Joseph Stiglitz says the US has a major ‘monopoly problem’

Nobel-prize
winning economist Joseph Stiglitz speaks about the release of a
new report he authored that was published by the Roosevelt
Institute May 12, 2015 in Washington, DC. The report, titled ‘New
Economic Agenda for Growth and Shared Prosperity’, discusses the
current distribution of wealth in the U.S. and offers proposals
for modifying that distribution.
Win
McNamee/Getty Images

• Economist Joseph Stiglitz believes the United States
  has a monopoly problem.
• He points to a growing market concentration across
  major industries like pharmaceuticals and telecom to be the
  result of a failure to keep antitrust laws updated.
• He considers a decrease in competition to be both the
  result of, and further cause of, wealth inequality, which in
  turn slows overall economic growth.
• This post is part of Business Insider’s ongoing series
  on Better
  Capitalism.

President Donald Trump has said for years that Amazon could
require an “antitrust
situation” and, with very different motivations, Sen. Bernie
Sanders of Vermont has been fighting against what he deems

Amazon’s abuse of its unmatched power over its employees.

And Massachusetts Sen. Elizabeth
Warren has been the most vocal figure in Washington calling
for breaking down what she considers America’s monopolies in the
airline and health care industries, among others.

For Joseph Stiglitz, a Nobel Prize-winning economist with
Columbia University, talk of monopolies in the United States goes
beyond partisan political rhetoric.

As he said
in a talk given last year:

“We seem no longer to control our own destinies. If we don’t like
our Internet company or our cable TV, we either have no place to
turn, or the alternative is no better. Monopoly corporations are
the primary reason that drug prices in the United States are
higher than anywhere else in the world. Whether we like it or
not, a company like Equifax can gather data about us, and then
blithely take insufficient cybersecurity measures, exposing half
the country to the risk of identity fraud, and then charge us for
but a partial restoration of the security that we had before a
major breach.”

Sure, comparing the steel monopoly of America’s Gilded Age of the
late 19th century to the concentration of power Big Pharma has
today in our “New Gilded Age” is a stretch, but in both cases
they were both the result of, and drivers of, further economic
inequality.

In an
interview with Business Insider in March, Stiglitz argued
that a foundation of the income inequality that has been rising
in the US since the 1980s was the free market ideology championed
by the Chicago school of economics.

Basically, the Chicago school argues that the “invisible hand” of
the market is capable of correcting itself; in the case of a
monopoly, for instance, “monopoly power would only be temporary,
and the ensuing contest to become the monopolist [would maximize] innovation and consumer welfare,” as Stiglitz put it in his
speech.

It’s an ideology that Stiglitz insists is disproven by data.

Stiglitz believes that antitrust law did not keep up with a
changing economy, and that’s why large companies were able to
create barriers to entry that allowed them to continue growing
larger and consuming smaller competitors — in a way beyond
healthy competition.

This results, he said, in rent-seeking (the increase of a
company’s share of wealth without creating new wealth), lower
returns on investment, a stifling of innovation, and a less
efficient economy.

In an
essay he wrote in 2016, Stiglitz pointed to research from
President Barack Obama’s
council of economic advisers, which was led by Jason Furman.
The team found that in the period from 1980-2010, the top 10
banks’ share of deposits rose from 20% to 30%.

The team also found that market concentration increased across
major industries from 1997-2012 (e.g. the revenue share of the
largest 50 firms in transportation and warehousing and retail
trade both increased by over 11%).

Stiglitz pointed out to Business Insider that the average GDP
growth for the US has been sluggish (a post-2000 average of 2.0%
versus a post-1948 average of 3.2%), and,
as French economist Thomas Piketty has pointed out in
detail, that recent growth has been largely captured by the 1%
anyway.

The rising inequality of both wealth and income in the US is, of
course, very complex, but according to Stiglitz, updating our
antitrust laws to make our markets more competitive is a
necessary step to lessen inequality and increase growth.