Over at the League - heck, over at the whole blogosphere - you get a lot of right-wing pundits and libertarian types talking about how regulatory capture or rent-seeking behavior wouldn’t be a problem “if government were just smaller with less regulation” because then there’d be no reason for large corporations to try to capture the government.
But in a Slashdot discussion about an incredibly slanted set of congressional hearings today, I saw a gem. To wit:
The core problem is not that government has gotten too big. The core problem is that businesses have become bigger than government, big enough to engage in regulatory capture and rent-seeking behaviors.
This is something that’s happened time and again. The British East India company essentially took over the British government for far too long, leading to the ruin of Britain as a nation for some time. In the early 1900s, we needed a major slew of trust-busting activities BY the government [u-s-history.com] because of abusive companies like Standard Oil and Nortnern Securities who had engaged in regulatory capture and were exerting unfair monopoly controls, slowly taking over more and more sectors of the economy.
Sound familiar? Strike any parallels at all to the incredibly abusive megacorporations of today that gobble up sectors at an alarming rate? Or did you notice - for instance, that of the “fast food chains” in the US, more than 50% of them are actually owned by ONE company, “Yum Brands”, which is itself owned by Pepsi - which also owns Lay’s potato chips, Ruffles, Lipton, Doritos, “Quaker” brand, and on and on…
Still think there’s any real competition left in the bullshit “free market” the Republicans worship so much? Might as well melt your coins down to a golden calf right now, buddy. There’s not a real christian left on the “religious right”, they’re worshiping greed instead.
This struck a nerve. Many of the parallels today to the trusts of the late 1800s/early 1900s are very apt. You have one factory making multiple labels of a food type. Or two. Or three. You have 101 brands of cat food contaminated because a single company is involved in making them all. You have single companies that make the entire array of supposed “competing products” that people believe are competing with each other.
There’s something very wrong about this. It seems to me that the anonymous commenter on Slashdot is hitting the point quite close to home; we wouldn’t have a problem with regulatory capture if there weren’t huge, overarching megacorporations running fake “competing brands”, exerting monopoly or near-monopoly pressures that destroy the idea of the “free market” that the libertarian/conservatives believe exists.
So I’d like to ask some readers from both sides of the aisle here (not political parties mind you, but just economics-wise): do we actually have a “free market” today? Can we even consider our market a “free market” when there are megacorps like Kraft, or Pepsico/”Yum Brands”, or any of the other giants that constitute monopolies, skewing the result? If not, is there a fix to be had, short of another round of trust-busting and the re-institution of most of the anti-monopolist rules that it seems have been done away with in the “deregulation fever” of the past few decades?
Different labeling often occurs because it’s a different product. And at least some of the time, these companies are successful because they are responsive to differing tastes.
To take Frito-Lay, for example: They don’t have 1,001 labels just to create the illusion of choice, but they do so because they have different product lines catering to different people. People want a lower-fat chip? They release Sun Chips. Like Kettle flavored? They have Miss Vicki’s. From a consumer’s perspective, there isn’t all that much difference between Miss Vicki’s as a separate entity or as a branch of F-L. They’re still vastly different from Pringles.
Regarding the Cracked article, it would be better if they could actually demonstrate overall market-share. The only time they do, it’s listed as all of… 33% and 80%. In the former case, it behaves as though because computers are manufactured at the same place they are essentially the same (No: parts matter, as are engineering specs). In the case of the latter (a more alarming number to be sure), the barrier-to-entry for corn seeds is rather low. If this company is getting 80% of the marketshare despite the corn-equivalent of DRM, they must be doing something right. That’s not helpful to someone who wishes their corn to be free of the chemical wizardry that Monsato apparently employes, but I suspect that’s going to be like corn syrup: whether one company or multiple, most are going to do it because it’s cost-effective.
(Also, as far as I know Yum and PepsiCo are distinct corporate entities these days. The former having spun off from the latter. Which would be a good thing, right? Or does it matter?)
Comment by trumwill — November 16, 2011 @ 5:23 pm
On the broader subject, where I depart from libertarians is that in order to prevent regulatory capture, you would have to prevent all regulation. Once the door for regulation is opened, then it becomes an open arena. The companies push for regulation when it benefits them and deregulation when that benefits them. I’m not sure what you can really do about this without getting rid of all regulation or without serious campaign finance reform. The latter is a subject unto itself, but a venture that has always ended in failure.
