Why the US economy isn’t as competitive or free as you think “Why on earth are US cell phone plans so expensive?” ...... Over the past two decades, competition and competition policy have atrophied, with dire consequences ....... America is no longer the home of the free-market economy, competition is not more fierce there than in Europe, its regulators are not more proactive and its new crop of superstar companies not radically different from their predecessors......... an inclination not to take free-market platitudes for granted ......... each step in his argument is based on meticulous analysis of the data. ......... “First, US markets have become less competitive: concentration is high in many industries, leaders are entrenched, and their profit rates are excessive. Second, this lack of competition has hurt US consumers and workers: it has led to higher prices, lower investment and lower productivity growth. Third, and contrary to common wisdom, the main explanation is political, not technological: I have traced the decrease in competition to increasing barriers to entry and weak antitrust enforcement, sustained by heavy lobbying and campaign contributions.” ........ Those prices of broadband access in the US are, for example, roughly double what they are in comparable countries. Profits per passenger for airlines are also far higher in the US than in the EU.......... across industries, more concentration leads to higher profits. Overall, the effect is large: the post-tax profit share in US gross domestic product has almost doubled since the 1990s........ This malignant form of increased concentration reflects significantly diminished entry of new businesses and greater tolerance of merger activity. In other words, the US economy has seen a significant reduction in competition and a corresponding rise in monopoly and oligopoly.............. From 1999 to 2017 real GDP per head rose by 21 per cent in the US, 25 per cent in the EU and 19 per cent even in the eurozone, despite the damage done by its ineptly handled financial crisis. Levels of inequality and trends in income distribution are also less adverse in the EU, so increases in incomes have been more evenly shared........ destroys the hypothesis that technology is the main driver of the downward shift in the share of labour incomes ....... “The US has better universities and a stronger ecosystem for innovation, from venture capital to technological expertise.” ....... the EU has established more independent regulators than either its individual members or the US would do (or have done). ....... Lobbying, both against deregulation and for favourable regulation, is much fiercer in the US. ........ this lobbying, which is inevitably dominated by big companies, works. Why else would people pay for it? ........ Members of Congress spend about 30 hours a week raising money.
The Supreme Court’s perverse 2010 “Citizens United” decision held that companies are persons and money is speech. That has proved a big step on the journey of the US towards becoming a plutocracy............ Corporate lobbying is two to three times bigger in the US than the EU. Campaign contributions are 50 times larger in America than in the EU.
........... the cost of intermediation — how much bankers and brokers charge for taking in savings and transferring them to end users — has remained around two percentage points for a century. All those computers have made no difference. This then is a rent-extraction machine. That really has to change......... There are two things about America that most outsiders will never understand: its gun laws and its healthcare system.
The US spends far more on healthcare (not much below a fifth of GDP) and yet has far worse health outcomes than any other high-income country......... the system creates rent-extracting monopolies from top to bottom: doctors, hospitals, insurance companies and pharmaceutical businesses all feed at this overflowing trough. ........ the “GAFAMs” (Google, Amazon, Facebook, Apple and Microsoft) ....... preventing dominant companies from acquisitions or forcing them to divest; limiting their ability to exploit dominant positions by imposing interoperability with other networks and data portability; and breaking them up........ the rise of monopsony — the monopoly power of buyers — in labour markets, via restrictive contracts, occupational licensing and restrictions on entry. Deregulation needs to focus on such barriers......... business on its own will pursue restraints on competition, and with great enthusiasm.
The outcome is rentier capitalism, which is both inefficient and politically illegitimate........... The answers, suggests Philippon, are: free entry; regulators prepared to make mistakes when acting against monopoly; and protection of transparency, privacy and data ownership by customers. The great obstacle to action in the US is the pervasive role of money in politics. The results are the twin evils of oligopoly and oligarchy......... Donald Trump is in so many ways a product of the defective capitalism described in The Great Reversal. What the US needs, instead, is another Teddy Roosevelt and his energetic trust-busting.
