Yesterday President Joe Biden announced his intention to sign an executive order targeting market consolidation in the rail and maritime freight industries. Mr. Biden is seeking to ban Class I, or major company, rail mergers and is tasking the Justice Department, Federal Maritime Commission, and Surface Transportation Board to investigate and crack down on anti-competitive practices, an issue which has drawn growing attention as freight prices have risen during the pandemic.
Both industries have seen remarkable centralization in recent years. In 1980, there were 38 Class I rail companies. By 1990, that number was down to 14. Today, there remain only seven Class I rail companies. In maritime shipping, three shipping alliances—whose members collude rather than compete—now control 80 percent of the market, whereas twenty years ago 10 companies controlled a mere 12 percent.
Some of this consolidation is likely due to certain providers failing to compete and closing up shop, especially as rail has seen competition from outside the sector in truck freight. However, a large share is the result of anti-competitive alliances which force smaller operators out of business and mergers like those Mr. Biden is seeking to ban. Which is to blame is difficult to tell, but Mr. Biden's plan certainly aims at a significant contributing factor.
The executive order, though, is not just focused on anti-competitive market practices in freight shipping. Mr. Biden is targeting all kinds of anti-consumer and anti-employee practices. He is seeking to limit non-compete clauses that keep competent employees from moving between jobs and wage-collusion practices in which businesses share wage data with each other but not employees. Further, and perhaps strangely, Mr. Biden intends to support right-to-repair initiatives to allow people to personally repair or seek repair for their property freely, unburdened by corporate restrictions on who can legally fix certain consumer products.
Some of these endeavors may seem an odd focus to take as part of a push for economic recovery, but Mr. Biden has his reasons. The thinking goes that such efforts will foster a more competitive economic atmosphere in which corporations will be forced to work to provide the best services at the best prices. Companies which have previously fortified their positions in the market, through mergers or anti-competitive collusion, will no longer be able to rest on their laurels, leading to lower prices and higher quality of service.
Mr. Biden's aim is dead-on. Liberal democracy is not merely a philosophy of government in which individuals vote for their leaders. It is founded on a belief that when politicians are forced to compete for the approval of the voter, they will seek to do their best by the voter.
And this does not end at politics. Capitalism, or the liberal economic theory which goes hand in hand with the "liberal" notions of democracy, is predicated on the same belief. Plenty of arguments can be made about capitalism and its present form, that it has allowed a wealthy few—like those 7 Class I railroads—to consolidate both political and economic power. However, as Mr. Biden clearly understands, in a liberal democracy it is the responsibility of government to ensure that such centralization does not occur.
Democracy is ultimately about providing as much power and influence as possible to citizens to allow them to decide what is best for themselves. Such a system cannot coexist with an economic reality in which consumers and employees have little or no power of choice to wield against enormous, unchecked, anti-competitive corporations. Mr. Biden may be tilting the playing field, but he's tilting in the right direction: toward voters, consumers, and citizens.