Here's a free article from an economist that I like to read. He puts his finger on something that some of us have been pointing out for years now. What we see today, is not the capitalism we saw in the early 80s, (or even in the 90s). Our country desparately needs to start enforcing the anti-trust laws we have on the books.

https://www.mauldineconomics.com/frontlinethoughts

Capitalism Without Competition

BY JOHN MAULDIN
FEBRUARY 8, 2019
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Monopoly Rents
Not Free to Choose
Data Oligopoly
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The Soviet Union’s collapse and spread of semi-free markets through Eastern Europe seemingly ended the socialism vs. capitalism argument. Capitalism had won. Collectivist economies everywhere began turning free. Even communist China adopted a form of free market capitalism although, as they say, with “Chinese characteristics.”
The fruits of capitalism: millions of people freed from abject poverty and a few who got rich indeed. Nor is this a recent phenomenon. Capitalism in the last three centuries, with all its faults and problems, with all its contradictions, generated the greatest accumulation of wealth in human history. From a few hundred years ago when the vast majority of the people of the world lived below the poverty line, barely above subsistence levels, today we have less than 10% doing so and that number is shrinking every year.
Yet now, perhaps because this prosperity is so easily taken for granted, some on the left are again embracing socialist ideas and irrationally high tax rates. What drives this thinking? One problem is “capitalism,” in practice, does indeed provide many points for justifiable criticism. It is, to paraphrase Winston Churchill, the worst of all systems, except for everything else.
Today’s capitalism has a contradiction that is increasingly hard to ignore: lack of competition in key markets. That’s a problem because competition incentivizes producers to get more efficient and reduce prices for consumers. Without competition, you end up with bloated monopolies that may be highly profitable for the owners, but don’t serve the greater cause of economic growth.
My good friend Jonathan Tepper, with whom I wrote Code Red and Endgame, has an excellent new book on this: The Myth of Capitalism: Monopolies and the Death of Competition. He and co-author Denise Hearn explain why this is a serious problem with world-shaking consequences. I highly recommend the book and today I want to give you a brief taste of it, plus a few more thoughts afterward.
First, let me once again remind you that registration is open for my Strategic Investment Conference in Dallas, May 13–16. As always, we have an amazing lineup of speakers but that’s not even the best part. The best part is the time you’ll spend and friendships you’ll make with other like-minded people. You might consider it, “Thoughts from the Frontline LIVE.” If you like my letters you’ll love the SIC. Click here for more info, the agenda, and registration.
Monopoly Rents

Before we get to the book, let’s deal with one contradiction. People think capitalism and government are opposing forces. Certainly, there’s tension between them, but in fact they need each other. The government needs a thriving economy to generate tax revenue, and business needs the civil order that government protects.
Capitalism in its current form would not exist unless governments had sanctioned corporate business structures distinct from their human owners. The Romans had something like this, but it really took off with 17th-century mercantilism. That’s when the Dutch East India Company emerged along with similar groups in England like the South Sea Company (now often used to describe asset bubbles).
Corporate structures shield business owners from personal liability, which lets them take greater risks and ultimately produced the economy we have today. But that protection depends on a government guarantee. And because governments are prone to corruption, capitalists almost immediately began using their influence to reduce or eliminate competition. This is nothing new. It dates back centuries.
If you would like to understand the 19th-century creation of the modern corporation and subsequent monopolies, read The First Tycoon, the amazing biography of Cornelius Vanderbilt. Vanderbilt was possibly the only trillionaire in history (in current inflation adjusted dollars). He and his friends and government contacts literally created the modern corporation seemingly from scratch. As noted, there were precedents, but Vanderbilt brought it to the level we would recognize today. He and the other 19th-century robber barons created wonderful monopolies and vast wealth for themselves. Later the same government that enabled these monopolies broke them up.
These monopolies had dire economic consequences, as we can see in the “Monopoly” board game. Gain ownership of all the properties on a street through which everyone must pass, and you can charge higher rents without delivering any additional benefits. But then what happens? Eventually the renters run out of money, go bankrupt, and the game ends with your monopoly rendered worthless.
Something along those lines is happening right now in numerous industries. Usually it’s not a single-company monopoly (though these do exist, like state-protected utility companies), but duopolies are growing common.
The vast majority of personal computers run on either Microsoft Windows or some version of the Apple OS. Those two companies are often your only choices. Google is trying to break in, but has hope only because it is so huge and ubiquitous. Smaller players are effectively locked out, no matter how superior their products may be (cf. Firefox). Creating a new operating system and effectively marketing it would be prohibitively expensive. As a result, we pay more and receive less. That may not be the best way to grow an economy.
With that as prologue, let’s look at The Myth of Capitalism.
Not Free to Choose

