Our economy almost certainly has a problem with rising market power. A slew of studies shows that concentration in many sectors of the economy has increased over the past 20 to 30 years. A new PPI study, however, shows that critics of the supposedly overweening power of U.S. tech companies are barking up the wrong tree.
The study, by PPI Chief Economic Strategist Michael Mandel, finds that the digital sector – encompassing tech, telecoms and ecommerce – significantly outperforms the rest of the non-health private sector on every important economic measure, benefitting both workers and consumers. For example, productivity in the digital sector rose by almost 60 percent between 2007 and 2017, prices fell by 15 percent, real annual pay per worker rose by 15.4 percent, and employment grew by 14 percent. Such dynamism is hardly consistent with the critics’ portrait of tech giants throttling competition, suppressing innovation and using their market power to impose higher prices on consumers.
Meanwhile, in the rest of the non-health private sector, productivity grew only 5 percent, prices increased by 21 percent, real annual pay increased by 7 percent, and employment grew by 3.3 percent. If you are looking for evidence that market concentration is weakening our economy and making inequality worse, here’s where you should start.
And for all the glib journalistic talk of “techlash,” Americans don’t see Big Tech companies in a particularly sinister light. In fact, a recent PPI poll found that most voters view the tech giants as testaments to American ingenuity and oppose breaking them up.
The poll, conducted by Expedition Strategies survey on the eve of the midterm election, found that 67 percent of likely voters view the tech companies positively, as shown in Figure 1, and 55 percent oppose breaking them up. While 60 percent of voters acknowledge they are concerned about tech companies’ handling of privacy and data protection, 71 percent of voters view tech companies as “a sign that the American economy is working.” In contrast, just 32 percent view Big Tech as “too powerful.”
That being said, voters do worry about privacy and data protection – in fact, 60 percent of voters say that the industry that concerns them most when it comes to these issues is Big Tech. Voters by a margin of 58 percent to 42 percent also say they’d like to see a national legislative response to privacy regulation rather than a piecemeal state-by-state approach.
Figure 1. Please rate how you feel about the following industries:
Given the general trends toward consolidation, a comprehensive look at market power, competition and innovation across the U.S. economy is certainly in order. But rather than succumb to the reductive nostrum that “big is bad,” progressives ought to engage in a careful, sector-by-sector analysis before they start calling for break-ups and more regulation. As Mandel shows, the evidence suggests that the digital sector does not pose a special problem, and in fact is outperforming the rest of the private sector.
Progressives ought to be vigilant about market power and monopoly, but it makes little sense to draw targets on our most successful companies.