Innovation

Competition and Consumer Welfare at the Mercy of Unprincipled Policy

The tone coming out of Washington, DC and any number of state capitols, for quite some time has been pretty clear in regards to technology and innovation – now is the time for government to seize control. The onslaught of legislative proposals specially targeting technology companies with the intention of placing them firmly under the thumb of big government has been breathtaking.

The variety of the legislation has been just as remarkable as the number of bills filed to be considered. Legislation to approve discriminatory taxation, create government competition with industry, outlaw certain citizen protections, limit intellectual property rights and multiple variations of other heavy-handed regulations, to name a few, have all been introduced. The all but wild-eyed lust for harming the U.S. innovation industry seems to have no end.

How could such government and legislative efforts cause harm? Most obviously the specific companies, or slice of industry, targeted would be directly harmed, as would their customers. Companies would be constrained and their customers would lose products or services they have become used to accessing. More broadly though, the whole of the country would be negatively affected.

Take just one example: content moderation.  While the debate has continued in Washington, DC, this year a handful of state legislatures rushed through consideration of how much more influence and force the state should exert to force social media companies to regulate online content and speech. Or, in the alternative, how much the government should limit corporate freedom of expression.

Meanwhile, Tiktok, direct competition to several U.S. based globally successful companies just announced 45% growth from July 2020. More alarming, the company’s highest concentration of users is in the United States. Global competitors—who are not initially subject to U.S. laws—are already making inroads and will fully exploit US government attempts to kneecap its own industry.

One more example — the biggest of big government sledgehammers, antitrust. Antitrust law in the United States is a combination of several federal and state laws. One of those is the Sherman Act of 1890, which was designed to prohibit the abuse of monopoly power. Other notable parts are the Clayton Act of 1914, which seeks to restrain an organization on price and sales, and the Federal Trade Commission Act of 1914.

From the floor of the U.S. Senate some have openly advocated for overt government action to break up companies they do not like. In the House, legislative efforts have included considering direct federal government intervention into the market, breaking up companies, and demanding financial settlements to protect “workers, entrepreneurs, independent businesses, open markets, a fair economy, and democratic ideals.” Whatever that means.

Consumer welfare is diluted as everything and anything can form the basis for government intervention into an industry or a particular business. Even free services seem to be considered bad by some. But free does not harm citizens. Paying less is a badge of pride for working Americans.  Switching to a different product with the click of the mouse is empowering and easily done today. Companies beating up each other in a free market in an effort to deliver better, cheaper or even free products or services to consumers is a win for all.

But here is the real cognitive dissonance. These debates are going on even while states and the federal government lavish money to build out more tech. Whether tax breaks to relocate or build out companies, directing billions of dollars to build out more broadband or direct subsidies for the operations of a business in a certain locality government wants the companies to benefit its constituents. Yet, many also want a political punching bag and scapegoat for societal ills, often ills that are kindled by unprincipled public policy.

What is the governing philosophy? President Ronald Reagan continues to be relevant, “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” President Raegan was correct to note the apparent fear of the free market. He only missed one trick, what happens when government is doing all three at the same time?


In Depth: Innovation

Whether improving processes, creating products or developing new ideas, the application of technology can enable real changes in how state government works, both in quality of services delivered to constituents, cost savings and quality of life. States have the opportunity in our national balance of government power, to address policy …

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