Monopolies Don't Happen Under Capitalism: Ayn Rand Explains

this was einan's answer to a question during a radio interview about 19th century capitalism can a free market function if monopolies naturally grow in a capitalist system the error in your question which is a very widespread fallacy is the belief that it is a less a fair capitalism a free market that leads to the development of monopolies this is not true and it is one of the very widespread fallacies inherited originally from Carl Marx who claimed that capitalism by its Nature has to lead to a few monopolistic concern running the whole economy with everybody else reduced to the state of proletarians as you have observed the development of capitalism you can see empirically that this is not true but to make the point clear first of all Define what is meant by a monopoly properly speaking what is meant when people use that term is a coercive Monopoly that is a business concern which preempts certain line of activity or production and bars all competitors all newcomers from entering that field this is a coercive Monopoly because a non-coercive monopoly that is the situation where one company provides a service and no one else engages that activity is not in any sense a social evil and cannot be considered as that because in that sense every one of us is a monopolist every man has certain goods or services to offer which are his exclusive production and which other people cannot do but this is not what is meant by a monopoly you speak here of a coercive Monopoly that is a monopoly which closes the entry of competitors into a given field such a monopoly has never existed neither in the United States nor anywhere else in the world without the help of the government it is not the free market notless a fair capitalism but precisely its opposite the intervention of the government into the economy that stands behind every coercive Monopoly that has ever existed it takes a special Act of government to Grant a special privilege a subsidy a franchise to a certain company or group of individuals and to Bar all competitors from that field by law if you are barred by law then of course nobody can enter that profession and that constitutes a monopoly if a few large companies combine as in the example you gave they they cannot bar other companies or other men from entering their particular field and one of two things will happen if by combining they can offer better Services better Goods at lower prices than anyone else can offer one would have to say more power to them it is then to the advantage of everybody to deal with that company and not to have to deal with 10 less efficient companies that would give you inadequate Goods at higher prices however no matter how efficient such a voluntary Monopoly would be it would be under constant threat of competition from the moment that it let down its standards or its efficiency it could be a monopoly only so long as it produced better and cheaper Goods than anyone else a competitor could enter the market with a new idea a new invention and unell them any moment in order for that company to Bar an abler competitor or an innovator it would have to have a government action behind it this has never happened with the companies that you mention the combinations they formed were voluntary and proper and there is no moral or political justification for suppressing or prohibiting combinations of that kind because it is ultimately the free market that decides whether a combined company of that kind will or will not succeed if they do not succeed at being the best in the field they will lose money and be forced out of the market which has happened with large companies size as such is not a sign of economic power for instance to quote a recent example or fairly recent United States still almost held a monopoly for about 10 years on the steel Market until the rise of what was then called little steel newer and smaller companies specific Republic Steel and National Steel in the early searches they were the first ones to come out with metal alloys and United States still had to change its mods of production to compete with them introduce new resurge or it was threatened with the total loss of the market now that is a fairly recent example of what happens with large companies if they do not keep up their efficiency in the value of their product any large company or combination of companies of that kind can be destroyed on a pre-market by any competent newcomer that is no threat to the economy or to the people but what kind of monopolies are beyond the reach of competition well observe Public Utilities Electric light telephone all of which were forced by the government during World War II the government forced two Telegraph companies postal telegraph and Western Union to combine into one Monopoly this was done by government order and you will find the same phenomenon behind any large business which controls a field exclusively it is done by the intervention of the government

Channel: Ayn Rand Institute

Views: 5,737

Keywords: ARI, Atlas Shrugged, Anthem, Ayn Rand, Ayn Rand Institute, Fountainhead, Individual Rights, Individualism, Objectivism, Objectivist, Philosophy, Reason, Rights, Capitalism, Freedom, Liberty, Atheism, Secular Humanism, Libertarian, Conservative, Libertarianism, Conservatism, laissez-faire, Marx, monopoly, proletarian, business, competition, company, competitor, United States Steel, little steel, Republic Steel, National Steel, government, public utilities, Postal Telegraph, Western Union

Id: BYc0YnmakI0

Length: 6min 47sec (407 seconds)

Published: Fri Apr 12 2024