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Corporate monopolies aren’t hurting consumers—just everything else.

By Binyamin Appelbaum


We live in an era of giant corporations, and there is little evidence consumers are suffering. But corporate concentration is causing other kinds of damage.

It is tilting the balance of power between employers and workers, because workers have fewer alternatives, allowing companies to demand more and pay less. When a few large companies dominate the marketplace for some kinds of workers, it’s also relatively easy for those companies to conspire. In 2007, Steve Jobs, then Apple’s chief executive, learned that Google was recruiting one of his engineers, so he sent an email to his Google counterpart, Eric Schmidt. “I would be extremely pleased if Google would stop doing this,” Jobs wrote. Schmidt forwarded the email to his recruiting department. “I believe we have a policy of no recruiting from Apple and this is a direct inbound request,” Schmidt wrote. “Can you get this stopped and let me know why this is happening? I will need to send a response back to Apple.” The response was that the Google recruiter had been summarily fired. Jobs replied with a smiley face.

Corporate concentration also is weighing on economic growth, by reducing innovation. Large companies, particularly in the tech sector, increasingly respond to the emergence of young rivals by imitating the Greek god Kronos, who swallowed his newborn children. Amazon swallowed Zappos. Facebook swallowed WhatsApp. Between 2010 and 2018, Google announced an average of 18 acquisitions per year. YouTube, which might have disrupted the Google-Facebook online advertising duopoly, now lives inside Google.

And it is taking a toll on democracy. The University of Chicago economist Luigi Zingales once subscribed to a common view among economists that big companies are generally benign, but in a 2017 speech, he announced that he had changed his mind. He told the audience that he’d been studying a rewrite of the nation’s bankruptcy laws in 2004. Previous overhauls had required carefully negotiated compromises between advocates of lenders and borrowers. This time, he said, the financial industry simply won. The sheer size of the largest banks, he said, was translating into political power.

Antitrust laws that limited corporate concentration were once a distinctive feature of American democracy. The first antitrust law, in 1890, was intended to check the power of railroads, Standard Oil, and other early behemoths. Legislators knew bigger companies might offer lower prices, but they decided it was more important to protect small business and to prevent the rise of big companies whose influence might distort the workings of democracy. “If we will not endure a king as a political power, we should not endure a king over the production, transportation, and sale of any of the necessaries of life,” said Senator John Sherman, the Ohio Republican who sponsored the legislation.

But over the last half century, the government largely abandoned antitrust enforcement. A new school of economic thinkers, who began to gain prominence in the 1970s, argued the government should only prevent corporate behavior that resulted in higher prices for consumers. This standard appealed to policymakers because it was clear and simple, and because it coincided with a basic shift in our national priorities. Americans, who had first defined themselves as a nation of farmers, and then as factory workers, were increasingly defining themselves as a nation of consumers. And as consumption replaced work as the quintessence of American identity, one consequence was a growing intolerance for policies that aimed to preserve the welfare of producers.

 “We must recognize that bigness in business does not necessarily mean badness, and that success should not automatically be suspect,” William French Smith, the nation’s new attorney general, intoned on June 24, 1981. Over the next three years, the government signed off on the nine largest mergers in American history to that time. But that was just the beginning. The merger wave of the Clinton years was surpassed by the merger wave of the Bush years, which in turn was surpassed by the merger wave of the Obama years. The country was left with four major airlines, three big car rental firms, two big brewers.

In Europe, state support and even ownership of large industrial firms was widespread through the 20th century—big was government policy. But in the 21st century, Europe increasingly has dissented from America’s tolerance for corporate concentration.

The divergence is particularly stark in the technology sector. In 2017, European regulators slapped Google with a record fine of 2.4 billion euros for manipulating search results to display its own price-comparison website more prominently than rival services. The next year, Europe fined Google 4.3 billion euros for requiring manufacturers to install Google software, including its search engine, on phones using its Android operating system.

In a 2017 article on the Yale Law Journal’s website, a student named Lina Khan argued for the revitalization of antitrust enforcement in the US, spotlighting Amazon as a prime example of a company amassing market power it could abuse to the detriment of its suppliers, workers, and customers. The piece struck a chord among a younger generation of scholars concerned about the erosion of antitrust enforcement. “We’ve been living through this natural experiment for the last 40 years and we should be able to agree that something is wrong,” Khan told me. “I’m under no illusions that the previous eras of antitrust enforcement were ideal, but I think we should be having a conversation about what we should do differently.”

The technology companies, and their advocates, say they are under attack for the sin of creating superior products, just like Standard Oil. They say Google dominates online search because it has the best search engine, and it is free, so there is little point in using the second-best search engine. And they like to emphasize the evanescence of tech companies. The truth, they say, is that their companies will dominate until someone comes up with a better idea. In the words of Google cofounder Larry Page, “Competition is one click away.”

But the popular image of a perpetual internet revolution is a remembrance of things past. The revolution is over; the major technology companies are middle-aged and fat. And the best argument for stricter antitrust enforcement is not that history has reached some kind of end point, but that no one can know what tomorrow might bring.


Binyamin Appelbaum C’01 is the author of The Economists’ Hour and a member of the New York Times editorial board. Excerpted from The Economists’ Hour Copyright © 2019 by Binyamin Appelbaum. Used with permission of Little, Brown and Company, New York.  All rights reserved.

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