By Rudolph Kohn
For all the claims made by socialists that capitalism produces monopolies, socialists argue for one big monopoly to control everything: the state.
@satoshiplanet this just happened to be in the newsletter today. Perhaps food for thought from our other discussion.
I've read it. I think the article contradicts itself, it claims monopolies only survive through state coercion, but its own examples seem to refute that: Standard Oil controlled the pipelines, the New River Company owned the water, and Jersey City and Newark were private monopolies, not concessions, the article admits it and moves on as if nothing happened.
I think it confuses two things: having a monopoly and charging monopoly prices: Amazon doesn't raise prices for consumers, it lowers them, but it keeps nearly half of every dollar a seller brings in, and pressures brands not to sell cheaper at Walmart or Target, it doesn't charge the monopoly, it administers it
The article, I think, measures abuse by what it costs, not by what it closes, the key line: "the only sure way to have a monopoly is for the state to give you one"`seems false to me, the sure way is to own what everyone needs, and then you don't need the state: you just need everyone else to have nowhere to go.
Recognizing this doesn't make me a socialist, it makes me someone who doesn't confuse a tool with an ideology. The market isn't a moral arbiter, it's a mechanism, and its failure seems to me to be concentration. The state's is coercion, NEITHER is neutral.
So thanks for the article, genuinely. It saved me from having to pick a side.
What I think you're over looking is that monopolies are self-defeating. That's the more interesting economic point. Market forces push against monopolies that arise from first-mover situations, as with Standard Oil.
I would say it's the persistence of a monopoly that requires state protections, in most cases, rather than the existence (which can just be a fleeting temporal artifact of having innovated new products).
Standard Oil didn't become a monopoly by capturing the state, it captured the state because it already was one
As I noted in the other discussion, Standard Oil was losing market share prior to the anti-trust intervention: i.e. market forces pushed against its "monopoly" (there were other providers in that market).
They had huge market share by innovating new products and production methods, which is a trivial and temporary way to be a monopoly that tells us nothing about market tendencies.
The market was correcting refining share, not control of transportation. And what good is competition in refining if everyone has to pay the toll on the same pipeline?
What good does there need to be, when prices came down because of Standard Oil's innovations?
What's the problem that needed to be solved by the state and what was stopping competitors from building their own pipelines? Also, there were other transportation options that weren't controlled by Standard Oil, so that wasn't a monopoly either.
Prices fell mostly before 1873, when Standard had no power yet, and during its dominance, refining patents stalled. Cheap product, locked door.
Standard, it bought land to block Tidewater's route, lobbied for exclusive charters, and sabotaged rivals.
Railroads charged Standard 10 cents per barrel and independents 35, then rebated Standard the difference. By 1900, Standard controlled 90% of pipeline investment, it wasn't one option, it was the option.
If the market was self-correcting, why did it take the Hepburn Amendment and the Supreme Court to open the door?