Economists Debunk Progressive Claims That U.S. Run by Monopolies

Real Clear Politics (Commentary)

By Robert H. Bork Jr.

March 16, 2022

Last summer, President Biden signed 72 executive orders to regulate virtually every major industrial sector to protect the American people from excessive market concentration.

“What we’ve seen over the past few decades is less competition and more concentration that holds our economy back,” the president said. “Rather than competing for consumers, they are consuming their competitors. Rather than competing for workers, they’re finding ways to gain the upper hand on labor.”

The president’s actions were a culmination of claims by liberal economists and progressive scholars to sound the alarm about monopolies and how they hurt the ability of workers to obtain wage increases, suppliers to get a fair deal, consumers to get a fair price, and market competitors to compete.

Since then, progressive antitrust appointees at the Federal Trade Commission, the Department of Justice, and the White House Competition Council have moved with alacrity to expand the mission and scope of regulation to deal with this emergency. FTC Chair Lina Khan, who is spearheading the administration’s effort to make a wholesale revision in antitrust regulation, wrote that “studies reveal high concentration to now be a systemic, rather than isolated, feature of our economy.”

Some Republicans buy into this view. Sen. Josh Hawley is fist-bumping his bill that would disallow any mergers or acquisitions for large U.S. companies, while swelling the enforcement budgets and powers of Khan’s progressive FTC. “If you allow corporations to amass significant economic power through market concentration,” he warned, “they are going to have political power, and they’re going to use it.”

But is this true? If the president and a gaggle of officials with Ivy League degrees say the market is overly concentrated – that we are being squeezed by the harmful effects of monopoly – does that make it a fact?

Not according to a new study sponsored by the U.S. Chamber of Commerce and conducted by NERA, which Harvard Law Professor Emeritus Laurence Tribe has called “one of the foremost economic consultancies.” When NERA’s economists analyzed these claims, they found no general trend towards increasing industrial concentration in the U.S. economy from 2002 to 2017.

Just the opposite.

“In both the U.S. manufacturing sector and the broader U.S. economy,” Robert Kulick and Andrew Card of NERA found, “industrial concentration has been declining since 2007.”

For the manufacturing sector, they examined a key metric, the Herfindahl-Hirschman Index (HHI), used by federal antitrust regulators at DOJ and the FTC. A market with an HHI of less than 1,500 points is considered competitive. These economists found that this index had in fact declined from 821 in 2007 to 619 in 2017. The average HHI for manufacturing in 2017 was 150 points below its 2002 level.

For a wider look at industry, they examined the percentage of economic activity accounted for by the four largest firms within a given industry. Here again, the numbers show a competitive economy that is becoming even more competitive – this concentration ratio fell from 36.9% in 2007 to 35.2% in 2017.

“In both the U.S. manufacturing sector and the broader U.S. economy, the decreases in concentration were largest for the most concentrated industries,” Kulick and Card wrote. “The evidence does not support the claim that high levels of industrial concentration have become a persistent structural feature of the U.S. economy.

The economists concluded that “pursuing deconcentration as an economy policy objective is unwarranted and risks causing significant economic harm.”

Don’t expect their report to discourage the regulatory and legislative juggernaut that is progressive antitrust. That aggressive action needs to be taken against industry is now a matter of religious doctrine within this administration. Among Republicans, it’s not just outliers like Sen. Hawley who buy into radical antitrust, but more conventional leaders like Sen. Chuck Grassley.

As inflation edges toward 8%, expect to hear more from President Biden and other politicians about how excessive market concentration drives up prices. This is not surprising. Politicians, after all, need someone to blame for the high price of eggs, meat, bread, and gasoline.

But this accusation won’t stick. A little history shows why: From 1979 to now, the prevailing standard for regulators and judges has been the Consumer Welfare Standard – by which mergers, acquisitions, and business practices have been judged solely by their impact on consumers. Under this standard, inflation had been at historic lows since the early 1980s. What changed in the last year? Did all the CEOs of America bump into each other on the golf course and decide to conspire against the American consumer? Or is it more likely we’re facing the consequences of historic levels of debt, “quantitative easing” and money printing, and record spending?

Perhaps the administration is right about one thing. There is excessive concentration of power – in Washington, D.C.

Robert H. Bork Jr. is president of the Antitrust Education Project.