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The power of monopolies and indeed of corporations in general is directly tied to the power of the State. It's no surprise to those who understand this that, as

by pitaj 8y ago

The power of monopolies and indeed of corporations in general is directly tied to the power of the State. It's no surprise to those who understand this that, as the federal government has grown in size, strength, and scope, corporations have followed. In fact, I'd go so far as to say that consumer-hostile monopolies cannot exist for any substantial amount of time without the backing of the State. Whether that be through IP law, limited liability, regulatory capture, or explicit utilization, monopoly in one industry requires the support of the largest monopoly there is: that on coercion, aka the State. Never have I seen evidence of a lasting consumer-hostile monopoly that existed without the involvement of the State. As far as I can tell, natural monopolies are a myth grown from mistaken economic theory.

tonyedgecombe 8y ago
Perhaps it's a sign of weak government, a strong government wouldn't allow monopolistic behaviour and America hasn't in the past.
- openbasic 8y ago
  Do you happen to have a recipe for a corruption-free government? Please share.
  - pitaj 8y ago
    A litany of angels
  - RandomTisk 8y ago
    Easy first step: prosecute criminals even if they're in your own political party and especially if they aren't little people.
    - AnimalMuppet 8y ago
      Step zero is then to get people in power who are willing to do that. How do you propose we go about that step?
  - tonyedgecombe 8y ago
    You don't need to go far back in history to see when the US government broke up monopolies.
  - jryan49 8y ago
    Make lobbying illegal, and make representatives more accountable to their constituents? Decentralize the government more, and make it more state and local instead of federal?
danharaj 8y ago
https://en.wikipedia.org/wiki/Hanseatic_League https://en.wikipedia.org/wiki/Hanseatic_League
kadendogthing 8y ago
>The power of monopolies and indeed of corporations in general is directly tied to the power of the State. No it isn't. This flies in the face of basic economics, and even worse, very much "in your face" evidence we have if you look at nations across the world. Weak governments continually fall victim/enable private entities. Governments that have power to withstand those pressures have regulatory teeth (i.e. big government). There isn't any model, theoretically or by experience, where in monopolies exist in a system without sufficient state powers. There hasn't ever been a time where monopolies were not directly handled by exercising state powers. You will find monopolies across history and the present that only exist because of the inaction/inability of states to do anything about it. The existence of monopolies is very much in fact a direct symptom of weak/dysfunctional governments. Read something else besides Ayn Rand.
- dragonwriter 8y ago
  > > The power of monopolies and indeed of corporations in general is directly tied to the power of the State. > No it isn't. Yes, it is for corporations (monopolies are a more complex question.) Corporations are creations of the state; everything done through them is an exercise of state power.
  - JumpCrisscross 8y ago
    > corporations are creations of the state; everything done through them is an exercise of state power Legally, yes. Politically, it's more complicated. The banana republics were largely run by the domestic subsidiaries of foreign companies. Just because the subsidiaries were chartered by the state doesn't mean they didn't have more power than the state.
    - dragonwriter 8y ago
      > Legally, yes. Politically, it's more complicated. The banana republics were largely run by the domestic subsidiaries of foreign companies. Just because the subsidiaries were chartered by the state doesn't mean they didn't have more power than the state. That was an exercise of state power (often quite directly, with implicit or explicit threat, and in some cases direct application, of conventional state power), just not exclusively of the state chartering the local subsidiary, often instead the one chartering the parent. EDIT: But there is the point that, especially in a weaker government, the private power of people (foreign or not, individual or corporate themselves) that own a corporation may be more relevant than government power in determining the power of that corporation; that's not really about the power of corporations as such, though.
logfromblammo 8y ago
"Natural monopolies" are impermanent. They fluctuate between states of monopoly and states of competitiveness. While there will be times when a single firm serves the market unchallenged, there will also be times when the market is not served by any firm, and times when multiple firms are competing to be the sole survivor. The de jure monopoly is therefore instituted to prevent the former, at the expense of the latter. According to microeconomic theory, a natural unprotected monopoly has to operate at a different price point than a legally protected monopoly, because attempting to operate at that point invites new firms to enter and attempt to unseat the incumbent. It therefore follows that every natural monopolist will attempt to seek legal protection for their monopoly, and would be willing to pay up to the marginal amount of profit between the price points of natural and protected monopoly in order to acquire or retain that protection. Where the legal framework is not available, the monopolist firm can just hire a brute squad to take out upstart competitors. So because there is a real economic difference between protected monopoly and natural competitive monopoly, the mere possibility of protected monopoly is a source of political corruption. And once corruption has taken root, every natural monopoly can then invest in its own protection, even where such protection might not be needed, because protected monopolies can charge higher prices, which is all (economic) profit.
- FloatingVertex 8y ago
  If the cost to enter the market is very high a monoply can portect itself simply by there being implicit knowldege that a competitor entering the market will result in the monopoly lowering their prices temorairly. With a high cost to enter + high risk of failure + low returns even if the monopoly is broken, a monopoly can protect itself effectively without the help of a state.
  - logfromblammo 8y ago
