A GOP that “has more of a care for American citizens,” Slater told UnHerd earlier this year, must protect the market system from monopoly. Yet today, powerful figures within and outside the administration are bearing down on Slater and her team — simply because she insists on a transparent, rigorous process for approving mergers that would hinder market competition.

“We’re willing to do settlements,” a former official familiar with the turmoil inside told me, “but they need to be real settlements. They can’t be weak, fake settlements, which is what HPE-Juniper was, frankly.” That’s in reference to a $14 billion deal that saw tech firm Hewlett-Packard Enterprise acquire Juniper Networks, one of its biggest competitors in the enterprise-networking market (think wireless systems and other connectivity solutions for large institutions and workplaces).

The Biden administration began scrutinizing the proposed merger. But it was Omeed Assefi, the acting attorney general for antitrust in the early Trump II administration, who challenged it in court before Slater was confirmed by the Senate and took up her position. Settlement negotiations began soon after the government filed suit. Yet the final settlement, and the way it came about, did not meet with Slater’s approval, according to The Wall Street Journal. Chad Mizelle, Attorney General Pam Bondi’s chief of staff, “pushed it through” anyway.

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Slater has been under intense pressure ever since, and two of her senior lawyers, Roger Alford and William Rinner, were terminated on Monday. The formal justification was reportedly “insubordination.” Yet the real nub was that they and their boss, Slater, objected to unusual shenanigans in the process, including boozy backroom meetings between company lawyers and lobbyists, on one hand, and officials from elsewhere in the Department of Justice, on the other. Slater and her team also took issue with the outsized influence of lobbyists “who weren’t antitrust specialists, but were brought in for their connections to administration officials,” per the Journal — a characterization echoed by the former official.

“Boozy backroom deal” here isn’t a figure of speech, by the way. It captures what literally took place, according to the former official, who described a meeting between government officials and lobbyists that took place at one of Washington’s “private city clubs” over cocktails.

That’s a red flag. As Matt Stoller, a historian of the anti-monopoly movement, told me, “when Richard Nixon engaged in a corrupt settlement over the ITT merger, Congress was so outraged that they passed the Tunney Act to stop these kinds of misdeeds.” Under the act, firms that are settling antitrust issues with the government must disclose any communications, written or oral, between their representatives and US officials related to the settlement.

Yet not all of the HPE lobbyists were listed on the Tunney Act disclosures, according to the former DOJ official. One unlisted figure is Arthur Schwartz, described by Punchbowl News as “a longtime behind-the-scenes operator who has extremely close relationships with corporations looking for advice in Trump’s DC.” A source close to Schwartz insisted that while he represented HPE, he wasn’t involved in settlement discussions, thus obviating the need for disclosure.

Tunney disclosures aside, a private gathering of company representatives and government officials circumventing regulators on the front lines — Slater’s office — is disturbing. The DOJ did not return a request for comment.

All this led Rinner and Alford, the two fired officials, to speak up, in frustration and warning, while they were still in their roles. In a June speech at George Washington University, Rinner declared: “We do not plan to hash out merger settlements over martinis.” Likewise, at a hearing of the Senate subcommittee on antitrust and consumer welfare, Alford railed against the “massive ecosystem of consultants and lobbyists who push regulatory agencies toward imposing durable rules and regulations that stifle the free market.”

In reality, said the former official, “we had intense pressure from lobbyists,” prompting Slater’s team to urge the firms to “call off their dogs against us.” According to multiple sources familiar with the deal, the “dogs” in question were Schwartz and Mike Davis, a Republican legal operative and president of the Article III Project that describes itself as “an advocacy organization fighting to rein in Big Tech” (Davis, unlike Schwartz, is listed on HPE’s Tunney Act disclosure; he didn’t reply to my request for comment by deadline; Schwartz would not speak on the record).

The settlement’s defenders insist that the merger is essential for national security, creating a large American rival to China’s Huawei for networking solutions used by foreign governments and militaries. HPE, the thinking goes, shouldn’t be confused with Hewlett-Packard’s consumer-products line: dorm-room printers and the like. Since enterprise networking isn’t a consumer-facing product, it shouldn’t raise typical antitrust concerns around price and consumer welfare.

That’s simply not true. As the DOJ noted in its original complaint challenging the merger, “HPE and Juniper are the second- and third- largest providers, respectively, of enterprise-grade WLAN solutions in the United States.” If one of the three largest providers is taken over, it would very likely lead to higher prices and less dynamic innovation for “for scores of American businesses and institutions” — not just foreign governments and militaries.

As it is, numerous domestic entities rely on MIST, Juniper’s flagship networking system, including Dartmouth College, the University of Massachusetts, Amherst, and George Washington University. Ditto for numerous state and local agencies, sports stadiums, and the like. Once MIST is eliminated or subsumed under HPE’s leading networking product, known as Aruba, then all of these American institutions would face higher IT costs, which they would no doubt pass down to customers. Indeed, in its original complaint, the DOJ submitted comments by an HPE executive noting the competitive threat posed by MIST to Aruba in the higher-education market — perfectly unrelated to networking for foreign militaries.

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Then, too, HPE didn’t raise national-security concerns in any of its legal filings related to the antitrust dispute (though it did bring them up in news releases). Moreover, the antitrust division has a process for checking whether challenging a merger might trigger national-security concerns. That process was followed by Assefi, the Trump DOJ’s acting antitrust czar, when he first challenged the HPE-Juniper merger. He met with no issues from the Intelligence Community or other national-security agencies.

