Too Much of the Economy is Powerless
March 27, 2018
By Marshall Steinbaum
Today, the Roosevelt Institute released Powerless: How Lax Antitrust and Concentrated Market Power Rig the Economy Against American Workers, Consumers, and Communities, a report I wrote with my colleagues Eric Harris Bernstein and John Sturm. In this report, we catalog the growing body of evidence that strongly supports our view that the economy is afflicted by a large and growing “market power problem.” We define market power as “the ability to skew market outcomes in one’s own interest, without creating value or serving the public good.” We make the case that today’s market power problem affects and distorts economic outcomes to the detriment of all stakeholders aside from the very powerful.
I want to highlight two important implications of this research.
First, the economy’s market power problem requires a legislative solution. The accumulation of court decisions, federal enforcement policies, and ideological consensus among officials charged with carrying out antitrust and related competition policies has skewed the existing body of law to focus solely on the consequences of market power for consumers (and even within this narrower purview, existing policy and regulators are doing a poor job protecting consumers from market power). The problem we document is not something that can be solved with a little tweaking around the edges—concentrated market power is a pervasive reality of the economy we live in and, as an overarching narrative, unites many of the economic concerns that have occupied public and policy debate in recent years. Merely “increasing enforcement” under existing, deeply inadequate doctrines, such as the consumer welfare standard, is not going to solve this problem.
Though complex, legislating on the issue of market power is not out of reach for the people’s representatives. Fundamental values are at stake: free and fair markets, an equal playing field, and universal access to the necessary components of a decent life. Antitrust jurisprudence has perverted the meaning of existing statutes over the past 40 years in order to deny the role of these principles, and now we’re paying the price with an economy that doesn’t work for the majority of Americans. It’s a mess, and it’s a mess that can only be cleaned up if the people and their representatives take antitrust policy back from the ideological interests who seized control of it.
Second, market power is the problem, and any solution must confront that problem head-on. One of the most fundamental missteps of recent antitrust policy is that it treated market power as not necessarily a problem in and of itself—that it might, in theory, operate for good, and therefore should not be against the law unless used affirmatively to do harm. And the legal barriers to prove harm have been stacked so high that the exercise of market power has been functionally immunized from any legal liability. As a result, we see the proliferation of extractive and predatory business models that would once have been illegal.
The evidence assembled in Powerless shows that the theoretical justifications for that permissive stance toward market power have yielded an empirically dire situation for American workers, consumers, and society at large. It’s time to challenge the status quo and jettison the discredited theoretical assumptions baked into the law in order to bring about that functional immunity. Power is the problem, and democratizing the economy by rewriting our antitrust laws to attack market power head-on is the solution.