One of the very first investigative journalists, Ida Tarbell, went after the “throttling hand” of Standard Oil and John D. Rockefeller. By 1880, his company owned 90 percent of US oil, its transport and its sale.
Writing a series of articles over a two-year period, Tarbell’s expose led to a Supreme Court ruling in 1911 ordering the dissolution of Standard Oil — so massive, it was broken up into 34 corporations.
John D. Rockefeller who called the journalist Miss Tar Barrel — echoes of Donald Trump here — was the country’s first billionaire. If he spent his later years giving away much of his fortune to found universities and fund research, he had been in his younger days a ruthless competitor.
Monopolies controlling markets can set prices to their own liking. They can raise them to increase income or cut them to stifle competition. In effect, they are interfering with the free market forces so ardently espoused by University of Chicago economists. On this issue conservatives and liberals have common ground, but the question is what to do with monopolies. There is break-up and there is regulation.
Utilities are regulated but if one has been exposed to utility bills in many parts of the country, one has to wonder how well. The renowned economist George Stigler in a landmark study covering 60 years of electricity regulation (1900-1960), in regions with varying degrees of regulatory oversight, found the differences in prices to be negligible. The finding surprised economists, and it, added to Stigler’s enormous output, garnered him a Nobel Prize, the Nobel citation specifically noting the work.
If monopolies damage free-markets, there is an issue staring us in the face today: the digital colossi Google, Facebook and the aptly named Amazon. Then there is Apple with an iPhone monopoly. The market has been unable to check their increasing power.
The University of Chicago’s Stigler Center for the Study of the Economy and the State has recently cast its gaze on the issue. A Stigler Center group headed by Yale economist Fiona Scott Morton analyzed the market structure of these digital behemoths. And last May she delivered its recommendation to the US Senate as part of a hearing on digital advertising and competition policy.
It is an interesting case because far from extracting high prices from a hapless public, two of the firms offer their products/services free, the third prides itself on the cheapest prices, at-home shopping and convenient delivery. Apple is a more conventional case holding sway over about 45 percent of cell phone users in the US through proprietary hardware and software.
In such a diverse environment what could the study group come up with but a regulatory body, a digital authority to regulate the industry — and a supreme irony given the major research finding of regulatory ineffectiveness from the man (George Stigler) whose name heads the Center shepherding their effort. Other economists also have been skeptical calling it the wrong tool to address a nonexistent problem. Yet the problem is not difficult to see.
There is a chilling nature to these websites and platforms as they follow your surfing, offering ads, purchase suggestions, other sites of interest, a looming presence behind your right shoulder. Something is not quite right when so much power is concentrated in so few corporations. Forget the invisible hand of free markets, there is an invisible hand guiding your clicking finger.
Author’s Note: This article first appeared on Counterpunch.org