It seems more likely after a court ruling, and that would shake up markets and change the world
Alphabet CEO Sundar Pichai: leading a monopoly
Most of us had probably suspected for years that Alphabet’s Google search-engine unit effectively had a monopoly on the way we navigate the internet. There are other search engines out there, and other web browsers, but hardly anyone ever bothers to use them, while “googling” something has become so commonplace that we have turned it into a verb. But now it is official. A US court ruled last week that the company is indeed legally a “monopoly”, and that it was guilty of exploiting its dominance to squash competition and stifle innovation.
In a 277-page ruling the judge argued that the company has done everything in its power to maintain its lock on the market and muscle out potential rivals. It remains to be seen what happens next. But if the ruling stands, it will enable the US government to take action against the company, and potentially even try to break it up. If that happens, it will be the biggest anti-trust action since the telecoms industry was broken up in the 1980s, or the oil industry at the start of the 20th century.
Expect more apps
That matters to investors, of course. Alphabet is a huge company, worth $2trn, and Google is at the core of its business model. There is probably not a portfolio in the world that does not have some exposure to it one way or another. How it gets broken up, and whether it can maintain its profitability, will have a huge impact on the markets. It will have greater significance than just that, too, changing the way businesses around the world work. Here are three ways it could fundamentally alter the way the global economy operates.
First, it would lower advertising costs. One of the main issues with Google is that its lock on online advertising drives up prices. That makes it harder for smaller companies to break into the market, it potentially offers an unfair advantage to established players, and it makes it difficult for start-ups to get any attention. If online advertising were more competitive, costs would come down, and we could expect many markets to become more open, with more choices easily available. It is hard to see how that would not benefit consumers.
Next, we would see the launch of more apps, as controls on what can and can’t be sold through the operating system on all of our phones are loosened. Through the app stores, the two major mobile operators keep control of what most of us can and can’t access through our smartphones. If the systems were more open – and especially if Apple were to be broken up at the same time – then it would create space for a lot more new apps to be launched, again widening the choice for consumers, and creating opportunity for rapid innovation. Indeed, one of the reasons many venture capitalists now support a break-up of Google is precisely because they think it would kick-start an increasingly stagnant industry. Google may well have been one of the great successes of venture capital, but it has become an obstacle to start-ups.
Expanding the internet
Finally, breaking up Google would lower costs, lead to more innovation and accelerate the shift to a digital economy. We may think the internet is ubiquitous, but McKinsey estimates it accounts for just 3.4% of global GDP. There is huge room for growth – that figure could hit 10% or 20% over the next decade – and breaking up the dominant players may be the key.
It will make a huge difference how the split happens. Google might be forced to divest its Chrome web browser and its Android mobile operating system. It could be forced to place its search engine into a separate company, ring-fenced from the rest of its operations. Alternatively, it might have to split out its advertising operation, or accept oversight of how it sets prices. But however it happens, if Google gets broken up, marketing and product strategies will have to change dramatically. In the end, the change will be for the better, for the simple reason that more competition is always beneficial – but it will be a very long and messy process, with lots of casualties along the way.
What’s worse: monopoly power or government intervention?
AMAZON FOUNDER JEFF BEZOS: NO ONE FORCES YOU TO USE HIS WEBSITE
Politicians of all stripes increasingly agree with Karl Marx on one point – that monopolies are an inevitable consequence of free-market capitalism, and must be broken up. Are they right? Stuart Watkins isn’t so sure
Free markets left to themselves in a capitalist context are great at producing wealth, but will inevitably tend to concentrate that wealth in ever fewer hands, leading to increasing inequalities of income, power and wealth, and undermining the benefits that might be supposed to flow to consumers, such as cheaper prices. The logic inherent in market exchange must, in other words, progressively undermine the very qualities that the champions of the market promise they will deliver.
This, at least, was the view of Karl Marx. Perhaps surprisingly, it is also the mainstream view today. It is not all that easy to find a mainstream commentator, economist, think-tanker or policymaker who will raise a squeak of protest against the idea. All the main political parties – particularly in the US, where the problem is deemed to be particularly acute – agree that something must be done to curb the rise of the monopolies, namely that the state should step in and break them up, or at least restrain them.
