Why have IT improvements failed to radiate through the broader economy? There are many possible explanations, but the transformation of once-disruptive tech companies into rent-seeking monopolies is surely an important one. The monopolization of information technology arises from the nature of the technology itself: so-called network effects make it convenient to have one venue on which to post political comments and cat pictures, one provider of office software that everyone uses, one giant internet retail marketplace, and so forth. But the fact that technological monopolies have their origin in network effects rather than in the nefarious manipulation of markets does not eliminate the potential for abuse. . . .
Twenty-five years ago, America’s tech companies took risks and disrupted established business models. Today, they are the new utilities, earning monopoly rents by controlling markets. Microsoft chased its challengers out of personal computer software; Amazon crushed most of its internet retailing rivals; Apple created a duopoly of hardware and services with its rival Samsung; Google destroyed the commercial prospects of competing search engines; and Facebook, through targeted investments and acquisitions, dominates social media. . . .
By allowing its tech companies to turn into monopolistic, unregulated utilities, it has high stock prices—for a handful of stocks—and low productivity. U.S. tech companies still innovate, but only where it suits them. Their monopolies for the most part arise from the logic of the marketplace, rather than nefarious practices, but still do damage, and not only in terms of economics. Facebook and Google capture 70 percent of all digital advertising revenue, for example, crippling America’s independent media, which can’t compete for ad revenue. This in turn strengthens platforms that are increasingly controlling and limiting political speech.
-David P. Goldman, from this essay
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