The Curse of Bigness: Anti-Trust in the New Gilded Age

"Tim Wu is an advisor to Joe Biden on antitrust. The book’s title refers to a book with the same title by Louis Brandeis (1846-1941), the Supreme Court judge who was very instrumental in applying antitrust. Tim’s book brings up what Amy Klobuchar also does (I’ll talk about her book in a minute), that there are two arguments for fighting corporate bigness: one of them is economic, the other is political. The Chicago school never went into the political: they were focused on economics. The economics part is about the exploitation of labor, exploitation of the consumer, excessive pricing. The political part is about an imbalance of power. So in a democratic country, we elect people to make collective decisions for us, they go to Congress, and the system of government was founded—under the typical democratic and liberal system—as a balance of power between the executive, the judiciary, and the legislative. Tim Wu’s argument is that the Founding Fathers, in the 1700s, could not expect that a fourth power would emerge. The Constitution did not do anything to control corporations because there were none to speak of at the time (with the exception of the East India Company, which comes up in Amy Klobuchar’s book). Then, in the late 1800s, the same thing happened as is happening in China now: the government recognized that corporate power is not just bad for labor but for who is running the country as well. A century ago, Americans were saying, ‘Teddy Roosevelt doesn’t run the country, J.P. Morgan does.’ When Teddy Roosevelt needed to end the coal strike for the sake of the country and he could not get the new coal workers’ union and the coal companies to agree, what did he do? He made a call to J.P. Morgan. It was J.P. Morgan who said, ‘Okay, we’re all going to go into some form of arbitration.’ In 1907, there was a financial crisis, and the US government ran out of gold. Who organized the funding? J.P. Morgan. At that point, everyone knew who was running the country, but nobody had voted for him. So the whole political movement against antitrust is around the idea that we, in a democratic society, want power to be balanced, and controlled by the people. The corporates have all this power now, and at some point, they’re going to do bad things with that. That’s the point Tim starts with. Then he brings in two new ideas. Historians can debate whether he’s right. He argues that corporate concentration ultimately leads to an equivalent on the government side, which is fascism. In Germany before World War II, there was massive corporate concentration, much more than in any other country. Big corporates needed a well-organized country, not the chaos of the Weimer Republic and hyperinflation. They needed a partner and that was Hitler . The same thing happened in Italy and Japan. Corporates have massive power, and they want the same power concentration in the government. Effectively, he says, corporate concentration leads to the destruction of democracy and he’s afraid that the same thing will happen in the US. America did not have fascism before because we had antitrust, but at some point, Apple and Google will say, ‘Look at this stupid democracy, we need somebody to run the country properly.’ The second idea, which I thought was very interesting, is about why these big tech companies emerged in America. Europeans and Japanese may have much better engineers than Americans do, how come they didn’t create big tech? Tim’s argument is that one of the last big acts of antitrust was to break up AT&T, which was a telephone monopoly. The UK didn’t do that, you still had BT. All the big European countries had their national telephone monopolies. Japan never really deregulated either. All the original internet technology needed to go via telephone lines. Starting in the 1990s, it was the open access in the US that allowed the big technology companies to grow. Ultimately, allowing open competition leads to innovation and productivity. It’s a very nice example of what the long-term impact is. You might say initially, ‘Oh Amazon is very competitive here.’ But if you give it a monopoly, at some point, its real objective is to prevent anybody else from entering the market. In the process, they destroy competition. That really made me think. Tim Wu also makes the familiar arguments about concentration and income inequality, populism and consumer prices. Internet access in the US is two, three times the price it is in France. Airlines, pharmaceutical products: with so many of these products where you have a concentration of power, you’re paying one heck of a lot more in America than you pay in Europe. Yes. I was virtually at a conference a couple of months ago in Brussels, by Charles River Associates. They have antitrust economists and they brought in Tim Wu and Lina Khan, who is chair of the FTC and Jonathan Kantor, who is head of the Department of Justice’s antitrust division. Jan Eeckhout was there too. All these people I’m talking about were all there in person. It was quite amazing to see them. They speak quite well."