Posts Tagged ‘Barry Lynn’

The reality of monopoly power in the USA

June 30, 2014

brands.monopoly_n

Yesterday I commented on Thomas Frank’s interview with Barry Lynn, author of Cornered, an important new book about business monopoly in the USA.   I intend to read the book and review it on this web log, but, in the meantime, here are some highlights of the interview, touching on the surprising (to me) extent of monopoly power.

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Amazon now essentially governs business within the book industry.  Amazon has so much power that it virtually gets to tell really big companies like Hachette, the French publisher, what to do.

You’re gonna sell this book at this price. You’re gonna sell that book at that price. That means Amazon pretty much has the power to determine how many copies of a book a publisher might sell.

That’s not citizens trading with one another in an open market setting those prices, that’s a giant corporation setting those prices.  Which means what we are witnessing in the U.S. book industry, I think, is a form of top-down government.

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Some years back a company named Tyco decided to take over the business of making plastic clothes hangers. It went out and bought at least four companies, and that gave it the power to jack up prices to clothing retailers. That’s the pattern in pretty much every industrial activity in America.

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The Supreme Court [in the mid-1960s] forced Pabst to unwind a merger with Blatz because their combined market share [of beer sales] would have been 4.49 percent.  … …

Well, now there’s two foreign companies, Anheuser-Busch InBev, which is controlled out of Brazil, and MillerCoors, which is controlled out of London.   And those companies control about 80% of the US market.  And until recently they controlled about 90% of the market.

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It’s not all that hard to manufacture eyeglasses. But there’s a single company, Luxottica, an Italian company, that controls most of the business in America. You go shopping for eyeglasses.

You go to a place called Lenscrafters. You go to a place called Sunglass Hut. You go to a place called Pearle Vision.  You go to Target Optical.  You go to Sears Optical. You go to Macy’s Optical.

You’re comparing quality, comparing prices, imagining you live in an open and competitive market.  And yet all of these stores and most of the product in them are controlled by Luxottica.

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The real problem is monopoly

June 29, 2014

Jeff Bezos

Monopoly power is the real enemy of both free enterprise and economic justice in the USA today.

In industry after industry, a single company or handful of companies dominates the market, and they act like little miniature governments, determining who can participate and how much they are paid.

Barry C. Lynn, a senior fellow at the New America Foundation, and author of Cornered, a new book about monopoly, wrote that the cause is simple.

Starting with the Reagan administration in the 1980s, the government decided to stop enforcing the anti-trust laws when it was argued that monopoly offered greater economic efficiency.

The solution also is simple (although, Lynn admitted, extremely difficult politically to do).

Resume interpreting the anti-trust laws as they were understood prior to 1980.

LINKS

Free markets killed capitalism: Ayn Rand, Ronald Reagan, Wal-Mart, Amazon and the 1 percent’s sick triumph over us all, an interview of Barry C. Lynn, author of Cornered: The New Monopoly Capitalism and the Economics of Destruction. Strongly recommended.

Printing controversy:  Amazon’s latest plan to harm publishers and consumers under the guise of customer satisfaction by Nathaniel Mott for PandoDaily.

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The argument for monopoly is the same as the argument for state socialism, which is that it offers greater economic efficiency and less duplication than a competitive free enterprise system.

It is true that Amazon, like Wal-Mart, achieved its domination of its markets through a superior business model in which costs were passed on to the consumer.  Once dominance was achieved, however, Amazon, like Wal-Mart, was in a position to use its position to drive down wages, drive down prices of suppliers and deny customers any alternative by squeezing out competition.

Under business monopoly, the only competition is between individuals and localities as to how much they are willing to give up.

 

Earthquakes, monopoly and supply-chain risk

April 26, 2011

Barry C. Lynn, a senior fellow at the New America Foundation, says the Japanese tsunami shows the vulnerability of the global corporate economy.  The tsunami and earthquake destroyed factories that make a high proportion of essential components for the world’s industry – 60 percent of a resin used in making semiconductors, 90 percent of copper for lithium batteries, 50 percent of a microprocessor used to control automobile transmission and brakes.  The result is a domino effect that has hit not only Japanese industry, but industry worldwide.

Before globalization, he said, industry wasn’t this vulnerable.  Industrialists such as George Eastman and Henry Ford sought to make their corporations as self-sufficient as possible.  Eastman Kodak Co. processed the wood pulp for its photographic paper; Ford Motor Corp. operated rubber plantations to have raw material for tires.  Supply disruptions might affect one corporation, but not a whole nation, let alone the world.

Now companies are tightly linked to independent suppliers located all over the world.  To avoid the cost of maintaining inventory, they rely on just-in-time delivery.  So they are vulnerable to any interruption in the supply.

Lynn said the problem isn’t really globalization, outsourcing or just-in-time delivery.  The problem is monopoly.  Companies are not vulnerable if they have many suppliers, spread all over the world.  But when they come to depend on one company at one location, they are at risk.

The problem, Lynn said, began under the Reagan administration, which abandoned a commitment to promoting business competition, and adopted the philosophy that monopoly is all right if it promotes economic efficiency.  Lynn said the Reagan administration at least fought for the interests of American business against foreign monopolies.  He said it was the Clinton administration that abandoned economic nationalism and adopted the gospel of efficiency on a worldwide basis.

The problem is that economic efficiency increases risk.  If you squeeze all slack and duplication out of a system, you make it more efficient, you save money and time, but you have nothing to fall back on if the system fails.

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