amazon economy targets walmart competition impact on consumers victor claar
Victor V. Claar
Last week, President Biden unveiled his 72-point plan to increase competition between American companies.
The executive order of July 9 begins as follows: “A fair, open and competitive market has long been the cornerstone of the US economy, while excessive market concentration threatens fundamental economic freedoms, democratic accountability and welfare. be workers, farmers and small businesses. , startups and consumers.
“Amen” to the first statement. Categorically.
But on the second claim, that market concentration threatens our way of life, I say, “It depends.
It depends on whether consumers themselves indicate that they prefer more concentration to less in some cases. Most of the people I know don’t feel exploited by Amazon. Despite its large market share, consumers continue to reward Amazon for good service and reasonable prices. And Amazon’s success has pushed competitors like Target and Walmart to improve their own value propositions for consumers, especially during the pandemic.
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In fact, the most powerful and effective regulator of all is not an agency like the Federal Trade Commission – despite the two statues outside their DC offices depicting muscular men (the flattering vision of the bureaucrats themselves) reigning in the wild stallions unfettered capitalism.
The most powerful regulator of all is you. Armed with your wallet or wallet, you can kill bad business just like David hit Goliath. And you can reward companies that serve you well.
The essential feature of this consumer-fueled regulatory structure is what the presidential decree first mentions: “a fair, open and competitive market”. A level playing field for all.
Fortunately, the presidential decree seems to recognize this profound economic truth – at least in places. We can applaud his call to reduce unnecessary barriers to professional licensing within and between states. Onerous state regulations should not prevent enterprising young people from pursuing new career opportunities. We already know this in Florida, as evidenced by the adoption in 2020 of the Occupational Freedom and Opportunity Act, opening many avenues out of poverty for Floridians.
And the president’s order should be celebrated for ordering Health and Human Services to classify hearing aids as over-the-counter, lowering the price of hearing the first word of a new grandchild.
Note the formula here: less government = more jobs and lower prices.
But that’s not what the rest of the order offers.
The remainder of the ordinance alleges that just by being big businesses are exploiting you. And the remedy is to do a little “trust trick” in the Teddy-Roosevelt era. By this line of thinking, a dozen little Amazons will serve you better than one, as baby Amazons will have to compete for your business.
But here’s what this mindset overlooks: Any “big” business started out small – often as the “mom and dad” we romanticize – and only grew because it made our lives better. Profits are only indicators that entrepreneurs were on the right track, and losses are the brutal consequences of bad ideas or poor execution.
And unless a company, once successful, can pressure Congress to introduce new regulations – presumably for the “good of the consumer” – to keep potential competitors out, then it must. continue to outperform potential competitors.
If Amazon can’t count on Congress to reduce competition, then it must do so on its own, perhaps by charging low prices as a preventative way to deter new competitors. So even though the market remains concentrated, we still benefit from these strategically low prices.
Some monopolies are bad, but they are usually created by the government. Consumers cannot kill them because regulations defend them and unfairly tip the scales against potential entrants.
Yes, let’s keep the markets “fair, open and competitive”. But the best way to do this is to make businesses as receptive as possible to the real regulators: you and me.
Victor V. Claar is Professor of Economics at Florida Gulf Coast University, where he holds the BB&T Distinguished Professorship in Free Enterprise at Lutgert College of Business. He sits on the Research Advisory Board of the James Madison Institute.