In its early days antitrust policy was motivated largely by public fears regarding economic power, the excess influence owners of large businesses might exert over political and commercial markets. Over time, antitrust enforcement has come to focus exclusively on market power, the ability to raise prices or reduce output in narrowly defined product markets. This article calls for a return to the wisdom of days past, less for the populist reasons then articulated, and more due to the ‘influence effect’, the scale and scope economies in procuring political influence and their detrimental effects on democracy. After delving into the market and political effects created by big business, the recent financial crises and Too-Big-To-Fail (TBTF) dynamic are discussed. The main problem, it is argued, is not potential business failures and resulting bailouts, but the influence TBTF institutions exert ‘while business is going well’. Preventing excess economic power and TBTF firms is a task originally entrusted to antitrust agencies, and this article calls for reaffirming this obligation. There are practical difficulties and political risks inherent in combating economic power, and these are discussed. In the end, such difficulties are very real and require careful formulation of enforcement strategy, but antitrust agencies should not shy away from the task.
Keywords: antitrust; economic power; democracy; too-big-to-fail; systemic risks; enforcement agencies; A13; D2; D21; D43; D63; G28; K21; L4; L5
Journal Article. 13430 words.
Subjects: General Economics ; Welfare Economics ; Antitrust Issues and Policies ; Production and Organizations ; Market Structure and Pricing ; Regulation and Industrial Policy ; Financial Regulation
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