Nobel Laureate Milton Friedman was correct that inflation “is always and everywhere a monetary phenomenon.” But, while true, it does not recognize the way fiscal and regulatory policy can alleviate or worsen inflation’s impact on the people.
Case in point: The Biden administration’s fiscal and regulatory policies, which will increase the burden of inflation.
Biden recently issued new directives aimed at examining whether shippers‘, meat packers‘, and Big Oil’s supposed violation of antitrust laws are somehow behind rising prices and supply shortages. This follows Biden’s July, 2021 Executive Order containing 72 directives to various federal agencies to increase antitrust enforcement.
Biden claims that enforcing antitrust laws will reduce inflation by ending “price gouging.” Biden is economically ignorant of the fact that it is natural and necessary for prices to increase during a shortage. Rising prices signals businesses that they need to increase supply of goods and services.
The other way anti-price gouging laws “protect” consumers from paying high prices is by increasing shortages — hardly an optimal solution. Price-gouging laws harm a naturally occurring economic process by giving bureaucrats and politicians a dangerous power to dictate “fair” prices.
Similarly, all antitrust laws assume that government bureaucrats can determine when a firm gets too big or when a market is “competitive.” There is no way for a government official to know this, any more than a government official can determine what is a fair market price.
Antitrust enforcement also assumes that the firms currently dominating the market will remain dominant absent government action. Historically, there are numerous examples of successful businesses failing because another business offered a better product.
Antitrust laws can harm consumers by denying them the benefits of economics of scale, as well as vertical and horizontal integration. Thus, antitrust laws push prices higher than they otherwise would be, making their increased enforcement an odd way to combat inflation.
Of course, antitrust laws are unlikely to be repealed anytime soon. Still, Biden could help consumers and promote competition by basing antitrust enforcement actions on whether a firm’s actions benefit or harm the consumer — rather than whether they exceed some arbitrary standard of “market concentration.”
This won’t resolve the problems with antitrust, but at least it would make enforcement less heavy-handed and destructive.
Today, a growing number of conservatives are abandoning traditional skepticism (or opposition) to antitrust. These members of the “anti-market” right want to use antitrust to punish Big Tech companies like Twitter and Facebook.
Ironically, many pro-antitrust conservatives claim to be more concerned than free-market conservatives and libertarians with the well-being of American families. Yet, they are supporting a policy that will force American families to ultimately pay more for goods and services.
They also ignore the fact that the market is slowly but surely working. Alternatives to the big tech and social media companies that cater to conservatives and libertarians are springing up on an almost weekly basis. Over time, these companies will emerge as serious challengers to the existing social media giants.
Yet, ironically, the one threat these companies face is antirust becoming a tool to punish companies that censor points of view. Can anyone doubt that a future Harris, Buttigieg, or AOC administration would use any precedent justifying targeting tech companies having too much power over political discourse to crack down on right-wing versions of Facebook and Twitter?
Conservatives should remember that, even when government regulatory power is deployed against their enemies, the government is never a long-term ally.
Norm Singleton is Senior Fellow at the Market Institute