Eyre Lines

So there’s a cheater’s version of monopoly now?

I’m remembering many conversations with my libertarian opposite number on GCP, in which he stressed the inadequacy of planned economies as opposed to free market competition, being inherently inefficient and having a strong tendency to grow without necessarily producing any benefit – and, in conscience, I can’t really argue too much with that. Governments are very large organisations, have far too much administrative superstructure, and are generally extremely bad at forward planning (as, indeed, it seems economists mostly are).

The thing is, it now seems absolutely obvious that if you leave a free market to operate without regulation, it will produce bigger and bigger commercial concerns which will become either cartels or monopolies, and at that point you might as well have governments running things, as all the diseconomies of huge scale will be there, plus the lack of incentive to innovate (you just buy out the competition) and the lack of the competitive mechanism producing efficiency without actual planning. You will also have an organisation which is purely self-interested, even in theory, which at least democratic governments are not supposed to be. I’m thinking of the history of Microsoft here – it has never produced the best software, but it has exploited its near-monopoly (initially aided and abetted by IBM) and it’s vastly greater purchasing power to buy up anything which might pose a threat to it, with only a very few exceptions. It will probably continue to produce software which we curse at but can’t do without ad infinitum, and better software will either be bought up and used by Microsoft or bought up and conveniently forgotten about.

The second avenue is probably the predominant one in the more traditional industries, and I have particularly in mind energy. Oil and coal have, in the past, been vast industries, and still retain commanding power in the marketplace; the only way newer technologies (solar, wind, wave, tidal, geothermal) have been able to make a dent in the effective energy monopoly is by government incentives. Curiously, considering the criticism of command economies, oil and coal have been less farsighted than have governments; it is clear even without taking into account externalities (pollution, notably) that exponentially increasing extraction of limited fossil fuels is going to result in their exhaustion (the only real question is how long that will take); governments are, in some cases, willing to take action to provide against that eventuality, while big oil and big coal have not been. Granted, it is climate change which has been the really major driver there; big oil and big coal have, however, not sought to respond to that (it is, after all, an externality not reflected in their balance sheets) and, in fact, to cast doubt on the overwhelming scientific consensus and, in some cases, buy governments to stop them taking action – something which I am confident has happened in the case of the current US administration.

Let’s face it, if you’ve built hotels on Mayfair and Park Lane, the last thing you want is a better hotel on The Angel Islington…

As Adam Smith wrote “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”.