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Robert Reich: Here’s Why We Need to Break Up Big Tech

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By Robert Reich, Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies. Cross-posted from Alternet.

The combined wealth of Facebook’s Mark Zuckerberg, Amazon’s Jeff Bezos, and Google’s Sergey Brin, and Larry Page is larger than the combined wealth of the bottom half of the American population.

They are the leaders of a second Gilded Age – ushered in by semiconductors, software and the internet – which has spawned a handful of hi-tech behemoths and crushed competition.

Facebook, Amazon, Google, Apple, and Microsoft now have the highest market values for all public corporations in America.

As of today, only three countries in the world have a GDP higher than these companies’ combined market value of approximately 4 trillion dollars.

America’s first Gilded Age began in the late nineteenth century with a raft of innovations – railroads, steel production, oil extraction – that culminated in mammoth trusts run by “robber barons” like J.P. Morgan, John D. Rockefeller, and William Vanderbilt.

The answer then was to break up the railroad, oil, and steel monopolies.

The answer today is the same: Break Up Big Tech.

First: They have a stranglehold on the economy.

Nearly 90 percent of all internet searches now go through Google. Facebook and Google together will account for nearly 60 percent of all digital ad spendingin 2019 (where most ad money goes these days).

They’re also the first stops for many Americans seeking news (93 percent of Americans say they receive at least some news online). Amazon is now the first stop for almost half of all American consumers seeking to buy anything online.

With such size comes the power to stifle innovation.

Google uses its search engine to promote its own productsand content over those of its competitors, like Yelp. Facebook’s purchases of WhatsApp and Instagram killed off two potential rivals. Apple stifles competition in its App Store.

Partly because of this economic concentration, the rate that new job-creating businesses have formed in the United States has almost halved since 2004, according to the Census Bureau.

Second: Such size also gives these giant corporations political power to get whatever they want, undermining our democracy.

In 2018, Google, Amazon, Facebook, Apple, and Microsoft spent 70.9 million dollars on lobbying and supporting candidates.

As a result, Amazon – the richest corporation in America– paid nothing in federal taxes last year. Meanwhile, it held a bidding war to extort billions from states and cities eager to have its second headquarters.

Not to mention, these companies have tremendous influence over how Americans receive information. And as we’ve seen, Facebook and Google have enabled the manipulation of our elections.

Third: Giant tech companies also hurt the environment.

Many are failing to reduce greenhouse emissions, as they promised, and are unwilling to commit fully to renewable energy.

Finally: Their huge wealth isn’t being shared with most of their workers.

Nine in 10 workers in Silicon Valley make less now than they did in 1997, adjusted for inflation. And many are part of the “working homeless.” That is, people who work full time and yet are still homeless.

The answer is to break them up. That way, information would be distributed through a large number of independent channels instead of a centralized platform. And more startups could flourish.

Even one of Facebook’s founders has called for the social media behemoth to be broken up.

Senator Elizabeth Warren has introduced a proposal to do just that. It would force tech giants to open up their platforms to more competition or break up into smaller companies.

Other countries are already taking on Big Tech. The European Union fined Google nearly 3 billion dollars for antitrust violations in 2017.

Let’s be clear: Monopolies aren’t good for anyone except for the monopolists, especially when they can influence our elections and control how Americans receive information.

In this new Gilded Age, we need to respond to them as forcefully as we did to the monopolies of the first Gilded Age and break them up.

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This entry was posted in Corporate governance, Free markets and their discontents, Guest Post, Income disparity, Market inefficiencies, Regulations and regulators on by .

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.

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19 comments

  1. Bill Smith

    I see Microsoft is thrown in there but nothing is mentioned beyond they spend money on lobbying.

    I don’t know what the specific proposals are but I wonder how well Google would function as a search engine if it was broken up. What are the opinions on what search engine is better than Google?

  2. cnchal

    Be careful of what you wish for. Didn’t a Google executive say the other day, and I am paraphrasing, “Google is going to manipulate the situation to prevent Trump from winning a second term”?

    Hmmm. Google believes it has a defacto veto over who the American people can select as president, just like the intelligence agencies. Better to wait to break them up, till after the next election.

    > As a result, Amazon – the richest corporation in America– paid nothing in federal taxes last year. Meanwhile, it held a bidding war to extort billions from states and cities eager to have its second headquarters.

    How is it that the so called “richest corporation in America” is also the biggest welfare queen this side of the military? Answer: Amazon rips your face off, whether a warehouse employee tied to Bezos whipping post for two years till the broken body can’t move anymore and is fired, or a tiny seller that has a nice product that Amazon steals from them, to idiotic governments grossly overpaying for AWS services, to customers being displayed different prices for the same item, depending on a secret algorithm.

    The question never asked is, what would the economy look like were Amazon’s earnings to grow so that the current stawk price is matched with a P/E ratio of fifteen? Only one place to sell to or buy from at that point.

    1. lyman alpha blob

      Idiots grossly overpaying is how these companies turned into behemoths – not because they produced anything particularly useful.

