monopolies of production resources

[ghotiblue]

Auto-industry was a bad example. One could have easily entered the market for new production of any type of vehicle they wanted had the government allowed the big 3 to go bankrupt. At that point, anyone looking to get factories and labor to start production on their product in the near future would have had an incredible opportunity. Instead, the government went and fucked with the program.

Of course they could have. But if one person bought up all of those factories and labor, then the only competition is from overseas. A company could continue to grow and force out competition by being the most appealing option to consumers, until they were at a place where they were not worried about competition due to natural barriers of entry.

I haven't had time to thoroughly analyze them, but the following links seem to address my original question, if you're intersted:
http://mises.org/story/1800
http://mises.org/Community/forums/t/1318.aspx

 

[theoakman]

Of course they could have. But if one person bought up all of those factories and labor, then the only competition is from overseas. A company could continue to grow and force out competition by being the most appealing option to consumers, until they were at a place where they were not worried about competition due to natural barriers of entry.

I haven't had time to thoroughly analyze them, but the following links seem to address my original question, if you're intersted:
http://mises.org/story/1800
http://mises.org/Community/forums/t/1318.aspx

That's a big if? The government was threatening us with the possibility of no one buying those factories, not one person. The fact of the matter is, the only entity that is currently preventing new people from entering the automobile market is currently the US government.

 

[ghotiblue]

That's a big if? The government was threatening us with the possibility of no one buying those factories, not one person. The fact of the matter is, the only entity that is currently preventing new people from entering the automobile market is currently the US government.

Don't get me wrong... I'm not arguing for regulation. I want the government out of the market as much as the next guy. I'm just trying to understand how natural monopolies fit in to Austrian Theory.

 

[Harris4LarouchePAC]

There is no free market when the government has a monopoly on the supply of money and credit. If you want to fight monopolies, fight the most oppressive one of all, the Federal Reserve, aka the 4th arm of the US government.

The Fed is not owned by the government. It is privately owned by the largest international banks. So in your eyes, who should have a control of the uttering a sovereign nation's credit? Certainly not the nation...lol...what?

 

[Harris4LarouchePAC]

No, but sometimes they function under the illusion of Democracy, kind of like us.

Yes, but what you have to realize is that it is our banking system that lead to corporatism. That is why Ron Paul is fighting for an honest monetary policy. Without the banking system we have where banks can legally counterfeit, these problems we are discussing cannot exist!

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.” — Thomas Jefferson

Stop calling things that aren't free market free market!! You have a terrible definition of free market. Free market cannot occur unless you have an honest monetary system. Do you know what that is??

Again, not free market. You think that everything that occurs is free market, you obviously don't have the first clue what that actually means!!

Yea, I dont get this whole "honest" monetary system. You need a real American Credit sytem. Not the Credit system running about today. A honest American Credit system is a honest monetary system. Hamilton for the win.

The illusion of a democracy...I can agree with you there, that is for sure.

 

[Bossobass]

Read the JD Rockefeller/Standard Oil story.

Railroad shipping price fixing/rebates, dumping, intimidation, gouging...every dirty trick in the books, funded by the Rothschilds.

Same with Gates/Microsoft.

There's a reason they were both brought up on anti-trust violations, and there's a reason both made even more money from those sham trials.

Any butt hole can become a monopoly if he cheats, robs, pays off and murders, and can send in the CIA, followed by the Marines if his devious plans fail.

Same as the Mafia. There's nothing free market about it.

For a true free market success story, read Giannini's story of starting the Bank of Italy, which became the Bank of America. Of course, the Rothschilds eventually wrested control of that enterprise after Giannini finally retired, just as JP Morgan bought Carnegie steel (with Rothschild money) and formed US Steel, the 1st US Corporation to gross $1 billion, after Andrew retired.

Bosso

 

[AutoDas]

To get back to the original question, I don't see why having a monopoly is a particularity bad thing in a free market because only those that know best how to allocate resources will survive. Standard Oil controlled 98% of the oil and it was the cheapest it has ever been. Companies who cannot meet this demand go bankrupt like any central organization because there is no price signal in the market.

 

[mczerone]

Of course they could have. But if one person bought up all of those factories and labor, then the only competition is from overseas. A company could continue to grow and force out competition by being the most appealing option to consumers, until they were at a place where they were not worried about competition due to natural barriers of entry.

I haven't had time to thoroughly analyze them, but the following links seem to address my original question, if you're intersted:
http://mises.org/story/1800
http://mises.org/Community/forums/t/1318.aspx

Thanks for the links, I've tried to work this situation out for myself, actually.

The best I can do for a hypothetical: Lets assume that there is a discovery of some non-essential element, say Misesium, that can be used in the production of some consumer good, but only exists in one single mine in the world. Initially after the discovery, the owner of the mine sold the excess Misesium to a variety of different producers, but when the price of Misesium began to be bid up, the mine owner has a natural monopoly, and realizes he can hold out for whatever price he wants.

The owner of the Misesium can then deprive the world of the products for personal reasons. So the burden is placed on the consumers to change his demand scale: if they truly want the products, they can either try to change the owner's value scale through coercive (not forceful, but boycotting or intellectually changing his mind) means or by offering ever increasing prices.

