Wednesday, October 9, 2019

Economics: Strange Bedfellows - The Trump Warren Crusade Against Big Tech

 

 

(Drivebycuriosity) - The US economy is still growing in spite of the damages done by President Trump`s trade war. The expansion is kept alive by an advancing service sector, especially by the big tech companies. Unfortunately a phalanx of politicians and bureaucrats on the left and right side of  the political spectrum performs a crusade against Amazon, Google, Apple & Facebook and threatens Big Tech with extended regulation. President Trump called the success of Amazon and Google a “huge antitrust problem” and laments that Amazon`s Jeff Bezos is " controlling so much ". He said  about Big Tech "the European Union is suing them all of the time. Well, we should be doing this. They're our companies" (exponents  reason). Trump is reportedly upset that his friends in the real-estate business complain that Amazon is responsible for the decline of the shopping center (nationalreview). Trump confident Treasury Secretary Steve Mnuchin  claimed that Amazon has “destroyed the retail industry across the United States” and should be investigated for antitrust violations" (market).

The President gets support from the left. Senator Elizabeth Warren and other liberals want to break up technology giants like Google, Facebook, Apple & Amazon (stratechery). Sen. Warren claims: "Today’s big tech companies have too much power — too much power over our economy, our society, and our democracy. They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation" (teamwarren). She declares she wants to “ensure that there are more representatives from labor, environmental, and consumer groups than from corporations and trade groups on every existing advisory committee” (vox).

The crusaders claim that the quadrumvirate of Google, Amazon, Facebook, and Apple is too big, too successful, too dominant in too many sectors. They want to gag the big tech companies, to oversee & to constrain their business. Big powerful American agencies join the crusade. The House Judiciary Committee launched a bipartisan investigation into whether large tech companies such as Facebook, Google and Amazon are using their vast market power to suppress competition (thehill). The Justice Department investigates Alphabet’s Google and Apple while the FTC probes Amazon & Facebook to determine if they abused their massive market power, setting up what could be unprecedented, wide-ranging probes of Big Tech.

The crusade is unjustified. Big Tech has much less power than the crusaders claim. Their power is constrained by competition, which is only a click away. Amazon´s success has been animating a legion of copycats who also want to benefit from the ascent of e-commerce. Today Amazon is competing against Walmart, who owns the onlineshop Jetcom. Walmart is much bigger than Amazon, its e-commerce business is growing faster than Amazon and  online buyers can also shop at Target, Kroger, Best Buy and a legion of other online sellers. Even Google & Facebook opened their own online shops and are trying to get a piece of Amazon´s pie. The Internet makes it very easy to compare prices and to switch to other shops, sharpening the competition. Customers can choose the company which has the best quality, the best service and/or the lowest price which gives them a lot power. As a result, customers have more power than the corporations.

Senator Warren claims that Big Tech companies "have hurt small businesses and stifled innovation". Did she ever hear of Uber,  Lyft, Airbnb & Pinterest?  These so-called unicorns were founded just years ago and are already valued $20 billion and more (nypost). Casper, who sells mattresses online, became a brand name almost over night. Apparently the success of Amazon, Google, Facebook & Co. is stimulating talents to start new & disrupting (innovative) businesses and is animating venture capital funds to finance them. It seems we are experiencing a Cambrian explosion. There are so many new & rising companies which are changing society & economy - on the coat-tails of Big Tech. And Amazon is employing more than 500,000 people and is probably the biggest job creator of recent times. 

While politicians left and right seem to hate big corporations, the people - the consumers - love them.  People use Facebook to communicate with relatives & friends for free, they use Instagram to spread their photographs without paying for it. I use Google maps and other services without getting charged. Amazon translates her experience & efficiency into low prices which forces the competitors also to sell cheaper. As a result Amazon and other e-commerce companies are keeping inflation at bay which translates into low interest rates (amazon-effect). Amazon is also a platform which allows even tiny businesses - including many unknown book authors - to sell their products globally. And the cloud services by Amazon, Microsoft and Google - who all are fiercely competing against each other - allow other companies, including tiny startups,  to reduce their expenses for information technologies and to expand their businesses. All these services & products benefit the whole economy and the society. The world would be a poorer place without Google, Amazon, Facebook & Apple.

The crusade is throwing sand in the gears of the economy and makes lives of the CEOs miserable. The crusaders want to infect the tech companies with government bureaucracy like mold. The antitrust attacks are occupying management capacities, slowing decision making and hinder innovations. If the crusade continues it  could slow down economic growth and harm everybody who does not live from the money of the taxpayers.

 












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