Presidential hopeful Elizabeth Warren has a new plan to break up big-tech companies. The populist proposal entails appointing a bunch of regulators to undo mergers that her future administration would deem anti-competitive. Considering the prevalent knee-jerk loathing of Big Tech and capitalism in general, it’s likely to be a popular idea. It also comports well with an agenda that allows the state to dictate the actions of the private sector for virtually any reason it sees fit.
Warren’s plan would classify any company that runs a marketplace and makes more than $25 billion a year as a “platform utility” and prohibit them from selling their own products. Surely this new regulatory commission would, like every other, experience mission creep in no time.
Some conservatives, angered at social media platforms, will no doubt also find the notion of breaking up these companies agreeable. While it’s true that social media giants regularly censor conservatives—for example, calling Jews “termites” is acceptable on Twitter, while typing the words “learn to code” at journalists will get your account suspended—there are a number of good economic and idealistic reasons to oppose Warren’s plan.
1. It Undermines Innovation and Hurts Consumers
For starters, Warren’s plan wouldn’t only strip the incentive for big companies to invest in growth and innovation, it would inhibit small-business innovation, as well. It’s true that Big Tech frequently swallows enterprises to eliminate competition. Yet many times smaller tech firms don’t have access to capital that allows them to bring big ideas to fruition, or they simply can’t take the risk. Big corporations can do both.
Amazon’s research and development spending, for example, has grown from $1.2 billion a year to more than $22.6 billion in less than a decade. Apple was spending around $2.8 billion per quarter last year. Oftentimes Apple gobbles up companies and innovations that are specifically designed to be adapted to improve their products (as with the iPhone) and make production cheaper.
I look forward to the day that market forces, rather than meddling politicians with aversions to the profit motive, smash Apple for good. But does anyone believe a gaggle of technocratic political appointees are going to do a better job of allocating investments?
Under Warren’s initiative a number of ideas, stripped of investment capital and partnerships, will remain just that: ideas. Although smaller companies are proficient at many things, big companies—the ones the Warrens of the world hate as much consumers love—do an excellent job of offering cheaper goods and services. We can use the savings to create more wealth.
2. Warren’s Plan Sets a Destructive Precedent
“Twenty-five years ago,” Warren writes, “Facebook, Google, and Amazon didn’t exist. Now they are among the most valuable and well-known companies in the world. It’s a great story — but also one that highlights why the government must break up monopolies and promote competitive markets.”
The fact that Facebook, Google, and Amazon didn’t even exist 25 years ago tells us the exact opposite. It highlights how quickly innovative ideas can transform the marketplace in an era of relative deregulation. I’d tell you to ask the executives at Woolworth’s or Blockbuster—and soon AOL, MySpace, and Sears—but there aren’t any. All of this happened without special commissions setting arbitrary standards that empowered government to lord over the actions of successful companies in competitive marketplaces.
While I’m no big fan of Apple or Amazon—which is why I often use one of their many competitors to buy books and other products even if it costs me more—those companies were early adapters of the market’s new realities. Now, some of their businesses are forced to compete with other giants like Walmart or Samsung. This has been beneficial for consumers. They also, incidentally, often give third-party sellers a huge consumer base. Other times they sell the same products even cheaper. Good for us.
Now, if Twitter and Facebook want to stay on top, they probably should stop antagonizing half of their marketplace. Then again, in 25 years, it’s quite likely that a bunch of new platforms will overtake both, no matter what they do. Yet Warren keeps acting as if tech companies like Google are the new Standard Oil.
“Aren’t we all glad that now we have the option of using Google instead of being stuck with Bing?” Warren argues, while praising previous government intervention. Well, yeah. There are also a slew of search engines available, such as Yahoo!, Ask.com, and DuckDuckGo.
I imagine Google is the most effective search engine, and thus the most popular. Google has no special geographical or technological monopoly, nor do they act as a “utility” in any true sense of the word. Most of Google’s revenue is derived from ads. No one is forced to use it. To treat it as a monopoly is to normalize the idea that politicians should be able to “fix” markets and companies simply for being successful.
