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Adam Smith discussed the harms caused by monopolies1 in the frequently, ritualistically cited book, The Wealth of Nations2. The progressive politics of the end of the 19th century and into the beginning of the 20th was marked by a deep reaction to the monopolistic practices of large companies then. This led to the ant-trust legislation that remains the cornerstone of the Federal government’s efforts to protect competition in the marketplace: Sherman Act of 1890, the Clayton Act of 1914 and the Federal Trade Commission Act of 1914.
Since the early 1970s the rich and corporations have successfully rolled back the enforcement of these protections. The rhetoric is familiar. We have to get government regulators off the back of entrepreneurs. This will unleash the productive forces of the market. Despite this rhetoric, the results are exactly as predicted by Adam Smith and many others. Concentration across almost every sector of the economy.3
Decline in Entrepreneurship
Not with much surprise many economists have noted a significant decline in new business formation in the last 40 years an more. Again, the rhetoric of free markets and small government is cover for the rich and corporations to get bigger and fatter.4two garphs below
Shift in Employment from Small to Big
Along with the slowing of entrepreneurial activity in the economy, more employees are working for large firms. This means that they have less choice of where to work and less leverage to hunt for higher wages. These conditions are compounded by the parallel shift in government policies that make union formation more difficult.
Other Articles about Monopoly Capitalism
- John Oliver and Monopoly Capitalism
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Also published on Medium.
- A note about the term “monopoly”: Economists have long acknowledged that the literal meaning of monopoly, a company having exclusive control over a commodity or service, is not a useful representation of how capitalist economies actually work. In practice when a small number of firms, say 3 or 4, control roughly 50% or more of a market, they can and do act to control prices, restrain trade, and force weaker competitors out of the market. As John Oliver notes we can experience this by simply booking an airline flight. Southwest, Delta, United, and American control 69% of the domestic market. This concentration is amplified by the hub and spoke system that assures that in many localities there is no choice but a single provider of air services. This is precisely why we need to reinvigorate the existing anti-trust laws and protect consumers from the gouging and abuse we now experience every time we fly.
- Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations.
- chart borrowed from: Leonhardt, David. “Opinion | The Monopolization of America.” The New York Times, November 26, 2018, sec. Opinion. https://www.nytimes.com/2018/11/25/opinion/monopolies-in-the-us.html.