It is telling, too, that HPE’s Tunney Act filings don’t mention any meetings with national-security officials, whether from the Central Intelligence Agency, the Pentagon, the National Security Agency, or the National Security Council. The filing only lists communications with officials in the DOJ. As the former official said, “under the statute, they would have to have disclosed that they spoke with nat-sec—they have to disclose whom within the government they spoke with. How is the government supposed to make that judgment” — that the deal isn’t security-sensitive — “if the nat-sec agencies haven’t been apprised?”

It is possible that the judge overseeing the settlement will review it for compliance with the Tunney Act, as four Democratic senators demanded in a letter on Tuesday. Either way, the episode opens a dismaying window into a second Trump administration in which the wealthy and well-connected are free to run roughshod over populist reformers.

I was in a queue at a train station ticket window. I didn’t have to be: these days you can buy train tickets online and collect them from a ticket machine. But not on this day. IT problems meant the machines weren’t working properly.

So when a man tried to collect his ticket, he couldn’t. Explaining this to the attendant at the ticket barrier, he was refused entry. He didn’t have a ticket, so he couldn’t come through, he was told. Mr. Exasperated displayed proof of his online purchase on his mobile phone. The attendant was not impressed: “I can’t let you through without a ticket and that’s not a ticket.” And so instead of joining his train, Mr. Exasperated had to join a queue.

And that’s what made by blood boil. Not the ‘sorry, not sorry’ attitude of the train company, but the fact that nineteen years into the 21st century, a mobile phone can’t be a train ticket. Well, it could be – we’re not talking about technology so advanced as to be “indistinguishable from magic” here. It’s the sort of user-friendly system that train companies could easily put in place if they wanted to. But when your customers can’t go anywhere else, why bother?

And that, in a microcosm, is why competition is good.

Or is it?

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In his book about entrepreneurship, Zero to One: Notes on Startups, or How to Build the Future, Peter Thiel argues that new enterprises should aim to become monopolies and that competition isn’t always healthy.

The book was published in 2014, but its influence has grown – especially in Thiel’s stamping ground, Silicon Valley. Indeed, it can be read as a justification of the monopolistic tendencies of big tech companies.

In that respect, Zero to One is among the most important books of our age. If you don’t have time to read it, there’s an in-depth review by Scott Alexander on the brilliant Slate Star Codex.

Let’s start with the kernel of Thiel’s argument:

“The title comes from Thiel’s metaphor that ordinary businessmen like restaurant owners take a product ‘from 1 to n’ (shouldn’t this be from n to n+1?) – they build more of something that already exists. But the greatest entrepreneurs bring something ‘from 0 to 1’ – they invent something that has never been seen before.”

What’s wrong with the ‘1 to n’ approach to business? New entrants to established markets provide more choice and more competition, which is good for us, isn’t?

That’s debatable:

“This was the promise of the classical economists: capitalism will optimize for consumer convenience, while keeping businesses themselves lean and hungry. And it was Marx’s warning: businesses will compete so viciously that nobody will get any money, and eventually even the capitalists themselves will long for something better.”

Those are the rival theories, but in practice competition isn’t always of the cut-throat variety. Even when they’re not forming actual cartels, most suppliers in the same market will try to avoid ultimately self-destructive tactics like full-on price wars.

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Thiel’s focus, however, is on escaping competition altogether by developing a product that can’t be copied by others. Instead of merely adding another version of something that already exists (i.e. going from 1 to n), Thiel’s advice is to create something that didn’t exist before (i.e. going from 0 to 1).

There are many ways of establishing monopoly. For instance, you can secure the rights to a ‘natural monopoly’ such as those enjoyed by train operating companies. Another is cartelisation – which one might regard as a shared monopoly.

Thiel’s interest is in creating markets not fixing them. And, according to Alexander, he mention four particular paths from zero to one: “proprietary technology”, “network effects”, “economies of scale,” and “branding”.

But whether a monopoly is created by fair means or foul, what’s to stop the monopolist from using that power against the public interest? Arguably that’s a question stemming from a glass half-empty view of the world, so here’s the glass half-full:

“Since it doesn’t have to worry about competing with anyone, it [the monopolist] has wider latitude to care about its workers, its products, and its impact on the wider world. Google’s motto — ‘Don’t be evil’ — is in part a branding ploy, but it’s also characteristic of a kind of business that’s successful enough to take ethics seriously without jeopardizing its own existence.”

In other words, the optimistic question is this: ‘free from the pressures of competition, why wouldn’t the monopolist use its power for the common good?’

Unfortunately, there’s a long list of answers to that one, but let’s stick to the most obvious: greed. Landlords hold the most natural monopoly of them all – and they use their position to extract as much money from the economy as the market will bear. The landlords of Silicon Valley are no exception – something lamented by a certain Peter Thiel.

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Admittedly, landlords did not create the product they monopolise, God did; and Thiel’s Zero to One argument concerns the monopolies created by genuine innovators.

However, that still leaves a number of counter-arguments. Here are three:

Firstly, the fact is that ‘1 to n’ – i.e. copying existing innovations – is an engine of global progress. Hundreds of millions of people have been lifted out of poverty across the developing world by local enterprises imitating, adapting and, on occasion, stealing innovations from more developed countries. If what you care about is achieving basic standards of nutrition, health, literacy and income, then the lesson of the last thirty years is that copying works.

Secondly, zero to one isn’t the whole story. Look a bit closer and you see that the starting point is often rather more than zero. The tech giants wouldn’t be where they are now without the internet and other key technologies – whose creators (including government agencies) chose to share. The giants shouldn’t guard their own monopolies so selfishly, not when they owe so much to others.