Indeed, “Market Power, Inequality and Financial Instability” – a new paper by Federal Reserve Board economists Isabel Cairo and Jae Sim – argues that the concentration of market power in a handful of companies, and the resulting decline in competition, explains the deepening of inequality and financial instability in the US, as Craig Torres reports on Bloomberg. They blame the rising market power of big companies for the decline in the share of wealth that goes to workers, the rise in inequalities of wealth and income, and the growing debt burden. The authors call for policies that will redistribute wealth to the poor, perhaps by gradually raising the tax on dividend income from zero to 30%. They suggest that such policies might help to slow the rise of inequality and the growth in debt, and make financial crises less likely.
The paper is just the latest voice in a rising chorus. Towards the end of last year, The Great Reversal, a book by economist Thomas Philippon, presented a detailed empirical analysis of the question and argued that America can no longer be considered a free-market economy in any real sense. As well as confirming that the trends already sketched are indeed in play, he concludes that the main explanation is political – namely, that politicians have not enforced competition policy as they should, thanks in part to lobbying and campaign contributions. The result, to quote just one example, is that the price of broadband access in the US is roughly double that of comparable countries, leading to predictably higher profits.
The year before Philippon’s book, a similar one by Jonathan Tepper and Denise Hearn (The Myth of Capitalism) made the same point. “I realised that particularly in the US, which is probably the most advanced in this trend, you’re seeing more and more industrial concentration,” he said in an interview with MoneyWeek at the time of publication. That gives companies pricing power over consumers, more power over workers as they don’t have to bid against rivals for their labour, and power over suppliers. The result is that a small number of huge companies are capturing very high profit margins. Tepper, too, blames lax enforcement of competition laws for the problem.
The problem may be about to get worse. The response of governments to the coronavirus pandemic has led to a huge economic crisis, and their response to what they have caused is to throw money at it. The combined effect will be to push smaller firms out of business, quenching the fires of creative destruction, and for the well-connected, better organised larger companies to obtain all the government cash and bolster their already dominant position. Low interest rates may also contribute, as bigger companies are in a better position to get hold of cheap credit and invest it in expansion. If rising concentration and monopolies are a problem, it’s one that seems set to get worse.
THE CASE FOR THE DEFENCE
Are Marx and his mainstream followers correct? The answer, as ever, is – it’s complicated. A sounder tradition in economics would lead us to be cautious about the claims from first principles. As Edmond Bradley, a writer for the Mises Institute, put it back when Microsoft was the monopolistic bogeyman in the early 2000s, “the fear of industrial concentration is the last refuge of socialist theory” and the idea that governments must step in to save us from it is “wildly incorrect”. A company operating in a market economy might look like a monopoly “under myopically static analysis”, but a broader and historical view will reveal that even very large, dominant companies face intense competitive pressure – whether from the fear of potential competition from new entrants eyeing their high profits; or from competitors offering products and services of a different but nevertheless substitutable kind; or from losing customers altogether, should they decide they’d rather do without what is being offered.
“HISTORY SHOWS THAT LARGE FIRMS ARE ALWAYS IN DANGER OF HAVING THEIR PROFITS COMPETED AWAY AT ANY MOMENT”
And if that’s what first principles tell us, there are plenty of reasons to be sceptical about what the real-world data are showing, too. A roundtable discussion of the subject by experts, hosted by the OECD group of wealthy nations in 2018, concluded that although market power did indeed appear to be rising in many countries, the causes were unclear. It might reflect a reduction in competitive intensity, but it might equally be the outcome of intense competition. If the causes are unclear, then there’s no way to be confident about what the correct policy response should be.
In any case, the rise in industrial concentration may not be all it appears to be. As a 2019 paper by Alessandra Bonfiglioli, Rosario Crinò and Gino Gancia for the Centre for Economic Policy Research notes, all the existing evidence for the increase in industrial concentration and the fear that this will usher in a new era of monopolies has been based on national data. They find that when competition from foreign imports is included, the overall level of competition may in fact have intensified rather than fallen – even if the number of firms from the home country entering the market falls. So increased global competition and greater national concentration may be two sides of the same coin – “growing global competition may force unproductive firms to exit and top firms to consolidate on their best products”.
IS MONOPOLY SUCH A BAD THING ANYWAY?
Amazon is one of the companies charged with unfairly exploiting its dominant position to crush competition and hence harm customers. Indeed, its boss, Jeff Bezos, was recently dragged before the US Congress and had to defend his firm from hostile questioning. But if Amazon is a monopoly, then the first question that arises is, is that such a bad thing? Amazon started out as an idea in Bezos’s mind, which he put into action using money he raised himself from family and investors, working from his basement and carrying parcels to the post office. It was, from the beginning, a high-risk venture, deemed by most to be almost certain to fail. Yet by consistently offering consumers what they didn’t know they wanted, and winning their approval and then loyalty, Amazon rose above its competitors by sheer excellence. It’s not as if its customers have been forced into anything.
