July 14, 2021
Last week President Biden unveiled his 72-point plan to bolster competition among U.S. firms.
The July 9 executive order begins as follows: “A fair, open, and competitive marketplace has long been a cornerstone of the American economy, while excessive market concentration threatens basic economic liberties, democratic accountability, and the welfare of workers, farmers, small businesses, startups, and consumers.”
“Amen” to the first statement. Categorically.
But on the second claim, that market concentration threatens our way of life, I say, “It depends.”
It depends on whether consumers themselves indicate they prefer more concentration to less in some cases. Most people I know don’t feel exploited by Amazon. Despite its large market share, consumers continue to reward Amazon for good service and reasonable prices. And the success of Amazon has driven competitors like Target and Walmart to improve their own value propositions for consumers — especially during the pandemic.
In fact, the most powerful and most effective regulatory authority of all isn’t an agency like the Federal Trade Commission — despite the two statues outside their D.C. offices depicting muscular men (the bureaucrats’ flattering vision of themselves) reigning in the wild stallions of unfettered capitalism.
The most powerful regulator of all is you. Armed with your wallet or pocketbook, you can slay bad business just like David smote Goliath. And you can reward businesses that serve you well.
The essential feature of this consumer-powered regulatory structure is what the president’s order mentions first: “a fair, open, and competitive marketplace.” A level playing field for all.
Thankfully, the president’s order seems to recognize this deep economic truth — at least in places. We can welcome his call to reduce needless occupational licensing barriers in states and between states. Onerous state regulations shouldn’t deny enterprising young individuals from pursuing new career opportunities. We already know this in Florida, as evidenced by the 2020 passage of the legislature’s Occupational Freedom and Opportunity Act, opening many pathways out of poverty for Floridians.
And the president’s order should be celebrated for directing Health and Human Services to classify hearing aids as over-the-counter products — thereby reducing the price of hearing a new grandchild’s first word.
Notice the formula here: less government = more jobs and lower prices.
But that isn’t what the rest of the order proposes.
The rest of the order alleges that, merely by being big, businesses exploit you. And the remedy is to effect a little Teddy-Roosevelt-era “trust busting.” According to this line of thinking, a dozen little Amazons will serve you better than one, because the baby Amazons will have to compete among themselves for your business.
But here is what that mindset overlooks: Any “big” business started out small — often as the “mom and pops” we romanticize — and grew large only because they made our lives better. Profits are merely indicators that entrepreneurs were on the right track, and losses are the brutal consequences of bad ideas or poor execution.
And unless a business, once successful, can lobby Congress to introduce new regulations — presumably for the “good of consumers” — to keep would-be competitors out, then it must continue to be better than potential competitors would be.
If Amazon can’t rely on Congress to reduce competition for it, then it must do so on its own — perhaps by charging low prices as a preemptive way to discourage new competitors. So even if the market remains concentrated, we nevertheless benefit from these strategically low prices.
Some monopolies are bad, but they are usually the creations of government. Consumers can’t slay them because regulations defend them, and unfairly tilt the field against potential entrants.
Yes, let’s keep markets “fair, open, and competitive.” But the best way to do that is make firms as responsive as possible to the real regulators: you and me.
Victor V. Claar is a professor of economics at Florida Gulf Coast University, where he holds the BB&T Distinguished Professorship in Free Enterprise in the Lutgert College of Business. He serves on the Research Advisory Board of the James Madison Institute.