tv WSJ at Large With Gerry Baker FOX Business November 23, 2019 9:30am-10:01am EST
fox news channel. plus on fox business every weekday tuning weekday six to 9:00 p.m. eastern on fox business. have a great rest of the weekend. that will do it for us for now. i will see you again next time. ♪ >> hello, and welcome to the wall street journal at large. competition, free markets, choice. those of the terms that americans doubt the history to find their economy. the u.s. has been seen as a cockpit of dynamic, where they resources and rewards. today questions are being raised about whether capitalism is still working for america. we see that question on display in the 2020 presidential campaign where is bernie sanders and elizabeth warren are proposing government programs to
intervene in the economy and saunders and other members of the party are not shy about identifying themselves at a democratic socialist. on the other side president trump and republicans are for training that is dangerous for america. some reason polling shows the capitalism and socialism through the lens of the political affiliation. a survey by two research taken earlier this year ruled 65 had a positive view of capitalism with 42% saying the same for socialism. however, republicans and those leaning republican 50% had a favorable view of socialism. 65% leaning democrat did. while majority of americans give capitalism the thum thumbs-up, y guest argues something has gone wrong with the nations economic mobile. what used to be highly competitive dynamic free market has morphed into something else
one increasingly dominated by huge companies that are eliminating choice, reason prices and harming the consumer impairing the strength of the world largest economy. in an especially ironic twist he says it europe what we like to think of of the social democratic content whose economy has become more free, a professor financed new york university in the new book the great reversal of how america gave up on free markets. welcome and thank you for coming. explain the thesis. we like to think of america as free market, choice, lots of opportunity and you go to the supermarket and you can choose anything you like, that's associated with free-market capitalism, should tell us why that's wrong. it was true, the u.s. of free-market low prices, this is the u.s. i discovered when i came hear from europe in 1999 for 20 years ago. what's astonishing over the past 20 years how things of change. many of the good and services
that were cheaper in the u.s. and in europe 20 years ago now are cheaper in europe than in the u.s. >> give us examples. tell us about the prices. >> if you live in the u.s. you probably -- the median household is $68 per month for having broadband access internet at home. the median household in france is $31. in the uk germany is $3235. about half of what american households pay. the same as for yourself on, if you live in berlin, london, paris and madrid you would pay half or less of what you pay today for yourself on plan. >> reno airlines, all of those websites and look at land prices and we see exactly this in price by most airlines in assisting for every two. >> 20 years ago the u.s. had eight major airlines over the country. today only a fourth so they went from 8 - 4 in europe went the other way. 20 years ago we had
nationalities owned by the government and not very competitive and once we've done over the cost 20 years is to bring in to force the carriers to get their act together and lower prices. >> which is why today flying is cheaper in europe. >> how widespread is this, is this true gold band airlines is it true to much of the economy customer. >> it's true for the majority but not all. if you look at cases they're different than the rest and there are some industries that are still extremely competitive and cheap but the majority that today if you look at the broad services the typical household in the estimate is that the overspend they should be at $500
of purchasing power if the market was where it used to be. >> that has all happened in 20 years since you came here? >> absolutely. again you say the overall is about $5000 per year? >> that is a striking finding. that's why it's a good move to write it. people have an improvement in the market that used to be more fragmented and big firms and everybody knows they're paying too much for their cell phone right now but many of the services and thereafter notices together. it actually is very hard to put a business together but today my estimate is roughly right his immediate household they would have about $5000 of purchasing power per year if market was competitive as today. about $3000 from lower prices and think of the household of being a consumer and as consumer they would get about 3000 extra dollars. and they would have to invest
more and move up the wages and productivity would go up and that would bring a 2000 extra dollars and together for a family that would be about $5000. that's a lot of money. >> one thing we have seen in the last 20 years is low inflation, a phenomenon since the end of the 1990s were inflation has been dead and you say prices and other areas have fallen significantly and the prices have been lot to lot but in these particular sectors prices hover listen significantly. these combined with the fact that the data and looking at, you only see things happening if you take a long time. roughly speaking prices are about 7% to 8% from where they should be that's over 20 years. that's a very small number. you would never notice it from one year to the next you would not notice in your grocery bills and the things you like typically it's only when you take a big lens and you look
