Two of the most important economic questions over the next few years are: how will the US-China relationship play out, and how will nations curb corporate monopoly power?
The biggest global economic winners over the past three decades have been China and large corporations, research by the United Nations Conference on Trade and Development shows. As they have risen, local labour’s share of gross domestic product has fallen in the US and most parts of the world.
That is not an argument for US president Donald Trump’s incoherent trade war against China, but rather for curbing the corporate concentration that has diminished the vibrancy of the US economy in the past 30 years.
The Department of Justice is finally starting to do that. It is expected to file a new lawsuit within weeks focused on Google’s search dominance, in what would be the biggest antitrust case in 20 years. It’s unclear yet exactly what the DoJ will allege. But it would be a losing game to focus exclusively on prices for consumers, even though that has been the defining metric of antitrust policy since the 1980s and was a key part of the argument in the DoJ’s recent, unsuccessful attempt to block AT&T’s purchase of Time Warner.
Digital transactions are valued in data, not dollars. That makes it extremely difficult to prove economic “harm”, particularly because large technology companies such as Google and Facebook also control access to the algorithms that help shape these transactions. The result is a business model that effectively allows companies to charge different prices to different customers for the same product. This is illegal for a physical store, although not for service providers such as airlines.
Rather than focusing on prices paid by consumers, US courts and legislators must begin to grapple with something both more complex and essential — the outsized power of corporations in our political economy. By many metrics, this power has made US markets less competitive, particularly in relation to Europe, where corporate lobbying has not reached quite the industrial scale that it has in the US.
Some critics argue that moving from quantitative discussions of pricing to qualitative discussions of corporate power will politicise competition policy. But Europe is already taking a much broader approach to curbing Big Tech, employing everything from traditional consumer harm arguments to more value-based discussions about forcing platforms to police hate speech and treat workers fairly.
Such conversations are neither anti-free market nor anti-American, though both arguments have been used by President Trump and Silicon Valley tech executives. The latter are trying to hide behind free speech claims in order to avoid the repeal of the legal loophole known as section 230 that allows them to gobble up advertising dollars and act like media companies without taking responsibility for the content they put out. The DoJ on Wednesday asked Congress to weaken that exemption
Indeed, Barry Lynn, journalist and founder of the Open Markets Institute, argues in a new book, Liberty from All Masters, that American history has been shaped by repeated efforts to control corporate power. Mr Lynn, who has worked with Republicans and UK Tories as well as on antitrust efforts with Democrats such as Elizabeth Warren and Bernie Sanders, argues that Americans are “awakening to the foundational role of antimonopoly policy in protecting democracy and liberty”.
According to Mr Lynn, we need neither a war with China nor a Green New Deal to address the imbalance of power between labour and capital, but rather a return to the basic scepticism about corporate power that drove the American Revolution. While the Boston Tea Party is most commonly thought of as a tax revolt, Mr Lynn argues that it was also a war against the ability of the British East India Company to control commerce in the colonies.
In the early 20th century, concern about the corrosive effects of corporate power drove trustbuster, and later Supreme Court justice, Louis Brandeis to battle the railroads and other oligarchs. He was worried not because the price of tickets was too high, but because companies had so much political power and controlled so much of the economy that it was no longer possible for individuals to work and compete and succeed on their own terms. As he put it in Other People’s Money: “Far more serious than the suppression of competition is the suppression of industrial liberty, indeed of manhood itself.”
Policymakers today should consider not only whether recent Big Tech mergers are legal but whether in the public interest we need to regulate digital giants as utilities or common carriers such as telecoms and railroads.
As federal stimulus money dries up and the Covid-19 crisis continues, we are likely to see a record culling of small and midsized businesses, which create the majority of new US private sector jobs. At the same time, five digital giants, Amazon, Alphabet, Apple, Facebook and Microsoft, make up almost one-quarter of the value of the S&P 500. They may give us lots of “free” stuff. But they can’t employ enough people to sustain the world’s largest economy. Here’s hoping that the DoJ’s arguments will be big and broad rather than discreet and technocratic. The problem surely is.