Closing the Income Inequality Gap with Antitrust Law Enforcement
It’s well-established that free and open markets are the foundation of a vibrant economy. When competition is aggressive among open-market sellers, both businesses and individuals are supposed to benefit from higher quality services and goods as well as lower prices. The laws that enforce the rules of a fair, open market are called antitrust laws. Consumer rights attorneys know that these laws are important not just to businesses, but to individuals. Recently, journalism outlet Vox delved into whether the economic gap of income inequality between the coastal cities, which are overall thriving, and Middle America, may be blamed on lack of antitrust enforcement.
This all started with President Ronald Reagan, and a policy to mute the impact of antitrust oversight. The idea was to make it easier for large companies to merge. In so doing, however, large companies became extremely powerful, consolidating market power and trampling their competition. Prior to Reagan’s antitrust policies, monopolies were largely prevented from forming. Now though, we see such mega-firms commonplace in almost every industry, from pharmaceuticals to technology to retail. Yes, they are bad for competition, but it’s being speculated that they are also largely to blame for the decline of a number of cities across the country. Vox looked specifically at the impact on St. Louis. When we look back at St. Louis in 1980, for example, the Midwestern city was home to 23 Fortune 500 firms. Fast-forward to 2017, and the city now has nine.
Why does this matter? It comes down to local growth, investment and jobs. For instance, when a city is home to a corporate headquarters, there are a number of supporting industries that crop up around that – advertising, public relations and legal services. These reliant companies are built on personal relationships with these large local clients. So when there is a drain on these corporate headquarters, these other companies start shutting down too.
We also see infrastructure that is unused or never expanded upon. For instance, St. Louis used to be a major hub for TWA. But when that company merged with American Airlines, it didn’t make sense to stay. Employees were laid off, and facilities fell into decline. From there, it became cyclical. A lack of infrastructure and supporting services made St. Louis (as with so many other cities) unattractive for investment by larger firms looking for corporate headquarters.
So the question then becomes whether this same pattern has been recognized in other cities. Researchers quoted by VOX say more research is needed, but it has long been established that corporate headquarters are the crux of economic development in large cities. Of course, the decline of manufacturing and globalization can’t be overlooked either.
Our Miami consumer rights attorneys understand that the current administration has expressed skepticism about large mergers, though it is also decidedly pro-business and large corporation in many other respects, so it’s unclear whether any decisive action might be taken to reverse Reagan-era policies.
Absent that, it’s not obvious what changes may need to be made to even the economic distribution of wealth nationally. Still, it hasn’t all been positive even in larger cities. While the wealth is now considerably concentrated in cities like New York, Boston, San Francisco and Los Angeles, we also know there is a shortage of land in those regions, which in turn has led to rocketing housing prices. Less affluent renters have been pushed out, while more people have found themselves underwater on their properties and possibly facing foreclosure.
What we can say for sure is that what is best for a particular business is not necessarily what is best for the entire economy. So while these mergers have seen boosted profits in the short term, the longer-term effect is that fewer cities are benefiting.
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