As long as there is no duty on the owner to provide the element, I see no problem with "monopoly," which can also be applied to any specialized skill of an individual - you have a monopoly over your labor. Should that justify an expropriation of that labor?

 

[Harris4LarouchePAC]

Read the JD Rockefeller/Standard Oil story.

Railroad shipping price fixing/rebates, dumping, intimidation, gouging...every dirty trick in the books, funded by the Rothschilds.

Same with Gates/Microsoft.

There's a reason they were both brought up on anti-trust violations, and there's a reason both made even more money from those sham trials.

Any butt hole can become a monopoly if he cheats, robs, pays off and murders, and can send in the CIA, followed by the Marines if his devious plans fail.

Same as the Mafia. There's nothing free market about it.

For a true free market success story, read Giannini's story of starting the Bank of Italy, which became the Bank of America. Of course, the Rothschilds eventually wrested control of that enterprise after Giannini finally retired, just as JP Morgan bought Carnegie steel (with Rothschild money) and formed US Steel, the 1st US Corporation to gross $1 billion, after Andrew retired.

Bosso

Bank of America as it stands today, originated in Charlotte NC. WTF man.

 

[Knighted]

Now this is all fine, except if the big business grows to a point where they control enough of the production resources to keep competition out of the industry. At that point, they can raise their prices and not be threatened by competition entering the industry. So this is my only concern with a free market. What would keep this situation from occurring?

The problem with the Austrian notion that free markets do not allow competition is that it oversimplifies things - namely by ignoring time delays/time lags. It assumes that entrepreneurs can put products on the market extremely quick in order to compete with price gougers or soon-to-be monopolies. This may be more true for some products, but many products take a great deal of time before they become marketable. There is first a delay in the time before an entrepreneur realizes that there is a large profit to be made in that industry. Then, he needs time to find investors and much more time to finish the development and mass production of the product. Assuming all of these hurdles are passed, others are faced - he then has to fight brand recognition and initiate advertising campaigns. A new product takes time to get around, and people who have routinely bought a competitor's product have a tendency to keep buying it.

And finally, all of this assumes that the monopoly does not undertake any actions to prevent you from entering the industry. If the monopoly chooses to play hard ball, it might pursue underhanded tactics like initiating price undercutting for an extensive period of times to force him out of business, since a monopoly likely has much more capital on hand than he does. It might negotiative deals with his supplier to keep him out. Or, the monopoly may just buy him out. Then, the process full of a large number of time delays must start over again. This would allow a business to remain a monopoly for decades, particularly if they chose to pursue only moderate profit margins rather than extreme ones.

 

[theoakman]

The Fed is not owned by the government. It is privately owned by the largest international banks. So in your eyes, who should have a control of the uttering a sovereign nation's credit? Certainly not the nation...lol...what?

no kidding, but since Bernanke, Paulson, and now Geithner have all been acting while holding hands, they might as well be the government. Who should have control of a sovereign nation's credit? The people, the market. Not the government and not Ben Bernanke.

 

[theoakman]

To get back to the original question, I don't see why having a monopoly is a particularity bad thing in a free market because only those that know best how to allocate resources will survive. Standard Oil controlled 98% of the oil and it was the cheapest it has ever been. Companies who cannot meet this demand go bankrupt like any central organization because there is no price signal in the market.

Maybe you should read about Debeers. You'll change your mind when your girlfriend wants an engagement ring.

 

[Bossobass]

Bank of America as it stands today, originated in Charlotte NC. WTF man.

NCNB, then Nationsbank, merged with Bank of America and HQ was moved to Charlotte.

Bank of Italy merged with Bank of America of los Angeles and retained the BofA name. BofA's controlling interest was held by Gianini's TransAmerica, but the government broke up that union.

Bank of Italy/TransAmerica originated in San Francisco, not Charlotte.

Bosso

 

[AutoDas]

Maybe you should read about Debeers. You'll change your mind when your girlfriend wants an engagement ring.

I saw the movie Blood Diamond as well

 

[Bossobass]

To get back to the original question, I don't see why having a monopoly is a particularity bad thing in a free market because only those that know best how to allocate resources will survive. Standard Oil controlled 98% of the oil and it was the cheapest it has ever been. Companies who cannot meet this demand go bankrupt like any central organization because there is no price signal in the market.

SO controlled oil refining, not oil. I assure you that prices were not cheap due to the monopoly vs the prices from free market competition between the many independents Rockefeller put out or bought out of business.

Visit THIS LINK chapter V, for a good run down of the story, written in the 20s.

Bosso

 

[AutoDas]

According to the Commissioner of Corporations, "unquestionably, the most important single element in this early extension of the company's power was the railroad rebate."​

Standard Oil used railroad rebates to extend their influence like anyone back then did, but that was the late seventies. By the early nineteen hundreds they had begun using pipelines and their prices were still the lowest. When companies get too big and inefficient like GM they will fail. Standard Oil was not that.

