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Market Power Is Eating the Economy

While economic observers have long worried about the growing dominance of Big Tech, few have apprehended the sheer scale of the problem. Today's technologies have handed exorbitant market power to dominant players across all sectors, to the detriment of the vast majority of people.

BARCELONA – Since the 1980s, the Dow Jones Industrial Average, adjusted for inflation, has grown at an average rate of about 6.7% per year, reaching new highs of 30,000 in November 2020 and 34,000 in April 2021. But the Dow has not always followed this growth pattern. If one takes the long view – focusing on the evolution of stocks since World War II and not letting sharp short-term fluctuations obfuscate matters – a very different picture emerges.

In 1981, the Dow (inflation-adjusted) was at the same level that it stood at in 1946, suggesting that there was zero growth over that 35-year period. But that does not mean the unprecedented rise in stock-market valuations since the early 1980s is a bubble. Bubbles are whimsical, short-lived phenomena. They are not driven by fundamental changes in the economy, nor are they backed up by firms achieving results that justify their seemingly outlandish valuations.

The most valuable firms today are genuinely thriving, turning huge profits that justify their high valuations. Apple, Visa, Johnson & Johnson, Facebook, and most other major companies that everyone knows and loves (in some cases) have enjoyed unprecedented success in recent years. The question, then, is what has happened since the 1980s to account for this massive, sustained stock-market boom.