Monopoly: too big to ignore

That’s the headline given to my latest piece in Inside Story

Here’s the opening para

Two hundred years after the birth of Karl Marx and fifty years after the last Western upsurge of revolutionary ferment in 1968, the term “monopoly capitalism” might seem like a relic of outmoded enthusiasms. But economists are increasingly coming to the view that monopolies, and associated market failures, have never been a bigger problem.

and the conclusion

The problems of monopoly and inequality may seem so large as to defy any response. But we faced similar problems when capitalism first emerged, and Western countries came up with the responses that created the broad-based prosperity of the mid twentieth century. The internet, in particular, has the potential to enhance freedom and equality rather than facilitate corporate exploitation. The missing ingredient, so far, has been the political will.

21 thoughts on “Monopoly: too big to ignore

  1. Excellent article, JQ!

    For readers, this is a good book;

    “The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China” by John Bellamy Foster and Robert W. McChesney

    It’s also worth going online to “Monthly Review: An Independent Socialist Magazine” and typing in monopoly in the custom search box. Plenty of good articles and books listed. I find Marxist research into monopoly is deep and extensive, because they have such a bee in their bonnet about it (justifiably). Orthodox economists tend to sweep this issue under the carpet unless of at least a bit of a leftist persuasion.

    A good MR article is “What Is Monopoly Capital?” – by John Bellamy Foster.

  2. “ the challenge is to find cases of the classical economic ideal: a market in which many small companies compete for customers, with no company large enough to unduly influence prices”

    Clothes, electronic goods, textiles, magazines, music – pretty much anything you can buy on the internet is subject to a great deal of competition.

    And then there’s cars. Toyota has the biggest market share (in Australia) at 18%. No other car company is in double digits.

    Then there’s haircuts, cafes, restaurants, private schools, (you might not approve, but that’s not the point), pharmacies (think of how many there are in a typical suburban strip shopping district), GP surgeries, optometrists (I don’t know why there’s so many – we must be a nation with poor eyesight) ….

    Everything is monopolised apart from what isn’t.

  3. And then there’s credit cards and home loans. You can get these from dozens of banks and credit unions and building societies (yes, they still exist).

    Thinking of selling your house? You are spoiled for choice with the number of real estate agencies.

    Thinking of renovating your house? The number of builders you could choose from is too many to count.

    Thinking of switching electricity retailers? Here, there is, if anything, too much choice.

  4. Smith9,

    J.Q. clearly deals with those issues in his article. Perhaps, you need to go back and read it more carefully. The full case is against modern monopolies, oligopolies, monopsonies and possibly oligopsonies. You need to understand this complex of concepts.

    The case also is not that there is no competition or no industries closer to real competition. Rather, the case is that there is insufficient real competition and excessive monopolies. It’s possible to find analyses which objectively bear this out. An they bear it out as an historical trend leading to higher and higher agglomeration of large companies, TNCs and conglomerates.

    In many of the examples you give, there is considerable evidence of cartel pricing, collusion (overt or covert), anti-competitive practices and so on. Often the “competition” is more illusory than real. Sometimes the competition is artificially created by breaking up a public natural monopoly and handing it out to multiple private operators all needing to extract a profit, pay more managers and running marketing campaigns for supplier switching (all extra overheads on the consumers) than were unnecessary before. Retail competition does not make networks or generators cheaper or cheaper to run.

  5. I loved the article, John. Monopoly is again becoming the defining issue of our age, but the likes of Google and Facebook have replaced Standard Oil and US Steel as the modern day titans. Have you read Age of Surveillance Capitalism? It’s quite a chilling account of how the likes of Google and Facebook are monopolising our data and trying to invade every aspect of our lives.

  6. Also Smith9 your point about vehicles is nonsense. The fact that 1 brand sells 18 percent of vehicles in Australia is incredible. But you overlook the fact that all vehicle manufacturers engage in restrictive practices. For instance, ever since Henry’s Ford’s days car manufacturers have tried to vertically integrate their business: manufacturing, retailing, servicing. The digitisation of cars has led to an increasing trend towards vertical integration. It is now almost impossible for your local mechanic to repair your modern car. Also, I think you’ll find that there’s an increasing trend toward concentration in the global car industry. For instance, Volkswagen Group own not only Volkswagen, but Audi, Skoda and the truck manufacturer Scania.