Taking into account both the cost of refining per unit and the yield, it is probably safe to say, stated the Commissioner, that the advantage of the Standard over the independent plants was not more than one-fourth of a cent per gallon in the cost of finished products, and at the outside it would not exceed one-half of a cent per gallon.1​

 

[Bossobass]

According to the Commissioner of Corporations, "unquestionably, the most important single element in this early extension of the company's power was the railroad rebate."​

Standard Oil used railroad rebates to extend their influence like anyone back then did, but that was the late seventies. By the early nineteen hundreds they had begun using pipelines and their prices were still the lowest. When companies get too big and inefficient like GM they will fail. Standard Oil was not that.

Taking into account both the cost of refining per unit and the yield, it is probably safe to say, stated the Commissioner, that the advantage of the Standard over the independent plants was not more than one-fourth of a cent per gallon in the cost of finished products, and at the outside it would not exceed one-half of a cent per gallon.1​

So, you read the first paragraph?

Yet the Standard would have effected a monopoly through low production costs only if it had been willing to charge prices generally so low that the independents could not produce at a profit. But this was not its policy. The Standard, to be sure, did cut prices in certain localities to make it uncomfortable for its competitors, but this is quite different from a policy of low prices generally—a policy that would have cut in severely on the Standard's profits. And the fact that the Standard was able to maintain its control of the industry while at the same time charging prices so high that many of the independents made ample profits, in spite of the difficulties under which they labored, must mean that the Standard resorted to other methods of restraining competition. Beyond question, says the Commissioner of Corporations, the dominant position of the Standard Oil Company in the refining industry was due to unfair practices—to abuse of the control of pipe-lines, to railroad discriminations, and to unfair methods of competition in the sale of the refined petroleum products. These practices will therefore be considered in some detail.

The excessive pipe-line rates charged the independent refiners were likewise charged the Standard refining companies. But this clearly was a matter of indifference to the Standard organization. It was simply a question of where the profit of the organization as a whole was mainly to be made, whether in transportation or in refining. To the independent refiner, however, a high pipage rate was a vital matter. An unreasonable rate reduced correspondingly his total profits, and might cause him to do business at a loss. At tunes the rate on crude oil from the Appalachian field to the seaboard was more than 25 cents per barrel higher than the cost of transportation, including in that cost a profit of 10 per cent on the cost of reproducing the pipe-lines.1 This was over half a cent per gallon, and half a cent would yield a profit of about 10 per cent on the investment required to carry on the refining business.2 It is clear that the opportunities for competition in the refining of oil would have been much greater had the Standard pipe-lines been compelled to carry oil for others at a reasonable rate. In fact, not only the prosperity, but, according to the Federal Trade Commission, perhaps even the existence of many small concerns was dependent on lower pipe-line rates and reasonable minimum shipments.3

The secret rates enjoyed by the Standard Oil Company naturally helped it to maintain its monopolistic position. With the aid of its favorable freight rates, the Standard was able to sell oil in competitive areas at prices which were profitable to it, but which left no profit to its competitors. Upon the elimination of the competitors, the Standard advanced its prices to several cents above the cost of refining, and thus made enormous profits.

The claim has been made that reviewing the history of the oil industry as a whole, the Standard has reduced prices, and thus has benefited the consumer; that because of its remarkable efficiency and the concentration of the business in the hands of a trust the Standard has charged prices lower than would have prevailed under a competitive regime.

From an examination of this table it appears that the margin between crude and refined oil declined almost steadily from 23.75 cents per gallon in 1866 to 11.96 cents in 1873. Prior to 1874 the oil industry was a highly competitive one, and obviously no one concern could claim the credit for the reduction in the margin. The decline in the margin between 1866 and 1873, it should be noted, exceeded the total decline since 1873. This great decline in the margin under a competitive regime—a decline due largely to a reduction in the cost of production—would appear to foreshadow a still further reduction in costs and in the margin, trust or no trust, though not in all probability at so rapid a rate as during the earlier period. Again, it should be noted that most of the decline in the margin which took place after 1873 had come by 1879. By this time the Standard had obtained its monopolistic control of the industry.

And, relevant to the OP, and the reason I brought SO up in the first place:

We find, therefore, that the Standard Oil capitalists became large shareholders in railroad companies. We find also that the Standard Oil interests went into the gas and the electric lighting businesses. The Consolidated Gas Company of New York City, for example, was once, if not still, a Standard Oil affair. We find these same interests in the steel business, notably as large stockholders in the United States Steel Corporation. We find them interested in copper, the Amalgamated Copper Company being a notable example. We find them in the glucose business, particularly in the Corn Products Refining Company. We find that they have even invaded the banking field.

Bosso

 

[LibForestPaul]

Maybe you should read about Debeers. You'll change your mind when your girlfriend wants an engagement ring.

Blood Diamonds?- not free market. People need to BE free to have a free market.

 

[AutoDas]

So, you read the first paragraph?

No. Did you read the second quote I had?

A 90 to 95% ownership of oil refineries does not a monopoly make. If Standard Oil undercut their competitors then why would that be bad? Are you some left-libertarian that thinks they should have been broken up? Only the Government has the power to create monopolies.