When is a Monopoly & Price Fixing a Good Thing?

I am starting this posting differently because in the process of writing about the hypocritical economic policies being advocated by the Obama administration and the liberal members of Congress related to the Cap and Trade and socialized medicine proposals, I have realized that capitalism must be thoroughly defended and explained. It has become popular to vilify, denigrate and blame the free market for all of society’s economic problems in order to gain support for new policies that concentrate on government planning. As such, I will begin a series of blog postings related to capitalism/the free market and the fallacies and effects of government planning on our economy and individual liberties. Here are a few of the upcoming topics: (1) The Moral Justification for Capitalism; (2) Why Big Business Supports Obama’s Regulation of the Free Market; (3) Pres. Obama’s Policy of Planned Competition/Capitalism. But, these topics are for another day; back to the topic at hand.

President Obama’s health care reform rhetoric and proposed policy agenda has proposed a clever, yet dangerous twist on applying government control within the framework of competition: Obama proposes to create a public health care option operated and funded by taxpayer funds that will compete with private health insurance companies. On the surface, it sounds like a good idea to many people because it sounds like you still have competition and the free market available to all with the government merely competing as a new member of the group for the benefit of all Americans. However, as pointed out by many economists, the government insurance plan will have many political and economic advantages over private insurance companies (gov’t agency has no need to make money and can run at a loss for decades at the expense of the taxpayer, as well as exclude itself from harsh regulations imposed on the private sector – thereby placing the private sector at a distinct disadvantage) that will ultimately create a government-run health care monopoly.

The health care proposals of President Obama are merely an example of a broader point I am attempting to make: Why is a monopoly and the practice of price fixing a criminal act punishable by prison time when a private business is involved but instantly becomes admirable policy enacted for the “public interest” when instituted and directed by government?

In order to understand why the public accepts such a hypocritical argument by bureaucrats, we have to understand that, over time, the public has accepted a baseless statement: businesses operate solely on a basis of “excessive greed and irresponsibility” and policies enacted by bureaucrats are admirable attempts by “public servants” with “good intentions” to look out for the common people.

It is useful to consider the government’s own arguments against the use of monopolies and price fixing (Anti-trust laws) when determining the government’s culpability. The logic behind the Sherman Act and other anti-trust laws as expressed by the U.S. Supreme Court was that business decisions “directed to (take) control of the market by suppression of competition” should be made illegal. “The end sought (by anti-trust laws) was the prevention of restraints to free competition in business and commercial transactions which tended to restrict production, raise prices, or otherwise control the market to the detriment of purchasers or consumers of goods and services, all of which had come to be regarded as a special form of public injury.” The primary purpose of the Sherman Act and similar laws was to protect the consumer from manipulation of the market by businesses that would result in higher prices and the squeezing out of competitors, thereby limiting the effectiveness of the free market. Additionally, the Sherman Act was so concerned about the effect a monopoly would have on the consumer and other competitors that it made it a felony to show “intent to monopolize,” as expressed in Section 2: “Every person who shall monopolize, or attempt to monopolize, or combine to conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony. . .”

If it has been determined by government that price fixing and monopolies are detrimental to the consumer and a “restraint to free competition,” what danger does a government program pose when it possesses inherent advantages that would have the end effect of creating an industry monopoly (a government-run health care monopoly)?

To gain a full understanding of the danger of such a government policy, it is necessary to examine the difference between economic and political power. Ayn Rand’s analysis is illustrative: “Economic power is exercised by means of a positive – offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative – threat of punishment, injury, imprisonment, alienation, destruction. The businessman’s tool is values; the politician’s tool is fear. The sole means by which a government can grow big is physical force; the sole means by which a business can grow big, in a free economy, is productive achievement.” Rand makes the insightful point that the only entity in society that holds a legal monopoly on the use of force is the government. Businesses and individuals have no legal power to force individuals to act against their own choice. However, “the nature of governmental action is coercive action.” The public must recognize that when businesses make an error of economic judgment, that business suffers the consequences; when the government makes an error of political judgment, the entire country suffers the consequences.

Perhaps the most important point to take from the government’s proposal is that just as bureaucrats consistently propose legislation from which they exclude themselves (excluding Congress from the proposed government-run health care monopoly), so too they vilify, criminalize and regulate business under the disguise of “protecting the public,” only to accept and implement the same monopolistic policies for the “protection of the public.” Which is more dangerous and capable of corruption and control, business or government?