Power and Market: Government and the Economy

Economic historians often inquire about the extent and importance of monopoly in the economy. Almost all of this inquiry has been misdirected, because the concept of monopoly has never been cogently defined. In this chapter we have traced types of monopoly and quasi monopoly and their economic effects. It is clear that the term “monopoly” properly applies only to governmental grants of privilege, direct and indirect. Truly gauging the extent of monopoly in an economy means studying the degree and extent of monopoly and quasi-monopoly privilege that the government has granted.

American opinion has been traditionally “antimonopoly.” Yet it is clearly not only pointless but deeply ironic to call upon the government to “pursue a positive antimonopoly policy.” Evidently, all that is necessary to abolish monopoly is that the government abolish its own creations.

It is certainly true that in many (if not all) cases the privileged businesses or laborers had themselves agitated for the monopolistic grant. But it is still true that they could not become quasi monopolists except through the intervention of the State; it is therefore the action of the State that must bear prime responsibility.76

Finally, the question may be raised: Are corporations themselves mere grants of monopoly privilege? Some advocates of the free market were persuaded to accept this view by Walter Lippmann’s The Good Society.77 It should be clear from previous discussion, however, that corporations are not at all monopolistic privileges; they are free associations of individuals pooling their capital. On the purely free market, such men would simply announce to their creditors that their liability is limited to the capital specifically invested in the corporation, and that beyond this their personal funds are not liable for debts, as they would be under a partnership arrangement. It then rests with the sellers and lenders to this corporation to decide whether or not they will transact business with it. If they do, then they proceed at their own risk. Thus, the government does not grant corporations a privilege of limited liability; anything announced and freely contracted for in advance is a right of a free individual, not a special privilege. It is not necessary that governments grant charters to corporations.78

• 76Historians, however, will go sadly astray if they ignore the monopolistic motivation for passage of such measures by the State. Historians who are in favor of the free market often neglect this problem and thus leave themselves wide open to opposition charges that they are “apologists for monopoly capital.” Actually, of course, advocates of the free market are “probusiness,” as they are pro any voluntary relationship, only when it is carried on in the free market. They oppose governmental grants of monopolistic privilege to businesses or others, for to this extent business is no longer free, but a partner of the coercive State. On business responsibility for interventions generally thought to be “antibusiness,” see Gabriel Kolko, The Triumph of Conservatism (Glencoe, Ill.: The Free Press, 1963), and idem, Railroads and Regulations, 1877–1916 (Princeton: Princeton University Press, 1965). See also James Weinstein, The Corporate Ideal in the Liberal State: 1900–1918 (Boston: Beacon Press, 1968).
• 77Walter Lippmann, The Good Society (3rd ed.; New York: Grosset and Dunlap, 1943), pp. 277 ff.
• 78It is true that limited liability for torts is the illegitimate conferring of a special privilege, but this does not loom large among the total liabilities of any corporation.