The New York Times revealed last
week that Facebook executives withheld evidence of Russian activity on the
Facebook platform far longer than previously disclosed. They also employed a political opposition research firm to discredit critics.
There’s a larger story here.
America’s Gilded Age of the late
19th century began with a raft of innovations — railroads, steel production,
oil extraction — but culminated in mammoth trusts owned by “robber barons” who
used their wealth and power to drive out competitors and corrupt American
politics.
We’re now in a second Gilded Age —
ushered in by semiconductors, software and the internet — that has spawned a
handful of giant high-tech companies.
Facebook and Google dominate
advertising. They’re the first stops for many Americans seeking news. Apple
dominates smartphones and laptop computers. Amazon is now the first stop for a
third of all American consumers seeking to buy anything.
First, it stifles innovation.
Contrary to the conventional view of a U.S. economy bubbling with inventive
small companies, the rate at which new job-creating businesses have formed in
the United States has been halved since 2004, according to the census.
A major culprit: Big tech’s sweeping
patents, data, growing networks, and dominant platforms have become formidable
barriers to new entrants.
The second problem is political.
These enormous concentrations of economic power generate political clout that’s
easily abused, as the New York Times investigation of Facebook reveals. How
long will it be before Facebook uses its own data and platform against critics?
Or before potential critics are silenced even by the possibility?
America responded to the Gilded
Age’s abuses of corporate power with antitrust laws that allowed the government
to break up the largest concentrations.
President Teddy Roosevelt went after
the Northern Securities Company, a giant railroad trust financed by J.P. Morgan
and John D. Rockefeller, the nation’s two most powerful businessmen. The U.S.
Supreme Court backed Roosevelt and ordered the company dismantled.
In 1911, President William Howard
Taft broke up Rockefeller’s sprawling Standard Oil empire.
It is time to use antitrust again. We should break up the high-tech behemoths, or at least require that they make their proprietary technology and data publicly available and share their platforms with smaller competitors.
There would be little cost to the
economy, because these giant firms rely on innovation rather than economies of
scale — and, as noted, they’re likely to be impeding innovation overall.
Is this politically feasible? Unlike
the Teddy Roosevelt Republicans, Trump and his enablers in Congress have shown
little appetite for antitrust enforcement.
But Democrats have shown no greater
appetite — especially when it comes to Big Tech.
In 2012, the staff of the Federal
Trade Commission’s bureau of competition submitted to the commissioners a
160-page analysis of Google’s dominance in the search and related advertising
markets, and recommended suing Google for conduct that “has resulted — and will
result — in real harm to consumers and to innovation.” But the commissioners,
most of them Democratic appointees, chose not to pursue the case.
The Democrats’ new “better deal”
platform, which they unveiled a few months before the midterm elections,
included a proposal to attack corporate monopolies in industries as
wide-ranging as airlines, eyeglasses and beer. But, notably, the proposal
didn’t mention Big Tech.
Maybe the Democrats are reluctant to
attack Big Tech because the industry has directed so much political funding to
Democrats.
In the 2018 midterms, the largest recipient of Big Tech’s largesse, ActBlue, a fundraising platform for progressive candidates, collected nearly $1 billion, according to the Center for Responsive Politics.
In the 2018 midterms, the largest recipient of Big Tech’s largesse, ActBlue, a fundraising platform for progressive candidates, collected nearly $1 billion, according to the Center for Responsive Politics.
As the Times investigation of
Facebook makes clear, political power can’t be separated from economic power.
Both are prone to abuse.
One of the original goals of
antitrust law was to prevent such abuses.
“The enterprises of the country are
aggregating vast corporate combinations of unexampled capital, boldly marching,
not for economical conquests only, but for political power,” warned Edward G.
Ryan, chief justice of Wisconsin’s Supreme Court, in 1873.
Antitrust law was viewed as a means
of preventing giant corporations from undermining democracy.
“If we will not endure a king as a political power,” thundered Ohio Sen. John Sherman, the sponsor of the nation’s first antitrust law in 1890, “we should not endure a king over the production, transportation and sale” of what the nation produced.
We are now in a second Gilded Age,
similar to the first when Congress enacted Sherman’s law. As then, giant firms
at the center of the American economy are distorting the market and our
politics.
We must resurrect antitrust.
Robert B. Reich is Chancellor's Professor of Public Policy at
the University of California at Berkeley and Senior Fellow at the Blum Center
for Developing Economies. He served as Secretary of Labor in the Clinton
administration, for which Time Magazine named him one of the ten most effective
cabinet secretaries of the twentieth century. He has written fifteen books,
including the best sellers "Aftershock", "The Work of
Nations," and "Beyond Outrage," and, his most recent, "The
Common Good," which is available in bookstores now. He is also a founding
editor of the American Prospect magazine, chairman of Common Cause, a member of
the American Academy of Arts and Sciences, and co-creator of the award-winning
documentary, "Inequality For All." He's co-creator of the Netflix
original documentary "Saving Capitalism," which is streaming now.