I’m not sure the degree to which super-large companies allow for greater amount of capture. When we talk about “the (powerful) (health) insurance lobby” we’re necessarily talking about a lot of independent entities that constitute nowhere near a monopoly, but whose resources have been pooled regardless. If we’d prevented the telcos from merging, they’d have a similar set-up.
And to the question of whether huge corporations are good or bad, it varies from situation to situation. I’ve commented before that having four national cellphone carriers benefits us a lot more than the hodgepodge or regional carriers we had before. With landline telcos, less so. National chain restaurants provide a comforting uniformity of dining experience. National banks are a mixed bag, but I love the fact that my bank has a location almost everywhere I go. On the other hand, the merging and merging of cable companies doesn’t sit so well. The integration between content producers and delivery systems (Comcast/NBC, formerly Fox/DirecTV) is highly problematic. So it depends very much on what we’re talking about.
The same applies to regulation. Being “for” regulation or “against” regulation on a consistent basis leads to some pretty serious problems on either end. My family went from driving halfway across the country to flying halfway across the country due in part to airline deregulation. On the other hand, regulation will make it so that I will always be able to use the restroom when I fly, which is quite a good thing.
Comment by trumwill — November 16, 2011 @ 6:03 pm
Will,
The problem comes in when a conglomeration or megacorp becomes big enough to exert undue force on the legislative process in one sense, and when they are deliberately producing competing brands of an item while knowingly providing no difference.
For instance, consider canned vegetables. Chances are that the canned green beans under a Roundy’s label are from the same farm, and processed in the same factory, as those under a Green Giant label.
Likewise for a lot of the various pet foods and other “competing” products - behind the scenes, the “different label” shell game approaches the level of false advertising rather quickly.
Comment by web — November 16, 2011 @ 6:31 pm
There’s not a real christian left on the “religious right”, they’re worshiping greed instead.
This is not really true, but the point is nevertheless well taken. Sometimes I think my quadrant (socially right, economically middle with sympathy towards the left) is the least popular of the four. This is an instance where I wish people could transcend petty partisanship and understand that big government and big business are *both* threats to liberty.
Comment by Samson J. — November 16, 2011 @ 9:53 pm
Meh. The Roundy’s/Green Giant example is a combination of house branding and branding assurance, both of which I consider to be legitimate. If someone buys other Roundy’s products, and likes them well enough, they might be more inclined to buy a can with the name Roundy’s on it. It’s an endorsement, of sorts. On the other hand, someone may have bought Green Giant at a competing supermarket, they might feel more comfortable going with the brand that they know. Product uniformity. It helps someone coming from one perspective (”Roundy’s house brand products are okay, and cheaper!”) or another (”I like Green Giant and don’t want to take a chance on anything else.”) get what they want. And allows those who are willing to take a chance on house brands the opportunity to save a little money, while giving assurances to those who want the brand that they buy wherever they go and letting them pay a modest premium for that.
Comment by trumwill — November 16, 2011 @ 10:39 pm
I’m not sure you understand what “free market” means. It doesn’t mean textbook perfect competition. It means that the government doesn’t intervene in the market process.
Now, it may be that the large market shares of certain firms in certain industries may be due to government intervention on their behalf, intentionally or otherwise. But a single firm having a large market share is not in and of itself evidence that a market is not free, especially when that firm offers a very wide variety of products.
And there’s something positively Orwellian about the suggestion that the government should step in and forcibly break up successful firms in order to make the market more free.
Comment by Brandon — November 17, 2011 @ 7:41 am
Maybe the government could impose a law saying that no written work may be read by more than 5% of the population. To make speech more free.
Comment by Brandon — November 17, 2011 @ 7:45 am
“Sometimes I think my quadrant (socially right, economically middle with sympathy towards the left) is the least popular of the four. This is an instance where I wish people could transcend petty partisanship and understand that big government and big business are *both* threats to liberty.”
Well, the Nolan Chart lists it as authoritarian and puts Hitler and Stalin in there (so libertarians can say ‘look! we’re at the opposite of the two biggest murderers of all time!’), so people who become familiar with the independence of social and economic liberalism tend to shy away from it. This was more or less what the Nazis *pretended* to be (before selling out and giving the country over to the corporations). It’s pretty easy to imagine varieties of combining social conservatism and economic liberalism that don’t involve millions of corpses and wars against every surrounding country, however.
