Robert Reich: How Silicon Valley Giants Are Destroying U.S. Capitalism
Throughout American history, whatever industries have dominated the economy have also had outsized control of the political system—until something shifted and their monopoly power was broken.
“Two centuries ago slaves were among the nation’s most valuable assets, and after the Civil War, perhaps land was,” wrote former Secretary of Labor Robert Reich in an excerptin the New York Times from his forthcoming book, Saving Capitalism. “Then factories, machines, railroads and oil transformed America. By the 1920s most working Americans were employees, and the most contested property issue was their freedom to organize into unions.”
Reich’s knows that government and the private sector are not separate entities, but deeply related. He notes the federal government has intervened over the decades to restrain and rebalance capitalism’s excesses. And he says that America is again at one of those moments when the economy is overrun by monopolies—with Silicon Valley’s giants as the top example.
Today, the most valuable asset in America is digitized information pulsing through the portals that Americans tap when sitting at a computer or using a phone, and the underlying infrastructure created by the Internet’s giants: Google, Apple, Facebook, telecoms, cable TV, etc.
“Now information and ideas are the most valuable forms of property,” Reich writes. “The most valuable intellectual properties are platforms so widely used that everyone else has to use them, too. Think of standard operating systems like Microsoft’s Windows or Google’s Android; Google’s search engine; Amazon’s shopping system; and Facebook’s communication network.”
Reich points out that Silicon Valley has a concentration of well-known monopolies. Google runs two-thirds of all Internet searches in the U.S., he notes. Amazon now sells almost half of all new books. Facebook has nearly 1.5 billion global monthly users. This, he said, is “where the money is.”
And just as the biggest slave owners found many ways to keep slavery growing in colonial America and a young nation, so too have high-tech giants convinced the government to keep its regulatory hands off.
“Antitrust laws used to fight this sort of market power,” Reich writes. “In the 1990s, the federal government accused Microsoft of illegally bundling its popular Windows operating system with its Internet Explorer browser to create an industry standard that stifled competition. Microsoft settled the case by agreeing to share its programming interfaces with other companies. But since then Big Tech has been almost immune to serious antitrust scrutiny, even though the largest tech companies have more market power than ever. Maybe that’s because they’ve accumulated so much political power.”
Reich believes the time has already come for the historic regulatory pendulum to start swinging the other way—that is, for the federal government to reign in monopolistic excess.
“As has happened before with other forms of property, the most politically influential owners of the new property are doing their utmost to increase their profits by creating monopolies that must eventually be broken up,” he writes. “Whenever markets become concentrated, consumers end up paying more than they otherwise would, and innovations are squelched. Sure, big platforms let creators showcase and introduce new apps, songs, books, videos and other content. But almost all of the profits go to the platforms’ owners, who have all of the bargaining power.”
Reich points to numerous economic statistics that show that since the late 1970s, “the rate at which new businesses have formed in the United States has slowed markedly.” This is especially true in Silicon Valley, he said, as “Big Tech’s sweeping patents, standard platforms, fleets of lawyers to litigate against potential rivals and armies of lobbyists have created formidable barriers to new entrants.”
Arcane areas of the federal government—such as U.S. Patent Office—helped make this so by assisting giants like Google and Apple acquire near-monopoly control over their respective profit centers. His prescription, of course, is for federal policymakers to reverse course and stand up for the little guy or gal.
“The underlying issue has little to do with whether one prefers the “free market” or government,” he writes, seeking to debunk the notion that these companies exist in a sphere immune from public accountability.
“The real question is how government organizes the market, and who has the most influence over its decisions,” Reich said. “We are now in a new gilded age similar to the first Gilded Age, when the nation’s antitrust laws were enacted. As then, those with great power and resources are making the “free market” function on their behalf. Big Tech — along with the drug, insurance, agriculture and financial giants — dominates both our economy and our politics.”
Reich says the time has come for federal power to break up the 21st centuries newest monopolies for the benefit of the rest of the economy. But it will take clear thinking to see the American economy for what its biggest actors have largely become—modern monopolies.
“Yet as long as we remain obsessed by the debate over the relative merits of the “free market” and “government,” we have little hope of seeing what’s occurring and taking the action that’s needed to make our economy work for the many, not the few.”