miércoles, 16 de octubre de 2019

Towards the end of digital monopolies

This have been the "annus horribilis" for the great US technological companies, the so called GAFA (Google, Amazon, Facebook, Apple). The multiple data breach scandals have ignited a general lost of confidence in the ability to preserve their users privacy, the impact of targetting political campaings in electoral process have spread the awareness of their big and unleashed influence power and their plans to extend their businesses to a growing number activty areas, such as finance, has raised the alarms about a possible capture  of the whole economy by the GAFA. It has been a slow process, but now there is a general feeling on the need that regulators around the world should act to rein on the digital plaforms.

Although the repetition of privacy scandals may be the issue that has captured the attention of the general public, for others it is only a symptom a of the illness which is their immunity feeling before any scandal due to their inmense market power. A growing number of economists and political experts point to their condition of oligopolies and monopolies as the root of the problem, in the same manner that happened with the robber barons in the change from the XIX to XX century.  For instance, in his last book, "The myth of capitalism", Jonathan Tepper has showed the evidences on how the rising market power of companies has always had as consequence less competition, lower investment in the real economy, lower productivity, less economic dynamism with fewer startups, less consumer choice, lower wages and more wealth inequality. According with his thesys, the GAFA are the last example of a long chain of monopolois/oligopolies and their effect.

As the Internet has been considered for long time as a permissionless innovation environment and the perfect model of the creative destruction dynamics, the view of people like Jonathan Tepper has taken some time to permeated in the society. But the evidence of the market dominance of the GAFA are there, for instance, Facebook and Google has captured 70% of the traffic and in US are the source of news to 70% of the pouplation , Amazon share on ecommerce is estimated on 45% and in the case of ebooks 90%. Tepper also collect evidences of their growing power effect on the economy, such as the lack of innovation (no relevant company has entered the digital market since 2008) or employment conditions (the majority of the people who work for this companies are not hired by the companies but for intermediary companies with low wages).

As a consequence of this climate, the debate is open on how to tackle the growing power of the GAFA. In the past, this debate was opend only in Europe but the forthcoming Presidential Elections has put the issue on the table also in US politics. Elsabeth Warren, who aspires to be nominated as candiadate to the US Presidency by the Democrats Partyhas proposed to break up the companies and reverse some the acquistions the have made in the last years. The symbolism of the idea has had as a consequence a great aceptation of it. Nevertheless, we should remember that in the Microsoft case that was not the solution adopted in 2001 but establishing regulatory conditions. The strongest evidence that the sentence of the Microsoft case works is that now exist the GAFA companies.

We can expect that the last months of this year and the next year will be decisive in the future of the digital economy. Whether the final battle against the digital monopolies is fighting with regulations or by breaking the companies is still to be decide, but it looks difficult that the market conditions will be same by 2021.

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