price of gas, that’s what you get at. It’s really a basic 500 to $1,000 increase at least on energy costs.
Goldy:
And at least $500 at the pump, because that’s easy to calculate.
Faiz Shakir:
Yes. Exactly.
Goldy:
You know how much the price of gas went up. You know how much the average American drives, and that’s simple math. So that’s a big chunk of why people are angry and dissatisfied with the economy. That inflation that they experienced, a huge chunk of that was just an oil price-fixing conspiracy. It’s not unbelievable, Nick-
Nick Hanauer:
So predictable. It’s sad.
Goldy:
… but pretty amazing.
Faiz Shakir:
But the point too is, yes, that conspiracy existed. It happened, and we wouldn’t have known about it. This is critical. Nobody would have known shit about any of this, except for a Federal Trade Commission that said, “We’re going to aggressively engage in oversight on behalf of American consumers and dive into the texts and the email messages of their CEOs, especially if they want to engage in mergers and acquisitions. If they’re going to do that, then we’re going to go and pry what is it that they’re after.”
Faiz Shakir:
And so, when they did that, that’s how we learn all of this. The role of government to ensure that marketplaces operate fairly is so critical. And oftentimes, when the FTC is coming in, it’s a measure of last resort. It means that, “Bad things have already happened. Now we have to block it.” But the fact that we really did do this at this juncture sends a message throughout the industry, not only the oil industry.
Faiz Shakir:
Many other industries said, “Oh, shoot, there’s cops on the beat. They’re looking after us. Maybe we shouldn’t engage in this collusion right now. Maybe we shouldn’t do it in the next administration, because somebody is going to catch us on the back end of this.” That’s really important. But Trump is literally promising that, “Hey, I will get all this off of your backs. Don’t worry about it.”
Nick Hanauer:
The finance industry goes… The private equity industry goes away. The venture capital industry goes away. Not quite goes away, but these guys get poorer, if you can’t simply-
Goldy:
Poorer.
Nick Hanauer:
… roll up every business in the country.
Faiz Shakir:
I mean, and you know this, but M&A activity is doing just fine. All the finance people are doing just fine right now, even under Lina Khan. The issue is only that there’s actually more scrutiny of them than there ever has been. There’s more challenge of some of those mergers. There’s more investigation of them, and they don’t like it.
Faiz Shakir:
Now, that means that it becomes public, right? That’s what’s happening right now. The public is catching up to the games that private oligarchs have been playing for a long period of time, and they’re pretty pissed off out about it, like, “Hey, all this is supposed to happen behind the scenes, under closed cover, not for American public consumption.”
Nick Hanauer:
Yeah. But I think I want to zoom out just a tiny bit. I was looking at a piece that our friend Matt Stoller wrote about these shenanigans, and at the center of it is this typically profoundly stupid tweet by Larry Summers that I’ll just read. The guy is so disconnected from reality.
Goldy:
God, there’s so many of them. How could-
Nick Hanauer:
Yes. Just, “The emerging claim that antitrust can combat inflation reflects ‘science denial.’ There are many areas like transitory inflation where serious economists differ. Antitrust as an anti-inflation strategy is not one of them,” which that claim is so profoundly stupid, because it is so disconnected from the reality of how markets actually work, and so embedded in a theory which has no connection to reality.
Faiz Shakir:
But you know this well, Nick, the behavior and the psychology of CEOs in general. They think that they’re sitting on a supply-demand chart, that we just talked about that on oil price, right? Do you think that’s how they’re making a decision on the price? Give me a break. They’re all trying to build moats and build monopolies and corner markets so that they can set whatever damn price that they want.
Nick Hanauer:
Exactly.
Faiz Shakir:
That is their behavior.
Nick Hanauer:
Exactly. And their power to do that is inversely proportional to the number of competitors in the market.
Faiz Shakir:
Correct. Correct.
Nick Hanauer:
Right? It’s as simple as that.
Faiz Shakir:
Or to the extent that they could co-opt and collude with each other such that they don’t have competition. That is the behavior.
Nick Hanauer:
That’s right.
Faiz Shakir:
You know this well. That is the behavior of a CEO. They’re all trying to build their little moats and their little islands and their little disconnected monopolies, and our job is to ensure that the public has a stake in those fights so that we can have a fighting chance to ensure that the price of these kinds of things works for all of us, not just for them.
