Crises like the one through which we’re living tend to stifle competition. Big firms – with higher margins, stronger financial networks and closer relationships with the state – tend to survive, while smaller ones often go under. Similar dynamics seem to be at play today: within the first few months of the Covid-19 crisis, firms like Amazon, Google and Tesla saw their share prices skyrocket as investors flocked into tech stocks, imagining these would be safe from the pandemic-induced slowdown. By August, the value of the tech companies was equal to a quarter of the entire S&P 500 index in the US. Meanwhile, small businesses were struggling to overcome the huge bureaucratic hurdles that stood between them and state support.
Michelle Meagher’s new book, Competition Is Killing Us, helps to put these dramatic levels of market concentration in a wider political and historical context. Meagher, a former competition lawyer who became disillusioned after working on mega-merger after mega-merger that seemed to achieve nothing other than boost the profits of some of the most powerful corporations in the world, takes the reader on a journey through the multiple legislative and ideological changes that have brought us to this point, as well as revealing the negative effects that rising market concentration has had on the economy.
She takes us back to the 1980s, when the ideological transition from Keynesianism towards supply-side economic policy led to a shift in the foundation of competition law away from a wider emphasis on market power and towards a narrower one of ‘market efficiency’. On the one hand, this narrowed the focus of competition law, which came to consider only the impact of market concentration on prices and consumer choice. On the other hand, supply-side economists’ suspicion of ‘government failure’ (as opposed to market failure) increased the burden of proof on those attempting to enforce competition law and therefore reduced caseloads among many competition authorities.
At the same time, and as I argue in my book Stolen: How to Save the World from Financialisation, there was a material and ideological shift in corporate governance, which saw the interests of shareholders placed above those of all other stakeholders. ‘Maximise shareholder value’ became the nostrum in boardrooms throughout the US, the UK and Europe. As well as share buybacks and increasing dividends payouts, mergers and acquisitions activity provided an easy way for corporations both to increase share prices today, and to boost profits tomorrow by consolidating their market power.
Throughout this period, as Meagher notes, as long as consumer prices weren’t rising, regulators weren’t concerned. And yet rising monopoly power has created so many economic, social and political problems that competition policy has now become an increasingly important concern for policymakers. Monopoly power also often means monopsony power – the power associated with being the dominant buyer in any one market, including the labour market – which can drive down wages and increase inequality. And while Joseph Schumpeter may have argued that temporary monopoly is a necessary reward for innovation under capitalism, many monopolistic firms are managing to retain their market power over very long periods, not by innovating, but by crushing or buying up their competitors.
This question of market power – which is largely ignored in much of the economics profession – is really what Meagher’s book is all about. Economic outcomes are not neutral. They derive from and reinforce unequal power relations between different economic actors. In the world that emerges from the pandemic – where poverty, inequality and climate breakdown will all be the most pressing issues humanity faces – Meagher’s book reminds us that these questions of power should be far more central to the way we think about the economy.
