Can We Live with Monopolies?

With technology playing such a vital role in all areas of life from government to business to society as a whole, several pressing questions are raised: Is the concentration of power within the tech industry characteristic of a monopoly? Are there any potential benefits to the monopolization of technology? And most importantly, how will the monopolization of technology affect the social and psychological fabric of the future? A panel at the recent World Economic Forum annual meeting in Davos tackled these very questions. The panelists included David Autor, Ford Professor of Economics and Associate Head at MIT’s Department of Economics, and Philip J. Jennings, General Secretary of UNI Global Union. The monopolization of technology not only has material consequences, but also affects society as a whole.  With the power of technology resting in the hands of relatively few tech firms, these companies possess the rare capacity to dramatically affect not only business but also the behavior and psychology of society as a whole—whether for good or for bad. From the power of advertising to the ability to influence how we interact as humans, how we form opinions and how we engage with the political process, the monopolization of the digital world has already begun to change the world. Change in market behavior has led to the creation of digital monopolies. While markets traditionally led to the creation of many successful firms of differing quality and prices, the advent of an Amazon-dominated Internet has led to an era of winner-take-most markets where companies with small competitive advantages—such as extremely low prices—can create enormous differences in market share. Our current regulatory framework is not set up for dealing with digital monopolies. Because of the relative newness of the digital industry, regulators often have difficulty pinpointing whether or not something is a monopoly—and whether or not an abuse of power is occurring. While cases such as the U.S. regulating AT&T or Apple being fined 13 billion dollars due to tax evasion policies demonstrate the U.S.’s ability to smother monopolies in extreme situations, it remains difficult to determine if and when the actions of technology companies should be regulated on stricter terms. It is difficult to determine exactly how to deal with digital monopolies. While the current regulatory framework is undoubtedly unfit to deal with digital monopolies, the ability to put into place new regulatory frameworks remains incredibly difficult, as we first need to understand difficult questions such as how to stop monopolies before they occur, whether or not structural values to monopolies should be built in certain industries, and whether or not the power of corporations that have the ability to dominate and control entire realms of commerce should be split up and neutralized.

“It is now clear that [digital technologies] not only can direct in terms of the products we buy, but they also begin to impact the way we think, the way that we respond and the way we receive and interpret the news—and all of a sudden you see an all-embracing monopoly that goes beyond the material into the non-material world.” –Philip J. Jennings

Monopsony is just as concerning as monopolies. While a monopoly—which is market power in the product market—is a large concern in today’s economic landscape, monopsony—which is market power in the labor market—can be just as concerning. With monopsony occurring across all occupations, the ability for firms to control a large portion of workers in a given occupation in order to suffocate competition could potentially lead to the abuse of workers’ rights. Competitive contracts and minimum-wage employees are the most susceptible to monopsony. With practices such as non-compete agreements in the fast food industry becoming more popular, workers in these industries don’t face effective outside competition for their labor and are left with fewer options for work. In order to reverse this effect, a more encompassing regulatory framework for worker protections needs to be introduced. Companies must respect workers’ basic human rights. With companies such as Amazon and Facebook facing criticism for their attitude towards the rights of their employees to organize, many are worried for the future of labor unions in the technology industry. It is important that tech companies engage with any employee movements and begin a serious conversation about human rights, trade union rights of workers and wage issues. The share of wealth produced by the working population is very rapidly declining. While there are over 3 billion people in today’s world labor market, statistics show that 1 in 3 of workers are surviving on only a couple of dollars a day—and the levels of inequality in distribution of wealth appear to only be increasing. In fact, the ever-increasing wealth and power of the technology industry will most likely continue to rise, and this will only continue to aggravate the inequality equation—unless something drastic is done.

 “I think in the U.S. where workers are not considered stakeholders—only shareholders are considered stakeholders—has created a level of inequality and social disaffection that has led to political upheaval.” –David Autor