I recently read an article about Uber Taxi that got me thinking about the role the government plays in creating monopolies. For those not familiar, taxis are licensed and are given a medallion to prove they are licensed. Uber Taxi is a ride-sharing mobile application where any car owner can list their location and make an offer to provide a ride. Licensed taxi companies are calling upon officials to ban the use of Uber since it breaks their monopoly hold.
When most people hear the word “monopoly”, they conjure up images of a greedy company that has squashed all competition and is now free to set any price for their product or service. While this may be true, some monopolies, like Rockefeller’s Standard Oil and Carnegie’s US Steel, actually made the industry more efficient and were never guilty of price fixing. Even so, many consider a monopoly to be an extreme case of capitalism that demands government intervention.
The Sherman Antitrust Act of 1890 gave the government the ability to break up big companies to suit their needs. In fact, most current monopolies are the result of the government erecting barriers to free trade derived by granting governmental privilege upon the monopoly.
Digging deeper, there are essentially four types of monopolies:
Company
Labor
Industry
Government.
AT&T often cited as a company monopoly, was, in fact, a government-supported monopoly. The company was considered a public utility until the Reagan administration changed course and invoked the Sherman Act to create what was called the Baby Bells.
Labor unions are basically a labor monopoly in a specific industry and were made possible as the result of legislation like the Davis-Bacon Act and the Walsh-Healey Act.
Industry monopolies like De Beers Diamonds and OPEC are fundamentally a collection of private businesses acting in collusion to control prices.
Finally, there are government monopolies like Social Security, the USPS, the FCC, and a host of others.
While naturally occurring monopolies often emerge and soon die out in the face of competition, monopolies require government assistance to truly be sustainable.
