No, Josh Hawley, we aren’t living in an ‘age of monopoly’ killing small business
Washington is nothing if not a vast assembly line for groupthink. It cranks out dubious claims faster than the chocolate assembly line in that famous scene from I Love Lucy. A case in point was a recent morsel from Missouri’s Sen. Josh Hawley, who penned an essay in the Wall Street Journal calling for a new generation of trustbusters to go after Big Tech in particular.
Hawley attempted to substantiate his populist argument that we are in an “age of monopoly” by repeating a series of faulty claims that have been passed around Washington so frequently that they have taken on almost mythic proportions.
To make it seem like rapacious monopolists are killing small business, Hawley stated that new business formation is “roughly half of what it was in the 1970s.” Actually, it declined by about one-third, but the real question is whether that was because of an increase in monopolies. No, it wasn’t. When you examine the 259 industries for which relevant data are available, you find no correlation between changes in concentration and changes in the number of startups. Moreover, all of the decline has occurred in retail — where large, but not monopolistic stores have gained market share from smaller, less efficient ones.
Hawley further claimed monopolies have led to workers receiving a declining share of national income. But the real reason for that trend is that there has been an increase in self-employment and rental income (including the mortgage payments). Factoring in those trends, labor’s share of national income actually grew from around 80% in the mid-1980s to 84% in 2019.
At the core of Hawley’s argument that we are living in an “age of monopoly” is the contention that two-thirds of industries have become more concentrated since the 1990s. But whether concentration went up or down is not the issue: What matters is whether monopoly has been increasing.
It hasn’t. Newly released Census data, which paints a picture through 2017, shows 77% of industries were unconcentrated (with the top four firms holding less than half of the market) and 19% were moderately concentrated (with the top four capturing between 50% and 80%), whereas just 4% of industries were highly concentrated (top four firms having more than 80% market share). Most of these were highly capital-intensive industries that require economies of scale, such as aircraft manufacturing, guided missiles and deep sea passenger transportation.
Hawley also railed against airline consolidation, assuming it’s been bad for consumers. Yet, between 1997 and 2014, airline productivity increased almost four times faster than the rest of the economy. Meanwhile, from 1995 to 2015, prices increased only about half as fast as inflation. And in 2017, airlines were investing almost three times more in capital equipment than in the early 2000s. What exactly is the problem here?
Finally, Hawley tried to justify a radical shift in antitrust policy by appealing to his party’s heritage, asserting that “Republicans were once the party of trustbusters.” Presumably, he was talking about Teddy Roosevelt. But Roosevelt was far from the business-bashing “trustbuster” of popular mythology. He actually distinguished between “good” and “bad” trusts, telling Congress in 1905, “I am in no sense hostile to corporations. This is an age of combination, and any effort to prevent combination will not only be useless, but in the end, vicious.”
None of this it to say there are not challenges in the economy that antitrust could address, especially where the courts find anticompetitive conduct. But breaking up successful companies just for being big is a prescription for national decline.
Robert D. Atkinson is founder and president of the 501(c)(3) nonprofit Information Technology and Innovation Foundation, the leading think tank for science and technology policy.
This story was originally published June 4, 2021 at 5:00 AM with the headline "No, Josh Hawley, we aren’t living in an ‘age of monopoly’ killing small business."