Who Will Own Economic Populism? Biden's New Competition Order, Antitrust Policy And Their Future

Tyler Durden's Photo
by Tyler Durden
Thursday, Jul 22, 2021 - 06:40 PM

By Mark Glennon of Wirepoints

“This is from the Biden Administration?”

If you’re a believer in free enterprise and the virtues of robust competition, that may be your initial reaction if you read through the fact sheet on President Biden’s new executive order to promote competition in the economy.

More importantly, if you review reactions to the order, you’ll see the issues that may determine both political control and direction of part of the populist surge in America, both nationally and at the state level. Resolution of those issues may fundamentally reshape our economy.

The driver is the huge majority of Americans who are now fed up with large corporations, particularly big tech platforms. Seventy-three percent say they are dissatisfied with major corporations, including 42% who are “deeply dissatisfied” with them, way up from earlier years. By numbers at least that large, Americans say big tech must be reined in and, most importantly, they support breaking up Amazon, Google and Facebook.

The matter is playing out in a broad debate about antitrust policy and what to do about tech companies, which may significantly change what America’s economy looks like.

Team Biden has noticed the space left empty after Trump. As reported by Politico, one of Biden’s lead campaign pollsters said Trump engaged repeatedly in cultural warfare but also weaved in economic populist threads. Now, however, they seem to be only doing one right now. “That’s surprising and it’s ceding a lot of terrain to us,” she said.

Who will ultimately hold that terrain? At the national level, it’s unclear because deep fissures are already apparent within both the left and right.

Failing national consensus, some of the answer may default to the states, including Illinois.

But the most recent headlines are on Biden’s executive order on competition, so let’s start there.

The order covers 72 distinct matters, some very specific and some broadly thematic. It’s written in language free marketeers probably will be comfortable with, not the leftist crazy talk so common in Washington today. That’s thanks no doubt to its primary author, Tim Wu, who is no stranger to free market thinking. He was a law clerk for Judge Richard Posner, who is regarded as perhaps America’s leading legal scholar on free market virtues (though Posner’s devotion thereto has diminished in recent years). Wu says Posner is “probably America’s greatest living jurist, and Posner called him Genius Wu.  “He’s very, very, very smart,” says Posner.

Most free marketeers will find some of the order’s 72 items at least directionally appealing. For example, a Wall Street Journal editorial endorsed the order to expedite deregulation of the hearing aid market by allowing Americans to purchase hearing aids over the counter rather than by prescription. Retailers and other cargo owners cheered the order to crack down on what they see as rigged pricing by freight carriers. And most conservatives will applaud the effort to limit occupational licensing restrictions, which are widely criticized as barriers to labor mobility.

But, geez, what a philosophical clash with the rest of what’s coming out of the Biden Administration and Congress!

If the sting of competition is healthy, why are we paying millions of Americans not to work? What sense is there setting a minimum, worldwide corporate income tax, which the Biden Administration supports? Why is the administration trying to federalize most everything, undermining the competition among states that has served America so well since its founding? Why are government mandates of all sorts micro-managing huge parts of the energy sector? Why are so many in Washington enthralled by the concept of universal basic income – money for nothing at all?

That clash is reason enough to worry how the new order will be implemented in practice. That worry is heightened by some of the vagueness in the order. Much of it requires later rule making, which means who-knows-what. It calls for creation of a new White House Competition Council ”to monitor progress on finalizing the initiatives in the Order and to coordinate the federal government’s response to the rising power of large corporations in the economy.” Who will be on it and what will they do? Nobody knows.

Far more important than the specific items in the order itself, however, is the broader policy on competition and antitrust of which it is a part. The order calls on the leading antitrust agencies, the Department of Justice (DOJ) and Federal Trade Commission (FTC), to enforce the antitrust laws vigorously and “recognizes that the law allows them to challenge prior bad mergers that past Administrations did not previously challenge.”