    The entry of a new competitor could also cause both the incumbent monopolist and the challenger to fail, if the monopolist hasn't kept a deep enough war chest filled, for weathering such challenges. But why keep a war chest, when you could use the same funds to greater effect by buying political protection and distributing the remainder to the owners? While it is possible to effectively protect a monopoly without help, appropriating the machinery of the state where possible is much more efficient. As I mentioned previously, where the state cannot be used, the company could hire a gang to burn down competitor capital more cheaply than trying to duke it out in a fair fight on the open market. If you're DeBeers, and someone opens a diamond mine that threatens your cartel in a place with little law enforcement, your carrot is a buyout offer, and your stick is murdering key personnel and destroying vital equipment using "security contractors". You don't need to lower prices, if you can make the new guy go bankrupt without ever bringing anything to market.
sharkmerry 8y ago
I dont disagree with any of these points but I am curious. Would DeBeers monopoly on diamonds count as not backed by a state? Reading their history, it seems like rhodes got lucky and reinvested.
- pitaj 8y ago
  I'd count DeBeers as statist in origin, even though they aren't really a monopoly IMO. The fact is that diamond supply has been under the control of warlords and other statist factions for a long time. I'd say that counts.
  - repsilat 8y ago
    > they aren't really a monopoly Yeah, this is more an example of monopolies naturally eroding. DeBeers held prices above equilibrium, and other players entered the market and now they don't have a stranglehold on it. (The extent of their hold on it was played up by journalists anyway...)
    - deleted 8y ago
      [deleted]
peisistratos 8y ago
I think there is a correlation, but it could run the other way - the means of production coming more and more into the hands of monopolies might have the result of the government growing as well.
- pitaj 8y ago
  I think it works both ways in a positive feedback loop. Corporations have an interest in using state power against competition, and Statists will increase state power to "keep corporations under control" with anti-trust and whatnot.
gammateam 8y ago
There were monopolies before the New Deal's expansion of the federal government in the 1930s. Antitrust law is based around those early 1900s monopolies. It doesn't necessarily disprove your correlation, but its food for thought.
- pitaj 8y ago
  Can you give a few examples? I imagine you're talking about steel, railroads, oil, and maybe Ma Bell? Those monopolies either weren't bad for consumers, or were consequences of government action.
  - AnimalMuppet 8y ago
    Electric utilities. They existed, if I understand correctly, before there were government regulations, and the government regulations formed in response to the electric monopolies.
    - pitaj 8y ago
      Any citations for that? I know this is the narrative, that monopolies happened and were bad, so regulations were formed reactively. But I haven't ever seen evidence that this was what happened. As far as I can tell, people just thought it was what would happen, so they proactively did so.
      - AnimalMuppet 8y ago
        Best I could find on short notice is the history of the California Public Utilities Commission (https://en.wikipedia.org/wiki/California_Public_Utilities_Commission https://en.wikipedia.org/wiki/California_Public_Utilities_Co...). It originated in the desire to control the power of the Southern Pacific Railroad, which had a stranglehold on transportation in California, and used it to squeeze all the money out. That is, first the monopoly (on efficient transportation) happened, then abuse happened, then outrage happened, then regulation happened. Note that anybody could have built a competing railroad... but it hadn't happened.
aylmao 8y ago
> Never have I seen evidence of a lasting consumer-hostile monopoly that existed without the involvement of the State. As far as I can tell, natural monopolies are a myth grown from mistaken economic theory. I disagree, not with your premise but with this conclusion, because there's also little evidence of monopolies that broke down without involvement from the state. One also has to consider industries and states are all different. In a country like the US with a codified anti-monopoly law, yeah, you need collusion with the state to turn the blind eye. But precisely cause this anti-monopoly law exists, it's that monopolies HAVE been broken down, by the state. There's industries like software where a random developer can create something that grows into a huge corporation, or a OSS project that completely changes the industry, etc. because the cost of entry is so low. But there's also industries that are ridiculously hard to get into and require massive investments that only other big companies can make. The free market IS rich-gets-richer territory.
- pitaj 8y ago
  > there's also little evidence of monopolies that broke down without involvement from the state That's not evidence that anti-trust laws are necessary. > monopolies HAVE been broken down My premise is that those monopolies existed as a result of state involvement in the first place. You can't use the existence of anti-trust law as evidence that it's necessary. You must give evidence that monopolies which existed before anti-trust were bad for consumers. You must also show that those monopolies weren't created by other government actions (the solution in those cases would be to just reverse such government action, not anti-trust). > ridiculously hard to get into and require massive investments that only other big companies can make The capital barrier-to-entry argument is exactly what I was referring to by "mistaken economic theory". Competition doesn't just stop happening because it's expensive. You gave the solution yourself: cross-industry competition. Capital gains from one industry flow into competition in others. Only in a situation where one company controlled a majority of the industries in the economy would preventing competition would possible. And such a firm would be hugely inefficient. > free market IS rich-gets-richer territory Getting richer requires risk. Risk is often rewarded, but risk goes both ways. Also, there's no evidence that the free market is any worse in this aspect than other systems.
hristov 8y ago
