Socialism Creates Monopolies, Capitalism Destroys Them

I find it interesting that so-called socialists are always complaining that greed and free market capitalism create monopolies that let corporations run our lives, yet never explain exactly how greed and free markets bring this about.

From everything I've studied in economics, the entire purpose of the free market is to depress prices.

In a free market, competition always reduces profit margins to zero.

Only through non-competitive laws and regulations can a monopoly come about. Only through the force of government intervening in the market can a monopoly form.

In fact the entire point of a socialist economy is to have the State monopolize everything! How can a monopoly, controlled by the State of all people, reduce prices and increase efficiency? I don't understand this line of thinking. Has there ever been a government agency in human history that produced better and better products while continually striving to improve efficiency and reduce prices?

Barriers to market entry are almost always put there by big government. Artificial restrictions on competition are exclusively a function of government.

Has there ever been a socialist country that didn't have an elite ruling political/business class controlling the masses?

Today we have absolutely massive artificial barriers to entry and state sanctioned monopolies everywhere. They are called patents. If someone comes up with an idea first, they are given exclusive monopoly over that idea for nearly a decade or more depending on what it is. We have massive restrictions on employee benefits, work environments, store locations, zoning restrictions, emissions restrictions, etc.. etc.. etc.. the list of artificial barriers to market entry is nearly endless.

We have absolutely epic government contracts given to private manufacturers that prevent competition from forming.

We have a legislature that does nothing but pass laws WRITTEN by corporate lobbyists for mega corporations.

We have massive tax burdens and a private central bank artificially suppressing interest rates, hindering savings and the formation of capital. Total top down control of the economy by a private banking cartel with command and control interest rates.

How can people blame the markets for mess we are in?

A simple question.
What is the goal of competition?
Is it not....to win?
What happens to your "free market" then.
This is why we have Anti Trust laws.

[edit on 29-12-2009 by OldDragger]

Originally posted by OldDragger

A simple question.
What is the goal of competition?
Is it not....to win?
What happens to your "free market" then.
This is why we have Anti Trust laws.

[edit on 29-12-2009 by OldDragger]

OK.

So say I have a gas station, no competitors around for 200 miles in all directions.

How much do you think I can charge for gas?

Then a new gas station opens up across the street, how much can I charge for gas now?


Competition drives prices down and quality up.

"Competition is a sin." - John D. Rockefeller.




[edit on 29-12-2009 by mnemeth1]

Communism (not socialism, you have a full blown socialist state in the nordic countries, and they enjoy more free market that most imagine) is about granting special priviledges to certain companies. Even the goverment sometimes start those companies, then sells some of it while still maintaing control.

But free market isn't different. Without *any* control, the big companies would either buy themselfs off or join (Rockefeller case comes to mind). In the free market the rich get righer. It's a simple mass-scale effect. If there would be *no* control (ie. anti-monopoly agancy) the natural process would automatically reduce the number of big companies to a smaller number and then to one.

Maximazing profits means minimizing risks. A bigger market enables you to have more cash flow. More cash flow enables you to better hold your ground. One company selling computers is stronger than 3 smaller ones.

Proof? Windows is not the best OS, but there are so many people using that there is virtaully no possibility of it ever going out of the market.

Not to mention that Microsoft has every asset to buy Apple and every other smaller bug. They just can't do that ... bacuse that would be too monopolistic and somebody would pay the price (ie. shareholders).

Having said that I strongly believe that the natural process is to simplify, minimize and optimize. We like simple solutions, small gadgets and well governed companies.

This is not a rant again capitalism, although it is not the same as free market IMO. In capitalism too much power goes to corporations (ie they are treated as an ordinary person, you can "sue" a corporation, the CEO can get away quite easily).

I just don't belive in free-reaming capitalism. Like everything in life, common sence must prevail and when I hear "maximizing profits" I see arces of amazon forests disappearing right now.

I've spend some part of my life under *true* communism and inicidentally - I'm almost in the same place. I mean nothing to the ones that are my governors

Cheers

Congrats on writing the most Orwellian response in the history of these forums.

By your logic: We are in a communistic-influenced society.

Utilities are state sanctioned Monopolies. Mega-Corporations are served by our government.

