Making bogus antitrust arguments to bring down big tech is bad for national security
Over the past two generations, the US economy has gradually shifted from producing goods to providing services. Although American manufacturers still dominate in industries such as aerospace, and American farmers remain the most productive in the world, their role is to keep the economy eclipsed by services.
There are many reasons for this change, not least of which are the income and lifestyle aspirations of working Americans. Working on a farm or on an assembly line is difficult, and many, perhaps most, Americans would rather do something else.
The internet has made this dream possible for a growing number of people, spawning millions of new businesses and transforming old ones with its unique ability to boost commerce. It is no coincidence that America’s biggest business success stories of the new century, from companies like Amazon
This is a revolutionary trend in business, and troubling to some. There is a fear that internet-based businesses will destroy jobs, evade taxes, invade privacy, spread vices and cause disruption. However valid these fears may be, they are the result of voluntary consumer choices rather than Big Tech business strategies.
It is not common in American political culture to oppose trends set in motion by the behavior of millions of consumers in search of the best solutions to their needs.
Nonetheless, on July 27, some members of the House Judiciary Committee will likely do just that. The committee’s antitrust panel has been investigating the nation’s biggest tech companies for a year, and on that day the CEOs of four of them will appear before the committee: Apple’s Tim Cook
This has never happened before, and it underscores the importance both political parties place on limiting potential excesses in an internet-based economy. Federal law governing the Internet has not changed much since the World Wide Web was in its infancy, so there is reason to justify a legislative review.
The arguments in favor of an antitrust investigation are less convincing. Antitrust law was born over a century ago, when industrialists sought to monopolize segments of the economy in order to secure profits. The laws were aimed at preventing combinations that could weaken competition, discourage innovation and reduce consumer choice.
For example, Standard Oil, which now controlled 90% of US oil refining, has been dismantled.
The difference between Standard Oil and today’s internet giants, however, is that consumers have many alternatives for what Big Tech provides, and the barriers to new entrants in the market are not as high as they are. ‘they were for refiners in 1900. Apple, Amazon, Facebook and Alphabet got big because consumers preferred them to other options. This was in large part due to their continuous innovation.
You really have to twist the intent of antitrust law to bring a complaint against companies like Alphabet’s Google, because its market dominance in search results from consumer choice rather than a lack of alternatives. The imposition of antitrust sanctions would be tantamount to punishment for success or of mere magnitude, rather than a rational application of regulatory power.
Or take the example of Facebook which, like other companies testifying on July 27, is the subject of an antitrust investigation by the government executive. The main types of antitrust complaints seem to have against Facebook is that it allegedly made acquisitions as it grew in an attempt to dominate social media.
Exhibit A in this case is the acquisition of Instagram in 2012, which has seen phenomenal success under the tutelage of Facebook. At the time of its takeover, however, the company had only 13 employees and lacked the capacity to adapt to what it is now. People laughed that Zuckerberg would be willing to pay a billion dollars for such a small business.
It turned out to be a smart move, but as Instagram took off, many younger users shifted their focus from Facebook to the new platform, so there was a downside.
But trying to fit the acquisition of Instagram (or WhatsApp or Oculus VR) in retrospect into a scheme to restrict competition and stifle innovation is simply misleading. There are plenty of places outside of the Facebook family where people can go online to network or play or post pictures or get the news, and they’re all innovating with fury.
The same can be said of all Big Tech companies. They have to run as fast as possible to stay where they are. Innovation has been the key to their success, and new market entrants are constantly appearing to challenge this success.
What makes this relevant for national security is that more and more new entrants are not American, they are Chinese. The main reason that manufacturing in the United States has declined since 2000 is the rise of China, and the success of companies like Beijing-based Bytedance, the parent company of TikTok, is a signal that China is able to do the same to American tech companies that it has done before. steelworkers and electronics manufacturers.
TikTok has been downloaded over 300 million times in the first quarter of 2020, making it the most downloaded app in a single quarter in history. Six of the top ten apps in India, soon to be the world’s most populous country, are Chinese. Authorities in India reversed this trend when they banned Chinese apps after a border skirmish, but U.S. internet service providers can expect continued assaults from their Chinese rivals for the foreseeable future.
Beijing undoubtedly encourages if not subsidizes such attacks. The contrast between how the Chinese government treats its tech companies and how Washington treats its own players is hard to miss. Whether we like it or not, companies like Alphabet and Facebook have become the main purveyors of American ideas and influence around the world. If they are hampered, Chinese competitors will gladly take their place.
There is no convincing argument for breaking down or otherwise sanctioning America’s tech leaders. If you think America’s big tech companies have too much power, imagine what it will feel like when their successors are kicked out of the People’s Republic.