Actually, your quadrant’s pretty popular in terms of people’s actual opinions. Most Americans aren’t up for gay marriage or BDSM on children’s television, but are hard up economically.
Probably the best real-life example is Catholic social thought: against abortion and in favor of taking care of the poor. Jim Wallis was a Protestant example, I think. Europe has Christian Democracy.
I personally think a socially conservative, economically liberal movement could be quite powerful and might do this country some good. Inequality’s gotten out of hand and the Democrats keep getting hijacked by their lifestyle-liberal wing. And I never saw what was so Christian about the free market, honestly. Letting poor people freeze and go without healthcare strikes me as just about the least Christian thing imaginable. The problem is it always founders on the rocks of the two-party duopoly.
Comment by SFG — November 17, 2011 @ 10:54 am
And there’s something positively Orwellian about the suggestion that the government should step in and forcibly break up successful firms in order to make the market more free.
Standard Oil, anyone?
The point is that a “free market” does not exist once regulatory capture and monopoly abuses exist. These two things prevent any such form of market function and create a pseudo-government entity that controls the entirety of a service; the government reserves to itself the right to allow monopolies vis-a-vis antitrust laws and noted exceptions (such as Major League Baseball) because historically, monopolies and near-monopolies have behaved in ways that are highly contradictory to the public interest.
There’s nothing Orwellian about this. You can HAVE a monopoly. But the moment you begin ABUSING it - by forcing your way into another market, by engaging in fraud and false advertising, by price gouging - then it is not just the government’s responsibility, but duty, to step in.
I submit that the problems recently, economically speaking, have much to do with the fact that those agencies responsible for stepping in - the SEC, for instance - have been the target of so much regulatory capture by business entities that were allowed to grow too big, and as such those agencies are now failing in their DUTY to correct the situation.
Comment by web — November 17, 2011 @ 1:57 pm
SFG:
Most Americans aren’t up for gay marriage or BDSM on children’s television,
As for the BDSM aspect… most Americans aren’t comfortable with kids knowing about sex, period. Which is more a function of most Americans being from unbelievably squeamish, gullible, and puritanical religious sects that push certain things into the realm of pure absurdity.
Regarding gay marriage… polling recently has shown that most of America really doesn’t care who someone marries. It’s only, again, the freaky fundies who think that showing kids “this family has 2 daddies” or “this family has 2 mommies” is instantly going to make 5-year-olds wonder about the mechanics of what goes on in the bedroom. The 5-year-old really doesn’t care.
I’m slowly coming to the conclusion that the US’s form of representative government is fundamentally broken, however, inasmuch as “third parties” the way you describe simply can’t exist. Parliaments seem to offer a countering influence, and I personally think the best option may be to replace the Senate as it exists with a parliamentary model - the House of Representatives to represent, well, the districts and then the Senate to represent the overall views of the country better, eliminating the “winner take all” nonsense that exists even on a statehood level. At the very least, we’d finally find out whether Libertarians can really carry 10% of the vote or not.
Comment by web — November 17, 2011 @ 2:08 pm
most Americans being from unbelievably squeamish, gullible, and puritanical religious sects that push certain things into the realm of pure absurdity.
You really need to make peace with your inner struggle against religion!
Regarding gay marriage… polling recently has shown that most of America really doesn’t care who someone marries.
That’s because after decades of moral relativism in the atmosphere, most of America doesn’t care about anything anymore. But don’t let’s let this become a homosexuality thread.
And I never saw what was so Christian about the free market, honestly. Letting poor people freeze and go without healthcare strikes me as just about the least Christian thing imaginable.
Yes, I completely agree. I was pleased, by the way, to see that even Half Sigma recently acknowledged that wealthy folks can’t properly be said to really “deserve” their money.
The big factor that prevents me from being full-on economically left has to do with consequentialism, I guess. It seems clear to me that economic leftism inevitably breeds social leftism, since being provided for all the time saps one’s work ethic and moral fibre. Historical evidence appears (to me, at any rate - I’m willing to hear a counter-argument) to show that, for instance, the establishment of a robust safety net usually precedes the decline of family integrity. So I’m stuck at fiscally “middle”.