Thirdly, even if we assume a starting point of ‘zero’, we shouldn’t be so impressed by the achievement of getting to ‘one’ that we ignore the means by which the monopoly is maintained. If the monopolist uses its power and wealth to kill (or merely buy-out) the competition at birth then it is destructive, not creative.

Whatever the downsides of 1 to n, the opposite process – i.e. n to 1 – is much, much worse.

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Today, the $740 billion former bookseller’s tentacles stretch far beyond e-commerce: into bricks-and-mortar retailing, air cargo, cloud computing and AI – technologies that are, or will become, the backbone of countries such as the USA and the UK. It has combined traditional market dominating techniques with an unrivalled understanding of its customers’ online behaviour, to awesome effect. And concern about monopolistic behaviour is increasingly being voiced.

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Everyone used to understand what a monopoly was, and nearly everyone, other than monopolists themselves, understood that it represented the failure of capitalism rather than its apex. When one company dominates a market then the good things that come from competition between producers, such as quality, variety and innovation, are likely to come to an end. Without competition, there’s little incentive to do any of these expensive things, and both consumers and the wider economy loses out.

Then in the 1970s a new idea emerged from America’s law schools that turned this thinking on its head. The size of the company no longer mattered: the only criterion by which it should be judged, or a takeover blocked, was consumer welfare. To put it crudely, a firm like Amazon could be as big as it wanted as long as it kept prices low. Today to be concerned about the ‘bigness’ of companies is to go back to the popularist goals of the past, argues Professor Daniel Crane of the University of Michigan.

By the second decade of the 21st century, that reinterpretation of the law has had – if you are cynical – its intended effect. We are living in a new age of concentration, where a few corporate giants like Amazon dominate the economy. The ratio between the cost of a good or service and its selling price in the wider economy – often seen as evidence of market dominance – has risen in advanced economies by 43% since the 1980s.  The combined revenue of the tech giants – Alphabet, Amazon, Apple, Facebook and Microsoft – is larger than the GDP of more than 90% of the world’s nations. Start-ups are even founded with the sole purpose of being acquired by one of these Big Five.

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Then, in 2016, an unknown law student decided to dust down some forgotten textbooks hidden away on the top floor of her university library. Early in 2017, Lina Khan published ‘Amazon’s Antitrust Paradox’ in the Yale Law Journal. The one word that Big Tech didn’t want to see in the public conversation – monopoly – was back, and at the worst moment. For the first time, Big Tech was caught in a bipartisan squeeze in Congress as real political pressure built up over the abuse of customer data and fake news.

Khan’s argument was simple. Once laws that were designed to prevent one company controlling a market had been pushed to one side, companies like Amazon were able to gain market dominance through anticompetitive practices. This gave them control of the infrastructure that many businesses and other parts of the economy depend on. Khan suggests that either Amazon should be regulated more forcefully to ensure competition – or that it should be recognised as a natural monopoly like the water or gas supply, and run as a publicity utility.

Now, Amazon, Google and the other modern monopolies have a battle on their hands. Worryingly, it looks like they have a formidable range of weapons to fight it with – and Khan and her allies have already been labelled as “hipster radicals.”

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Big Tech’s lobbying dates back 20 years, but the scale of it has grown significantly. In America, five years ago Amazon spent $3.5 million on lobbying, last year they spent $13 million. In just a few years, Amazon’s lobbying operations have gone from almost nothing to rival Google. To defend its sprawling empire from the politicians that are circling the tech giant has assembled the biggest lobbying team of any tech company in Washington: 28 in-house lobbyists, compared to Apple’s and Facebook’s eight. 

Perhaps more disturbing is the influence that companies like Amazon and Google have that you can’t see. Both regulatory capture, where the regulators identify too closely with the companies they are trying to control, and policy capture, when commercial interests so infiltrate governments that they can affect the design of measures relevant to their activities, should concern us.

Since 2005, concern has grown over Google’s political influence after research showed that it had poached at least 65 government officials from all over the European Union. During the same period, 15 ‘Googlers’ have been appointed to government positions in Europe, thus penetrating to the heart of the decision-making process. In the UK, Google has targeted for recruitment civil servants from key parts of the government machine like the Treasury and No. 10. This revolving door between politics, tech and regulators is a key characteristic of crony capitalism.

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Then, of course, there is the ‘dark money’ – the think tanks, research institutions and publications who enjoy their journey on Big Tech’s gravy train and can be used to shape the debate. Last year a critic of Google was fired from the New America Foundation, when he posted an article in support of the European Commission’s antitrust regulators. The think tank has received over $20 million from Eric Schmidt, co-founder of Google, his family trust and the company itself.

Then in July 2018, US activists really woke up to the power of Amazon, and the damage it could do to democracy, when the company used its influence to repeal a law passed by its home city of Seattle that imposed a small employee ‘head tax’ on large corporations. The purpose of the tax was to fund affordable housing in a city whose horrendously high costs are partly down to the very same tech companies. Many were left with the feeling that Amazon was too powerful to tax and regulate.

If politicians can be persuaded to act, the big question is how to tackle the problem. The traditional anti-monopoly medicine would be to break up these large conglomerates into their smaller component pieces. Amazon could easily be split into retail, cloud, logistics and video production. Alphabet (Google’s parent company) could be broken up into divisions such as Google Search and YouTube.