Goldy:
It’s funny how these orthodox economists and neoliberals love to cite Adam Smith’s invisible hand to say, “Oh, the market makes everything perfectly fair and efficient.” I’m going to go right to the source and quote Adam Smith on The Wealth of Nations. Quote, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” I mean, don’t, on the one hand, throw Adam Smith in my face and then ignore Adam Smith.
Nick Hanauer:
No. It’s so sad. And I know that… Go ahead, Faiz. Yeah.
Faiz Shakir:
Nick, I mean, you know the tech world better, but we’re learning from the cases against Google right now, from the Antitrust Division of the DOJ, that one of the ways that they all work together is Apple is paying Google, maintaining a monopoly over certain markets, basically taking a terrain and saying, “You get this side. I’ll get that side. We each make billions of dollars without competing with each other, buying each other off.”
Faiz Shakir:
And it often happens in the airline industry as well, “You take that market. We take this market. Yeah, I’ll take this market. We’ll break this off so that all of us can just have a happy coexistence without competition.” And it’s our job as enforcers of the FTC of the Biden administration to say, “No, no, no, no, no. Competition works for American consumers and American small businesses. So we have to fight for it,” because otherwise, these people, as they acquire more power, are trying to prevent competition. That is their ambition in life.
Nick Hanauer:
That’s right. And just to play that back, I mean, we were spending a long time bashing these companies on the podcast. I just want to reiterate that markets actually are an amazing social technology for generating prosperity in human societies, but they only work if they’re legitimately competitive. Right? Otherwise, they’re just exploitation machines.
Goldy:
And explain, Nick, what the goal of a good CEO is, and that is to avoid competition.
Nick Hanauer:
Is to avoid competition.
Goldy:
You don’t want a competitive market.
Nick Hanauer:
No.
Goldy:
You want an advantage. That’s how you make your money.
Nick Hanauer:
That’s right.
Goldy:
Nobody makes money from a perfect market.
Nick Hanauer:
No. And the more imperfect the market is, the more market power you have through whatever means you can accumulate it, defines your pricing power and, therefore, your profits, which is fine. It’s not like there’s something wrong with companies trying to find differentiated ways to accumulate market power. This is God’s reward for making really good products in actually competitive markets. Right? If you make a great product, cheaper than your competition can, you are likely to be rewarded with lots of sales and good profit margins, which is-
Goldy:
Yeah. Exxon did a tremendous job creating the Permian Basin, and so should be rewarded for that.
Nick Hanauer:
Well, they certainly did a good job exploiting the Permian Basin. I mean, but the thing is, is that, and what 50 years of neoliberalism have brought, and what we’ve all become used to is this idea that the bigger the company, the more efficient it is, and the better it will be for everybody. And we have confused, in many cases, convenience for benefit.
Faiz Shakir:
Downstream, I would be remiss if I didn’t also add that as those companies have gotten bigger and bigger, the profit gap has grown deeper and deeper such that the accumulation of cash flow at the very top among the wealthiest shareholders in this country, among the biggest private equity firms, among the biggest corporate CEOs is huge.
Faiz Shakir:
And so, you’re talking about the gap between, let’s say, a worker at Exxon who happens to drive the truck. The gap between him and the CEO, Darren Woods or whomever, is going to be upwards of a thousand differential from how much a CEO gets paid. And also, as that cash flow generates, it does not go back into the hands of-
Nick Hanauer:
No.
Faiz Shakir:
… working people or American consumers.
Nick Hanauer:
No.
Faiz Shakir:
And that’s why you, in my view, sometimes need government actions like a windfall profits tax or something like that to ensure that when you come into that much money, we don’t trust that you’re going to do the right thing and make right policy decisions with that much money in your hands.
Nick Hanauer:
Yeah. So tell us a little bit more about what has happened since this has been uncovered, and what does the future hold?
Faiz Shakir:
Yeah. So the first uncovering was in the course of Exxon merging with Pioneer. Scott Sheffield, who was the CEO of Pioneer, was barred from serving on Exxon’s board. He is now fighting the hell out of the FTC. He’s very upset about this, that he’s been outed as having colluded with OPEC. Then a few months later, the FTC, in its investigation of a Chevron merger with Hess, found that John Hess, the head of Hess, had been doing the same thing as Scott Sheffield of Pioneer. So both of them have now been barred from being on boards.
