Squint and you can see this working out. Sort of. As with earlier Right-wing coalitions — like the one between religious conservatives and foreign-policy hawks that defined the Bush era — both camps can claim some wins. Populists got an immigration crackdown plus tariffs; the tech bros neutered entire regulatory agencies. But when it comes to combating monopoly, Big Tech’s default business plan, the contradiction threatens to make the populists look like utter saps.

Standing at the sharp edge of these tensions is a diminutive Dublin-born lawyer named Gail Slater, who leads the Antitrust Division of the Department of Justice as assistant attorney general. Given her reputation as a fierce enemy of monopolies, Trump’s choice of Slater for the job drew cheers from the market-skeptical corners of the so-called New Right. Yet Slater views her mission as protecting markets — not attacking them.

“We see what we’re doing as an essential part of the American free enterprise system”, she tells me in an interview at her office deep inside the DOJ’s labyrinthine Washington headquarters last week. “We think that we should have more confidence in our system and not think that in order to compete with China, we have to become more like China” — that is, an economy in which most sectors are dominated by a handful of giants coddled and controlled by the state.

The tech lobby insists that US national security and dominance in fields like AI require government to get out of industry’s way. Slater doesn’t see it this way, and the disagreement is more than academic. This week, an antitrust suit against Google launched in the first Trump administration and carried through by Team Biden entered its remedies phase. In 2024, Google was found to have engaged in anticompetitive behavior in the online search market, and now the court has to decide how to hold it accountable and prevent future wrongdoing.

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Slater’s litigation team argued that Google operates a “vicious cycle”, spending enormous sums to become the default engine worldwide, then improving its search results with better data gleaned thereby, and then using the windfall revenues to deepen its advantage as the default engine. The Trump administration insists that Google must sever its default-engine partnerships with the likes of Apple, divest from its own Chrome browser, and license its data to competitors.

Meanwhile, the Federal Trade Commission — a parallel independent agency with rule-making authority as well as the power to bring its own cases — is trying a suit against Meta launched in 2020, during the first Trump term. According to The Wall Street Journal, Meta boss Mark Zuckerberg attempted to forestall the trial by offering a $1 billion settlement, far short of the $30 billion demanded by FTC Commissioner Andrew Ferguson. Trump himself was reportedly open to a cash deal, but the FTC ultimately spurned Zuckerberg’s payout after a meeting involving Ferguson and key staff.

Was Slater worried that a cash offer, however high, wouldn’t bring about structural fixes to Meta’s overweening market power? Yes, “and I’m told I was in that meeting”, she adds knowingly — that is to say, she inveighed against settling. A progressive antitrust veteran tells me he believes that Slater’s arguments played an important role in the outcome.

In response, Big Tech and its allies in the Chamber of Commerce Right have characterized Slater as a dangerous radical who’d sacrifice American innovation on the altar of fair play. But she insists her philosophy has a solidly conservative precedent in the Reagan administration’s decision to break up AT&T.

“This is an argument that’s been made before”, she tells me. “AT&T made a similar argument when this division, the Antitrust Division, in the mid-Eighties” resolved to “break them up.” Back then, “AT&T said, ‘You can’t do this. We are a national champion. We are critical to this country’s success. We will lose the Cold War if you break up AT&T’, in so many words.” Even so, “the division moved forward, and the Reagan administration, which is not thought of as the toughest antitrust enforcer in the history of the country” divided the firm into smaller units. Bell Labs, its research and development arm, was spun off.

America didn’t lose the Cold War, and contrary to the corporate fearmongering, the following decades saw the communications revolution that allows you to read this very article. “From that [breakup] came a lot of competition and innovation”, notes Slater. “The wireless industry came from that breakup. Bell Labs was unleashed, because the innovations at Bell Labs had been suppressed for the reason that AT&T didn’t want to disrupt its own monopoly.”

It’s true that bigness is sometimes rational. Most modern industries entail network effects, increasing returns to scale, or both. It’s why you don’t see mom-and-pop tire manufacturers, as UnHerd contributor Michael Lind often quips. But as the AT&T case shows, bigness can also generate sclerosis. Firms that dominate “toll roads”, whether landline connections or search engines, collect hefty rents without having to innovate or improve their products. They begin to put much of their energy into maintaining the chokehold.

As a result, market power translates into political power and vice versa in an accursed loop all too characteristic of neoliberal capitalism. It’s why Slater views antitrust as a critical component of the post-neoliberal turn in American political economy and the bipartisan rethink on globalization.

“I came from a family of lawyers”, she recalls. “And for people of my generation in Ireland, a lot of our legal education was influenced by being part of the European Union”, and that meant “competition law and economic law. Law and economics was a big part of, you know, European Union law, because it was all about integrating those economies”.

A pinched account of antitrust law, in which the only thing that mattered was consumer prices, was critical to the neoliberal revolution. That model “did very, very well for a lot of companies and the stock market” — and for a narrow slice of the population with the right degrees and the equity portfolios to show for it. The rest lost well-paying, often-unionized jobs and were told to take solace in cheap flatscreens.

There has to be an alternative model that “has more of a care for … American citizens, right?” asks Slater. “We see ourselves as part of that project.”

From an antitrust point of view, this means taking a more holistic view of the consumer-welfare standard that is at the heart of American monopoly law, crucially determining whether mergers should go forward. Slater laments how neoliberals of the Left and the Right, under both George W. Bush and Barack Obama, reduced consumer welfare to consumer prices alone, neglecting other factors, such as whether a merger would substantially lessen competition or cost jobs (consumers are also workers, after all).

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Today’s antitrust renaissance — represented on the Right by Slater and Ferguson and on the Left by Biden-era czars like Lina Khan and Jonathan Kanter — is all about reopening windows onto the economy that had been shuttered by the neoliberals. Yet Slater resists the “Khan-servative” label embraced by Right-of-center fans of the progressive antimonopoly crusader.

“There’s some overlap, like in the Venn diagram, there is some overlap” with Khan’s approach, Slater says. But there are also significant points of departure. For one thing, Khan led the FTC, aggressively using that agency’s rulemaking authority, which had long been left dormant. Slater, by contrast, is at the Antitrust Division, strictly an enforcement agency.

Philosophically, too, Slater sees herself as perhaps more deal-friendly compared to Khan. “If you’re doing a merger that’s benign”, says Slater, “we’ll just get out of the way. There was a perception . . . that a lot of deals were being held up for a long time, unnecessarily by both agencies [the FTC and the Antitrust Division]. And that was leading to inefficiencies” and hindering “deal flow”. Slater hopes that her approach — “If your deal is not a problem, we’re gonna say, ‘OK, you’re free to merge’ ” — will lead to less polarizing drama in the business community.