Do you even know what a natural monopoly is? Have you ever seen anywhere in the world where the business of a natural monopoly is actually not a monopoly? Is there anywhere in the world where a can buy a house and can have 5 different companies with 5 different sets of pipes attached to my house in fierce competition with each other offering me water service? I would really like to check out such a place. This is one of the things that is really annoying about economics. Because the result of economics depends on money, even the simplest most obvious things will be disputed. In physics nobody will seriously say that gravity on Earth makes things fly up, but boy in economics there will be an endless supply of serious scholars writing books and articles and earnestly arguing on TV shows that up is down and down is up. Because of course if you convince people that up is down and down is up in economics, you can get really rich. If you can convince the public that there is no such thing as a natural monopoly, there will still be natural monopolies but they won't be treated as such by the government, and then you have a license to print money.
- malvosenior 8y ago
  Utilities are heavily regulated by the state so you're not really refuting the parent's point. They didn't say that we should get rid of the government and industries it's propping up. They said that you can't have a monopoly without government support and your example reinforces that. For example, if there was no regulation of water utilities, anyone could just put a big tank on their property (bought from anywhere) and hire any number of water supply companies to come fill it. To the best of my knowledge this isn't legal due to numerous laws and regulations.
  - empath75 8y ago
    Sure you can. That's what bottled water delivery is. We have that now. I've been to places where the government doesn't or can't regulate water delivery and perhaps not coincidentally, you also can't drink the water.
    - malvosenior 8y ago
      I agree that the situation we have now provides healthy water reliably (normally). The point the OP was trying to make isn't that monopolies always provide a bad result, it's that they exist due to government backing and regulation.
deleted 8y ago
[deleted]
nitwit005 8y ago
> consumer-hostile monopolies cannot exist for any substantial amount of time without the backing of the State AT&T creates the first phone network. No one can use their network because it's their property, and the phones installed in people's homes are also owned by AT&T, rented by consumers. How is competition going to appear? I suppose you could say the state is enforcing property laws, but even in the absence of functional governments people often prevent theft (there was a time before police, after all).
- pitaj 8y ago
  Ma Bell was a monopoly created by the federal government. It probably would have happened like this: - phone is invented - consumers want it - AT&T starts in one city, other companies start up in other cities - eventually people want to speak between cities - different phone companies start networking with each other to provide that service - AT&T has old infrastructure in the city where they started and consumers aren't happy, so one of AT&Ts competitors goes into that city and starts setting up a newer network that's higher quality and so on, and so forth
  - nitwit005 8y ago
    It wasn't created by the federal government, and it did start locally in a single city. The city was New Haven, Connecticut. I believe other cities were initially franchises. Regardless, you see the exact same thing happen with railroads, with them holding monopolies on the rail lines they built (sometimes with incompatible rail).
    - ghostwriter 8y ago
      AT&T wasn't created by the government, yet there was a government intervention into the market, led by nationalisation. " Around 1917, the idea that everyone in the country should have phone service and that the government should promote that began being discussed in government. AT&T agreed, saying in a 1917 annual report: "A combination of like activities under proper control and regulation, the service to the public would be better, more progressive, efficient, and economical than competitive systems." In 1918 the federal government nationalized the entire telecommunications industry, with national security as the stated intent. Rates were regulated so that customers in large cities would pay higher rates to subsidize those in more remote areas. Vail was appointed to manage the telephone system with AT&T being paid a percentage of the telephone revenues. " https://en.wikipedia.org/wiki/History_of_AT%26T#Monopoly https://en.wikipedia.org/wiki/History_of_AT%26T#Monopoly
rayiner 8y ago
Your analysis is completely unmoored from history. The scope of government authority today is the lowest it's been since the 1940s. Back then government agencies would use a few pages of broadly-worded statutes and regulations to impose sweeping controls: setting prices, telling airlines what routes they could fly and trucks what routes they could drive, telling telecoms where they could build wires. Government agencies today have to invoke thousands of pages of regulations just to achieve the most minor ends. The Interstate Commerce Commission had vastly greater powers than any of the three-letter agencies that replaced it. This is true not just in the U.S., but in Europe as well. Yet, despite the entire Western world being at the tail end of a decades-long process of deregulation, corporations are bigger than ever. That's not because of the State, it's because of technology. Amazon, Microsoft, Apple, Google--all are the result of massive economies of scale enabled by technology. Amazon isn't monopolizing retail because the State is giving it special privileges. It is doing so because smaller retailers cannot compete with Amazon's nationwide logistical infrastructure and footprint.
VikingCoder 8y ago
I'm curious why you added "limited liability." I think any liability is tied to the power of the State. You are, after all, being found liable through the legal process (probably the courts.) On your last point, one natural monopoly that thrived completely independent of any States, is the monopoly of force exerted by Warlords over their domains. Given the choice between Warlords and a State Government, I chose a State Government, even with all its other problems. Hopefully the government is reasonably democratic, and a nation of laws.
- pitaj 8y ago
