Monopoly

Everyone agrees that monopoly is bad. When there is a monopoly, the buyer has no choice but to purchase that good from that only supplier. Consider the possibility of Mega Tire Company buying all the tire manufacturers. Bridgestone, Michelin, Firestone, Dunlop, and all the rest rolled into one giant tire company. Of course, under current law, the government would step in to prevent a monopoly. But what if they didn't? Ford, Chrysler, GM, and other domestic manufactures of cars would only be able to get tires from Mega Tire Co. What would Mega Tire do? Would Mega Tire keep their prices as low as possible? Probably not. Would Mega Tire be interested in the highest possible quality? Again, probably not. Why not? Well, the car companies have no other alternative. If Mega Tire produces shoddy tires at a high price, what are the car companies going to do? That is the problem with monopolies. Without competition, quality goes down and price goes up.

Now tires are only a fraction of the inputs that the car companies require to produce their product. There are several factors of production: Labor, Land, Capital, Entrepreneurship. Do any of these suffer from a monopoly? Land is plentiful and there are lots of landowners who would be glad of the rent. Capital is more scarce these days but there is no one bank that has cornered the market. Entrepreneurship is paid in profit, and there are lots of people eager for some profit. What about labor? Hey, look at that. There's the United Auto Workers. And there is no competing union. It looks like the UAW has a monopoly on labor.

It is interesting to note that the government approves of labor monopolies. In most states, membership in the monopoly... er, union is required to work in the industry; there shall be no competition. This monopoly has, over the years, demanded more benefits for less work. It is no wonder that GM and Chrysler went bust. However, since government favors this particular monopoly, it arranged for a reorganization/bankruptcy that benefited labor and penalized investors.

Monopoly is bad unless it is a labor monopoly, in which case it is great. It is so great that we have heard much talk on the Freedom of Choice Act, which would make it easier to monopolize... er, unionize labor.