Massachusetts senator and presidential hopeful Elizabeth Warren recently released a missive titled “Here’s how we can break up Big Tech.” I have studied it, and I conclude the only thing that needs breaking up is the agglomeration of misunderstandings in Warren’s mind.
“Twenty-five years ago, Facebook, Google, and Amazon didn’t exist,” says the senator. “Now they are among the most valuable and well-known companies in the world. It’s a great story — but also one that highlights why the government must break up monopolies and promote competitive markets.”
Warren claims the government’s antitrust suit against Microsoft during the 1990s “helped clear a path for Internet companies like Google and Facebook to emerge.” She concludes it ought to act similarly now, this time with legislation and direct executive force.
Her proposed laws would set an arbitrary marker of $25 billion of annual global revenue. At or above this, a company would be designated as a “platform utility,” which seems to mean nothing except that the Warren administration would interfere with its business in various ways. The administration’s henchmen, if they deemed a “platform utility” insufficiently compliant, would sue it and fine it.
She promises further to “appoint regulators who are committed to using existing tools to unwind anti-competitive mergers.” By way of example, she proposes divesting Amazon of Whole Foods and Zappos, Facebook of WhatsApp and Instagram, and Google of Waze, Nest, and DoubleClick.
Why? For our own good, of course. She asks us, collectively, “Aren’t we all glad that now we have the option of using Google instead of being stuck with Bing?” To which I reply, “What do you mean, ‘now’?” Microsoft launched Bing in 2009, 11 years after the founding of Google.
For that matter, Microsoft invested $240 million into Facebook in 2013, in competition with Google’s effort to similarly stake a claim in the social media company. Did we not thwart Microsoft sufficiently in the ‘90s?
On the other hand, should we now take Microsoft’s side in its competition with Google, by reversing the latter’s business acquisitions dating as far back as 2008? On yet another hand, since we’re supposed to break up Facebook too, is it good that we’re going to devalue Microsoft’s investment?
In summary, these are the most addled technology ideas coming out of a Democratic candidate for president since Hillary Clinton proposed a “Manhattan-style project” to break encrypted communications. “There must be some way,” she said in 2015. Clinton’s discussion with reporters about this proposal resulted in what should have been the campaign quote of the season: “Maybe the back door is the wrong door.”
But her ideas about the technology sector are merely a subset of her wide assortment of futile schemes. Warren, for instance, is planning to bail out student loans and make college tuition-free. College-educated workers predictably earn more over the course of a lifetime than workers who are not college-educated. Consequently, economists across the political spectrum have pointed out that this proposal amounts to a bailout for everyone except the poor.
Less discussed is whether Americans want a European-style system in which tuition is low but access is more competitive. Or, if we solved that problem by exploding the number of programs, would we welcome the resulting devaluation of degrees at a time when students and parents are already questioning the worth of those credentials?
Practically unmentioned is the sorry fact that student debt comprises half of all federal financial assets. Federal liabilities already outweigh its financial assets by a factor of eight. Does Warren have the stomach to throw a jubilee, only to make that difference a factor of 16?
Warren has attempted to tackle the student loan problem before. Her first piece of legislation as senator proposed reducing the student loan interest rate to the federal funds rate, a necessarily far lower percentage. She remarked at the time, in 2013, “We shouldn’t be profiting from our students who are drowning in debt, while giving a great deal to the banks. That’s just wrong.”
It ought to have been obvious to anyone who has ever taken out a loan that lower rates stimulate more borrowing. Students were drowning, and Warren’s idea was to add water to the ocean. Total student loan debt back in 2013 was a trillion dollars. It’s now $1.5 trillion.
Warren’s vehemence correlates inversely with her coherence. Back in 2014, the Heritage Foundation worked on a coalition that would reach across political divides to end the Export-Import Bank. The bank is essentially a welfare program for Boeing, with a minor side hustle of lending to small businesses. Heritage contacted the famously anti-corporate Warren as a potential ally.
As Reason quipped, “Looks like the joke is on Heritage.” Said a spokesman to Bloomberg, “Sen. Warren believes that the Export-Import Bank helps create American jobs and spur economic growth, but recognizes that there is room for improvement in the bank’s operations. She looks forward to reviewing re-authorization legislation if and when it is introduced.”
She has had that opportunity, and has supported reauthorization without improvement at every turn. In 2017, President Donald Trump appointed Scott Garrett to lead the Ex-Im Bank. Garrett served in the Congress that voted not to renew the bank’s authorization a few years ago, but he pledged to the Senate’s banking committee to carry out the reforms that Warren has long claimed to want.
During testimony, Warren badgered him for “doing what was politically convenient.” She accused him, as a congressman, of costing Massachusetts “real jobs.” Warren’s melange of anti-corporate, pro-jobs, reformist, and anti-reformist sentiments come together with all the philosophical rigor of a pot of spaghetti.
Even this recent attack on “Big Tech” reveals a bug in Warren’s anti-corporate program. “Amazon has used its immense market power to force smaller competitors like Diapers.com to sell at a discounted rate,” she writes. “Amazon crushes small companies by copying the goods they sell on the Amazon Marketplace and then selling its own branded version,” she says later.
Since then, Warren has publicly supported the Amazon workers’ strike that took place in conjunction with the company’s Prime Day promotions. Yet the Warren campaign has spent more money at Amazon than every other candidate in the race except for Sen. Bernie Sanders.
Warren’s rhetoric often doesn’t withstand casual analysis. And for all her vaunted passion about these issues, she seems curiously unable to do the right thing when the opportunity is directly in front of her. Whether this is the product of confusion or cynicism is hard to know. In either case, you’ve no doubt heard the quote from Henry David Thoreau, “There are a thousand hacking at the branches of evil to one who is striking at the root.” Warren cannot even reach the branches.