Naked Capitalism: What is the proper libertarian response to concentrated corporate power? (my humble response)

Naked Capitalism, a popular left of center financial blog, has posted a question, "What is the proper libertarian response to concentration of power?"

Never mind the fact that Libertarians are not one blob with one given proper response.  I outline my response below.  It attracted attention from some so called "progressive" capitalists.  I thought it might be interesting.
Well, I cannot speak for all libertarians, certainly not the anarchists, but will attempt to explain my response to the question, "What would a libertarian response be to corporate monopolies or concentration of power?"

The first question is, what type of monopoly? The question is important.

The first type is a State Sponsored Monopoly. No one will deny that there are monopolies which are setup by the government (the post office comes to mind). In that case dismantle them and dismantle the laws protecting them.

There are all kinds of state sponsored monopolies, Fannie and Freddie (actually they are a duopoly). ATT during the 80s and 90s. The post office. They can either be setup by the state or have a list of regulations so tight that it serves as a natural bottleneck.

Secondly, there are cases as has been brought up by many intelligent statists that there are Natural Monopolies. Those usually exist temporarily. There are many reasons for corporate concentrations. Telephone wires, plumbing lines, electricity all have one thing in common. There is a common infrastructure which needs to be accessed, and it is difficult to come up with a compelling reason for competing systems (water is a great example of this).

What should be done is what was done to ATT which was a monopoly before and allowed competition for interstate long distance. They should breakup and allow individual firms to compete for servicing of that common infrastructure. In Minnesota, we had three companies competing to take my garbage, where we used to have just one. And if you can remember, after the breakup of ATT, the INTRAstate long distance was still a monopoly which is why it cost more to call from Dallas to Fort Worth than from Dallas to Honolulu.

Third, there are natural reasons for some concentration of business (think of technology or the network effect). I'll call these a free market monopoly. Microsoft/Intel duopoly was mentioned so we will deal with that. It makes some sense to have everything on the same machine preinstalled. But it gets more tricky. They of course have the code, so they can shut out all their competitors.

The reasons for breaking up the monopoly usually center around fairness. Its unfair to practically force people to use Internet Explorer or Windows Media, at least that's what Netscape and Real were arguing.

The other reason is that innovation from startups is crushed.

For this, I would do nothing. Yep, that's right. I'd sit on my hands. With the exception of violation of inalienable rights, I'd balk.

For me, it comes back to property rights. Who said free markets will always give the most desirable outcome. The benefit that we all get from free market driven solutions is a byproduct of property rights. We all know that individuals and corporations can be downright nasty and only look out for themselves.

In most cases, this self interest ends up having side effects in the case that there is an free exchange of value. But, there are some cases where individuals make decisions that are not in society's interest. That is why we have eminent domain to protect the obstinate holdout who doesn't want to sell his house to put up a mall. Now, would it be more beneficial to society to have a mall? Yes.

Would it be right to take away the property rights of a homeowner to steal that house and put up a mall? No

Imagine Microsoft was owned by only one person, Bill Gates. Would it be right for government to break his code and say that you have to give away your code on your operating system that you wrote. That would be wrong.

Anyway, all free market monopolies are temporary in nature. In the 80's, Coke was the monopoly of scorn. The contracts they wrote shutout everyone else. They played unfairly. No one seems to worry about them anymore.

Today, the potential free market monopolist could be facebook and google. We all know Microsoft is a dying breed. They have failed in almost every new thing they try. But they have the PC and the OS and MS office. That won't be around forever and we will be arguing about something else.

The railroads of the past turned into the phone companies which turned into the technology firms. Who knows what will be next.

The only ones that never die are the ones that have a wall of government protection. Think Fannie and US Post.

Anyway, people here like making fun of Libertarians, but you know they call you the same names... think of any term and add BOT. They call you sheep.

Anyway, I would be proud to be called a freedombot. I will err on the side of freedom every time. And while you are at it, isn't government the biggest monopoly of them all.

At least in free markets we can sue for grievances. Try suing the government and they will roll up your lawsuit nice and tight and try push it into a place where it will never see the light of day. `

While you are at it join my humble blog were you can read my libertarian responses and call me names.

DownSouth says:

August 29, 2010 at 9:16 am

Wow! That’s such an ideologically blinkered telling of the history and philosophy of utility regulation that it’s hard to know where to begin in correcting all the distortions and misrepresentations.

For an excellent review of some of the pertinent issues, there’s this paper by William Yurcik, which discusses in detail the ATT breakup.

