# Does Capitalism Eventually Kill competition? **URL:** \ **Category:** Great Debates\ **Created:** [April 1, 2012, 11:11pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519 "2012-04-01T23:11:04Z")\ **Posts on this page:** 20\ **Page:** 7
**Author:** ![igor\_frankensteen](https://avatars.discourse-cdn.com/v4/letter/i/839c29/32.png) [@igor\_frankensteen](https://boards.straightdope.com/u/igor_frankensteen)\ **Post date:** [September 13, 2016, 12:54am UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/121 "2016-09-13T00:54:03Z")
Big subject. Complicated by more than just the fact that it’s big. Trying to understand and discuss capitalism is muddied terribly by the same thing that makes it tough to rationally and factually talk about constitutional rights: there’s a ton of politics mixed into it, and a lot of it is purposely designed to confuse things. Some things to consider: - the problem of monopolies is not the fact of the monopoly, so much as it is the ABUSES that have so often been possible because of the monopoly. Microsoft did NOT get into trouble, as certain biased people on the right like to pretend, “because they were successful, and earned the largest market share by building a better product.” They got into trouble, because they ABUSED the power that they were handed. Restraint of trade, in particular. And by the way, they didn’t defeat Netscape with a superior product. They torpedoed Netscape, by sabotaging the market itself: Netscape’s business model was based on selling software, just like Microsoft did at the time. But Microsoft took unfair advantage of it’s overall dominance, by GIVING AWAY Internet Explorer. They could, because the bulk of their money came from Windows and Office. Netscape only HAD navigator, so this was a classic case of destroying a competitor the old fashioned way: not with a better product, but with a lesser one at an artificially low (zero) price. - capitalism is NOT a philosophy. It’s closer to being an observed mechanism that evolved and was named after it was recognized, rather than being invented. That means a number of things. First and foremost for this thread, it means that no, “capitalism” doesn’t “kill competition.” It’s like guns. Guns don’t kill people, PEOPLE KILL PEOPLE WITH GUNS. Someone above somewhere, mentioned that capitalism is just exchanging goods and services, with an agreed upon medium of exchange involved, where merchants, vendors and customers have OVERALL decision making power over what is bought and sold. But it’s never as simple as that, and there has never been (nor could there be) a true “free market system” wherein everyone comports themselves in an egalitarian and honorable fashion for any length of time. Not because “capitalism” (the exchange of goods and services by private individuals) contains “bad” elements, so much as because it doesn’t inherently include necessary “good” elements. It does NOT “naturally” adjust itself, as it’s most self-blinded proponents like to pretend, because it IS just a vague mechanism. So no, capitalism doesn’t invariably lead to abuses, but the fact that it is PEOPLE who are operating this mechanism, DOES mean that abuses are going to occur. Again, just like guns. Or cars. Or cheap motel rooms. - lots of people over time, have purposely and artificially LINKED the idea of capitalism to other things, sometimes for good, sometimes for ill. Marx linked it to corporatism and imperialism, because he wanted people to oppose it. Others have linked it to patriotism and freedom, often ironically because they wanted to use it to reduce freedom and loyalty to the nation itself. ---
**Author:** ![Trinopus](https://avatars.discourse-cdn.com/v4/letter/t/2bfe46/32.png) [@Trinopus](https://boards.straightdope.com/u/Trinopus)\ **Post date:** [September 13, 2016, 2:18am UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/122 "2016-09-13T02:18:13Z")
I’ll buy that. Capitalism is a big, powerful machine, and it is all but inevitable that some jerk would use it to hurt others. The machine isn’t wholly to blame…but it is a wise government that puts a few safety regulations in place. ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [September 13, 2016, 6:41am UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/123 "2016-09-13T06:41:21Z")