Regulations force a company into following ethical constraints. From not including toxins in toys to ensuring the board of directors does not make profits from their own failins (by dumping stock before a bad announcement).

A Free Market keeps the cost down-not by artificial means (such as monopolistic price collusion) but by competition. It certainly does not reduce the price to zero. Look at wal-mart. They deflate half the store prices (Toys are notorious) to the point of being undervalued to lure in. This is called a Loss Lead. They lure in with a 3-5 dollar loss on a toy because statistically a parent will buy more than just a toy on a trip. They then make up for those losses by being bad to employees (halting at 38 hours time to never classify as Full Time and other techniques.).

Wal Mart is a perfect example of Free Market Capitalism. They move in, destroy local businesses and the populace is so happy to save a twenty cents on a loaf of bread they don't even see the destruction.

In this case the regulations saves local businesses, given most the income generated by a wal-mart goes out of the state: Wal-Mart is very bad for the economy.

Otherwise your Thesis statement of regulation causing monopoly: This is profoundly flawed if on no other level than it being implicit that companies are pure of heart and altruistic: That they server the community instead of drain as much capital as possible while avoiding all the taxes they can.

The perfect situation for any company is a monopoly which is exceptionally easy given that the larger the company the less effort is required to destroy the competition.

The only monopolies the government has created as Utility companies. Contract sway can give Boeing or Lockheed the edge at times, but still: Utilities.

I am interested in this part:

Only through non-competitive laws and regulations can a monopoly come about. Only through the force of government intervening in the market can a monopoly form.

The only thing I can think of is regulations allow definition of monopoly. I am sure that is not what you meant though. Could you expand on that section?

reply to post by mnemeth1


Well, how about you go to the other station and get the owner to agree on a high price? You both make out like bandits.
AND, how about answering my question?

"How can people blame the markets for mess we are in?"
They haven't even begun to ask themselves the questions you're raising. It's easy to blame something you don't understand and beyond your control for causing the ills of society. People I know don't have enough money -->Money is part of the economy--> It's the economy's fault.

"Has there ever been a government agency in human history that produced better and better products while continually striving to improve efficiency and reduce prices?" Not to my knowledge but that question should really be directed to advocates of socialism.

Personally, I don't think we're living in capitalism today. There is far too much government intervention to call this a free market. What exists today is a perverted, neo-liberal system of government favoring the Corporations that buy it out. Unsustainable over-consumption is no way to maintain a free market yet this is what we have. The system as it stands is no longer viable. Ben Bernanke cannot play god for the rest of his tenure. Socialism is merely a convenient avenue for those with large hearts and little brains.
What advocates of socialism have a problem with is the losers of capitalism, who just like the minority of a successful democracy, should stand to gain naturally from the system. They want things evened out for those who can't stay afloat in a capitalist society. I agree somewhat but a flourishing free market will breed successful safety nets for these people not massive government welfare programs. Why does the Fed care about maximizing employment if wages are nothing?

What freaks me out is the difference in mobility between capital and labor in this world economy of FTAs and multinationals. The ability for capital to up and move overnight can decimate an area. But it is a result of unsustainable burdens on capital. Whatever, many economists actually argue businesses arent that mobile.

I do think patents need to be enforced at least on an international level. China just lost a paltry WTO case over pirated copies of Hollywood(US) films. But yes, perhaps domestically if a guy wanted to start up a company based on an invention a large company already owned a patent for but didn't use, I'd say he deserves some legal support.

reply to post by mnemeth1


To think that a free market cannot create monopolies is extremely naive in my opinion. One only has to take a brief look at the world to realize that this is not so.

Windows is a good example, another example is Rupert Murdochs Clear Channel, which runs a huge portion of the worlds media.

I realize these are not monopolies but what we are seeing at the moment is a very clear tendency for big companies to merge & absorb smaller ones.

To use your analogy of the gas station, if Shell has the only gas station for many miles & some guy opens one next to it & provides better prices,
then Shell has the resources to dump their prices so low that the little guy goes out of business.

Afterwards they can simply raise their prices again.

Originally posted by MrVertigo
reply to post by mnemeth1

 

To think that a free market cannot create monopolies is extremely naive in my opinion. One only has to take a brief look at the world to realize that this is not so.

