By: Joseph E. Stiglitz (Project Syndicate)
The functioning of markets relies on competition, yet businesses often resist it as it tends to reduce profits. For the average businessperson aiming for returns beyond the normal capital yield, this is far from enjoyable. As observed by Adam Smith 250 years ago, gatherings of people in the same trade often lead to conspiracies against the public or schemes to raise prices.
The U.S. government has been striving to ensure market competition for at least 130 years, but this has proven to be a persistent struggle. Companies continually devise new methods to sidestep competition, their legal teams come up with strategies to elude the law, and the government struggles to keep pace with these practices, not to mention rapid technological advancements.
As a result, there is now substantial evidence indicating an increase in market power in the United States. This translates to larger corporate profits, well beyond risk-adjusted returns, heightened market concentration across various sectors, and a decrease in new market entrants. Despite the widespread belief that the U.S. boasts the most dynamic economy ever witnessed, supposedly on the verge of a new era of innovation, the data contradicts such assertions.