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Big Business Is Overcharging You $5,000 a Year
When Thomas Philippon moved to Boston from his native France 20 years ago, he was a graduate student on a budget, and he was happy to discover how cheap American telephone use was. In those days of dial-up internet connections, going online involved long local phone calls that could cost more than $10 apiece in France. In the United States, they were virtually free.
Philippon eventually got a Ph.D. in economics at M.I.T. and decided to stay here. He’s now a professor at New York University. And over the years, he has noticed something surprising about his adopted country: Internet usage is no longer a good deal. Today, his parents pay about 90 euros (or $100) a month in the Paris suburbs for a combination of broadband access, cable television and two mobile phones. A similar package in the United States usually costs more than twice as much.
... Many Americans have a choice between only two internet providers. The airline industry is dominated by four large carriers. Amazon, Apple, Facebook and Google are growing ever larger. One or two hospital systems control many local markets. Home Depot and Lowe’s have displaced local hardware stores. Regional pharmacy chains like Eckerd and Happy Harry’s have been swallowed by national giants. Other researchers have also documented rising corporate concentration. Philippon’s biggest contribution is to explain that it isn’t some natural result of globalization and technological innovation. If it were, the trends would be similar around the world. But they’re not. Big companies have become only slightly larger in Europe this century — rather than much larger, as in the United States.
... In air travel, European discount carriers like easyJet have received better access to the gate slots they need to operate. The largest four European airlines control only about 40 percent of the market. In the United States, that share is 80 percent, and, as you’d expect, airfares are higher. Even Southwest Airlines has begun to behave less like a low-fare carrier. The irony is that Europe is implementing market-based ideas — like telecommunications deregulation and low-cost airlines — that Americans helped pioneer. “E.U. consumers are better off than American consumers today,” Philippon writes, “because the E.U. has adopted the U.S. playbook, which the U.S. itself has abandoned.”
... The consolidation of corporate America has become severe enough to have macroeconomic effects. Profits have surged, and wages have stagnated. Investment in new factories and products has also stagnated, because many companies don’t need to innovate to keep profits high. Philippon estimates that the new era of oligopoly costs the typical American household more than $5,000 a year.
More at https://www.nytimes.com/2019/11/10/opinion/big-business-consumer-prices.html
Philippon eventually got a Ph.D. in economics at M.I.T. and decided to stay here. He’s now a professor at New York University. And over the years, he has noticed something surprising about his adopted country: Internet usage is no longer a good deal. Today, his parents pay about 90 euros (or $100) a month in the Paris suburbs for a combination of broadband access, cable television and two mobile phones. A similar package in the United States usually costs more than twice as much.
... Many Americans have a choice between only two internet providers. The airline industry is dominated by four large carriers. Amazon, Apple, Facebook and Google are growing ever larger. One or two hospital systems control many local markets. Home Depot and Lowe’s have displaced local hardware stores. Regional pharmacy chains like Eckerd and Happy Harry’s have been swallowed by national giants. Other researchers have also documented rising corporate concentration. Philippon’s biggest contribution is to explain that it isn’t some natural result of globalization and technological innovation. If it were, the trends would be similar around the world. But they’re not. Big companies have become only slightly larger in Europe this century — rather than much larger, as in the United States.
... In air travel, European discount carriers like easyJet have received better access to the gate slots they need to operate. The largest four European airlines control only about 40 percent of the market. In the United States, that share is 80 percent, and, as you’d expect, airfares are higher. Even Southwest Airlines has begun to behave less like a low-fare carrier. The irony is that Europe is implementing market-based ideas — like telecommunications deregulation and low-cost airlines — that Americans helped pioneer. “E.U. consumers are better off than American consumers today,” Philippon writes, “because the E.U. has adopted the U.S. playbook, which the U.S. itself has abandoned.”
... The consolidation of corporate America has become severe enough to have macroeconomic effects. Profits have surged, and wages have stagnated. Investment in new factories and products has also stagnated, because many companies don’t need to innovate to keep profits high. Philippon estimates that the new era of oligopoly costs the typical American household more than $5,000 a year.
More at https://www.nytimes.com/2019/11/10/opinion/big-business-consumer-prices.html
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