  7. JAF & Iko

    vehicle manufacturers would like you to believe that only they can service your car, but it’s just not true. And while there are more cross-shareholdings in car companies, the world car industry is not even close to being a monopoly, or even an oligopoly. If it was, car companies would not have so much trouble making a profit.

    Tell me more about the considerable evidence of collusion in the examples I give.

  8. Smith9 – monopsonies. Those strip malls must be in JQ’s future story last month.

    Great headline and opening JQ. Who could disagree with “economists are increasingly coming to the view that monopolies, and associated market failures, have never been a bigger problem.” 

    Many in the general population would agree also. Fund managers though? Blackrock? “BlackRock is today the world’s largest asset manager with $6.3 trillion in assets undermanagement as of December 2017″. Wikip. Any clues about turning bRock around? And if so, how long to turn such a  SuperBankerTanker to avoid shocks? 1 / 2 generations? n biz cycles?

    JQ …” But what is really needed is support for the non-commercial uses of the internet ” … ” we need ad-free search engines of the kind Google promised to be in the long-lost days when its corporate watchword was “don’t be evil.”

    I was nearly assaulted by a director no less – he was so incensed he came to my house while I was showering -I kid you not – for using a work email address to tell alta vista what I thought of them charging for knowledge. It took me a while realise goo gls fortune is my data exhaust. 

    Quack out to Duckduckgo.com
    Works for me on the 80/20 rule. But as per Blackrock above. Goo gl is the biggest ever “SuperInhouseAlgorithmSearchData’Tising” Tanker. Very poor responsiveness now. All the mirrors on the planet can’t penetrate a googol walls they put up.

    Internet positives. Knowlege. Self help sites a positive. Obviously research, weather, etc and a newish category; “”The positive role of Internet use for young people with additional support needs: Identity and connectedness”. 
    Computers in Human Behavior
    Volume 53, December 2015, Pages 504-514

    Identity is to my surprise going to be dependent on the internet? Scary yet “has the potential to enhance freedom and equality” as JQ said. I just can’t wrap my brain around “identity-Internet”. And freedom? Equality via net neutrality yes, but freedom -arab spring- hashtags- is via a fibre funnel somewhere owned by FANGS or stamped on by authoritarian states – Freedom is ill defined here imho. Would you define freedom for us JQ.

    JQ… ” the market power of large firms was largely offset by what the economist John Kenneth Galbraith called the countervailing power of trade unions and governments. As unions declined and governments increasingly followed the dictates of financial markets, that power dissipated. Monopolies and monopsonies became ever more influential.”.
    … the tail is wagging the dog. A great retraining is needed. But the park is owned by them. The trainers are gigged by them. And most haven’t got the freedom, time, history or power to change the 2 m’s. 

    JQ; “The United States undertook “trustbusting,” breaking monopolies like Standard Oil into separate competing companies.”

    Yet Rockerfeller “with the dissolution of the Standard Oil trust into 34 smaller companies, Rockefeller became the richest man in the world, as the initial income of these individual enterprises proved to be much bigger than that of a single larger company.”

    Is that our fate if and when we break goo gl amzon etc up – owners become richer?! How will this wealth condensation be overcome with present or even medium terms’ states, laws and investors please? I just can’t see how busting into smaller units will prevent capital ala kock bros cease using capital to bend the commons to their will. I like being positive yet will it take chaos and revolution. I don’t want that.

    So my question  to you JQ is – how will this come about in an orderly fashion please. A link maybe. I don’t expect nor put this on your shoulders. I am sure you are better placed than I to point a way.
    Many smalls doesn’t cut it.

