Comments from a reader
Here are some comments from a reader, Don Wilson, that I thought I would share it. Ironically, his feedback came as part of an objection that I had turned off the comments funstion on teh site a few days ago. I include much of his cogent argument here, most wof which I agree with.
Personally, I believe there are good cases to be made pro and con on the trend toward oligopolization in different circumstances.
For example, oligopoly and ultimately monopoly, for all their bloated management structures, do cut out a lot of redundant management and risk structures. And there are products that are produced on a volume that it is simply absurd not to recognize economies of scale achieved allowed by oligopolies. And oligopolies can foster predictability in quantity and timing of supply (and yes even of consumption through systematic propoganda)that is hardly worth giving up to diminish the risks of concentrating power the corresponding scheming that ensues.
Alternatively, there are many cases where oligopoly so suffocates innovation, or so egregiously inflates unit pricing, or so onerously cost shifts onto the vulnerable, that political, economic and social fabrics are torn to shreds locally, regionally and in some cases globally. In turn, tens and hundreds of millions can suffer unnecessary poverty, disease and death.
But then deconcentrated competition and cooperation, which I will not belabor now, have their admirable advantages and horrific disadvantages also.
So, my thinking is this: what a functional society or group of societies ought to be doing is fairly simple.
They ought to be looking at all situations and acting something like this:
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in situations where oligopoly yield desirable outcomes to society as a whole, we ought to encourage it with regulation and simultaneously constrain it with regulation that eliminates at bare minimum its onerous cost shifting on the vulnerable;
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in situations where decentralized production and competition produce desired outcomes to society as a whole, we ought to encourage it with regulation and constrain it with regulation that eliminates the draconian efficiencies of decentralized production and competition;
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in situations where the private sector return rate on oligopoly simply adds a cost factor without adding efficiency, or where the private sector return rate simply adds a cost to deconcentrated ownership and competition scenarios that are not yielding timely goods and services in sufficient quantities, then that sector ought to be taken public.
Regulatory feed backs systems are crucial in every functioning system from DNA/RNA activity in cells, to ecosystems, to politics, to economics. I think we spend too much time worrying about whether oligopoly is intrinsically bad or good, whether decentralized competition is intrinsically bad or good, or whether state ownership is intrinsically bad or good. All have done yeoman duty under certain circumstances and all should be used in appropriate circumstances.
If I could elaborate your web site at all it would be to make it clarify the need for a regulatory feedback system that works with gov. ownership, concentrated private ownership and diversified private ownership.
We seem to lack that now, not because it is unfeasible, but because we lack the vision, resolve and strategic motivation to get us to put teeth and reason back into regulation in order achieve goods and services for everyone AND opportunities to excell and prosper for those that get goosed by that sort of thing.
Within the context of your website, I think this might be done initially by beginning to think about government itself as one of the oligopolists that you watch. Governments after all were one of the first forms of oligopoly/monopoly on certain kinds of activities. Recalling this and focusing attention on the way the EU is an emerging oligopoly of states, or how the Pentagon is an oligopoly of military force, or how US intelligence agencies are moving towards oligopoly would clarify some of the reasons why we are having so much trouble with regulatory feedback on the more conventional sectors of oligopoly in the privately owned sectors of the economy. Government itself has become more an oligipolist with an agenda that often compromises, or at least alters, its function as a part of the regulatory feedback system on other oligopolies, monopolists, and diversified producer market players.
I won't elaborate too much here, but while I agree with much of what Mr. Wilson says, I can't agree on a few particulars. Regulation is of course the key, and the definition of goverbnment in a classiclaly liberal economic system ( a la Adam Smith) should be to act as a fair referee to enforce an equal playing field, and to penalize thoe who foul.
But regulation has always been a fraught issue. Our country goes through cycles of regulation and deregulation, but the tide for a long time has been toward deregulation. There are good arguments for deregulation in what were once over-regulated industries (where often entrenched interests were protected), but there are also some pretty unpleasant reasons why big companies, or some individuals in companies, want to avoid any oversight at all.
We're seeing the fruits of underregulation now in the pharmceutrcial industry, in the insurance and securities industries, and have seen it in the banking and energy industries. There is strong pressure to get rid of most legal remedies for gross corporate malfeasance.
In a democracy, there will always be politciians beholden to the large economic interests that either legally or illegally finance them. Current oligopolies are adept at manipulating those links. Yes, govenrment is a monopoly (it kind of has to be, except that state governments in our system (for example, New York's Eliot Spitzer) can disagree with the federal government). But that natural monopoly can be used in a variety of ways. The trend lately has been to wink at some of the worst excesses of the oligopolies.
Thanks, Mr. Wilson, for the comments and I hope that other readers can add to the dialog. (I'll certainly post the good ones.)
