Lynn As Long As Consumer Prices Were Falling There Was No Monopoly Problem Discussion

An overdue look at monopoly distortions: US hearings must tackle the malign effects of ma…
Financial Times; London (UK) [London (UK)]. 13 Sep 2018: 10.
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This week, the US Federal Trade Commission will hear whether the country should rethink its policies
towards competition and antitrust law. It’s about time. For more than four decades the US and most other
nations have weakened laws that held the private sector in check and made it hard for companies to wield
monopoly power. The result has been increasing concentration in many sectors of the economy, from finance
to media telecommunications and technology. The latter industry will be the focus of particular attention
in the hearings.
With the rise of the commercial internet from the mid-1990s, platforms such as Amazon, Google, Facebook,
Apple and others have leveraged network effects and the power of data to become the richest and most
powerful corporations in history. These companies have somewhat different business models. But it is their
power ? both economic and political ? that will be up for discussion at the FTC hearings.
Since the 1980s antitrust law in the US has been predicated on the notion that as long as consumer prices
were falling there was no monopoly problem. This “consumer welfare” approach was an ideology popularised
by Robert Bork and other University of Chicago school academics. Its appeal lies in its simplicity ? the
notion that a single metric could encapsulate whether a company was too big or not. But rising corporate
concentration, a declining number of start-ups, stagnant wages and growing inequality all give good cause to
question whether it is, indeed, working.
A number of academics and politicians would like to see the US go back to a broader definition of welfare,
one that looks at whether large corporations might wield undue political power, which they can then use to
distort the economy in their favour. This “new Brandeis” school harks back to the thinking of former Supreme
Court justice Louis Brandeis, who believed that extreme concentration of corporate wealth represented a
threat not just to shared prosperity, but to democracy itself. It’s a subject worth considering, given the record
amounts being spent by big companies on political lobbying, the way in which technology platforms have
been used to influence the outcome of elections, and the general sense among broad swaths of the
population that the richest people and corporations have rigged the system of liberal democracy.
The last time economic concentration and inequality were this high was during the Gilded Age of the 19th
century
Back then, middle and working class disaffection fuelled a populist reaction and the original antitrust
initiatives of Theodore Roosevelt. The same factors are at work today, driving trade and currency wars,
protectionism and populism that could result in multinational corporations losing their credibility. That’s why
businesses should welcome the FTC hearings as a chance to explore the economic effects of four decades
of unfettered deregulation and technological change.
It is worth asking whether concentration of power has made the US and the global economy less
competitive; how the wealth of data markets can best be shared and whether the usual economic laws of
gravity stop working when data, rather than dollars, are the chief currency. It is also worth considering
whether the notion of consumer welfare should be broadened. These are all worthy questions, ones that the
FTC will be asking. We should listen carefully because when monopolies suppress wages and competition,
coopt the political system and lower trust in institutions, we all suffer.
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Copyright The Financial Times Limited Sep 13, 2018

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