Like me, Jonathan respects capitalism and capitalists. He’s not a leftist shill. It’s because he respects capitalism that he wants to see the best version of it, just as we all want our children to reach their full potential. Sometimes, that means pushing them to change.
The book refers to Milton Friedman’s old TV series “Free to Choose,” then says this.
"Free to Choose" sounds great. Yet Americans are not free to choose.
In industry after industry, they can only purchase from local monopolies or oligopolies that can tacitly collude. The US now has many industries with only three or four competitors controlling entire markets. Since the early 1980s, market concentration has increased severely. We’ve already described the airline industry. Here are other examples:

  • Two corporations control 90 percent of the beer Americans drink.


  • Five banks control about half of the nation’s banking assets.


  • Many states have health insurance markets where the top two insurers have an 80 percent to 90 percent market share. For example, in Alabama one company, Blue Cross Blue Shield, has an 84 percent market share and in Hawaii it has 65 percent market share.


  • When it comes to high-speed internet access, almost all markets are local monopolies; over 75 percent of households have no choice with only one provider.


  • Four players control the entire US beef market and have carved up the country.


  • After two mergers this year, three companies will control 70 percent of the world’s pesticide market and 80 percent of the US corn-seed market.

The list of industries with dominant players is endless. It gets even worse when you look at the world of technology. Laws are outdated to deal with the extreme winner-takes-all dynamics online. Google completely dominates internet searches with an almost 90 percent market share. Facebook has an almost 80 percent share of social networks. Both have a duopoly in advertising with no credible competition or regulation.
Amazon is crushing retailers and faces conflicts of interest as both the dominant e-commerce seller and the leading online platform for third-party sellers. It can determine what products can and cannot sell on its platform, and it competes with any customer that encounters success.
Apple’s iPhone and Google’s Android completely control the mobile app market in a duopoly, and they determine whether businesses can reach their customers and on what terms. Existing laws were not even written with digital platforms in mind.
So far, these platforms appear to be benign dictators, but they are dictators nonetheless.
It was not always like this. Without almost any public debate, industries have now become much more concentrated than they were 30 and even 40 years ago. As economist Gustavo Grullon has noted, the “nature of US product markets has undergone a structural shift that has weakened competition.”
The federal government has done little to prevent this concentration, and in fact has done much to encourage it. Broken markets create broken politics. Economic and political power is becoming concentrated in the hands of distant monopolists.
The stronger companies become, the greater their stranglehold on regulators and legislators becomes via the political process. This is not the essence of capitalism.
Now, to be clear, some industries require such massive scale that they can only support a small number of producers. Passenger aircraft, for instance: You have Boeing, Airbus, and a handful of smaller players (like Canadair and Embraer, who make smaller planes).
Most industries aren’t like that. Banking certainly isn’t. Lots of studies show the economies of scale stop improving once a bank passes $50 billion or so in assets. Yet the megabanks have grown larger without growing more efficient, in the process killing many of the local banks that once financed local businesses on favorable terms.
That’s a problem because we need those small, local businesses. Here’s Jonathan again.
Ever since the time of Thomas Jefferson, Americans have idealized the yeoman farmer and the small business. While family neighborhood stores are a critical part of the economy, it is important to distinguish between small businesses and the high-growth startups that Haltiwanger describes.
Small businesses like restaurants and dry cleaners create most jobs, but they also destroy most jobs. They create most new businesses, but they have the highest rate of failures. They are important, but they don’t drive productivity.
It is the small companies that become big, like the next Costco, Southwest Airlines or Celgene. All of these started small.
Geoffrey West, in his masterful book “Scale,” showed that companies are like living organisms. Just like in the animal world, many startups die when they are very young, but those that survive and grow quickly tend to grow exponentially, which leads to higher profitability and productivity.
Note, this is not an argument against large companies. They have an important role. But the real innovation and growth starts much lower on the food chain. So, it is a problem when small business loses the chance to thrive and prove itself.
As you know, I go fishing in Maine every summer with a group of economists. Maine has complex rules for its lakes, governing which fish you can keep or must release. We rely on professional guides to know the differences, but the general idea is to give the younger fish from underpopulated species a chance to grow. This preserves the lakes as a resource for everyone.
We might look at small businesses the same way. Most won’t grow into big businesses, but it serves everyone to protect their opportunity. As Jonathan points out, that isn’t happening. We’re already paying a price and it is getting worse.