As demonstrated by the current presidential campaign, Americans live in an age of hostility toward economic power being concentrated in a few big firms. The breakup of big tech, big pharma, big banks, and firms in other industries such as airlines, beer, and hospitals may get a lot of media coverage, but the public shouldn’t bet on seeing much really change.
Candidates on the left sermonize that it is time to take a fresh look at antitrust laws that have not gotten much attention for the last 40 years, with the exception of the Microsoft case in the late 1990s. They want to smack down companies that have gotten too big, too powerful and make it harder for entrepreneurs to build the next Google or Facebook. The candidates argue that the U.S. economy has grown more concentrated since the early 1990s, with the spoils going to a select few in each industry.
They’re right. Beyond all the left-wing piety, American industry is increasingly dominated by a shrinking handful of giant companies.
For example, the top four domestic airlines collected 41 percent of the industry’s revenue 10 years ago; today they collect 65 percent. It’s the same story in the beer industry, where four firms control nearly 90 percent of the market despite the proliferation of craft brewers. Even in the poultry industry, Tyson’s, Pilgrim’s Pride, and Perdue all but control U.S. production. And three major drug store chains – Walgreens, CVS Health, and Rite Aid – dominate that industry.
Facebook has acquired 67 firms and Amazon 91 firms – some of which were rising, young competitors – without being challenged by regulators. And the number of companies listed on the New York Stock Exchange fell by half between 1996 and 2016. The dominant players believe that if they are to succeed, they must shore up economies of scale and erect high barriers to entry to scare off potential competitors and lock up new markets.
A handful of politicians, policy advisors, and economists contend that unrestricted concentration in certain industries is a threat to a functioning democracy. This is a fancy way of saying that the United States has massive income inequality, with the top 1 percent earning 23.8 percent of the national income and controlling 38.6 percent of national wealth. For political candidates on the left, this intensifies their meliorism and arguments that a structural dismantling of this concentrated power is necessary.
In general, Washington politicians have failed to take steps to make markets more competitive, allowing superstar companies to become even more powerful. Sure, retirement accounts do OK, but wages and the economy suffer as a result of decreasing competition.
None of this is new, it’s just been forgotten. Regulating market concentration has been a leitmotif in American history, starting with passage of the nation’s first antitrust law, the Sherman Act of 1890. Later, President Theodore Roosevelt led the effort to break up the Standard Oil Company’s monopoly, and up through the 1960s many mergers were routinely challenged.
Fast forward to the 1970s, when University of Chicago scholars argued that the Sherman Act was to protect consumers from high prices, not preserve competition by protecting small businesses from big ones. They claimed that large companies contribute to economic efficiency and innovation, and government should cut back on antitrust enforcement. In effect, get government off the back of American industry.
They won the day. Other than Microsoft, antitrust enforcement on big companies has been essentially dormant for the last 40 years.
It may be time to take a fresh look at the enforcement of antitrust law – especially big tech companies. But don’t hold your breath. Big corporations spend tens of millions of dollars every year to push their objectives. According to the Center for Responsible Politics, Facebook spent $12,120,000 on lobbying in 2018 and Amazon spent $14,400,000.
Former California political power broker Jesse M. Unruh was indeed right when he said, “Money is the mother’s milk of politics.”
