People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice….But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblages, much less render them necessary.
This quote appears in the first chapter of David Cay Johnston’s Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense.
I’ve been irritated, for quite awhile, that self-identified conservatives have been able to successfully use words like “laissez faire” or “free markets” or “competition” to characterize the private sector of the US economy. In fact the most predominant characteristic of the US economy is the widespread prevalence of oligopoly and collusion within a number of sectors, generally with the either tacit or explicit support of the government.
Take, for example, internet access–or pretty much anything to do with telecommunications. In a free market with open competition, I would not have to pay Pat Robertson a monthly subscription fee in order to watch Monday Night Football on ESPN. Football fan (if he is) Pat Robertson wouldn’t be forced to send money to MTV’s godless bottom line either. I received an email yesterday, seeking advice on internet connectivity for streaming video into a new home theater setup. The choices are Time Warner,or Verizon, both of which have absolutely dreadful track records as service providers. But they don’t care because they don’t have to.
What happens when monopolies are allowed to form, and to control consumer markets? Prices rise, and quality of service diminishes. Comparing the US to other countries makes the point quite stark:
The median U.S. internet speed connection is 1.97 megabits per second compared to Japan’s 61 megabits per second. Other countries that have a higher speed than US are South Korea (45 megabits), France (17 megabits) and Canada (7 megabits).
You see this replicated in different product sectors–banking, pharmaceuticals, health insurance–pretty much everywhere the government plays a role in setting or regulating prices.
This is,of course, neither creating free markets, nor adhering to the role Adam Smith envisioned for the government–as protecting and regulating markets so the Invisible Hand could operate most effectively rather than allowing the producers to subvert them.