      A few years ago Google’s own research showed that 50% of all internet ads are never seen by a human being, but they get paid for them anyway. And people pay a premium because supposedly FB and Google can target the ads to a specific audience but customers just have to take FB/Google’s word for it. Funny that I’ve never seen them prove it.

      There’s an old quote from some 1950s ad exec or CEO saying half the money he spent on advertising was completely wasted, he just wished he knew which half. That still applies, despite what these companies would have you believe.

    2. anon y'mouse

      Google IS an intelligence agency. See Assange. See the ads the play in movie theatres before the latest superhero flick re: being the vehicle for political activism all over the world.

      Yeah, speculation and horse manure…

  3. Ignacio

    Search engines/web navigators are like electric grids, a natural monopoly. There should be a public search engine and navigator and internet communication with public institutions should be available only through this. I wonder why in the EU nobody thinks seriously about this.

    1. PlutoniumKun

      Indeed – the Chinese have been smart in developing their own alternatives so they can cut out Google/FB/Amazon without consequences. Europe has failed at this – there must surely be a role for both EU/National and local level internet ‘services’, from search engines to local craigslist type services that could displace the likes of Airbnb or Uber with locally controlled apps.

      1. Carolinian

        Didn’t China develop alternatives so they could censor? Turning information access over to governments may not be the best idea.

        Of course when Google starts acting like a government then it’s time for a change. I’ve been perfectly happy with DuckDuckGo and don’t miss Google search at all. If you compare results from the two they rarely differ in any significant way except that DDG has less clutter.

        One reason some of us found it hard to believe that Google would skew results for political reasons is that it would be so bad for their business. “Don’t be evil” was a business, not moral, proposition. However it seems they’ve decided they have to “partner” with governments and political interests to keep antitrust off their backs.

        1. Ignacio

          Because it is a natural monopoly the governing entity, Google or the Chinese government, can practice censorship as well as other bad practices mentioned in the post. I wonder if this narrative is somehow inflated as to make us think that Google monopoly, through disgusting, is the lesser evil. I don’t share this view.

        2. fdr-fan

          Re Bad for their business: If their business depended on maximizing viewers, bias would be bad. But their business depends on the goodwill of advertisers, who are other share-value corporations with the same fashionable views. Those advertisers DON’T WANT a maximum number of viewers. They specifically want to EXCLUDE Deplorables from seeing their ads, and Google is happy to oblige.

      2. Piotr K.

        Yes, if you dont “privatize” your national cable operator to french company, and ALL your internet goes throught Paris and then outside, like we have here, in Poland

  4. simjam

    Exactly how would these companies be broken up? Do you really expect the US Government to do a competent job at this or anything? Making these companies dysfunctional opens the door for Chinese dominance. Yes, change is needed but our broken political system needs an overhaul first.

    1. tegnost

      The government can regulate industry competently if it has the will to do so, unlike the current framework where entrenched interests dysfunctionally “self regulate” (boeing as one prominent example of this widespread practice). We should reject candidates who support the form of business friendly government we have now in order to overhaul our broken politics.

      2. flora

        Tech monopolies are bad for US defense. Wall St. demands short term profits. One of the easiest ways to guarantee profits is monopoly.

        https://www.theamericanconservative.com/articles/americas-monopoly-crisis-hits-the-military/
        *
        There’s little question the Chinese government is interested in using equipment to spy. What is surprising is Zhengfei is right about the products. Huawei, a relatively new company in the telecom equipment space, has amassed top market share because its equipment—espionage vulnerabilities aside—is the best value on the market.

        In historical terms, this is a shocking turnaround. Americans invented the telephone business and until recently dominated production and research. But in the last 20 years, every single American producer of key telecommunication equipment sectors is gone. Today, only two European makers—Ericsson and Nokia—are left to compete with Huawei and another Chinese competitor, ZTE.

        …
        Yet it wasn’t one of those adversaries that killed our telecommunications capacity, but one of our own institutions, Wall Street, and its pressure on executives to make decisions designed to impress financial markets, rather than for the long-term health of their companies.
        **

        And from Matt Stoller
        https://twitter.com/matthewstoller/status/1144274942223159296

  5. WestcoastDeplorable

    I worked for one of the first “interconnect” companies back when AT&T started being broken up in the mid 70’s. Until then, if you wanted to hook up an answering machine to your phone, you had to rent it from the phone company. Same with a speakerphone. And it wasn’t cheap….as I recall about $300 a month for a “code-a-phone” answering machine. Innovation was totally stifled. The company I worked for, on the other hand, offered electronic PBX systems, speakerphones, answering machines, phones in all shapes, sizes, and colors, and all made in other countries where the phone company wasn’t a monopoly. Best of all, you could OWN your equipment rather than renting it endlessly from AT&T.
    It makes one wonder what innovations we could be enjoying now if the field wasn’t monopolized by these giant companies! With all this censorship, I think they’ve finally “jumped the shark”.

  6. ira

    If you think about it, the most appropriate candidate to succeed Trump would be Marianne Williamson: the two most archetypal American personalities are the huckster and the self help guru. Both are simply variants of the generic con man.

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