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On Monopolies -- from Standard Oil to Google and Amazon

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Message Arshad M Khan

Note: This article first appeared on Counterpunch.org


One of the very first investigative journalists, Ida Tarbell went after the "throttling hand" of Standard Oil and John D. Rockefeller. By 1880, the company owned 90 percent of US oil, its transport and its sale.


Writing a series of articles over a two-year period, Tarbell's expose led to a Supreme Court ruling in 1911 ordering the dissolution of Standard Oil -- so massive, it was broken up into 34 corporations.


John D. Rockefeller who called the journalist Miss Tar Barrel -- echoes of Donald Trump here -- was the country's first billionaire. If he spent his later years giving away much of his fortune to found universities and fund research, he had been in his younger days a ruthless competitor.


Monopolies controlling markets can set prices to their own liking. They can raise them to increase income or cut them to stifle competition. In effect, they are interfering with the free market forces so ardently espoused by University of Chicago economists. On this issue conservatives and liberals have common ground, but the question is what to do with monopolies. There is break-up and there is regulation.


Utilities are regulated but if one has been exposed to utility bills in many parts of the country, one has to wonder how well. The renowned economist George Stigler in a landmark study covering 60 years of electricity regulation (1900-1960), in regions with varying degrees of regulatory oversight, found the differences in prices to be negligible. The finding surprised economists, and it, added to Stigler's enormous output, garnered him a Nobel Prize, the Nobel citation specifically noting the work.


If monopolies damage free-markets, there is an issue staring us in the face today: the digital colossi Google, Facebook and the aptly named Amazon. Then there is Apple with an iPhone monopoly. The market has been unable to check their increasing power.


The University of Chicago's Stigler Center for the Study of the Economy and the State has recently cast its gaze on the issue. A Stigler Center group headed by Yale economist Fiona Scott Morton analyzed the market structure of these digital behemoths. And last May she delivered its recommendation to the US Senate as part of a hearing on digital advertising and competition policy.


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Arshad M Khan is a former Professor. Educated at King's College London, Oklahoma State University and the University of Chicago, he has a multidisciplinary background that has frequently informed his research. He was elected a Fellow of the (more...)
 
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