The theory of capitalism says that free market competition will ensure quality products and services at competitive prices. Unfortunately, that theory is not the reality of U.S. capitalism today.
Deregulation and our business laws and practices, from anti-trust to financing to patent protections, have destroyed competition. Without competition, businesses have no incentives to restrain price increases, to ensure quality, or to provide consumers the choices that free market theories assume. Furthermore, monopolistic employers and business owners have little incentive to fairly compensate workers or even invest in the future of their businesses. Instead, they can and have been keeping profits high and lining their own pockets.
Rather than free markets, the U.S. economy is sea of monopoly or, at least, oligopoly, where a small group of sellers or producers control a market. For example: [1]
- Four airlines control the bulk of air travel
- Two corporations produce the bulk of beer
- Six enormous banks / financial institutions hold over 40% of deposits and 50% of assets
- Drug companies find ways to extend patents or otherwise restrict competition so they can jack up prices and make huge profits (see previous posts here, here, and here)
- Two corporations control all on-line travel bookings
- Two companies make nearly all the intravenous saline solution used in hospitals
- Two firms control the majority of on-line advertising
- Three companies control the agricultural markets for seeds and pesticides
- Four firms make 89% of baby formula
- Two companies make 76% of coffins
- The supermarket and media industries are continuing to consolidate so that a handful of corporations control these markets
- Two companies control the mobile app market
Furthermore, the oligopolists find ways, such as carving up geography or colluding (for example, generic drug makers) to make themselves effectively monopolists and charge exorbitant prices and/or deliver low quality goods and services. For example, there are many Internet service providers (ISPs) in the U.S., but three dominant providers (Comcast, Charter Communications, and AT&T, each with over 15 million subscribers) and six midsize providers (with between 3.5 and 7 million subscribers). Every other provider has under 1.3 million users. The nine dominant and midsized companies have carved up the country so that 76% of households have only one choice of Internet provider making the ISPs effectively monopolies.
The monopolists and oligopolists have used political and market place power to restrict new entrants to their markets. The rate of new business formation today is half of what it was in the late 1970s. When competition does emerge, the big, dominant companies often simply buy up the competition, sometimes to use its technology or innovations, and other times simply to eliminate it as competition.
Our anti-trust laws and regulators have failed to stop anti-competitive acquisitions. In the last ten years, Amazon, Apple, Facebook, Google, and Microsoft have purchase 436 companies and startups without a single challenge from anti-trust regulators. [2] As a result, with almost every purchase consumers make, we are paying a toll, an excessive price, to one or another of the many monopolies or sets of oligopolies.
This trend of business and economic concentration, which allows companies to build high levels of market share and power, began in the 1980s under President Reagan and supposedly “conservative” Republicans. An important symbolic step in this trend was when the Federal Trade Commission stopped collecting data on market concentration in 1981.
Capitalism without real competition is not capitalism; it’s monopoly or oligopoly. The monopolists and oligopolists have very strong incentives to preserve their dominant status. Until the American public responds forcefully, and demands that its elected representatives do so as well, the number and size of monopolies and oligopolies are likely to grow.
Unfortunately, the mass media, which could provide the information to the public on the growing economic concentration, lack of competition, and harm to consumers and our politics, are highly concentrated corporations themselves. Therefore, our mass media have a vested interest in not telling us this story.
In the early 1900s, when the U.S. government fought back against the giant trusts such as Standard Oil and U.S. Steel, anti-trust laws and anti-monopoly regulatory actions were viewed as a check on excessive private power, and competition was seen as necessary to preserve opportunity, as well as human freedom and liberty. We need to fight back against the excessive private power of economic concentration again today.
An important piece of reclaiming our democracy from the plutocrats is reclaiming our economy from the monopolists and oligopolists. Some of the 2020 presidential candidates, especially Senator Elizabeth Warren, are talking about this and presenting policy proposals (e.g., here and here) to do so.
I encourage you to follow the presidential candidates’ proposals and the discussion of America’s Winner-Take-All, anti-competitive, faux free market, monopolistic capitalist economic system.
P.S. Sorry for the recent lack of posts to this blog. I was managing a campaign for the local Select Board (i.e., town council). The election was April 2 and we were successful! Over the last 3 years, we’ve replaced 4 of the 5 Select Board members with strong progressives, including two young mothers. A real turnaround!! All politics is local and political change does start at the grassroots.
[1] Dayen, D., Winter 2019, “The new economic concentration,” The American Prospect
[2] Dayen, D., Winter 2019, see above
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