ProPublica and John Oliver on monopolies

One of the features of capitalism is the growth of monopolies. As a result of their emergence either because of mergers or by the purchase of smaller companies, we end up having less competition and that results in higher prices and less innovation, leading to inferior products and services. The government’s anti-trust division is supposed to prevent monopolies but that long ago became a toothless tiger.

Last year, Justin Elliott of ProPublica wrote about what happened to the airline industry as a result of all the mergers. He writes about how the Obama administration, after initially vowing to oppose the merger of American Airlines and US Airways, suddenly did an about-face and let it go through, so that now travel in the US is overwhelmingly dominated by just four airlines.

It announced a settlement that allowed American and US Airways to form the world’s largest airline in exchange for modest concessions that fell far short of addressing the concerns outlined in the lawsuit.

The Justice Department’s abrupt reversal came after the airlines tapped former Obama administration officials and other well-connected Democrats to launch an intense lobbying campaign, the full extent of which has never been reported.

They used their pull in the administration, including at the White House, and with a high-level friend at the Justice Department, going over the heads of staff prosecutors. And just days after the suit was announced, the airlines turned to Chicago Mayor Rahm Emanuel, Obama’s first White House chief of staff, to help push back against the Justice Department.

As a candidate in 2007, President Obama pledged to “reinvigorate antitrust enforcement,” calling that the “American way to make capitalism work for consumers.” Hillary Clinton has recently made similar promises.

But the reversal in the American-US Airways case was part of what antitrust observers see as a string of disappointing decisions by the Obama administration.

John Oliver picked up on that story and on the deleterious effects of that and other mergers.


  1. invivoMark says

    The third biggest lie is that the efficiency of a competitive capitalist economy benefits all players and is a desirable end in itself.

  2. Sunday Afternoon says

    This one has me in two minds.

    Yes, the natural progression of capitalism is towards monopolies. That much is clear.

    But, I work in part of the tech industry that has undergone substantial consolidation. Our advanced work is closing in on the limits of what we understand is physically possible with the current materials and methods and there is investment by the industry in alternatives. However, there is clearly a critical mass of resources and know-how required in the R&D space of the remaining companies to even be able to support this effort as it is expensive, time-consuming and involves developing and applying new physics. And in a couple of years we may decide that the new tech won’t work for products.

    To be able to support this (possibly throw-away) effort requires advanced R&D to be a small part of the overall company budget. In the past, smaller companies that could not afford this have found themselves failing when trying to catch up after the larger companies have developed new technologies. “Fast followers” are no more in our industry, All remaining companies have access to advanced R&D, either in-house or through strategic partnerships.

    So, I’m in the position of doing work that is only possible through the not-quite-complete monopolization of our industry.

    @Rob Grigjanis, #4:


    This would be a really exciting development for my industry!

  3. Reginald Selkirk says

    Sunday Afternoon #5: Yes, the natural progression of capitalism is towards monopolies.

    Yes, if left unregulated.
    This reveals the lie of “supply-side” economics. Cutting taxes on corporations allows them to accumulate more money, and they don’t use it to create jobs. They use it to pay off their investors (who already have money) and to buy out their competition though mergers and acquisitions.

    So, I’m in the position of doing work that is only possible through the not-quite-complete monopolization of our industry.

    One possible solution to this might be to regulate vertical integration. It sounds like you are using semiconductors as your example. In that case, the problem is worse if the company making semiconductors is the same company selling widgets to consumers. Another example is operating systems. Microsoft nearly monopolized the OS market a few deacdes ago, and then tried to use that to monopolize other markets as well; web browsers, hardware, etc.

  4. lanir says

    Monopolies are capitalist cancer. They’re part of the system run amok, grown way too huge and consuming all the resources. Left alone they eventually proliferate and destroy the system. The analogy is slightly imperfect in that they don’t clone themselves so much as grow more massive. So malignant tumors rather than individual cancer cells are closer to the mark.

    @Sunday Afternoon #5: If we didn’t have bloated corporate monopolies (and virtual monopolies) politics would be a lot less broken. The sort of cutting edge physics R&D you’re talking about could end up part of a government R&D push. I’m not in the hardware end of the tech industry but from the outside it also looks like industry groups and partnerships seem to get things done as well. Monopolies have great PR because they can afford to shovel piles of money at it. But their actual benefits to society at large are extremely limited and never manage to keep pace with their drawbacks.

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