Big Tech and the News: A Problem of Countervailing Power
On the morning of October 14, 2020, I caught a firsthand glimpse of what it’s like for a traditional media outlet to go up against the vast agglomeration of economic and digital power known as Big Tech—and to do so without the benefit of what economist John Kenneth Galbraith defined as countervailing power.
That was the day the New York Post, where I served as op-ed editor at the time, published its first story on the so-called Hunter Files, dishing on the contents of a laptop abandoned by then candidate Joe Biden’s son at a Delaware repair shop. Normally, I would have looked up the day’s cover—“the wood,” in tabloid parlance—in the Post’s pagination system the night before. But in this case, I hadn’t bothered for some reason, and got to read it at the same time as everyone else.
The first Hunter story—there would be a few others—concerned his business dealings in Ukraine. E-mails recovered from the laptop suggested that Hunter in 2015 had arranged a meeting between executives from Burisma, a Ukrainian energy firm that was paying him at least $83,000 a month to serve on its board, and his father, then the vice president of the United States and the Obama administration’s point man on Ukraine.
“What a scoop!,” I thought, upon opening my Post app while still lying in bed at five in the morning. I wasn’t alone in my excitement. As the hours sped by, the story garnered massive attention on social media—until suddenly, it disappeared. At about 11 o’clock, I spotted a curious online statement from a communications staffer at Facebook named Andy Stone. It read: “I want be [sic] clear that this story is eligible to be fact checked by Facebook’s third-party fact-checking partners. In the meantime, we are reducing its distribution on our platform.”
Twitter went further. The microblogging platform flat-out banned the story from being shared—including in private messages between users—and suspended the Post’s account to boot. All this, on the grounds that the paper had supposedly violated Twitter’s “hacked-materials policy.” High-level Twitter executives considered that excuse to be risible at the time, as we now know thanks to new CEO Elon Musk’s disclosures of internal deliberations at the firm. Yet in those early days, Twitter refused to budge from its initial determination; the Post, founded more than two centuries earlier by Alexander Hamilton, remained suspended for a fortnight.
The Hunter Files ordeal has become the subject of intense national scrutiny and debate. In years to come, it may well mark a watershed moment in American journalism in the twenty-first century. Most of the brouhaha, however, has focused on political questions. These include the role (if any) played by the national security apparatus in suppressing the story, the effect on the outcome of the 2020 election, and the need to reform the 1996 law that permits social media platforms to act like publishers while shirking the liabilities associated with traditional publishing.
Almost no effort has been made, however, to examine the Hunter Files from an economic standpoint: that is, to situate the episode (and others like it) within the context of a U.S. media market that has been dramatically transformed by the likes of Facebook, Twitter, and Google. Since the mid-2000s, traditional outlets have increasingly had to compete with Silicon Valley as both disseminators of news content and as sellers of digital advertising. This, even as traditional media are also utterly dependent on search and social platforms to reach new readers and grow their subscriber base as print advertising continues its downward spiral.
Could it be that this lopsided distribution of market power has no editorial or ideological consequences? Of course not. The crisis of Big Tech censorship is at least in part a problem of market power, an instance of the coercion that suffuses market systems in the absence of sufficient regulation and pushback from its victims. Or to use the classic terminology developed by John Kenneth Galbraith: What we are dealing with is original market power that is as yet unmet by countervailing power by those subjugated by it.
Countervailing power is today largely associated with labor progressivism. Mounting countervailing power against employers’ original power is the central function of labor organizations. But for Galbraith, the concept had applications far beyond labor markets. Countervailing power, he argued, is necessary in any market in which a few buyers lord it over many sellers (or vice versa)—which is to say, in most markets in aftermath of the Industrial Revolution.
The problem of less-than-perfect competition has long bedeviled advocates of laissez-faire economics. Basing their abstract models on preindustrial conditions, laissez-faire theorists treat competition, crystalized in the common-price mechanism, as the one thing needful to forestall market-based coercion. But in the real world, most industries are dominated by a handful of giants, leaving workers, suppliers, and consumers more or less at their mercy.
Laissez-faire was prepared to smash these giants into smaller parts if they achieved monopoly status. The problem was that oligopoly—a market characterized by a few dominant sellers—was the more frequently encountered pattern. Besides, as political-economist Michael Lind has shown, oligopoly or even monopoly has often served socially useful purposes, as compared to the destructive chaos that could rack entire sectors or even the whole economy as a result of cutthroat price competition.
There was a better way to check the undue power of the giants, and that was to raise the countervailing power of those coerced by them. In this model, instead of putting their hopes in competition between sellers or between buyers and turning to antitrust when that failed, policy makers would seek to empower sellers in relation to buyers (or vice versa). That is, the counterpressure came “from the other side of a given market,” as Galbraith often said, from buyers going up against sellers or vice versa.
In some markets, government didn’t have to a lift a finger for countervailing power to emerge on its own. As Galbraith noted in his classic text, American Capitalism: The Concept of Countervailing Power (1952), large retailers naturally mount countervailing power against, say, appliance manufacturers and then pass on the resulting savings to consumers. In other markets, however, the raising up of countervailing power requires political supports, owing to the objective and subjective weaknesses of those subjugated on the other side.