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Others are thinking about an updating of the vision behind the BBC. In Britain, the think tank IPPR argues that the digital economy should be reorganised as a “digital commonwealth”, to be an open, collective resource for the common good. The major digital platform companies would be regulated like broadcasters and mobile providers. Where large digital companies have the advantage of existing data when moving into a new market, such as banking or mobility, they would be compelled to open it up for others to use. And a new public service corporation would ensure that public data is widely available for innovation and public good.

This is already being done in other industries. In the energy industry, consumers who share their data with new firms such as Switchd can already get better access to cheaper prices, and the process will only get better, faster and more automated as energy suppliers share more of their data digitally. Banks and other financial institutions are also opening up their data for others to access, use and share. Customers are doing something similar by sharing data from their accounts with third parties they trust.

In the end, the convenience of Amazon’s platform has turned us into lazy consumers who would give up almost anything in return for same day delivery. But if we are not careful it won’t just be the High Street that we have abandoned. Big Tech has the will and the wallet to bypass traditional regulators, and that leaves few options other than to turn them into social enterprises that serve the common good.

In 1911, the breakup of John D Rockefeller’s monopolistic Standard Oil Company prevented one man from having a stranglehold on the fuel that America depended on. If data is the new oil, then perhaps it’s time we stopped a handful of men from controlling the lifeblood of every advanced nation.

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Executive pay is a good place to start. Thirty years ago, a FTSE 100 chief executive earned on average 20 times the salary of an average worker in his company (and it always was a him). Today the figure is 129 times. (And it’s still almost always a him.) A conventional economist would want to understand this in terms of the marginal productivity of chief executives relative to the marginal productivity of workers, and of the supply and demand of top talent.

But these explanations simply don’t fit the evidence. Measured by profits or share prices, corporate performance on average has not improved by anything like the increase in executive pay, whose rise has had no relationship to the movements of stock markets. And there is no evidence at all that such pay results from a scarcity of talent – many of those who have cleaned up over the last three decades have exhibited mediocre performance (which is why they tend to stay in post such a short time) and there is no let-up in the conveyor belt of directors waiting to replace them.

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A much more plausible explanation for the rise in top pay is the structure of corporate governance. The remuneration committees which decide pay packages are made up almost entirely of other directors. This creates a self-serving system in which one group of directors pays another exorbitant salaries, and these then act as the ‘competitive benchmark’ for the next round. In other words, it is the power of directors as a group to set their own salaries that determines their level and growth.

Classical economics had a name for this. It was ‘rent extraction’: the appropriation of value in excess of that required to reward effort. But it was one of the ideas that disappeared when the neoclassical school – focused on marginal analysis and competitive markets in equilibrium – came to dominate the discipline. Which was rather convenient for those who took the rents.

Rent extraction derived from excessive power is most clearly seen today in the financial sector. One of the most extraordinary economic facts of recent decades has been the persistently high costs of financial services. As Thomas Philippon and Guillaume Barzot have shown, the cost of financial intermediation – what the financial sector charges the rest of the economy for its services – has barely changed over the last fifty years. Yet in that same period the productivity of these services has been transformed out of all recognition by new technologies, and the sector has become much larger.

These increased competitive pressures should have led costs to fall, as companies passed on productivity gains to their customers. What has happened instead is that the financial sector has managed to appropriate these gains for itself, resulting in consistently higher profit rates for financial firms than for the economy as a whole.

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This is hard to explain in conventional economic terms, but easy in terms of power. One need only look at the money spent on political lobbying by the financial sector, and the weak regulation which has been applied to it by governments, to understand why it has been able to reward itself so handsomely.

In the digital sector too, it is power that we should be focusing on. Because while the orthodox concept of monopoly seems to apply – Google has approximately 70% of the global search engine market, Amazon has a market share across some product categories in excess of 80%, Facebook has over two billion active users globally – the term is not actually helpful.

In conventional economic analysis, monopoly should lead to higher prices. But that is not what has happened in the digital field at all – on the contrary, many of their services are offered for free, and where they do charge (such as for advertising) their prices have not risen as their monopoly position has been consolidated.

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Yet we should still be worried, because while the business strategy of these companies is not to maximise profits, it is to dominate markets. And not just their own markets, but the markets which will determine the shape of the future economy: digital infrastructure on the one hand, and artificial intelligence on the other. As a recent IPPR report argued, it is scale that gives these companies access to the key resource of the modern economy, data, and the ability to extract from that data the maximum value.

And just as there are serious economic implications from a financial sector chasing ever larger profits – not least the lost productivity, profits and earnings of the non-financial economy – there are serious economic implications from this extreme market power. Firstly, we need technological innovation to be as widely spread as possible, in markets that are as competitive as possible, in order to maximise its value to the economy and society.

Second, this concentration of market power is also concentrating wealth. The tech titans behind these behemoths have become fantastically wealthy as a result of their dominance. This is one of the reasons for widening wealth inequality over the last decade, and likely to be a critical cause of it over the next. Jeff Bezos, for example, is now the world’s richest man. Meanwhile the workers in Amazon warehouses are paid the minimum wage and monitored on their toilet breaks.

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Which takes us to another power relationship at work in the economy. One of the puzzles of the UK economy of the last decade is how we have managed to achieve near-full-employment at the same time as average wages have stagnated. Economists have been scratching their heads: scarcity of labour should have bid up wages. But understanding the labour market in terms of power makes it entirely explicable. The reason that average wages have been held down is that workers no longer have enough bargaining power to force them upwards.