Windows is a good example, another example is Rupert Murdochs Clear Channel, which runs a huge portion of the worlds media.

I realize these are not monopolies but what we are seeing at the moment is a very clear tendency for big companies to merge & absorb smaller ones.

To use your analogy of the gas station, if Shell has the only gas station for many miles & some guy opens one next to it & provides better prices,
then Shell has the resources to dump their prices so low that the little guy goes out of business.

Afterwards they can simply raise their prices again.

And without regulations: This is exactly how it always goes. Though most times regulations are not even enough.

One thing I love about Portland, OR is: Only one wal-mart in the city. Here in Salt Lake it seems like there is one on every block.

reply to post by lordtyp0


So lets look at your example of Wal-Mart.

Wal-Mart gets its products from China, a totalitarian state that suppresses wages by 47 to 85 percent below what they should be,according to the AFL-CIO's complaint about China's labor policies filed with the United States Trade Representative last year.

Without Chinese government coercion in the labor market, Wal-Mart and other major retailers that utilize Chinese labor for the products they sell could not deliver products so far below market costs.

We also have the Chinese government suppressing its currency value below what it should be in order to monopolize producer export markets.

Wal-Mart would not be wal-mart without totalitarian government intervening in the markets.

The US could correct these trade imbalance issues by doing several things, none of which involve "regulating" industry.

The US government has intentionally colluded with the Wal-Marts of the world to craft legislation, trade agreements, and taxation policies that specifically benefit the Wal-Marts of the world. More government intervention in the markets.

For example, Wal-Mart actually lobbied for minimum wage increases, because higher minimum wages make it far more difficult for domestic retail distributors to compete against them.

Wal-Mart loves big government.

reply to post by lordtyp0


I suppose I should also mention the benefit Wal-Mart brings to consumers as well.

Consumers only shop at wal-mart because they know the store offers consistently low prices on the products they want to buy.

So while mom and pop might get put out of business, consumers in the community are now paying far less for the same goods.

Without wal-mart selling those government suppressed goods from China, consumers would be spending more of their income to acquire the same goods.

So what is the end result?

Lower prices.

Gee, wasn't that my point to begin with?

How much would Wal-Mart be charging for a Chinese toothbrush if no one was allowed to compete with them?




[edit on 29-12-2009 by mnemeth1]

Yes but it is lack of regulations that allows wal-mart to use overseas labor, trade agreements etc. constitute a release of regulation/easing of options.

The concept of regulation is to reduce options (generally unethical and or illegal options).

Everything now days is made in China. If the U.S. Gov tries to add tarifs to regulate and bring jobs back to the U.S. they are being anti-capitalist/anti-free market.

You response actually hurt your thesis statement of regulations creating monopolies. They have all their power because they get their supplies from a place with no worker protections, really no protections of any sort. Thus they are able to pull money in by the bucketload and destroy all competition.

No regulations = monopoly.

Originally posted by lordtyp0

No regulations = monopoly.

Are you kidding me?

What do you think is preventing US producers from competing against Chinese labor?

You got China artificially suppressing labor costs.

You got the US government regulating the living tar out of domestic producers with insurance requirements, labor wage requirements, zoning policies, emissions restrictions, etc.. etc.. etc..

You got the Federal Reserve suppressing interest rates, killing savings which wipes out capital markets for long term investment in production.

The list of reasons why US production is so low is nearly endless and ALL of those reasons are a function of government regulation.

China DOES have a monopoly on production of consumer goods, but only because of tyrannical labor laws and because our own government regulates the living tar out of our own producers.





[edit on 29-12-2009 by mnemeth1]

Originally posted by mnemeth1
reply to post by lordtyp0

 

I suppose I should also mention the benefit Wal-Mart brings to consumers as well.

Consumers only shop at wal-mart because they know the store offers consistently low prices on the products they want to buy.

So while mom and pop might get put out of business, consumers in the community are now paying far less for the same goods.

Without wal-mart selling those government suppressed goods from China, consumers would be spending more of their income to acquire the same goods.

So what is the end result?

Lower prices.

Gee, wasn't that my point to begin with?