> [@CheapBastid](#): > > Does Capitalism in the Wild (not in theory) naturally lead to [Monopolies](https://www.weforum.org/agenda/2016/05/joseph-stiglitz-are-markets-efficient-or-do-they-tend-towards-monopoly-the-verdict-is-in/)? I don’t know what “in the wild means”. But the answer is “depends”. In economics, there are [5 main types of markets](http://smallbusiness.chron.com/5-different-types-market-systems-25818.html). Different products will naturally tend towards different market types depending on factors such as barriers to entry, economies of scale, availability of substitutes and network externalities: -Perfect competition - lots of identical buyers and seller. Commodities like oranges or grain. -Monopoly - single seller. Like the cable company -Oligopoly - several main sellers. Coke/Pepsi. -Monopolistic -Numerous but differentiated competitors. The music industry -Monopsony - one powerful buyer. Walmart vs it’s suppliers The main danger to capitalism isn’t monopolies or even collusion among oligopolies. It’s companies that become “too big to fail”. Essentially, they become so big in terms of tax revenues, number of people employed or economic impact that they can influence policy to stifle competition. While that may be good in the short term for employees and shareholders of the large company, in the long run it stifles advancement. It also creates a “moral hazard” where these companies can adopt bad business practices, knowing that they will be bailed out. Just letting them fail is not a great option either, as their failure can significantly harm the greater economy. ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [September 13, 2016, 8:30am UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/124 "2016-09-13T08:30:04Z")
Rereading this old thread I see some important points were overlooked. _ **Companies don’t need 90% control to restrain trade.** _ The possibility of Target building a store does not reduce WalMart’s power while it is alone. It is ignorant to believe Microsoft derived its huge monopoly power from technical prowess, rather than sharp business practices. (Of course, huge profits allowed them to buy engineers.) Adam Smith didn’t use the word “cartel” but he applied the term “monopoly” to a very broad class, even writing [QUOTE=Adam Smith in the Wealth of Nations] People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible, indeed, to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary. [/QUOTE] Guilds and labor unions also imply monopoly power. _ **Monopolies need not last forever.** _ Some would cite a company like Microsoft, whose share price has barely recovered to its 1999 peak, and say “See! Monopolies don’t last forever. Competition will arise.” But this ignores all the rents collected by a monopoly during the period it had monopoly power. The break-up of Standard Oil or Ma Bell are similarly cited — but these just replaced monopolies with cartels (or in the case of Ma Bell, nation-wide monopolies with region-wide monopolies). _ **“Rent collection” is the more general problem.** _ Smith didn’t use the term “rent” AFAIK except in connection with land, but modern thinkers apply the term to a variety of unearned income. Microsoft continues to derive rent from happenstances many decades ago. The banking cartel derives huge sums from the credit-card structure America has adopted. Stiglitz’ book has a chapter devoted to counter-productive “rent collection.” _ **The government is controlled by the elite.** _ Right-wingers express faith in unfettered markets, and blame evil government for capitalism’s failings. But government must exert a powerful role (as, again, Adam Smith pointed out). The issue is: which side does government take? Government is not an evil force, as Hyperlibertarians and other right-wingers would have you believe, but is controlled by people — usually the rich capitalist elite, rather than the misinformed electorate. Today, government actively helps big business cartels, while passing laws to curtail the power of labor unions. _ **Free-market mechanisms are imperfect.** _ For most of us this goes without saying, but some on the right feel that free markets are a magical solution to everything — that their soundness is as clear as that the sum of a triangle’s angles is 180°. [I’ll link to an amusing article one more time](http://www.theatlantic.com/magazine/archive/1999/03/the-market-as-god/306397/?single_page=true). (AFAIK the only Doper who has ever clicked this link is the one upthread who clicked it only _after_ I pointed out that he obviously hadn’t!) ---
**Author:** ![WillFarnaby](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/willfarnaby/32/514_2.png) [@WillFarnaby](https://boards.straightdope.com/u/WillFarnaby)\ **Post date:** [September 13, 2016, 1:58pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/125 "2016-09-13T13:58:50Z")
The term “monopoly” was originally used to describe a situation in which the state granted a company or individual the exclusive right to provide a good or service. Competitors were smashed using state violence. When anti-capitalists complain about monopolies, they are not simply talking about a company that has beaten out competition and delivers an excellent product at a good price. They make claims that a large firm will begin to deliver inferior products and/or raise prices while still smashing all competition. This has never happened without state granted privileges. Indeed, even during the days of evil robber barons, the industries that were declared to be monopolized by the bureaucrats, special interests, and other political hacks were lowering prices at the same rate as competitive industries or faster. The robber barons of cartoonish textbooks were actually great benefactors to humanity even disregarding their philanthropic efforts. ---