Once upon a time, wages were determined principally by collective bargaining, in which trade unions in major companies set wage levels in negotiation with employers, and these then set the benchmark for wages in the rest of the economy. Trade unions had the power to do this because the major companies had large workforces in which it was easy to organise, and easy to threaten industrial action.

Today most of this has disappeared. As manufacturing has declined, large companies with unionised workforces have become rare. Companies have fragmented their operations into smaller sub-contracting units, making collective bargaining more difficult. In turn firms have increasingly fragmented their workforces, employing a smaller core of higher paid workers and a larger periphery of ‘self-employed’ and gig workers.

Unsurprisingly, trade union membership in the private sector has fallen precipitously, and collective bargaining with it. Few workers now feel secure enough to bargain for higher wages. The balance of power, in other words, has decisively shifted in favour of management and against workers.

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Analysing the economy in terms of power – in these and other fields – does not mean abandoning conventional economic analysis. But as the recent report of the IPPR Commission on Economic Justice argues, it does mean thinking about how power can be rebalanced.

Reining in executive pay will best be achieved by changing the structure of remuneration committees – including by putting workers on them, as Labour have pledged to do – and outlawing bogus ‘incentive’ schemes which tie pay to short-term share prices. Tackling rent extraction in financial markets means resisting the lobbying power of the financial sector and regulating its profits down to reduce the costs of finance to the rest of the economy.

Curbing the market power of the digital companies will require regulatory oversight similar to that of other utilities, and preventing them from further vertical and horizontal expansion. And recoupling wage growth to economic growth means giving trade unions greater access to workforces, making it easier for workers to join unions (for example through auto-enrolment, on the model of opt-out workplace pensions), and restoring collective bargaining in low-wage sectors.

With people losing faith in capitalism and polls consistently showing public support for tackling the excesses of big business, this power-focused agenda should be of interest to both Left and Right. And encouragingly, while those on the Right have historically been like economists, uncomfortable with talking about power, that is changing. For many on both sides of the political divide, it is now impossible to imagine a competitive economy, a wider distribution of wealth and a meritocratic society without thinking about how power can be rebalanced. A consensus is forming, and it might just lead to an economy that combines justice with prosperity.

Cornelius Vanderbilt, the 19^th century steamship and railroad titan for whom the modern-day use of the term “robber baron” was coined, was transparent in his business model: kill the competition. His entrepreneurial spirit and predatory tactics made him the richest man in America, and having established himself at the top, he wasn’t about to be usurped.

Fast forward to today and you wouldn’t catch the new tech ‘captains of industry’ talking so brazenly about being above the law – but I can’t help thinking Vanderbilt’s immortal words are apt.

In just a few short years the tech giants have gone from upstart agents of digital democracy, connecting the world through their free platforms, to monopolistic fat cat enablers of abuse.

Where once politicians were falling over themselves to hang out with tech’s boy billionaires, they’re now eager to be seen castigating them for their failure to fix up – to protect children from would-be abusers, to stop hosting terrorist propaganda, to prevent fake news and hate speech, halt hacking, safeguard our data, and, of course, to pay more tax.

The likes of Google, Facebook and Amazon are facing the sort of scrutiny that would ordinarily send corporate executives into a tailspin. And yet, despite issuing apologies and pledging to do better, they have shown almost no commitment to real change.

How do the tech titans get away with it? Well, ain’t they got the power?

When your reach is greater than government, you hold a near monopoly market position, and consumers have little alternative than to use your services, what’s the inducement to real reform?

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Take Facebook, which has almost 2.2 billion users worldwide. Its business model is to link people – for free – in a spider web of connections that create a dependency on the platform. If everyone else is on Facebook, communicating, organising events, sharing photos, sharing news, are you really going to disconnect?

For many people Facebook is too central to their social and professional lives to quit – one survey of small businesses in America found 80% used Facebook for marketing – which helps explain why the #DeleteFacebook movement doesn’t seem to have had a discernible effect.

What is the alternative for users? When people say consumers have a choice to disconnect, they’re right. But it is the same choice as people had in the Gilded Age: they didn’t have to use one of Vanderbilt’s ships to get from New York to San Francisco, but if they didn’t, they wouldn’t be travelling.

Market concentration removes real choice, and enables companies to become so powerful that their position is all but unassailable. In the US in 2016, 43% of online sales went through Amazon, and their market share is growing. Google account for 80% of the global search engine market (over 90% in the US). And it is estimated that Google and Facebook together account for almost three quarters of digital advertising in the States – unsurprising when they have all the online traffic.

And their overwhelming dominance is getting worse as they gobble up competitors and use their huge cash piles to spread into new markets (think Amazon acquiring Whole Foods for $14 billion).

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In response to the monopolists of the Gilded Age, President Teddy ‘Trust Buster’ Roosevelt broke up the overreaching corporations, arguing that: “Where a trust becomes a monopoly the state has an immediate right to interfere”.

Breaking up the tech giants, or at least breaking off parts of them, may in the end be the only solution to tame their power, but applying this type of antitrust to today’s hyper-networked model would be much tougher than breaking up Rockerfeller’s Standard Oil or the Northern Securities Corporation (the holding company for the railways).

A new report by think tank Respublica and the Big Innovation Centre, aptly titled “Technopoly”, has a more realistic idea: stop the tech giants eating their competition.

The report’s starting point is that “liberal free market capitalism has not failed – but has not existed and doesn’t exist where markets have become monopolised”. And it is complacency, on the part of both governments and competition authorities, that has led to this.

