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For the past 40 years in America, competition policy has revolved around the consumer. This is in part the legacy of jurist Robert Bork, whose 1978 book The antitrust paradox considered that the main objective of antitrust policy should be to promote “business efficiency”, which, from the 1980s, was measured by consumer prices. These were seen as the fundamental measure of consumer well-being, which in turn was the center of economic well-being.
But things are changing. A White House executive order on competition policy, signed last month, contains some 72 discreet measures designed to eliminate anti-competitive practices in nearly every sector of the U.S. economy. But it’s not so much about low prices as it is about higher wages.
Like the Reagan-Thatcher revolution, which seized union power and unleashed markets and corporations, Biden’s decree could well be seen as a major economic turning point – this time, away from consumer-centric neoliberalism, and towards consumers. workers as the main interest group in the US economy.
In some ways, this matters more than the details of particular parts of the order. Many commentators have suggested that these measures alone would do little. But decrees are not necessarily about the details – they are about the direction of a government. And this one takes us completely away from the Bork era by focusing on the link between market power and wages, which no president of the last century recognized so explicitly.
“When there are only a few employers in town, workers have less opportunity to negotiate higher pay,” Biden said in his announcement of the order. He noted that in more than 75 percent of U.S. industries, fewer large companies now control more activities than 20 years ago.
Its solutions include everything from reducing onerous licensing requirements in half the private sector to banning and / or limiting non-compete agreements. Companies in many industries have used such agreements to prevent top employees from working for competitors, as well as to make it harder for employees to share salary and benefits information, which Silicon Valley has done. nefarious way.
This goes to the heart of the American myth that employees and employers are on an equal footing, a lie that is reflected in Orwellian labor market terms such as the “right to work.” In the United States, this does not refer to any sort of equality in the workplace, but rather the ability of some states to prevent unions from representing all workers in a given company.
But beyond explicitly labor-related measures, the president’s ordinance also addresses the more important link between not only monopoly power and prices, but firm concentration and labor share.
As economist Jan Eeckhout explains in his new book The profit paradox, rapid technological change since the 1980s has improved business efficiency and dramatically increased business profitability. But it has also led to an increase in market power which is detrimental to those in employment.
As his research shows, companies in the 1980s were making average profits of one-tenth of labor costs. By the mid-2000s, this ratio had risen to 30 percent and reached 43 percent in 2012. Meanwhile, the “margins” of profit margins due to market power have also increased dramatically (although it can be difficult to see this in parts of the digital economy that do not operate on dollars but on personal data barter transactions).
While technology can ultimately lower prices and thus benefit everyone, it “only works well if the markets are competitive. It’s the paradox of profit, ”explains Eeckhout. He argues that when companies have market power, they can screen out competitors who might offer better products and services. They can also pay workers less than they can afford, as fewer and fewer employers are hiring.
This last problem is called monopsony power, and it’s something the White House is paying special attention to.
“What happens to workers with the increase [corporate] concentration, and what that means in a time without so much union power, is something I think we need to hear more of, ”said Heather Boushey, member of the Presidential Council of Economic Advisers, who recently spoke to the Financial Times of how the White House views the country’s economic challenges.
The main challenge, according to the Biden administration, is to shift the balance of power between capital and labor. This explains the emerging ideas on how to approach competition policy. Many consider the abandonment of consumer interests to the center of antitrust policy to be dangerously socialist – a reflection of the Marxist claim that demand shortages are inevitable when the power of work diminishes.
But we could also consider the approach as a return to the origins of modern capitalism. As Adam Smith observed two centuries ago, “labor was the first price, the initial purchase – the money that was paid for all things. It was not by gold or silver, but by work, that all the wealth of the world was originally purchased. Redefining your priorities is a good thing.