AP Photo/Manuel Balce Ceneta
By Jonathan Taplin
Little, Brown
World Without Mind: The Existential Threat of Big Tech
By Franklin Foer
Penguin
The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality
By Brink Lindsey and Steven Teles
Oxford University Press
This article appears in the Winter 2018 issue of The American Prospect magazine. Subscribe here.
Long the darlings of the digital revolution, Google, Facebook, and Amazon now face growing concern about the power they have acquired over politics, culture, and the economy. With Google and Facebook, the immediate issue in the past year has been their role in spreading fake news. With Amazon, it's been the online retailing giant's seemingly relentless march into every consumer market. Three new books suggest that these concerns about Big Tech are indicative of a larger battle over new forms of concentrated corporate power and their implications for inequality and democracy.
In Move Fast and Break Things, Jonathan Taplin provides a bleak picture of a 21st-century culture industry cannibalized by informational platforms. A music and movie producer, Taplin has worked with such luminaries as Bob Dylan and The Band, George Harrison, and Martin Scorsese. The central insight of his book is that internet platforms like YouTube/Google and Facebook risk destroying the economic basis of creative work.
As Taplin reports, revenue for artists and cultural producers from direct sales and rentals has plummeted. People are still reading, listening, and watching as much, if not more, than they ever have. But since they access content through platforms like Facebook and Google, the platforms absorb billions of dollars of ad revenue. The differences are stark; 100,000 plays of a song on Spotify earns an artist a mere $500, hardly enough to base a career as a professional musician on. YouTube, Taplin estimates, now accounts for 52 percent of streaming market share for music, but only pays 13 percent of streaming music revenues that media companies pay. Taplin's central concern is that the economics of information platforms means that culture and knowledge producers can no longer afford to produce. Taplin points to similar trends in other media spaces: advertising and subscription revenues have collapsed for newspapers, and newsrooms have shrunk accordingly.
A journalist and former fellow at New America, Franklin Foer complements and expands Taplin's account. Like Taplin, Foer highlights how Google and Facebook engineer their platforms, leveraging user-created content without carrying the burden or cost of producing the content themselves. For example, by optimizing algorithms for its news feed, Facebook tries to maximize attention from users in the effort to keep them hooked on the platform. As the new curators and gatekeepers to information, Facebook and Google can even change voter behavior, potentially enough to swing elections. Meanwhile, through their control of vast amounts of data about both consumers and other firms that use their platforms, Google and Facebook are in an incomparable position to track the marketplace as a whole as well as the behavior of individuals.
For both Foer and Taplin, part of the danger of these tech platforms is cultural. Both fear the loss of cultural creativity and quality in a controlled, manipulated, and homogenized internet ecosystem. That anxiety is not entirely justified since the internet platforms have also supported new forms of cultural expression. But the bigger issue that Foer and Taplin are right to foreground concerns the structure of cultural and informational production.
In the very process of making it easy to produce, share, and access information, Amazon and Google have driven down the pay-off from producing knowledge and undermined the incentives to invest in it.
At the same time, these firms have effectively centralized control over the dissemination of culture and information, giving them outsized power and influence, marked by Amazon's dominance over publishers, Google's dominance of streaming media on YouTube, and Facebook's dominance of news and written online content. Part of the challenge is that the companies themselves are blind to the consequences of the destructive power they have accumulated. Both Taplin and Foer discuss the countercultural roots of Silicon Valley, rooted in faith in self-organizing social harmony, innovation, and markets.
In their concern about the effects of concentrated economic power, Taplin and Foer draw on a long tradition of antimonopoly thought. Over a century ago, the emergence of monopolies in the telegraph and railroad industries and the rise of financial titans like J.P. Morgan raised new challenges to communities and local businesses. Goods couldn't go to market without the railroads, information couldn't flow without the telegraph, and businesses couldn't develop without access to finance. But because these infrastructural services were in private hands, the companies could exploit their position to make exorbitant profits—and with their vast wealth, the leading industrialists and financiers could lean on lawmakers for favorable treatment to boot.
For early 20th-century reformers, economic liberty and dynamism seemed to require a radical shift in public policy. While traditional views of liberty sought to restrain state power, these reformers saw the new forms of concentrated economic power as being in need of checks and balances. Without limits on private power, the economy could not thrive, and neither could democracy.
THE PROBLEM OF PRIVATE power and its repercussions for economic inequality and vitality extend beyond the tech platform, as Brink Lindsey and Steven Teles argue in their book, The Captured Economy. Lindsey is vice president of the Niskanen Center, while Teles is a political scientist at Johns Hopkins. They suggest that the basic dynamic described by Taplin and Foer—where dominant tech firms extract returns beyond the fair market value of their products—is replicated throughout the economy. Inequality, on this argument, is not chiefly the result of technological change or superstar salaries for the exceptionally talented. Instead, dominant firms and interest groups obtain excessive returns—“rents,” in the language of economics—without investing in broad-based innovation or growth. As an alternative to the current positions on the right and left, Lindsey and Teles offer what they call a “liberaltarian” approach to public policy that focuses on curbing rent-seeking, limiting government in some ways and strengthening it in others.