  9. KT2 I agree with what you’re saying re trust busting Google and Facebook. While I support divesting these companies, I don’t think it’s going to address the main problem: the harvesting of our data. If Google and Facebook disappeared today or their operations were broken into smaller companies, you’d soon have those smaller companies or start-up companies moving-in. We need more stringent privacy regulations to protect people’s data. What’s with this whole Internet of Things palaver that you hear management consultants blather on about? Nobody wants a fridge that’s connected to the internet or washing machines that switch on when the spot price for electricity is at its lowest (most people can do this themselves by switching on the washing machine before they go to bed). The IoT is all about the FAANGs invading every aspect of our lives. Because of the FAANGs harvesting of our data, monopoly in the 21C is going to have so much control over our lives. The Federal Trade Commission in the United States has allowed Google and Facebook to acquire to many companies. It’s a very ruthless form of monopoly capitalism.

  10. JAF says: “I don’t think it’s going to address the main problem: the harvesting of our data.”.

    Harvesting my data would be great IF we were in JQ’s democratic socialized story. But as you state we are in ” a very ruthless form of monopoly capitalism”. With lots of political and propagandised lipstick feigning “we are on your side”.

    IoT – is – could – may – shows promise – to be helpful tech improvement freeing my neocortex to do other things like solve black swans and bring about that nice sweet dream of a cooperative society. Yet I trust the techo’s but NOT faangs, politicians, capital holders nor shareholders – us included via superannuation and use of monopolies and monopsonies.

    Even the biggest oldest co-op (co-ops global about $3Bn so – 3% ?? of global gdp) Mondragon can’t withstand financialised tech disrupting and competition and debt – why did it take on the debt! – storms …
    …” the failure was a “perfect storm” of three related issues. First, immediately prior to the recession, Fagor Electrodomésticos had expanded by buying a competitor in the household white goods sector; it financed the acquisition by taking on major debt. Second, the number of its Asian competitors was growing every day. And third, just as the cooperative’s expanded capacity came on line, the recession hit and the bottom fell out of the market.”
    View at Medium.com

    Note on Mondragon- they have the seeds of their own destruction too.

    What to do? Plan S above. Get JQ to be president and treasurer at the same time? Hope. Alot. Teach the children well. As in Mondragon above “One can imagine a sophisticated, cooperatively organized, service-based economy that would also require significant technical expertise. STEM education is the right approach, but we are far from figuring out how to deliver it effectively.”

    We are not far from figuring out how to deliver STEM… we are just inna syatem forever half way there and always just out of reach. Political will blah blah…

    Make a great three generation time switching movie about how to change and changed into a better society, the reverse of “Watchman”. Any economists with a script?

  11. Some thoughts after reading the article….

    “the six most valuable companies in the world were Apple, Exxon, Alphabet (Google), Microsoft, Amazon and Facebook. All of them depended, to a greater or lesser extent, on monopoly power. “

    I don’t think those are monopoly companies. Indeed the six tech companies are in fierce completion with each other, some examples:

    Google and Facebook are in constant battle for advertising dollars.
    Google built Android and gave it away for free to stop Apple controlling mobile search
    Amazon is killing Microsoft with its cloud server platform.
    The Microsoft operating system monopoly was basically killed by the iphone
    Facebook had to buy Instagram for $1 Billon just to top Google from buying it.

    And to say Exxon is a monopoly in Oil would ignore all the other Oil companies.

    “One useful measure of monopoly power is the proportion of household expenditure that goes to monopoly or oligopoly businesses. “

    Most household expenditure goes to rent/mortgages, utilities and of course taxation.

    Now copyright and patents are big problem. But those are government granted monopolies, not market failures.

  12. Duncan E and Smith9,

    Read “The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China” by John Bellamy Foster and Robert W. McChesney.
    It might give you a different perspective on monopoly and oligopoly.

    I don’t think one can say that Apple, Alphabet (Google), Microsoft, Amazon and Facebook are all directly in competition with each other in all tech sectors. Apple and Microsoft are in competition for PC operating systems. Basically, that’s a duopoly. And Apple does “special things” to make sure its system and all software for Apple-Mac only runs on purpose built machines not generic PCs, IIRC. So even these duopolies do not compete directly but “product differentiate”. In their specialty corners they are pretty much monopolists. Do Alphabet, Amazon and Facebook make bona fide PC operating systems? Not to my knowledge. Google’s Chrome OS isn’t really a general-purpose PC operating system. Open source and kind-of hacked/hijacked operating systems are the only other ways open and these are only for tech-savvy people.

