Anonymous
Anonymous asked in Social ScienceEconomics · 1 decade ago

Can anyone give an example of a harmful monopoly that was not government sanctioned? Not created?

through barriers against competition set by government? No created through special privileges granted by government?

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  • 1 decade ago
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    Examples of such are few and far between, and also short-lived. Generally, a non-government-sanctioned monopoly only forms out of a pioneer. For example, founded by Alexander Graham Bell, inventor of the telephone, the American Telephone and Telegraph Company (AT&T) literally created its market, including the project to create a nationwide long-distance calling network. It is not strictly a monopoly to offer something completely novel which nobody had beforehand, but de-facto has no competitors. Obviously nobody had the technological know-how to compete for a long time, and by the time they did (and by the time the telephone patent expired), there was obviously going to be a wide moat to cross before being competitive. At this point, the government stepped in and under the guise of preventing a monopoly, actually helped create one! In the Kingsbury Commitment with the Attorney General, AT&T was essentially granted a monopoly. AT&T was required to allow competitors, who only had small local networks, to connect through their national network. This reduced the incentive for these companies to build competing long-distance lines, cementing the AT&T long distance monopoly. A few years later, the federal government nationalized the entire industry in the name of national security and directly regulated rates and forbid competitors from installing new competing lines. Thus, AT&T went from being the founder of a new niche market to a regulated entity with special privileges.

    In a free market, a monopoly can never last long. Someone will always come along and outmaneuver them. E.g. when the Blackberry controlled the "smart phone" market, Apple came along and introduced the iPhone. And then Google comes along with Android and Nexus One. Companies can try to play hardball by buying out competitors, making deals with suppliers and retailers, and driving competitors out of business with anti-competitive pricing, but ultimately they can only do this for so long before they become unprofitable. And then a competitor swoops in. Only the government can create a permanent monopoly through the force of law.

    As an aside, a sign that hung in many Bell facilities in 1983, after the break-up of Ma Bell into the Baby Bells, read: "There are two giant entities at work in our country, and they both have an amazing influence on our daily lives... one has given us radar, sonar, stereo, teletype, the transistor, hearing aids, artificial larynxes, talking movies, and the telephone. The other has given us the Civil War, the Spanish-American War, the First World War, the Second World War, the Korean War, the Vietnam War, double-digit inflation, double-digit unemployment, the Great Depression, the gasoline crisis, and the Watergate fiasco. Guess which one is now trying to tell the other one how to run its business?"

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  • Anonymous
    1 decade ago

    If you mean a natural monopoly like Andrew Carnegie and his steel monopoly, it would be just that. The same for John D. Rockefeller and the oil industries. Both these industries were declared unlawful monopolies or trusts and later (after their formation) broken up by the government. The anti-trust or anti-monopoly laws (Sherman Anti-trust and a few other amendments) were instituted to break up these "natural" or non governmental approved monopolies around the turn of the century (1900). This was when steel, railroads, oil, and a few other monopolies were formed.

    Source(s): M.A. Economics 1968
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  • 1 decade ago

    You need to define "harmful" in an economic context. What is harmful? Is it just higher prices? or less output? or what? After all, what is harmful to the consumer may be beneficial to the seller (and the other way around as well)

    Microsoft has an HHI around 9,100 (which places it into the Monopoly range). So, I personally think its a crime to buy Windows 7 for $300, but if you are willing to pay that price, are you really being harmed? After all, its a voluntary choice to hand the money over (this basically applies to all examples).

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  • Anonymous
    1 decade ago

    Don't let any lefties brainwash you. They'll tell you horror stories about the oh so evil "Robber Barons" and how anti trust / anti monopoly legislation saved the day etc. blah blah blah etc.

    http://mises.org/story/2317

    PS: I believe even the Bell monopoly was not free of government regulation in their favor. I'll have to research it again.

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  • ?
    Lv 6
    1 decade ago

    IRS

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