Unlock Editor’s Digest for free
Roula Khalaf, editor-in-chief of the FT, selects her favorite stories in this weekly newsletter.
This article is an on-site version of our Swamp Notes newsletter. Premium subscribers can sign up here to receive the newsletter every Monday and Friday. Standard subscribers can upgrade to Premium here or explore all FT newsletters
I spent a few days last week at the University of Chicago’s annual antitrust conference, where all the economists, lawyers and many journalists who are interested in competition policy gather. Former White House competition adviser Tim Wu, FTC Chair Lina Khan and Justice Department antitrust chief Jonathan Kanter were of course in attendance, as were a number of Europeans . (You can stream the video here.)
One of the most interesting presentations was on the impact of antitrust measures – which are of course having a big moment right now – on productivity growth. As Swamp readers probably know, productivity growth has been slow in most rich countries, including (until very recently) the United States, over the past two decades. There are many ideas as to why this is happening, from lack of education to declining technology skills in an aging workforce to lack of investment from businesses.
But what if the productivity gap is actually due to the way big companies use their economic and political power to crowd out innovation in favor of higher profit margins? Several scholars have presented data supporting this conclusion. Ufuk Akcigit, a professor at the University of Chicago, presented fascinating slides showing that when innovators and entrepreneurs move their work to larger companies, new patents and product development drop by 50 percent. However, this is not a reward for guessing that their pay would increase. Large companies also receive more government subsidies, even if their innovation rates are lower. And perhaps most shocking was a slide showing the inverse correlation between declining innovation and the growing number of local politicians hired by big business to support their lobbying efforts.
None of this will surprise anyone who has worked in or covered the business world. Power exists in political economy. It’s the air we breathe. Academic and former EU regulator Tommaso Valletti, now at Imperial College London, noted a sharp increase in political lobbying funds associated with mergers as big companies got bigger. We truly have a market system that has been captured by big business, something I experience almost daily in my own professional life.
And yet, I was also struck by the fact that the conversation around all this remains very technical and siloed, in academic conferences like the one I attended, or too broad and rather hysterical (as the rhetoric on corporate greed that we hear in progressive circles). The politicians). Even though we all know intuitively that our policies are captured by corporate interests, it is difficult to galvanize the public around this.
I think part of the reason is that the metrics we use to talk about the impact of corporate power don’t resonate. I raised this point at the conference and asked what we could actually begin to measure to give us a more colorful and understandable approach to the narrative of big business power and its effects, one that would capture the imagination of the audience.
Wu had an interesting idea: take a page from the book of racial activists, who have conducted highly publicized experiments on how resumes with “ethnic” names get buried in slush, while those of more obviously white people leave. via HR with ease. “Maybe academics should look at, for example, how long it takes for phone calls from different stakeholders to be answered by different politicians or regulators,” Wu suggested. Good idea.
I would also suggest that scholars start focusing more on this type of inductive rather than deductive work, focusing more on actual expressions of power – like, perhaps, regularly counting visitor logs at the White House or in agencies. One of the data points that led to my first book was work done by an academic at the University of Michigan, tallying consultation visits made to financial regulators during the creation of the Dodd-Frank regulations. It found that 96 percent of all meetings took place with the largest “too big to fail” banks. Talk about catching.
There have to be all kinds of other creative ways for this issue to really resonate with the public. Peter, I’m curious what steps you would suggest we look at to understand how power is actually used in our political economy?
Recommended reading
-
During the IMF and World Bank Spring Meetings in Washington last week, I had the pleasure of participating in an Oxfam roundtable on the post-neoliberal world with some leading development economists, including the laureate of Nobel Prize winner Joe Stiglitz, the Senegalese economist Ndongo Samba Sylla and Adriana Abdenur, development specialist. advisor to Brazilian President Luiz Inácio Lula da Silva. It was an interesting window on the tensions between the industrial policies adopted by rich countries and the hyper-financialized markets which still penalize the poor (the subject of my column which will appear on Tuesday). Watch the panel video here.
-
European technocrat Mario Draghi is in fact calling for “radical change”, that is to say the end of the neoliberal system, and for an industrial policy on a European scale. This sounds like Davos Man calling for an end to free market capitalism. Read here.
-
Additionally, this speech by John Podesta, given last week at the Columbia Center on Global Energy Policy, was truly groundbreaking. He calculated the carbon cost of the free trade system itself, making it the second largest polluter after China. A big victory for USTR Katherine Tai’s vision of a post-neoliberal business paradigm.
-
FTC Chair Lina Khan Takes a Very Successful Media Tour; she recently did a spot on CBS Sunday morning about how companies can become “too big to care” by using price gouging and other techniques to make profits at the expense of customers.
-
And in the FT, I loved Soumaya Keynes’ column on the running economy, and in particular how a hotter economy and the longer working hours it requires are taking their toll on our health.
Peter Spiegel responds
Rana, I guess I’m a little old-fashioned about this, but to be honest, I’m only one indicator: money.
The American campaign finance system is one of the most corrupting features of a modern democracy in the world, and what is shocking is that most of this system is completely legal and transparent – it is so relatively easy to follow. Campaigns and political action committees must regularly report their contributions to the Federal Election Commission and are increasingly willing to brag about how much they have raised and who their biggest donors are.
What’s harder to track is money that doesn’t flow through PACs or official campaign committees, but nonetheless has an outsized impact on the American political system. traditional large donations to candidates.
Take Charles and David Koch, the billionaire industrial brothers who are generally credited with creating and developing the anti-government spirit of the Tea Party that overtook the Republican Party in the early 2000s. The Koch brothers changed the American political ecosystem not just donating to candidates (although they did some of that), but seeding right-wing interest groups, foundations, and nonprofits across the country. All this was done almost without anyone noticing, since none of it was traceable; these groups do not have the same disclosure requirements as political campaigns.
The Koch brothers, in many ways, created the model that others have followed since. For example, the Mercers – a father (Robert) and daughter (Rebekah) billionaire hedge fund team – created the space for Donald Trump to rise by funding right-wing media outlets like Breitbart and supporting conservative provocateur Steve Bannon long before Trump even entered the political arena. scene.
When I was a foreign correspondent, the obscene sums of America’s political system rivaled only our lax gun control laws as what most baffled foreigners about America—and what I had the most difficulty explaining to strangers.
During this election cycle, I continued to push our political correspondents to keep an eye on the money game, and we published numerous articles from the field. As a journalist and editor, I continue to believe this is one of the most important indicators of political economy that the Financial Times can monitor.
Your reactions
We would like to hear from you. You can email the team at [email protected]contact Pierre at [email protected] and Rana on [email protected]and follow them on @RanaForoohar And @SpiegelPeter. We may present an excerpt of your response in the next newsletter
Newsletters recommended for you
Not covered — Robert Armstrong breaks down the biggest market trends and explains how Wall Street’s best minds are responding to them. register here
The Lex newsletter — Lex is the FT’s incisive daily investment column. Local and global trends written by expert editors from four major financial centers. register here