“WE NEED LESS GOVERNMENT INTERFERENCE, NOT MORE”
Moreover, even in its current dominant position, Amazon faces plenty of intense competition. As Bezos pointed out in his testimony to Congress, customer trust is hard to win and easy to lose. Amazon’s globe-spanning dominance would end very quickly should that trust disappear. There are plenty of competitors snapping at its heels. Amazon accounts for less than 1% of the $25trn global retail market, according to Bezos, and less than 4% of retail in the US. There are more than 80 retailers in the US alone that earn more than $1bn in annual revenue – that includes Walmart, which is more than twice Amazon’s size and whose online sales grew 74% in the first quarter. In the wake of the pandemic, plenty of other companies are competing with Amazon in the race for online orders for goods, including Shopify and Instacart.
The briefest review of relatively recent history should be enough to show that large companies of the kind that draw fire from those concerned about monopolies are in reality always in danger of having their profits competed away at any moment – witness Kodak and Myspace, to take just two commonly cited examples. As those economists who most consistently defend free markets insist, monopolies are only ever really a threat, not as a result of companies operating in free markets, but as a result of government interference – particularly, in our day, as a result of money printing and ultra-low interest rates. What is needed, then, is not more government interference to solve the problems they have created, but less. In this sense, the rising threat of monopoly as a result of the coronavirus pandemic is a clue to the real source of the problem.
THERE ARE BETTER SOLUTIONS THAN ENFORCED BREAK-UPS
Even if you’re not buying all that, and are convinced that rising concentration and market power is a problem that the government should try to tackle, is it really worth the bother? As Ryan Bourne of the Cato Institute has pointed out, over the past 100 years or so, major anti-trust cases have seen huge amounts of time and resources spent litigating against companies that seemed dominant. And yet in most cases, the firms in question were overtaken by competitors even as the investigation was going on (see the box on page 28). Companies would be better off focusing on improving their offering to consumers rather than resentfully pursuing their competitors in the courts. And the political energy spent pursuing monopolies would be better spent pursuing polices that make free-market economies more robust and dynamic, says Bourne.
And even if you agree that Facebook, say, deserves to be split up, just how would that work? You might say that it should sell off Instagram and WhatsApp, two subsidiaries that are now enormous platforms in their own right, as James O’Malley points out in The Spectator. Yet those three platforms are tightly integrated and share the same back-end infrastructure. Demanding a split would be like demanding that McDonald’s sell off some restaurants and then expecting those branches to operate without staff or supply chains, says O’Malley.
Even if the split worked, there would be nothing to stop Facebook launching its own alternatives, which would probably win out in the end thanks to network effects and Facebook’s existing dominance. So if governments are serious about dealing with the problem in a way that the cure won’t be worse than the disease, they’ll need to be at least as savvy as Silicon Valley in crafting regulation that is fit for purpose. Anyone looking at governments’ response to the coronavirus worldwide would be justified in suppressing a chuckle at that idea.
Trouble is, that doesn’t mean they won’t act. Panicky governments aren’t in much of a mood for listening, or for restraint, or for good judgement. The coronavirus panic is leading to ever-bigger government, and bigger government has to be seen to be doing something. Taking on the tech giants and breaking up monopolies is “something”. So it wouldn’t be wise to bet against it happening. That’s something to keep an eye on if you are invested in big tech, say – which, given their huge weighting in the main indices, probably means everyone with a pension or an index tracker. For more on what that might mean for your money, see box at the bottom of the page
A brief history of competition law
Laws governing monopolies (and who was allowed to hold them) have been around for almost as long as human beings have been trading with one another, writes John Stepek. One of the earliest surviving examples of competition law is from around 50BC, when Rome passed a law (the Lex Julia de Annona) imposing heavy fines on anyone who tried to drive up the price of corn artificially by disrupting supplies. Note that food price inflation would have been one of the biggest threats to social order at that time (as it still is today). Competition law has always been political and it’s almost certainly no coincidence that today’s increasing hostility by politicians to Big Tech in particular, go hand in hand with the general sense of voter anger.
