The U.S. economy has been less dynamic in the 21st century, by many measures, than it was in the late 20th century.
Get The Morning by email Make sense of the day’s news and ideas with this daily newsletter. Get it sent to your inbox.
Fewer new businesses are starting. Existing businesses have slowed the pace at which they hire new workers (as the chart here shows). Workers are less likely to switch jobs or move to a new city. Companies are investing in new buildings and equipment at a lower rate. And small businesses make up a shrinking share of the economy.
Together, these trends suggest that the economy suffers from a lack of fair competition, many economists believe. Large corporations are often able to increase profits not by providing better products than their rivals but instead by being so big that they exercise power over workers and consumers. The government also plays a role, through policies that protect existing companies at the expense of start-ups and new entrants into an industry.
The technical term for excess profits from a lack of competition is “monopoly rents.” Just think about how frustrated you may have been by the customer service from an airline, cable-television provider or health insurer. And then imagine how frustrating it may be to work there. Despite the problems at these companies, consumers and workers don’t always have good alternatives.
The lack of competitive dynamism plays a role in many of the U.S. economy’s biggest problems: the disappointing economic growth of the past two decades; the declining share of output going to workers; and rising income inequality. It also helps explain the new concern — among both Republicans (like Josh Hawley and Ken Buck) and Democrats (like Elizabeth Warren and Amy Klobuchar) — about the power of big business.
More news, perspectives and your comments in the thread below. TGIF!