Last week Donald Trump, in his usual provocative manner, called out Amazon.com for having “a huge antitrust problem”.
Leaving aside Trump’s tendency for headline-grabbing theatrics, the real question is: does he have a point?
We think yes. In fact, we think he probably didn’t go far enough. After all, it’s not just an Amazon issue. It’s a FANG complex and beyond issue.
And we’re not the only ones. In the last week Joseph Stiglitz has knocked it out of the park in terms of articles lamenting the scale of monopolism today. On Friday in the Guardian, Stiglitz noted for example:
But we think there are other factors in play as well.
Back in the day antitrust was about breaking up monopolies and cartels to allow the little guy to have a stab at having a business of his own, a process which hopefully in the long run transferred producer surpluses to consumers — because it helped to create localised and diverse jobs. Small was beautiful. Small was distributed. And small meant everyone had a chance of pursuing the archetypal American dream.
These days, however — even if antitrust is still in play — the result seems only to be a substitution of one monopolist for another. A replacement of the old guard by a new guard.
And part of that, we’d argue, is down to the mindset of those doing the disrupting. Rarely these days (especially with regards to tech companies) is the aim to become a consistently profitable small or mid-sized company. Much more frequently the focus is on becoming a growth obsessed winner takes all unicorn.
This in turn, we’d argue, is connected to the modern entrepreneurial mantra, wherein innovators are openly egged on to become monopolists from the get go. This is now a celebrated cultural phenomenon with no regard for the twisted incentives embedded within it, and one which manifests in business logic like “minimum viable product” enterprise ventures.
While certain “natural monopolies” can be inevitable, the idea generally is to operate them under the auspices of a governmental, state or non-profit body — so that the profits (if any) can flow right back into the public sector rather than be stockpiled in the coffers of Apple, Google and so on.
But celebrating unchecked monopolism in and of itself, we’d say, is a bit like celebrating autocracy — and by that we don’t mean the benevolent sort which sees an absolute ruler harnessing his wealth for the social good.
To the contrary, while it’s currently good to be the king, it’s even better to be Mark Zuckerberg — something which suggests today’s Game of Thrones is all about finding ways to disrupt, dethrone, or usurp the existing power base in a bid to claim it for yourself rather than to dismantle it for the greater good. (No one is trying to “break the wheel”, in other words.)
That’s worse than a neo-feudalism structure. At least during feudalism, most kings and lords understood they had a duty of care to their serfs, vassals and dependents. No such luck here.
So is rising monopoly power part of the explanation for stagnating middle class incomes in the West and the trend of rising inequality? Simon Taylor, director of the University of Cambridge Master of Finance has some thoughts on that here (H/T Climateer) and he provides some compelling evidence for the case that yes, rising inequality and reduced productivity may both be connected to failing antitrust intervention.
From his concluding comments (our emphasis):
If these platform-dependent technologies give rise to more monopolism not less who’s to say we’re not better off insisting we keep doing much of the work ourselves?
More importantly still, if today’s inequality problem can really be equated to an anti-trust issue cast within a giant game of monopoly, does that somehow make Donald Trump the real world version of Jon Snow? (Both men support robust border security, were born to wealthy families, have a way with the ladies, are known for their hair, and are loathed by many of their comrades. Both are also said “to know nothing” about foreign policy. Just saying.)
Leaving aside Trump’s tendency for headline-grabbing theatrics, the real question is: does he have a point?
We think yes. In fact, we think he probably didn’t go far enough. After all, it’s not just an Amazon issue. It’s a FANG complex and beyond issue.
And we’re not the only ones. In the last week Joseph Stiglitz has knocked it out of the park in terms of articles lamenting the scale of monopolism today. On Friday in the Guardian, Stiglitz noted for example:
In today’s economy, many sectors – telecoms, cable TV, digital branches from social media to internet search, health insurance, pharmaceuticals, agro-business, and many more – cannot be understood through the lens of competition. In these sectors, what competition exists is oligopolistic, not the “pure” competition depicted in textbooks. A few sectors can be defined as “price taking”; firms are so small that they have no effect on market price. Agriculture is the clearest example, but government intervention in the sector is massive, and prices are not set primarily by market forces.Stiglitz says some of the increase in market power stems from changes in technology and economic structure. He cites network economies and the growth of locally provided service-sector industries in that regard as well as firms such as Microsoft and drug companies which have learned how to better erect and maintain barriers. In other cases, he says, it’s down to more skilful abuse of market power through the political process, for example the lobbying actions of banks.