  Limited liability refers to the privilege that firms gain when they are sanctioned by the State. This privilege is characterized as the owners (shareholders) of the corporation not being liable for the actions of the corporation. This is a creation of the state. Without LL, destructive corporate actions could result in suits against the shareholders or at least the operators of the company. Shareholders would like to limit the risk they take, so they would be likely to pressure firms to act more carefully. With LL, firms can take whatever risk they want, and the only consequences stockholders see is if the stock price of the company falls.
  - VikingCoder 8y ago
    ...and the other point? That yes, there are natural monopolies: Warlords. Curious about your thoughts on that?
    - pitaj 8y ago
      My views on the warlords question mostly follow this article: https://mises.org/library/wouldnt-warlords-take-over https://mises.org/library/wouldnt-warlords-take-over In addition to that, the idea that a state arises to prevent warlords is fantasy. In reality, warlords evolve to become the state as they legitimize their position as rulers.
      - VikingCoder 8y ago
zjaffee 8y ago
This is absolutely not true, corporations in the absence of state power could simply hire paramilitary forces to do whatever is necessary to get ahead. Stateless capitalism would very quickly become something akin to feudalism. Just because it's true that certain regulations create economic minimums that prevent new entrants into the market doesn't mean that this is the sole thing that causes monopolies, as immense vertical integration can lower costs to the point where only the largest organizations can provide services at said lowest margin. The problem only becomes bigger once they prevent new entrants, and begin to raise prices since there is no competition.
- ghostwriter 8y ago
  The essence of a state is to hold a monopoly on physical force, so there's no other agent in the market providing coercion to whoever is willing to pay for it. Without this, any market that has multiple agents providing force-as-a-service based on their own code of rules, ceases to exist in a matter of weeks and simply becomes a territory of gang-rule. The state has to hold a monopoly on coercion. Once this monopoly on coercion is secured before the state, the state's only responsibility regarding the markets comes down to enforcing property rights and establishing a system of courts and judical practices to resolve disputes between free agents in the market. If such a government later decides to enter the market through nationalising industries, and/or establishing state-controlled for-profit organisations, and/or rationing/licensing entries to individual professions, it starts exercising coercion in the field of voluntarily trading agents, thus skewing competition in favor of those who is willing and is able to make deals with policy-makers. And once there's a regulation in favor of one of the players in the market, there's hardly any way for their competitors to outperform them, but to go to other policy-makers that might help to pass another set of regulations that would potentially harm the first player. And this is how monopolies are created in the first place - in the end, there's going to be a dominant player that has used all the opportunities to squeeze competition from the market through various regulations that work handy for their particular business, and at the same time prevent any other new player to enter the competition, even if they have enough money for it - precisely because they have to comply with the government regulations that already benefit the monopoly.
amelius 8y ago
Yes, and of course other countries than the US will do little to keep their companies in check, so they can compete with the companies of other nations. So this is a problem that crosses borders, and thus we probably can't solve it.
rndmize 8y ago
I have a hard time finding a single statement in your comment I agree with. > The power of monopolies and indeed of corporations in general is directly tied to the power of the State. That's a big claim with zero evidence. It would certainly seem that the lack of strong national government and insufficient power at the state level was what lead to powerful corporations/trusts like Standard Oil. > It's no surprise to those who understand this that, as the federal government has grown in size, strength, and scope, corporations have followed. My understanding of the Gilded Age was that corporations were only stopped because laws were passed at the federal level after monopolies had already become a problem and caused pushback from voters. eg. > In 1890, Congress passed the Sherman Antitrust Act, which made it illegal to monopolize or restrain (or attempt to do so) interstate commerce. On the basis of this Act, the United States filed a suit against five sugar manufacturing companies to keep them from merging after one firm purchased the stock of the other four (E.C. Knight Co. was one of the four firms bought out). The American Sugar Refining Company had gained control over 98 percent of the sugar refining business in the United States in this way and was considered a monopoly. ( http://landmarkcases.org/en/Page/401/How_Interpretation_of_the_Commerce_Power_Has_Changed_over_Time http://landmarkcases.org/en/Page/401/How_Interpretation_of_t... ) Further, I don't think there was a notable increase of federal government until the Depression and New Deal era, followed by significant military expansion before, during and after WW2. Arguably there was major growth in the 60s and 70s (HUD, DoT, DoE, DoEd, EPA, etc.) But I feel it's fairly clear that government size and corporate size change largely independently. > In fact, I'd go so far as to say that consumer-hostile monopolies cannot exist for any substantial amount of time without the backing of the State. You're moving the goalposts here, changing from discussions of monopolies in general to "consumer-hostile" monopolies. Further, I'd expect you're still wrong even here. Consumers might accept hostile monopoly situations if there's simply no alternative, ie, places where it's not cost effective for a company to build out to a rural location. Even if the service is bad for your power/telecom situation in some rural location, there simply might not be an alternative, aside from not getting that service. > As far as I can tell, natural monopolies are a myth grown from mistaken economic theory. I don't really know what to say to this. If you can look at the mechanics of road, power and telecom construction/distribution and say that natural monopolies don't exist, then clearly we must have wildly different understandings of the term.

