How monopolies are destroying the US economy

Monopolies Are Destroying Our Economy

What can be done about it?

Jake VP.
Jake VP.
161
views

In a functioning capitalist economy competition will drive down prices. You can't charge $10 for your deluxe foot washing massage chair invention when your competitor is selling their ultra massage chair (with foot washing attachment) for $9, you would need to reduce your prices, and your competitor would reduce their prices, and so on and so forth. All the while the consumers of massage chairs which also wash feet would be revealing in all of the money they get to save because of the low prices.

This is why the antithesis of a working capitalist market is the monopoly. Whether it's in the hands of a business, or a government, the typical market is worst off when it's in the hands of just one entity (there are definitely exceptions, some markets work best as monopolies, if you want to learn about them you can start here).

The World Economic Forum (WEF) looked at a working paper from the International Monetary Fund (IMF) which used markups to look for "market power" or for companies/industries which are closer to monopolies than they are to a competitive market. The WEF said "markup is how much a company charges for its products compared with how much it costs to produce an additional unit of this product, expressed as a ratio. This provides a measure of market power." As I said earlier, low prices come from competition, so the IMF used that logic, and looked at high markups to figure out where there was low competition. The IMF's finding can be seen in the following graph.

The WEF's analysis is eye-opening, and startling, they say "More in-depth analysis shows that the increase in markups in advanced economies is mostly driven by "superstar" firms that managed to increase their market power further, while markups in other firms have essentially been flat. Interestingly, this pattern is found in all broad economic sectors, not just in information and communication technology.

Should we be concerned about this rise in corporate market power in advanced economies? The short answer is yes, especially if this trend continues. Our paper finds that, starting from low levels, higher markups are initially associated with increasing investment and innovation, but this relationship becomes negative when market power becomes too strong. Further, the link between markups and investment and innovation is more strongly negative in industries featuring higher degrees of market concentration."

The increase in market power isn't only trouble for consumers though, it's bad news for workers as well. The WEF state that "labor (workers') share of income declines in industries where market power rises." and the WEF and IMF aren't the only groups looking at increasing market power. Another study "found that average markups, defined as the amount above cost at which a product is sold, have shot up since 1980. The average markup was 18% in 1980, but by 2014 it was nearly 70%." Although it wasn't the author's main purpose they do "offer a few possible explanations, including an increase in mergers and acquisitions alongside deregulation."

One big example of mergers leading to an increase in market power is the airline market. A ProPublica article reported that "for decades, the federal government directly regulated fares and routes. Amid runaway inflation in the late 1970s, the industry was deregulated on the theory that market forces would produce lower prices and more efficiency. Still, the father of deregulation, economist Alfred Kahn, argued the new market needed strong antitrust enforcement to preserve the benefits of competition that deregulation was supposed to produce." The article talks about how we have gone from having 9 to now 5 major airlines, and this has led to less routes, and higher prices.

One thing that seemed to work in the past in curbing market power were unions. A recent Bloomberg article states that "there's the chance that unions might be an effective remedy for the problem of increasing corporate market power -- evidence suggests that when unionization rates are high, industry concentration is less effective at suppressing wages." And the ProPublica article mentioned that "The union of mechanics and ground workers recently came to an agreement with American giving its members a large pay raise."

When the problem is consolidation of both wealth and power in the hands of few, it becomes apparent that the solution is to more evenly distribute that power.

Cover Image Credit:

Samuel Zeller

Popular Right Now

Austin Alexander Burridge, Volunteer Advocate, Shares 3 Great Reasons to Volunteer and Help Others

Austin Alexander Burridge is an avid academic who studies Environmental Science at Winona State University and believes that work in the service of others is a key pillar to personal development.

4671
views

Sometimes it's easy for someone to adopt a "me, me, me" attitude. While focusing on oneself, a person may feel nice in the moment, but serving and helping others will bring lasting benefits. While there are many great reasons to serve and help others, there are three universal truths that resonate with volunteers around the globe.

Austin Alexander Burridge's 3 Reasons to Volunteer:

1. Accomplishment

Often, people fall into a trap of focusing on themselves when they are feeling down. Maybe someone did not get a job they wanted. Or perhaps a person gets dumped by an expected lifelong companion. Maybe someone feels they have underachieved after looking at Facebook and seeing great things a high school classmate has accomplished. When feeling down, helping others is a proven way to improve one's mood and attitude, and it can provide a sense of pride and accomplishment. The act of giving to those in need is an inherently good action and leaves people with a wonderful feeling of joy.

