- Economist Joseph Stiglitz believes the United States has a monopoly problem.
- He points to a growing market concentration across major industries like pharmaceuticals and telecom to be the result of a failure to keep antitrust laws updated.
- He considers a decrease in competition to be both the result of, and further cause of, wealth inequality, which in turn slows overall economic growth.
- This post is part of Business Insider’s ongoing series on Better Capitalism.
President Donald Trump has said for years that Amazon could require an “antitrust situation” and, with very different motivations, Sen. Bernie Sanders of Vermont has been fighting against what he deems Amazon’s abuse of its unmatched power over its employees.
And Massachusetts Sen. Elizabeth Warren has been the most vocal figure in Washington calling for breaking down what she considers America’s monopolies in the airline and health care industries, among others.
For Joseph Stiglitz, a Nobel Prize-winning economist with Columbia University, talk of monopolies in the United States goes beyond partisan political rhetoric.
As he said in a talk given last year:
“We seem no longer to control our own destinies. If we don’t like our Internet company or our cable TV, we either have no place to turn, or the alternative is no better. Monopoly corporations are the primary reason that drug prices in the United States are higher than anywhere else in the world. Whether we like it or not, a company like Equifax can gather data about us, and then blithely take insufficient cybersecurity measures, exposing half the country to the risk of identity fraud, and then charge us for but a partial restoration of the security that we had before a major breach.”
Sure, comparing the steel monopoly of America’s Gilded Age of the late 19th century to the concentration of power Big Pharma has today in our “New Gilded Age” is a stretch, but in both cases they were both the result of, and drivers of, further economic inequality.
In an interview with Business Insider in March, Stiglitz argued that a foundation of the income inequality that has been rising in the US since the 1980s was the free market ideology championed by the Chicago school of economics.
Basically, the Chicago school argues that the “invisible hand” of the market is capable of correcting itself; in the case of a monopoly, for instance, “monopoly power would only be temporary, and the ensuing contest to become the monopolist [would maximise] innovation and consumer welfare,” as Stiglitz put it in his speech.
It’s an ideology that Stiglitz insists is disproven by data.
Stiglitz believes that antitrust law did not keep up with a changing economy, and that’s why large companies were able to create barriers to entry that allowed them to continue growing larger and consuming smaller competitors – in a way beyond healthy competition.
This results, he said, in rent-seeking (the increase of a company’s share of wealth without creating new wealth), lower returns on investment, a stifling of innovation, and a less efficient economy.
In an essay he wrote in 2016, Stiglitz pointed to research from President Barack Obama’s council of economic advisers, which was led by Jason Furman. The team found that in the period from 1980-2010, the top 10 banks’ share of deposits rose from 20% to 30%.
The team also found that market concentration increased across major industries from 1997-2012 (e.g. the revenue share of the largest 50 firms in transportation and warehousing and retail trade both increased by over 11%).
Stiglitz pointed out to Business Insider that the average GDP growth for the US has been sluggish (a post-2000 average of 2.0% versus a post-1948 average of 3.2%), and, as French economist Thomas Piketty has pointed out in detail, that recent growth has been largely captured by the 1% anyway.
The rising inequality of both wealth and income in the US is, of course, very complex, but according to Stiglitz, updating our antitrust laws to make our markets more competitive is a necessary step to lessen inequality and increase growth.
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