over a long term and to eat away the processing power. >> how does this happen, how do we get to it, why have we seen the situation where american workers and consumers are significantly worse off because of lack of competition, how do we get to this. >> gotten interesting fighting better europe gets interesting as you said the irony looks like europe went the other way. the thing that's important, the reason europe today doing better than any other market, is precisely because your adopted the american playbook of the 1990s, when europe set up the single market along 1985, 25 years ago, we looked around and said what the best single market, obviously the u.s. so which one do we want to adopt, what we did was brought in the u.s. playbook, give it to strong
independent regulators and we ran with it, 20 years later prices have come down in the purchasing power has increased. over the same period of time, the u.s. has forgotten its own history. >> u.s. and got more europeans in european has more mickens. we will take a short break. more with the professor why he believes capitalism in america has changed for the worse and further on how we got here. further on how we got here. don'n'n'n'
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>> welcome back my guest economist thomas. we were talking about how the u.s. has become more european and as we used to think of it in europe's become more american and free markets. let's focus on america. how do we go in 20 years to the situation were so many sectors are dominated by two or three or four major company.
>> that's a very couple get a question. you can think of it as concentration. i think that's clearly something that happened in the airline case in the silicone and other industries. but you also have a bunch of issues which is many regulations that have the growth of medium and small companies. and that's competition, they really goes both ways, it is not about more with good regulation. sometimes that means removing regulation. >> gimme example that they discourage new interns into new markets. >> many industries -- give licensing requirement that a man creeping up the state level and then you have all the regulations the only the last company.
any given year that's a small effect but if you have 20 years younger lack of injury by new business which is what they say. >> you talk about the role of lobbying company spend huge amount of money on lobbying in the state and federal level and they get result. >> absolutely. they have will result over time. so when you see the data very large increase expenditure of the u.s. by u.s. companies in the form of compelling financing or towards the legislator and that is showing the data that you can predict excess profit and concentration using this lobbying. if there is another point in time in two or three years later, surprisingly the margins are higher and less entry and less enforcement action against him. >> the fact that the political system means so much cash
because of the campaign spending. >> the big compartment, the amount of contribution has gone out to campaigns. that is something that happens in 2000. it did not really happen as much as before. that is what is changed. >> europe in brussels. >> that is interesting when the regulars were design, that's the funny part, because they don't trust each other, the germans did not trust the french and the french do not trust the germans. in all of this for the two big ones to agree together in the outcome was going to be very independent to be sure nobody gets to regular. we did it for that reason -- >> again you pointed out very
clearly how the u.s. has lost and become more competitive, overall the u.s. economy compared with europe has been stronger the last 20 years the u.s. has almost double the rate of growth that europe is had in the last ten years and if this is true with the american economy coming more free, why is it better than europe? >> it's not that much better than europe. the difference is 20%. in germany in 1999 compared today, the growth exactly the same as the u.s. up to the point. if you take the average for europe because of italy and might be slightly lower but if you take that you and there from the u.s., roughly speaking it's not that different. that's the first thing to keep in mind. and population growth. the more important thing is growth on many things.
innovation, funding and free markets. a used to be the u.s. had all three in the best innovation and venture capital as well as free markets. europe felt better but first on the first two. >> some people argue that monopolistic practices are actually needed to encourage investment anyway you can make a sizable return on investment in the big silicon valley, if you have monopoly power. is there conflict between the environment that will create competition customer. >> that is interesting. that is your job and that's what
business is all about. in the job of the government is to make sure you might become a monopoly on the big change we've seen is profits have become higher and more persistent over time. that is about time. monopoly as a motivation but you should not take forever. >> one more break i'm a regular in my neighborhood. i'm a regular at my local coffee shop and my local barber shop. when you shop small you help support your community - from after school programs to the arts! so become a regular, more regularly. because for every dollar you spend at a small business, an average of 67 cents stays in the community.