In their chapter on land use, for example, Lindsey and Teles rightly highlight how the housing affordability crisis in cities like San Francisco and New York severely limits economic vitality. High housing costs make it difficult for people to move to those job-creating centers, while the costs also absorb a high proportion of the income of the workers who do live there. Those costs, in return, result partly from zoning restrictions that limit new construction. Housing affordability requires, on this analysis, changes to zoning laws and expanded investment in housing supply and construction.
Lindsey and Teles are right to point out that extractive strategies for securing private wealth undermine economic growth. But at times they risk painting with too broad a brush, for if rent-seeking is everywhere, how do we prioritize which types of rent extraction are most troubling and in need of elimination or reform? The book occasionally focuses on relatively minor aspects of the problem. Occupational licensing, the subject of a chapter in the book, is no doubt a form of rent-seeking, yet how much of our larger inequality crisis results from onerous licensing requirements for occupational groups such as eyebrow threaders?
At the same time, the most troubling forms of private rent extraction sometimes don't get the attention in The Captured Economy that they deserve. Government-sponsored mortgage providers such as Freddie Mac and Fannie Mae did help inflate the pre-2008 mortgage crisis. But private fraud, predatory lending, and sketchy securitization practices among private actors were also central in driving the subprime bubble. Indeed, in their discussion of the internet era, Lindsey and Teles highlight how intellectual property can act as a form of rent-seeking, but largely miss the dangers of private platform power that Taplin and Foer highlight, saying little about how Google, Facebook, or Amazon themselves have siphoned off the returns that might otherwise flow to producers.
SO WHAT CAN WE DO about this unequal, exploitative, imbalanced economy? Foer notes that media have always been profit-making, but during the 20th century, journalists developed professional schools, norms, and ethics as a way to limit the purely commercial aspects of the industry. Perhaps a similar shift in professional norms might change how tech platforms and market-dominant firms conduct themselves, as they are forced to acknowledge their public responsibilities. While this is a plausible direction for some efforts, a more structural solution seems necessary, particularly given the scale of rent-seeking extraction that Lindsey and Teles describe beyond the tech platforms.
Lindsey and Teles rightly argue that rent extraction abounds where democratic politics fails, particularly where organized interest groups operate in the shadows. Democratic accountability requires not just transparency, but also more investment in countervailing civil society organizations. Lindsey and Teles highlight, for example, the growth of public-interest legal efforts to protect the environment in the 1960s as a key turning point, creating countervailing pressure against polluter interests.
We also need ways of limiting concentrated economic power directly. Taplin and Foer both evoke the legacy of antitrust and public utility regulation from the early 20th century, and Lindsey and Teles see some potential in the Federal Trade Commission. In the Progressive era, concerns about the private governance of shared infrastructure led to the creation of modern regulatory institutions, starting with efforts to ensure fair pricing and nondiscrimination on the railroads. Many cities converted shared infrastructure such as water and transport systems into public utilities. These ideas animated the New Deal's regulations on finance and limits on corporate concentration, which helped set the stage for decades of broad-based economic growth.
While covering many different industries and contexts, the 20th-century policy changes shared some common principles. They saw concentrated private power as a threat to both economic vitality and democracy, and they sought to curb that power through a variety of techniques, including the breakup of big firms and tight regulatory oversight to protect against fraud, predatory pricing, and discrimination in access. The policies were seen not just as limits on private power, but as catalysts for economic innovation.
As Taplin and Foer both argue, the 21st-century economy now faces a similar challenge. Tech giants such as Google, Facebook, and Amazon provide the infrastructure of our knowledge economy. Their decisions have vast repercussions for economic opportunity and fairness, inequality, and the functioning of our democracy. What we need is a similar effort to develop “rules of the road” to prevent the new forms of concentrated private power from stifling innovation and distorting the democratic process.
First, we might regulate these platforms as public utilities, limiting how they employ their data, mandating protections against fraud, and requiring nondiscriminatory treatment of businesses and users on the platforms. Foer suggests something along these lines, proposing a Data Protection Authority that, like the FTC, would oversee tech platforms. Taplin suggests the FTC should directly regulate Google as a public utility.
Second, we might conclude that the dominant tech firms are too large to govern themselves responsibly and should be broken up into smaller firms. Amazon, for example, is now a conglomerate spanning many different industries from books to groceries, while Google merges search, advertising, and many other information-based services. Expanded antitrust enforcement against concentration would help promote competition and dynamism, addressing some of the rent-seeking problems that Lindsey and Teles identify.
Creating new rules of the road to prevent abuses of market power would complement political efforts to limit the political power of concentrated wealth. The antitrust movement of a century ago was not just the work of lawyers and policymakers; it was also the product of widespread bottom-up political organizing. Today, reforming our economy again requires that kind of bottom-up effort. As all three of these books suggest, our culture, economy, and politics are all at stake.