But we think there are other factors in play as well.
Back in the day antitrust was about breaking up monopolies and cartels to allow the little guy to have a stab at having a business of his own, a process which hopefully in the long run transferred producer surpluses to consumers — because it helped to create localised and diverse jobs. Small was beautiful. Small was distributed. And small meant everyone had a chance of pursuing the archetypal American dream.
These days, however — even if antitrust is still in play — the result seems only to be a substitution of one monopolist for another. A replacement of the old guard by a new guard.
And part of that, we’d argue, is down to the mindset of those doing the disrupting. Rarely these days (especially with regards to tech companies) is the aim to become a consistently profitable small or mid-sized company. Much more frequently the focus is on becoming a growth obsessed winner takes all unicorn.
This in turn, we’d argue, is connected to the modern entrepreneurial mantra, wherein innovators are openly egged on to become monopolists from the get go. This is now a celebrated cultural phenomenon with no regard for the twisted incentives embedded within it, and one which manifests in business logic like “minimum viable product” enterprise ventures.
While certain “natural monopolies” can be inevitable, the idea generally is to operate them under the auspices of a governmental, state or non-profit body — so that the profits (if any) can flow right back into the public sector rather than be stockpiled in the coffers of Apple, Google and so on.
But celebrating unchecked monopolism in and of itself, we’d say, is a bit like celebrating autocracy — and by that we don’t mean the benevolent sort which sees an absolute ruler harnessing his wealth for the social good.
To the contrary, while it’s currently good to be the king, it’s even better to be Mark Zuckerberg — something which suggests today’s Game of Thrones is all about finding ways to disrupt, dethrone, or usurp the existing power base in a bid to claim it for yourself rather than to dismantle it for the greater good. (No one is trying to “break the wheel”, in other words.)
That’s worse than a neo-feudalism structure. At least during feudalism, most kings and lords understood they had a duty of care to their serfs, vassals and dependents. No such luck here.
So is rising monopoly power part of the explanation for stagnating middle class incomes in the West and the trend of rising inequality? Simon Taylor, director of the University of Cambridge Master of Finance has some thoughts on that here (H/T Climateer) and he provides some compelling evidence for the case that yes, rising inequality and reduced productivity may both be connected to failing antitrust intervention.
From his concluding comments (our emphasis):
The goal of governments should not be to try to stamp out any deviation from perfect competition but to ensure that industries with high profitability have earned it through genuine competitive success, not by excluding competitors. It will always be hard to get this judgement right but the history of the US economy suggests that vigorous competition, reinforced by occasional but firm anti-trust interventions, is in the best interests of consumers and employees.Which does make you wonder about a lot of the autonomous and networked-tech being touted by technologists these days. After all, whose interests do these technologies really serve? Are they supposed to make our lives easier? Or are they being rolled out to increase our dependency on a system governed by a network of absolute monopolists?
Rising concentration and higher profitability for the most profitable firms is consistent with the trend of stagnating wages (because profits are taking a higher share of national income) and of declining productivity growth (because these firms are less under pressure to invest for innovation).
There are undoubtedly other causes too (changes in technology, especially those that reduce the need for skilled labour, and globalisation of trade leading to erosion of high paid manufacturing jobs in the US). But this is an area where government can actually do something.
If these platform-dependent technologies give rise to more monopolism not less who’s to say we’re not better off insisting we keep doing much of the work ourselves?
More importantly still, if today’s inequality problem can really be equated to an anti-trust issue cast within a giant game of monopoly, does that somehow make Donald Trump the real world version of Jon Snow? (Both men support robust border security, were born to wealthy families, have a way with the ladies, are known for their hair, and are loathed by many of their comrades. Both are also said “to know nothing” about foreign policy. Just saying.)
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