by pitaj 8y ago

tonyedgecombe 8y ago

Perhaps it's a sign of weak government, a strong government wouldn't allow monopolistic behaviour and America hasn't in the past.

openbasic 8y ago
Do you happen to have a recipe for a corruption-free government? Please share.
- pitaj 8y ago
  A litany of angels
- RandomTisk 8y ago
  Easy first step: prosecute criminals even if they're in your own political party and especially if they aren't little people.
  - AnimalMuppet 8y ago
    Step zero is then to get people in power who are willing to do that. How do you propose we go about that step?
- tonyedgecombe 8y ago
  You don't need to go far back in history to see when the US government broke up monopolies.
- jryan49 8y ago
  Make lobbying illegal, and make representatives more accountable to their constituents? Decentralize the government more, and make it more state and local instead of federal?

danharaj 8y ago

https://en.wikipedia.org/wiki/Hanseatic_League https://en.wikipedia.org/wiki/Hanseatic_League

kadendogthing 8y ago

>The power of monopolies and indeed of corporations in general is directly tied to the power of the State. No it isn't. This flies in the face of basic economics, and even worse, very much "in your face" evidence we have if you look at nations across the world. Weak governments continually fall victim/enable private entities. Governments that have power to withstand those pressures have regulatory teeth (i.e. big government). There isn't any model, theoretically or by experience, where in monopolies exist in a system without sufficient state powers. There hasn't ever been a time where monopolies were not directly handled by exercising state powers. You will find monopolies across history and the present that only exist because of the inaction/inability of states to do anything about it. The existence of monopolies is very much in fact a direct symptom of weak/dysfunctional governments. Read something else besides Ayn Rand.

dragonwriter 8y ago
> > The power of monopolies and indeed of corporations in general is directly tied to the power of the State. > No it isn't. Yes, it is for corporations (monopolies are a more complex question.) Corporations are creations of the state; everything done through them is an exercise of state power.
- JumpCrisscross 8y ago
  > corporations are creations of the state; everything done through them is an exercise of state power Legally, yes. Politically, it's more complicated. The banana republics were largely run by the domestic subsidiaries of foreign companies. Just because the subsidiaries were chartered by the state doesn't mean they didn't have more power than the state.
  - dragonwriter 8y ago
    > Legally, yes. Politically, it's more complicated. The banana republics were largely run by the domestic subsidiaries of foreign companies. Just because the subsidiaries were chartered by the state doesn't mean they didn't have more power than the state. That was an exercise of state power (often quite directly, with implicit or explicit threat, and in some cases direct application, of conventional state power), just not exclusively of the state chartering the local subsidiary, often instead the one chartering the parent. EDIT: But there is the point that, especially in a weaker government, the private power of people (foreign or not, individual or corporate themselves) that own a corporation may be more relevant than government power in determining the power of that corporation; that's not really about the power of corporations as such, though.

logfromblammo 8y ago

"Natural monopolies" are impermanent. They fluctuate between states of monopoly and states of competitiveness. While there will be times when a single firm serves the market unchallenged, there will also be times when the market is not served by any firm, and times when multiple firms are competing to be the sole survivor. The de jure monopoly is therefore instituted to prevent the former, at the expense of the latter. According to microeconomic theory, a natural unprotected monopoly has to operate at a different price point than a legally protected monopoly, because attempting to operate at that point invites new firms to enter and attempt to unseat the incumbent. It therefore follows that every natural monopolist will attempt to seek legal protection for their monopoly, and would be willing to pay up to the marginal amount of profit between the price points of natural and protected monopoly in order to acquire or retain that protection. Where the legal framework is not available, the monopolist firm can just hire a brute squad to take out upstart competitors. So because there is a real economic difference between protected monopoly and natural competitive monopoly, the mere possibility of protected monopoly is a source of political corruption. And once corruption has taken root, every natural monopoly can then invest in its own protection, even where such protection might not be needed, because protected monopolies can charge higher prices, which is all (economic) profit.

