22A038 Monopolies by Jim Davies, 9/20/2022

While they last, they can be a bad thing for most of us. First off there's no way to tell whether the price charged for their products is reasonable; for there's no alternative with which to compare it. Then, if we happen to be dissatisfied with some aspect of their service, there's no place else to go. We're stuck. Cornering the market or obtaining a monopoly may be good for those who own the company, for they can (for a while) charge whatever they like and coin money by the truck load.

But above, I wrote "can be" and "while" and "may be." How come?

The reason is that without external support (see below) a monopoly cannot last long, either in theory or practice. The very existence of those piles of profits provides a powerful motive for new rivals to find a way to compete, and some will find it. Who in 1950 would have supposed that by the Century's end, land lines would be obsolescent and replaced by cell phones? - very few of AT&T's shareholders, I suspect. And bear in mind that cell phones would have emerged regardless of the government division of Ma Bell into nests of local monopolies.

Further, the more the monopoly firm pays its officers (and, with luck, its shareholders) the more it will charge for its products and so the stronger becomes the motive and opportunity for new, innovative rivals. To top it all, the bigger the monopolist, the more turgid becomes his bureaucracy and so the slower he can react to competition when it does arrive.

In practice too? - yes. How many large firms can you name who have enjoyed a monopoly for more than ten years? - and twenty years? I used to work for IBM, which was accused of monopolizing the mainframe computer market. That was never true (at most, we had 70%) but after about 20 years leading a market that we had created in the first place, we were out-manoeuvred by new firms that designed distributed computer systems - and eventually by Apple and several others who created the PC market. In another market, yesterday's giant retailers, like Sears Roebuck and J C Penney, have lost their leadership to Amazon and eBay, who offer buyers a better service.

But now think of the everyday monopolists around us. The DMV, in absolute control over the monopolist road operators. Wait in line to pay their fee, or get taken off the highway - for which you paid. Amtrak, the sole owner of rail travel facilities. Police Departments, which monopolize "protection" services and which frequently despise and bully security firms that try to compete. The entire "Justice" function, that monopolizes courts and prisons. The Army, Navy, Air Force, which supposedly protect us from foreign governments... no rival allowed. And need I mention the IRS?

Schools, which force you to pay their fees whether you use their services or not! - even if you pay double by using a private school, which are allowed to exist only on that basis. In some states, liquor retailing; you want some wine, there's only one place you can buy it. The USPS has held a monopoly on first-class mail for nearly two centuries, and is today like a beached whale only because the demand for first-class mail has been happily displaced by email. Yet even now, it is not allowed to declare bankruptcy so that its remains can be sold to those who can put them to profitable use.

All those are government controlled, operated and monopolized, as is airport security, known and detested as the TSA. They suffer all the same, bloated inefficiencies of private monopolies, but are protected by law from any and all competition - so they go on growing, with ever less concern for customers. The natural operations of the market, which could displace them, are literally outlawed.

In addition there are many firms that are large but not strictly monopolies, yet which are so tightly regulated by law that divergence from a single standard of product or service is well-nigh impossible. The bigger their industry, the more voluminous the laws under which they labor. Health services such as hospitals are one example; they are "independent", yet must operate within strict limits and recently their physicians were even prohibited from treating Covid patients with Ivermectin and Hydroxychloroquine even though trials had shown them highly effective.

Then there are cartels; they too are each much smaller than a single monopolist, but sometimes act together to control a market. The Seven Sisters in the oil industry form a well known example. Government pretends to limit and discourage such cooperation, but actually does the opposite.

So, if we dislike monopolies and wish to end them, we have but one choice: to abolish government, which operates most of them and controls the rest. The means exist; it's for you to use them.