So there has always been a recognition of the risks posed to consumers by overly dominant producers. However modern competition law as we know it has been most heavily shaped by the US. In 1890, the Sherman Anti-Trust Act was passed, banning trusts (hence the term “antitrust”) and other monopolistic entities. The move came in response to the power of groups such as John D Rockefeller’s Standard Oil Trust, which Rockefeller used to consolidate the oil industry. Again, note that the act passed at the height of America’s “gilded age”, another era of heightened inequality and political turbulence, which is often compared to today. Eventually, in 1911, Standard Oil was broken up by the US Supreme Court into 34 smaller companies (its surviving successor companies include ExxonMobil and Chevron). That said, by that point its share of American refining capacity had fallen from 90% in 1880 to below 65% – due to competition.
In 1961, none other than Alan Greenspan, during his early days as a disciple of Ayn Rand, declared that the Sherman Act had stifled innovation by “inducing less effective use of capital”. The former Federal Reserve chairman argued that while the free market itself “does not guarantee that a monopolist who enjoys high profits will necessarily and immediately find himself confronted by competition”, it does ensure that “a monopolist whose high profits are caused by high prices, rather than low costs, will soon meet competition originated by the capital market”. In other words, if someone else can do the job better than you, or more cheaply than you, or both, then it’s impossible to sustain profiteering prices in a genuinely free market.
Companies in the firing line – and those that are not
The most obvious targets of today’s competition concerns are the big technology companies, writes John Stepek. That matters, as Stuart notes above, because the big tech stocks – or FAANGs – also happen to be some of the most valuable companies in global markets right now.
It’s worth noting that not every member of that group is in the immediate firing line. Streaming service Netflix is important but it has plenty of competition. Microsoft – not in the acronym but often lumped in with these companies – has also largely escaped scrutiny (although it did have its own run-ins with the competition authorities in the late 1990s).
Currently in the spotlight, following the testimony of their chief executives in front of US politicians in July, are Facebook, Amazon, Apple and Alphabet (Google). As James Clayton reports on the BBC, both the Republicans and the Democrats have their quarrels with Big Tech, and both parties want to be seen to champion small businesses. “It’s hard to avoid the conclusion that whoever wins the next election, Big Tech is going to get whacked. The question is how and by whom.”
We may not even have to wait that long. In November last year, notes CNBC, analyst Paul Gallant of the Cowen Washington Research Group tried to forecast the odds of action being taken by the US government against any of the big four. In his view, Alphabet was deemed the most likely target regardless of the political party in charge, and as it turns out, there are reports that US attorney general William Barr wants to announce a case against Google – based primarily on its dominance of internet search – ahead of the election.
Also, competition cases don’t just have to be brought by the government. Both Apple and Google are increasingly being challenged by other companies over the commission fees they take on sales made through their apps with Epic, developer of the popular Fortnite video game, currently the most prominent.
With the big tech stocks looking expensive, any decisive setbacks could be bad news for their shareholders. But perhaps what investors really need to grasp is that – as was the case in the “gilded age” (see the box on page 28) – this focus on competition is just one symptom of increased concern about the perceived concentration of power and wealth in society, and a wider sense of voter dissatisfaction.
In essence, governments are reminding corporations that when push comes to shove, they’re the ones who have the power, not the companies. That might work in favour of “value” sectors that have already been humbled – banking and fossil fuels, say. You might also see it as an reason to own smaller stocks that won’t appear on government radars for a long time. And you might also see it as a reason to own a bit of gold as a defence against politically induced volatility.
Boris Johnson's plan to speed up the roll-out of faster broadband coverage has been questioned by MPs CREDIT: JEFF OVERS/AFP
He may have been the recipient of technology lessons from his good friend Jennifer Arcuri, but even for such a dedicated student as our Prime Minister, the complexities of broadband infrastructure policy are a tough nut to crack.
Johnson’s goal is clear enough and correct. Every home should be connected to a full-fibre network as soon as possible.
Our current digital plumbing is unreliable and will relatively soon will be incapable of meeting the data demands of ordinary families, particularly those who live outside big towns and cities.
The physics of sending signals over copper mean that the further you live from a BT exchange or a streetside cabinet, the worse your broadband. Fibre optics are meanwhile unaffected by distance or bad weather.
It’s a bitter irony that those in the countryside most likely to benefit from full fibre are currently least likely to get it.
To make a case for a new network in a densely packed city or big town, investors need to be confident they will attract somewhere between 30pc and 40pc of the market.