Comment by Samson J. — November 17, 2011 @ 8:26 pm
SFG beat me to it, but one of the dirty little secrets in American politics is that abstractly people like to think of themselves as socially liberal and economically conservative, but when you start moving issue-by-issue, you start to get a different picture once you move past the most hot-button issues.
Comment by trumwill — November 17, 2011 @ 8:30 pm
Web:
I don’t see any specific allegations of abuse. I just see “Big, therefore bad.” Or, again, “Shoot ‘em all and let god sort ‘em out.”
Comment by Brandon Berg — November 17, 2011 @ 9:44 pm
The market in soft drinks is free if I have other choices than the market leader. I do. Both niche guys and big guys.
A monopoly looks like pre-breakup AT&T: Stagnancy with slowly rising prices. Show me where we have that IYHO; I’ll Google it on my phone and see if I agree.
The fact that things are imperfect doesn’t prove they’re intolerable, nor that your own personal hobbyhorse (or mine) is necessarily not a worse answer. Might be nice (for the affluent educated minority who actually matter) if Coke shrank without screwing property rights in general; OK, what’s the plan, other than rule by decree? Next step is to invent equitable, fair laws that prevent highly competent providers of goods and services from serving all the customers who are tired of the loser vendor they have now. For values of “fair” equal to “Venezuela”, it’s doable, though catastrophic.
The state isn’t inherently virtuous.
I DO agree that big companies are a nightmare to work for, even for white-collar guys like me. Work is such a big aspect of life, that’s a huge issue for those who don’t have skills valuable to a “cool” small company. OTOH it beats farming with horse-drawn ploughs, and it’s way better than a union or government job, from what I’ve personally experienced of both.
Comment by matt walker — November 19, 2011 @ 7:07 am
Matt,
A monopoly doesn’t always look like “pre-breakup AT&T.” It can manifest in a variety of ways.
The infamous “blacklists” of actors in the early and mid 20th century, where supposedly “competitive” studios competed to keep certain actors out of the business based on political or racial reasons, were one other example.
Likewise, you’re missing the point. You say “Next step is to invent equitable, fair laws that prevent highly competent providers of goods and services from serving all the customers who are tired of the loser vendor they have now.” Currently, in many industries - cell phone service being one, TV service being another - there are many customers who want to dump the loser vendor they have now but cannot because those loser vendors constitute a monopoly in the area in which they live.
For instance, living in Colosse, which is a major city, you’d think I had “choice” in internet providers. But I don’t. I can go with one cable company only, because that cable company has a monopoly on cable-line service. I can switch to AT&T internet service, but they carry exactly the same terms as the cable-line service and they collude to keep it that way. I cannot switch to Verizon FiOS, because the cable company and AT&T have colluded and engaged in regulatory capture to prevent FiOS from providing service in my section of the city. I can theoretically get a “wireless 4G” service like Clear, but that is known to be completely inferior; the same if I were to switch to dial-up.
For the service I am seeking, on the terms I want, there is no negotiation possible, and no vendor other than the “loser” vendors. This is monopolist behavior even if “on paper” the cable company and AT&T are supposedly in competition with each other, because their various agreements give customers no actual choice of service other than to drop to a much, much inferior product.
Comment by web — November 20, 2011 @ 10:10 am
Could you elaborate on the specific “terms” the cable companies and telephone companies are colluding to maintain (outside of whatever is going on with Verizon FiOS)?
Comment by trumwill — November 20, 2011 @ 2:04 pm
Will:
#1 - the “speed pricing tiers” from both AT&T and the cable company are identically priced.
#2 - The channel lineups are amazingly similar and both completely fail to offer any a la carte option. I can get the “low end family” pack and miss two channels I really want, or the “low end normal” pack and get those two channels but lose three from the “family” pack that I would like. Or, I can pay an extra $30/month to go up to the “super deluxe” channel tier and get all the channels I would like, along with another 200 that I don’t want. (As it stands, both “low end family” and “low end normal” each also carry roughly 40 channels that I really don’t care for anyways).
#3 - Both services carry identical “data usage limits” in terms of a cap over which they yell at you for “using too much internet” (even though their advertising is “high speed unlimited internet).