At the same time, she has so far retained the merger-review guidelines the Trumpians inherited from Team Biden. Though standard practice, the move has triggered grumbling in the pro-business press. It also garnered praise from a group of high-ranking progressives and Biden alumni I spoke with earlier this month. Slater is also scrutinizing the use of anticompetitive practices to suppress wages — winning a criminal conviction against a home health agency to fix nurses’ wages in Las Vegas. And she beams about meeting Teamsters President Sean O’Brien as one of her earliest steps in the role.

Speaking to Slater and her colleagues — one of them vents rage about how corporate attorneys used to walk around the DOJ building as if they owned it — it’s hard to believe they’re part of the same administration as Elon Musk, who positively loathed Biden’s trust-busters. Slater says she supports DOGE’s mission, even as she has resisted its efforts to shutter her division’s local field offices.

After our interview, I email her to ask if she would hesitate to act against one of Musk’s firms if she concluded that it was engaging in monopolistic behavior. In response, she sent me a screenshot of Trump’s Truth Social post announcing her nomination to the job, underlining the President’s expectation that she will enforce the law “vigorously and FAIRLY.”

The Sleep Number Bed is typical of smart home devices, as Harvard business school Professor Shoshana Zuboff describes in The Age of Surveillance Capitalism. It comes with an app, of course, which you’ll need to install to get the full benefits. Benefits for whom? Well, to know that you would need to spend some time with the 16-page privacy policy that comes with the bed. There you’ll read about third-party sharing, analytics partners, targeted advertising, and much else. Meanwhile, the User Agreement specifies that the company can share or exploit your personal information even “after you deactivate or cancel … your Sleep Number account.” You are unilaterally informed that the firm does not honor “Do Not Track” notifications. By the way, the bed also transmits the audio signals in your bedroom. (I am not making this up.)

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How science has been corrupted

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The business rationale for the smart home is to bring the intimate patterns of life into the fold of the surveillance economy, which has a one-way mirror quality. Increasingly, every aspect of our lives — our voices, our facial expressions, our political affiliations and intellectual predilections — are laid bare as a data to be collected by companies who, for their own part, guard with military-grade secrecy the algorithms by which to use this information to determine the world that is presented to us, for example when we enter a search term, or in our news feeds. They are also in a position to determine our standing in the reputational economy. The credit rating agencies and insurance companies would like to know us more intimately; I suppose Alexa can help with that.

Allow me to offer a point of reference that comes from outside the tech debates, but can be brought to bear on them. Conservative legal scholars have long criticized a shift of power from Congress to the administrative state, which seeks to bypass legislation and rule by executive fiat, through administrative rulings. The appeal of this move is that it saves one the effort of persuading others, that is, the inconvenience of democratic politics. 

All of the arguments that conservatives make about the administrative state apply as well to this new thing, call it algorithmic governance, that operates through artificial intelligence developed in the private sector. It too is a form of power that is not required to give an account of itself, and is therefore insulated from democratic pressures. 

In machine learning, an array of variables are fed into deeply layered “neural nets” that simulate the binary, fire/don’t-fire synaptic connections of an animal brain. Vast amounts of data are used in a massively iterated (and, in some versions, unsupervised) training regimen. Because the strength of connections between logical nodes is highly plastic, just like neural pathways, the machine gets trained by trial and error and is able to arrive at something resembling knowledge of the world. The logic by which an AI reaches its conclusions is impossible to reconstruct even for those who built the underlying algorithms. We need to consider the significance of this in the light of our political traditions.

When a court issues a decision, the judge writes an opinion in which he explains his reasoning. He grounds the decision in law, precedent, common sense, and principles that he feels obliged to articulate and defend. This is what transforms the decision from mere fiat into something that is politically legitimate, capable of securing the assent of a free people. It makes the difference between simple power and authority. One distinguishing feature of a modern, liberal society is that authority is supposed to have this rational quality to it — rather than appealing to, say, a special talent for priestly divination. This is our Enlightenment inheritance. It appears to be in a fragile state. With the inscrutable arcana of data science, a new priesthood peers into a hidden layer of reality that is revealed only by a self-taught AI program — the logic of which is beyond human knowing.

The feeling that one is ruled by a class of experts who cannot be addressed, who cannot be held to account, has surely contributed to populist anger. From the perspective of ordinary citizens, the usual distinction between government and “the private sector” starts to sound like a joke, given how the tech firms order our lives in far-reaching ways.

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The danger of safetyism

By Matthew Crawford

Google, Facebook, Twitter and Amazon have established portals that people feel they have to pass through to conduct the business of life, and to participate in the common life of the nation. Such bottlenecks are a natural consequence of “the network effect.” It was early innovations that allowed these firms to take up their positions. But it is not innovation, it is these established positions, and the ongoing control of the data it allows them to gather, that accounts for the unprecedented rents they are able to collect, as in a classic infrastructure monopoly. If those profits measure anything at all, it is the reach of a grid of surveillance that continues to spread and deepen. It is this grid’s basic lack of intelligibility that renders it politically unaccountable. Yet accountability is the very essence of representative government. 

Mark Zuckerberg has said frankly that “In a lot of ways Facebook is more like a government than a traditional company.” If we take the man at his word, it would seem to raise the question: can the United States government tolerate the existence of a rival government within its territory? 

In 1776, Americans answered that question with a resounding ”No!” and then fought a revolutionary war to make it so. The slogan of that war was “don’t tread on me.” This spirited insistence on self-rule expresses the psychic core of republicanism. As Senator Amy Klobuchar points out in her book Antitrust, the slogan was directed in particular at the British Crown’s grant of monopoly charters to corporations that controlled trade with the colonies. 

Today, the platform firms appear to many as an imperial power. The fundamental question “who rules?” is pressed upon America once again.

This is an edited version of Matthew B. Crawford’s testimony before the US Senate Judiciary Committee on June 15th 2021.

But her card wouldn’t work at the cashpoint either. She tried another one. With the same result.

Laura opened the banking app on her phone. It said only ‘error’, then automatically closed.

She finally abandoned her shopping and went into the nearest branch of Santander. There, the counter assistant seemed just as mystified. After about an hour of waiting, though, Laura was called through into the manager’s office.

“I’m going to read a statement out for you,” the manager said. “But I’m not going to be able to answer any of your questions after that.”

He read out:

“We have locked your bank account. We can’t give you any more information. We might be in touch in future with more information. But we don’t know when that might be.”

Could she have her money? No.

But how was she supposed to get home? After all, she lived eight miles outside of Leeds, and now she had no bus fare. Apparently, this was not the bank’s business.