FloatingVertex 8y ago
If the cost to enter the market is very high a monoply can portect itself simply by there being implicit knowldege that a competitor entering the market will result in the monopoly lowering their prices temorairly. With a high cost to enter + high risk of failure + low returns even if the monopoly is broken, a monopoly can protect itself effectively without the help of a state.
- logfromblammo 8y ago
  The entry of a new competitor could also cause both the incumbent monopolist and the challenger to fail, if the monopolist hasn't kept a deep enough war chest filled, for weathering such challenges. But why keep a war chest, when you could use the same funds to greater effect by buying political protection and distributing the remainder to the owners? While it is possible to effectively protect a monopoly without help, appropriating the machinery of the state where possible is much more efficient. As I mentioned previously, where the state cannot be used, the company could hire a gang to burn down competitor capital more cheaply than trying to duke it out in a fair fight on the open market. If you're DeBeers, and someone opens a diamond mine that threatens your cartel in a place with little law enforcement, your carrot is a buyout offer, and your stick is murdering key personnel and destroying vital equipment using "security contractors". You don't need to lower prices, if you can make the new guy go bankrupt without ever bringing anything to market.

sharkmerry 8y ago

I dont disagree with any of these points but I am curious. Would DeBeers monopoly on diamonds count as not backed by a state? Reading their history, it seems like rhodes got lucky and reinvested.

pitaj 8y ago
I'd count DeBeers as statist in origin, even though they aren't really a monopoly IMO. The fact is that diamond supply has been under the control of warlords and other statist factions for a long time. I'd say that counts.
- repsilat 8y ago
  > they aren't really a monopoly Yeah, this is more an example of monopolies naturally eroding. DeBeers held prices above equilibrium, and other players entered the market and now they don't have a stranglehold on it. (The extent of their hold on it was played up by journalists anyway...)
  - deleted 8y ago
    [deleted]

peisistratos 8y ago

I think there is a correlation, but it could run the other way - the means of production coming more and more into the hands of monopolies might have the result of the government growing as well.

pitaj 8y ago
I think it works both ways in a positive feedback loop. Corporations have an interest in using state power against competition, and Statists will increase state power to "keep corporations under control" with anti-trust and whatnot.

gammateam 8y ago

There were monopolies before the New Deal's expansion of the federal government in the 1930s. Antitrust law is based around those early 1900s monopolies. It doesn't necessarily disprove your correlation, but its food for thought.

pitaj 8y ago
Can you give a few examples? I imagine you're talking about steel, railroads, oil, and maybe Ma Bell? Those monopolies either weren't bad for consumers, or were consequences of government action.
- AnimalMuppet 8y ago
  Electric utilities. They existed, if I understand correctly, before there were government regulations, and the government regulations formed in response to the electric monopolies.
  - pitaj 8y ago
    Any citations for that? I know this is the narrative, that monopolies happened and were bad, so regulations were formed reactively. But I haven't ever seen evidence that this was what happened. As far as I can tell, people just thought it was what would happen, so they proactively did so.
    - AnimalMuppet 8y ago
      Best I could find on short notice is the history of the California Public Utilities Commission (https://en.wikipedia.org/wiki/California_Public_Utilities_Commission https://en.wikipedia.org/wiki/California_Public_Utilities_Co...). It originated in the desire to control the power of the Southern Pacific Railroad, which had a stranglehold on transportation in California, and used it to squeeze all the money out. That is, first the monopoly (on efficient transportation) happened, then abuse happened, then outrage happened, then regulation happened. Note that anybody could have built a competing railroad... but it hadn't happened.

aylmao 8y ago

> Never have I seen evidence of a lasting consumer-hostile monopoly that existed without the involvement of the State. As far as I can tell, natural monopolies are a myth grown from mistaken economic theory. I disagree, not with your premise but with this conclusion, because there's also little evidence of monopolies that broke down without involvement from the state. One also has to consider industries and states are all different. In a country like the US with a codified anti-monopoly law, yeah, you need collusion with the state to turn the blind eye. But precisely cause this anti-monopoly law exists, it's that monopolies HAVE been broken down, by the state. There's industries like software where a random developer can create something that grows into a huge corporation, or a OSS project that completely changes the industry, etc. because the cost of entry is so low. But there's also industries that are ridiculously hard to get into and require massive investments that only other big companies can make. The free market IS rich-gets-richer territory.

pitaj 8y ago
> there's also little evidence of monopolies that broke down without involvement from the state That's not evidence that anti-trust laws are necessary. > monopolies HAVE been broken down My premise is that those monopolies existed as a result of state involvement in the first place. You can't use the existence of anti-trust law as evidence that it's necessary. You must give evidence that monopolies which existed before anti-trust were bad for consumers. You must also show that those monopolies weren't created by other government actions (the solution in those cases would be to just reverse such government action, not anti-trust). > ridiculously hard to get into and require massive investments that only other big companies can make The capital barrier-to-entry argument is exactly what I was referring to by "mistaken economic theory". Competition doesn't just stop happening because it's expensive. You gave the solution yourself: cross-industry competition. Capital gains from one industry flow into competition in others. Only in a situation where one company controlled a majority of the industries in the economy would preventing competition would possible. And such a firm would be hugely inefficient. > free market IS rich-gets-richer territory Getting richer requires risk. Risk is often rewarded, but risk goes both ways. Also, there's no evidence that the free market is any worse in this aspect than other systems.

