The Fed took a natural phenomenon—a worldwide price rise from a worldwide reduction of supply (from factory lockdowns during COVID-19)—and made the situation worse by doubling interest rates. Reduction of a nation’s money supply reduces inflation, but reduction of a nation’s supply of goods and services, with a doubling of interest rates, causes real price rise.
Plus, government handing citizens $2.5 trillion during COVID-19 (without asking for repayment) absolutely caused inflation—the very definition of inflation: printing money to add to the money supply. As citizens of a democracy that protects economic freedom, why do Americans allow their government to intervene in the economy?
Because progressives fear democracy; that is, citizens making certain decisions. Progressives fear an unregulated economy, which is why Amazon must be broken up; unregulated speech, which is why it’s been cancelled at American universities; and unregulated voting, which is why voting districts are gerrymandered to produce specific results.
It is why Lina Khan, a progressive, is attacking Amazon. Believing there is nothing to learn from history—that timeless economic theory, rates of return, efficient markets (laws of money that citizens understood in 1,000 B.C. Babylon) do not apply to Amazon’s current online retail shopping platform—Ms. Khan believes the Federal Trade Commission (FTC) must step in before Amazon corners its market.
Ms. Khan believes that “this time things are different” (as communists today believe that “next time will be different”). It is why, to Ms. Khan, economic theory from the “Chicago school” does not apply, that predatory Amazon, with 40 percent of its market, must be prevented from acquiring 100 percent—thus, destroying its own market.
How can Ms. Khan sue Amazon for antitrust when there has been no harm to consumer prices or to product quality, variety, service, and innovation, nor to access to the market? Amazon takes a cut from competitors who use its platform, but that’s not antitrust. Those competitors can use another platform. Ms. Khan says there are no other platforms. Mr. Bezos says that besides Target and Walmart today, in 20 years, there will be plenty of platforms.
How can Ms. Khan sue Amazon for vertical integration when that’s what firms do? Were Henry Ford still alive, Ford Motors would not have been, as most factories were, without supply when they reopened after COVID-19. Ford owned the factories that supplied his parts. And he owned the labor. A ferocious racist, he purposely hired black workers, then paid them three times market wage. Why? Because he knew his workers would be so grateful they would never strike, never stop production.
McDonald’s is another example of vertical integration. It owns the farms that provide its ingredients, franchises its locations to avoid labor strife, and owns the underlying real estate.
The purpose of the Federal Trade Commission Act (2014) was to ensure open markets and promote small business. It’s what the FTC and antitrust laws are all about: controlling markets, using the political process (political activism) to control the economy. It is why Lina Khan works for the FTC: She wants to control.
It’s nobody’s business to control markets—their structure, their processes. A great market phenomenon, Mr. Bezos’s online shopping network, Amazon, is like a great work of art: something beyond the understanding even of its maker. Because Lina Khan can’t imagine what will replace Amazon—artificial intelligence, 3-D laser printing—she thinks she has to break up Amazon.
She wrote in The Yale Journal in 2017: “Amazon has established dominance as an online platform thanks to two elements of its business strategy: a willingness to sustain losses and invest aggressively at the expense of profits and integration across multiple business lines. These facets of its strategy are independently significant and closely interlinked—indeed, one way it has been able to expand into so many areas is through foregoing returns. This strategy—pursuing market share at the expense of short-term returns—defies the Chicago school’s assumption of rational, profit-seeking market actors.”
Amazon certainly does not defy the Chicago school assumption of rational, profit-seeking market actors. Ms. Khan, at once stating and immediately dismissing sound economic thought, is not accounting for that thought. Amazon did not invent long-run business planning.
Neither did Henry Ford, who spent every cent he owned, for years, to pay the nation’s best engineers to discover how to make an engine with the pistons all on one side. The engineers said it was impossible. Ford said: “I’m paying you; I’m giving you all my money; keep working; I don’t care how long it takes.” When the engineers finally “got it” and coupled it to Ford’s other great invention, the moving assembly line, Ford had the beginning of a monopoly. Were Ms. Khan alive, she would have stopped Ford Motors dead in its tracks.
Ms. Khan wrote in The Yale Journal, “Just as striking as Amazon’s lack of interest in generating profit has been investors’ willingness to back the company.”
Does Ms. Khan believe American investors are stupid? She was a student when she wrote her Yale Journal “Note,” and she is now a government bureaucrat. Does she believe she is smarter than the creative industrialists she is attempting to control?
To Ms. Khan, that letter is a warning shot to signal: “Enemy! Prepare to attack!” Does Ms. Khan plan to attack any firm that writes such a letter?
What about Andrew Carnegie? His business insight was “never stop production.” Especially during an economic downturn, because that’s when you pick up market share, when your competitors can’t hold on. Good thing Carnegie didn’t write letters to his shareholders, because some do-gooder would have prevented him from acquiring most of the nation’s steel mills. Carnegie Steel. Carnegie’s fortune did not come from underselling his competitors nor from union busting.
Lina Khan will lose her lawsuit with her own arguments, which, to a jury, are almost a compliment to Amazon.
She wrote: “The way that Amazon has leveraged its dominance as an online retailer to vertically integrate into delivery is instructive on several fronts. First, it is a textbook example of how the company can use its dominance in one sphere to advantage a separate line of business. To be sure, this dynamic is not intrinsically anticompetitive. What should prompt concern in Amazon’s case, however, is that Amazon achieved these cross-sector advantages in part due to its bargaining power. Because Amazon is able to demand heavy discounts from FedEx and UPS, other sellers faced price hikes from these companies—which positioned Amazon to capture them as clients for its new business. By overlooking structural factors like bargaining power, modern antitrust doctrine fails to address this type of threat to competitive markets.”
How is any of this not normal business practice?
What if Ms. Khan wins her lawsuit? Where will the Department of Justice (DOJ) find the million-man personnel to first destroy, then rebuild Amazon? Plus, why would Ms. Khan want to break up what all socialists want: centralization of a nation’s operations—horizontal and vertical integration?
Ms. Khan wrote, “Although platforms form the backbone of the internet economy, the way that platform economics implicates existing laws is relatively undertheorized.”
Should Ms. Khan win her lawsuit, she will need a battery of Nobel economists (all of whom advocate for free markets) to write new theory to replace what the Supreme Court both currently and in the past embraced (this author’s arguments): efficient market hypothesis—that market prices reflect all available information. Ms. Khan, you’re wasting the court’s time.
Worse, your motives are un-American.
“Key is deciding whether we want to govern online platform markets through competition, or want to accept that they are inherently monopolistic or oligopolistic and regulate them instead,” Ms. Khan wrote. “If we take the former approach, we should reform antitrust law to prevent this dominance from emerging or to limit its scope. If we take the latter approach, we should adopt regulations to take advantage of these economies of scale while neutering the firm’s ability to exploit its dominance.”
Neuter the enemy, an American company? Sounds feminist.
What if Ms. Khan wins? Does she expect there’ll be no consequences, that Wall Street will simply lie down, that Amazon won’t counter the DOJ’s every move? Or that American citizens, forced to live through the turmoil, will have no response because they’ll be cheering for her?
Ms. Khan’s feelings replaced her judgment. Those timeless laws of money, business, and economics, curtailed in the short run, will rebound in the long run—with fury. For 70 years, the Soviet Union curtailed those laws. It will be another 70 before Russia is back to where it was in 1917.