This low-rent version of The Trial went on for another three weeks. Frequently, Laura would phone up Santander customer services. She’d be put on hold for ages. Then the phone would just go dead. She wrote to Santander to complain. They wrote back: they weren’t interested in her complaint and wouldn’t be taking it any further. Meanwhile, her rent, standing orders and Direct Debits stacked up, the late fees and penalties mushroomed around them, as life tumbled towards chaos.

Nearly a month on, she received a letter from Santander:

Under the terms and conditions… we can withdraw banking facilities at any time, and in line with company policy we don’t give further details.

The account had been closed. Without apparent irony, the balance had been appended as a cheque.

‘Laura’ could be any of us. But she is also Laura Towler, one of the founders of Patriotic Alternative. Towler is a sort of next-gen BNP type, a net-savvy white identitarian who campaigns against mass-migration, and occasionally winks to her Telegram followers about ‘you know who’ (they know alright: The Jews). It would seem that Towler had been expelled from Santander for her views. But in line with the bank’s conditions, this has not been made clear.

By a strange coincidence, in the same month, the same thing happened to Mark Collett, her Patriotic Alternative co-founder. Only, Collett doesn’t bank with Santander — he is with HSBC. Somehow, the same thing also happened, in different countries, to Europe’s leading young white identitarians: Brittany Pettibone and Martin Sellner.

Coincidence abounds in the modern world. Last year, on the other side of the Atlantic, various alt-ish-Right figures who banked with JP Morgan Chase woke up on the same morning to find that they no longer banked with JP Morgan Chase. They included the chair of the Proud Boys Enrique Tarrio, former InfoWars staffer Joe Biggs, Project Veritas associate Laura Loomer, and Martina Markota, a Trump-supporting performance artist.

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Of those four, it’s the other Laura whose case drives home the full capriciousness of corporate power in a networked age. Loomer styles herself as the “most banned woman in the world”. In addition to Chase, she is banned from PayPal, from VenMo, from The Cash App, Airbnb and Instagram, from Lyft, Uber and UberEats, from the blogging monetisation platform WordAds and the t-shirt print-to-order site TeeSpring, from Twitter and Facebook — obviously — and from any one of a half dozen other platforms for digital congress.

Some of these bans are strongly self-inflicted; controversy is her currency. She got booted from Uber in 2017 after ranting about being unable to find a taxi driver who wasn’t Muslim in Manhattan, in the hours after the NYC terror truck attack. Twitter banned her in 2018, after she laid into Ilhan Omar, the Muslim Congresswoman, claiming, scandalously, that Omar was part of a religion in which “homosexuals are oppressed”, and ”women are abused” and “forced to wear the hijab.” Later that month, wearing a gold ‘Juden’ star (Loomer is Jewish) she handcuffed herself to Twitter HQ, to protest the decision.

But many of those bans are mere cascade effects. TeeSpring works with PayPal. PayPal had already declared Loomer an unperson, and thus they informed TeeSpring that they would have to stop supplying her. Ditto Venmo and The Cash App.

You don’t want to mess with the people who make the widgets that undergird the financial system. In 2018, in response to activist pressure, MasterCard began choking off various far-Right and internet Right figures. That in turn meant their often lucrative Patreon accounts were cancelled: YouTube ‘Classical Liberal’ Carl Benjamin lost $12000 a month. Now, in a post-Covid world, where we’re often being told that cash is no longer acceptable, some are also being told that electronic banking is no longer for them. It’s an interesting crossroads.

The likes of Towler might be distasteful. But if that alone is the bar for the arbitrary exercise of power by, say, the PR department of NatWest, then all kinds of people — from Cat Bin Lady down — stand to be unpersoned.

Right of admission is always reserved — we all know this — and you might say that these examples are just the market at work. Except that some things are so fundamental to our everyday lives that they’re not so much markets as the thing that you need in order to use a market.

In the dying days of Gordon Brown, an attempt was made to guarantee every citizen’s right to a current account. It was quickly shot down by the Big Five banks (after all, it wasn’t as if they owed the government any favours). A decade on, that tide is further out than it has ever been.

In the banking system’s capacity to disable the individual without pro-actively doing them harm, there’s an echo of the elegance of the Chinese government’s social credit. “There was no file, no police warrant, no official advance notification. They just cut me off from the things I was once entitled to. What’s really scary is there’s nothing you can do about it,” was how Liu Hu put it — a Chinese journalist, who ran afoul of social credit in 2019. But perhaps Black Mirror’s ‘Nosedive’ episode would be a more apt comparison. In our hemisphere, that kind of deletion is done more cheerily, coated in the veneer of freedom of choice and association, by PR and HR, not by the grey monolith of The Party’s star council.

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Increasingly, we allow our corporations to police the soft boundaries of acceptable speech and thought, from Sainsbury’s rejection of ‘racist’ shoppers to the Yorkshire Tea wars to Tampax’s latest bloodbath.

Ironically enough, the license that companies now take as part of their remit is a perfect mirror image of the Cake Problem: the oft-rehashed libertarian thought experiment, over whether a fundamentalist Christian cake-maker should be forced to bake a cake for a gay wedding. When US Libertarian Party candidate Gary Johnson was posed the question in 2016, he said that they should — and added that he would equally require a Jewish baker to make a Nazi wedding cake. The underlying principle is one of neutrality. Where two belief systems clash, if they remain polite and cooperative, shouldn’t the public still retain an underlying right of service?

Evidently not.

Another great thought experiment dawned in August of last year, when Laura Loomer stunned the Republican establishment by winning the GOP primary for Florida’s 21st Congressional District. The 21st is West Palm Beach, where Mar-a-Lago lives. Trump himself has already cast his vote for her.

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Clearly, Loomer’s campaign has been adversely affected by her various bans. At the time of her deletion, Loomer’s tweets were getting 150 million impressions a month. As she puts it: “They just assume that people can afford TV, and that they’re not going to get all their information through social media.”  She might have wingnut tendencies, but Loomer is also half of the choice for voters in the 21st District.

This year, “in the interests of transparency and fairness”, Twitter has given every single candidate standing in the US election a blue-check verified account. So, when she won her primary, she applied to have her accounts reinstated.

No dice. She can’t get on Big Social, the broadcast networks are ignoring her, and her opponent, Lois Frankel, won’t even say her name, let alone debate her.

Should she win — still a long shot — Loomer has sworn to spend her time on Capitol Hill breaking up the tech giants’ monopoly. So couldn’t it be said that they’re acting to titrate their own legislative environment?

F.A. Hayek, and his prophet on earth Margaret Thatcher, saw the market as the best bulwark against tyrannical state power — that by pulling lots of little levers every day with our cash, we’d effectively be voting, in a constant dialogue of mini-democracy. It was only towards the end of their regime that the Thatcherites began to realise that some things — from trains down — remain public utilities in spirit, no matter who runs them.