None of these things is available for negotiation with the providers. Verizon FiOS still lacks the “data usage limits” nonsense, but due to regulatory capture by AT&T and the cable company in my area, FiOS is not allowed to run the fiber lines necessary to provide a competing service.
Comment by web — November 21, 2011 @ 7:59 am
Thanks for the examples.
#1 I think the stronger argument here would actually be that DSL and Cable aren’t in competition with one another because (even when both are available) they serve two different markets. AT&T offers *much* lower pricing, because they offer lower-speed options. CableCo has costlier options with better speeds. Where the two intersect (at about 6mps) the prices are similar, but that’s as likely a result of competition as much as anything. Both prices are substantially lower than anything available to me out here, for instance.*
#2 When it comes to TV lineups and the like, there are (usually) also two other options (Dish and DirecTV) and greater competition. Still no a la Carte pricing, but that’s as much a product of the demands of the content producers (that all of them have to deal with) than the cable/sat provider collusion.
#3 While I absolutely agree that they should not advertise “unlimited” when it is not, in fact, unlimited, the similarities between the two are mild. And even those aren’t the same, as AT&T offers two different caps depending on what kind of customer you are. But AT&T’s policy is shockingly reasonable, allowing you to go over at very reasonable rates. CableCo’s, on the other hand, will take punitive action up to cutting off your Internet or cancelling your account. These policies are different enough that I don’t think the collusion charge sticks.
FiOS: It’s not clear to me how anxious Verizon is to offer FiOS where it would require duplicate infrastructure. They do not offer FiOS presently at my folks’ house, despite the fact that they are outside of AT&T’s footprint (they do offer it one town over, however). I would be surprised if they were to want to offer the service to AT&T areas before even doing so in their own back yard. Once they have their own areas sewn up, then a battle could brew.
Ultimately, though, this is the product of locally-designated monopolies far more than than the sheer size of AT&T. After all, Verizon is large as well and could put up a pretty big fight. And, of course, local monopolies pre-date the reformation of AT&T all the way back to when the previous AT&T was broken up.
At the end of the day, you are likely to end up with either (a) one company running the lines or (b) duplicate infrastructure. We have (a) right now. There was an effort in Delosa to open everything up and force the line-carriers to allow third parties access to their lines, but it ultimately didn’t work out. Perhaps we would be better off if the cities and counties themselves owned the lines, I’m not sure. I’ve heard some convincing arguments that we should go with (b), though I’ve heard some convincing arguments that we shouldn’t.
Clancy’s home town actually took control of the local cable lines**. Everybody liked it because they preferred to deal with the city rather than CableCo, but when I asked my father-in-law how much he was paying and what he was getting, it was about the same as what was available in my area (but with no ESPN3.com). In concept, I like what Beyreuth did. In action, I’m not sure it actually solved much.
Due to the fact that it’s incredibly difficult to offer a free market in something as infrustructure-intensive (not to mention digging in peoples’ back yards, requiring them to service unprofitable areas, and so on), we don’t have a clear idea of how much these services “should” cost. If where I live now is any indication, people are willing to pay a lot more than my parents have to pay. On the other hand, it’s possible that with more competition they would lower prices. Or the duplication of infrastructure could negate or reverse any savings.
* - Obviously, this is at least partially a result of infrastructure-to-customer ratios. It costs more to deliver out here. However, if people out here are willing to pay $x a month for Internet, one suspects that if there were collusion between CableCo and Telco, they could jack the rate up there, as well. But they don’t. Arguably, this is because if either company did it, the other would reap the benefits.
Comment by trumwill — November 21, 2011 @ 5:48 pm
Regarding #1 - actually, I was comparing the cable option with the AT&T Fiber option that’s come up recently, not their DSL option. The pricing tier and advertised speeds are pretty much identical.
Ultimately, though, this is the product of locally-designated monopolies far more than than the sheer size of AT&T. After all, Verizon is large as well and could put up a pretty big fight. And, of course, local monopolies pre-date the reformation of AT&T all the way back to when the previous AT&T was broken up.
I think you just proved part of the point; the local monopolies are, in many cases, a result of regulatory capture that’s a leftover from previous abusive monopolies.
Comment by web — November 21, 2011 @ 10:47 pm