2. Gratitude

One can become more appreciative of life by serving others that have less. Whether volunteering at a soup kitchen, visiting the elderly at an assisted living center, or helping families after a natural disaster, service enables people to be grateful for what they have. Seeing people who have fewer advantages, especially those who are spirited and thankful for small things, allows one to realize just how fortunate he/she is in life.

3. Friendships

Volunteering is a great way to build meaningful friendships, not only with other volunteers but also with those who are served. One of the most profound and fascinating aspects of these relationships is how volunteers will learn from those served and vice versa. As these special bonds are built, they lead to impactful connections that last for years to come.

Of course, these are just a few reasons to volunteer and serve others. One can never go wrong by helping others as opposed to merely focusing on oneself. Volunteering invariably and inevitably contributes to personal growth, development, and satisfaction.

About Austin Alexander Burridge: Helping others has been of paramount importance to Austin, and as a part of the Fellowship of Christian Athletes (FCA), Austin gave back to the community around him. He also has participated in annual peanut butter drives, The Minnesota Sandwich Project for the Homeless and collected canned goods for local food shelters. Additionally, Austin has a passion for the environment, which he pursued when visiting the Galapagos Islands, Ecuador, and the Amazon Rain Forest while studying at the School of Environment Studies, which investigates ecological systems and their sustainability

Related Content

Connect with a generation
of new voices.

We are students, thinkers, influencers, and communities sharing our ideas with the world. Join our platform to create and discover content that actually matters to you.

Learn more Start Creating

Saying You "Don't Take Political Stances" IS A Political Stance

All you're doing by saying this is revealing your privilege to not care politically, and here's why that's a problem.

bethkrat
bethkrat
621
views

I'm sure all of us know at least one person who refuses to engage in political discussions - sure, you can make the argument that there is a time and a place to bring up the political happenings of our world today, but you can't possibly ignore it all the time. You bring up the last ridiculous tweet our president sent or you try to discuss your feelings on the new reproductive regulation bills that are rising throughout the states, and they find any excuse to dip out as quickly as possible. They say I don't talk about politics, or I'm apolitical. Well everyone, I'm here to tell you why that's complete bullsh*t.

Many people don't have the luxury and privilege of ignoring the political climate and sitting complacent while terrible things happen in our country. So many issues remain a constant battle for so many, be it the systematic racism that persists in nearly every aspect of our society, the fact that Flint still doesn't have clean water, the thousands of children that have been killed due to gun violence, those drowning in debt from unreasonable medical bills, kids fighting for their rights as citizens while their families are deported and separated from them... you get the point. So many people have to fight every single day because they don't have any other choice. If you have the ability to say that you just don't want to have anything to do with politics, it's because you aren't affected by any failing systems. You have a privilege and it is important to recognize it.

Martin Luther King Jr. once said, "history will have to record that the greatest tragedy of this period of social transition was not the strident clamor of the bad people, but the appalling silence of the good people."

We recognize that bad people exist in this world, and we recognize that they bring forth the systems that fail so many people every single day, but what is even more important to recognize are the silent majority - the people who, by engaging in neutrality, enable and purvey the side of the oppressors by doing nothing for their brothers and sisters on the front lines.

Maybe we think being neutral and not causing conflict is supposed to be about peacekeeping and in some way benefits the political discussion if we don't try to argue. But if we don't call out those who purvey failing systems, even if it's our best friend who says something homophobic, even if it's our representatives who support bills like the abortion ban in Alabama, even if it's our president who denies the fact that climate change is killing our planet faster than we can hope to reverse it, do we not, in essence, by all accounts of technicality side with those pushing the issues forward? If we let our best friend get away with saying something homophobic, will he ever start to change his ways, or will he ever be forced to realize that what he's said isn't something that we can just brush aside? If we let our representatives get away with ratifying abortion bans, how far will the laws go until women have no safe and reasonable control over their own bodily decisions? If we let our president continue to deny climate change, will we not lose our ability to live on this planet by choosing to do nothing?

We cannot pander to people who think that being neutral in times of injustice is a reasonable stance to take. We cannot have sympathy for people who decide they don't want to care about the political climate we're in today. Your attempts at avoiding conflict only make the conflict worse - your silence in this aspect is deafening. You've given ammunition for the oppressors who take your silence and apathy and continue to carry forth their oppression. If you want to be a good person, you need to suck it up and take a stand, or else nothing is going to change. We need to raise the voices of those who struggle to be heard by giving them the support they need to succeed against the opposition.

With all this in mind, just remember for the next time someone tells you that they're apolitical: you know exactly which side they're on.

bethkrat
bethkrat

Related Content

Facebook Comments