hristov 8y ago

Do you even know what a natural monopoly is? Have you ever seen anywhere in the world where the business of a natural monopoly is actually not a monopoly? Is there anywhere in the world where a can buy a house and can have 5 different companies with 5 different sets of pipes attached to my house in fierce competition with each other offering me water service? I would really like to check out such a place. This is one of the things that is really annoying about economics. Because the result of economics depends on money, even the simplest most obvious things will be disputed. In physics nobody will seriously say that gravity on Earth makes things fly up, but boy in economics there will be an endless supply of serious scholars writing books and articles and earnestly arguing on TV shows that up is down and down is up. Because of course if you convince people that up is down and down is up in economics, you can get really rich. If you can convince the public that there is no such thing as a natural monopoly, there will still be natural monopolies but they won't be treated as such by the government, and then you have a license to print money.

malvosenior 8y ago
Utilities are heavily regulated by the state so you're not really refuting the parent's point. They didn't say that we should get rid of the government and industries it's propping up. They said that you can't have a monopoly without government support and your example reinforces that. For example, if there was no regulation of water utilities, anyone could just put a big tank on their property (bought from anywhere) and hire any number of water supply companies to come fill it. To the best of my knowledge this isn't legal due to numerous laws and regulations.
- empath75 8y ago
  Sure you can. That's what bottled water delivery is. We have that now. I've been to places where the government doesn't or can't regulate water delivery and perhaps not coincidentally, you also can't drink the water.
  - malvosenior 8y ago
    I agree that the situation we have now provides healthy water reliably (normally). The point the OP was trying to make isn't that monopolies always provide a bad result, it's that they exist due to government backing and regulation.

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nitwit005 8y ago

> consumer-hostile monopolies cannot exist for any substantial amount of time without the backing of the State AT&T creates the first phone network. No one can use their network because it's their property, and the phones installed in people's homes are also owned by AT&T, rented by consumers. How is competition going to appear? I suppose you could say the state is enforcing property laws, but even in the absence of functional governments people often prevent theft (there was a time before police, after all).

pitaj 8y ago
Ma Bell was a monopoly created by the federal government. It probably would have happened like this: - phone is invented - consumers want it - AT&T starts in one city, other companies start up in other cities - eventually people want to speak between cities - different phone companies start networking with each other to provide that service - AT&T has old infrastructure in the city where they started and consumers aren't happy, so one of AT&Ts competitors goes into that city and starts setting up a newer network that's higher quality and so on, and so forth
- nitwit005 8y ago
  It wasn't created by the federal government, and it did start locally in a single city. The city was New Haven, Connecticut. I believe other cities were initially franchises. Regardless, you see the exact same thing happen with railroads, with them holding monopolies on the rail lines they built (sometimes with incompatible rail).
  - ghostwriter 8y ago
    AT&T wasn't created by the government, yet there was a government intervention into the market, led by nationalisation. " Around 1917, the idea that everyone in the country should have phone service and that the government should promote that began being discussed in government. AT&T agreed, saying in a 1917 annual report: "A combination of like activities under proper control and regulation, the service to the public would be better, more progressive, efficient, and economical than competitive systems." In 1918 the federal government nationalized the entire telecommunications industry, with national security as the stated intent. Rates were regulated so that customers in large cities would pay higher rates to subsidize those in more remote areas. Vail was appointed to manage the telephone system with AT&T being paid a percentage of the telephone revenues. " https://en.wikipedia.org/wiki/History_of_AT%26T#Monopoly https://en.wikipedia.org/wiki/History_of_AT%26T#Monopoly

rayiner 8y ago

Your analysis is completely unmoored from history. The scope of government authority today is the lowest it's been since the 1940s. Back then government agencies would use a few pages of broadly-worded statutes and regulations to impose sweeping controls: setting prices, telling airlines what routes they could fly and trucks what routes they could drive, telling telecoms where they could build wires. Government agencies today have to invoke thousands of pages of regulations just to achieve the most minor ends. The Interstate Commerce Commission had vastly greater powers than any of the three-letter agencies that replaced it. This is true not just in the U.S., but in Europe as well. Yet, despite the entire Western world being at the tail end of a decades-long process of deregulation, corporations are bigger than ever. That's not because of the State, it's because of technology. Amazon, Microsoft, Apple, Google--all are the result of massive economies of scale enabled by technology. Amazon isn't monopolizing retail because the State is giving it special privileges. It is doing so because smaller retailers cannot compete with Amazon's nationwide logistical infrastructure and footprint.

