Antitrust is changing from the ground up

Big Tech is back in the congressional hot seat. On Wednesday, the chief executives of Amazon, Apple, Facebook and Google will be questioned in a House judiciary antitrust subcommittee hearing.

This is perhaps the most important and high-profile conversation about monopolies since the Microsoft case of the 1990s. If Democrats triumph in the November elections, it could also be a major, multi-decade turning point in US antitrust policy. They want to curb not only Big Tech, but a number of other industries with dominant players — finance and pharmaceuticals — with more regulation.

If that happens, we should thank not only Washington, but state and local officials who have been challenging corporate power in their own backyards for several years. As a new report from the Institute for Local Self-Reliance lays out, they have been “on the front lines of the problems caused by excessive concentration” in America, including food insecurity, power outages and poor broadband coverage. These vulnerabilities have been highlighted by the coronavirus pandemic.

Nationally, Democrats are focusing on corporate concentration as a campaign issue. They are pushing back against 40 years of neoliberal thinking that has measured economic success in terms of low consumer prices rather than high incomes and job security. But well before antitrust became trendy, local communities were waging successful fights against corporate behemoths for practical rather than ideological reasons. Those battles have laid the groundwork for what may come at federal level.

North Dakota, for example, has made a purposeful decision to put community banks and credit unions at the heart of its financial sector, sidestepping the four megabanks that now control 44 per cent of the assets of the US banking system. That looks smart now that research has shown that cities and states with more community banks are receiving more aid from the Covid-19 Paycheck Protection Program. Entrepreneurs have been able to look to local banks to support their applications, and that translates into improved solvency and higher employment in the crisis. 

There are countless examples of communities that have successfully waged such David and Goliath battles. They have used not just state antitrust legislation but also rules around land use, tax policy and labour enforcement. Very often, they end up economically better off. Communities with a greater share of their economy in the hands of small businesses are better at solving problems collectively, says Stacy Mitchell, the ILSR’s co-director. They also have higher levels of civic participation, according to research. “Just as we know that concentrated power corrupts democracy, the opposite is true,” she says. “The more broadly economic decision-making is distributed, and the more say people have over their livelihoods, the more effective and engaged they are as citizens.”

That is a key point to get across now, as Congress wrangles over the next Covid-19 relief package, and whether to offer more help to small businesses as well as state and local government. Some believe policymakers should embrace creative destruction in a kind of Schumpeterian culling of what would surely be tens of thousands of small businesses in less productive sectors such as restaurants, services and personal care. They argue this would encourage workers to retrain and redeploy in the digital economy. But that runs into the problem that each generation of Big Tech companies seems to be able to do more with fewer people. A handful of very large, very rich companies that need fewer and fewer workers doesn’t add up to an economy.

Allowing certain kinds of small- and medium-sized enterprises to fail not because they are unsuccessful, but because they are not high-growth digital enterprises, would be a mistake. Economists obsessed with “efficiency” theory have been making it for years. They look simply at a few data points on a spreadsheet, and ignore how SMEs support communities in ways that larger companies often do not or cannot.

Regions with a greater share of SMEs have less income inequality and faster household income growth, according to research gathered by the ILSR. Small businesses tend to be embedded in a web of local and regional economic relationships with other businesses. This creates resiliency and also sparks innovation. Research shows that industries with a mix of firm sizes produce new inventions and processes at a faster clip. Indeed, this is an argument many Big Tech executives would put forward about Silicon Valley. It’s that very ecosystem which helped launch generations of successful start-ups.

Battles with big corporations of any kind are hard to fight. EU competition commissioner Margrethe Vestager recently lost a tax case against Apple. But the smaller battles fought at the city and state level can have national impact. During the 1920s, small-town protests over issues such as grocery monopolies and Wall Street control of family farms brought the attention of Franklin Roosevelt to antitrust issues. He began to give speeches about the topic — much as Senator Elizabeth Warren, Representative David Cicilline and Federal Trade Commissioner Rohit Chopra do today. FDR led the last big crackdown on corporate monopolies. It’s time for another.

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