This is the final part of a trinity of posts on Lynn Stuart Parramore’s recent Atlernet article called “3 Things That Make Libertarian Heads Explode“. The first two posts in the series dealt with selective contentions about her thoughts regarding the libertarian attitude towards inequality and public goods. This one is about her thoughts on libertarianism and regulation. It will similarly quote a selected contention as the basis for a discussion. Let’s present the quotation:
Reality check: Markets are not invariably naturally competitive. In fact, many have a tendency to move toward harmful conditions like oligopoly, which turns them into anti-competitive entities.
The libertarian will try to say that oligopolies are the fault of government intervention. But there are plenty of examples to refute this. If you look at history, even at periods when governments have been quite limited and have served as little more than a night watchmen, you’ll find big, nasty oligopolies, like the 19th-century railroads, or steel. Today, we find computer operating systems (think Netscape and Microsoft) as examples of oligopolistic conditions.
Lynn Stuart Parramore is unaware of the previously cited revisionist history of Gabriel Kolko. Let’s quote his description of the anti-oligopolistic effects of even far from perfectly free market forces again. As Roy Childs prefaces his quotation of Gabriel Kolko in his essay “Big Business and the Rise of American Statism“:
As Gabriel Kolko demonstrates in his masterly The Triumph of Conservatism and in Railroads and Regulation, the dominant trend in the last three decades of the nineteenth century and the first two of the twentieth was not towards increasing centralization, but rather, despite the growing number of mergers and the growth in the overall size of many corporations,
He goes on to quote Gabriel Kolko:
toward growing competition. Competition was unacceptable to many key business and financial leaders, and the merger movement was to a large extent a reflection of voluntary, unsuccessful business efforts to bring irresistible trends under control. … As new competitors sprang up, and as economic power was diffused throughout an expanding nation, it became apparent to many important businessmen that only the national government could [control and stabilize] the economy. … Ironically, contrary to the consensus of historians, it was not the existence of monopoly which caused the federal government to intervene in the economy, but the lack of it.1
Her specific examples are also flawed. The transcontinental railroads of the 19th century involved massive land grants by the government. Microsoft benefits from IP protectionism. Neither of these are great examples of a natural oligopoly, unaided or supported by government. Both are actually prime examples of state capitalism.
She also ignores how regulation privileges established firms at the expense of newcomers who can’t meet the costs of regulation. They represent the forcible cartelization of industry and compulsory standardization. No more competitive pressure exists. This means that oligopolies are actually easier to establish, because there is no way to upset the market dominance of existing firms by out competing them. The status quo is forcibly maintained by the corporate influenced regulatory state Let’s embrace left-wing market anarchism and destroy concentrations of wealth!