**Author:** ![Mijin](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/mijin/32/9369_2.png) [@Mijin](https://boards.straightdope.com/u/Mijin)\ **Post date:** [September 13, 2016, 4:49pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/126 "2016-09-13T16:49:09Z")
> [@septimus](#): > > _ **Monopolies need not last forever.** _ Some would cite a company like Microsoft, whose share price has barely recovered to its 1999 peak, and say “See! Monopolies don’t last forever. Competition will arise.” But this ignores all the rents collected by a monopoly during the period it had monopoly power. The break-up of Standard Oil or Ma Bell are similarly cited — but these just replaced monopolies with cartels (or in the case of Ma Bell, nation-wide monopolies with region-wide monopolies). Also, of course, if a dominant company losing its standing after 20 years supports the idea that we do not need to regulate the market, then why don’t the companies that have been dominant for many decades, and have only grown bigger (e.g. through mergers) support the idea that we _do_ need regulation? > [@](#): > > _ **Free-market mechanisms are imperfect.** _ For most of us this goes without saying, but some on the right feel that free markets are a magical solution to everything — that their soundness is as clear as that the sum of a triangle’s angles is 180°. And indeed, immediately after your post someone has dived in and said that. Apparently now to even suggest that something like a monopoly has _ever_ happened makes one an “anti-capitalist” :rolleyes: ---
**Author:** ![WillFarnaby](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/willfarnaby/32/514_2.png) [@WillFarnaby](https://boards.straightdope.com/u/WillFarnaby)\ **Post date:** [September 13, 2016, 6:18pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/127 "2016-09-13T18:18:10Z")
> [@Mijin](#): > > Also, of course, if a dominant company losing its standing after 20 years supports the idea that we do not need to regulate the market, then why don’t the companies that have been dominant for many decades, and have only grown bigger (e.g. through mergers) support the idea that we _do_ need regulation? > > And indeed, immediately after your post someone has dived in and said that. Apparently now to even suggest that something like a monopoly has _ever_ happened makes one an “anti-capitalist” :rolleyes: Large companies support regulation because it disproportionately hurts smaller competitors. Nothing magical about it. There may be large companies on the free market, but destructive monopolies that anti-capitalists talk about are mythical. Name one please. ---
**Author:** ![CheapBastid](https://avatars.discourse-cdn.com/v4/letter/c/8baadc/32.png) [@CheapBastid](https://boards.straightdope.com/u/CheapBastid)\ **Post date:** [September 13, 2016, 7:22pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/128 "2016-09-13T19:22:30Z")
> [@WillFarnaby](#): > > There may be large companies on the free market, but destructive monopolies are mythical. [Really?](http://monthlyreview.org/2011/04/01/monopoly-and-competition-in-twenty-first-century-capitalism/) :smack: ---
**Author:** ![septimus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/septimus/32/410_2.png) [@septimus](https://boards.straightdope.com/u/septimus)\ **Post date:** [September 13, 2016, 7:50pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/129 "2016-09-13T19:50:06Z")
> [@WillFarnaby](#): > > Competitors were smashed using state violence. Your ideas would seem slightly less cartoonish if you could resist harping on the peculiar government==violence meme. Bars send their burly bouncer when a customer stiffs his bill or is rude to a waitress. Businesses dealing in large amounts of cash often use armed guards. But I guess these are lovable private capitalists threatening violence. I suppose you also approve of violent picket-line busting by companies being struck — _the free market at its finest_. But let a government demand that mail be accompanied with a postage stamp or that SocSec be withheld by an employer, and **Farnaby** needs to talk about violence! Don’t forget the secret stockpiles of sarin and even the nuclear arsenal — _the U.S.A. is prepared for violence against its human slaves_, and doubtless a little disappointed when citizens pay their taxes with only minimal coaxing. 🙂 ---
