The Monopolization of America

Only tangentially. I recently finished Pikkety's "Capital" and found it very much to be (as you said) about observed behavior not theory. His primary discussion is about labor vs capital return split of output (and its resulting effect on individual inequality). He does discuss observed economies of scale for returns on capital which could have monopolistic effects. (aka returns on 1 million might be 5% but for 100 million might be 7%)

Only anecdotally: a couple Korean tire companies (Kumho, Hankook) I had never previously heard of started showing up in the U.S. in the past decade or two. They are of high quality and at a lower price than the U.S. tire manufacturers.

So, foreign competition?

All industry is in a constant cycle of centralize/decentralize. There are benefits to both so when you are at one extreme you look to the other. There generally isn't a middle ground that is easy to find.

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.

> 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.

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.

"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.

> 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).

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.

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.

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.

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.

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.

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.

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

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_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.

This is why I didn't identify as liberal for a long time (even though I'm wildly socially liberal) - the more power the government has, the more it tends to wind up like that. Whether in the form of classic regulatory capture, the defense-industrial complex, or the student debt industry writing the law that covers itself... it's a troubling reality of "big govenment".

However at some point, the party representing the conservative movement (i.e., the Republicans) completely abandoned this pretense, instead becoming baldly corporatist. Everybody gets their hands dirty (post Citizens United, how can you not?) but the Republicans don't even pay lip service to that idea any more. The platform is more or less what's good for big companies must be good for America. It raises employment after all!

In that world, the one which we live in, the progressive movement (ie, the Democrats) starts to seem actually anti-corporate by comparison. Of course they have tons of their own issues and different corporate patrons, but in comparison they look great. Can you imagine a Republican saying the EPA should regulate CO2?

Another way to look at it - from a progressive point of view, regulatory capture and more powerful monopolies are an undesirable side effect of attempts at regulation and reigning in the power of these companies. From the view of today's conservative, it's a desirable outcome; bigger more powerful companies means a bigger more powerful America with better jobs and fewer shipped overseas. Let them trample individual rights because they'll either do it here or do it there, and if they do it here at least it's good for employment.

I think they meant "progressive" in the 1900-1910 sense, not in the 2010 sense.