At the heart of utility regulation is the belief that every household has a right to certain services—-running water, electricity, telephone. Households are provided what is called a “lifeline,” which is a minimal quantity at a minimal cost. Since it almost always costs more to deliver this “lifeline” than what it is sold for, the delivery of this “lifeline” is cross-subsidized. Services that are deemed to not be a necessity—-long distance, large business and industrial users, etc.—-are charged more so that this “lifeline” can be provided at below cost.

When Judge Greene ordered the breakup of AT&T, he left the monopoly of the local loop in place. And despite the howling of AT&T, he left the regulation of the local loop in place. Basic telephone service is considered to be a necessity. Long-distance is not. The high intralata long-distance rates the still-regulated RBOCs charged were used to cross-subsidize the low “lifeline” rates. The unregulated interlata and interstate carriers, on the other hand, had no “lifeline” service to cross-subsidize. This explains why intralata rates remained high while interlata and interstate rates declined.

In place of this factual reality, however, EconomyPolitics invents this fiction, which conforms to his ideology, out of whole cloth:

What should be done is what was done to ATT which was a monopoly before and allowed competition for interstate long distance. They should breakup and allow individual firms to compete for servicing of that common infrastructure. In Minnesota, we had three companies competing to take my garbage, where we used to have just one. And if you can remember, after the breakup of ATT, the INTRAstate long distance was still a monopoly which is why it cost more to call from Dallas to Fort Worth than from Dallas to Honolulu.

In Latin American, where neoliberalism has been forced upon the people as a result of the US’s strong-arm diplomacy, the scheme EconomyPolitics advocates has been implemented, and with predictably tragic results:

Arguably, the best-known reaction to water privatization occurred in Cochabamba, Bolivia when the engineering giant Bechtel set up its subsidiary, Aguas del Tunari, in early 2000 and immediately raised the price of water beyond the reach of the vast majority of the population. Its contract even gave the company the right to charge people for the water they took from their own wells and to send collection agents to homes to charge for rainwater collected in cisterns on roofs. Consumers were hit with up to 200% rate increases as the company planned for annual profits of $58 million. Public protests forced the government to reverse this privatization effort, but Bechtel is now suing Bolivia for $25 million in lost profits. Despite the fiasco in Cochabamba, the Bolivian government is still pursuing several other privatization schemes, including plans to export and sell bulk water to neighboring Chile for use in its mining industry. If last October’s attempted exportation of gas through Chile is any indication, this plan is bound to provoke a negative response from the Bolivian public.

But despite these setbacks, EconomyPolitics and his neo-colonial allies are undeterred in their drive to subjugate the poor peoples of the world:

The nudge towards water privatization in Mexico provides yet another alarming example of how governments, the international financial institutions and private water companies work in concert, with little regard for public well-being. The government of Mexico, along with others in the Global South, is laying the groundwork for the corporate takeover of the country’s water system.
Down South:

All of those tragedies are pretty scary.

I’m sure you forgot to include the stories of substandard government water. But for you it is an inalienable right to crappy water that you can’t drink without boiling. Most middle class Bolivians and Peruvians drink lots of bottled water.

You didn’t read what I said. Or maybe you didn’t get it.

What happened in Cochabamba Bolivia and Mexico is very predictable. There is no real functional difference between a government monopoly and a private one. In Madagascar, they tried a similar privatization of the long distance phone company. The problem is they gave the privatization to one company in a private bid. They found that long distance phone rates increased.

If you privatize by giving rights to one individual monopoly private company, you just screw the consumer through a different hole.

In Peru, the long distance phone company was privatized, and they allowed 6 private companies to bid on the service. Now it is just pennies to call Lima.

Just because I think private companies can do things better, doesn’t mean I favor government sponsored privatization into the hands of a single monopoly. You make it sound like I was ok with Fannie rather just because its private. Give me a break.

One of the problems most of you statists have with libertarians is that you think that we think private companies can do things better than government, that we like big business getting into bed with government. I call that socialism lite because it leads to concentration of power which is what we were trying to do away with in the first place.

My recommendation was to have multiple companies competing for servicing the common infrastructure. That is very different from all the examples you gave.

So think some more and come back with a real response.

Oh, by the way, I know Bolivia well. I have lived in Peru and Central America for several years. Just because people are protesting high rates doesn’t mean that they are right. In Latin America, people protest for all kinds of reasons. They protest to keep jobs. They protested in Mexico for the high tortilla prices.

And if you think that people shouldn’t get their water shutoff for not paying bills, try not paying your water or electricity bill in the United States or Europe and you will see how inalienable that right really is.


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