The trouble with the U.S. economy is monopoly power.
Concentrated business power means less consumer choice, less opportunity for entrepreneurs and greater concentration of wealth.
Senator Elizabeth Warren described the problem very well in a speech on Wednesday. If you care about this issue, I strongly recommend that you click on the first link below.
She noted that five banks have been designated as “too big to fail” by the Federal Reserve Board and the Federal Deposit Insurance Corp.
But that situation is not limited to the banking industry. Four airlines (down from nine in the past 10 years) control 80 percent of all airline seats. If American, Delta, United or Southwest were to be in danger of ceasing operations, could there be any doubt that the government would want to keep them flying at all costs?
There’s another problem with concentration in the transportation industry, and that is the incentive to abandon small and remote communities and concentrate services in a few hubs. The second article linked below describes how concentration in the airline, railroad and trucking industries has harmed small cities in the Heartland. “Flyover country” wasn’t always flyover country.
Concentration means less consumer choice. Warren pointed out that more than half of Americans who with Internet or cable television service use Comcast. Yet, she said, a third of U.S. citizens who theoretically have access to high-speed Internet service can’t afford it. Americans pay more than Europeans for Internet service and get worse service.
Concentration gives large companies the power to block emerging competitors. Recently, Warren said, complaints have been filed against Google for using its search engine to harm rivals of its Google Plus user review feature, against Apple for making it difficult for rivals of Apple Music to offer streaming services via i-Phone and against Amazon for steering customers to books published by Amazon to the detriment of other publishers.
Even with straight-out competition, there is the “Wal-Mart” effect. When a big box store comes to town, small locally-owned businesses fail.
And when economic power is concentrated in the hands of a just a few, the “job creators” have the power to drive down middle-class wages while enriching themselves.
The solution to this problem, Warren said, is simply to enforce the anti-trust laws as originally written.
The reason that they aren’t is a neoliberal philosophy of business regulation that took hold in the late 1970s, which held that the most important thing was not competition, but business efficiency. If Amazon can serve customers more efficiently that a local bookstore, then, according to this idea, there was no reason for the local bookstore to exist.
That could be true only if Amazon, Wal-Mart, Comcast and other big corporations were owned and operated by altruists, who passed along the gains in economic efficiency to customers, workers, suppliers and the local community.
But even when consolidation produces economic efficiency that benefits consumers, economic efficiency isn’t everything. Concentration of economic power means concentration of political power, which results in the kind of dysfunctional economic system we have now.
The benefit of Warren’s proposals is that they do not require action by Congress. All they require is enforcement of the letter of the law.
I myself would go beyond this. In banking, for example, and maybe Internet service and other industries, there is a benefit in a public option. And in some cases, there is a need for public utility-type regulation. But a return to traditional anti-trust enforcement, as Warren proposes, would be a big change for the better.
Elizabeth Warren’s Consolidation Speech Could Change the Election by Paul Glastris for the Washington Monthly. This includes the complete transcript of Warren’s speech. Of course what’s important is whether her proposals are actually put into practice, not whether they help Hillary Clinton against Donald Trump.
Bloom and Bust: Regional inequality is out of control, here’s how to reverse it by Phillip Longman for the Washington Monthly.
Monopoly Power Is on the Rise in the US: Here’s How to Fix That by Mike Konczal for The Nation.