The Counterbalance: an anti-monopoly newsletter
Welcome to the Balanced Economy Project newsletter.
We are setting up an organisation, the Balanced Economy Project, to tackle monopolies1 and excessive concentrations of market power, around the world.
This is the first edition of what will become a regular newsletter.
Dominant firms are using raw economic and political muscle to squeeze the life out of our economies in pretty much any sector you can think of: agriculture, digital technology, finance, manufacturing, pharmaceuticals, music, accounting, eyewear, academic publishing, social care, military procurement and nuclear weapons (yes, really,) cheerleading, retail, and more.
Instead of investing to produce better value goods and services, monopolists are locking down markets to extract wealth, crushing healthy economic ecosystems while also escaping taxes, environmental rules, and other civic obligations. They use this extracted wealth to bend politics, laws, and public opinion to amass more power to control markets, in a vicious circle.
Monopolisation corrupts markets, curbs innovation, tramples creativity, worsens inequality, saps economic resilience, makes poor regions poorer, harms the environment, empties out our high streets, undercuts the media, undermines democracy, threatens our security and fuels popular anger. In the past 40 years, the share of global income going to workers has fallen by some eight percentage points – if they had the same share of global income they had in 1980, they would collectively earn $7 trillion more each year - over $2,000 per worker, on average, worldwide – and a lot more in rich countries. These vast trends have several causes, such as globalisation and the rise of digital markets – but these are in turn umbilically intertwined with monopoly power.
Monopolisation has dangerous regional, racial and gender effects, worsening inequality across each dimension. Value that could circulate in local communities is increasingly shipped out, accumulating in large corporate vehicles and financial centres, often offshore, undermining regional productivity. Similarly, the victims of extractive monopolisation tend to be disproportionately women, people of colour, and other vulnerable groups.
That is the first problem. The second is that governments and citizens around the world are not effectively recognising, understanding or tackling these threats. That is not just because of lobbying and corruption: it is also because of a dangerous orthodoxy about markets and competition, half a century old, guarded by an ossified technocratic competition establishment.
And that provides an opening for change – because that orthodoxy is built on quicksand. A powerful new story is now being created to replace it. We aim to help build and spread this new story, which first emerged in the United States, to other countries.
The goal is to re-balance our economies in the wider public interest and roll back a rising tide of oligarchy now threatening our democracies.
A brief history of modern antitrust
In the 1970s a small group of scholars and activists in Chicago, led by the jurist Robert Bork, popularised a novel set of ideas about corporate power and competition.
At the time, antitrust authorities worked with other regulators and institutions to watch out for excessive concentrations of economic power and to keep economies in balance. Corporations were seen as essential for economic dynamism, but were constrained by strong regulation to channel this vitality to serve the wider public interest.
Bork and his allies attacked this vision. They argued that antitrust authorities should stop worrying about concentrations of power, the integrity of markets, or economic diversity and resilience – and instead narrow the focus down to two core questions: the internal efficiency of corporations; and prices and consumer welfare. Mergers of firms into bigger firms were encouraged, since it was assumed larger firms would deliver economies of scale and other ‘efficiencies,’ then pass these on to consumers.
There was a risk of abusive monopolies but the new anti-antitrusters simply scoffed at the idea that monopolies could survive, because competitors “would arrive in sky-darkening swarms for the profitable alternatives.” Wielding clever graphs and formulae, they fought to keep power, politics, history and the broad public interest out of view, like embarrassing relatives. Their ideas captured the courts, the politicians, and most of the media.
This anti-state vision gained traction first in the U.S., where the new laissez-faire antitrust regime allowed Wall Street firms to assemble a train of mergers, in a fast-growing “market for corporate control.” It fully captured both the Republican and Democratic parties.
Anti-antitrust spread in the 1980s to Europe, where social democracy blunted some of the sharpest edges, but could not stop the core ideas becoming orthodoxy at the heart of the construction of today’s European Union. Meanwhile, institutions like the IMF and World Bank helped spread the message of mergers and bigness around the globe, helped by the tailwinds of globalisation and the broader ideological shifts of the Reagan and Thatcher era, which cut taxes and regulations and generally sought to, as a leading ideologist put it, shrink government “to the size where I can drag it into the bathroom and drown it in the bathtub.”
By the late 1990s, over 80 percent of global foreign direct investment was in the form of mergers and acquisitions (p16), and a decade later European’s top competition regulator gushed enthusically about the ongoing “merger tsunami” – which remains in full flood today.
Today, the consumer obsession is clearly evident in top-level outputs of the UK’s lead competition regulator, the Competition and Markets Authority:
. . . and a similar bias is evident at the European Commission.