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I have written about the tech giants’ acquisition binges before. What better way to maintain your dominance than buying up any potential threats to it. The Respublica report points out that in the past decade, Google has bought 167 companies and Facebook almost 70. That’s not just aggressive, it’s predatory.

Critics of tougher action will argue that such acquisitions are innovation-enhancing, and some of them are, but the whole point of competition watchdogs is to separate innovative from anti-competitive behaviour. In fact, if “competition is the mother of invention”, as the report points out, a system that “does not catch or scrutinise mergers between major players and innovative upstarts”, will end up damaging innovation.

The authors even go as far as to say that “innovation is more important than short-term efficiency for our society”. And when you look at Britain’s lagging productivity and stagnating wages it’s difficult to disagree. They therefore recommend a much more aggressive approach to mergers and acquisitions, with competition authorities assessing each case based on a sophisticated understanding of value – for the new robber barons, data and, as the report puts it, “eyeballs”, are the new route to monopoly. Competition policy and enforcement needs to catch up, and quickly.

The tech titans’ transition from hero to villain looks uncannily like the experience of their Gilded Age equivalents, who went from celebrated entrepreneurs to reviled monopolists. Teddy Roosevelt understood just how pernicious extreme market concentration was for free markets, and therefore consumers. Today we are facing the same problems – but where’s our 21^st century trust buster?

The most organised example of this is the founding of the Center for Humane Technology, whose mission is to “realign technology with humanity’s best interests”. But the most interesting is a clarion call from Facebook co-founder Chris Hughes to re-examine the basic business model that makes these companies tick. It’s this model that has rocketed both Facebook and Google past the banks and oil companies that used to dominate the ranking of the world’s corporate giants to the very top of the list. And it’s turned a handful of entrepreneurs such as Zuckerberg into the wealthiest tycoons on the planet.[1. Chris Hughes, ‘The wealth of our collective data should belong to all of us’, The Guardian, 27 April 2018]

And what’s that model? In one word, barter. It’s the revival of an approach to business that had almost died out in modern societies. When did you last offer the baker a chicken in exchange for a dozen bagels? Or pay the window cleaner in cabbages? Modern economies use money as the means of exchange.

There’s been little focus on the revival of the barter economy that lies at the heart of the business model of Facebook and similar companies. Since we don’t pay money to use their services, they seem to be “free”. But of course they are not. Each time we “like” something on Facebook, or check Google for the opening hours of a restaurant, we’re feeding tiny morsels of data into an enormous machine that has been brilliantly designed to turn that data into truly enormous quantities of cash.

We’re bartering our data. And while each “like” or search inquiry isn’t worth much, the aggregation of billions and billions of these data morsels means Facebook the company – despite all the recent controversies – is worth half a trillion dollars, and every year returns a profit to its investors of a staggering 30%. The company had income last year of $40,000,000,000, almost all of it from advertisements; after expenses, there was a profit of $15,000,000,000.[2. See Matt Egan, ‘Facebook and Amazon hit $500 billion milestone’, CNN Money, 27 July 2017; and Rakesh Sharma, , ‘How does Facebook make money?’, 25 April 2018]

The impact of this data-driven business model has been enormous, driving the growth of a handful of mega-companies. As I argued here on UnHerd, governments have entirely failed to apply traditional pro-competition policies (what in the US is called anti-trust) to prevent any single company from dominating the market.[3. The classic example: Luigi Zingales and Guy Rolnik, ‘A Way to Own Your Social-Media Data’, New York Times, 30 June 30 2017: “When Standard Oil, in the early 1900s, controlled 90 percent of oil refinery capacity in the United States, the federal government used its antitrust power to break it up into more than 30 smaller companies. A similar breakup was imposed 70 years later on AT&T.”]

Suggested reading

The cracks appearing in the digital economy's foundations

By David Z Morris

One reason for this is that the barter model is thoroughly confusing. Consumers have no idea how much they are “paying” for the service, and are far less aware of the fact that they are in the hands of a monopoly than they would be if there were only one company from which they could buy a car. Facebook looks a bit like a charity, and the idea that its ads are personalised for you can seem like it is doing you a favour. While the Cambridge Analytica scandal over how data was misused has tarnished this image (and hit the stock price), there’s no evidence it has made a long-term difference to how the company is seen and the loyalty of its more than two billion users.

As David Z. Morris pointed out recently, if competitors are to have any chance against these mammoths, governments will need to intervene. For example, Morris suggests, they could require that a portion of the data gathered by a company like Amazon be shared with its rivals. Or, as two University of Chicago professors recently argued in the New York Times, consumers could be given a property right to their own data.

Chris Hughes has a different idea, based on the idea that everyone should benefit. Writing in the The Guardian, this is how Zuckerberg’s Facebook co-founder captures the problem:

Nearly every moment of our lives, we’re producing data about ourselves that companies profit from. Our smartwatches know when we wake up, Alexa listens to our private conversations, our phones track where we go, Google knows what we email and search, Facebook knows what we share with friends, and our loyalty cards remember what we buy. We share all this data about ourselves because we like the services these companies provide, and business leaders tell us we must to make it possible for those services to be cheap or free…

Just like many other business leaders, Mark Zuckerberg describes this as a win-win – people stay in touch with friends and family more often through a free service, and businesses can more efficiently spend marketing dollars to fuel corporate profits, making Facebook free to all. But one party has benefited a lot more than anyone else: Facebook shareholders.