As the Hunter Biden story still freezes the New York Post’s Twitter feed, it seems the power of the corporate lever-pullers to mould the outer edges of democracy is as strong as it has ever been. We can vote with our wallets, sure. But what if the scope extends way beyond a single product line, into an entire kind of product, or the social architecture that makes products possible? What if the lever-pullers are our wallets?

From an American perspective, for example, it is often linked with the Left. Which is a bit odd, because for Marx it was, broadly speaking, a philosophy of the Right. For him it represented “an individual separated from community, withdrawn into himself”.

In other words, the Right’s liberalism seeks to protect us from each other, by separating us from each other. To regard other people as a threat to our security and freedom is to undermine precisely the sort of human solidarity that is the proper basis for genuine freedom and human flourishing. And that is how I have always understood liberalism.

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So for example, I see neo-liberalism — new liberalism — not as some sort of aberration, but as the authentic face of the liberal tradition. There is a direct line from Locke to Friedrich Hayek, which works on the basic assumption that the best way to oppose the imposition of heteronomous power – originally, the power of absolute monarchy — is by establishing the philosophical ramparts around the individual and their rights.

In the 20th century, capitalism made an easy alliance with this strain of liberalism, both philosophies agreeing with each other that the individual, and the choices the individual makes, are to be regarded as morally sovereign.

I believe, as a Christian and a Marxist – or, at least, someone who has taken seriously the Marxist critique of society, if not its solutions – that this atomisation of society has been responsible for a great deal of human misery, loneliness and alienation, separating us, one from other.

Capitalism isn’t threatened by a political perspective that makes individual choices the foundational move of moral philosophy. Thus, today, woke liberalism happily co-exists with Silicon Valley free market capitalism, both mutually reinforcing. This is the reason liberalism has long been a dirty word for me. Liberalism is a moral alibi for capitalism. And capitalism – at least, in the form in which we have it now – is ultimately a recipe for human unhappiness.

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But maybe I have got this all wrong.

Last week, I sat down with the distinguished political philosopher Sir Larry Siedentop to record his Confessions podcast. One of the joys of this series, for me anyway, has been to open myself to the perspectives of others, and have my own world-view challenged. And the person who has managed to rock my understanding of things more than any other has been Sir Larry.

There is another tradition of liberalism, he explained. And, in this tradition, individualism is a dirty word. Read more de Tocqueville, he advised.

If you listen to the interview, you will hear the sound of someone changing his mind. Me. Not that the pieces of this new perspective are all solidly in place. I have lots of reading to do. But talking to Sir Larry, I saw something different. A new way to configure my understanding of things.

Why I was wrong about liberalism

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The point of Tocqueville’s liberalism, he explained, is to disperse power, not to establish the individual as some impregnable citadel with its fortifications directed towards our fellow human beings. Individuals are freed from the oppressive power of absolute monarchy or Papal proclamation, not so that they can become free-floating centres of self-government, but precisely so that they can form “associations”, and thus, through the power of these new collectives, disperse power throughout society.

The basic point is this: that the ultimate purpose of the strain of liberalism Sir Larry was pointing to was not to release the individual from any authority other than itself but simply to oppose over-weaning concentrations of power. And the best way to do this is through the power of human association, often expressed in terms of institutions – parliaments, the judiciary, the armed forces, the media, the church, even football clubs, even the monarchy.

Taking Jesse Norman’s Confession earlier this week – the episode is out on Monday – he suggested that Tocqueville lifted a lot of this from his hero, Edmund Burke. And there is certainly something in this idea of association that is reminiscent of the ‘little platoons’ that Burke famously talked about. But I will leave the provenance of this idea to the academics. My interest is in its explanatory power.

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What attracts me about this dispersal of power idea is firstly that it makes sense of liberalism’s moral crusade against concentrations of power, without collapsing into atomisation. Also, it helps explain the need for resistance to concentrations of power other than that of the monarch or the pope. So, for example, the same logic can be applied to  the city of London or the tech monopolies.

In other words, liberalism does have the resources to take on capitalism, without destroying its wealth-creating potential. Society is an organism, and the various parts of the organism have their place, but should not get above themselves.

By this explanation, neo-liberalism – and its over-estimation of the market – is not a new, improved version of liberal logic, but a violation of its core purpose: to disperse power. In a piece I wrote on conservative anti-capitalism the other week, I looked at the emergence of conservatives who are starting to argue that the market has become a threat to many of its traditional values: family, church, even nation.

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It was the Cold War that bent traditional conservatism out of shape: the binary nature of the choice it presented – communism vs capitalism – forced us to throw all in with the market as the basis for resistance to state authoritarianism, as expressed by the Soviet Union. But this was a temporary alliance, and the collapse of communism has now freed conservatives to ask whether market forces were ever really their friend.

Something similar may have happened to liberalism, with neo-liberalism having become so obsessed with the threat of communism that it didn’t recognise that it had justified a whole new apparatus of control: market forces.

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This idea that liberalism is properly expressed as the dispersal of power has some unusual consequences. For example, I was astonished that Sir Larry expressed the view that the eradication of the class system in this country enabled power to be concentrated in London, the gentry having previously jealously guarded their regional power.

Not that anyone would seriously argue for a return to class deference as a means of re-establishing regionalism. But at least this should give us pause if we think of liberalism as a crusade to do away with the power of a few toffs pottering around their estates, dead-heading their roses and worrying how to keep the rain out of their castles.

These are old battles, long won. The new battles must square up to the power of Google and Facebook and Apple. Or, more controversially, resist the power of the judiciary to extend the application of rights language to areas of our lives that are properly political – as Jonathan Sumption has ably argued in his recent Reith lectures.

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The idea of power dispersed is also at the heart of our debates about the EU. Some of us see the repatriation of powers to national governments as a means of resistance to the desire of the European Union to accrue ever greater power to itself. In a world of globalisation, the nation state is an important expression of regionalism.

Others, of course, see the EU as the guarantor of rights and freedoms that protect us from the power of big business and even the venal majoritarianism of political nationalism. Though my sympathies are firmly with the former position, both are arguments that seek the dispersal of power.

But there are some less controversial policy decisions that liberalism as power dispersal points to. Scrap HS2. Its too much about London being at the centre of things. Take seriously the northern powerhouse. An English Parliament is a must, with ever greater power devolved from Westminster to the regions. Oh, and I’d nationalise the trains, essential utilities and even the banks (no, the Marxist in me hasn’t gone away).

Sir Larry thinks Brexit will mean a federal version of the United Kingdom, and a written constitution. I’m not convinced, but these are the right things to be speculating about.

If liberalism is to survive as a positive force within society, it needs to move away from the idea that the human individual is sovereign and appreciate that human flourishing requires society. And that society – association, if you like – requires a continual revolution of power redistribution.

