It is no coincidence that ordoliberalism—the European (originally German) alternative to classical liberalism that emphasized the importance of the “social market” economy—and the New Brandeis or “neo-Brandeisian” movement, which harkens back to the Progressive Era thought of the late U.S. Supreme Court Justice Louis Brandeis, both are enjoying comebacks simultaneously. The effects of these ideological resurgences are most apparent specifically in the field of antitrust law (see here and here). But you can also see them in the broader political-economy movement to formulate an alternative to “neoliberalism” (here and here) that at least some audience find appealing.
The antitrust mainstream has long dismissed the ideas associated with these movements as populist, romantic, or naïve. Being called an “ordoliberal” was, until relatively recently, considered an epithet in Europe. And before individuals associated with their views were elevated into the U.S. antitrust establishment, gaining the attendant aura of respectability that accompanies occupying such lofty heights, the neo-Brandeisians were commonly derided as practicing “hipster antitrust.”
But these glib dismissals underestimated, at their own expense, the visceral appeal of the arguments the ordoliberals and neo-Brandeisians put forward. Ideas that had been relegated to the fringes of academia have begun to seep into the mainstream, and now threaten to upend the “neoliberal” antitrust order—all because opponents refused to take them seriously. As in the past, this trend can only be reverted through a better understanding of why these ideologies are so attractive, and why they ultimately fall flat.
The Perennial Appeal of Neo-Brandeisianism and Ordoliberalism
Ordoliberalism and neo-Brandeisianism are not identical. The former stems from the German Freiburg School and the latter is the product of American Progressivism. They do, however, share sufficient similarities as to form something like a united front against the established order. Both have an intuitive and emotional appeal, especially at a time when some feel that market logic has overstepped its legitimate confines and encroached into areas of life where it does not belong (here and here).
On this view, a “market in society” approach—in which the state has greater authority to restrain markets and shape them in accordance with a range of social or political considerations, beyond merely facilitating economic efficiency—sounds, on the face of it, more humane. After all, reducing competition policy to the idea of efficient markets and “consumer welfare” fails to account for the fact that human flourishing is about much more than just efficiency.
Attractive as this may sound, the new versions of ordoliberalism and Brandeisianism are ultimately doomed to fail—as other iterations have done in the past—for three main reasons.
First, they postulate an overly complex web of mutually conflicting goals and values as an alternative to the workable, narrow focus on efficient markets predicated by neoliberalism. In this “post-neoliberal” world, governments must use their discretion to rank and decide whom or what to favor, allowing the preferences of some to trump others. Even if one doesn’t object to this on deontological moral grounds, rooted in the intrinsic value of personal freedom, the augment doesn’t end there. While making the “right” decision may be technically possible, weighing layered values and objectives places unrealistic expectations on public authorities to act as all-seeing, all-knowing philosopher kings.
For example, how should the Federal Trade Commission (FTC) weigh the values of anti-racism or gender equality against lower prices? What about weighing the necessity of fighting concentrations of political influence, versus the values of consumer welfare, inclusion, and sustainability (or some other combination of the four)? It’s unclear what the right yardstick to weigh these incommensurable goals and values is, or if one even exists. In such circumstances, arbitrary decisions by the enforcer are inevitable, which invites rent-seeking by self-interested parties and weakens the rule of law.
Furthermore, while placing a broad range of values within its remit might superficially appear to expand the number of people that antitrust law could satisfy, it ends up achieving exactly the opposite. It instead multiplies the instances in which some preferences are allowed to override others. Friedrich Hayek warned 70 years ago in “The Road to Serfdom” that “well-intentioned” policies that purportedly strive to advance a broad definition of “social justice” could lead to tyranny.
Second, and relatedly, neo-Brandeisians and ordoliberals make noneconomic arguments against economic concentration. They argue that economic concentration should be prevented even if it does not harm consumers because it is inherently noxious, regardless of any utilitarian calculus of output, innovation, or quality. The main problem with this assertion is that it is grounded in aesthetic preference and intuition, rather than demonstrable evidence. Ordoliberals have long expressed gripes with large industrial complexes on grounds that they ruin a bucolic topography in which men are “vitally satisfied” in their small, tight-knit communities. But this argument rests on a very traditional and idiosyncratic vision of the good life that many may not share in the 21st century (it is telling that ordoliberals admired Switzerland as the ideal society).