The question, therefore, is how to share that benefit more equally. One option is to clarify in law that we own our own data, and have a system of “data brokers” to sell it to the highest bidder. Another, which Hughes favours, is by taxing the use of data by these companies, and sharing the revenues among people whose data has been harvested. There’s a parallel, he suggests, in the US state of Alaska, where a portion of oil company taxes fund an annual payment of $1,500 to every resident.

Suggested reading

It's time to rein in the reckless monopolies

By Ann Pettifor

Hughes’ proposal is a creative solution, and before the companies start to complain about an additional tax burden they need to be reminded that neither Facebook nor Google invented the internet, or GPS (the basis of location services), or much else in the architecture that undergirds their business models and their enormous profitability. That technology was developed courtesy of the U.S. government.

What’s more, Google did not even invent the famous Google algorithm that enabled it to beat out early competitors in the search business. Its founders Larry Page and Sergei Brin did the work while they were students, funded by a US government grant.

It was public risk and public investment that got Silicon Valley and its megafauna going on their huge profits. Now the giants are hoovering up our data and turning it into cash, it’s time to take a long hard look at ways to re-structure our relationship with them.[4. On the public investment that underlies the digital companies, see Mariana Mazzucato’s book, The Entrepreneurial State. I discuss her argument briefly here: https://stage.unherd.com/briefings/big-techs-tipping-point/]

More on big tech...

How the big tech companies are eating free markets

By Charlotte Pickles

Jeff Bezos’ move astonished everyone. Amazon’s cut-throat, price-focused image was in stark contrast to Whole Foods’ organic, quality (and pricey) approach.

What was he after, and what’s he been up to?

Here’s your quick ten point (via press clippings) guide.

(1) The Bezos Empire

Jeff Bezos, world’s richest man, presides over a vast corporate empire, from book selling (where he started) to outer space (where he hasn’t been doing too well) to cloud storage (Amazon Web Services is the market leader and a huge driver of profit) to – the latest move – selling groceries. He also owns (personally) the Washington Post.

A wonderful chart on MarketWatch pulls it all together.

(2) Making money

Suddenly, Bezos became enormously more wealthy after the acquisition…

CNBC:

“Imagine being a tech company with so little profit that you could buy a grocery store and cut prices – all while improving your margin. Yes, that’s Amazon. In announcing … its $13.7 billion acquisition of Whole Foods on Thursday, Amazon also said that starting next week, it will offer lower prices on popular items…. Amazon’s operating margin for the second quarter was a paltry 1.7 percent. Whole Foods recorded operating profit of 4.8 percent.”

And also MarketWatch:

“Jeff Bezos is having some “fun” on Friday. The $34.39, or 3.6% surge in Amazon.com Inc.’s AMZN, -0.10% stock, after the deal to buy Whole Foods Market Inc. wfm is boosting the the Amazon co-founder and CEO’s coffers by about $2.75 billion.”

(3) Disrupting the food trade

Vanity Fair:

“On the day Amazon announced plans to buy the upscale grocer for $13.7 billion, investors pulled billions of dollars from competing companies, with the market cap destruction totaling almost $40 billion for the 20 worst-performing food and retail stocks on the S&P alone. And the fallout from the potential merger isn’t over.

On Wednesday, meal-kit delivery company Blue Apron announced plans to slash the target share price for its upcoming I.P.O., from $15 to $17 per share to $10 to $11 per share—a dramatic cut for a company that, while unprofitable, was generating significant year-over-year revenue and closing its losses. The new share price would value Blue Apron at about $2 billion, compared to its previously expected $3.2 billion valuation.”

(4) Prime discount

“Prime customers carrying the Amazon Prime Rewards Visa Signature credit cards have a shiny new perk coming their way — the card will now net them the same 5 percent cash back at Whole Foods that it currently captures on Amazon.com.”

(5) Building Prime – and Amazon’s core business

CNBC:

“[Analyst] Nowak … estimated 38 percent of Whole Foods customers, or about 5 million households, are not Amazon Prime subscribers. We expect Amazon to convert half of these shoppers between now and the end of 2019,” he wrote. “We see AMZN’s Prime member growth and engagement, Echo device sales, and consumer web traffic/interest driving solid top line trends and GMV [gross merchandise volume] per customer growth.”

(6) Prices down

Whole Foods has been cutting (some) prices. Forbes:

“Morgan Stanley’s Brian Nowak wrote in a note to clients in August, as the acquisition was finalized, that Whole Foods’ average food-item price was approximately 14% higher than the average grocery store’s. He cited a recent survey in which 70% of consumers who said they didn’t shop at Whole Foods blamed pricing as the primary reason.”

But, as Bloomberg pointed out, “those price cuts were highly selective and carefully chosen for maximum attention”

(7) Prime Now food deliveries

…And, in select US cities, “free” if you can wait 2 hours….

The DAOnline:

“Amazon Prime Now…is operating out of Whole Foods in select cities where it offers rapid delivery in 1-2 hours, at cheaper prices than its competitors. Istacart, Amazon’s main competitor, charges $5.99 for 2-hour delivery, while Amazon charges $4.99, [if you want it in 1 hour] according to Business Insider.”

(8) Squeezing suppliers

NewFoodEconomy:

“Yes, Whole Foods will now ask suppliers with annual sales of more than $300,000 to discount their wholesale price by 3 percent. (The Washington Post and Business Insider have reported three to five percent.)”

This was Amazon’s approach with publishers as it built its book business, and has been a standard Walmart technique.