1. Release land, to end the housing crisis

The average UK home costs eight times the median salary, rising to 12 times in London and the South East. While this is partly due to quantitative easing and loose credit conditions, the underlying reason so many youngsters are priced out of property ownership is that, for decades, we haven’t built enough homes.

The Help to Buy scheme has stoked up demand, helping over-powerful developers to make super-normal profits while producing sub-standard, under-sized homes. Reform must focus on supply – particularly changes to the 1961 Land Compensation Act, with the state using compulsory purchase if necessary to release acreage. Landowners must be fairly compensated of course, but we must avoid letting sky-high land prices feed through into the house prices faced by ordinary home-buyers.

Our opaque, dysfunctional land market is at the root of our housing crisis – which is causing misery among not only millions of aspiring homeowners, but also those in need of decent social housing. The Letwin Review explored these issues but stopped well short of tackling the vested interests – or recommending changes to existing legislation, which would be required to solve this enduring problem.

2. Scrap HS2, the most expensive railway ever conceived

The original case for HS2 – speed – has been seriously undermined by growing internet connectivity, which facilitates work on trains. The case then shifted to capacity – but the London-to-Birmingham route is already well-served, with trains only 43% full, on average.

More recently, HS2 – which is scheduled to extend from the Midlands to Manchester and Leeds – has been sold as a way of addressing the North-South divide. Yet cost-benefit analysis suggests that building better rail links between our big Northern cities – creating an alternative growth centre to London and the South East – is a far better use of public funds.

Official HS2 cost estimates have ballooned from £33bn to £56bn. Industry insiders put the eventual bill way above £100bn – which would make HS2 the most expensive railway ever built. With passenger dissatisfaction across the existing network at a ten-year high, it makes no sense to invest in a vanity project on routes already relatively well served. We need better local commuter services instead, into cities including London, Manchester, Bristol, Leeds and Newscastle, where the passenger growth has far out-paced that on inter-city routes.

Spending on HS2 (around £4bn to date) is about to crank up – to £4.2bn every year for the next ten years, as serious construction begins. We need to think not about the billions already spent, but the many tens of billions that should now be diverted away from HS2 to local rail infrastructure, buses and other vital transport projects.

3. Internet that’s faster than super-fast – and universally accessible

Around 95% of UK premises can access ‘superfast broadband’ (24-plus megabytes per second). While this is sufficient for current needs, the growing use of data-intensive services, particularly “smart” devices linked to the internet, mean we need “full-fibre” connections (at least 1 gigabyte per second).

Some 71% of premises in Spain can access full-fibre, rising to 89% in Portugal, 97% in Japan and 99% in South Korea. In the UK, the figure is just 6%.

‘Full-fibre’ networks consist of fibre optic cables running from local exchanges directly to each premises. Such infrastructure also supports high capacity mobile broadband networks – particularly future 5G networks – allowing very fast download speeds and near instant response times. Failing to build this network quickly will hold back our nation.

The Government has a target to ensure 15 million UK premises can access full-fibre by 2025 – less than 50%. Just £200m of public money has been made available, re-allocated from super-fast roll-out to full-fibre. This shows a pitiful lack of ambition and urgency. Above all, broadband infrastructure should be incorporated into all new-build homes – and BT must allow other providers to access cable ducts and digital maps on a non-discriminatory basis.

4. Break up the banks and crank up the interest rates

“A big public narrative in this country is … ending too-big-to-fail, because that process is not complete”. So said Bank of England Governor, Mark Carney, in late 2017. Since then, with the on-going Brexit row, bank reform has been out of the headlines. But that doesn’t mean the problem has gone away.

The UK failed to introduce meaningful banking reform after 2008. Far too few challenger banks have emerged to compete with the long-standing incumbents, so the UK banking sector is dominated by a few big institutions – even more so than before the global financial crisis.

The post-crisis “Vickers Reforms” were deeply inadequate – leaving investment banking and commercial banking intertwined, with the deposits of ordinary firms and households still dangerously exposed to the City’s high-risk investment strategies. The ‘moral hazard’ at the heart of the previous collapse remains, then, with the UK’s biggest banks knowing taxpayers will ultimately bail them out.

That encourages excessive risk-taking, as do ultra-low interest rates, as mainstream investors ‘search for yield’. We need to take on the banking lobby and solve ‘too-big-to-fail’. The UK should also follow the US lead and decisively raise interest rates.

5. Reboot capitalism by cracking down on monopoly

Across much of the UK, stagnant living standards and spiralling corporate profits are fuelling a sense that capitalism is skewed, with the benefits accruing to an elite few at the expense of the many. That explains the popularity of Corbyn’s anti-capitalist ideas of aggressive renationalisation and punitive taxation.

The reality is that UK capitalism needs to be updated and modernised. Many key sectors – from telecoms, housing supply, banking, power utilities and audit – are over-concentrated, dominated by a small number of large companies. This results in bad consumer outcomes – including a lack of choice, poorer customer service, low trust levels, “super-normal” profits and high prices.

British politicians have become far too tolerant of monopolies, oligopolies and other restrictive practices. When important markets are dominated by a few big providers, capitalism stops working and the customer gets a bad deal.

The UK’s last Competition Act was in 1998 – when Facebook and Google didn’t even exist. We need a period of concerted ‘trust-busting’ to inject more competition and restore public faith in ‘the system’. Capitalism works, but periodically gets silted up as incumbent firms become too powerful and capture politicians and regulators. Every few decades, the system needs rebooting – and that’s where Britain is today.

Click here to compare Liam Halligan’s pledge card to the others in our Beyond Brexit series.

Undoubtedly, there has been Russian meddling in democratic elections and Chinese economic pressure – but neither of these can explain the scale and depth of popular discontent. In fact, our age of anger has its origins in the moral bankruptcy afflicting economic liberalism, and the rapid cultural change brought about by social liberalism. Establishment parties seem to be struggling to understand this.

Worse, though, is their failure to recognise why liberal democracy is under strain from within. Since Antiquity, philosophers from Plato via Aristotle to Cicero have warned against the slide of democracy into autocracy. Today this warning applies to liberalism and the way it unleashes democracy’s demons – oligarchy, demagogy, anarchy and tyranny.

Further reading

Europe's democratic difficulties

By Helen Thompson

Liberals today, instead of defending open markets, promote existing cartels and new monopolies. As a result, more than a decade after the financial crash, the banking behemoths that rule global finance are still ‘too big to fail’. Our everyday economy is dominated by the Frightful Five – Amazon, Apple, Facebook, Microsoft and Alphabet, the parent company of Google. By controlling access to information, these tech monopolies restrict not just economic competition but also free speech. Their plutocratic power undermines both open markets and democratic debate.