Political arguments about the need to curb “bigness” would be more convincing if there was a clear and unambiguous relationship between market concentration or the presence of large companies and the quality of a democracy, or a tendency toward authoritarianism. As of today, I am not aware that such evidence exists (here and here). Freedom House and other similar reports make no mention of a causal link between concentration and democracy.
It’s also unclear whether antitrust measures of notions like market power—a firm’s ability to profitably raise prices—adequately translate into the political realm. A corner shop might have “market power” because it doesn’t face significant economic competition. But that does not mean that it can influence national or even local elections. By the same token, smaller economic actors who lack market power in the economics sense—e.g., farmers—have often exercised outsized influence over political decisions (for example, the agricultural sector in the EU enjoys a partial dispensation from competition law).
As to size, of the world’s 12 largest companies by market capitalization, all but one (Saudi Aramco) hail from the United States—still regarded, whatever its flaws, as one of the world’s freest, most democratic societies. Granted, anecdotal evidence of correlation doesn’t fully refute the ordoliberals and neo-Brandeisians’ arguments, but it beats anything they have put forward so far.
Alternatively, one might argue that the very existence of large concentrations of private economic power is antithetical to democracy. But this lifts a particular republican vision of democracy over the more mainstream liberal notion, which is rooted in negative freedom and individual rights. Under the latter view, it could be argued that antitrust intervention taken on noneconomic grounds is deeply illiberal and undemocratic, as it necessitates a powerful state with the ability to crush private companies seen as “too big.”
Further, unless a clear threshold can be established for when and why a concentrated industry becomes a threat to democracy, ambiguous standards would invite abuse by the state and reprisals against political opponents (China’s crackdown on tech companies under the pretense that they are “too powerful” comes to mind). This, once again, undercuts another basic principle of democracy: the rule of law. It also yields a paradox, wherein the pursuit of ordoliberal and neo-Brandeisian democratic ideals leads to more centralized political power, weaker democratic accountability, and less individual freedom.
Distrust of Markets
Third, ordoliberalism and neo-Brandeisianism are built on the notion that markets have socially explosive features and should not be allowed to dominate every facet of life. Authors like Wilhlem Roepke and Luigi Einaudi, for example, observed that excessive reliance on competition as an organizing principle stood in stark opposition to “higher” ethical values, and could ultimately corrode the fabric of society. Competition, Roepke wrote, “had a disturbing tendency to lead to consequences to which we cannot remain indifferent, especially from the moral point of view.” Seen also as a social, not merely economic force:
Competition, which we need as a regulator in a free market economy, comes up on all sides against limits which we would not wish to transgress. It remains morally and socially dangerous and can be defended only up to a point and with qualifications and modifications of all kinds (here).
Competition and the market order could therefore only be regarded as beneficial if adequately embedded within a holistic, humane framework “encompassing ethics, law, the natural conditions of life and happiness, the state, politics, and power” (here).
To address this, ordoliberals and neo-Brandeisians generally accept a higher degree of deviation from the general principle of efficient markets, and are thus more willing to accept tradeoffs among competition and other social, political, and moral goals, including in the context of antitrust law.
These arguments against “economization” are more persuasive, but they miss the point. Most reasonable people would agree that a life guided purely by competition and quantifiable economic metrics like output would be bleak and miserable (in fact, most of us routinely deviate from such principles in our family and personal relationships). We should, however, be careful not to conflate public policy with the totality of human life, or the broad possible spectrum of human action. These are different realms, and the former only represents a small slice of the latter. The advantage of narrow, measurable, economics-based public policy is that it generally allows more space for human freedom (including for voluntary non-market behavior), than do the alternatives.
By the same token, the advantage of tethering public policy—including competition policy—to notions of economic efficiency is that this offers a predictable, transparent, and universal standard. Even if one takes issue with the “reductive” consumer welfare standard (as opposed to, e.g., total welfare), as President John Kennedy said, “consumers by definition, include us all,” and we all, in theory, benefit from increased output and lower prices. Granted, public policy can also affect interpersonal relationships, and there may be a case for curbing the sprawl of efficient markets in the most egregious of such instances—especially when there is no scope for individuals to voluntarily opt out (here).
But even where such policies are warranted, there are almost certainly better ways of addressing noneconomic goals and values than through competition law. Competition law doesn’t occur in a vacuum and, even if we accept the need for broader redistributive policies and social goals, these needn’t be addressed through policies that are ill-equipped for the task.
