“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.”
– Adam Smith, The Wealth of Nations
We adhere to some essential core values at Liberty Through Wealth.
We believe that capitalism is the greatest economic system ever to lift people out of poverty and create wealth.
And central to capitalism is the idea of freedom: the freedom to pursue your dreams, the freedom to compete and the freedom to choose.
And we believe that the United States embodies these values more than any other nation.
At the same time, it’s also important to recognize when the U.S. falls short of these ideals.
And there are good reasons to believe this is the case today.
Enter Jonathan Tepper’s new book, The Myth of Capitalism: Monopolies and the Death of Competition.
Tepper argues that a handful of large firms now dominate the U.S. economy.
These monopolies and oligopolies recall the Gilded Age of the late 19th century.
That’s when J.P. Morgan dominated the banking system, Andrew Carnegie ran the steel industry and J.D. Rockefeller crushed all his rivals in the oil sector.
So how does this apply to our economy today?
Tepper argues that U.S. consumers suffer from a “lack of choice.”
Today, most Americans make their purchases from industries where a mere three or four competitors control the entire market.
Tepper offers the following eye-opening statistics:
- Two corporations control 90% of the beer Americans drink.
- Four airlines dominate airline traffic, many enjoying local monopolies or duopolies in their regional hubs.
- Five banks control about half of the nation’s banking assets.
- Many states have health insurance markets where the top two insurers have an 80% to 90% market share.
- More than 75% of households have no choice in high-speed internet providers.
(This is not true if you live in, say, the United Kingdom.)
Surprisingly, technology – the supposed great leveler – has made the problem worse.
The Apple iPhone and Google Android are a duopoly. Google dominates internet searches with an almost 90% market share. Facebook has a nearly 80% share among social networks.
The Google and Facebook advertising duopoly has no credible competition, even with Amazon’s recent entry into the space. Meanwhile, Amazon remains both the seller and the leading online platform for third-party sellers.
Each of these companies works hard to appear benign.
But, as even Adam Smith pointed out in The Wealth of Nations, they are not.
Many small businesses in the U.S. are held hostage to the whims of Google and Facebook and Amazon.
Today, a 20-something employee in Silicon Valley has the power to crush your small business if she wants to. And as with the oil and steel industry in the Gilded Age, her actions are unregulated.
Just as you need a referee and rules in a basketball game, you need the same to promote competition in the economy.
Today, that referee – the government – has gone AWOL.
That’s because the original antitrust laws focused on protecting consumers from price gouging.
These laws, however, don’t apply to the winner-takes-all dynamics of online platforms.
The bottom line?
If you believe in capitalism, free markets and competition…
The oppressive power of a handful of companies in the United States should worry you.
Less competition is bad for consumers.
In the absence of real competition, consumers are not – to use free market economist Milton Friedman’s famous phrase – “free to choose.”
And that’s an issue that both left and right can agree on.