    Same deal when we look at Facebook and Amazon. Quite different businesses. Does either one have a significant competitor in its field? Maybe one, so duopolies at best. Alphabet perhaps competes in more fields than most, so it’s just a bigger conglomerate I guess.

    Most mortgages are made by the big four banks in Australia, so an oligopoly there, and we have seen how crooked the banks are from the Banks Royal Commission. Rents are less oligopolistic but given that rents are so high in Australia it is hard to believe there is any real competition. Rather, high real estate prices have somehow pushed themselves into rents in defiance of theoretical competition principles, though I don’t understand the reasons why. Rents are very high compared to minimum wages.

    Utilities are either government owned or privatized. Where privatized, they are often then government granted monopolies or duopolies. Finally, Including taxes is completely specious when considering what goes to the private sector in order to assess the issue of private monopolism or not.

    Really, your objections evaporate in the plain light of day.

  13. Duncan: “Amazon is killing Microsoft with its cloud server platform.”

    Which means, between them, they have a virtual duopoly over cloud hosting. Microsoft is quickly catching up btw, as scores of businesses begin shifting their hosting directly from Windows Server 2008-2016 to Azure.

    https://www.zdnet.com/article/top-cloud-providers-2018-how-aws-microsoft-google-ibm-oracle-alibaba-stack-up/

    It’s important to recognise that cloud hosting means third-party hosting providers are essentially no longer required. That’s a >$150 billion market, and thousands of companies worldwide, Amazon and Microsoft are devouring.

  14. Harry Clarke,

    Your two option (a) or (b) multiple choice question excludes other possibilities.

    The supermarket duopoly could be using monopsony power to drive farm gate prices too low. I don’t know if they have actually done that. They could also be using monopoly power to squeeze other milk retailers out of the game. Are low milk prices in the supermarket duopoly a loss leader to stimulate other sales? If that’s the case, an adequate farm gate price need not be inconsistent with low supermarket prices. But as I say, I don’t know the detail.

    The full situation is more complex and global. It’s worth reading this;

    https://www.abc.net.au/news/rural/2017-01-27/understanding-the-dairy-crisis/8184510

    As that article says;

    “The combined effect of Russian sanctions, Europe removing milk quotas and China’s (milk powder) stockpile created the perfect storm that Australian dairy farmers are still enduring.”

    So to propose that it’s just about local “monopsony power” or “food retailers providing benefits to consumers” is to mislead with the question by providing a false dichotomy.

    ————————–

    Part 2 – A little bit of data – Probably interesting rather than useful in the above debate.

    From the DairyAustralia site (my interpretation of their table);

    (1) Australian milk production peaked in 1999/2000 at 10,847 million liters.
    (2) Since 2006/2007, milk production has stabilized in the 9,000 to 9,999 million liters range.
    (3) In 2017/18 milk production was 9,289 million liters.

    This had me checking decimal points and commas. Really! Production in the 9 billion litres range! Quite surprising to me.

    Drinking milk sales in 2018/19 ( one year out of step with 3 above) 2,548.4 million liters.
    Manufactured production (Dairy Australia site stopped responding – maybe later.)
    Cheese production (Dairy Australia site stopped responding – maybe later.)

    From the NFF site:

    “In terms of the utilisation of Australian milk in 2008-09, the share of volume produced is as follows: Cheese (34 percent), Skim milk, Powder, Butter (24 percent), Milk (25 percent), Whole milk powder (11 percent), Casein/butter (3 percent) and Other (3 percent).”

    “Australia exports around 45 percent of its annual milk production.”

    “There are 8,594 dairy farms in Australia, with a national dairy herd of 1.6 million cows.”

    “Australian dairy farmers produce 9,102 million litres of whole milk per year with the farmgate value of milk production being $4 billion.” – ABARES 2011.

    “The average herd size in Australia is 220 cows, with an average annual milk production of 5,445 litres per cow.

