itif.org
The Great Revealing: Taking Competition
in America and Europe Seriously
HADI HOUALLA AND AURELIEN PORTUESE | MAY 2023
With its provocative claim that America now has less economic competition than the EU, Thomas
Philippon’s book
The Great Reversal
has become a bible for neo-Brandeisians. But reports of the
death of competition in America are highly exaggerated: While U.S. antitrust remains effective,
EU competition policy has failed to stimulate innovation, productivity, or growth.
KEY TAKEAWAYS
In advancing his widely touted claim that concentration and profitability are reaching
extreme levels in the United States, Thomas Philippon’s book
The Great Reversal: How
America Gave Up on Free Markets
paints a decidedly biased picture.
The reality is U.S. concentration levels were largely flat from 2002 to 2017, and the
share of U.S. industries with low concentration grew by approximately 25 percent in the
same period.
Domestic profits as a share of GDP are now lower than they were in the 1950s and
1960s, a period of very aggressive antitrust enforcement.
In 2022, net profit margins in the United States and Western Europe were within 1
percentage point of each other.
In part because the EU suffers from such a large share of small firms, the United States
leads Europe in terms of both productivity growth and the rate of innovation.
Because productivity and innovation partly depend on scale, aggressive European-style
antitrust enforcement threatens economic growth.
