Progress | Centre-left Labour politics
Mark Zuckerberg giving a speech on the future of digital

Digital monopolies: Ending the age of concentration

Creating a digital commonwealth will challenge those who are currently dominating the market, writes Matthew Lawrence

We are living in the age of concentration. In sector after sector, a small number of corporate giants are increasing their market power. Mark-ups – the ratio between the cost of a good or service and its selling price and a measure of market power – have risen by 43 per cent since the 1980s in advanced economies. Market concentration is linked to low investment rates, weak productivity growth, and a falling share of national income going to labour as more and more goes to the owners of capital. This trend raises profound challenges for our economy and society.

Nowhere is growing concentration more pronounced than in the rise and rise of the digital ‘platform’ companies. Apple recently became the first trillion dollar company. Jeff Bezos, the founder and owner of Amazon, has seen his net worth rise by $400m a day in 2018. The combined revenue of the ‘big five’ – Alphabet, Amazon, Apple, Facebook, and Microsoft – is larger than the gross domestic product of more than 90 per cent of the world’s countries. And it is not slowing down: the year-on-year growth rate of the big five is currently at 26 per cent a year compared to a projected 8.7 per cent for the rest of the Standard & Poor’s 500, a major global stock market.

we should move from conditions where large swathes of the digital economy are controlled by only a few powerful companies, towards a ‘digital commonwealth’, where data and the digital infrastructure are organised as an open, collective resource for the common good

Alongside concerns around privacy and the potential threat to democratic norms and institutions that such power represents, there is a real risk that the concentration of digital power and capability in the hands of so few companies could stifle innovation, as the tech giants use their market power to exclude rivals, extract rent, and consolidate their dominant economic position.

The business model of the digital platforms is simple: the extraction of data from users of the platform and its analysis to generate insights that are sold for profit. More data equals more users equals more revenue. From cloud computing to search engines and social networks, the digital giants increasingly control the infrastructure of modern life.

The Institute for Public Policy Research Commission on Economic Justice argues that we should move from conditions where large swathes of the digital economy are controlled by only a few powerful companies, towards a ‘digital commonwealth’, where data and the digital infrastructure are organised as an open, collective resource for the common good. By creating shared digital assets, we can drive innovation in enterprise and democracy, better solve the huge challenges facing us, and do so with greater equity.

Four steps can build an open ‘digital commonwealth’ and reduce market power:

First, the major digital platform companies should be regulated like public utilities such as broadcasters and mobile phone providers. Where they provide infrastructural services – such as searching, networking or mapping – they should come under the authority of a new Office for Digital Platforms.

Second, the Competition and Markets Authority should be reformed so that it has a specific remit to foster innovation. Where large digital companies have the advantage of existing data when moving into a new market, such as banking or mobility, they should be compelled to open it up for others to use.

Third, we propose the creation of a new public service corporation, Digital UK, that would bring together and curate public data to make it more widely available for innovation and public good.
Finally, drawing inspiration from innovative cities like Barcelona, we would like to see the adoption of ‘local digital commonwealth strategies’ to enable local authorities, voluntary organisations and local businesses use data to provide better local services.

The new digital technologies can be a powerful force for good. Right now they are too concentrated in too few hands. But managed well, they can help us build a future of innovation and shared opportunity, where we achieve prosperity and justice together.

Read next: Will the Cambridge Analytica scandal wreck Facebook’s business model?

–––––

Mathew Lawrence is a senior research fellow at IPPR. He tweets @DantonsHead.

–––––

Progressive centre-ground Labour politics does not come for free.

It takes time, commitment and money to build a fight against the forces of conservatism. If you value the work Progress does, please support us by becoming a member, subscriber or donating.

Our work depends on you.

Print Friendly, PDF & Email

Matthew Lawrence

Sign up to our daily roundup email

int(0)