Time To Break Up Google? Hardly

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There is an interesting piece on FT.com by Richard Sennet in which he argues that “real progressives” should advocate for the break up of Google (as well as Apple and other “big tech groups”) on anti-trust grounds. Sennet believes that Google has crossed an economic Maginot line and has become so big that it must be broken up for the good of society.

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Referencing Herbert Croly’s 1909 progressive manifesto The Promise of American Life, and thus drawing on the tradition of the anti-trust activists at the start of the last century, Sennet argues that the more a company like Google finds success, the more it is doomed to become a force for corruption and inefficiency in society.

Writes Sennet:

Classic progressivism set great store on the power of technology to build a better society, just as modern progressives do. The difference between progressives then and now concerns market power. Croly believed that there was a natural tendency for markets to generate monopolies. Successful start-ups would end by crushing their competitors and, indeed, extinguishing competition. The reason for this, he said, would be apparent to any reader of Charles Darwin: the struggle for existence meant strong creatures destroyed the weak, eating them or ruining their habitat. Evolution was not like a game in which the losers got a second chance to compete. So it was in markets: the better the winners were, the bigger they became, the more crushing they were. 

There is no need argue the fact that when some companies get to a certain level of market dominance, there is an organic tendency for them to turn monopolist and anti-competitive. Time and again, history has shown that there are corporations in certain sectors that, after reaching a certain scale, can distort the competitive dynamics of competition, engender corruption through the manipulation of political influence, and restrain new entrants into their markets. In thinking about this historical phenomenon with respect to Google, we have to ask ourselves two basic questions: (a) has Google crossed that line; and (b) if so, is the negative outcome Corly argues inevitable.

To the first point, I would argue that Google has not crossed that line, but it is approaching that point very quickly. There are other ways of searching (and of reaching searchers), but they are not a real threat to Google. Through its innovation and superior technology, Google has come to dominate the process of finding information on the web to the point that many people would consider it a monopoly, even if it is such by popular acclaim. However, the reality is that Google is not a monopoly, and that anyone who wants to use another search method is certainly free to do so with basically zero switching costs, which was not the case in the classic monopolies of the last century.

To the second point, I think that at least in the tech sector, the traditional evolution that Sennet worries about does not apply. Time and again we have seen tech companies that seemed to have crossed into monopoly territory pulled back from that position by the natural dynamics of technology evolutions, which, again, is something very different from the robber baron era. Microsoft was thought to be unassailable a while back, and now it struggles to hold on to its Office franchise to survive. More recently, people argued that the iPhone would make all other mobile phones obsolete, and now Samsung has taken over Apple as maker of the device of choice. These changes came about not because of regulatory intervention but because of the natural development of entrants into attractive markets signaled by the very success Sennet decries.

It may that in the next few years Google does cross that invisible line between good and evil and becomes a true monopoly, and that the competitive dynamics of the high-tech market change. But for now that is not the case. There is no need to break up Google. Hopefully, somewhere in the world, there is someone preparing to do just that not with new laws but with better ideas.

 

Read Sennet’s piece here: http://www.ft.com/intl/cms/s/0/06512782-de6e-11e2-9b47-00144feab7de.html#axzz2Xc17qpSX

 

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1 comments on “Time To Break Up Google? Hardly”

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