The Great Revealing: A Misrepresentation of Competition in the US and EU Hadi Houalla and Aurelien Porteau | May 2023 Thomas Philippon's book The Great Reversal has sparked controversy with its claim that America has less economic competition than the EU. However, this claim is unfounded. While US antitrust remains effective, EU competition policy has failed to stimulate innovation, productivity, or growth. Key Takeaways:
- The Great Reversal presents a biased view of US concentration levels and profitability.
- US concentration levels were largely flat from 2002 to 2017, and the share of US industries with low concentration grew by approximately 25% 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 US and Western Europe were within 1 percentage point of each other.
- The US leads Europe in terms of both productivity growth and the rate of innovation due to its larger scale.
- Aggressive European-style antitrust enforcement threatens economic growth due to its focus on small firms.
