Big Tech is not the enemy, Sen. Warren

Sen. Elizabeth Warren’s (D-Mass.) call to break up Google, Amazon, Facebook and Amazon is puzzling. These companies have grown big because they’ve been successful for workers, consumers and the American economy.

They’ve added jobs, driven down prices and invested tens of billions of dollars in the U.S. economy. Productivity in the digital sector has grown by almost 60 percent since 2007, compared to only 5 percent in the rest of the non-health private sector.

{mosads}What’s more, these companies are helping the U.S. maintain its global and economic leadership against fast-growing competitors in countries like China.

These factors don’t exempt the platform companies from close scrutiny to make sure that they are not stifling competition or harming consumers. But breaking them up would be a mistake, for three reasons.

First, the tech platforms have been good for workers. The four companies have added in excess of 800,000 jobs since 2007, almost totally by organic growth.

Moreover, these companies pay good wages to workers both with and without college degrees. For example, Amazon’s minimum wage of $15 per hour is far in excess of the $11 hourly median wage for retail sales workers in the U.S.

Second, the trouble spots for U.S. consumers are physical sectors like food and health care, not the tech sector.  Our analysis shows that prices in the tech/telecom/e-commerce sector have fallen by almost 15 percent since 2007. By contrast, prices in the rest of the private sector, even leaving out health care, have risen by 21 percent. 

Particularly troubling is the price of food, which represents 13 percent of household budgets, and more for poor Americans. Since 2000, the price of food relative to other goods and services has been rising, breaking a 50-year trend of food getting cheaper. 

This relative price increase for food — in large part due to consolidation and weak productivity growth in the food processing industry — is hurting poor Americans much more than anything the tech platforms might be doing. Indeed, it’s one of the biggest reasons why real incomes have stagnated.

Finally, the tech platforms are relatively small compared to the global economy, which is the appropriate measuring stick. Their 2018 revenues total only 0.8 percent of global GDP.

By contrast, the top four companies on the Fortune Global 500 list — Walmart plus three Chinese giants — have revenues equal to 1.7 percent of global GDP.  

To put these numbers into historical perspective, the top four U.S. industrial companies in 1969 — GM, Ford, GE and IBM — had revenues equal to 2 percent of the global economy. These industrial giants were far bigger, in relative terms, than the tech giants are today, yet they are remembered fondly as pillars of the American economy. 

Moreover, there’s no sign that the tech platforms are suppressing small business. Newly released Bureau of Labor Statistics data shows that new establishments are being created at the fastest rate in a decade, led by the information sector.    

Sen. Warren is drawing the wrong lessons from the growth of the tech platforms. If she really cared about the future of American workers and the American economy, she would laud the success of the digital sector in generating U.S. jobs and incomes. 

Indeed, as a recent PPI poll makes clear, most Americans quite rightfully have a favorable view of the big tech companies and oppose breaking them up. 

Next, we advocate that Sen. Warren should concentrate on policies to help digitize lagging sectors, such as manufacturing, as we have suggested. That would create a network of local manufacturing operations around the country, using technologies such as 3D printing to bring back production from overseas. 

Instead, Sen. Warren is proposing policies that would weaken the global competitiveness of the U.S. economy. Sen. Warren’s call to break up America’s tech leaders will no doubt go down well with Chinese and Europe leaders, who would prefer to face enfeebled U.S. tech giants.

But these companies symbolize American creativity, entrepreneurial prowess, and job creation. Those are qualities that progressives should be supporting, not trying to tear down.

Michael Mandel is the chief economic strategist at the Progressive Policy Institute.