Senator Elizabeth Warren (D-MA) is campaigning like it’s the 1892 presidential election, and her opponents are President Benjamin Harrison and former President Grover Cleveland. Sen. Warren’s campaign promise is breaking up the monopolies running wild in the U.S. economy, and nothing is going to hold her back, not even the yellow fever epidemic. As a famous Native American proverb goes, one that may have been uttered by her ancestors: “People may hate you for being different and not living by society’s standards, but deep down, they wish they had the courage to do the same.”
Warren Against Monopoly
In an attempt to bolster her single-digit support in the polls, the two-term senator is throwing every progressive goodie at the wall to see what sticks. First, it was leading a national conversation on slave reparations. Then, it was taking charge of a nationwide discussion on abolishing the electoral college. Now, Warren doesn’t just want to talk about breaking up Big Tech and Big Ag, she wants to go to war with the titans of Silicon Valley and the giants of agriculture.
Speaking in Queens, Warren championed a regulatory initiative targeting the decimation of Amazon, Apple, Facebook, and Google. How would she accomplish this feat? One proposal is to rollback several major mergers in recent years, including Amazon’s acquisition of Whole Foods, Facebook’s purchase of Instagram, and Google’s deal with Waze. Another idea is to prohibit transferring and sharing users’ data with third parties. The other suggestion is to ban websites from maintaining a marketplace for commerce and then participating in that same marketplace; for example, the AmazonBasics brand could not be sold in the Amazon marketplace.
Apple, too, would be in the senator’s warpath, as she told The Verge:
“Apple, you’ve got to break it apart from their App Store. It’s got to be one or the other. Either they run the platform or they play in the store. They don’t get to do both at the same time. So, it’s the same notion.
If you run a platform where others come to sell, then you don’t get to sell your own items on the platform because you have two comparative advantages. One, you’ve sucked up information about every buyer and every seller before you’ve made a decision about what you’re going to sell. And second, you have the capacity — because you run the platform — to prefer your product over anyone else’s product. It gives an enormous comparative advantage to the platform.”
Next on her list is Big Ag.
Writing in a policy post on Medium, Warren complained that “consolidation is choking family farms,” blaming lax merger enforcement for the trends of the last decade. Like the technology sector, Warren would appoint trustbusters and reverse so-called anti-competitive mergers, including the recent Bayer-Monsanto deal.
She also targeted specific elements of the agricultural sector, such as meat processing and seeds. Warren grieved that there are only a handful of businesses selling seeds today, plummeting from about 600 companies two decades ago. And she homed in on food giant Tyson, accusing it of controlling “just about every aspect of bringing chicken to market,” which has led to chicken farmers forced into a “contracting farming system in which they take on huge risks.”
According to Warren, the nation’s concentration problem is what is affecting the economy and it is “hiding in plain sight.”
Since coming into office, President Donald Trump has repeatedly sounded the alarm about monopolies, going as far as threatening to use anti-trust laws against Big Tech. So, could Trump supporters back Sen. Warren on this issue? Andrew Surabian, Donald Trump Jr.’s political adviser, thinks conservatives ought to lend their support to the first-ever Native American senator and presidential candidate.
Many Republicans have been outspoken about monopolies. Rep. Matt Gaetz (R-FL) told The Daily Beast that the House antitrust subcommittee could “go gangbusters on Big Tech,” which would “get lots of bipartisan support.”
Senator Ted Cruz (R-TX) has also endorsed Warren’s proposals, arguing that “Big Tech has way too much power to silence Free Speech.”
This would likely please Trump’s base. There has been a push to treat the internet like public utilities, using outdated 19th century regulation to achieve this feat. Of course, this is nothing more than an act of revenge against the occupants of Mountain View, who have regularly censored the online right. What is often omitted is that big government helps big business, not mom and pop.
So, is using the Sherman Act and other measures from 1890 the right thing to do?
For more than a century, the U.S. has had antitrust legislation at the federal and state level. Using the public interest concept, the economic logic is that businesses will bulldoze the competition, monopolize trade, and jack up prices to unaffordable levels. These monopolies would employ unfair policies, utilize deceptive practices, and ensure that there is no other alternative to a product, service, or raw material.
Is this happening right now? Is the free market giving birth to a monopoly crisis? It can be agreed that a free market system would afford businesses the freedom to monopolize. At the same time, it is important to determine if today’s economy is churning out monopolies. And, if it is, the question then becomes: Haven’t consumers decided what they want?
The internet seems like an infinite realm. There are one billion websites available, as many as 500 new web portals are developed every day, and the number of people accessing the net is increasing. In other words, consumers have options – a lot of them! Google is a search engine juggernaut, but users also have many alternatives at their disposal: DuckDuckGo, Bing, Yahoo!, Gibiru, Search Encrypt, and many more. Don’t like Facebook or Twitter? Give Google+, Telegram, Reddit, Gab, or Codias a try. If you still think Facebook and Twitter are superior services, then that is your decision.
Even if Mark Zuckerberg, Jack Dorsey, and Sundai Pichai colluded to acquire all available services, a free market society would still offer competition. An entrepreneur from Biloxi, Mississippi or Iqaluit, Nunavut has the liberty to offer a new product, improve his own output, and innovate a service already in existence. The only way this could not happen is if the government intervened and passed laws protecting monopolies.
A free market monopoly is still possible, and that isn’t necessarily a bad thing. A business may be more efficient in its operations than competitors. The company could produce goods at a lower cost and sell these products at the lowest prices to shoppers. Indeed, there would be a barrier of entry, but that is because rivals are inefficient compared to this enterprise.
It is routinely surmised that monopolies would institute predatory pricing. This entails companies, in an attempt to monopolize, to suppress prices and offer the cheapest possible cost to shoppers in the hopes that customers only patronize that store. It might make sense in a classroom lecture, using Walmart as a case study, but it is impractical in the real world.
- Price-cutting is an expensive endeavor, especially if the market is open enough for a new supply.
- A business cannot survive for an entire decade perpetually undercutting competitors.
- If the business eventually raises the cost, then ex-competitors would return to the market.
- Consumers can decide if they prefer low or high prices and use other factors (customer service).
Zuckerberg and Bezos are not sitting in a dark room somewhere plotting to takeover the internet. But you should be concerned when these two billionaires begin to advocate heightened regulation, more government intervention, and, heaven forbid, Warren’s plan.
What, Me Worry?
Milton Friedman quoted an old expression that to catch a thief, you should unleash a thief. If you want to stop a businessman’s monopoly, then you set a businessman to break it down. You never send a government bureaucrat after it. Throughout history, contrary to popular opinion, some of the biggest U.S. companies that have gotten immense has been through state regulation, intensive lobbying, and government-led barrier to entry efforts. If the anti-trust crowd is fearful of monopoly, then the best thing it can do is to deregulate industry, shrink the size and scope of government, and allow the free market to be what it is supposed to be: free.