In 2012, as Elizabeth Warren (D) was campaigning to become the junior senator from Massachusetts, she sealed the deal with a call to break up America’s big banks. With the economy still reeling from the financial crisis, the idea of smaller, less complicated banks resonated on the left. As late as 2015, the cry was still being heard in Democratic presidential primaries.
The slogan appealed not because breaking up the banks would actually prevent another financial crisis, but because it made intuitive sense to people who didn’t know very much about the banking industry. It was what I call a Washington Issue — a policy proposal with negligible impact on any real problem that nonetheless gains currency because it can be explained to voters in less than a minute. Good luck doing that with the Basel III accord.
Now Warren is running for another office, the highest in the land, and she has once again brought out the rhetorical sledgehammer. This time her target is big tech companies. On Friday, in an op-ed posted on Medium and at a rally on the site where Amazon (whose founder and chief executive, Jeffrey P. Bezos, owns The Post) had planned to build a headquarters in New York, Warren announced that she wants to break up Amazon — and Google, and Facebook, and maybe some other firms, too — into their constituent pieces.
Warren’s position is of a piece with her earlier focus on banks: Big is bad. It’s also consistent in that it’s a Washington Issue that doesn’t address any particularly pressing problem, except maybe an inchoate unhappiness with the alienating scale of the modern economy.
As a longtime skeptic of antitrust, I note that Warren’s proposal would probably make the lives of most Americans somewhat worse. Amazon would be forced to divest both Amazon Marketplace and its Amazon Basics line of cheap utility products, meaning those USB cables wouldn’t be quite so affordable. Google would be forced to divest its advertising business, a move of little benefit to the average person. It would, however, somewhat impair the cash flows Google uses to fund a bunch of free stuff, such as Gmail and Google Maps.
Warren argues that breaking up big tech isn’t about consumers, at least not directly. It’s about enhancing competition, giving smaller tech companies space to grow into the next Amazon or Facebook. Sure, if you’re one of a couple hundred people wandering around Silicon Valley with a business plan in your pocket, that might actually help you. Then again, it well might not.
For Warren’s theory to work, you have to believe that both tech firms and antitrust regulators can correctly identify which businesses are likely to pose a threat to big incumbents and force them to stay out of those businesses. But the history of antitrust does not offer much reason to think this is true. Consider the decade-long antitrust case against Microsoft, in which both the firm and regulators obsessed about who was going to control the Web browser, while Google quietly sneaked into the pole position in the race for the Next Big Thing.
Too, the venture capitalists who fund all these start-ups want to recoup their investment, if not more, and one of the main ways of doing that is by selling out to one of the FAANGs — Facebook, Apple, Amazon, Netflix or Google. So, ironically, an antitrust move to enhance competition could end up making it harder to finance start-ups in the first place.
Meanwhile, Warren’s plan would do approximately nothing to address a subject that voters do actually care about, at least a little: the fear that occupying such dominant market position gives the FAANGs too much power over our day-to-day lives. The problem is, the companies have that power only because we want the services they provide.
And since these businesses tend to be characterized by network effects — meaning that sites such as Facebook become more valuable to users as more users join them — you can’t break up their core services without taking away something we really want. Splitting Facebook or Amazon or Google Search in two would create substantially less useful services. But slicing off big tech’s peripheral offerings won’t substantially diminish the power that really bothers people.
Warren undoubtedly understands that consumers — and voters — would revolt if she actually tried to cut these companies up into less functional parts. So instead she has offered voters a “solution” that really solves only one problem: her need for a campaign slogan.