The Ideological Roots of America's Market Power Problem

Abstract

Mounting research shows that America has a market power problem. In sectors ranging from airlines and poultry to eyeglasses and semiconductors, just a handful of companies dominate. The decline in competition is so consistent across markets that excessive concentration and undue market power now look to be not an isolated issue but rather a systemic feature of America's political economy. This is troubling because monopolies and oligopolies produce a host of harms. They depress wages and salaries, raise consumer costs, block entrepreneurship, stunt investment, retard innovation, and render supply chains and complex systems highly fragile. Dominant firms' economic power allows them, in turn, to concentrate political power, which they then use to win favorable policies and further entrench their dominance. As a few technology platform companies mediate a rapidly growing share of our commerce and communications, the problem will only worsen. Since these gatekeeper firms have captured control over key distribution networks, they can squeeze the businesses reliant on their channels. Furthermore, these firms leverage their platform power into new lines of business, extending their dominance across sectors. Their muscle, in turn, spurs additional consolidation, as both competitors and producers bulk up in order to avoid getting squashed. Concentration begets concentration.