The question of how to encourage innovation while limiting the abuse of market power long precedes the advent of the digital age. And today, the need to strike the right balance is nowhere more apparent than in the case of dominant information-technology companies like Facebook and Google.
Unlike the 2008 global financial crisis, which was mostly a large negative aggregate demand shock, the next recession is likely to be caused by permanent negative supply shocks from the Sino-American trade and technology war. And trying to undo the damage through never-ending monetary and fiscal stimulus will not be an option.
The Communist Party of China would like the mainland Chinese population and the rest of the world to believe that the ongoing, sometimes violent protests in Hong Kong pose a threat of "terrorism." But the truth is that China has only itself to blame for pushing the city's idealistic youth into the streets once again.
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MEDFORD, MASSACHUSETTS – In a modern capitalist economy, we celebrate innovations that produce market power, but fear the risks of unchecked dominance. Nowhere are those risks more apparent than with today’s information-technology monopolies.
The question of how to encourage transformational, market-dominating innovations while limiting the abuse of market power long precedes the digital age. In the United States, the story of Walmart founder Sam Walton is a case in point. The World War II veteran went from small-town variety-store franchise owner to multi-billionaire mogul, presiding over what would become the world’s largest private employer.
It is a stirring tale of audacity and enterprise, which included innovations – such as establishing distribution centers in sparsely populated regions and building up global supply chains – that business students worldwide now study. And the huge profits Walmart generates for its owners are dwarfed by the value it provides to its customers, who rely on the low prices made possible by the company’s ability to buy and sell on a massive scale.
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