Libertarian View on Monopolies

There was a recent article on by Brian LaSorsa about creating a monopoly.  The author, in a sarcastic tone, presents "the five best ways to create a monopoly and to ensure you never have to compete again."  The five things are as follows:

  1. Regulations
  2. Subsidies
  3. Nationalization
  4. Tariffs
  5. Intellectual property
The main point to take away from the article is that for anyone complaining about monopolies and how the government must be used to stop or break up monopolies, it is actually government that usually enables monopolies in the first place.

I always think back to Microsoft and Bill Gates and the treatment given by the Clinton administration.  Some people were saying that Microsoft was a monopoly and we therefore needed the government to step in and regulate things.

Of course, Microsoft, while suffering at the hands of the government regulators, was and has been a beneficiary of government protection, particularly when it comes to intellectual property.

But it turns out that Microsoft wasn't a monopoly, even with the government protection it had.  Look at what Apple has done to Microsoft.  It hasn't put it out of business by any means, but I think it is hard for anyone to now say that Microsoft is a monopoly, and it isn't because the government put a stop to it.  It was competition in the marketplace that led people to buy other products.

I am not one to say that a monopoly is an impossible thing in a completely free market environment.  If someone owns a particular Picasso painting and charges people a fee to view the painting, then that person has a monopoly with respect to this particular painting that he owns.

There are even situations where it makes sense to have a monopoly in a free market where others could try to compete.  In the case of Microsoft, it has made sense for millions of people to all use the same programs that are compatible with each other.  As long as there are no government barriers to entry or competition, then a company that sells 100% of a particular product or service must be satisfying the customers.

Another interesting aspect about monopolies is that companies can lose market share to other companies with similar products.  They don't necessarily need to be the same products.  For example, if Coke started charging a lot more for their drinks, then some people might switch to Pepsi on the basis of price, even if they still prefer the taste of Coke products.

You can also see examples of government created monopolies that have been broken up by the free market, despite the barriers.  Telephone companies and cable companies given monopolies in certain local areas now have to compete with cell phones, satellite television, and even the internet.  Again, you don't need an identical product to compete.

Regardless of your thoughts on whether monopolies are good or bad and whether they are even possible in a free market, libertarians should agree that government should never be used to control a company on the basis of monopoly.  Most monopolies are created because of government.  If a company can keep all competitors away on the basis of consumer satisfaction, then why would we want to change that?  If consumers are happy with the quality, price, and other factors, then it is unnecessary to force changes on that company, as long as everything is voluntary.

The worst monopoly is government.  It has a monopoly on the use of legalized violence over a given area.  That is one monopoly we should be trying to break up.