A few months ago I argued in a blog that the FANGS are too dominant and regulators should break them up. In its feature this week on competition The Economist agrees about the problem -and says it goes wider than the tech giants – but proposes a different solution.
It says firms have reinvested a ‘stingy share of their profits’; the free cash flow of US firms is 76 per cent about its 50 year average relative to GDP. It calculates the ‘global pool of abnormal profits to be $660bn, one third of which comes from technology firms.
Labour’s share of GDP has been falling. There are few new entrants to markets and productivity has been falling.
Its solutions are threefold. First freeing users of tech firms to take their data elsewhere. Second ‘ tear down barriers to entry’ such as non- compete clauses. Third stop big firms from to acquiring smaller rivals.
All this makes sense, along with transaction taxes that increase the incentives for shareholders to encourage firms to think long term. (And do look at new proposals just published by Tomorrow’s Company on encouraging long term investment).
But I still don’t see why it makes sense for Google or Amazon or Apple to be allowed such dominance in so many linked sectors. Breaking up should not be hard to do!