Well before politicians got interested, a broader range of Democratic wonks were coming around to the view that growing corporate concentration was an important factor in explaining the sluggishness of the recovery from the 2008 Great Recession. Much of this has to do with the fact that corporate profits as a share of GDP rose in the 21st century but high profits did not generate an investment boom that helped power the overall economy forward.
Furman, who’d praised Walmart in the Bush years, was observing by the end of the Obama years with the fact that “returns on invested capital for publicly-traded U.S. non-financial firms have also become increasingly concentrated within a smaller segment of the market.”
Rather than a general economic boom, in other words, rising profits were hyper-concentrated in a small number of superstar firms, whose super-profitability seemed to suggest the possibility of monopoly rents. That this was happening alongside a statistically visible increase in the concentration of many sectors of the economy suggested that, yes, monopolization was driving superstardom. As a May 2016 Economist special report put it, “profits are too high” and “America needs a giant dose of competition.”
Declining competition could, in theory, explain why high profits were spurring payouts to shareholders rather than investments in business expansion, and recent empirical work from German Gutierrez and Thomas Philippon suggests this is the case.
As the Roosevelt Institute’s Marshall Steinbaum puts it, this adds up to an argument that competition policy “must be a core component of any agenda that would address the slow economic growth, rising inequality, and wage stagnation that are our most pressing economic problems.”
A bonus feature of this approach is that it allows Democrats to advance a populist economic agenda without asking the public to swallow large new tax increases or trust the government to competently administer a big new government program. In an era of high and rising distrust in major institutions, using the power of the state to check the power of big corporations may be an easier sell then counting on the state itself to grow.