In the countryside, however, only a monopoly works and in the most remote corners of Britain the number can never stack up. There simply aren’t enough customers to ever justify the outlay.
This is conundrum Johnson and all his technological knowledge must tackle.
As we report this week, in those most unspoilt regions the answer is relatively simple: a bazooka of public money.
Such subsidies are fraught with pitfalls and Whitehall’s record of designing structures that ensure value for money is very poor. Yet at the moment there isn’t really any other choice.
Some might say that those parts of the country should just be left behind. After all, mains gas is not available everywhere. However, heating oil deliveries and electricity are universally available.
No similarly viable alternative currently exists for data connectivity. Leaving swathes of Britain behind as the economy is transformed by full fibre would not be tenable, especially for a Prime Minister in Johnson’s political predicament.
The calculus gets much trickier in the grey areas. These are the rural and semi-rural places where there are enough people to pay for one upgrade, but not two or three.
Nobody will currently invest commercially here, in case someone else comes along and splits the small market, destroying a fragile business case.
The taxpayer can’t be expected to bear the cost either. It should not be beyond the with of government and Ofcom to create a system that incentivises private money in this portion of Britain.
This is where the real action will be Johnson and the telecoms industry after his big subsidy announcement. Cracking this in the next few months won’t make the Prime Minister’s original target of ubiquitous full fibre coverage by 2025 achievable, but it could mean a sharp acceleration towards the goal.
On the other hand, if the Government and Ofcom get this wrong, it has no chance of delivering ubiquitous full fibre on any schedule. Number 10 knows this all too well and are signalling frustrations with colleagues at the regulator “sitting on the sidelines sucking their teeth at everything”, according to one insider.
The problem here for Ofcom and its departing chief executive Sharon White is clear. Creating a system that solves the economics of building full fibre networks everywhere ultimately will require the regulator to change its mind.
For years now it has pursued infrastructure competition, encouraging others to build independent new networks to compete with Openreach, BT’s legally separate broadband wholesaler, and Virgin Media. It has not been a success, delivering very little progress even in big cities. In the countryside, where only monopoly economics can justify investment, it acts as a serious impediment to investment. This is a reality Ofcom must confront.
It is a big moment for the telecoms industry too. The way in which the tensions between competing interests are resolved, or not resolved, will set the tone. The futures of BT, Sky and Virgin Media, not to mention TalkTalk, Vodafone and fibre challengers backed by the likes of Goldman Sachs are in the mix. There will be losers.
On the face of it, the proposals from Philip Jansen, the BT chief, seem reasonable. Those who want to build in town must build in the country. Yet, in part thanks to the policy of infrastructure competition, there are multiple players in the market set up to cherry-pick cities.
Hyperoptic, backed by George Soros and Abu Dhabi sovereign wealth, only does blocks of flats, and there are few in the Highlands. Virgin Media itself is very much an urban animal and has little interest in bringing cable to the shires.
The ultimate answer may be some form of joint venture that could be granted a regulated monopoly in rural areas where multiple networks would undermine the case for full fibre. Senior sources across the industry are mulling such ideas already.
There is at least a serious intent to come up with solutions. Johnson’s subsidies should build confidence, but time is not on anyone’s side.
Vodafone's deal takes a hit
The German sense of humour should be more celebrated. No sooner does Vodafone complete an €18.4bn cable takeover to create a national rival to Deutsche Telekom than teutonic politicians threaten regulatory changes that could seriously damage its business.
Vodafone Germany benefits from a strange system in which the landlords of apartment blocks in which millions live automatically add cable TV onto rent bills, and add a mark-up for themselves. Now the government is considering opening up this market when it transposes new European legislation into German law later this year.
The upshot is that as much as half of the profits of Unitymedia, the business Vodafone just acquired from Liberty Global, could be under threat for the first time.
Nearly two-thirds of parsimonious German consumers who are not locked into contracts choose free TV, according to market research.
This issue has been bubbling away in the background for some months but could soon become a big problem for the deal and Nick Read, the Vodafone chief.
For the price of Unitymedia to make sense he needs to deliver growth in Germany, challenging Deutsche Telecom with a superior broadband network and mobile bundles. The deal could end up a practical joke instead.
Your money’s no good here. At least, that’s true at a growing number of stores and restaurants that are ditching cash and switching entirely to credit and debit cards. Cashless retail is still relatively uncommon, but it’s on the rise and has begun to concern some lawmakers. New Jersey recently banned cashless retail. Philadelphia has done the same. Other cities may soon follow.
