Monopoly

Warnings About Monopoly Power Are Right

The biggest monopolies are government.

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"America Has a Monopoly Problem—and It's Huge," ran a headline in The Nation recently. The piece by Nobel Prize-winning economist Joseph Stiglitz lamented that "If we don't like our internet company or our cable TV we either have no place to turn, or the alternative is no better."

If you spend any time with left-of-center commentary these days (and everyone should—especially people on the right), you'll find this is a common theme of late. The New Republic writes about "How Democrats Can Wage a War on Monopolies—and Win." In The Week, Jeff Spross tells us "What Beer Reveals About Monopoly Power." (Cliff's Notes version: nothing good!) At The Huffington Post, Zach Carter and Paul Blumenthal consider the proposed merger of AT&T and Time Warner "intolerable… No single entity should have that much power."

In recent months Massachusetts Sen. Elizabeth Warren (D) has warned repeatedly about how "a handful of corporations" have "seized power in this country" through economic consolidation. Her colleague Sen. Al Franken (D-Minn.) wants to know "How did big tech come to control so many aspects of our lives?"

Proponents of net neutrality warn that "in a future without net neutrality, instead of being able to watch whatever is being produced by anyone, you'll either just have to submit to whatever the local monopoly is willing to provide, or pay through the nose for universal service." Editors at Talking Points Memo discuss "Our Problem With Monopolies." The New York Times asks, "Is Google a Harmful Monopoly?" And so on.

You could argue that this concern over monopolies, real or alleged, is overwrought. The "gales of creative destruction," as Joseph Schumpeter called them, do not discriminate: Today's economic colossus is tomorrow's kitschy relic (see: Philco radios, Pullman railway cars).

As Mark Perry of the American Enterprise Institute pointed out not long ago, only 60 of the companies listed on the Fortune 500 in 1955 remain on the list today. The rest went bankrupt, were acquired by or merged with another company, or have been outrun by other firms.

But let's assume the monopoly alarmists are right: that more consumer choice is better, that the concentration of power is bad, that gaining market share though non-market (and especially political) means is inherently suspect, and that allowing large, impersonal, unaccountable institutions to control the smallest details of our lives is simply wrong. Those points do seem reasonable enough, after all.

Why, then, are so many progressives so enamored of the worst monopolist of all—government?

Take Warren. In one breath, she condemns the lack of consumer options. In the next, she blasts Education Secretary Betsy DeVos for supporting school choice. "Your history of support for policies that would drain valuable taxpayer resources from our public schools and funnel those funds to unaccountable private and for-profit education operators may well disqualify you from such a central role in public education," she wrote back when DeVos was first nominated.

(Warren wasn't always opposed to school choice, incidentally. Before running for office, she supported vouchers as a means to produce "schools that offer a variety of programs that parents want for their children, regardless of the geographic boundaries.")

Speaking of consumer freedom, shouldn't consumers be able to choose their own health insurance—and even no insurance at all? Apparently not: Warren supports Obamacare, with its individual mandate forcing people to buy coverage regardless of whether they actually want it. What's more, she has pledged to support Bernie Sanders' single-payer proposal—under which a single government agency would control health care financing for everybody.

Let that marinate for a minute. If Aetna were to gain monopoly control of the health insurance market by merging with its rivals—or even simply by winning over their customers—Warren would find this abhorrent. But she wants the federal government to do precisely the same thing by edict.

Like Warren, Franken also opposes school vouchers and supportssingle-payer health care. While generalizations are risky, it's probably a good bet that many progressives with similar views on corporate monopoly power are perfectly fine with government monopoly power.

Many Democratic politicians are concerned about the power of Facebook and other tech companies to control what political viewpoints people can hear. And yet they rail against the Citizens United decision, in which the Supreme Court said government may not control what political viewpoints people can hear. (For those with dusty memories, the case concerned whether the government could ban distribution of a movie about Hillary Clinton during the closing days of an election.)

In a speech about the dangers of monopoly power, Warren said: "Giant corporations crush competition. They shut out small rivals and they kill young startups… Giant corporations jack up prices and cut corners on quality… Many giant corporations don't win in the marketplace because they're better. They win because they are big."