This old orthodoxy would praise Facebook or Amazon to the skies for delivering low consumer prices and efficiency – while ignoring their roles in eliminating or capturing economic ecosystems of small businesses, for instance, or in fostering hate speech. Ask any struggling musician, or small-business supplier to a giant supermarket chain, about the dark side of giant platforms crushing their livelihoods to keep prices low. And why would monopolists, with all their power, pass their winnings on to consumers, when it is easier and more profitable just to crush lower-priced competitors?
The evidence is that they don’t. Price markups have risen from 10 percent above production costs in the 1980s to a stunning 60 percent today, worldwide. The consumer obsession has failed, even on its own narrow terms. In future editions of this newsletter we will lay out how deep the malaise has spread.
A vibrant new story is birthed in the US . . .
A decade ago, in the ruins of the global financial crisis, a new antitrust story began to emerge in the United States. It was first laid out systematically for a mainstream audience in “Cornered,” a book by the U.S. journalist Barry Lynn, who described a “false cornucopia” of apparently vibrant competition, masking “hidden monopolies everywhere,” an “invisible fist” killing jobs, sapping economic dynamism, corrupting markets and politics, fostering instability and threatening national security. Reaching back to older antitrust traditions, he reminded Americans that their attachment to “liberty” was historically a bulwark not just against excessive government power, but also against excessive private power: especially against the tyranny of monopolists.
He exposed the old orthodoxy’s incoherence too. Shifting antitrust’s focus to the consumer had:
“enabled Bork to roll out a magically simple chain of reasoning: if antitrust law exists to serve the consumer, and if consumers are best served by getting more for less, and if the best way to get more for less is to encourage business to be “efficient,”| and if the best way to be efficient is to build up scale and scope, then ergo, monopoly is the best friend of the consumer.”
If those last words sound silly – that’s because they are. The old orthodoxy was a intellectual house of cards, waiting for a new story to overturn it. That story is now arriving.
The new fightback rapidly gained adherents in the US, from the scholars Lina Khan and Tim Wu to the politician Elizabeth Warren, the journalist Matt Stoller, and think tanks such as the Open Markets Institute, the American Economic Liberties Project, or the Institute for Local Self Reliance. It is now a diverse, vibrant and fast-growing movement, with supporters across the political spectrum, from those on the left worried about rising inequality, environmental damage and overly powerful corporations, to those on the right who hate rigged markets and seek greater economic dynamism. This small but growing group has, in the words of one of their critics,
“succeeded in fundamentally changing the terms of the antitrust debate in a very short period of time.”
In recent days the Biden administration has appointed leading lights of the new antitrust movement – Tim Wu, Rohit Chopra, and potentially Lina Khan, to top positions. This contrasts with the Obama administration, which essentially gave Google lobbyists the run of the White House.
Deep change is afoot. Is American democracy re-inventing itself again?
. . . but the rest of the world is still asleep
The thrilling new pushback comes with a big proviso: it has not spread far outside the United States. Although many people, in many silos, in many counties, have battled for years to oppose various forms of excess corporate power, there is no coherent critique or movement to bring them together.
Instead, there is a blind spot, encouraged by scholars such as Thomas Philippon who have mistakenly argued that monopoly is above all an American problem, and that Europe is to be envied for its strong antitrust regulation. Meanwhile Margrethe Vestager, Europe’s top competition regulator, is widely seen as a monopoly-busting hero, protecting Europe’s citizens from predation.
These views are wrong: to see this, ponder the market-bending powers in Europe of dominant Too-Big-To-Fail banks, Big Tech, Big Pharma, Big Four accounting firms, Big Agriculture, Big Retail, Big Music, and more. In December 2020, as the European Commission approved Google’s dangerous takeover of Fitbit with its trove of private personal data, attorneys general in nearly every U.S. state filed three massive antitrust suits targeting Google’s and Facebook’s core business models.
Europe has its moments, but it is no model. Outside the United States and Europe, most lower-income countries have even less ability to push back against monopoly power, and the problems there are likely to be greater still. Little good research has been done here: this needs to change.
Another blind spot is that market competition is held up as an unalloyed good. Competition often is beneficial. But in an environment of poor regulation firms will out-compete rivals on factors that harm the wider public interest. For instance, they may be more willing to pollute, more aggressive in their use of tax havens to escape tax or scrutiny, more eager to crush labour unions and employee conditions, or readier to take on large debts and take profitable risks with other people’s money, backstopped by taxpayers.
We will develop all these themes in future newsletters, and in our wider project.