So far, the debates leading up to these laws have mostly centered on how cash-free establishments impact the many low-income people who lack bank accounts and credit cards. But there’s another major problem with going cashless. Cashless retail—and credit cards in general—allow a handful of giant banks and credit card monopolies to siphon more and more revenue from the productive economy, at the expense of consumers and businesses.
Retailers are essentially locked into a “partnership” with financial services monopolies. To get a sense of how inflated our rates truly are, the EU has capped rates at one-seventh of ours and, believe it or not, credit cards are still a profitable and growing business in the European economy.
We need to do the same. Unless the U.S. follows suit, banks and card networks will continue to extract a kind of monopoly rent across a growing share of consumer spending, skimming money from both consumers and businesses, and dampening real, equitable economic growth.
Cards are big business. Over half of all credit cards are issued by the Big Four banks: JPMorgan Chase, Citigroup, Wells Fargo, and Bank of America. Interchange fees alone—the “swipe fee” retailers pay to the banks in order to process cards—netted these and other card issuers $64 billion in 2018, more than doubling the revenue of 2012. Processing associated with those fees made the card network market’s uncontested duopoly, Visa and Mastercard, about $15 billion last year.
Those numbers are so elevated because the U.S. has the highest swipe fees in the world, between 1.5% and 2%—and oftentimes nearly 3%—of a transaction, depending on the type of purchase. And the market is highly concentrated: Visa is a credit card titan, controlling 60% of the credit and debit card market last year. Mastercard had a full 25% of the market and American Expresscaptured 13%, which left Discover to clean up the dust, with just a 2% share.
This market dominance allows the networks to largely dictate card fees to merchants. Retailers and restaurants cannot feasibly refuse Visa and Mastercard, ensuring there is no true competition in the market. Card network technology has only become more efficient over time—yet, fees keep rising, forcing merchants to pay more for the same service year after year.
While big retailers like Walmart and Amazon have some leverage to negotiate down fees, small independent businesses do not. This all but ensures that the increasing use of cards favors big business, and shifts the largest cost burden to those who have the least ability to negotiate. Small businesses are forced to both accept the fees and pay a higher relative price than the chains do. In other words, concentration in the card market is helping to propel growing concentration in retail.
This is further exacerbated by Amazon’s new fleet of “Go” stores, for which cashless (and cashier-less) retail is central to the business model.
Such stores will lead to death by a thousand cuts for the American economy. The cashless trend puts more power and control in the hands of billion-dollar credit card companies and trillion-dollar banks—who play an inconsequential role in the doings of your local restaurant, bookstore, or independent retailer. Yet, these giants profit handsomely from inserting themselves between you and your neighborhood businesses. And their gain comes at a real cost: Local retailers are stuck paying tribute to monopolists far removed from the operation of their businesses, instead of offering better wages, adding new services, or lowering prices.
Ultimately, the high cost of cards is passed down to consumers in the form of higher prices. Whether they use a card or not, consumers are effectively paying a premium to subsidize the banks and card companies. Federal Reserve data shows strong credit card issue and spending growth year over year, which means consumers are not only using their cards more, they’re paying more—millions more—in hidden interchange fees every year to do so.
No consequence, legal or economic, stands in the way of card companies hiking their rates. And that’s exactly what they plan to do in April.
So what’s the solution? In 2015, the EU took charge and set a strict cap on interchange fees at 0.2% for debit and 0.3% for credit card transactions, keeping more money in small businesses’ hands. Visa and Mastercard make a little less, but millions of businesses and consumers make a lot more. People still use credit cards all the time in Europe.
In the meantime, legislation to ban cashless on the local and state level is a good starting point. Cities like San Francisco, Chicago, Washington, D.C., and New York are all considering cashless bans. None of these proposed laws forbid the use of credit cards, they merely require businesses to honor their customer’s cash. That protects consumer choice, and allows those unbanked Americans to participate in the economy.
Cash, for all of its contingencies, is a much more anonymous, resilient, and democratic system. Cities and states are right to insist that it continue to be an option for consumers. But with card transactions almost certain to become more expensive, we also need to cap these hidden fees so that giant financial interests cannot continue to use their monopoly position to drain more revenue from the economy.
Charlie Thaxton is a researcher with the Institute for Local Self-Reliance’s Community-Scaled Economy program.
Boris Johnson's £5bn broadband bazooka has to hit the spot