Imaginary Menace

Dave Killion — December 28, 2011

Although seriously alarmed by government monopoly, which survives only through force and fraud, libertarians are concerned with private sector monopolies only so far as they exist as a result of government policy. In the absence of tariffs, subsidies, licensing restrictions and requirements, and other such state-based mischief, monopolies are difficult to create, impossible to sustain, and beneficial for almost the entirety of their brief existences. Hans F. Senholzlays lays out the argument in the longish-but-worthy essay, ” The Phantom Called “Monopoly” ” –

“…  even if competitors of similar size and structure should be absent, the monopolist must be mindful of the potential competi­tion that can arise overnight. Numerous financiers, promoters, and speculators continuously search for opportunities to estab­lish new enterprises. They have formed new giant companies in the past. And they are willing to risk their capital again if they see an opportunity for profits.

Dreading the promoter who may invade his field, the monopolist therefore must act as if he were surrounded by numerous competitors. He must be alert and always “competitive.” He must continu­ously improve his product and re­duce its price. For if he should relax, another company will soon invade his field. The newcomer is likely to be a formidable competi­tor for he has new machinery and equipment. He has new ideas and applies new methods of production. And he enjoys the good will of all customers. Indeed, a monopolist who relaxes invites disaster.”

Anyone doubting the truth of the above may wish to acquaint themselves with this brief history of the rise and decline of  De Beers, perhaps the strongest monopoly ever. Interesting stuff!

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