(9) Revamping inventory

The new Amazon approach to shelf-stacking has caused problems. PJMedia:

“Employees are blaming tight controls on Whole Foods’ order-to-shelf (OTS) inventory system for the shortages. Employees acknowledge that less food is spoiling in storage rooms, but they describe OTS as a ‘militaristic’ system that crushes morale and leads to many items being out of stock,” the United Food and Commercial Workers tweeted.”

(10) Revamping management

And, related, reports The Daily Meal:

“We’ve lost team leaders, store team leaders, executive coordinators and even a regional vice president. Many of them have left because they consider OTS to be absurd. As an example, store team leaders are required to complete a 108-point checklist for OTS.”

“Amazon’s takeover of Whole Foods sent the stock of competing grocery chains plummeting. To understand why, you need to know something much simpler than Amazon’s far-reaching ambitions or possible vision for transformation of the grocery industry: Amazon doesn’t make any money.”

What's it like to work at Amazon?

Test article

By Tim Montgomerie

“The most common way people give up their power is by thinking they don’t have any.”

― Alice Walker 

Today, the world is confronted by globe-spanning, tax-dodging corporate behemoths; monopolies based on advanced, intrusive as well as seductive technologies. Some are armour-plated cartels with ever-stronger (and longer) intellectual property protection. They include not only the FANGS – that bundle of high-tech platform utilities – but also Big Pharma, Big Agrobusiness, Big Media and Megabanks. The rise of these new monopolies has coincided with the lowering of real wages, especially in the UK and US, for many workers, and to a reduction in the labour share of the economy.

The process of monopoly (or giant oligopoly) creation has accelerated at a reckless pace.

As economic power has become more concentrated, so levels of corporate crime have risen. Perhaps the most egregious of these was the conspiracy involving Barclays, a 300-year-old British bank, in rigging the interest rate that people and corporations around the world pay for loans or receive for their savings. LIBOR – the London Interbank Offer Rate –was used as a benchmark to set payments on about $350 trillion worth of financial instruments.

The process of monopoly (or giant oligopoly) creation has accelerated at a reckless pace. But can this late-capitalist model survive populist uprisings across the world?  Can it survive the political instability caused by the gross inequality in wealth fostered by increased monopolisation?

For many decades, the USA operated a strong anti-monopoly (or “anti-trust”) policy.  Beginning with the Sherman (1892) and Clayton (1914) Acts, the federal government oversaw an era of active interventionism to regulate, prevent or break up monopolies, reaching a new peak with FDR’s New Deal in the 1930s. It is no accident that the strongest steps to control big finance and Wall Street ran in tandem with anti-trust laws – first with the creation of the Federal Reserve in 1913, and then with the Glass-Steagall Act of 1933.

In Britain, the home of ultra-laissez-faire ideology, action against monopolies was more restrained. Indeed, the common law doctrine of unlawful “restraint of trade” was traditionally used more against trade unionists than against any corporate’s “conspiracy against the public, or… some contrivance to raise prices” in Adam Smith’s famous phrase. True, from 1948, legislation was passed to give some limited powers over monopolies and mergers, but they were used more modestly than in the anti-trust heyday in the States.

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Global monopolies were not created thanks to technology, or to entrepreneurial genius – but because we citizens let them happen

The big change in ethos came with the era of financial liberalisation, notably the Nixon-Reagan-Thatcher years, effectively endorsed in the Clinton-Blair period. First, the creation of a private monopoly was no longer seen as a bad thing (recall for example how at its peak Microsoft avoided break-up). Glass-Steagall was repealed in 1999, with support from Bill Clinton and the economist Larry Summers, symbolising the bi-partisan policy of support for hyper-financialisation.

The Reagan-Thatcher era also gave birth to the privatisation boom, with an ambiguous policy towards monopoly, leaving telecom giants in place, while also (in the UK) illogically fragmenting the rail network.

The myth propounded by recent governments is that the answer is more competition, with the public constantly checking prices (usually unfathomably expressed) from ever more new entrants to each utility. Everyone understands that this is a farce, since it relies on the inertia of the majority for a minority of customers to benefit. The attempts by regulators to police the system have likewise failed, so that customers have become victims of “regulatory capture”.

The EU runs a different competition and monopolies model, still (contrary to Brexiter mythology) from a strongly capitalist perspective. If the Anglo-Saxon model is founded on laissez-faire, the continental model has strong roots in German ordoliberalism, with its emphasis on rules and their enforcement. The European Commission takes its role more seriously in taking on cartels and harmful private sector monopoly acts. It was the Commission that forced the telecom oligarchs to abandon roaming charges. Its Commissioner Ms Margrethe Vestager (a staunch economic liberal) has taken on Google in ways not yet seen in the UK.

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The great British public is supremely unconvinced by the past decades of privatisation

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After decades of experience of privatised utility monopolies, in water, gas and electricity as well as rail, the great British public is supremely unconvinced. Polling by Populus and Legatum Institute showed that 86% said favoured public ownership of water, 77% gas and electricity, and 76% rail.  50% supported public ownership of banks.

The next step is for the British public to understand that it has the power to hold these companies accountable.

• This can be done by Parliament enacting tough anti-monopoly laws.
• Secondly, a democratic government can use its powers more effectively to break up companies that do not act in the public interest.
• Third, companies that have a strong public interest dimension should be required by law to fulfil public service obligations. Those obligations have already been imposed on the liberalised network industries in the EU, but public service obligations need now to be extended to companies in the gig economy.

Global monopolies were not created thanks to technology, or to entrepreneurial genius. They happened because we, as citizens let them happen. We must not give up our power to change this monopolistic system, by thinking that we don’t have the power. As citizens of democracies, we most certainly do.