Capitalism and Competition
Plus, a dog being glorious in the summer.
President Joe Biden's new executive order on competition is great. Its 72 separate provisions -- from reinstating net neutrality rules to allowing prescription drug imports from Canada -- are all improvements over the status quo. But the most important point is that Biden is breaking with the narrow antitrust orthodoxy of the Trump and Obama years for a more comprehensive view of what antitrust policy can do. Biden sees antitrust as a key battleground on economic inequality, and he wants his regulators to use antitrust as a legal tool to raise wages where they can. That's a big change.
So Biden's policy priorities here are good, and they pair well with his regulatory appointments to date, especially new FTC Chair Lina Khan, the most important intellectual in the antitrust reform world.
But while Biden is doing all of this great policy work, he's also sounding off on the miracles of economic competition with some rhetoric that is, I think, very wrong.
"The heart of American capitalism is a simple idea: Open and fair competition," Biden said when he signed the executive order last week. "Competition keeps the economy moving and keeps it growing. Fair competition is why capitalism has been the world’s greatest force for prosperity and growth."
And then he tweeted this:
I'm willing to be persuaded that this may be good political messaging. Biden has a knack for packaging progressive economic policy as aw-shucks, good old-fashioned American Americanism in a way that enhances its appeal to moderates and conservatives. Look folks, I'm just talking about raising taxes on rich people a little and giving poor families so much money that we cut child poverty in half, the same way your hard-working old granddad wanted to do, what a pal he was, let's have a beer.
But in general I don't like appeals to the Virtues of True Capitalism. Words like capitalism and socialism are slippery. They mean different things to different people at different times, and I think rhetoric that leans hard on either word ends up spreading a lot of silly ideas about economic history.
Champions of True Capitalism like Milton Friedman and Paul Ryan often credited something called "capitalism" as the greatest engine of prosperity and enlightenment the world had ever known. But when pressed on the various horrors that accompanied the economic realities of the 18th, 19th and 20th centuries, they'd insist that all of the outrages were examples of anti-capitalism -- individual rights were not respected, freedom of contract was not enforced, etc. True Capitalism, a Platonic ideal that never actually existed on planet Earth, would address all of these minor errors. Capitalism was thus responsible for everything good that ever happened, even though it had never existed.
Right-wing ideologues aren't the only people who get tangled up here. There really is a lot of ambiguity surrounding these concepts when you take a long historical view. Karl Marx and Friedrich Engels only made a dozen or so policy recommendations in The Communist Manifesto, but those included free public education, progressive taxation, central banking and the abolition of child labor. Nobody today thinks you're a Communist for wanting to keep 19th century style child labor in the 19th century. In general, I think it's better to rely on concepts that don't carry so much historical baggage when writing about present-day economic policy. Inequality, concentration, etc.
For the purposes of Biden's executive order on competition, I want to emphasize two points. First, a more vigorous and expansive antitrust regime will not restore a great economy that once was. Open and fair competition is at most an extreme outlier in an American economic history that includes slavery, the Gilded Age, the Big Three automakers, the pharmaceutical industry, Wal-Mart and Facebook. The American economy wasn't built on free competition, and many of our most devoted self-styled capitalists -- John Pierpont Morgan, for instance -- believed competition was an impediment to social progress.
Second, competition is not a cure-all. Competition alone will not solve climate change, fix the U.S. relationship with China, or relieve working families of the excessive financial burdens created by high childcare, education or housing costs. We need monetary, fiscal and trade policy for all of that. And we need a more egalitarian tax policy. And probably some serious industrial policy.
Competition can help with these and other problems, however. And I think antitrust reforms can be particularly effective with regard to raising wages. A growing body of evidence indicates that intensifying corporate concentration has put significant downward pressure on worker pay over the past four decades. Using antitrust policy to help reverse that trend is a great idea.
Making that a reality will require a lot more than an executive order. Agencies have to write rules and crack down on violators. Congress needs to pass new laws. The courts probably need to be reformed, as much of the legal profession remains mired in the narrow antitrust thinking of yesteryear. But Biden’s executive order is a great start — an important sign he’s taking all of this seriously.
Here’s Pepper being glorious in the summer:
