Is the "War on Tech" just around the corner?
By Scott Sumner
The media says yes. I say no. Before explaining why, I’ll use a couple of analogies.
In the 1980s, I recall reading that all the recent innovations in macro, especially “micro foundations”, would eventually lead to lots of Great New Models. The great new models never arrived and macroeconomics circa 2019 is complete mess.
A few years later, behavioral economics was the new fad. Again we were told that these behavioral insights would revolutionize the field. If you pick up the latest addition of any economics textbook, you’ll see that the field has not been revolutionized by behavioral insights.
At some point I realized that if something were obviously going to happen, you’d already see signs of it happening. When there is a true theoretical breakthrough, the low hanging fruit are grabbed almost immediately.
Here’s another analogy. If a recession were obviously going to happen, you’d already see signs of recession.
And this is why I’m skeptical of the media predictions that a war on big tech is just around the corner. For years, the media has been telling us that big tech is increasingly unpopular with (American) politicians of both parties, and that more taxes, regulations, antitrust enforcement, etc., are coming down the road. But when I look at what’s actually happening, I see little evidence for this claim. I see the US trying to advance the interests of Big Tech in its trade negotiations (at the expense of old line manufacturing.) I see the US objecting to a French tax on big tech revenues earned in France.
Here people might say, “You don’t understand. Our government is just trying to prevent France from taking our money.” Oh really? So now Big Tech is “us”.
Actually, I do understand, which is why I’m so skeptical of the idea that a war on big tech is just around the corner. Big tech firms are the crown jewels of the US economy. Their big profit margins are a boom to both US stock investors and the US Treasury. Yes, we could break them up into tiny pieces, each highly competitive. I’m sure the French government would love to see tech profit margins plunge so that French consumers would transfer much less money to the US. But I’m not sure why the US would want to do that.
How do left wing politicians in Sacramento feel about breaking up big tech, which provides much of the funding for California’s lavish social programs? How do left wing politicians in Massachusetts feel about drug price controls, which would impact the Bay State’s lucrative biotech industry? How do left wing New York politicians feel about Wall Street profits?
President Trump is known to have a somewhat negative view of many firms in Hollywood and Silicon Valley. So how does he represent their interests in trade negotiations? Who said, “all politics is local”?
While I don’t expect a war on Big Tech, I do expect a few skirmishes. Politicians don’t like to lose face and will surely try to do something. Recall the late 1990s, when the US government brought an antitrust case against Microsoft. Today, Microsoft has the largest market cap of any company in the world. Perhaps those antitrust actions involved a bit of kabuki theatre.