In a conference room overlooking the Chicago River last week, 35 years of thinking about the economy came under direct challenge. It won’t get as much attention as a Sean Spicer press conference or a Bernie Sanders town hall, but decades from now it may prove much more important to how our economy is organized.
The University of Chicago Stigler Center’s three-day conference asked: “Does America Have a Concentration Problem?” A sufficient response to this could be “go outside.” Virtually every major sector in our economy has been whittled down to a few major players. Two companies produce nearly all of America’s toothpaste. One, Luxottica, produces nearly all the sunglasses. There are four cable and Internet providers, who have divvied up the country and rarely compete. There are four major airlines. There are four major commercial banks. There are four major Internet platforms—Amazon, Facebook, Apple, and Google—controlling your information flow, your data, and your virtual life.
These markets are shrinking further, thanks to a continuing wave of mergers. Bayer is buying Monsanto to control a significant section of the agricultural seed market. AT&T and Time Warner’s combination would tie a content distributor to a content provider. The Walgreens–Rite Aid deal would narrow major chain pharmacies down to two (three if you’re generous and include Walmart). Platform monopolies like Google are buying a firm a week; it’s become a large part of their research-and-development strategy to acquire ideas and market share simultaneously.
This market consolidation has wide-reaching effects beyond the higher prices monopolies can charge due to lack of competition. Quality suffers when consumers have nowhere else to turn. Supply chains become fragile—an outage from Amazon Web Services, the leader in cloud computing, took out half the Internet in February. Economic power begets political power, and democratic institutions suffer. Personal liberty to use talents and skills gets stymied when there’s only one game in town. Barriers to entry have led to a decline in business start-ups and a retrenching of economic dynamism. Inequality grows when a few at the top gather all the rewards in a market.
Our growing monopolization didn’t happen by accident. Starting in the 1970s, a group of academics led by failed Supreme Court nominee Robert Bork changed the view of antitrust law, which was originally intended to break up concentrated power. Without altering a word in the Sherman Antitrust Act, Bork and his colleagues—known as the “Chicago school” because of their devotion to University of Chicago neoclassical economic theories—rewrote history, determining that antitrust merely concerned “consumer welfare,” an economic study of prices, rather than effects on competition. Starting in the Reagan administration, the Chicago school’s capture of antitrust theory has brought us to a period of market concentration unrivaled since the Gilded Age.