Monopolies Are Bad

There is a consensus that monopolies are bad, but why?  Because it limits choice, inflates prices, depresses wages and, most important, it operates against the foundation of a free society: you get only that which the monopoly decides to give you.  Ergo, we have anti-trust laws that are intended to limit the consolidation in an industry so that there is sufficient competition to assure free and healthy markets. So if monopolies are “bad” then why does government create or support monopolies?

The fact is, the government neither likes nor understands free markets or competition because the government is itself a monopoly.  It is far more difficult for government to regulate a myriad of free market competing companies than one or a few dominant companies.

Let’s look at two examples of industries targeted by the government.  First, the financial sector.  Prior to the 2008 recession, the five largest banks had assets equal to 43% of the GDP, but five years later these banks assets grew to 56% (source: Bloomberg).  This despite the declaration by President Obama to eliminate the danger posed by financial institutions that are “too big to fail.”  Government forced consolidations and expanded regulations so that the largest banks grew larger and, with it, consumers have seen less choice and access to credit.

Next, the healthcare market.  The government today controls the healthcare payer and provider markets as it accounts for some 50% of the entire industry.  Therefore, government either directly or indirectly controls healthcare.  Under the Patient Protection And Affordable Care Act (a.k.a. ObamaCare) healthcare premiums have risen by double digits, consumers have limited doctor networks and many consumers are being forced into health insurance they neither want nor can afford.  The monopoly concept of one-size-fits-all is in plain sight with government mandates for maternity coverage – even if you are an 88 year old women.  Or consider the VA, which at one time President Obama touted as the model for universal healthcare.  Here veterans are literally dying while waiting to see a physician.

Government has vital a role to play in free-markets, but when government takes too large a role then we get what we have had for the past six years – slow growth and high unemployment and under-employment.