L7 Dangers of Monopolies

Tools For A New Political Economy

Regarding the Danger of Monopolies & The Need for Intervention


(Excerpted from
Blurts & Spasms Blog)

Adam Smith believed that a diffusion of wealth and the relative independence of labor were a natural byproduct of commerce. What he saw occurring across Europe was a gradual liberation from feudal forms of economic and class structure where both concentrations of wealth and servile relationships had been fixed. Manufacturing and commerce seemed to have eroded those traditions and established more liberty and economic security for everyone. This resulted in what Smith called “good government,” where there was no longer anyone with sufficient means or positional influence to manipulate circumstances exclusively to their own ends (as had been the case in prior centuries), and “sufficient authority to adjudicate the disposition of property and any disputes of custom.” Writing in
Wealth of Nations, Smith is clear about what he believes always occurs when such “good government” is absent, when disproportionate concentrations of wealth and power emerge:
  • “The proposal of any new law or regulation of commerce which comes from this order, ought always to be listed to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.” (Bk 1, Ch.11);
  • “All for ourselves and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.” (Bk 3, Ch.4)
  • In the public deliberations, therefore, [the laborer’s] voice is little heard and less regarded, except upon some particular occasions, when his clamor is animated, set on, and supported by his employers, not for his, but for their own particular purposes.” (Bk 1, Ch.11)

Clearly, from his historical perspective, Smith could never have anticipated the rise of megalithic corporations whose wealth and influence far exceeded anything in his time, and whose owner-shareholders have consequently pursued the “vile maxim” to an extraordinary degree and on vast scales. Modern capitalism has thus restored a servile, feudalistic relationship of worker-consumers through wage and debt slavery. It has also weakened and perverted governmental authority — through the authoring of self-serving regulation (via A.L.E.C. and the like), and the capturing and neutering of regulatory agencies entirely (such as what has occurred at the EPA under Republican administrations).

Smith also recognized the problem of monopolies, and warned against them this way:

“Merchants and master manufacturers are, in this order, the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of the public consideration. As during their whole lives they are engaged in plans and projects, they have frequently more acuteness of understanding than the greater part of country gentlemen. As their thoughts, however, are commonly exercised rather about the interest of their own particular branch of business, than about that of the society, their judgment, even when given with the greatest candor (which it has not been upon every occasion) is much more to be depended upon with regard to the former of those two objects than with regard to the latter. Their superiority over the country gentleman is not so much in their knowledge of the public interest, as in their having a better knowledge of their own interest than he has of his. It is by this superior knowledge of their own interest that they have frequently imposed upon his generosity, and persuaded him to give up both his own interest and that of the public, from a very simple but honest conviction that their interest, and not his, was the interest of the public. The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens. The proposal of any new law or regulation of commerce which comes from this order ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.” (Bk 1, Ch.11)

Smith also elaborates elsewhere in
Wealth of Nations on the dangerous influence that monopolies can have on government itself:

This monopoly has so much increased the number of some particular tribes of them, that, like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature. The member of parliament who supports every proposal for strengthening this monopoly, is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists.” (Bk 4, Ch.2)

And of course we have long since arrived at the very place Smith warned about; we have been subject to the “absurd tax” for many generations now — and to the undue coercive influence on our government of powerful corporate monopolies. What is Smith’s solution? I think his sentiments about what constitutes “good government” elaborate on that: a government with enough authority and independence to restrict monopoly, encourage competition, and ensure the liberty and security of its citizens without interference from business owners.
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