The Biden Administration’s Recent Antitrust Wins Help Us All
The steady rise of market power in the United States has undercut productivity growth, contributed to inequality, and reduced ordinary Americans' living standards. Fortunately, US antitrust authorities are finally taking the problem seriously and chalking up important victories on the public's behalf.
NEW YORK – Competition is what makes markets work (when they do). But firms don’t like competition because it tends to drive down profits. For the typical businessperson, whose objective is reaping gains above the normal return on capital, that is no fun. As Adam Smith observed 250 years ago, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”
For at least 130 years, the US government has been trying to ensure competition in the marketplace. But it has been a constant battle. Firms are always coming up with new ways to circumvent competition; their lawyers are always devising new methods to avoid the reach of the law; and the government has failed to keep up with either of these practices, let alone with rapid advances in technology.
Hence, there is now overwhelming evidence of an increase in market power in the United States. That means bigger corporate profits (far exceeding risk-adjusted returns), higher market concentration in sector after sector, and fewer new entrants. Americans like to think that they have the most dynamic economy the world has ever seen, one that is now on the cusp of a new innovative era. But the data refute such claims.