How much would Wal-Mart be charging for a Chinese toothbrush if no one was allowed to compete with them?

[edit on 29-12-2009 by mnemeth1]

This part is problematic: Lower prices for consumers is fine and dandy. But the destruction of local business = fewer jobs and less buying power in a city.

Look at areas that thrive with local businesses such as Portland: more restaurants per capita than anywhere else. Countless mom and pop stores. Huge local infrastructure because all the money stays local. When huge chains setup shop all the income goes out of state. Local income rates fall. Wal-Mart promises a huge income to a city for setting up shop but:

They destroy local business (less tax revenue, more displaced workers)
They have a sub-company (think it's wal-mart property holdings) they pay rent to-avoiding tax on ownership of the land. The subsidy then pays profits to the parent company which sends money back to the franchise-avoiding all local taxes entirely.
Wages within the area fall resulting in less buying power, and neighborhood dilapidation.
Crime goes up in the region due to abandoned buildings and a huge-full parking lot that has next to no security.
Health Benefits are also lost to all the workers swapping to wal-mart.
Essentially Wal-Mart creates a cascade failure in an area-which ultimately leads to rot.

All because someone wants to pay $8 for a barbie doll instead of $11.

Summary:
Healthy and vibrant quality of life in a region vs. squandered existence for 'savings' on clothing that falls apart in a month, sub-par produce and a pittance saved on groceries. Doesn't seem like a useful trade to me.

Originally posted by lordtyp0

Originally posted by mnemeth1
reply to post by lordtyp0

 

So lets look at your example of Wal-Mart.

Wal-Mart gets its products from China, a totalitarian state that suppresses wages by 47 to 85 percent below what they should be,according to the AFL-CIO's complaint about China's labor policies filed with the United States Trade Representative last year.

Without Chinese government coercion in the labor market, Wal-Mart and other major retailers that utilize Chinese labor for the products they sell could not deliver products so far below market costs.

We also have the Chinese government suppressing its currency value below what it should be in order to monopolize producer export markets.

Wal-Mart would not be wal-mart without totalitarian government intervening in the markets.

The US could correct these trade imbalance issues by doing several things, none of which involve "regulating" industry.

The US government has intentionally colluded with the Wal-Marts of the world to craft legislation, trade agreements, and taxation policies that specifically benefit the Wal-Marts of the world. More government intervention in the markets.

For example, Wal-Mart actually lobbied for minimum wage increases, because higher minimum wages make it far more difficult for domestic retail distributors to compete against them.

Wal-Mart loves big government.

Yes but it is lack of regulations that allows wal-mart to use overseas labor, trade agreements etc. constitute a release of regulation/easing of options.

The concept of regulation is to reduce options (generally unethical and or illegal options).

Everything now days is made in China. If the U.S. Gov tries to add tarifs to regulate and bring jobs back to the U.S. they are being anti-capitalist/anti-free market.

You response actually hurt your thesis statement of regulations creating monopolies. They have all their power because they get their supplies from a place with no worker protections, really no protections of any sort. Thus they are able to pull money in by the bucketload and destroy all competition.

No regulations = monopoly.

I don't think so.

Wal Mart isn't a monopoly at all.

They face extreme competition in retail sector.

Wal Mart can not increase its prices and still stay in business.

However, Wal Mart loves big government regulation. That's my point. They love labor laws, they love minimum wage laws, they love all manner of zoning restrictions that keep competitive retailers out of their market area.

Regulations in the retail sector do nothing but help Wal Mart, not hinder it.

I kind of mix and matched my arguments, there's two distinct things going on here, the production of Chinese goods and the retail distribution of those goods by major chains like Wal Mart. I should have separated them out more.

Originally posted by mnemeth1

Originally posted by lordtyp0

No regulations = monopoly.

Are you kidding me?

What do you think is preventing US producers from competing against Chinese labor?

You got China artificially suppressing labor costs.

You got the US government regulating the living tar out of domestic producers with insurance requirements, labor wage requirements, zoning policies, emissions restrictions, etc.. etc.. etc..

You got the Federal Reserve suppressing interest rates, killing savings which wipes out capital markets for long term investment in production.