VikingCoder 8y ago

I'm curious why you added "limited liability." I think any liability is tied to the power of the State. You are, after all, being found liable through the legal process (probably the courts.) On your last point, one natural monopoly that thrived completely independent of any States, is the monopoly of force exerted by Warlords over their domains. Given the choice between Warlords and a State Government, I chose a State Government, even with all its other problems. Hopefully the government is reasonably democratic, and a nation of laws.

pitaj 8y ago
Limited liability refers to the privilege that firms gain when they are sanctioned by the State. This privilege is characterized as the owners (shareholders) of the corporation not being liable for the actions of the corporation. This is a creation of the state. Without LL, destructive corporate actions could result in suits against the shareholders or at least the operators of the company. Shareholders would like to limit the risk they take, so they would be likely to pressure firms to act more carefully. With LL, firms can take whatever risk they want, and the only consequences stockholders see is if the stock price of the company falls.
- VikingCoder 8y ago
  ...and the other point? That yes, there are natural monopolies: Warlords. Curious about your thoughts on that?
  - pitaj 8y ago
    My views on the warlords question mostly follow this article: https://mises.org/library/wouldnt-warlords-take-over https://mises.org/library/wouldnt-warlords-take-over In addition to that, the idea that a state arises to prevent warlords is fantasy. In reality, warlords evolve to become the state as they legitimize their position as rulers.
    - VikingCoder 8y ago

zjaffee 8y ago

This is absolutely not true, corporations in the absence of state power could simply hire paramilitary forces to do whatever is necessary to get ahead. Stateless capitalism would very quickly become something akin to feudalism. Just because it's true that certain regulations create economic minimums that prevent new entrants into the market doesn't mean that this is the sole thing that causes monopolies, as immense vertical integration can lower costs to the point where only the largest organizations can provide services at said lowest margin. The problem only becomes bigger once they prevent new entrants, and begin to raise prices since there is no competition.

ghostwriter 8y ago
The essence of a state is to hold a monopoly on physical force, so there's no other agent in the market providing coercion to whoever is willing to pay for it. Without this, any market that has multiple agents providing force-as-a-service based on their own code of rules, ceases to exist in a matter of weeks and simply becomes a territory of gang-rule. The state has to hold a monopoly on coercion. Once this monopoly on coercion is secured before the state, the state's only responsibility regarding the markets comes down to enforcing property rights and establishing a system of courts and judical practices to resolve disputes between free agents in the market. If such a government later decides to enter the market through nationalising industries, and/or establishing state-controlled for-profit organisations, and/or rationing/licensing entries to individual professions, it starts exercising coercion in the field of voluntarily trading agents, thus skewing competition in favor of those who is willing and is able to make deals with policy-makers. And once there's a regulation in favor of one of the players in the market, there's hardly any way for their competitors to outperform them, but to go to other policy-makers that might help to pass another set of regulations that would potentially harm the first player. And this is how monopolies are created in the first place - in the end, there's going to be a dominant player that has used all the opportunities to squeeze competition from the market through various regulations that work handy for their particular business, and at the same time prevent any other new player to enter the competition, even if they have enough money for it - precisely because they have to comply with the government regulations that already benefit the monopoly.

amelius 8y ago

Yes, and of course other countries than the US will do little to keep their companies in check, so they can compete with the companies of other nations. So this is a problem that crosses borders, and thus we probably can't solve it.

rndmize 8y ago

I have a hard time finding a single statement in your comment I agree with. > The power of monopolies and indeed of corporations in general is directly tied to the power of the State. That's a big claim with zero evidence. It would certainly seem that the lack of strong national government and insufficient power at the state level was what lead to powerful corporations/trusts like Standard Oil. > It's no surprise to those who understand this that, as the federal government has grown in size, strength, and scope, corporations have followed. My understanding of the Gilded Age was that corporations were only stopped because laws were passed at the federal level after monopolies had already become a problem and caused pushback from voters. eg. > In 1890, Congress passed the Sherman Antitrust Act, which made it illegal to monopolize or restrain (or attempt to do so) interstate commerce. On the basis of this Act, the United States filed a suit against five sugar manufacturing companies to keep them from merging after one firm purchased the stock of the other four (E.C. Knight Co. was one of the four firms bought out). The American Sugar Refining Company had gained control over 98 percent of the sugar refining business in the United States in this way and was considered a monopoly. ( http://landmarkcases.org/en/Page/401/How_Interpretation_of_the_Commerce_Power_Has_Changed_over_Time http://landmarkcases.org/en/Page/401/How_Interpretation_of_t... ) Further, I don't think there was a notable increase of federal government until the Depression and New Deal era, followed by significant military expansion before, during and after WW2. Arguably there was major growth in the 60s and 70s (HUD, DoT, DoE, DoEd, EPA, etc.) But I feel it's fairly clear that government size and corporate size change largely independently. > In fact, I'd go so far as to say that consumer-hostile monopolies cannot exist for any substantial amount of time without the backing of the State. You're moving the goalposts here, changing from discussions of monopolies in general to "consumer-hostile" monopolies. Further, I'd expect you're still wrong even here. Consumers might accept hostile monopoly situations if there's simply no alternative, ie, places where it's not cost effective for a company to build out to a rural location. Even if the service is bad for your power/telecom situation in some rural location, there simply might not be an alternative, aside from not getting that service. > As far as I can tell, natural monopolies are a myth grown from mistaken economic theory. I don't really know what to say to this. If you can look at the mechanics of road, power and telecom construction/distribution and say that natural monopolies don't exist, then clearly we must have wildly different understandings of the term.