**Author:** ![s0meguy](https://avatars.discourse-cdn.com/v4/letter/s/a3d4f5/32.png) [@s0meguy](https://boards.straightdope.com/u/s0meguy)\ **Post date:** [September 13, 2016, 8:55pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/130 "2016-09-13T20:55:16Z")
> [@Candyman74](#): > > That’s why anti-monopoly laws exist. And why corporations buy politicians through campaign donations to prevent them from being applied. ---
**Author:** ![Trinopus](https://avatars.discourse-cdn.com/v4/letter/t/2bfe46/32.png) [@Trinopus](https://boards.straightdope.com/u/Trinopus)\ **Post date:** [September 13, 2016, 9:03pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/131 "2016-09-13T21:03:38Z")
> [@WillFarnaby](#): > > . . . When anti-capitalists complain about monopolies . . . Thank you for poisoning the well. Lots of pro-capitalists complain about monopolies too. > [@](#): > > . . . they are not simply talking about a company that has beaten out competition and delivers an excellent product at a good price. They make claims that a large firm will begin to deliver inferior products and/or raise prices while still smashing all competition. This has never happened without state granted privileges. . . . Tautological: corporations cannot exist without government protection. The problem has been that the government has not always protected the consumer, and has, in the past, allowed big corporations (like Standard Oil in the late 19th century) to engage in predatory practices. So, yeah, sure, government has been part of the problem. But it would be insane to derive from that that government should be restricted from interfering. Instead, it’s proof that government needs to interfere. Which is has since the Robber Baron era, to the benefit of all. > [@](#): > > . . . The robber barons of cartoonish textbooks were actually great benefactors to humanity even disregarding their philanthropic efforts. Bullshit. They ruined thousands of small businesses, cast thousands of people into homelessness, created the poverty-stricken migrant worker, created the dust bowl, sold watered stock, profited from crashes and panics, and otherwise were the worst possible neighbors. ---
**Author:** ![Dr.Arthias](https://avatars.discourse-cdn.com/v4/letter/d/f19dbf/32.png) [@Dr.Arthias](https://boards.straightdope.com/u/Dr.Arthias)\ **Post date:** [September 15, 2016, 12:31am UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/132 "2016-09-15T00:31:22Z")
Capitalism sows the seeds of its own destruction: - in order to compete in a capitalist system, you need to make your product cheaper than your competitors’. - to make your product cheaper, overseas labor is employed to build said product for less. - exploited workers and unemployed people can’t afford to buy your product. - business fails. So yeah, capitalism eventually kills itself because it can’t see the forest for the trees. Short term gain, long term loss. ---
**Author:** ![Trinopus](https://avatars.discourse-cdn.com/v4/letter/t/2bfe46/32.png) [@Trinopus](https://boards.straightdope.com/u/Trinopus)\ **Post date:** [September 15, 2016, 2:20am UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/133 "2016-09-15T02:20:25Z")
That was the great insight Henry Ford had: make a product his own employees could buy. It created a giant among corporations, on that very sensible basis. ---
**Author:** ![Sitnam](https://avatars.discourse-cdn.com/v4/letter/s/6a8cbe/32.png) [@Sitnam](https://boards.straightdope.com/u/Sitnam)\ **Post date:** [September 15, 2016, 2:43am UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/134 "2016-09-15T02:43:57Z")
> [@CheapBastid](#): > > Three years later and my questions still reverberate. > > There are entrenched stances on both sides with Libertarians repeating the chestnut that Theoretical Free Markets Don’t Create Monopolies, and the Socialists shouting that Regulation and Social Considerations are necessary checks to the Evils of Corporate Oligarchies. > > I’ll try to simplify the question: > > Does Capitalism in the Wild (not in theory) naturally lead to Monopolies? It doesn’t cost any money here to start a new thread topic pinpointing your area of interest. Why dredge up a zombie, other than an ‘I told you so’. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [September 15, 2016, 2:34pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/135 "2016-09-15T14:34:26Z")
> [@Dr.Arthias](#): > > Capitalism sows the seeds of its own destruction: > > - in order to compete in a capitalist system, you need to make your product cheaper than your competitors’. > - to make your product cheaper, overseas labor is employed to build said product for less. > - exploited workers and unemployed people can’t afford to buy your product. > - business fails. > > So yeah, capitalism eventually kills itself because it can’t see the forest for the trees. Short term gain, long term loss. You aren’t holding your breath on this…hopefully. Are you? :eek: This is standards communist doctrine. It’s funny to see this trotted out at this point in history, when most socialist and even the more successful communist countries have implemented at least some aspects of capitalism so that their economies don’t completely collapse. ---