The list of reasons why US production is so low is nearly endless and ALL of those reasons are a function of government regulation.

China DOES have a monopoly on production of consumer goods, but only because of tyrannical labor laws and because our own government regulates the living tar out of our own producers.

[edit on 29-12-2009 by mnemeth1]

AHA. This is a bit of a different take on things than you initially described.
Are you actually saying that: Regulations are bad and should not be used because unethical companies have incentive to circumvent them and become monopolies?

If so: My answer is more regulations: Create a tariff that would equalize the cost: reduce profits for using slave labor by making it cost the same as using regular labor.

reply to post by mnemeth1


Sorry, I did not mean to imply Wal-Mart was a monopoly. I actually define them as a predatory company-well on it's way of becoming a monopoly.

The evidence of that is how all stores around crumble. Sears Grand is struggling, Kmart was also hit hard. Target reduced it's stores.

In the City of Tooele Utah (bout half an hour west of Salt Lake) there were 3 grocery stores. A Wal-Mart super center set up shop. One of the stores folded. The other two (Albertsons and Smiths) made an arrangement of trading territory: They agreed to pull stores and give regions to the other-otherwise they both would have folded as the other store did.

Though Wal-Mart is not a classic monopoly they hold all the power of one.

reply to post by lordtyp0

Yes but it is lack of regulations that allows wal-mart to use overseas labor, trade agreements etc. constitute a release of regulation/easing of options.

First off - its not walmarts fault that places like China don't follow the same guidelines for labor like the U.S.

You are comparing Chinese labor laws to US standards...but you're failing to realize that the Chinese are benefiting from ti GREATLY...and so are we.

We get cheaper prices at WalMart and China gets a great economy of providing the products we need.

Thats how an economy works. If everyone lived in rainbow land like you seem to be, then nobody would have anything because there'd be no fair way to sell it to the guy who wants to buy it.

I actually define them as a predatory company-well on it's way of becoming a monopoly.

Of course you do. But as many a great thinker has pointed out - all small businesses strive to be what Walmart has become.

If a small business gets to be that successful, there will always be people like you (who have no argument, just jealousy) there to say "you're a predatory company"


Predator/Prey - if you boil it all down - that is all consumerism is. Lure in the customer with great prices, get them to buy. They benefit, you benefit...everyone is happy.

Why pay MOM AND POP $1.62 for a can of corn that i can buy for $0.49 at walmart?

So mom and pop can have more money than me?

Please.


[edit on 29-12-2009 by Snarf]

Originally posted by mnemeth1

Originally posted by OldDragger

A simple question.
What is the goal of competition?
Is it not....to win?
What happens to your "free market" then.
This is why we have Anti Trust laws.

[edit on 29-12-2009 by OldDragger]

OK.

So say I have a gas station, no competitors around for 200 miles in all directions.

How much do you think I can charge for gas?

Then a new gas station opens up across the street, how much can I charge for gas now?


Competition drives prices down and quality up.

"Competition is a sin." - John D. Rockefeller.

[edit on 29-12-2009 by mnemeth1]

What if you get your gas cheaper, and sell it cheaper, the other one go's out of business. But gas stations are not a good example, in general supermarkets and other things are, they eat small bussines.

The idea is that you can't compete with giants because you do not have the money to open up a 500 square meeters supermarket.
Once the trucks are rolling in to town all other shops surrounding the area are going out business once the supermarket opens because it has anything and cheaper.

1 You do not have the money to build such a structure.
2 You go out of busniness because you can offer limited items in a limited shop, limited by space and limited by the money you have, and since they have it all why bother to go to your shop and then to another shop when I can get it all in one place.
3 Since they sell alot they can afford to lower prices, you can not.

Once someone becomes a big fish in capitalism there is no competition.
Capitalism works at the begining and fails at the end, it's not viable in the log run because it teds to eliminate competition.

A perfect idea would be a hibrid, socialism mixed with capitalism where socialism limits capitalism so anyone bigger than X will have to not build at X spot where other small owned Y shops are. Total open market is chaos.
It creates control even more, big corporatations can then dictate terms
to small personal owned business. I'll buy you out...sell sell sell or else.

Competition is good as long as it exists.