More Reasons For Stronger Antitrust Enforcement
I have been harping on the importance of a strong antitrust policy for a long time now. As I’ve written, this one policy can provide enormous benefits across a wide range of policy areas – increasing jobs, raising wages, minimizing the barriers to enter markets, lowering inequality, and reducing the political power of these monopoly firms. There’s not many other single policies that can provide those benefits. And two recent stories show the absolute need for stronger antitrust enforcement.
A study now claims that the relaxation of antitrust enforcement in the 1980s has led to the decline of smaller and medium sized cities around the country. The relaxed antitrust rules created a wave of mergers over the last thirty years and the result is that a few large cities have gained lots of jobs, even creating housing shortages, while other cities saw their anchor companies taken over and the jobs disappear. According to an expert on urban policy at the Brookings Institution, “Virtually all cities and metropolitan areas have seen precipitous declines in the number of locally owned corporations“. That has “seriously degraded the quality and local focus of regional business leadership, philanthropy, and other resources.”
A classic example of this phenomenon is the city of St. Louis which has gone from being the home of 23 Fortune 500 companies to just 9 in the last 35 years. The ancillary effects from a loss of this magnitude was large. Jobs in advertising, public relations, and legal services disappeared. When TWA was taken over by American Airlines, the city lost its status as a major airline hub. In 1997, when Boeing took over McDonnell Douglas, it resulted in 7,000 direct layoffs. A similar takeover of Anheuser Busch resulted in 2,000 direct job losses. As the related white collar jobs associated with these business eventually leave the city, it becomes a less attractive place for business, creating a vicious cycle of decline. In addition, the loss of local control also probably leaves many investment opportunities wasting as there is no one home to actually finance the various projects.
Before the conservative view of antitrust took hold in the 1970s and 1980s, local control was a real factor in determining whether a merger or acquisition should go forward. That, along with so many other considerations that protected jobs and regions, went into the dustbin when the conservative concept of promised lower consumer prices achieved total primacy in antitrust enforcement. Now, admittedly, the decline of St. Louis and other cities has also been effected by the destruction of unions, globalization, and automation. But there is no doubt that lax antitrust enforcement has also been an issue.
Less devastating but equally pernicious is what has happened with Google and the New America Foundation, a leading think tank on the left. Eric Schmidt and Google have given over millions to support the foundation over the years. But when the Open Markets group of the foundation, which focuses on reining in monopoly power, put out a statement supporting the EU’s $2.7 billion fine of Google, it was apparently too much for Schmidt and Google to bear. They apparently threatened to withdraw funding for New America unless the foundation agreed to cut loose the Open Markets group. Needless to say, the foundation did exactly that. The specifics of this sordid affair are bad enough. More importantly, it speaks to the power that monopolies like Google have and the influence they have not only in Congress but even in constricting the range of ideas that are allowed in mainstream discourse. Yes, this is probably the least of the problems with monopolies but it is instructive on just how detrimental they are not only to our economy but to our political discourse.
It’s simply time to break them up.