Labor was one such market. Galbraith famously interpreted the New Deal as one big effort to bring countervailing power to bear against the original power of employers—a power that had proved catastrophic, by creating permanent low-wage conditions that ended up suppressing demand in a manufacturing economy. In response, the Wagner Act and the Fair Labor Standards Act (FLSA) made it easier for many workers, sellers of labor power, to push back against a fewer number of buyers in the U.S. labor market.
How precisely countervailing power operated in the labor market, and how it was lost in recent decades, are questions beyond the scope of our discussion here. What matters for our purposes is the analogy between the crisis of market-based coercion in the pre-New Deal labor market and the problem of Big Tech power today. In our time, a handful of web 2.0 platforms exercise unchecked power over two sets of other actors: consumers and suppliers.
Their power over the consumer—the power to restrict access to certain information, inter alia—is all too familiar. It triggers much harumphing, particularly among conservatives who are its chief victims. The outrage is justified, for in wielding that power, Big Tech takes advantage of its market power to gather an enormous reservoir of what Galbraith called “conditioned power”: the power to shape what millions of people get to say, know, and think.
Far less visible, but as crucial, is the market power Big Tech wields over traditional media outlets. Indeed, there is a good argument to be made that Big Tech’s conditioned power over users or readers is a function of its market dominance—“compensatory power,” in Galbraithian lingo—over other vehicles of democratic knowledge: namely, traditional media, which have paid the heaviest price for the rise of social media.
The exact scale of that dominance is well-established in the antitrust literature. The best single assessment may be found in a 2020 majority staff report of the Senate Judiciary Committee’s Subcommittee on Antitrust, Commercial and Administrative Law, of which Lina Khan was the lead author, since then tapped by President Biden to serve as chairwoman of the Federal Trade Commission. Khan and colleagues found that “the United States has lost nearly 1,800 newspapers since 2004 either to closure or merger, 70 percent of which were in metropolitan areas. As a result, the majority of counties in America no longer have more than one publisher of local news, and 200 [are] without any paper.”
The decimation of U.S. newspapers, particularly local papers, has many causes. But one major cause identified by Khan et al. is the ruthless practices of Big Tech. To wit, search and social giants like Google and Facebook expose readers to a great deal of local-news content on their platforms, but the entire reading experience can take place on Big Tech’s turf. Many people never click through to the underlying source, depriving the original news-gatherers of “eyeballs,” subscriptions, and ad revenue. Local outlets were thus forced to compete with Big Tech not just for ad dollars, but as suppliers of content. This, even as they remained utterly dependent on these platforms for spreading their content and growing their audience online.
This is a raw form of power asymmetry. It translates into a painful incapacity to translate the creation of original reportorial content into either ad revenue or subscriptions. But it also means something more ideologically insidious: As anyone who has worked in upper-middle to upper management at a traditional outlet can tell you, management is loath to challenge Big Tech when it reduces circulation on a story lest “they cause us problems with other content” (the Hunter story was the exception to this norm of quiet submission, precisely because the censorship in that case was so blatant and egregious). As Galbraith would say, compensatory and conditioned power frequently go hand-in-hand. Or as any ordinary person would say, money talks.
In this case, we are dealing with unduly gathered conditioned power that, in turn, rests on abuse of market power: Big Tech, in short, sits on both sides of both digital-advertising and content transactions. As advertising platforms, Facebook and the like force news outlets to compete with them on their own territory, even as they also attract eyeballs and subscribers away from the outlets that put capital and sweat equity into producing original journalism. And those subjugated, the traditional outlets, dare not fight back lest they lose still more ground. Rather, each outlet tries individually to do the best it can, given this structural asymmetry, with varying degrees of success. National papers like the Wall Street Journal and New York Times, for example, mastered the paywall model early on, as have a handful of local and regional newspapers like the Boston Globe and the Minneapolis Star Tribune. Many others founder.
This, in short, is a classic problem of countervailing power. Just as, all else being equal, most individual employees eschew collective and political action in favor of doing their best individually, to the detriment of employees as a class, so traditional media can’t challenge the original power—both compensatory and conditioned—of social-media platforms. Their subjugation, in turn, translates into the subjugation of news consumers who lose access to information, either through the diminishment of traditional journalism or outright censorship.
The challenge, then, is to fortify the ability of traditional outlets to mount countervailing power. A first step is to put a stop to practices like those described above, in which traditional outlets find themselves competing with Big Tech on both advertising and content. On the content front, it must be recognized that Big Tech’s advantage is often based on sheer expropriation of others’ sweat equity. The proper policy response is restorative: to demand that tech platforms pay outlets for content, as Australian lawmakers have done (and as lawmakers in Canada and elsewhere seek to do).
Would this, without more, solve the problem of Big Tech censorship and the broader decline of traditional outlets? No. But it is a starting point, much as the FLSA was a starting point for concentrating and fortifying the countervailing power of nonunionized workers in the midcentury labor market. Workers who could count on a minimum wage were more willing to take the risks associated with collective and political action. Likewise, we might expect outlets that are marginally less subjugated by Big Tech to feel more secure in challenging its market and ideological diktats.