Justice Thomas, Countervailing Power, and Big Tech

In a non-binding concurrence, Justice Clarence Thomas (joined by no other justices), argued that social media platforms could be labeled “common carriers,” and should therefore be treated like phone companies or similar utilities. Thomas’ commentary accompanied a Monday Supreme Court order instructing a New York district court to dismiss as moot a lawsuit against former president Donald Trump over his blocking of some Twitter followers.

Justice Thomas has entered a hot debate about the best means of regulating social media.  His approach to regulation tends to be more function-centric as opposed size-centric (which is often a major preoccupation of the “big is bad”) neo-Brandeisian approach to regulation and antitrust enforcement.

Figures such as Senator Elizabeth Warren and Barry Lynn of the Open Markets Institute see monopoly power per se as the great villain—the textbook problems of monopoly being too little output at too high a price and the squelching of new firms and products. Their solution is to use antitrust laws to break up businesses, especially Big Tech firms: Google, Facebook, Twitter, and Amazon. They presume that a promised land of optimal competition can be reached through aggressive economic decentralization, unleashing the virtues and powers of the capitalist entrepreneur.

Their program is, in effect, free-market romance parading as populism. But this approach is a fantasy, as John Kenneth Galbraith and William Baumol well understood. The competitive world of many small producers never existed, and never could. When firms were small, so were their markets; the company store tyrannized its local customers just as much as (or more than) Google tyrannizes the Internet today.

And the monopolistic firms that held real power, such as railroads, electric utilities, phone companies, airlines, and today, Amazon, Facebook, and WalMart, all had declining costs with increasing scale. They may be rapacious, but it would not be better for their customers if they were small.

Most modern examples of sustainable small producers are maintained by state policy, as family farms were by price supports for many years in the United States, and as millions of small manufacturers are by state-owned banks with very elastic credit standards in today’s China.

In the U.S., many small businesses of course exist, but they are mostly in the service sector, and many are hanging on precariously as franchises and chains gobble up their economic terrain.

To be sure, antitrust has a role to play. Preventing the mandatory bundling of products and services that are easily separable, for example, is a valid and sensible function. But, as Justice Thomas suggests, what all big corporations really need is effective regulation to protect workers, consumers, the environment, and the public interest. This is what J. K. Galbraith termed “countervailing power,” and sustaining it over time will require renewed and robust trade union, consumer, and environmental movements; a downsized financial sector; and, of course, ditching Friedman’s doctrine of shareholder value. If that doesn’t do it, there is—and should be—the option of taking over rogue firms and running them as public utilities or not-for-profit corporations.

Of course, that entails solutions well beyond Theodore Roosevelt-style trust-busting. As J. K. Galbraith argued, tolerance for consolidation of power must be very closely matched to effective institutions of countervailing power. The Warren vision obsesses on process, rather than outcome, and risks devolving to an exhausting and impoverishing-of-most neoliberalism. True, the Galbraithian vision risks devolving to a Soviet-style hierarchy, with the forms of participation and countervailing power but not the effective reality, absent structural changes in other parts of the economy (for example, by increasing the power of workers via German-style co-determinism structures). Where we have institutional scale, we should strive for effective, enfranchising countervailing power. That’s a better alternative than devolution or breakups.

Change is coming, and Justice Thomas has offered a promising function-centric approach that is outcome rather than processed based. In practice, we should support codetermination, unionization, and other forms of countervailing power, as well as antitrust (where applicable via structural separation).

We must also keep in mind the question: If great hierarchies check one another, even if they do a good job, are the people at the bottom of those hierarchies rendered passive with respect to the circumstances of their own lives? Improving the quality of democratic institutions (whether state, union, professional association, or board of directors) is another important consideration, both from the perspective of the quality of decision-making and the degree to which low-level participants in those institutions perceive themselves as having agency. What is key is that Justice Thomas’s judgment points to the fact that there is now widespread agreement that we should not leave the status quo as-is and hope for the best.