The proposed merger of Netflix and Warner Bros. Discovery (WBD) “could be a problem,” Donald Trump says, because Netflix has “a very big market share. When they have Warner Bros., that share goes up a lot.” He said he would consult “some economists” on the matter, adding, “I’ll be involved in that decision, too.”
He went on to say that CNN, which is owned by WBD but is not part of Netflix’s offer, should be included in any deal because the cable-news channel’s management must be ousted: “I don’t think they should be entrusted with running CNN any longer.” He also said the “dishonest [people who run CNN] should not be allowed to continue.” (Emphasis added.)
I’m tired of the Trump Show. Can we change the channel now? Is there anything else on—something more friendly to free enterprise?
Netflix is prepared to spend more than $80 billion to merge with WBD (including streaming service HBO Max). Meanwhile, Paramount, which recently acquired CBS, is offering Warner stockholders what it calls a better deal (worth $108 billion) as well as a better prospect of regulatory approval. Paramount’s owner, David Ellison, has connections to Trump, as well as backing from Saudi Arabia’s and other Gulf states’ sovereign wealth funds.
I don’t want to talk about what this might mean for the movie industry. I will simply point out that before August 1997 Netflix did not exist. Then Reed Hastings and Marc Randolph founded the DVD-by-mail rental company. Its trend-setting streaming service began in 2007. Before Netflix came along, the giant Blockbuster Video chain ruled the roost. Netflix also produces original programs and has won Oscars and Emmys.
The point of the mini-history is that the free(ish) market is dynamic and unpredictable. If you survey the Fortune 500 over the years, you will see how the market churns. Some companies on the list did not exist a short time ago. Big companies have dropped off. As a former owner of the Philadelphia Phillies once said, “The way to make a small fortune in baseball is to start with a large fortune.” That rule applies to more than baseball.
Even in our government-laden market economy, private enterprise—entrepreneurship— is extraordinary. Consumers at all levels are the beneficiaries. How could it be otherwise? If they don’t like something, they let the capitalists know, and other capitalists stand ready to take their place. As Ludwig Mises noted, consumers make poor people rich and rich people poor according to what they buy and choose not to buy. Of course, the “poor” in a free-enterprise economy look nothing like the poor in socialist countries.
That the executive branch, thanks to Congress, has the power to approve, reject, or modify mergers and acquisitions is an abomination in a society that calls itself free. That The Maestro—the man who would be king—expects to review Netflix’s proposal personally is simply the latest outrage and perfectly consistent with Trump’s “philosophy” of governance, or more to the point, his ridiculously expansive view of his coercive power over peaceful exchange, that is, social cooperation. (Constitution? What’s that?) He seems to believe that he runs the economy and country, not just a branch of the government.
But let’s not put all the blame on Trump and political favoritism. Government control of mergers and acquisitions is bad even when the allegedly objective procedures set out in the law are strictly followed. The case against such control is similar to the case against socialism and lesser government intervention: the overlords cannot know what they need to know to do the job they presume to do. Why can’t they know? Because that knowledge—fragmented and scattered among millions, even billions, of people and often unarticulated—can be generated only by the very process with which the overlords interfere. It is rooted in the actions of market participants, in their changing personal preferences, and in their choices to buy or not to buy. No ruler or bureaucracy can get a handle on that.
Unfortunately, most people who are outraged over what Trump is saying about Netflix, WBD, and CNN complain only about the real danger to freedom of the press. But that’s not enough. An exception is Ari Melber of MS NOW, who said, “It is a problem for free speech if big government can crush the free market to pick winners and losers.” Yes!
Finally, let’s not jump to the popular conclusion that because the government routinely impedes freely undertaken market relations, regular people’s living standards have stagnated since—well, they can’t make up their minds—either the 1970s or the Reagan years, which began in 1981. It ain’t so. It is said that the dollar has lost 96 percent of its value since the Federal Reserve opened its doors in 1914. (Boo!) But does that mean we were richer in 1913 than we are today? No way! Except for those services most regulated by the government—medical care and education—Americans have never been richer. As Marian Tupy shows,
Productivity, competition, and innovation have dramatically reduced the “time price” of consumer goods in the United States since 1971. The time required for a blue-collar worker to afford 75 finished goods has fallen dramatically, increasing the personal abundance available to these workers. This trend highlights the power of markets to enhance prosperity far beyond population growth, underscoring the importance of preserving economic freedom.
This even applies to housing, despite zoning and other building and land-use restrictions (which should be repealed). Focusing on time-price allows us to dispense with the need to adjust for inflation. We’re not talking about prices. Rather, we’re comparing how long nonsupervisory workers have to work to earn enough to buy all kinds of things now compared to the past. The picture is even rosier than it looks because products are better than they used to be. If today you need to work only a few hours to buy something that required weeks of labor 50 years ago, you’re getting stuff for free!
As I like to say, “Capitalism takes a licking and keeps on ticking.”
