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Deregulation leads to trusts and "robber-barons"

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C Le Master posted on Fri, Feb 11 2011 3:48 PM

Recently in US history we covered the late 1800s and early 1900s - The robber baron era, as my teacher calls it. Rather than dance around this ( i assume you all already know the history of this period), here are my questions: Did "excess capitalism" cause this? Are trusts bad, and/or achievable without government? Were the "robber-barons" to blame, and were they in any way immoral? How was this era really caused? Could that have happened without the government and WHY? Are you guys in support of Unions, if they are privately started and achieve all their means privately, not through government help? That may be a lot to answer but it can all be tied together... Thanks!

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http://www.youtube.com/watch?v=8C4gRRk2i-M

 

i would respond more fully, but im at work

My Blog: http://www.anarchico.net/

Production is 'anarchistic' - Ludwig von Mises

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I don't speak for the ancaps, but it is near impossible to form a regional, much less a global monopoly in any industry. The roadmap for undercutting competition is to lower prices and increase production, thereby losing money hand over fist hoping that the competition capitulates before you go broke yourself.   Assuming that the industry hegemon forces competitors out of business, they would have to raise prices in order to recoup the losses suffered trying to force out the competition -- once they raise prices, it is profitable for competitors to re-enter the market.  Hence, dissolving the monopoly status overnight.

Lastly, an  astute investor could easily see this coming and short the stock of a company seeking monopoly status and sell the interest once monopoly status is attained, then invest it in a competitor firm when the monopoly company started raising prices. 

Moreover,  my  anti-ancap opinion is that local monopolies are possible and prevalent.  However, consumers, capital, and labor are mobile -- so the consequences of a local monopoly are short-lived and futile.

One caveat is the security industry which uses coercion to obtain economic goals.   Hence, the largest most capable military force could gain control of vital societal centers of gravity by coercion and disregard free market mechanisms -- hence statism.

The robber baron era, as my teacher calls it. Rather than dance around this ( i assume you all already know the history of this period), here are my questions: Did "excess capitalism" cause this? Are trusts bad, and/or achievable without government? -- C Le Master

Your teacher is ill-informed (probably the product of a public school system).   The real robber barons were inefficient, wasteful, corrupt, and unsustainable government subsidized enterprises.   In contrast, privately funded and managed enterprises were productive, profitable, and sustainable.

The following is  a short read that provides a better explanation than I could within the context of the construction of the transcontinental railway system:

http://www.thenewamerican.com/index.php/history/american/4036-railroads-robber-barons-and-unbridled-capitalism

In sum, the only monopolies are subsidized by the government and enforced by the barrel of a gun.   This is not capitalism and for all of ancaps faults it is not maximal-capitalism -- it is called crony capitalism or state capitalism.

Liberalism differs radically from anarchism. It has nothing in common with the absurd illusions of the anarchists... Liberalism is not so foolish as to aim at the abolition of the state.-- von Mises, Omnipotent Government

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Bogart replied on Fri, Feb 11 2011 4:48 PM

There is no historical example of a monopoly being able to exist without government help and at the same time extract higher than market prices.  There are two problems facing any monopolist or wanna be monopolist in any somewhat free market.  They are inherent in the only two mechanisms available to the monopolist without using force or violence:  The mechanisms are: 1. Predatory pricing and 2. Buying out your competition.

1.  Predatory Pricing Problem:  That is you price individual competitors out of a small market by charging higher prices in a market the competitor does not have access to.  The tough part is that the higher priced market invites competition.  The best case of the failure of Predator Pricing is that of Standard Oil.  Standard Oil was in a price war with Shell and BP in Europe.  So it raised prices in the USA.  Of course the increased prices invited the Chevrons and others into the market.  At the time the Standard Oil "monopoly" was broken up in the USA, its market share had fallen from above 90% to 60%.  As long as Standard Oil could under cut competition it maintained its "monopoly" but it was having trouble in its market with European suppliers.

2. Buying Out Competitors:  The problem is that as you attempt to purchase or merge with your competitors the next competitor you purchase knows this and charges a higher premium.  So you must raise prices to pay the premium but the competitor can just take the market share at that point and charge an even higher premium for the buyout.  The best examples of the failure of this method are Casino Companies.  No company even in the booms was able to purchase enough competitors in any major gambling market: Vegas, Taho, Macau, Monte Carlo without an exclusive government provided license to obtain a monopoly.

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Bogart replied on Fri, Feb 11 2011 4:55 PM

Don't tell me that Microsoft had a monopoly in software or De Beers in diamonds.  Microsoft is fighting to stay in business against Apple, Google and others, more over it has government provided IP law that allows it to sustain lots of advantages in the PC operating system market.  De Beers is really bad and it depends on government force to restrict competition from "Blood" diamonds out of the marketplace, and more over it is under intense competition from diamond suppliers in South America and Asia.

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