3. Warren’s Plan Would Create More Cronyism
For some strange reason, a number of voters believe that increasing regulatory oversight helps alleviate the destructive relationship between government and business. By giving politically motivated regulators expansive powers to dictate how and when companies can grow, Warren would not only imbue government with more power to pick winners and losers, she would further incentivize CEOs to placate government officials and politicians rather than do what’s best for their companies and consumers.
After all, every single regulatory regime ever concocted in the United States has grown in scope—and with it rent-seeking and cronyism. And there’s no doubt that this regulatory commission will give dispensation to morally favored industries—green-tech companies, etc.— if they act in accordance with the ruling party’s wishes.
It would be a lot more productive if we left markets to compete and broke up government power.
4. Warren’s Plan Would Create More Corruption
“I want a government that makes sure everybody — even the biggest and most powerful companies in America — plays by the rules,” Warren claims. This misleading turn of phrase has become standard on the left, which often acts as if companies are breaking the law or using “loopholes” when they fail to adhere to the imaginary laws and regulations Democrats have invented.
Tech companies aren’t breaking any rules by ignoring Warren’s fictitious strictures. We already have a place to adjudicate the usefulness of mergers, and it’s called the Justice Department. They already do a terrible job without any more help.
Last week, a New Yorker story alleged that President Donald Trump asked White House aides to ask the Justice Department to stop AT&T from purchasing Time Warner to hurt the liberal cable news network CNN. Whether this story was true or not—and since the byline read Jane Mayer, it might not be—accusations of partisan influence aren’t new. Even without direct instructions from the president, partisan officials can intuit which mergers are politically unhelpful. The Obama administration was accused of selectively blocking mergers to punish Republican CEOs for years, as well.
Now, I wish the big media organizations that dominate television had reported on Obama’s penchant for sinking certain mergers. But if the DOJ is susceptible to partisan corruption, as Democrats are now arguing, surely a second regulatory body based on capricious progressive concepts of the common good would likewise be ripe for abuse.
5. A Transparent Attempt to Control Free Expression
“Curious why I think FB has too much power?” Warren recently asked on Twitter. “Let’s start with their ability to shut down a debate over whether FB has too much power. Thanks for restoring my posts. But I want a social media marketplace that isn’t dominated by a single censor.” Even her conservative colleague Ted Cruz agrees: “Big Tech has way too much power to silence Free Speech. They shouldn’t be censoring Warren, or anybody else. A serious threat to our democracy.”
A person doesn’t need to be exceptionally perceptive to notice that Warren’s grievance regarding a “single censor” shutting down debate on social media is weakened by the fact that she went to a competing social media platform to perpetuate the debate. Nor did it take much work to find out that virtually every major news site had thoroughly covered her plan to break up Big Tech. Her own tweet debunks the notion that a sole social media site can dominate news coverage or a national debate.
Then again, Warren’s admission that her power grab “starts” with the notion of regulating free expression is quite telling. Conservatives who believe Warren’s plan to break up tech companies will mitigate the bad behavior of those platforms are fooling themselves. Taking Instagram away from Facebook would do nothing to induce the social media giant to embrace truly open debate. However, forcing a private entity to run ads that call for its own destruction—which seems to be what Warren is suggesting and Cruz is endorsing—is an unambiguous attack on free expression. I’m unsure what part of the Constitution has persuaded Cruz to believe otherwise.
Even if we conceded for the sake of argument that government should have a role in forcing social media to allow all expression, does anyone really believe that a left-wing administration would use the state’s newfound influence to do so? Everyone saw how easily bureaucrats at the Internal Revenue Service, whose mission now includes okaying campaign speech, could abuse its power.
From “fairness doctrines” that dictate appropriate opinions to campaign finance laws that allow the banning of documentaries and books to laws against “dark money” that strip away anonymity; from health-care regulation to proposed banking regulation, there is no regulation that isn’t used by contemporary Democrats to further progressive cultural policy. So there’s zero reason to believe that Warren’s regulatory regime wouldn’t somehow be used to compel progressive conceptions of good behavior.
In the end, Facebook contends that they removed Warren’s ads because they violated company rules against use of its corporate logo. “In the interest of allowing robust debate, we are restoring the ads,” the company explained. That makes the tech giant a far more robust space for free expression than your average news channel. And as sure as state intervention into TV news “fairness” would backfire—not to mention undermine free expression—so too will opening the door to Big Tech intervention.