Markets are less competitive than you think

And government is not always monopolistic

May 29, 2012|Thomas F. Schaller

In my previous column, I argued that American citizen-consumers seem far more likely to complain about government failures than about similar problems arising in the free market. Waste, fraud, inefficiency and other frustrations resulting from government action are considered endemic, yet similar patterns of failure in the private sector are discounted if not overlooked.

Responding either by email to me directly or via letter to the editor, several readers protested that a key distinction I failed to acknowledge is that government is a monopoly that permits citizens no alternative, whereas pluralistic, competitive markets allow consumers to take their business elsewhere.

This distinction is true — but only to a point. In fact, there is competition among governments; meanwhile, we have unfortunately lost a significant degree of competition in the marketplace. Let me address each of these counterpoints in turn.

It's true that there is but one national government, and that a person can only officially live in one state at a time. (I say "national" because the term "federal" implies a two-level, national/state system of dual sovereignty.) Among the 50 American states, however, there is often significant competition.

Indeed, conservatives relish the power of "voting with one's feet" — the idea that people and businesses can chose to relocate to different states based on relevant political features, including a state's tax regimen, the quality of its public universities or its regulatory environment. There are national organizations of governors, secretaries of state, treasurers, attorneys general, and state legislators, among others, each of which brings together officials from different states to solve similar problems by sharing (if not stealing) ideas from each other.

As our so-called "laboratories" of democracy, the state governments also provide competition or, at the very least, exert upward innovative pressure on Washington. To pick just one very salient example, the health care individual mandate that is the cornerstone of President Barack Obama's Affordable Care Act was partially modeled — to Mitt Romney's great chagrin — on the health insurance mandate that then-Governor Romney enacted in Massachusetts.

As for competition in the supposedly "free" markets, I would urge caution about championing the degree of choice and competition available to American consumers. The truth is that products and services across a range of American commodities, from cereals to cellphones to cinema chains, are controlled by competition-starved oligopolies.

Does anyone really think that American agribusiness is becoming more pluralistic and competitive when the majority of beef, chicken, soy, corn and potatoes are produced by a handful of companies? When their computers freeze up, do users reflect on the fact that Microsoft enjoys a near-monopoly in the operating system market? Are conservatives unaware of the increasingly oligopolistic airline, entertainment and telecommunications industries?

As for those "too big to fail" banks that brought us the 2008 financial meltdown? Guess what: After a series of mergers and acquisitions, the biggest banks are now bigger than ever.

We might hear more stories about declining industry competition in America, but unfortunately the mass media, which are both a market unto themselves and also affect the marketplace of ideas, are also more concentrated than ever — a fact that should be evident in everything from expanding cable prices to our narrowing public discourse.

So, yes, in theory consumers have the option of buying a mouse trap from the firm that produces the best one, or at the best price or with the options that best suit them. But the very same readers who send me emails complaining that I'm a muddle-headed college professor pushing abstract theories from my disconnected-from-the-real-world ivory tower may want to stop their fawning over Milton Friedman and take a clear-eyed look at the realities of market competition in modern America.

Should they wish to practice what they preach about the magical powers of pluralistic market competition, here's a challenge: Go a month — heck, go a week — without shopping at a big-box retailer, eating at a national restaurant chain, flying on a major commercial airline, or watching or listening to any movie, cable network program, radio station, magazine or newspaper owned by Disney, Viacom or Time-Warner.

Good luck.

Thomas F. Schaller teaches political science at UMBC. His column appears every other Wednesday. His email is Twitter: @schaller67.

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