Inflation continues its relentless march: The latest Consumer Price Index report shows its rate soaring to 8.6 percent in May, the highest level in over four decades. Inflation is the number one challenge facing the American consumer, the American voter, and by extension the American government. Actually to address the problem, the US government will have to invest in resilient, forward-looking domestic industry. But instead, Washington is doing the opposite: Pouring its energies into a misguided obsession with breaking up the foundation of modern industry; therefore not only ignoring the real squeeze facing the American consumer, but in fact exacerbating it.
The anti-trust crackdown on Big Tech is inflationary. Scale makes platform companies more efficient, allowing them to provide better services at lower cost. More importantly, scale also makes platform companies more effective
The anti-trust crackdown on Big Tech is inflationary. Scale makes platform companies more efficient, allowing them to provide better services at lower cost. More importantly, scale also makes platform companies more effective: It grants them real leverage in commercial environments at a time when such leverage is critical, and in short supply. Amazon can address today’s supply chain crisis in a way that Washington cannot. Tesla can resolve the dearth of electric vehicle charging infrastructure that is proving an insurmountable obstacle for Congress.
China understands this. In April 2021, as the first hints of inflationary trends were beginning to cast a shadow on the US economy, China’s Tsinghua University convened its Chief Economists Forum. There, Xing Ziqiang, the chief economist of Morgan Stanley China, explained that unusual and lasting inflation in the United States would be “inevitable” – not only because of economic overheating, but also because of Washington’s crackdown on big technology companies. Xing argued that the rise of “tech giants” over the past thirty years has been critical to “suppressing inflation and improving global productivity.” Antitrust attacks on those ensure both that inflation will return and that it will last.
Xing’s argument is by no means anomalous. It aligns with Larry Summers’s recent Tweet storm admonition of the Biden Administration: “I am very concerned that we may headed into a new era of Brandeisian populist antitrust policy that will make the US economy more inflationary and less resilient.”
But the implications of Xing’s argument – and its broader reflection in Chinese sources – are critical. Washington is stretching itself thin trying to wrestle with the simultaneous challenges of skyrocketing inflation, escalating US-China great power competition, Putin’s invasion of Ukraine, and an uncertain relationship with Big Tech. Washington could seize this opportunity to kill four birds with one stone. Instead, the US is at risk of shooting itself in the foot.
The Chinese Communist Party recognizes that big tech can protect against inflation. Beijing also sees big tech as a critical battlefield in the US-China competition. In an information technology era, digital platforms will form the foundation for, well, everything; for industry and trade, politics and communication, security and military affairs. If China can deploy the most competitive digital platforms, it will dominate; will not only claim an inherent upper-hand in global affairs, but also set the terms of engagement. And thanks to network effects and the advantages of scale those create, the biggest digital platforms will be the most competitive.
Beijing is investing accordingly. It is cultivating its national tech champions’ scale while ensuring their subordination to the Party State so that they can both implement China’s agenda internationally and protect the country’s economic fundamentals. Take, for example, Beijing’s forced reorganization of Ant Group: The effort was billed as part of an anti-trust campaign. What it really did was bring Ant into the larger monopoly of the Chinese Communist Party, including by merging the company’s consumer credit and micro-loan services with a State-backed bank. And just last week, Chinese Premier Li Keqiang declared that Beijing would support platform and digital companies in deploying overseas.
It’s time for Washington to start working with, not against, big tech; to start leveraging American industrial scale in order to fight inflation and for the global order.
At present, the US effort to break up big tech play straight into China’s hand. In the short term, it fans the flames of inflation to handicap the US economy – and undermine its global competitiveness. In the medium- to long-term, this ill-advised anti-trust campaign risks neutralizing the most critical US advantage in a contest for the global order. It risks destroying today’s arsenal of democracy and the foundational industry of a new information era.
It’s time for Washington to start working with, not against, big tech; to start leveraging American industrial scale in order to fight inflation and for the global order. That means bringing Amazon to the table to resolve the supply chain crisis. It means working with Apple to create a secure semiconductor supply chain – and market. It means partnering with Tesla to build the charging foundation for the electric vehicle revolution and telecommunications companies to invest in the new infrastructure that a 5G era demands. And across the board, it means recognizing that competitive advantages should be used, not crippled.