**Author:** ![XT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/xt/32/456_2.png) [@XT](https://boards.straightdope.com/u/XT)\ **Post date:** [September 15, 2016, 2:43pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/136 "2016-09-15T14:43:24Z")
> [@CheapBastid](#): > > Three years later and my questions still reverberate. > > There are entrenched stances on both sides with Libertarians repeating the chestnut that Theoretical Free Markets Don’t Create Monopolies, and the Socialists shouting that Regulation and Social Considerations are necessary checks to the Evils of Corporate Oligarchies. > > I’ll try to simplify the question: > > Does Capitalism in the Wild (not in theory) naturally lead to [Monopolies](https://www.weforum.org/agenda/2016/05/joseph-stiglitz-are-markets-efficient-or-do-they-tend-towards-monopoly-the-verdict-is-in/)? Instead of a drive by link why don’t you list all of the natural monopolies that have ever formed? That should give us a baseline on how prevalent they are, instead of links that you don’t bother to quote from that use graphs displaying the share of income of the top 1%…which really says nothing about monopolies OR capitalism but, instead resonate with its obvious target audience. From my own half-remembered econ in college, natural monopolies are very rare. Most of the things we think about as monopolies were formed not because of capitalism but because of collusion between corporations and government intervention in the markets. And as another poster noted, why revive this thread after 3 years? Why not just start a new one if you have stuff you want to discuss? ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [September 15, 2016, 2:55pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/137 "2016-09-15T14:55:01Z")
> [@Voyager](#): > > It is hardly the case that technically superior solutions always win anyhow. Look at VHS versus Beta. Beta wasn’t better than VHS. That myth needs to die. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [September 15, 2016, 2:55pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/138 "2016-09-15T14:55:05Z")
> [@Sage\_Rat](#): > > The originator of Capitalism, Adam Smith, already mentioned the potential for monopolies to arise and gave his blessing to break them up. Breaking up monopolies is pro-Capitalist. > > On the other hand, lots of times, the companies which get big and clobber everyone else, become too slow and behind-the-times to keep up with competition. Microsoft, for example, is still a monster, but they’re on a pretty straight path downhill. One of their large competitors, Google, barely even existed a decade ago. I know I’m late to the game on this but I want to offer a dissenting opinion on Microsoft. For a company you regard as on ‘a straight path downhill’ they’re showing remarkable signs of life. Five year trend on share value: 126.99% Earnings per share: 2.06 P/E: 27.32 Dividend: 2.55% The firm’s recent earnings beat expectation by 2.2% ($22.6 billion) EPS beat estimates by 18%. For a firm that’s going straight downhill those are pretty good numbers. Do they have competition? Sure, certainly in markets they’d like to develop such as cloud computing and mobile, but so does everyone. In the desktop operating system market they’re dominant - something around 84-85% market share - and that doesn’t look to change. ---
**Author:** ![RickJay](https://avatars.discourse-cdn.com/v4/letter/r/bb73d2/32.png) [@RickJay](https://boards.straightdope.com/u/RickJay)\ **Post date:** [September 15, 2016, 2:57pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/139 "2016-09-15T14:57:10Z")
> [@Trinopus](#): > > That was the great insight Henry Ford had: make a product his own employees could buy. It created a giant among corporations, on that very sensible basis. Henry Ford was beaten to this idea by decades. People had already long figured out that if you make a product affordable for the general population, you’ll make more money than if you just make it for rich people. George Eastman was doing this with cameras when Henry Ford was still a failure. ---
**Author:** ![Jonathan\_Chance](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/jonathan_chance/32/701_2.png) [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)\ **Post date:** [September 15, 2016, 3:44pm UTC](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519/140 "2016-09-15T15:44:25Z")
Yeah, but Ford got the quote in Bartlett’s. [Previous page](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519.md?page=6) [Next page](https://boards.straightdope.com/t/does-capitalism-eventually-kill-competition/617519.md?page=8)