Economics: Antitrust - The Crusade Against Big Tech

 (Drivebycuriosity) - The covid-19 pandemic - and measures against it - caused a sharp recession in the US and worldwide. People would have suffered even more without the services of technology corporations, especially of the giants Amazon, Google, Apple and Facebook. But some US politicians and bureaucrats on the left and right side of the political spectrum don´t  care. Corona pandemic or not, they want to gag the big tech companies, and they intend to oversee & to constrain their business. 

Recently a bipartisan group of Washington DC lawmakers, the House Judiciary Subcommittee on Antitrust, held a hearing on the market power of tech companies and  Amazon Ceo Jeff Bezos, Apple Ceo Tim Cook, Facebook Ceo Mark Zuckerberg, and Google Ceo Sundar Pichai all were forced to testify before the group. Subcommittee chairman Rep. David Cicilline, a member of the Democratic Party, called these Ceos  “emperors” who “have the power to pick winners and losers in the economy.” (cei.org )

Washington`s new crusade against Big Tech is not only ungrateful, it also could harm the people the technocrats claim to protect. The crusade might endanger the economic recovery and curb the growth of the coming years. Through Mid-March till May many shops were closed (in lockdown) in order to constrain the pandemic. Even today many people, especially the elderly, avoid shopping because of the infection risk. Amazon´s swift deliveries of necessaries are helping many people. Amazon also inspired other companies, like Walmart & Target, to invest in online delivery. They all keep people fed and supplied while social distancing and temper the recession.

Google´s search engines and maps make it easier to keep up with the latest news about the virus. They help to find doctors, clinics, shops, restaurants. Google`s YouTube provides entertainment while staying at home and make it easier to work or learn from home. And so do Apple`s products & services like iPhones, iPads, iMacs & MacBooks.

Google and Facebook`s social networks (including the Facebook`s daughter Instagram) help people stay in touch, share ideas, allow people to gather, exercise, hold business meetings, have happy hours, celebrate special occasions, and console distant loved ones from within their own homes ( reason ). We will likely never know how many lives have been saved by these services, many of which are free of charge (cei.org).

All these beneficial services are ignored by the crusaders. They claim that Amazon, Google, Apple & Facebook have monopoly power and that the technology giants abuse their alleged power and do so harm to the economy. The bureaucrats ignore that the power of companies is always constrained by competition. When a corporation has success, her rising profits attract automatically others who want a share from the pie.  The Internet makes it very easy to compare prices and to switch to other shops, news providers & entertainers, sharpening the competition. Customers can choose the company which has the best quality, the best service and/or the lowest prices which gives the consumers a lot power. As a result, customers have more power than the corporations.

Amazon´s success has been animating a legion of copycats who also benefit from the ascent of e-commerce. And many competitors are growing much faster than Amazon (image below).  Amazon is competing against huge retail corporations like Walmart, Target & Best Buy who are copying Amazon`s success, getting better over the time. Amazon is also competing with other Internet companies like Ebay, Wayfair & Overstock. And there are rapidly growing e-commerce platforms like Shopify, where companies can sell their products & services online. Facebook (and their daughter Instagram) and Google also developed platforms where companies can sell their products & services independent from Amazon. Amazon`s cloud business AWS, which is also getting much attention from the trustbusters, is challenged by Microsoft, Google, IBM, Oracle and other companies who also want to have a large piece from the pie. Microsoft`s cloud business won recently a huge contract with the Pentagon and is already growing faster than Amazon`s cloud business AWS.

 

 

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Apple`s iPhones, iPads & MacBooks and services are competing against similar products & services from Microsoft, Google, Samsung, Huawei and a lot of other technology companies. Google & Facebook are fiercely competing against each other and myriad of other media companies because they all depend on advertising dollars. 

Big Tech doesn`t need to be our friend, but the tech giants have to behave friendly otherwise they would go out of business. Adam Smith declared “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”. That is also true for Big Tech. If Amazon would treat their customers unfriendly, if they would sell too expensive, deliver too slow & too unreliable, then customers would buy at Walmart, Ebay or elsewhere. That is the magic of competition. Because Big Tech has to compete against others they have to behave like friends. And competition is fierce as the sharp online revenue growth @ Walmart, Shopify & Target demonstrate.

While politicians on the left and right seem to hate big corporations, the people - the consumers - love them. We all are benefiting a lot from Big Tech. Consumers love to get goods delivered cheap and fast from Amazon, buy gadgets from Apple, search on Google and use the free services from Twitter, Facebook & Instagram. People use Facebook to communicate with relatives & friends for free, they use Instagram to spread their photographs without paying for it. I employ frequently 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  - keeping America`s economic expansion alive (Amazon-effect).

I am really happy to buy Kindle e-books for a relatively low prices, why is that a problem for David Cicilline & other trust busters in Washington. 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 trust busters claim that Big Tech companies "have hurt small businesses and stifled innovation". Really? Did they ever hear of Uber,  Lyft, Arbnb & Pinterest?  These so-called unicorns came out of nowhere. They 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. Competitor Wayfar started in 2002 and envoled into a billion Dollar company, Did Amazon stop them? Nope! 

The enormous success of Amazon, Facebook & Google is stimulating talents to start new & disrupting (innovative) businesses (me too effect)  and animates huge venture capital funds to invest massively in newcomers, fueling competition & innovation. 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.

Washington`s anti-Big-Tech crusade employs thousands of high paid lawyers and are burning so a lot of tax payers money which could be used for education or health care. The anti-tech crusade creates a lot of highly attractive job opportunities for anti-trust lawyers and university employees which attracts many young talents. Instead moving into technology, medical research and other sciences, which would benefit the society, these people are wasting their talents in unproductive skirmishes. As a result the anti-tech crusade will slow down economic growth and harm everybody who does not live from the money of the taxpayers 

Did Washington´s trust busters ever notice that there is a world outside of the US? If the US  government would curb her tech giants ore break them up they would support the global competitors.  China has been highly supportive of its own tech sector to foster her economic growth and to catch up with the USA. The Peoples Republic already has fast growing tech giants like Huawei, Alibaba, Baidu & Tencent;  Latin America`s e-commerce is ruled by Mercado Libre and Russia´s Internet is dominated by Yandex. The foreign giants would be happy to inherit the turf of Google, Amazon & Co. and to overtake the global markets. America`s anti-tech crusade is giving China, Russia and other countries a huge advantage. 

Antitrust law is designed to protect the consumers. Big Tech are serving the consumers, the society, by spurring price reductions, delivering better quality & innovation. US politicians are making the world a poorer place by fighting the quartet of Google, Amazon, Facebook, and Apple that have helped so many Americans make 2020 a little more bearable" (twitter).