Mr. Ederer, are big companies strangling competition in the United States?

Winand von Petersdorff-Campen

Business correspondent in Washington.

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The White House clearly sees a competition problem.

In my opinion, that's right.

America has long been considered the land of free competition.

Studies over the past decade have shown that this no longer looks so good.

How do you know that the competition is no longer working so well?

One of the most influential studies of recent years comes to the conclusion that the contribution margins of leading companies have risen sharply since the 1980s.

That is the difference between variable costs and sales.

The profit is borne by the consumer.

The idea behind it is that companies could not afford high profit margins or profit margins if they had to fear competitors who would undercut them.

Exactly, and it's not just about consumers.

Companies also pay too little to their employees.

That would be classic exploitation.

Yes, that already points in the direction of the Marxist class struggle.

Only, one must not hide the fact that the studies with this thrust are controversial despite their importance.

The criticism is not even politically motivated.

There are scientific challenges and alternative interpretations: For example, companies with high fixed costs need high profit margins to remain profitable.

Fixed costs are about research and development costs and administrative costs: everything that arises, even if you don't make anything.

Yes.

On the other hand, it can be seen that the share of profits in the gross national product has been increasing for years, while the share of wages is shrinking.

That points towards exploitation.

An alternative explanation is: Superstar companies make high profits because they are much more productive than their competitors through their own efforts.

That doesn't necessarily harm consumers.

In other words: the picture is not that clear.

What do your instincts say?

My instinct is that America has a competition problem.

However, politics is exaggerating.

But it must also act as a counterweight to the Trump era.

Almost anything was allowed, unless one of President Donald Trump's chosen enemies like Amazon wanted to buy something.

Wouldn't you like to check out Amazon?

You have to look closely at the technology giants.

However, the political focus solely on the big five technology groups Amazon, Apple, Facebook, Google and Microsoft is wrong.

America's competitive problem is much broader.

Back to exploitation: So far it has been said that America's wages are so low because of globalization - not because there was too little competition, but too much.

And about prices: where is the notorious price-setting power of the monopolies if there has been no inflation for decades?

The trend that the wage share in value added has fallen cannot be explained by globalization.

As politically significant as the China shock was, its dimensions are not sufficient.

It is true that prices per se do not rise.

However, due to technical progress, we expect increasing productivity and thus falling prices, unless the progress benefits the company owners alone.

Research shows that variable costs have actually decreased as productivity advances, but prices have not decreased to the same extent.

Big profits taste like a lack of competition.

Or they are just made by superstars.