Faiz Shakir:
These were contingent upon each of those mergers going through. So now, Chevron’s merger and Exxon’s merger have been completed. And so, now, we’re in a situation where there are still pending mergers of companies in the Texas Permian Basin, because they’re trying to consolidate, and one giant oil company of the future probably is where we’re all headed.
Faiz Shakir:
And so, I think that that fight over whether there’s going to be a continued oversight over oil companies, over CEOs, over fair markets, over competition is very much at play, because you’ve got one direction, not only Trump, but obviously some people who are aligned with Harris, arguing that the FTC has been too rigorous in its oversight, and we don’t need to continue down this path. And part of what I believe strongly is that not only do we need a little bit more, we need a lot more of this on a lot of different areas to ensure that we get back to level playing fields.
Nick Hanauer:
When do you get to put these people in jail?
Faiz Shakir:
So in fact, what the FTC did when it found out that Scott Sheffield had been colluding, the Pioneer CEO colluding with OPEC, they referred the case to the DOJ for criminal prosecution. It is sitting there at the DOJ now. I think DOJ is kind of looking at the case. I don’t know what the next course of action might be, but it is historic in the sense that they did refer it for exactly that, to say, “Hey, if you engage in this, there should be criminal penalty, not just civil penalty, not just you don’t get to serve on a board.” And that’s now in the DOJ purview to decide. And obviously, I would urge, I agree with you, that, “Hey, let’s make an example of some people to really shut others-“
Nick Hanauer:
We are never going to get on top of this stuff unless we start sending these guys to jail for 20 years.
Faiz Shakir:
Right. Right.
Nick Hanauer:
Right?
Goldy:
That’s going to make you very popular at parties.
Nick Hanauer:
Okay. Whatever. But honestly, I mean, there is simply no way to manage these problems without harsh criminal penalties for the CEOs of these companies, because if there’s no downside to this behavior, then these are not good people, generally.
Faiz Shakir:
My view, Nick, was when we engaged in that prosecution of Sam Bankman-Fried, it did send a certain message through the entire crypto industry that, “Oh, shoot.” And you can see the reverberations through it all, is that people are very concerned about, “Is there too much prosecution or too much restriction of us? Is there going to be too much hampering of us such that potential crypto scams might lead us into jail?” That’s what happened as a result of that one prosecution. I think that, to your point, if there were other examples of it across other industries, it wouldn’t be a bad thing at all.
Nick Hanauer:
Yeah. Well, the finance industry and the oil industry, and maybe somebody in the tech industry would be pretty awesome.
Faiz Shakir:
Totally.
Goldy:
The crypto industry. I mean, if you actually prosecuted for fraud-
Faiz Shakir:
The scams. Yeah.
Goldy:
… there wouldn’t be a crypto industry, because that’s what it’s based on. It’s like, “We’re going to start prosecuting the Ponzi scheme industry.”
Nick Hanauer:
Yeah. So, Faiz, let us ask you the benevolent dictator question. If you were in charge, what would you do?
Faiz Shakir:
About this?
Nick Hanauer:
Yeah.
Faiz Shakir:
Which question? There are so many things that’s out there.
Nick Hanauer:
Yeah, yeah, yeah. That’s the thing about you. You have such strong feelings about so many things, but this sort of-
Faiz Shakir:
Where are we going?
Nick Hanauer:
… price-fixing antitrust in general. If you were in charge, what would you do?
Faiz Shakir:
So in general, I think that we finally are getting to the place where government does have a role to play, not as price setter, but as price overseer, to investigate, are these prices fair? As you know, Nick, now there’s starting to be Medicare price negotiation going on. For a long period of time, we were the only country in the world that didn’t negotiate with the pharmaceutical companies for prescription drug price. It’s crazy.