Put differently: not every policy has to facilitate every goal and value of society. For instance, if one wishes to curb the influence of economic power on politics (a laudable goal), campaign-finance reform or lobbying restrictions may better achieve this end than using antitrust to require break-ups of large firms. This is particularly true, given the lack of evidence of any nexus between anti-democratic outcomes and economic concentration, as well as the costly tradeoffs involved. Similarly, racial and gender disparities are probably better tackled by scrapping discriminatory laws—and, possibly, through grounded, targeted redistributive policies—than through antitrust.
Ultimately, the issue is not only that antitrust law is ineffective at achieving these goals, but that pursuing them will inevitably deviate enforcers’ (and therefore taxpayers’) finite resources from those cases where we know that antitrust can contribute more to the public interest—i.e., where restrictions of competition lead to a loss of consumer welfare. In addition, some of these other goals and values—such as anti-bigness or the protection of small and midsize enterprises (SMEs)—are at loggerheads with the consumer welfare standard. There is therefore a risk that, by attempting to be a tool for everything, antitrust law will end up being a tool for nothing.
The Unspoken Benefits of Neoliberalism and Neoliberal Antitrust
Let’s assume that consumer-based antitrust law is, indeed, neoliberal, as neo-Brandeisians often suggest (here and here). So what? Before being weaponized by its opponents as a thought-terminating cliche, “neoliberalism” was a legitimate political philosophy that sought to “save” liberalism by resolving the fundamental problem that had afflicted Western societies since the Industrial Revolution: how best to square ever-expanding markets and technological progress with the social, legal, and political order (here).
While neoliberalism appears today to be falling out of favor as too narrow or overly economistic, this may be precisely what we want out of competition law and public policy more generally: to focus on narrow, relatively predictable and quantifiable standards that leave little space for competition authorities or courts to exercise arbitrary authority or act as social engineers in the process of ranking complex values. No system is perfect, and neither is this one (for example, there are competing schools of economic thought that posit different theories about competition, such as neoclassical price theory and the Austrian school).
But the kind of utopian thinking against which the neoliberals were reacting was, like today’s ordoliberalism and neo-Brandeisianism, full of lofty ideals and expansive, detailed visions of the “common good” (see here). In contrast, neoliberalism—while not entirely anti-utopian—embraces a minimal but more universal notion of the common good: economic well-being, against a background of negative liberty. In antitrust law, this means that the system’s lodestar is some version of consumer welfare.
Some might say that this is overly “technical” or economistic, and that it crowds out important moral and ethical considerations. This is true, in a sense, but it is so by design. The neoliberal paradigm may seen as more “amoral,” as it seeks to minimize instances in which the state would exercise moral judgment—even if completely jettisoning ethical considerations from public policy is impossible. But this, too, is grounded in a morality, albeit one determined not by the lofty goals the state aims to achieve, but by all the goals, values, and judgments it does not foist on society.
From this “meta-moral” perspective, in which negative liberty is close to the pinnacle of the value hierarchy, and notwithstanding any utilitarian benefits that might accrue therefrom, the best case for a narrow consumer welfare standard in competition law is precisely in all the values that it excludes.
The principle of Chesterton’s fence teaches us that, before tearing down a fence, we should understand why someone put it up in the first place. The flip side of that maxim is that, before bringing something back, we should understand why it isn’t already there, or why it isn’t there anymore. In the same way, before rushing to celebrate or encourage the adoption of old paradigms under new names, we should inquire why those paradigms were relegated to the past.
Ordoliberalism and neo-Brandeisianism will always be attractive to some, because they speak to modern sensibilities about the environment, anti-materialism, inequality, “fairness,” and other high ideals. In a sense, ordoliberal and neo-Brandeisian antitrust can be interpreted as part of a more general attempt to re-embed markets back “into society,” as Karl Polanyi would put it, after an era perceived to be one of rampant, unmitigated marketization.
Those who champion these ideas will no doubt argue that a sensible compromise between opposing views of the “good society” is necessary at times of political polarization, and that antitrust law should therefore strive to be more nimble, flexible, and better-integrated with a range of political objectives. To the contrary, I would contend that it is precisely during times of political polarization—in which everyone seems to know what matters the most in life (and in the lives of others)—that competition law should remain anchored in relatively clear, universal, and predictable goals.
And while the consumer welfare standard may not be perfect in this sense (its precise meaning remains subject to value judgments), it is preferable to the alternatives. Sometimes, good enough is the best we can do.