Wednesday, February 17, 2016

Copy of post to Facebook.

I've been asked my opinion about how government should deal with monopolies.

Before I address the issue of monopolies, I want to talk about core beliefs.  Before I do that, I have a question to ask.

By my caculation, the level of government spending in 2015 is about 37.5% of GDP.  In recent years the figure was closer to 40%.  To me the figure is actually worse because all  of government spending is included in the GDP calculation.  So my question is at what point would government spending have to rise before people on the left would have to say enough is enough?  Would it be 50% GDP?  How about 60 or 70 percent?  The same thing could be asked about taxation.  Is 90% taxation fair?  (I could make the same argument about immigration, because I honestly believe hundreds of millions of people would come here if they could, so we have to set some sort of limit to make it reasonable.)

I ask this question because there doesn't seem to be any limit on how much people want to raise government spending or increase government control of our lives.

If we take the two extremes of government, comparing countries that spend 100% of the GDP, like the former USSR or North Korea who don't prosper very well, with countries that have temporarily had little or no government and also did very badly because there were no laws or courts to maintain order, we see that both far extremes don't work.  But as we move away from the far extremes, things improve.  Things improve more quickly on the low end than they do the high end.  Studies have shown that GDP growth tends to peak around 20 to 25% of spending GDP of government, although some have argued that because we lack examples of less than 20%, that less than 20% is even better.  

For this reason, it is my belief that minimizing government leads to greater prosperity, less poverty and even less disparity of wealth.

The Libertarian Principle is that everyone has a right to do what they want so long as they don't interfere with the same right of others.  This includes being able to own property, engage in business, and make decisions without government getting in the way.  If Walmart is one of the richest companies in the world, it is because people choose to shop there.  Likewise people choose to work at Walmart.

The issue of monopolies is such a nonexistent problem that I am surprised that it still comes up.  I have had discussion with people about this for decades.  At one time you could have said that Netscape had a monopoly on the internet browser, Microsoft had a monopoly on operating systems, and Lotus had a monopoly on the computer spreadsheet, but look at how those have changed.

At one time Opec seemed to have a monopoly on oil production, but that has also changed.

Traditionally monopolies have been granted by governments.  If you go back centuries, governments gave people exclusive rights to certain types of businesses and markets.  In more recent history the phone company was an example, and currently all my utility companies have a monopoly.  Often times government regulation is used to keep competitors from entering the business, and the industries that want to maintain control sometimes encourage such regulation.

The theory is that in a free market as one business starts to own too much of a particular market, it becauses more profitable, but that will make others want to to enter that business.  Even if others don't enter the business right away, the threat of competition can keep things in line.  For example, we have known for many years that artificial fuels can be created for about $5.50 per gallon.  Opec has publically stated that they were pricing oil at a level would not make alternatives profitable.

There has been much myth about the late 19th century and monopolies.  The late 19th century was one of the greatest times of economic growth that this country has seen.


No comments:

Post a Comment