First, you may want to read
the rest of Millenium's writeup and typo's writeup to get more context. Their discussion implies that laissez-faire capitalism
has some inherent problems
from which we need to protect ourselves. I would like to address them directly.
Millenium: This, in the end, is the real problem with laissez-faire capitalism: monopolies can and do occur under such a system. Under monopolistic conditions, there is no incentive to improve, nor to keep prices low. In fact, in a monopoly, the incentive is towards not doing these things. And so, it doesn't happen.
In order for a monopoly to exist for any length of time, something must protect it from the competition of capitalists with enough money
to compete, whose incentive is (obviously) to get some of the profits that are currently achieved through the monopoly. Let's assume something
like that exists, and that it is not a law
, for that would be a violation
of the idea of "laissez-faire capitalism," wouldn't it? For example, perhaps it is the case that all such capitalists find that it is more profitable to expand the business that holds the monopoly by purchasing shares of it, rather than competing. This requires that all such capitalists find the prices set by the monopoly holder to be acceptable. Furthermore, the product provided must be something the consumer cannot do without, for example water, (or else the increasing price will decrease demand]. This is the worst case
I can imagine, and I submit that it provides no good reason to avoid laissez-faire capitalism. Here's why:
Millenium: Under monopolistic conditions, there is no incentive to improve...
This means that anyone wishing to provide water in an improved way will generally do it by competing, or else the monopoly will not exhibit this particular negative feature.
Millenium: ... nor to keep prices low. ...barriers to entry rise, as do prices.
I can see how prices rise, but I do not see how barriers to entry
rise. I would think that increased prices for water would make it easier for new businesses wishing to provide water to purchase or create the means
and make enough money to do well. So it seems that the effects of the monopoly, as described by Millenium, would actually increase the chances of would-be competitors. To say that the emergence of a monopoly decreases these chances of successful competition appears to put the cart before the horse
. What makes more sense is that decreased chances of successful compeition can produce a monopoly.
typo: it is possible for a company to reach a critical mass after which it can only be stopped - or even slowed down - by the ruling of more laws.
This is simply a bizarre claim
. I'll admit that with the existence of a government that can be influenced
by the large amount of money
that a monopoly can generate
for a company, laws may be created (using that money) that can prevent the compeition that inevitably slows down every successful company. For example, the state holds a monopoly on the creation of money and the use of force
for the protection of property
(and everything else), and so it is nearly impossible to stop it, but considering the state to be a company that has reached the critical mass of which typo is writing is certainly in direct opposition to an argument against laissez-faire capitalism. Likewise, many cities and counties provide energy suppliers with monopolies over the generation and/or distribution of energy, and this too often makes energy companies unstoppable. But again, these monopolies exist only because of laws
, not because of laissez-faire.
typo: Take Microsoft for a perfect example.
This is an excellent idea. Microsoft almost has a monopoly over home operating systems. But Apple still has a strong Mac following, and Linux's place in home operating systems has been increasing. But let's suppose they got squeezed out, and Microsoft suddenly has a complete monopoly over the home-based OS. The claim is that the monopoly will A) lose incentives for improvement, and B) cause an increase in prices. In fact, these are the very reasons that Linux has started to find its way into home computers. It seems clear that Microsoft's monopoly, should it ever come about, would only increase the profits (raised prices, remember?) and the opportunities (Microsoft would stop improving, right?) available to fledgling
typo: devotion to money, greed that is, will damage human relationships
Money is essentially a tool for transporting value from one place or person to another. It is an abstraction of value. Greed, or an obsession with increasing the amount of money you hold at the expense of at least one of your moral principles, will damage your relationships with others. Does this mean that you should avoid increasing your net worth
? More to the point of using this as a reason to restrain laissez-faire capitalism, should you be prevented by law
from such behavior
? Can a law really prevent a person who might damage his or her relationships with others from doing so? It seems to me that the answer to all these questions is no. I think the way to avoid damaging your relationships with others is to take responsibility
for building and maintaining them. In fact, I'd go so far as to say that the short-sightedness that typo talks about is created and promoted not
, but by laws that subject our long term plans to the whims of our rulers
both point out how monopolies protect themselves from competition. The methods they cite are:
- buying competitors
- using muscle to suppress competitors
- bullying suppliers to prevent competitors from getting supplies
- patents and trademarks
- exclusive contracts
In this list, we find elements that are in opposition to laissez-faire - that is, they require coercive government intervention to be maintained. For example, as Highlander points out, trademarks and patents and contracts are very much encouraged and appreciated by big business. However, they are examples of big business' hypocrisy
in its claims of promoting a free market. In a free market, the enforcement of contracts, trademarks, copyright, and patents is done without government intervention, and so when a monopoly uses them as a tool of oppression, they are no longer respected and the monopoly loses the advantages. This, of course, is the basis of the hypocrisy of big business in this area. Big business likes monopoly, and so it encourages the government intervention that supports it.
The other items in the list clearly show that the monopoly uses some of its profit to maintain itself, and as long as the customers (people who need water in my worst-case scenario) continue using enough product to support those levels of profit, the monopoly is able to remain in effect. However, when customers don't like the higher prices, they purchase less - let their lawns go dry, stop washing their cars, or move to a wetter area. This is the balance that a free market achieves. When the monopoly is bad for the customers, they stop supplying it with resources - they give up some water, and they may even pay more for water from what small competitors manage to exist, just to stick it to the big bad monopoly
. In a market free of coercion, being bad for the consumer is the one thing that companies will strive most to avoid. Of course, this assumes that customers pay attention and take personal responsibiility
for understanding the market in which they are making purchases, and that is something sorely lacking these days because government intervention teaches us to rely on the government for due diligence