Monopolies Are Destroying Our Economy

Monopolies Are Destroying Our Economy

What can be done about it?

156
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

A Thank You Letter To My Best Friend

All the things I should thank you for more often than I do.
316265
views

To My Best Friend,

This thank you is long overdue. There are so many things I want to thank you for, and I’m sure I’m going to still be missing some by the end of this letter. But here is a small token of my gratitude for just being by my side in this life and making it all worthwhile.

Thank you first of all for accepting me and loving me for exactly who I am. This isn’t easy. I can be stubborn, difficult and confusing, but you love and accept me for me. There are days I wonder when you’ll finally come to your senses and move on and find a new BFF, one who isn’t so complicated, but to my amazement, you never do. You tell me you’ll take the good with the bad, and when I question whether I have any good left, you’re always there to reassure me and show me that I do. Thank you for loving me in my dorky and difficult moments, moments where if the rest of the world saw them, they’d probably walk away. Thank you for understanding me like no one else does; if we didn’t have the connection we did, I can’t imagine how lonely and big this world would feel. Because of you, this world seems like a little friendlier place, one I can see myself being a part of.

Thank you for being my biggest fan. Besides my family, you are my biggest supporter, and I know that when I win, you win, and when you win, I win. In this battle we call life, it doesn’t matter who’s in my opponents corner, because I know I am always going to have you in mine, and that’s the best asset I could ever ask for. You encourage me to chase my dreams like no one else does, and I can tell that you sincerely hurt when I hurt — not many people care about me in such a deep way. Whatever crazy dream I tell you I’m going to chase after next, you believe I can do it, even when the rest of the world thinks I’m crazy for even suggesting it. When something good happens, you’re the first person I want to tell, and when something bad happens, you’re the first one I go to for support.

Thank you for being you. You are incredible my dear, and I can’t wait to constantly remind your husband that he got crazy lucky and out kicked his coverage big time. You are beautiful inside and out. On the outside, you are so gorgeous; you’re very own unique and incredible definition of beauty, and I know I’m one of many who see it. You’re intimidating to stand next to in pictures because I know your light shines so bright, but I’ll gladly stand next to you and take a picture, because I’m so excited to show the world how breathtakingly beautiful my best friend is. On the inside you are even prettier, with a warm heart, a sharp mind and an unbelievable personality. You are hands down the funniest person I know, and I still can’t believe that someone as funny and hilarious as you chooses to spend her time with someone as dweeby and awkward as me. I mean, half the time we’re laughing at some fail I had or something stupid I did, so I guess I contribute a little bit to our constant laughing. You are so kind and so sweet, and have the biggest heart of anyone I know. God spent a little extra time when he made you, because you’re the total package: you’re beautiful, awesome and amazing, all wrapped in one, and I’m so lucky he put you in my life—he knows I’d be lost without you.

Thank you for being there for me whenever I need it. It was once said that “all that relationships are are being there for someone when they need you,” and you’re a pro at this. Whether it be because another boy is being stupid or I’m feeling alone, I know all I need to do is call you, and I’ll instantly feel better. You help my through the countless problems Lord knows I have trouble solving, and you reassure me that no matter what, you’re always going to be there for me. This is huge, and something very few people have been able to do for me, but you always have, and I know you always will be. And that is the most reassuring thing I know, knowing that if all hell breaks loose, the world falls apart and I have no one, I’ll have you. And that is all I need.

Thank you for being a spark, a light in my life that no matter how dark the world around us gets, is always there to light my way and show me the way home. Thank you for laughing with me when God blesses us with a funny moment, and crying with me when God is trying to tell me something. Thank you for standing beside me in the greatest of moments and the darkest of hours. Thank you for being the one I share my fondest memories with: all the nights we stayed up really late, all the exciting adventures we went on and all the inside jokes we still laugh about today. Thank you for growing up with me; for being there every step of the way and creating some of my happiest moments with me. Thank you for all the memories I've shared with you, and I can't wait for what crazy adventure we're going to go on next.

So thank you for accepting me, loving me, and supporting me. Thank you for being your wonderful self, and thank you for being there for me, through thick and thin, even when I'm at my lowest. Thank you for shining your brilliant light into my life and illuminating my world.

Oh, and thank you for being my maid of honor. I know I won’t need to ask you for a while, but you had to know it was coming, right?

Thank you for being the godmother to my future children, the sister to my family, and another daughter to my parents.

And finally, thank you for being the best to my friend.

Cover Image Credit: EnkiVillage

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

Irish-American History Is Just As Important As Any Other Culture, You Can't Prove Me Wrong

I cherish being Irish and I will not let anyone let me feel bad for that.

246
views

Depending on when you're reading this, Saint Patrick's day has either just passed or is around the corner. For me, Saint Patrick's day is tomorrow. I've been debating this article for some time now because I didn't know how it would be perceived. At this point, though, I feel it's important for me to get out. No, Irish people were never kept as slaves in America, and I will never be one to try and say they were. However, Irish people were treated tremendously awful in America. A lot of people tend to forget, or just try to erase entirely, the history of the Irish in America. So much so that I felt shameful for wanting to celebrate my heritage. Therefore, I want to bring to light the history that everyone brushes under the rug.

In 1845, a potato famine broke out across Ireland. This was a big deal because the Irish lived off, mainly, potatoes. They were cheap, easy to grow, and had tons of nutrients. So when the famine struck, many people either died of starvation or fled to America in seek of refuge. When the Irish arrived in America they were seen as a threat to the decency of America. People viewed them as drunk beasts, sinful savages, barbaric, violent, belligerent, stupid, and white apes. When the Irish would go to look for jobs, many times they found signs that read "Irish Need Not Apply," even when the job was hiring. Therefore, the Irish did the jobs no one wanted, and even jobs African slaves wouldn't do. The biggest example of this is when Irishmen built canals and drained swamps. They were sent to do these things because of the enormous amount of mosquitoes; in the swamp, they would get bit and ultimately die of malaria.

Also, during this time, Irish people were poor and therefore lived in the same neighborhoods as the free African Americans. A lot of the Irish people were friendly with their neighbors of color and even got into interracial relationships. Because the Irish lived in these neighborhoods they were seen as dirty and even a lot of people at this time put African Americans higher on the totem pole than Irish. One person during the time even said, "At least the black families keep their homes clean."

The main reason American's outlook on Irish people changed was that most Irishmen took up fighting for the Union in the Civil War. I make this argument, not because I think the Irish suffered more than African slaves. I don't say this in means of trying to erase the struggles of the African slaves. I do not think that any of our ancestors should have been treated the way they were. I mean to say that the Irish did in fact suffer. Irish people were treated wrongly on the basis of...nothing. Simply because my ancestors hailed from the shores of Eire, they were treated with malice. And I write this simply because I want people to remember. I want people to understand what happened.

On Saint Patrick's Day this year, next year, and for the many years to come, I want people to embrace the Irish culture. I want the folks of Irish heritage to not be ashamed of where they come from; to not be ashamed to share their culture the way I have for many years. I want everyone to have a beer, wear some green, eat a potato or two, and dance the Irish step; to celebrate the history of Irish people with a bit more understanding than before.

Related Content

Facebook Comments