A False Choice for Progressives
Democrats don’t have to decide between the abundance and anti-monopoly movements.
Illustration by Claudine Hellmuth/POLITICO (source images via iStock)
Opinion by Hannah Garden-Monheit
Hannah Garden-Monheit is a senior fellow at the American Economic Liberties Project. She served in the Biden-Harris administration as director of the Federal Trade Commission’s office of policy planning and as special assistant to the president for economic policy at the National Economic Council.
At a recent talk about his new book Abundance, Ezra Klein derided the anti-monopoly movement for a “monomaniacal” focus on antitrust, faulting anti-monopolists for purportedly trying to explain too many problems through the lens of corporate power.
His co-author Derek Thompson elaborated that in the “abundance” worldview, government must be pro-business, because it is business that will build the housing and clean energy needed to solve our nation’s supply problems. As he put it, “to have the progressive outcomes we’re rooting for and to root against companies is to have fully divorced the world that you want from the means to get there.”
For their part, anti-monopolists have also expressed skepticism about Klein and Thompson’s approach. In her review of their book, Zephyr Teachout wondered whether the abundance agenda was “something fairly small-bore and correct (we need zoning reform) or nontrivial and deeply regressive (we need deregulation).”
In fact, pitting pro-growth supply-side economics and anti-monopolists against each other is a false choice. Pro-competition and pro-building policies should be complements, not jealous competitors. Effective progressive governance requires pursuing both in tandem — not treating them as alternatives or as separate, divorced lanes. As the Democratic Party searches for ways to win back the American people and craft an economic vision that can deliver for the public, they’d be smarter to team up than to face off.
Take, for instance, one of the biggest supply problems Klein and Thompson highlight: our country’s housing shortage, which relentlessly drives up costs for Americans.
Klein and Thompson are undoubtedly right that onerous zoning and permitting requirements are a serious obstacle to building the millions of housing units we need to fill our supply gap and lower prices. But I’m unaware of any disagreement with that from the anti-monopolist crowd (as Teachout underscores). Meanwhile, if policymakers were to focus only on solving this (undoubtedly important) aspect of our housing crisis, they will fail to build the kind of housing supply that actually benefits working Americans. And the anti-monopoly movement does have something to say about that.
For example, there is growing evidence (and bipartisan concern) that “mega” corporate investors — institutional investors that own over 1,000 single-family homes — are becoming major players in local housing markets, and that this emerging consolidation problem has increased home prices and rents. Such institutional investors first emerged on the scene following the 2008 financial crisis, when the federal government encouraged the formation of investment vehicles to acquire distressed single-family properties. We should learn from that mistake. An abundance policy that turns a blind eye to the market structure of who owns the supply of housing in our country may produce a housing market dominated by distant and greedy corporate Wall Street landlords — an outcome unlikely to yield more affordable housing for the rest of us.
Klein dismisses private investors as currently a mere drop in the bucket, but housing markets are local, not national, and it is in these local markets where we are starting to see price effects from corporate ownership. More importantly, we need to address problems before they become full-blown crises. A desire to get ahead of this corporate consolidation problem doesn’t mean we can’t do zoning and permitting reform, too.
Similarly, there is an even larger body of evidence that many landlords are turning to algorithmic price-fixing software to drive up rents. In this “algorithmic collusion,” landlords who would otherwise compete to undercut each other on rents instead use common software and data to drive up rents — including in some cases by holding back supply. If a pro-abundance policy succeeds in building millions of new housing units but landlords use common software to ensure those new units aren’t in price competition, working Americans will see no benefit.
Another main focus for Klein and Thompson is energy, and they rightly trumpet our country’s need to rapidly increase the supply of clean energy to fuel the next century of innovation, lower costs for American families, and curtail climate change.
But here too, a strategy for building more supply will not succeed — or at least it will cost significantly more and produce fewer benefits for ordinary people — unless it also accounts for anticompetitive market dynamics. For example, in 11 states, incumbent utilities have “rights of first refusal” to build and connect new energy transmission lines. This allows incumbents to block new entrants like clean power innovators. It also incentivizes the incumbents to inflate, rather than reduce, their construction costs — costs that they can then turn around and charge to their captive ratepayer customers, generally with little meaningful oversight. One study found that using competitive bidding could lower energy construction costs by 20 to 30 percent, saving ratepayers billions.
A pro-abundance approach that ignores these competition problems with the dominant utility incumbents would forgo the many benefits of new entry by innovative disruptors and could actually increase consumers’ energy costs — not reduce them. And while Klein and Thompson seem to assume that deregulation is the way to clear the path for abundance, in this instance a regulation could readily solve the problem: The Federal Energy Regulatory Commission has authority to issue rules preempting (i.e., eliminating) incumbent rights of first refusal. Thinking of policymaking in purely binary fashion as either pro-regulatory or deregulatory is overly simplistic and outdated.
It’s also worth stating that Klein and Thompson are wrong to assume that competition policy has nothing to say about the zoning and permitting restrictions that most concern them. To the contrary, these restrictions are what competition policy experts call barriers to entry, and lowering barriers to entry is in fact a tried-and-true way to increase competition and lower costs. Klein and Thompson can and should fully embrace pro-competition economics alongside their abundance thesis — not deride it as some pet project of a near-sighted anti-monopoly or anti-business movement.
Klein and Thompson are absolutely right that America must build more to increase supply and lower costs, and yes, it is the private sector who will do most of that building. But to deliver actual results for working Americans, we have to consider the market structure and market dynamics of the firms who will build and own what we create.
An abundance underpinned by healthy competition among firms will be more cost-efficient and innovative and will deliver real results. The alternative — a liberalism that builds, builds, builds without simultaneously tackling issues of corporate power and accountability — will fare no better than the failed political projects of the past.
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