For all the power corporations have, though, even the biggest lack a monopoly exercised by government: the monopoly over the legitimate use of force. Facebook can't compel you to join its social network—but the federal government has the power to make you join the Army. Apple can't force you buy an iPod at the point of a gun, but governments oblige you to purchase services you don't want all the time. Strange, isn't it, that Warren and others who rail about the danger of monopoly are so eager to wield the power of the biggest monopoly of all?

This column originally appeared at the Richmond Times-Dispatch.

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  1. If Aetna were to gain monopoly control of the health insurance market by merging with its rivals?or even simply by winning over their customers?Warren would find this abhorrent. But she wants the federal government to do precisely the same thing by edict.

    Yes, but that would be corralling everyone into the same tent where she envisions herself the big chief in charge. That’s different.

    1. Aetna is an evil greedy corporation willing to cheerfully kill their customers for a nickel whereas governments are run by omniscient altruistic angels. You can tell the difference between the two by their attachment to profits – if Aetna doesn’t make a profit it would rather go out of business than attend to the needs of the poor and the sick whereas government will continue tending to the needs of the poor and the sick long after it’s bankrupt.

    2. How brave is Barton willing to be? How far is he willing to take this argument? Would he support competing agencies to protect me from crime? How about my ability to choose which judge I want to adjudicate my disputes? How about my ability to choose how much of my income I get to spend on defense from foreign invaders?

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      2. Sounds good to me…

      3. Fire departments used to compete for your business. Ambulance companies still do.

      4. And? What’s the catch?

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  2. Strange, isn’t it, that Warren and others who rail about the danger of monopoly are so eager to wield the power of the biggest monopoly of all?

    Nope.

    1. To say something like that either has to be ironic unless the person saying it has not paid attention to the history of leftist politics since the French Revolution.

    2. “wield the power”

      You just answered the question.

  3. Show me a monopoly and I’ll show you a company that is providing something of better value than any of their competitors, government policies preventing competition, or a combination of both.

    1. See MP below.
      AFAIK, There was only one (non-government created) monopoly in US history, and that was Alcoa.
      As soon as the trust busters forced Alcoa to set up competition to itself, the price of aluminum started rising. Until that time, Alcoa had kept the price down to avoid enticing others to enter the market. After that, not so much and according to the story I read, Alcoa was so good at making the stuff, they could raise the price and the newer competitors couldn’t match it.

      1. If they were so good, why did Scotty have to travel back in time to give us transparent aluminum?

  4. The only reason I would worry that modern monopolies have a chance to actually stay monopolies is the massive growth of the regulatory state in the last couple of decades.

    Government programs last forever, and they can prop up broken business models forever as well.

    Otherwise corporations suffer from having to support customers and increasingly top heavy wages and benefits. They’re the fodder for young, hungry companies to feed on.

  5. The Stiglitz article…tldr;…but in a quick skim, did he even call out a single monopoly? I saw the following firms listed:

    Equifax…not a monopoly
    Microsoft…not a monopoly
    Google…not a monopoly
    Apple…not a monopoly
    Cisco…not a monopoly
    Oracle…not a monopoly

    The whole article seems to be a scare story about big companies. How the fuck a Nobel laureate confuses size with monopoly power is beyond me.

    1. The power of a big company comes from consumer demand for what they are selling.

    2. He is not a Nobel Laureate. He got some prize to honor the memory of Nobel, which is given out by the Swedish Central Bank.

    3. The problem with these companies is that they either keep coming up with new products that they have an obvious market advantage in, or their competitors make products that the hype machine knows or cares little about, and there is no penalty for repeating self-serving falsehoods.

  6. How do the tech companies supposedly “control our lives” in any meaningful way anyway? What are these leftists even talking about when they say that? When Facebook can send armed thugs to drag me out of my house and throw me in a cage THEN I’ll be worried about their “control over my life”

    1. This x 1000.

      This is what I always wonder about when people complain about the evil corporations. So far as I know, I can tell any single one of them to “f – – – off, you won’t get a dime from me,” and there’s not a damn thing they can do about. Just try that with your government and see what happens.

