“Big Tech” Should Worry about Entrepreneurial Dynamism, Not Antitrust Politics and Volatile Regulation

By at 18 June, 2021, 12:19 pm



In the political world, it seems like everyone – no matter which side of the aisle they reside on – loves small business. And they truly seem to want small businesses to succeed. Just not too much, apparently.

After all, if a U.S. business builds, innovates, excels at serving consumers, and rises to become a global leader, then the political winds often turn against such enterprises. Specifically, when progressivism and populism push onto the political stage, then U.S. businesses that rank as global leaders suddenly attract political attacks.

You see, while progressivism is a viewpoint from the Left and populism tends to be on the Right, they often differ more in tone and emphasis rather than in terms of actual policymaking. Consider the current situation whereby various Democrats and Republicans are attacking so-called “Big Tech,” namely, Facebook, Amazon, Apple and Google. Heck, one might think that Senators Amy Klobuchar (D-MN) and Josh Hawley (R-MO) disagree on everything, but they both have books out attacking “big” business.

In the case of tech leaders, the Democrats seem to be following a long tradition of being suspect of and opposed to large businesses. As for Republicans, attacks appear primarily rooted in political disagreements with these firms. In either case, various Democrats and Republicans are, to varying degrees, calling for more antitrust regulation.

Here Comes the Far-Reaching Legislation

Last week, five antitrust bills targeting “Big Tech” were released by the House Subcommittee on Antitrust. The bills propose to, for example, limit mergers and acquisitions; restrict lines of business that technology companies could enter; dictate business models and operations; and increase the budgets of antitrust regulators, among other political escapades.

In the fall of 2020 and early in 2021 Democrats and Republicans on the Subcommittee produced their own reports advocating increased antitrust regulatory activism, only disagreeing on how far to go. (See SBE Council’s briefs here and here.) Unfortunately, and sadly, the five bills dropped by Subcommittee Chairman David Cicilline (D-R.I.) have the support of the Republican Ranking Member Ken Buck (R-Col.).

“Big Tech First, Then the Rest.”

These bills represent a vast expansion of government power and intrusion into the market, and to believe that this type of hyper-meddling will begin and end with “Big Tech” is very naïve. But even if lawmakers could somehow manage to simply focus on the U.S. tech sector, the effects on innovation, investment, competition and the startup ecosystem would be quite severe.  As noted by SBE Council president & CEO Karen Kerrigan in a media release following the introduction of the legislative proposals:

“We are concerned that various proposals could cut off access to the massive consumer markets provided by the platforms, and actually harm innovation and choice in the marketplace. Millions of entrepreneurs are using these platforms to start or grow businesses, and certainly during the pandemic, digital tools and platforms have been a lifeline for countless small businesses in reaching and serving new and existing customers….Big regulatory bills such as these often have unintended consequences for, and a disproportionate impact on, entrepreneurs and small businesses.”

Indeed, antitrust regulation is tricky business, to say the least.

Politicians and Bureaucrats Cannot Predict Markets

In effect, antitrust regulation is about politicians and their appointees overruling decisions made by consumers, and assuming that they know how industries and markets will develop. These are rather outrageous assumptions given how dynamic and innovative markets are, and that elected officials and their appointees are governed by political incentives and lack the knowledge to make such judgments.

The unforeseen – or more aptly, the foreseen – consequences of such regulatory activism include limiting investment, innovation, entrepreneurship and efficiency, with direct and indirect costs being imposed far beyond so-called “Big Tech,” and onto consumers and onto new, emerging and future competitors.

Whether or not you buy into the latest anti-big-business trend (and there is no economic basis for buying in), the question is: What’s the most beneficial path for keeping large businesses focused on serving consumers well?

A Competitive – Market-Driven – and Favorable Business Climate

First, it must be recognized that companies like Facebook, Amazon, Apple and Google earned their current market leadership by serving consumers well. And given the dynamism of technology markets, these firms cannot afford to act as if they now are monopolists, and therefore, can get fat and sloppy.

If large firms fail to serve and innovate, they are just as vulnerable as any other businesses. After all, history is strewn with market leaders who either no longer exist or rank as mere shadows of what they once were, such as Sears, Pan Am, Blockbuster, Kodak, Atari, MySpace, Borders, Commodore Computer, and on the list goes.

Second, and therefore, rather than going down the path of antitrust regulatory activism and dictates, again along with the considerable and varied costs, the most beneficial actions that elected officials can take if they are truly concerned about big business is to establish the best possible environment in which new competitors are able to emerge. That is, if you’re worried about big business, then make sure entrepreneurship can flourish.

Today’s Tech Leaders May be Replaced by Tomorrow’s (and today’s) Entrepreneurs

There’s no mystery as to what a pro-entrepreneurship policy agenda looks like. It would include low personal and corporate income tax rates; no capital gains taxes; a light regulatory touch; free trade; a welcoming immigration agenda; government spending restraint; and a Fed focused on maintaining sound money.

Get that right, and entrepreneurship, investment, and innovation can flourish. In the end, so-called “Big Tech” shouldn’t have to be worried about dealing with overwrought politicians and regulators, but instead about entrepreneurs who relentlessly push to advance innovation and dynamism.

To put it succinctly, we should all want entrepreneurs, not politicians, gunning for the big guys. Heck, that’s how today’s big guys became, well, the big guys.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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