The Curse of Bigness: Antitrust in the New Gilded Age, by Tim Wu (Columbia Global Reports, 154 pp., $14.99)
Tim Wu’s attack on the prevailing consensus in antitrust law, The Curse of Bigness, is a slim volume with broad ambitions. Wu, a Columbia law professor who ran a quixotic, left-populist 2014 campaign for lieutenant governor of New York, wants government to reclaim a robust, activist role in managing economic outcomes, an approach that he believes is consistent with the legislative history of the Sherman Antitrust Act. That approach also happens to align with current fashions in progressive politics.
Beginning in the 1970s, federal courts and enforcement agencies pushed antitrust politics offstage with their adoption of the consumer-welfare standard, which narrowed antitrust inquiry to the question of what outcome would be best for consumers, principally as measured by prices and output. Wu thinks that the consumer-welfare standard fails to account for political values like fairness or the dangers to the democratic process posed by corporate power. He seeks to tie together two strands of our political culture: longstanding populist hostility to big business and the newer animus to Big Tech firms like Facebook and Amazon. Wu positions The Curse of Bigness as a homespun solution to the serpentine problem of corporate power—it’s antitrust law in the spirit of Frank Capra.
“We have managed to recreate both the economics and politics of a century ago—the first Gilded Age—and remain in grave danger of repeating more of the signature errors of the twentieth century,” Wu writes. “As that era taught us, extreme economic concentration yields gross economic inequality and material suffering, feeding an appetite for nationalistic and extremist leadership . . . The road to fascism and dictatorship is paved with failures of economic policy to serve the needs of the general public.”
Wu is an assured writer, and he possesses an easy command of the intellectual history of his field. He is also, unfortunately, something of a fun uncle: jaunty, appealing, and ultimately untrustworthy. He distorts the views of mainstream antitrust thinkers, disregards the choices of consumers even as he purports to protect their interests, and makes easily falsified claims about the links between economic concentration and authoritarian politics. The result is a book that brings more heat than light to an important policy area.
The villain of The Curse of Bigness is Robert Bork, the publication of whose 1978 The Antitrust Paradox marked a pivotal moment in the field’s intellectual history. Bork drove stakes through several bad precedents: the presumption against vertical mergers; cases like the infamous Von’s Grocery, involving the combination of competitors possessing relatively small market share; and the prohibition against resale price-maintenance policies. The Antitrust Paradox both predicted and in part caused a decisive shift in the federal courts’ approach to antitrust cases, from one of hawkish suspicion of industrial “bigness”—for which Wu is nostalgic—to one that presumes that the present allocation of economic resources in any given market is the most efficient one.
Wu’s treatment of two oligopoly industries, airlines and telecommunications, is instructive. He says that consolidation through mergers has given the airlines substantial market power. This is not entirely wrong. The remedies that the Antitrust Division insisted upon as a condition of the 2010 United–Continental merger, for example, were arguably insufficient to protect consumers, and prices rose on some routes as a result. But the airline industry’s boom-and-bust cycle, which features regular bankruptcy filings by major carriers, doesn’t look much like a monopoly story. And the most powerful force in the industry’s history has been deregulation, the Carter administration’s move to an open market system that resulted in a dramatic drop in fares and made flying suddenly affordable to middle-class families.
Wu previously wrote The Master Switch, a compelling book about the tendency of communications networks to drift inexorably toward monopoly. Nonetheless, his account of the recent history of the telecommunications industry is incomplete. It’s true that the current structure of the telecom market is an oligopoly, which means that price competition is not as robust as it could be. Wu neglects to mention, though, that the government blocked the recent attempt by AT&T to purchase a lower-cost competitor, T-Mobile, a deal that would have been a disaster for consumers. (AT&T was so confident that it could bully the Justice Department into approving the merger that it gambled, and lost, a $6 billion breakup fee.) More fundamentally, oligopoly is probably the natural structure of this market because of the enormous sunk costs involved in building telecommunications networks. Small businesses and startups have many virtues, but Justice Louis Brandeis’s “small dealers and worthy men” will never lay enough cable or launch enough satellites to let you call your Uncle Stewart in Seattle.
Wu wants the courts to consider all possible effects of any corporate merger—from prices to unemployment to the environment to public corruption—but offers no way to reconcile these criteria when they conflict. Suppose two coal producers plan to merge, and more efficiency means more coal production, with negative collateral effects on air quality? The prevailing consumer-welfare standard attempts no reconciliation. It favors efficiency, leaving environmental regulation and enforcement to Congress and the EPA, respectively. Wu wants these functions to be trusted to a federal district court judge.
The rise of giant firms like Google, Facebook, Amazon, and Apple creates public-policy challenges in the areas of labor standards, campaign finance, and taxation. But antitrust law is far from the best policy tool available to deal with these problems. It is not even clear that economic concentration is responsible for the problems Wu raises. To take one example, the biggest companies pay their employees more than smaller firms do and are far more likely to offer health insurance and other benefits. And almost any policy choice, even a bad one, is less destructive than breaking up efficient and dynamic firms.
Wu’s most tendentious argument is that permitting increased industrial concentration invites the rise of authoritarian government. He cites the cozy relationship in the prewar years between Hitler and massive German industrial firms such as I.G. Farben and Krupp. Of course, patent licensing and vertical-contracting practices—the major antitrust issues of today—don’t create firms like these. Jeff Bezos, Mark Zuckerberg, and the other big winners of the technology economy did not need authoritarian government to develop their companies. And Silicon Valley business leaders, though they remain anxious to portray themselves as not choosing sides, tend to be distinctly anti-Trump.
Wu is a romantic at heart, as his conception of antitrust—a matter of bringing bad guys to heel—reveals. But when it comes to government, antitrust enforcement included, evidence-based policymaking should be the beau ideal. Wu would have us replace such evidence with lofty sentiments, but that’s a trade that rarely makes for good policy.