That’s a repudiation of antitrust policy that has been in place since the Reagan Administration. It’s a reference to a new approach whose champions will hold the two key positions – Lina Khan,who has already been sworn in as Chair of the FTC, and Jonathan Kanter, recently nominated to lead the DOJ’s Antitrust Division. Khan and Kanter, like Wu, want tougher legislation and stricter enforcement of competition and antitrust laws, particularly against big tech companies. Also like Wu, they are different from so many others in the Biden Administration – they are smart, credentialed and respected by many on both sides of the aisle.

Real change, however, requires legislation. Biden’s new order has limited scope.

Broadly speaking, the new call for tougher antitrust legislation is in line with many congressional Republicans. Rep. Ken Buck (Colo.), the top Republican on the House Judiciary antitrust subcommittee, recently formed a new “Freedom From Big Tech Caucus” along with a handful of other GOP lawmakers who supported antitrust bills advanced by the committee last month. The caucus will aim to unite Republicans in Congress to “rein in Big Tech” through “legislation, education, and awareness,” as reported by The Hill.

On the Senate side,  Senator Josh Hawley (R-MO) is pushing a bill block big tech mergers and acquisitions outright.

That makes for an unusual alignment with progressives, at least in broad terms. For months, many progressives have been posting images with mugs emblazoned with “Wu, Khan & Kanter, reports CNBC.

But agreement on specific legislation has been elusive, no doubt stemming in part from each side hoping to claim ownership of any results. Moreover, many in both parties are beholden to big tech contributors.

On the conservative side, however, there’s further reluctance. “There are some Republican members that are concerned with any proposal that might give the Biden government more authority to harass businesses along ideological lines,” Rachel Bovard, senior director of policy for the Conservative Partnership Institute, told Axios. “It’s Republicans thinking the cure is worse than the disease in terms of giving the Biden DOJ and Biden-controlled FTC broad powers to rework corporate America in their vision,” a GOP aide told Axios.

Those are legitimate concerns that apply to Biden’s new order as well. Selective prosecution for political reasons has become a major concern, for good reason. Wu, Khan and Kanter didn’t come out of the Washington swamp, but the swamp corrupts people and the swamp has final say.

Perhaps most importantly, there’s a fundamental disagreement coming from adherents to the hands-off attitude toward antitrust that has been in place since the 1980s. Big is by no means bad, under that approach, and the government should stay away absent solid evidence of harm to consumers. That has been the thinking from the Reagan Administration through Obama’s.

As a result, between 2009 and 2019, antitrust enforcers did not block a single one of the more than 400 acquisitions by the five biggest online tech platforms. The Obama administration failed to prevent Facebook from acquiring Instagram and Whatsapp — “enabling Facebook to co-opt its most promising potential competitors,” as The Hill put it.

A less charitable characterization of that old approach is summarized by what a former colleague of mine told me about his antitrust class when he was at Stanford Law School. It was taught by William Baxter, who championed the old approach and later headed DOJ’s Antitrust Division under Reagan. Students called his antitrust class “protrust.”

In stark contrast, the new, aggressive approach of Wu, Kahn and Kanter “identifies concentrated corporate power — something both parties previously encouraged — as actually contributing to a broad range of harms for workers, innovation, prosperity and a resilient democracy overall,” said Sarah Miller, executive director of the American Economic Liberties Project.

Democrats are particularly anxious to embrace the new approach to shake the growing perception that they are now the party of wealth and big corporations, not populism. It’s not just perception, as Victor David Hansen recently documented nicely.

What if Congress is unable to overcome its differences and no legislation is passed? The struggle then may devolve to the states. To a significant extent, it already has, as catalogued here.

Illinois, for example, already passed a law restricting the use of covenants not to compete in employment contracts, which is one of the items in Biden’s competition order. Legislation is pending in Illinois that would prevent certain technology companies from requiring use of their own preferred payment system, which is also the subject of an antitrust case brought against Google by 36 states. Legislation is also pending in Illinois on “right to repair,” another item in Bidens’s order.

I’m not about to make any predictions on how this will all shake out. However, it’s clear that much is at stake, for both the economy and politicians.