Wednesday, June 08, 2011
I read this recently on Steve Sailer's blog (in my opinion one of the purely most intelligent people in the blogsphere despite, or because of his politically incorrect views). It is about the decline of interest in preventing monopolies. This used to be a major focus of "leftist" opinion yet has virtually disappeared. Few industries now exist where more than half a dozen companies do not control 80% of the market. It is something both "leftist" opponents of "monopoly capitalism" and "rightist" supporters of free markets, which, as Adam Smith pointed out, depend on unrestrained competition. Jerry Pournelle, no leftist, has said that the failure of the Marxist prediction was because anti-monopoly laws prevented all productive power being concentrated in very few hands.
It is understandable why the "right" should not spend its energy opposing concentrated business power when we the "leftists" are so busy grabbing anything of value. Perhaps the failure of the "left" to do so shows how they have been absorbed as an arm of the state funded fakecharity industry and the state does much better out of big businesses with whom they can do deals and who are much less likely to oppose their political wishes (compare Ryanair with the big energy compnies who support windmillery or compare the CBI positions with those of the Federation of Small Businesses).
One of the less expected changes in public life over the last third of a century has been the growing apathy over the subject of antitrust (known outside of America as "competition law"). For example, the proposed merger of AT&T and T-Mobile, reducing the number of national cell phone network competitors from four to three, isn't popular in the Senate, but it doesn't seem to be a big news story with the public.
.....It's hard to explain to today's youth what a big deal trust-busting was just a third of a century ago. Alternatively, it's hard to figure out why nobody cares much anymore about cartelization.
When I was majoring in economics at Rice in the late 1970s, monopoly was a massive topic. I took a semester-long course devoted to propounding the emerging libertarian line that there was very little to worry about. Competition would tend to rapidly eliminate monopolies. This popular idea of businessmen getting together in smoke filled rooms to agree to keep prices up was a stereotype. I got a very good grade in that course. I believed.
The young professor making these arguments against antitrust law in the late 1970s saw himself as a rebel against orthodoxy. Today, though, his free market ideas seems to have become conventional wisdom, or at least nobody cares that much to argue against them.
The funny thing was that when I got a job with a young company, however, it turned out that competition, from the perspective of owners and employees holding stock options, was awful. It's like Adam Smith said, in a genuinely competitive market, it's hard for a business to make more than the risk-adjusted cost of capital, which is not much fun at all. Why go through the immense amount of hard work to invent a new, better way of doing business if that's all you'll end up with? To make good money, the kind of money the stock market demands you make, you need some kind of quasi-monopolistic edge.
... It's easy to understand the high profits of, say, Apple, but why does Procter & Gamble make so much off toothpaste and detergent these days?
One difference is that in the inflationary 1970s, it was common for members of the public to suspect that rising prices were caused by monopolistic practices. With the prices of manufactured goods stable or even falling in much of the time since the 1970s, however, it's common to assume that anticompetitive activities can't be a problem because, say, cell phones or TVs keep getting awesomer. Psychologically, it's hard to worry much about whether prices should be falling even faster.