what does that market have on the economy. >> that's an interesting market, people get most of the facts wrong, they think tech is exceptional but if you look at the history of the u.s. you've amazing companies issues names change, at&t, ge, i'm today is google, amazon and apple. you can look in compared to innovation in compared to what they're doing. and it seems to have more on the economy than today. and it's slightly overrated. on the other hand it is clear they do have positions in key markets and they create issues. >> what needs to be done, breakup companies, should they break up companies with mergers and disaggregate the market? >> they need due to something
going forward and undoing a merger is like on scribbling eggs. unfortunately that will take a lot of time. >> you pointed out in the book that's what they did with at&t and that led to a portion of competition so breaking up companies is tough, possibly but tough. >> it's usual even if you don't succeed. you don't want to be too tough, it's a very bad system if the regulator will only prosecute but there sure to win. how they will fail and it's okay. and you think that this will get and you should try. at the end of the day it might not be enough but you should try. >> what else can be done to use more competition? >> some of the things have to do with regulation and data possibility and competitive. >> how would that work?
that would work across all industry. >> yes a big impact on tech and finance. it is something we impose on the industry throughout and you can call everybody with one phone and if you switch from one provider to the next it can be a cell phone number. that is the equivalent with your social network in your data and your friends. that's a no-brainer and a regulatory change. that is step one. after that you have to look at companies one by one because outside is not the same for amazon or google or facebook. >> there's an irony that people think of regulation with being stifling and companies have to do with which is difficult and slows growth and innovation and productivity but the kind of regulation you're talking about is regulation to make the market
more dynamic. >> of people can take one thing away, it should not be about less regulation. that's a wrong way to think about it. where we are today you should think of good regulation or regulation that will increase competition. sometime less regulation and getting way with licensing requirement. if it's about breaking a company or forcing them to share, it's more regulation. the key is improving competition. >> a final question, there's concern about capitalism and as a set at the beginning among democrats for socialism and you do not expect to see. you think addressing these issues would help to restore the faith and capitalism? >> i think it would have a significant income. my estimate is the middle class, the middle bottle which is the heart of the american economy,
their income would go up by $5000 which would move back. that would make much more supporter of capitalism. >> a terrific book. good read and fascinating thesis and good data. an excellent book. it's called the great reversal on how america gave up on free markets. my thanks to you. just ahead which economic model has led to prosperity than any other. i will tell you after the break ♪ we made usaa insurance for members like kate. a former army medic, made of the flexibility to handle whatever monday has in store and tackle four things at once. so when her car got hit, she didn't worry. she simply filed a claim on her usaa app and said...
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here's an important truth, capitalism created more conspiracy and more people out of poverty, more suffering in the last century alone than any other economic system and tens of thousands of years in our existence. premarket is more efficient of resources and also the economic expression for liberty. premarket do need to be free and there's lots of ways as we just heard in which capitalism is falling short of potential. the alternative is socialism which is failed even to come close to capitalism and economic in human terms the alternative is more freedom, more choice and more open market. the danger is a highly imperfect capitalism can bring resentment and frustration of the unfairness and inequality is producing which tells us we need reform pride or the alternative
is revolution. that seldom ends well. that is it for us, the latest updates follow me on twitter, facebook, and instagram i'll be back on black friday for the retail in america, that is here on the wall street journal at large. thank you for joining us and have a wonderful thanksgiving. >> "barron's roundtable" sponsored by qqq. chris davis on roy davis advisors on bank stocks for growth and why he says they can boost your portfolio. no surprise test those who pick up, the cyber truck of the future of the ido industry? in groups joins us on the panel of whether you should prepare for a bear market in 2020. "barron's roundtable" starts right now. ♪ >> welcome to "barron's roundtable" with the sharpest minds on wall street to get behind the