Benchmarking American Businesses: They Are Not Competitive

Arguments for freer markets and more deregulation point to the efficiencies that competition inherently brings as part of the rationale. But in some areas such as non-universal health care, the US system is significantly more expensive than comparable but universal healthcare in other industrialized countries.

Economist Thomas Philippon analyzed broadband and cell phone costs and again found that the US ranks near the top in costs compared to other countries, some of which subsidize the costs. A New York Times opinion piece comments:

“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.”

Subsidies are probably not the whole story. Philippon argues that companies in the US have grown leading to less competition and lower wages. By contrast, growth in Europe is more constrained by antitrust regulation, leaving more competition in place. He sees Europe as more market- and competition-based than comparable industries in the US. Other research comes to similar conclusions, e.g., “a market-based, pro-competition strategy would include both increased antitrust enforcement and also a broader pro-competition agenda.”