Renowned economist John Galbraith once compared the mid-century economy to a bee. In his 1952 American Capitalism, he wrote that “such are the aerodynamics and wing-loading of the bumblebee that, in principle, it cannot fly.” Yet, in blissful ignorance of the laws of physics, it does. With a powerful government, potent labor unions, and thriving companies, America’s postwar economy too was in defiance of Adam Smith’s and David Ricardo’s economic laws. Skeptics of the unprecedented prosperity were apprehensive about the overwhelming success of massive corporations and sought ways to eliminate them. Galbraith, however, felt otherwise. He asserted that “countervailing powers,” or grassroots institutions and interest groups, could be depended on to rise in strength and match such companies’ economic might; there was nothing to worry about.
Galbraith’s solution to trusts was in tune with the times. Yet, the pernicious concentration of market power in modern capitalism has demonstrated the risk of relying on Galbraith’s countervailing powers in lieu of strict government oversight. The ambitious online bookstore and all-knowing search engine of the early 2000s started out as novel ideas that would optimize the budding Internet. Over the years, these innovations have become the basis of multinational conglomerates which dominate the market as corporate giants. Amazon controls 40 percent of America’s online commerce, and Google occupies 85 percent of online-search-ad revenue worldwide. And it is not just the FAANGs; the number of players in numerous non-tech industries have fallen. Molson Coors and Anheuser Busch sell about 75 percent of all beer sold in the US. At 93 of the US’s 100 largest airports, one or two airlines control the majority of seats.
The titans’ soaring valuations leave economists wondering if the boom will plateau anytime soon. Although their remarkable performance raises few issues, their effect on fair competition does. Utilizing various techniques to exploit systematic loopholes or establish barriers to entry, these businesses have had a stifling effect on both consumers and startups—even the future of entire niche markets. As a result of this problematic trend, there has been a widespread sense of powerlessness among consumers. Even in the face of increasing prices and a decreasing standard of living, few alternatives are available to them. Given the need to prevent the overwhelming consolidation of market power among few entities, steps must be taken to level out the playing field and preempt winner-take-all scenarios in both technology and non-technology industries.
As Austrian political economist Joseph Schumpeter theorized, “creative destruction” necessitates new entries into the market to replace old monopolies. However, the recent revival of monopolistic behavior among modern corporations has hindered this natural economic process. Lenient and lax government oversight in recent decades has enabled the consolidation of market power to an almost irreversible extent. To make matters worse, the advent of technology companies has been a riddle to contemporary economists, as conventional antitrust tools have proven ineffective. In 1913, Woodrow Wilson cautioned the American people that “[i]f monopoly persists, monopoly will always sit at the helm of the government.” It is a message worth heeding.