Whole Foods Market, a mecca for sophisticated urbanites, “woke” progressives, and crunchy-granola types, is being bought by Amazon, and that unsettled some of the folks in the eternally fretful and perpetually aggrieved world of liberal politics. Matt Stoller at the Huffington Post worries that:
the amount of power in Bezos’ hands should frighten all Americans. Bezos meant that Amazon will soon be so good for consumers that it would just be folly not to be a member. But what he unwittingly implied is that as a citizen, you will have no choice but to interact with his institution to buy and sell key goods that everyone needs — on his terms.
Ooh, scary! Bezos’s company is, thanks to its appeal to consumers, so big and powerful that it’s ultimately going to take over the retail world. And, then, watch out!
If this sounds familiar, if you think that you’ve heard this story before, it’s because you have. It wasn’t all that long ago that statists, regulators, and opponents of free markets had lathered themselves up over AOL’s utter dominance of Internet access, and of Microsoft’s massive dominance in web browsing. Those and the Amazon scare are but three examples of the eternal fear of the rise of a all-powerful monopoly that, after years or decades of delivering the better consumer experience that enabled the rise to power, will suddenly turn into Evil Corp, raise prices, reduce choices, and start dictating what we are and are not allowed to buy/do.
History is a nifty thing. It provides us lots of useful information by which we can judge predictions such as these. The problem, at least for the prognosticators that foresee a Rollerball world run by a handful of mega-corporations, is that the past doom-sayings have all fizzled out. The other problem for these folks is that the monopolies that have arisen and thrived have done so thanks to the political ideology that the doomsayers believe is the counterweight to monopolies i.e. big government.
Throughout history, Big Government has served to protect monopolies, not dismantle them. Despite big shows of anti-trust activity, denials of mergers between big players, and lots of bold talk, scratching the surface of any monopolistic entity and you find government protection, often secured via cronyism. We are persistently taught that monopolies are a Bad Thing, and that, if left unchecked, they’ll work to our detriment and the detriment of our society. Except, that is, when they are Good, as in the cases of public education and local utilities, to name just two, a notion that undermines the broader assertion. But, even the concept of the “natural monopoly” that’s used to justify public utility exemptions is an idea that was reverse-fit to the government’s granting of monopoly rights, rather than a sound theory that drove public policy.
Lets say that Amazon continues to dominate, and actually becomes the beast that Stoller fears. What then? What if Amazon starts behaving differently? Absent artificially stifled competition, what’s to stop Amazon from losing market share should it start to raise prices, especially in today’s flexible, delivery-driven e-tail world? Very little. The forces of market competition are relentless and eternal, and about the only way Amazon could fend them off in order to start acting in a way that doesn’t benefit consumers is to get government to wield power on its behalf.
Can a company achieve a de facto monopolistic state in a free market? Sure, but so what? The moment it stops being the best choice for consumers, competition will re-emerge. In other words, if it does manage to become a monopoly by being the “best,” it better remain the “best” if it wants to keep its market share. Yes, yes, there are the arguments about entry barriers, economies of scale, and the like, but absent an element of force i.e. government interference, there will be disruptions to the monopoly if it tries to stop being the best choice for consumers. And, modern technology, the Internet, crowd funding and related innovations, and other “disruptions” born of human innovation make it easier than ever before for competitors to get to market and get themselves known.
Not convinced? Take a good, hard look at the monopolies out there, and see if they would exist for any substantial period of time without government protection. I’ve already mentioned utilities and public education, and both have been encroached on by market forces. In the case of the former, you can, in many markets, choose from whom to buy your electricity and natural gas, with only the delivery component fully monopolized. In the case of the latter, charter schools, vouchers and other “choice” systems are breaking the public education monopoly, with positive results. Consider two others others: taxicabs in NY City and other major municipalities and the US Postal Service, both of which are, despite the protections they enjoy, being disrupted by competition and innovation.
Now, consider Amazon. Already, Amazon has all but wiped out brick-and-mortar book stores, except for the occasional outlier and for niche and boutique shops. Are we, collectively, worse off for it? If so, by what metric? Sure, some like the idea of having miles of shelves to peruse, but that’s not a right or an entitlement – it’s an offering by someone looking to make money, and if not enough people are willing to support the idea with their disposable income, you and I are in no position to demand it continue to exist. Has Amazon’s dominance given it the power to hamper our choices or to charge us more? Hardly. Beyond the enormously larger inventory you and I can access (instantly, if we use e-readers) thanks to Amazon’s model, Amazon faces competition from Google, Apple, a host of smaller e-book sellers, and from self-publishing platforms. And, books are Amazon’s oldest sector, and thus illustrative of the limits of monopolistic market capture absent government coercion/protection.
Back to our hand-wringers. Amazon’s foray into the grocery sector is supposed to be a foreshadowing of its complete dominance, control, and terms-setting of the consumer goods market. The fact that we’ve seen many such warnings in the past, warnings that have failed to materialize, doesn’t dissuade this prognostication. Nor, apparently, do the myriad examples of monopolies only existing under government protectionism.
We can theorize anything we want, and find someone who’ll buy into our theory, but without empirical validation, we’re just waving hands and seeking attention. But, if monopolizing is such a big concern, why are the people who have that concern the same people who demand government be granted the power to interfere? Isn’t it blatantly obvious that this power has been used to protect monopolies? Isn’t the record clear that free-market competition, not government intervention, is what breaks monopolies down? Isn’t the record also clear that the monopolies broken down by government (e.g. the Bell system) were created by government in the first place?
In other words, if you fear monopolies, don’t support the tool most likely to create and maintain them: big government. And, don’t bitch about a monopoly growing when it is your governing philosophy that’s fertilizing it. If you truly fear monopolies, then support small government. A government of limited scope, one that’s not involved in free market activities other than as an adjudicator of contracts and a protector of individual and property rights, won’t have the ability to intervene on behalf of even the biggest company seeking protection for its monopoly.
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