Who are we
The Balanced Economy Project is a global antimonopoly initiative, not aligned with any political party. It is founded by:
Michelle Meagher, a competition lawyer based in London. She has worked on competition issues in private practice, as a regulator, and at the World Bank. She grew disillusioned with the prevailing consensus around 2013, and wrote Competition is Killing Us (Penguin Random House, 2020) laying out a new agenda. @MichMeagher
Nicholas Shaxson, a journalist specialising in politics, finance and financial globalisation. He wrote the bestselling book Treasure Islands, a critical look at tax havens, in 2011, and followed this in 2018 with The Finance Curse, a book about the perils of hosting oversized financial sectors. He has written numerous articles for the Financial Times, Vanity Fair, The Guardian, The Economist, Washington Post, Foreign Affairs, the IMF, the Tax Justice Network, and many others. @nickshaxson
John Christensen, former chief economic adviser to the British tax haven of Jersey, who in 2003 was the main founder of a body to campaign against tax havens, the Tax Justice Network. This spurred a global movement whose international campaigning arm in 2021 was co-nominated for the Nobel Peace Prize. @jechristensen56
We first came together in late 2020 when Barry Lynn sent Michelle an article by Nick entitled “If tax havens scare you, monopolies should too. And vice versa,” calling for a new antimonopoly movement outside the United States. We recognised our shared interests, and began working together almost immediately.
We have a vision of a world where the benefits of capitalism are shared widely, and the rules apply fairly to all. We believe in economic resilience, a balanced economy and a level playing field at national and global levels, economic security for all, accountable government, and empowered and enfranchised citizens. Our vision is of a world where:
Governments confidently regulate businesses in the broad public interest; no business has excessive political or economic power.
Businesses flourish as efficient, effective, diverse and creative ways to meet human needs and generate shared wealth; the benefits are shared widely both through the tax system but also at source, as wealth is generated.
Businesses compete on their merits, rather than by using financial engineering, tax abuse, monopolisation or other rent-seeking behaviour to extract wealth from the economy, workforce or environment.
Economic power is dispersed as far as is appropriate; but where scale is essential power is democratised via measures such as internal governance reforms, or countervailing power via facilitated and protected collective action by stakeholders.
Governments confidently participate in areas of the economy where it is in the public interest to do so.
Governments use antitrust and other antimonopoly tools to improve economic resilience and economic balance along geographical, gender and racial lines.
Regulators include in positions of true authority representatives of small businesses, trade unions, civil society, and others, balancing the influence of large corporations.
Governments do not ‘compete’ to attract mobile global capital by downgrading” lax regulation or enforcement, tax loopholes, or weak antitrust policies.
Competition (or “antitrust”) policy is potentially the most powerful economic regulatory toolkit a government possesses, because of its broad cross-sectoral purview and its direct and explicit impact on corporate power. Because it can reshape economies and markets wholesale, competition policy is really industrial policy, and inherently political.
How to we plan to operate
We are in the process of setting up a formal legal organisation, and we have obtained initial seed funding (from the Joffe Charitable Trust in the UK.)
We plan a formal launch around the third quarter of 2021, and we are currently working out the precise form, tactics and strategy of the organisation, and how we will harness, amplify and add value to the energy we now know is out there. Some things are already clear.
First, we want to shift the content of competition policy, away from an obsessive focus on “consumer welfare” and “efficiencies” towards power, the integrity of markets, economic diversity and resilience, and democracy.
Second, we want to drag competition policy out of the technocratic domain, re-aligning it as a transparent, democratic, political exercise. Employees, small businesses, unions, civil society bodies, citizens, and, yes, consumer representatives, must be allowed into the political processes of formulating and overseeing competition policy.
We have so far interviewed over 60 people in Britain, Europe, the United States, Africa and Australia, including competition lawyers, trade union officials, small businesspeople, non-governmental organisations, politicians, academics, journalists, privacy campaigners, think tankers, economists, financiers, and others. Most have agreed to be associated in some way with this initiative, and we have encountered enormous enthusiasm for this project – along with confirmation that nothing of this kind exists outside of the United States.
We want to help spur a movement that not only argues for countervailing power, but is itself a countervailing force. We will seek to ground ourselves in the constituencies facing or challenging monopoly power on different fronts, and be a hub linking different silos. We would like to help build long-term infrastructure to help regulators to engage with others affected by regulation. We do not wish to control any movement: we aim to spur others to engage in this area, together.
We see journalism and public debate as central to our way of operating. This newsletter will serve as a regular ‘heartbeat’ for the Balanced Economy Project. We plan to publish new ones every 1-2 weeks, with a mixture of our own outputs and contributions from others. Later, we will set up a more comprehensive website.
We are eager to amplify the voices of others working on monopoly issues and those directly affected by monopoly power. Please get in touch if this sounds like you. We’d love to hear from you. Please sign up, to receive our updates into your inbox.
We use the term ‘monopoly’ in its broadest and loosest sense, as others do, to mean a company with excessive market power. “Antitrust” means using competition policies to tackle monopoly power. “Antimonopoly” is broader, meaning antitrust plus other regulatory and tax levers to tackle monopoly power, ideally in co-ordination. We try to avoid ugly technical terms such as “oligopoly” or “monopsony,” unless really necessary.