Toro
Diamond Member
The most glaring example of a monopoly that exists today is Wal-Mart. Before their expansion into groceries in the early 1990s, they were already known as a forceful retailer that drove small businesses out of the towns where they opened. But the move to add grocery stores onto their existing stores to create "Supercenters" removed all doubt as to whether or not they are a monopoly. What must be understood about the grocery business is how thin the profit margins are. I once heard that the average grocery store must gross one million dollars a day in order to make a profit; that is why there are so many bankruptcies and mergers within that industry. Adding a grocery store to the existing Wal-Mart store layout allowed them to sell groceries at little or no profit in order to sell more of their products elsewhere in the store. This action is described as "horizontalintegration" and is considered anti-competitive because the companies that deal only in groceries cannot match Wal-Mart's prices and lack the ability to make their own general merchandise store to match. As Wal-Mart built hundreds of new Supercenters during the 1990s, they began to employ another anti-competitive tactic. They have roughly a quarter of the American grocery market today, which makes them far and away the largest buyer of every major brand of foods; this leverage has allowed them to force suppliers to sell their products for less than their normal wholesale rates.Only two things need be noticed: first that a person cannot continually undercut prices infinitly; larger, more resourceful corporations have a greater ability to do so than smaller less resourced corporations.
And yet smaller companies manage to undercut large corporations all the time.
Unless there is economy of scale in the process, then a large company has no real advantage and may be at a disadvantage due to higher overhead costs.
"Private sector monopolies" are a myth. They cannot exist. Part of what may be confusing you is terminology.
If I run a small food store in a small town, the only one in town, do I have a monopoly?
The answer is "no." If Wal-Mart moves in and I go broke, does Wal-Mart have a monopoly? Still "no."
You see, a monopoly is coercive in nature, a barrier or impediment to trade. Monopolies are enforced, they do not exist. What I mean by this is that a lack of competition does not equate to a monopoly. The coercive impediment to competition is what creates a monopoly. If Wal-Mart came to town, shot my dog and burned down my store, THEN they would be enforcing a monopoly by infringing on trade.
Now what would happen if Wal-Mart did that? I'd go to the police and seek an arrest and then sue them. The only way this would NOT happen is if the government were the enforcer of the monopoly. There is simply no other way to enforce it.
Just the opposite, they do develop because of government interference on their behalf. Government coercion drives competitors from the market. Absent government coercion the competitors would refuse to bow to the monopoly or trust.
Again, monopolies cannot exist in a capitalist system. Coercion is absent in a free market, monopolies are coercive by nature. They do not and cannot exist.
What economics should teach you is that monopolies and trusts are coercive in nature, violence and the threat of violence are the basis of any monopoly or trusts. Absent coercion, a monopoly cannot exist (a "natural monopoly" is an oxymoron.) Where there is coercion, there is government collusion. Government has exclusive control of violence. Any organized violence or threat of violence is done with the collusion of government.
Basic economic classes will tell you that monopolies do exist, up til anti-trust, that's true because they are dealing with the underlying principles pre gov't development of econ. controls.
Every trust you read about under the "Robber Barons" had the government enforcing it. The Federal Government ceded land and even army troops to the railroads and the oil companies. Without government the monopolies decried would not and could not have formed.
While one might immediately think that this is a good thing and leads to the lower prices you see in stores, you must also understand the detrimental effects it has on the side of the supplier. For example, Kraft Foods was forced to shut down dozens of plants and lay off over 30,0000 workers in order to meet Wal-Mart's price demands. Other major comanies that would seemingly be insulated from these problems, such as Coca Cola, Procter & Gamble, and Rubbermaid have also been forced to submit to Wal-Mart. A third way that Wal-Mart constitutes a monopoly is that they operate in many areas where they have a natural monopoly, meaning it would be impossible to introduce a competitor due to geographic or population reasons. In many small towns, they are the only store selling products like hardware, eyeglasses, electronics, and sometimes even a full line of groceries. This leavesthe residents of those areas with two choices on where to shop: Wal-Mart or going all the way to the next town, which may only have a Wal-Mart itself. It also leaves the residents of that town dependent on Wal-Mart's employment and sales tax dollars, meaning they have little choice but to go along with whatever the big corporation wants.
What Monopolies Exist Today? - Part 1: Wal-Mart - amicuspeccatorum's Blog - Blogster
The problem with this line of thinking is that it assumes that monopoly unto itself is a bad thing. Its not necessarily. The reason why monopoly is presumed to be a bad thing is because enterprises will exhibit monopoly power and extract monopoly rent from consumers. But what if the monopoly behaves like a firm in competition? Why is that bad, especially when it lowers costs for all? If you can buy something for $8 that used to cost $10, that is good for the consumer, no matter who sells it to you.
I'm not a big fan of Wal-Mart. I don't shop there often. However, Wal-Mart has not used to monopoly power to extract monopoly rents from buyers. They have done just the opposite in fact. They have lowered prices for consumers through scale. That is how efficiency in a market is supposed to work.