Faiz Shakir:
We’re doing it now. And you see, when the Fed sets an interest rate, what is it doing? It is negotiating a price of your home mortgage loan or whatever. It is setting certain parameters so that you aren’t getting fleeced or suggesting that the entire economy should benefit it by a certain rate. These are things that the government does. I would like to see this across the board of making sure that as we not only find and discover price gouging, that we’re giving more transparency to the American consumers and American public about how prices are being set in various markets so that we…
Faiz Shakir:
Transparency can be a great disinfectant. Right? I think if more people are aware of how and why various prices are charged to us, they will be able to take better action, whether it’s the state, local consumers, however you want to call that to the carpet. You just need better transparency. We lived in a rigged economy, where so much of these determinations are made behind closed doors, made at the elite levels, such that Larry Summers can say, “Oh, this is just an invisible hand marketplace. Nobody should intervene in this, because the CEOs know what they’re doing, and they’re just setting proper rates for everybody.”
Faiz Shakir:
Well, that’s what you’re going to think when you have literally no knowledge and no desire, no awareness to figure it out. So I want to see the government play much more of an active role across the board, even such that when we sell, let’s say, a weapons system to a different country, we should know, “How much is the price for that? Are we paying a fair price, or are we not paying a fair price?” And I think the government is often getting fleeced, because the government is a price-taker, oftentimes. You know this, right?
Goldy:
Right.
Faiz Shakir:
Corporate America knows they just set whatever price, the government takes. It is the American consumers, the American government that’s often the most screwed here, because we just take whatever the hell they tell us.
Goldy:
Well, because otherwise, it would be interfering in the market, and that would be so much worse than price-fixing.
Nick Hanauer:
And one final question, why do you do this work?
Faiz Shakir:
Because we know the economy is not working for real people. It just frustrates the hell out of me. There’s such injustice out there. And we could spend a whole… I mean, I’m sure you do, spend a lot of time talking about various elements of this economy that don’t work for regular people, and they could. We know it could. We have the American historical experience to lean on. We have seen great entrepreneurship. We have seen when American workers rise, with American productivity rising, and we’re on the cusp. You know it well, and AI coming along, and the transformation of economy once again.
Faiz Shakir:
And we stand at the cusp of whether some of those decisions that are going to be made in the future are just going to wipe out American workers and American livelihoods, period, or are we going to fight for the decency, the justice of what it means when a regular person has a lifestyle and a job that they enjoy, that they can live their lives with? It means something. There’s purpose. There’s mission to a life well lived when you have employment and a job that means something to you, and I fight for that. I care about that.
Nick Hanauer:
Awesome.
Goldy:
Well, thank you for your service.
Nick Hanauer:
Yeah. Thanks for being with us, Faiz. Super fun, as always.
Faiz Shakir:
Thank you, guys. I appreciate it.
Nick Hanauer:
Yeah.
Faiz Shakir:
All right.
Goldy:
Okay. That was a lot of fun.
Faiz Shakir:
Yeah. I enjoyed it.
Goldy:
I am shocked, Nick, shocked to learn that there’s gambling going on in this casino.
Nick Hanauer:
I know. I know.
Goldy:
To paraphrase Casablanca, for those of you who are too young and have never watched the classic. Of course this was happening. Of course. Of course. I went back to Adam Smith. He knew it. He wrote a lot about it. This is what businesses do if they have the chance.
Nick Hanauer:
Yeah. But Goldy, so I have to just tell you that it has changed.
Goldy:
I know.
Nick Hanauer:
So the thing is, is that I grew up in my family business. I learned so many things helping run that company that made pillows and down comforters for retailers and stuff like that, in this sort of old-fashioned industry. But I am telling you that my father, of course, who was maybe the most painfully honest man I’ve ever met in my life, just an unbelievably principled guy, but he was terrified of getting caught up in a price-fixing scheme. I mean, our industry was insanely, pathologically price-competitive. We had another problem, which is people… It was so-
Goldy:
Cheating.
Nick Hanauer:
… price-competitive that people cheated. Right?
Goldy:
Right.
Nick Hanauer:
They would actually adulterate the product to meet the price that the retailer wanted, but actually inflate their profits. So that was the challenge that we had in our industry. It was people-
Goldy:
It’s not that it was a moral industry and you didn’t price-fix. It’s that there were other ways to pad your-
Nick Hanauer:
The easier way to pad the profits.
Goldy:
Because nobody could really tell whether a pillow was 100% goose down-
Nick Hanauer:
Yes, blah, blah, blah. Cool.