In turn, this oligarchic control reinforces the drift towards demagogic politics, as both establishment liberals and populist insurgents exploit popular fears about economic and cultural insecurity. Democracy is, as a result, caught between technocratic facts and the ‘post-truth’ of anti-elite challengers. Neither upholds common sense and what George Orwell called ‘common decency’, including respect for political opponents. Instead, they demonise each other and practise a politics of ideological purity and the closing down of robust yet civilised debate.

The demons of oligarchy and demagogy reinforce anarchy, in the sense of social fragmentation, and as a result societies are increasingly balkanised. The social capital involved in interpersonal trust and cooperation has declined significantly. Civic ties are weaker just when public trust in our main public institutions is substantially lower. Loneliness has escalated from personal misfortune into a social epidemic with around 9 million people in Britain being socially isolated. All this feeds a strong sense of powerlessness.

Oligarchy, demagogy and anarchy also exacerbate what Alexis de Tocqueville called in Democracy in America the ‘tyranny of voluntary servitude’ – a “kind of servitude, ordered, mild and peaceable, a singular power, tutelary, all-encompassing”. This applies to the surveillance capitalism of the tech monopolies, which extract data from their users and use it to manipulate their behaviour for maximum profit. In the name of choice and emancipation, personal autonomy is usurped by permanent monitoring and free will is subverted. We voluntarily hand over our humanity without realising it.

Further reading

The rise of post-truth liberalism

By John Gray

But these three irrepressible demons of liberal democracy can be tamed. The alternative to an ever-greater oligarchic concentration of wealth and power is not simply better regulation but a much more fundamental change of ownership to transform the rentier economy that extracts excessive profits, as with the tech platforms.

The radical move would be to downsize incumbents by breaking them up and introducing limits on ownership concentration – not simply send them off with a  fine. Anti-monopoly regulators in the US and Europe should force monopolies to spin off recently acquired business lines, so that there is a structural separation of the core business from new activities.

Facebook would have to sell off its acquired image and messaging services Instagram and WhatsApp. Google should relinquish ownership of YouTube that provides a rich data mine with end-to-end control, from email via web browsing to operating systems and advertising platforms such as Chrome or Android. And Amazon should be compelled to separate its e-commerce platform from its offline retail operation.

Further reading

Why I welcome the Economist's mea culpa

By David Goodhart

Those who object on grounds of market freedom have to be reminded that it is the ‘robber barons’ who replace open and competitive markets with closed corporate monopolies. There is a noble tradition of enforcing anti-trust laws, as with Theodore Roosevelt deciding to smash the monopoly of Standard Oil in 1911, and it needs to be renewed. Politicians and regulators should hold Facebook’s founder Mark Zuckerberg to his word: “Move fast and break things.”

Splitting up the tech platforms is also an important element in tackling the demon of demagogy. Facebook and Google have to be treated as media corporations and subject to the same rules and regulations. The regulators should be given powers to hand out fines to all new media found to produce or distribute bogus stories in an attempt to attract attention and advertising. That includes those click-hungry mainstream media outlets which persistently feature falsehoods by embedding links to lies on their websites. Printing insincere apologies on page 19 will not do.

Persistent misinformation in all media should lead to the loss of their legal licence. Where individuals or groups are explicitly targeted, the ‘right to reply’ should be extended in a spirit of free yet fair argument.

The fundamental task for both media and politics is to nurture a commitment to truthfulness that can once again inspire popular trust. What is required is a new ethos in public discourse. This would involve informal norms such as the defence of robust debate, viewing your opponents as legitimate instead of demonising them as ‘traitors’, and a joint concern for mutual flourishing rather than merely personal advancement at the expense of others. Without such a shared ethos and some common norms liberal democracy will continue its slide into the anarchy of social fragmentation.

Further reading

Can bribery fix democracy?

By Peter Kellner

To rebuild civic ties, a genuine democracy needs to pluralise the state, not just by devolving political authority and central bureaucracy to lower levels according to the principle of subsidiarity. It also has to encompass a much greater participation of groups and associations in the public sector.

For example, associations could provide a wide range of public services by forming cooperatives and mutuals that use state funding to deliver education, health care or welfare. By contrast with free-market managerialism or bureaucratic statism, such associations would focus on members – funders such as local government, but especially workers and users.

Moreover, the pluralisation of the state can extend to utilities by establishing public-interest and community-interest companies. Like cooperatives or employee-owned businesses, such companies operate on the basis of mutualist principles that involve in their governance owners, workers and users. Public- or community-interest companies pursue not just private profit but also a social purpose by reinvesting their profits in the business and in the community instead of simply enriching the top management or institutional shareholders. The building of an associative democracy is an alternative to oligarchy and anarchy.

Further reading

Can social democracy survive?

By Matthew Goodwin

Taming democracy’s demons is especially urgent at a time when both liberal elites and anti-establishment insurgents are undermining parliamentary democracy and are silent about what binds people together as members of national communities. Both polarise politics just when democracy needs a transcendent conversation about how, in a context of plural values, we can forge a common life.

This will require far more than restating liberal democracy’s founding values of liberty and equality or delivering on the promise of prosperity and peace. Rather, democracy requires a renewed civic covenant – what Edmund Burke called “partnership … not only between those who are living, but between those who are living, those who are dead, and those who are to be born”.

This emphasis on covenantal ties among generations can help us address the growing economic injustice between young and old today. Society is not a contract of individuals but a partnership between the generations that balances individual rights with mutual obligations and contributions with rewards. Without a commitment to civic covenant, democracy will continue to disintegrate.

Adrian Pabst is the author of The Demons of Liberal Democracy

Patents give drug makers a period of time with no competition where they can be rewarded for their innovations, encouraging drug companies to invest in costly research and development that might take years to pay off. The logic behind patents is sound, and drug companies devote billions of dollars to find extraordinary cures that extend our lives.

But intellectual property, once an unremarkable area of law, has exploded since the 1980s. From 1900 to 1982, the number of patents increased by around 138%. After 1982, the number of patents extended increased by an astounding 416% by 2014. Not only did the number of patents explode, the areas they cover has expanded in ways the Founding Fathers never intended.

Over the past few decades, copyright protection has been extended to unpublished works, the requirement to register one’s copyright has been dropped, and copyright terms have grown from 28 years to the life of the author plus 70 years. This is the dark side of patents, when they are often used as a tool to gouge customers. In the case of drug companies, patents allow them to rip off patients. The longer the drug lacks competition, the longer companies can charge extortionate prices.

The cost to society is immense. The United States spends over $3 trillion annually on health care, and 10% is spent on drugs. The average American spends more than $1,000 a year on prescription medications, 40% more than the next highest country, Canada, and double what Germany spends.

