The Making of Monopoly

Google made headlines again last week, this time countering criticisms that the company has achieved “monopoly power” versus its competitors, putting consumers at risk. The company’s chairman, Eric Schmidt, faced questioning by the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights.

In his testimony, responding to questions from US Senator Herb Kohl (D-WI), Schmidt admitted that his company is “in [the] area” of monopoly.

The word itself scares people and seems to offend the delicate principles that form “the American way” of competition and free enterprise. Government, many imagine, must protect these principles from the encroachments of greedy capitalists coveting a monopoly position.

But what is the source of monopoly power really? And further, does the state stand in to protect us from it, or does the state play some other, less benevolent role in the economy?

Nineteenth century Americans, particularly anarchists like Benjamin Tucker, entertained none of today’s groundless illusions about the power relationships existing between and linking influential corporate interests and the state. Rather they developed an accurate picture of the ways that the institutions of law and government sculpted the economic structure of society, allowing favored business actors to exploit the productive. Business and government, they understood, were seldom foes locked in battles over public policy, but more often allies in a project geared to building special privileges for entrenched commercial interests.

Attempting to outline what he saw as the most pervasive and significant forms of coercive state intervention in economic affairs, Tucker defined four “class monopolies.” Implicating the legal frameworks surrounding money, land, tariffs and patents, these monopolies stood opposite the “Manchester doctrine,” one of genuine laissez faire, without the state tipping the scales in favor of capital. Though Tucker detailed his four monopolies more than 120 years ago, his insights remain relevant, identifying a collusion that endures to this day.

Tucker argued that the most important monopoly, the one with the most “evil influence,” is the money monopoly. This privilege consists in the state’s prevention of competition among currencies, established through legal tender laws that, as Tucker said, “mak[e] it a criminal offense to issue notes as currency.”

Add other obstacles — things like minimum requirements for bank capitalization and certificates of need for new banks — and state intervention effectively wipes out the kinds of competition that allows ordinary, working people access to credit. With barriers to entry surrounding the credit market removed, Tucker contended, the rent-seeking of the banks and the tolls it produced would almost completely dissolve.

Next Tucker assailed the land monopoly, the state’s forcible annexation of huge swaths of land through methods other than “personal occupancy and cultivation” (i.e., actual homesteading). By enforcing for its favorites claims to land that in fact amount to theft, the state artificially reduces the supply of usable land. Hedging in and monopolizing land in this way allows the privileged to institute a levy upon use of land that they don’t rightfully own in the first place.

Tucker fingered the tariff monopoly, protecting domestic companies at the expense of consumers, as the third of his big four. Tucker was careful to observe the fact — still true today — that protectionism in its various manifestations is intimately bound up with manipulations of the money supply. Today, as in Tucker’s time, protectionism creates a illusion of safeguarding the American worker. However compelling such an argument within the present version of capitalism, in the absence of the other monopolies (most especially that in money), any supposed need for tariffs would quickly fade away.

Finally, Tucker spotlighted a form of monopoly privilege that is at the center of the Information Age economy, one providing a prodigious part of the capital base for virtually all of today’s most powerful corporations. Though Tucker limited his discussion to patents, intellectual property rights in the form of both patents and copyrights allow big business “to exact tribute” for the use of the “natural wealth” of information and scientific facts of nature.

Genuine free markets constantly undermine monopoly, pressuring business to respond to the sum of millions of freely and voluntarily made decisions. What we have today is no free market; it is the system Benjamin Tucker described, updated over the passing of more than one hundred years. To be free from the state altogether is to be free from monopoly, from the dangers of avarice that we see all around us today.

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