  15. Smith9 – your comment broken up with my comment interspersed in square brackets:

    “Then there’s haircuts, cafes, restaurants

    [No, these within a region are as likely chains or group owned seemingly independent owner operated businesses but actually a localised monopolistic force – a clue with many salons would be to check the product range they use and sell, better yet talk to your local friendly postie or couriers],

    private schools (you might not approve, but that’s not the point)

    [Are you kidding? Check out the religionists],

    pharmacies (think of how many there are in a typical suburban strip shopping district)

    [You need to think on the three (or is it five?) year cycle of contract signing between an always beaten Comm Health Dept and the Pharmacy Guild and the attitude of the guild toward negotiation, and the points they will not negotiate on, one being the number of pharmacy owners being strictly limited by law leading to multiple pharmacies (up to 20 is it?) in the hands of each proprietor. Then there is the corporate and chain invasion. Again, talk to, or just watch the postie or courier who delivers to a particular shopping strip to see where the bulk of literature/business/financial/consignee mail is delivered. The postie ought not tell you the addressee is that for several operations having various trading names at other street addresses, nor are you likely to spot it either unless you strategically place yourself at the pharmacy counter when the bulk mail is dropped. I think you are in for quite a surprise as to the state of monopoly in both your local and the national pharmacy trade. This no doubt is mostly why pharmacists average much higher income than other professions],

    GP surgeries

    [Now “clinics”, mostly part of regional or wider corporate owned chains, and multinationals],

    optometrists (I don’t know why there’s so many – we must be a nation with poor eyesight)

    [many corporates and many “sole” owners with multiple storefronts.]….

    Everything is monopolised apart from what isn’t.

    [Which isn’t much! We could go on with the invasion, now largely completed, by foreign multinationals into everything from dentistry to undertaking… ]

  16. Svante,

    Good reply. The appearance of free market competition in our society is mostly that. Just appearance. It’s already command socialism in a sense, except the socialism is only for rich people. Highly centralized and controlled industries, operating as state conferred or sanctioned monopolies or oligopolies, which funnel income to the few rich. It’s not capitalism anymore, just socialism exclusively for the rich. Oligarchism equals socialism for the rich.

  17. Svante – howncould we also forget;

    Hearing aids – I tried to tell my Mum – $25k in tens years. And 4 mfgrs?
    “Prices partly being driven by commissions of up to 15 per cent
    -Some customers paid $10,000 for hearing aids before finding them online at half the price
    -Hearing aid industry is self-regulated”
    https://abc.net.au/news/2017-03-02/consumer-watchdog-puts-hearing-aid-industry-on-notice/8319738

    Mum again. Pacemaker. 3mth check. Heart specialist at astronomical rates. Line up. Checked by induction loop.
    “Oops dont stop her heart. Oh he is busy so its ok. don’t worry. see you next check – full price. Thanks. Oh no it’s proprietary “… I could do with my phone and a plug in. Or community nurse at hospital BUT we wont let you have the software even though you’ve paid for it via medicareless 10x over.

  18. “Facebook and Big Tech are monopsonies, even when they’re not monopolies
    …”This is a problem with many concentrated markets, from eyewear to Itunes, and it’s the end-result of the Chicago School’s bizarre version of antitrust, which took over the world in the Reagan years and has been wrecking things ever since.
    https://boingboing.net/2019/03/14/walmart-of-everything.html

    Wobbly Elizabeth Warren…
    …”contemporary digital capitalism that I think many commenters and antitrust crusaders miss: Silicon Valley isn’t full of monopolists. It’s full of what are (technically) called monopsonists.”…
    …”and requires entirely different antitrust remedies. In a monopoly situation, antitrust means disaggregating supply to bring relief to consumers. In a monopsony situation, antitrust means disaggregating demand to bring relief to suppliers, which over the long term should benefit consumers.
    https://www.wired.com/story/facebook-not-monopoly-but-should-broken-up/

  19. Harry Clarke, March 18, 2019 at 10:25 am > Stiglitz March 11, 2019 >

    “For example, US corporate executives made sure that the vast majority of the benefits from the tax cut went into dividends and stock buybacks, which exceeded a record-breaking $1.1 trillion in 2018.”

    The outcome predicted by many…

    Thanks for the link to what appears to be a rich reading resource.

    Also seen at Project Syndicate:

    Videos | Feb 7, 2019 | PS editors | 2min:41
    https://www.project-syndicate.org/videos/ps-in-theory-the-rise-of-monopsony

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