
The Monopolization of America - NN88
https://www.nytimes.com/2018/11/25/opinion/monopolies-in-the-us.html
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nostromo
Low central bank interest rates may have played a part in big business
consolidation.

Large mega corps can borrow money at extremely low rates. Because of this
infinite access to capital, they can more easily acquire their competition.

Even if a company uses equity to purchase a competitor, they can counteract
the dilution with financed stock buy backs.

Money may be too cheap for big companies and too scarce for small companies.

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DCKing
Isn't monopolization an inevitable consequence of Pikkety's observed behaviour
that capital begets more capital and it's increasingly concentrating in fewer
places? Not only can concentrations of capital in private companies enable
them to gobble up smaller competition until there is nothing left, it also
enables them to control legislation over it.

I'm not sure if me observing this relation is correct, but if it is then
politics must be very strong to resist the trend. I sure hope it is.

~~~
petermcneeley
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%)

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roenxi
They aren't wrong about the timing. I cite bank mergers [0] as evidence, you
can see they start becoming the norm about 1981. The inflation-adjusted
numbers start exploding as well [1].

I'm a bit suspicious that the real advantage of large companies is more
assets, more faith and better access to credit. From an economic perspective,
I can recall many mergers and acquisitions that basically failed to make
money. But on the other hand, maybe a good merger is a very low key event, I
can name a few in tech specifically that worked - but usually that is because
the network effects of online businesses are absurdly important.

[0]
[https://en.wikipedia.org/wiki/List_of_bank_mergers_in_the_Un...](https://en.wikipedia.org/wiki/List_of_bank_mergers_in_the_United_States)

[1]
[https://en.wikipedia.org/wiki/List_of_largest_mergers_and_ac...](https://en.wikipedia.org/wiki/List_of_largest_mergers_and_acquisitions)

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dsfyu404ed
Anyone know why the tire industry (bottom line of the graph) bucked the trend
and decentralized over the time period displayed?

My educated guess would be that something happened that caused value priced
tires manufactured in Asia to suddenly increase in quality and capture some
market share from buyers who previously shunned them but I'm really not
familiar enough with the industry to put any confidence behind that claim.

~~~
JKCalhoun
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?

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MrTonyD
The concept of monopolies needs a complete overhaul. When I worked for Steve
Jobs we were more focused on differentiators, since a differentiator defined a
monopoly. You don't need to control an entire market or even be the major
player in a segment - you can charge high prices and extract obscene profit
from everyone if you have a good differentiator - especially if it is
something they need. In some circles, these are referred to as "effective
monopolies".

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pitaj
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.

~~~
hristov
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.

~~~
pitaj
Why would the incentive structure of competition suddenly disappear when
applied to utilities? Food and housing are equally inelastic and have high
barriers of entry, but we see competition there.

The water example you gave is an example of the government proactively
monopolizing such utilities. It's exactly what I was talking about.

Never have I seen evidence of water, power, etc naturally monopolizing and
being hostile to consumers. Firms just can't keep out competition without
state intervention.

~~~
hristov
Ok then give me an example. In the entire world there are places with weak
governments and with laissez faire governments. Is there any place where I can
buy a house with five different independent water delivery and sewage removal
systems attached to it?

If there isn't then you would have to rethink your theories don't you.

The fact of the matter is that there is such a thing as a natural monopoly and
just a cursory examination of the facts on the ground and the history of the
last 150 years or so will prove it.

~~~
pitaj
> there are places ... with laissez faire governments

Not really

> Is there any place where I can buy a house with five different independent
> water delivery and sewage removal systems attached to it?

I never claimed that it exists. I claimed it was possible. A thing doesn't
need to exist to be possible.

> The fact of the matter is that there is such a thing as a natural monopoly

Name some, then. Show me the evidence of all these natural monopolies which
cropped up on their own, taking advantage of consumers, and resulting in the
necessity of making them state utilities.

~~~
dannyobrien
I’m not sure it directly helps anyone’s argument here, but 5 minute’s
searching gave this study of water service in Nigeria, with a mixture of
public and private services competing to provide potable water using different
strategies.

[http://file.scirp.org/pdf/JWARP20120700002_74310948.pdf](http://file.scirp.org/pdf/JWARP20120700002_74310948.pdf)

I think two responses to this would be a) that sounds like terrible public
_and_ private provision, and b) the competing water providers don’t all use
pipes — they use boreholes, tankers, and rainwater collection, so they don’t
count. But that’s probably how competition against an apparent natural
monopoly would work: what might undermine Comcast, say, isn’t another cable
company digging up the road, but a wireless broadband provider, or some
technological alternative that circumvent the apparent advantages of the
monopolist.

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75dvtwin
From the article: >"America was born as “a nation of farmers and small-town
entrepreneurs,” the historian Richard Hofstadter once wrote, “anti-
authoritarian, egalitarian and competitive.” Hostility to corporate bigness
animated Thomas Jefferson and Teddy Roosevelt, as well as the labor movement,
Granger movement, Progressive movement and more. "

I disagree that Progressive Movement of today, is reflective of

> "America was born as “a nation of farmers and small-town entrepreneurs,”

Completely opposite, I think, what is called Progressive movement today -- is
completely Pro-Monopoly.

It is easier for a monopoly to lobby Federal government, it is easier for a
monopoly to litigate complex issues, it is easier for a monopoly to control
opinion of the masses.

Therefore, it is absolutely, more desirable for monopolies to have more power
concentrated within fewer individuals -- and that's done by making Federal
government more and more powerful.

Powerful monopolies a fuel for political corruption, by means adapting the
'veil of political-correctness' that hides bribery and money-laundry (through
well known means of: 'book signing', ' paid speeches', and 'charitable
foundations')

So the self-feeding, snow-balling cycle of power is 'larger federal
government' <\--> 'more powerful monopolies'

And today's progressive movement' is 'larger federal government' type of
ideas.

~~~
JimboOmega
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.