Goldy:
… or washed duck feathers or chicken feathers or whatever.
Nick Hanauer:
That’s right. Exactly. Exactly. And so, the unsavory competitors cheated. I mean, that’s the bad news. The good news is that high-road manufacturers, like we did, destroyed them. We put them all out of business. So eventually, the cheaters went out of business mostly. But still, all I’m telling you is that when I grew up, I remember conversations with my dad and the other executives about how we would never talk to our competitors. We would never even hint at a coordinated approach to a big retailer. Right? It was just so not done. And these guys, I mean, and here’s the thing, it’s not just that they did it. They felt like they could text and do it.
Goldy:
I know.
Nick Hanauer:
They left a fucking written record of this. These are people who obviously weren’t worried at all either about violating the law or getting caught violating the law. Right? They just didn’t care, because they didn’t have to, because it had been so long since somebody had to challenge this behavior. And so, it is different than it was. It is different than when I was in high school, and it’s just kind of endlessly shocking how much things have changed for the worse.
Goldy:
Right. And look, obeying the law sometimes can be difficult. In this case, it’s pretty simple. Don’t collude with your competitors. Don’t text each other, “Hey, let’s set the price at this.” Look, in our own office, Nick, Civic Ventures, a little political shop, we deal with candidates and campaigns all the time, and we make this really rigid effort to separate our hard money activities from our soft money activities, because the hard money stuff is really tightly regulated.
Nick Hanauer:
Yes.
Goldy:
And a great example is that in the 10 years I’ve been in the office, I have always, always been strictly on the hard money side, because nobody trusts me on the soft money side. Right? And that means that I can talk to candidates. I don’t do much of that anymore, but I can talk to candidates. But I can’t talk to the PACs. Right? Nobody shares any information with me about how we might be working on the PAC side, on the committee side, so that I am free, if I want to, to talk to a candidate. And that is because we are very careful about obeying the law. The FEC, the Federal Election… even though there’s no enforcement there anymore.
Nick Hanauer:
Yeah.
Goldy:
And so, you can do that. You can obey the law. Now, I’m sure many places are not as careful as we are, and they sometimes get caught up. But yeah, whether you like the law or not, you obey it, and that is something which, of course, the oil industry did not do. And when I look at the solution side to this, there’s no reimposing of moral norms on the oil industry. I mean, this was-
Nick Hanauer:
No, of course there is. No, no, no, no. All you have to do is put a couple of guys in jail. All you have to do is catch them and put them in jail. That’s it. That guy, Scott, whatever his name, Scheffler, or whatever his name is, you just stick that guy in jail for 10 or 20 years. Stick the CEO of Hess in jail for 20 years. You will see better behavior. But in the absence of that, I think it’s helpless. Fines are not going to do it.
Goldy:
If you ask me, I let them all merge into one company and then regulate it as a utility.
Nick Hanauer:
Yeah. Well…
Goldy:
Look, there’s other ways to deal with this, of course. And in the 1970s, we did a windfall profit tax. And if you do a windfall profit tax, there’s no benefit to having a windfall profit.
Nick Hanauer:
Yeah. Maybe.
Goldy:
I mean, there are ways to handle this. But we had no windfall profit tax, and we had nobody investigating and regulating the industry against something like this, even though we all suspected something like this was happening.
Nick Hanauer:
Yeah, yeah, yeah. I just think it’s crazy that we don’t take this stuff more seriously.
Goldy:
Yeah. So anyway, if you want to learn more about this and you’re shocked, “Why didn’t I read this above the fold in The New York Times?” because, I don’t know, a big shrug on stuff like this. It’s not like a Hillary Clinton email or Biden being old. They had other things to cover. We will provide links in the show notes, both to some of Faiz’s writing and writing from a bunch of other people.
Speaker 6:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to follow, rate, and review us wherever you get your podcasts. Find us on other platforms like Twitter, Facebook, Instagram, and Threads, @pitchforkeconomics. Nick’s on Twitter and Facebook as well, @NickHanauer. For more content from us, you can subscribe to our weekly newsletter, The Pitch, over on Substack. And for links to everything we just mentioned, plus transcripts and more, visit our website, pitchforkeconomics.com. As always, from our team at Civic Ventures, thanks for listening. See you next week.