Further Reading

Clash of the Titans: Amazon takes on big pharma

By Nigel Cameron

The broadest study done on the reasons for the increase in costs appeared in the Journal of the American Medical Association: “The most important factor that allows manufacturers to set high drug prices is market exclusivity, protected by monopoly rights awarded upon Food and Drug Administration (FDA) approval and by patents.” Generic drugs are the main reason why drug prices have fallen, but access to them is generally delayed by numerous business and legal strategies.

When patents are about to expire, for example, the pharmaceutical industry seeks endless extensions through ‘reformulation’ of their drugs or minor modifications to the methods of delivery. Reformulation involves changing the drug just enough to obtain additional patent protection, while keeping enough characteristics the same, so that previous clinical testing results can be relied on to obtain FDA approval. There is no new innovation, no new discoveries or any greater benefit to patients, yet companies can continue to charge high prices.

For example, the Orphan Drug Act of 1983 regulated the approval of drugs for rare diseases and gave a drug companies even greater exclusivity. In theory, this would encourage drug companies to find cures for diseases that might not have a big market. The problem is that Orphan Drugs are not in fact rare. They make up 20% of all global prescription drug sales. Incredibly, 44% of new drugs approved in 2014 had orphan status, and due to pricing they are almost all the most expensive drugs. Now pharmaceutical companies are taking advantage of these incentives to gouge patients, insurers and the government.

Even once patents expire, regulations and bureaucracy provide another even greater barrier to entry for challengers who might want to bring new medicines to market. All new drugs are approved by the FDA to make sure that they work and are not harmful. This is an essential job. Generic drugs, though, are not new or unknown. They are identical to a brand name drug that is off patent in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use. Yet the current FDA approval process for generics is extremely onerous.

Further Reading

The cosy relationship between big pharma and doctors is killing people

By Charlotte Pickles

Drug makers can charge what the market will bear because the magic of competition is missing. On average, a generic takes between three and four years to be approved. Given how long this process takes, it is no surprise the FDA’s backlog of generic drugs stands at an all-time high. In 2014, nearly 1,600 applications for generic drugs were submitted to the FDA. By the end of the year, not a single drug was approved due to a backlog of over 4,700 generics from previous years. Fast-forward to July of 2016, and 4,036 generic drugs awaited FDA approval, yet very few were even processed.

The bipartisan Creating and Restoring Equal Access to Equivalent Samples Act (CREATES), which has been submitted to Congress, should remove roadblocks to the approval of lower-cost generic drugs. However, lobbying – the industry spends millions of dollars a year – means it has almost no chance of passing and has failed every time it has been introduced.

The ugly truth about regulation is that while big businesses often complain about regulation, they tend to benefit from it. Regulations that are burdensome enough kill small companies but not enough to kill large ones are, in fact, ideal. To big companies, startups are like a horrible cancer attacking them, and they are willing to put up with anything painful that will kill them.

Further Reading

Only lateral thinking can save us from economic stagnation

By Peter Franklin

You can compare its effect with cancer treatment. Chemotherapy has the capacity to kill nearly every cell—tumor or normal. The most common way it does so is to damage DNA, the genetic blueprint of the cell. The damaged cells do not die right away—only when they try to replicate with the damaged DNA do the cells die. Sometimes replicating with damaged DNA triggers cell suicide, called apoptosis.

Normal tissues can repair damage because they have the resources and DNA blueprint to repair damage, even if it means slowing growth. Cancers, on the other hand, grow at the expense of any DNA repair. When they try to grow with damaged DNA, they then undergo cell death, through apoptosis or necrosis. Hence, the basis of selectivity of chemotherapy.

Bigger companies favour regulation because, like the normal tissues, they can divert energy to repair and maintenance (lawyers, compliance officers, lobbyists, etc). Big companies are not in the exponential phases of growth like many startups are. (Interestingly, most toxicity in normal tissues come from tissues that grow rapidly: intestines, skin, hair, bone marrow.) These smaller companies need to grow and do not have the budgets to hire an army of lawyers and compliance officers. These fixed costs are a bigger drag on the profitability of small firms than large firms. Hence excessive regulation selectively kills off the small startups attacking big corporations. It is a formidable barrier to entry for any industry.

Today, small businesses are feeling the scorching heat from the chemotherapy of regulation. US companies in 2016 were subject to 104.6 million words of regulation. (The King James Bible comes in around 783,137 words.)

Further Reading

'Government Sachs' keeps adopting policies that favour Wall Street

By Reihan Salam

Researchers have found that a 10% increase in the regulatory restrictions on a particular industry is associated with a decrease of about 0.5 % of the total number of small firms within that industry, with large firms mostly unaffected. The correlation between regulation and higher profits holds across countries. The economist Fabio Schiantarelli looked at OECD countries, and found that high barriers to entry contributed to higher markups. It also explains the loss of dynamism in the economy with fewer startups.This is exactly what has been happening in the US, as industries have concentrated.

If you doubt that regulations can effectively kill any new entrants, consider what has happened to the banking industry. The extensive new regulations introduced with the Dodd-Frank Act have created a protected class of financial firms, with only seven new banks formed between 2009 and 2013. Jamie Dimon, the CEO of JP Morgan has said that Dodd-Frank creates a “moat” around the big banks, while doing nothing to break up America’s largest banks or end the status of banks that are too big to fail. Instead, it has simply kept lawyers, accountants, and consultants busy while choking off competition.

For big businesses across many industires, it’s exactly as one Goldman Sachs lobbyist told Politico in 2010: “We are not against regulation. We’re for regulation. We partner with regulators.”

This is the third of three extracts from “The Myth of Capitalism: Monopolies and the Death of Competition” a new book co-authored by Jonathan Tepper and Denise Hearn.

When Americans think of businessmen getting together to fix prices, they generally think of Matt Damon in The Informant. The movie tells the story of Mark Whiteacre, the highest-level corporate mole in FBI history, who helped break the Archer Daniel Midland (ADM) lysine price fixing scandal. ADM never met a price it didn’t want to fix. Like a Mob family, they met with competitors to restrict Lysine, an essential amino acid, as well as citric acid and high fructose corn syrup. In a document that came to light in court, an ADM executive wrote, “Our competitors are our friends. Our customers are the enemy.”

ADM were no outliers, either – the estimated annual cost of price fixing by cartels is up to $600 billion worldwide. And collusion doesn’t even need to be so explicit. In fact, you don’t need for players to talk to each other at all to get collusion. Many firms that have been caught continue to collude even after they no longer speak to each other. Tacit collusion can lead oligopolistic firms to achieve monopolistic outcomes, leading to reduced output, higher prices, and lower consumer welfare. This is known as the ‘oligopoly problem’. By allowing extreme industry concentration, the government has essentially guaranteed oligopolies can act like monopolies and encouraged outright and tacit collusion.