      On top that, there is always this really bizarre effect whereby, when a company consistently overcharges its customers for CRAP, it quickly goes out of business or at least loses whatever sort of monopoly it had going for while. Contrast that to government: a government program might be utter crap, and even worsen the problems it is supposed to address, but not only will the “customers” (us) keep on getting that served that crap, the government will even demand we pay MORE for it. Because, as they seem to think, the only possible problem with a program is that they aren’t spending quite enough of our money on it.

      Leftists (and to be fair, most rightists) never seem to get either of these points.

  7. So what’s your monopoly problem?

    Water?
    Food?
    Shelter?
    Energy?

    No?

    It’s cable TV?

    Go fuck yourself.

    1. Yep. And even there, the monopoly power of cable TV companies (created by local government franchise deals, BTW) is rapidly dying because of internet TV services and cord-cutting.

    2. But aren’t all those precious life-sustaining elements natural human rights? Where do the Euro-pussies stand on universal access to cable TV?

  8. Before I read the article, anyone here know if Stiglitz asserts that the USA’s problem in that regard is worse than that of other countries? Or is that just Nation headline writer Amer. bashing?

  9. Her colleague Sen. Al Franken (D-Minn.) wants to know “How did big tech come to control so many aspects of our lives?”

    The mention of Al Franken was kind of a bright spot for me in this otherwise gloomy article. Just hearing his name makes me smile.

  10. Stiglitz should know full well that local cable companies are municipal franchises, i.e. they are government granted monopolies.

  11. Has this been forwarded to the Honorable Senator from Massachusetts for comment? I would be very interested to read her response; it would either be pure BS or an insight into a completely different way of perceiving reality.

    1. In all likelihood it would be nothing.

  12. It’s kind of obvious, but people love government, probably because they assume 99% of the time that it is neglecting them rather than targeting them.

  13. Now I agree regarding concentration of power…

    But did you really need to write a big “whataboutism” story? I kept waiting for more discussion regarding how Libertarians would address a situation like this but there just isn’t a lot of meat on the bone in this story…

    1. Don’t confuse a reprinted column from a libertarian leaning columnist with actual Reason generated content.

  14. Comparing Aetna to the federal government is a false comparison.
    If 300 million people were suddenly Aetna customers, there would be a huge payout for stockholders.

    With the federal government, all savings would benefit taxpayers, as opposed to stockholders.
    Now, does that motivate the state the same way it does a corporation? Obviously not. It arguably does not motivate the state AT ALL.

    A better comparison would be a non-profit and the fed–there are all kinds of bad non-profits, but at least on paper the comparison holds up.

    1. What savings? You really think the federal government would run a health insurance company more efficiently than competing private companies do? Costs would go way up, service quality would go way down, and wait times would increase.

      In fact, if you want to know what government run health care looks like, check out the Veterans Administration. Then imagine it’s 10 times worse.

  15. Some of us are old enough to remember when there was a telecom monopoly in the USA — the Bell system, enforced by government. Everyone had a black (or later, beige) rotary dial phone, maybe a party line, and long distance calls required a second mortgage.

    Who said there’s no competition between cable TV or internet providers? I can sign up for either Frontier or Spectrum (rebranded TIme Warner or rebranded Verizon), or pick Dish or Direct TV instead, or not sign up for any of them and just get the Internet on my smart phone through AT&T or Verizon or Sprint. I can get TV and/or Internet and/or phone service, at various price points and quality levels. There’s plenty of competition, and it would be even better with fewer government-enforced rules like “Net Neutrality” or “Cable Channel Neutrality” or what not.

    1. Remember what, when? Most Americans can’t remember what happened last week, let alone last year. And there was no history before the internet or any millennial’s freshman college year, which ever came later.

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  18. One thing the article left out, is that ALL monopolies in the private sector (except for 1) were systematically created by the government. One of the best examples was Ma Bell (AT&T). Over decades of government regulations, it created an environment ALWAYS choosing AT&T’s technology OVER the competing technologies, driving AT&T’s competition out of the marketplace. Then in the 1984, government came to our rescue and forced AT&T to split up into multiple companies (baby Bells) to compete against each other. MY HERO!!!! When government causes a problem (read: anytime it intervenes in the economy, no matter how small), it then has to touch it further to fix the problems it first created, which in turn create more problems, requiring more intervention, rinse and repeat…

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