Note: The stunning conclusion! Read part 1 first, or don't.
Regulation is not really part of a free market. The only things we need to regulate are the obvious things, fraud, theft, things that are illegal in and out of business, and the only other thing you really have to regulate is competition. Lack of competition leads to monopoly. Most people believe that monopolies are bad because a monopoly can jack the price of their product up to wherever they want to. But take it a step further, a monopoly is growth unchecked. A monopoly is very close to a monarchy. If I controlled the sale of all the wheat in the country, not only could I charge whatever I wanted, I could use my control as political power. On top of that, as I'm growing richer, I'm buying a monopoly in textiles. Then I move on to energy, and other industries until I own everything, or close enough to everything to literally buy the entire nation. That may seem extreme, but it's not. When your growth is unchecked you tend to grow really fast. That's probably how the first monarchy started, some guy owned everything and before long he's making the rules. I don't like regulation, but a monopoly will always hurt a free market, because without competition, no fair price can be established.
A monopoly can also be a coalition. It can be competitors colluding for the sake of their mutual benefit. This, in its most simple form, is already illegal. The problem, however, is much less simple. We have collusion in almost every major industry, and we have collusion from the government allowing it to happen. In a free market, in a true market, nobody makes a profit (or much of one) outside of what it costs them to do business. I'm including the cost of making a living from your business in the cost of doing business, you can't work if you can't eat. In a true free market, I couldn't sell an apple for a penny more than I needed to without some opportunist setting up shop across the street selling it for a penny less and putting me out of business. It is basic, basic economics. It is capitalist selection. Survival of the fittest. Any company that makes massive profits is either charging too much, or they are paying too little in expenses (or both). The only way this is possible is if their competitors agree to the same tactics. Whether it's the pay of employees, what they will pay for stock and supplies, or what they charge the customer, they have to collude to make profits above and beyond their needs. If they were not colluding, one would lower their prices to make a play for a larger market share. The other would follow suit or go out of business.
This type of tacit collusion still forms a monopoly. It's called an oligopoly, but I will to call it a monopoly for simplicity right now. It's not technically illegal if the two companies don't actually pick up the phone and say, "let's collude." They could just monitor each others' prices and find out what they pay their employees and keep their numbers in line with that. Both companies can be more successful working together than working against each other. The only problem is that they work against consumers, and they make enough money to buy power.
The way our lawmakers are elected, they are all from large campaigns that are funded by rich donors. Who has large amounts of money? Some big corporations, and the people who own and run them. If an organization or a company wanted to get a lawmaker elected who would go to work for them instead of his constituency, and they had the money, they could make it so that he was one of two or three candidates you heard from. In fact, if a candidate doesn't have large amounts of donations to his campaign for a major state or national elected post, you will never hear from him. And as companies are always looking out for their own best interest (like all of us), and they would throw their support behind a candidate (or candidates, or possibly an entire political party, or both political parties) who would have their back. If I'm a serious politician, and I take getting elected seriously, I have to have somebody's back. I have to be corrupt, because my true constituent is the one who got me elected. The only electable politician is the corrupt politician. And the corrupt politician will never do anything about tacit collusion, because without it, he doesn't have a job, nor the illusion of power that comes with it.
Our country is truly run by the few rich people who can afford to. We elect our leaders based on choices handpicked by corporations, who use their lobbies to write our laws. This is the cost of letting the market get out of hand, an oligarchy that hides itself behind a fake democracy. If we could regulate trade so that competition was forced, so that organizations weren't allowed to collude, nobody would be rich enough to buy our government from the people.
Let's take a look at some polls, shall we?
14 years ago
I have never heard the term "oligopoly", but I disagree with the idea of non-collusion collusion. I'll give you an example, in my business, we even have a "sister company" that we use to base our rates and such on. Sort of like what you are talking about...BUUUUT, we will lower our rates and even advertise that our rates are lower than that sister company. What you try to do is stay the same or lower than competition.
ReplyDeleteAn oligopoly is a monopoly that involves more than one party. When one company dominates a market, it's a monopoly, when two do it it's a duopoly, and when multiple parties own a market at the exclusion of others it's an oligopoly. It's something that happens, I really don't think that's up for debate. The debate is on if it's legal, if it's right, which I think is a very complicated issue. I would probably fall down on the side of "it's not a big deal, it's the market" if it didn't threaten our liberty as free people, but it does, and so it has to end. There just isn't anything more important.
ReplyDeleteI don't know what company you work for, but I'm not saying every company in the world does it. I'm saying that companies that make extreme profits do it. Walmart, Target, Microsoft, Apple, drug companies, insurance companies, I mean, it's a lot of companies, but it's probably not a locally owned business or certain types of businesses. If the owner of the business has a billion dollars, they're ripping somebody off to get it. There's so much room for a competitor to move in that it's highly suspicious if one doesn't.
Also, your example is just competition. Competition is so important, so good. It's not tacit collusion until you're working together. I mean, there still has to be collusion. Even if nobody gets on the phone to say, "let's collude," if you're huge you can take steps to keep other stores from becoming a threat, or you really have to say, "We could compete with these guys but it's easier to keep the status quo." We really have to make competition mandatory. It already is, but it's just not enforced nearly enough.
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