Suggested reading

Is capitalism immoral?

By Victoria Bateman

This unusual phenomenon can be explained by an idea known as game theory, which can be applied to almost any interaction. Everyone has seen A Beautiful Mind, in which John Nash, played by Russell Crowe, has an epiphany at a bar with his friends as they are trying to pick up women.

There is a group of women: one blonde and a few brunettes. All the men want the blonde woman, and one of Nash’s friends remarked that Adam Smith would have encouraged competition, and the best strategy would be for them to all go and speak to her. But, Nash points out, this would be a really dumb strategy. If they did that, none of them would get the girl. She would feel pressured and then the others would be offended that they were the second choice. The optimal strategy is for the group to cooperate — no one talks to the blonde and instead they all talk to the less attractive friends.

Nash’s key idea was that among different players, they might all choose tacit cooperation rather than face competition. The solution to the problem of competition is called “Nash Equilibrium”.

Nash didn’t create game theory, but he developed it. His idea was a direct descendant of John von Neumann’s Minimax theory. The idea is that players of a game won’t seek to achieve the highest pay-out but will try to minimize their maximum loss. The easiest way to understand this is the example of a parent who allows their two children to divide a cake. The most equal division will happen if one cuts the cake and the other chooses the first piece. Each kid doesn’t seek a theoretical bigger piece – he tries to minimise the chance he ends up with a really small one. Firms will often collude to avoid competition and minimise their maximum loss. That’s what Nash was describing in the film with the blonde.

Suggested reading

Corporate fat cats are abusing their power

By Michael Jacobs

But there is much more to game theory than talking to a blonde or dividing a cake.

The most famous example is The Prisoner’s Dilemma. If two prisoners are caught by the police and interrogated separately, they each have a difficult choice to make: to snitch or not to snitch. If they both stay silent and don’t rat on each other, they will both achieve the optimal outcome. However, if one of them wants to improve his own lot, he might talk to the police and betray his friend. He might walk, and his friend will serve a longer sentence.

There is no right answer to the Prisoner’s Dilemma. If you only play the game once, you are highly motivated to betray your partner. However, completely different solutions begin to emerge if you play the game many times.

In 1984 Robert Axelrod invited mathematicians, economists, and computer scientists to submit strategies for playing Prisoners’ Dilemma. What he found surprised him.

Suggested reading

Capitalists – not socialists – are killing capitalism

By Victoria Bateman

Strategies in the competition could either cooperate with each other or try to punish each other, but rather than play once, they had to play repeatedly until a victor emerged. The computer programs could not speak to each other or know each other’s intentions. All they could do was observe what the other program did in the previous games. Most strategies were sneaky and tried to get away with punishing their partners any chance they got. Other strategies economists submitted were very complicated with all sorts of rules for cheating or cooperating.

It was completely counterintuitive, but none of the complicated strategies won. The simplest, least elaborate strategy emerged victorious; the strategy was Tit for Tat. If the opponent cheated, Tit for Tat cheated. If the opponent cooperated, Tit for Tat cooperated. It was that simple. The program generally elicited cooperation, yet if others cheated, it punished the opponents and didn’t let them take advantage of Tit for Tat’s kindness.

If you only play one game, punishing your partner might make sense. You can get away with it once. But if you’re in a repeated game, things work differently. The dominant strategy of any iterated interaction is Tit for Tat, which leads to cooperation.

The lessons from Tit for Tat for industries is that if you’re in a cozy enough industry with very few players, selling to the same customers day in and day out over many years, the optimal strategy is always to cooperate.

Suggested reading

What government can do about the winner-takes-all economy

By Peter Franklin

Most industries are involved in repeated ‘games’ where they can observe their competitors’ actions, and much like the strategy Tit for Tat they have an incentive to cooperate the greater the number of interactions they have. They know competition can be punished in the future with price wars, and they know that tacit collusion can lead to higher margins.

For decades Anheuser-Busch got its rivals to cooperate by not lowering prices. Generally, everyone else followed, and if they didn’t, Anheuser-Busch played Tit for Tat. They signalled to competitors that if they lowered their prices, they’d start an ugly price war. In 1988 Miller and Coors lowered prices on their main beers. In response Anheuser-Busch slashed prices on their key beers. As August Busch III said, “We don’t want to start a blood bath, but whatever the competition wants to do, we’ll do.” Miller and Coors very quickly dropped their price cuts.

Winning everything through competition sounds great, but it is even better not to lose everything.

Academic research on tacit collusion in oligopolies shows that in highly concentrated markets, firms will often coordinate their behaviour simply by observing and reacting to their competitors’ moves. This often leads parallel price movements, and the results that you would associate with a traditional agreement to set prices, output levels, or other conditions of trade. In the US a wide variety of industries are now oligopolistic, which makes tacit collusion easy.

Suggested reading

The collapse of unions is corrupting capitalism

By Denise Hearn

In the corporate world, this is common knowledge. Hermann Simon is a recognised consultant and has worked for decades with companies on their pricing strategies. He wrote a book titled Confessions of the Pricing Man that explained how firms could increase their pricing and get around antitrust laws and competition policy. Simon recognised the easiest way to fix prices would be to speak to competitors but noted that is illegal. Instead, he suggested following a “price leader” and signalling to the market.

Companies in the US car market practiced exactly such price leadership for decades, with General Motors setting price increases. The largest company in most duopolies and oligopolies functions as the price leader, and other companies tend to follow price increases in lock step. These moves are almost never prosecuted.

Another frequent method that companies use is price signalling where CEOs will indicate to the market their desired price hikes to see what the reaction is from competitors. Before any planned hike, a company sends ‘signals’ to the marketplace. Then the company can listen to whether competitors, investors, or regulators send signals back. Simon helpfully explained that, “Signalling is not illegal per se. As long as companies keep their communication relevant to everyone in the marketplace, including customers and investors, and do not go overboard, they are usually on the safe side.”

Just in case these informal methods of price fixing encountered problems, Simon advised, “Please always discuss any application of these approaches with your legal department or advisors to make sure that your company’s policies comply with the law.”

Despite 15 price increase announcements and numerous supply reductions by paper companies over six and a half years, in August 2017 the courts decided in favour of six containerboard companies: Georgia-Pacific, Westrock, International Paper Company, Temple-Inland Inc, and Weyerhaeuser Company. The court ruled that it was not a violation of antitrust law for a firm to raise its price, hoping its competitors would do the same. The containerboard companies bet on a follow-the-leader strategy and that ‘gamble paid off’.

Proof that in business, tacit collusion is rarely punished.

This is the first of three extracts from “The Myth of Capitalism: Monopolies and the Death of Competiton” a new book co-authored by Jonathan Tepper and Denise Hearn