In connection with the discussion about the tank discount, there is now also a discussion about breaking up the mineral oil companies. “Monopolies” and big corporations have few friends but many enemies.
A paper from the Ministry of Economic Affairs by Robert Habeck describes how antitrust law could be tightened. Accordingly, the competition authorities would be allowed to intervene structurally in markets – without having to prove a violation of competition law! According to this proposal, so-called “excess profits” should also be taxed by the state, even if market abuse cannot be proven. If necessary, the corporations should even be able to break them up.
Rainer Zitelmann has a doctorate in history, sociology and has been a member of the FDP for 25 years. He is also the author of the book “Psychology of the Super-Rich”.
CDU politician Jens Spahn demanded: “The tank discount, worth billions, seeps away and the traffic light is watching. Ordering the oil multinationals to report is the least that Economics Minister Habeck can do.” Saxony-Anhalt’s Economics Minister Sven Schulze (CDU) made a similar statement: “Now Robert Habeck has to summon the oil multinationals to report. The rip-off of citizens at gas stations must not go on like this for a week.” The AfD also supports Habeck’s anti-business plans. Alice Weidel, leader of the AfD parliamentary group, signaled support for a change in antitrust law. She called for “additional intervention options” for the authorities to “smash the obvious mineral oil cartel”. Only the FDP disagreed with Habeck.
Populist slogans against large corporations are always well received. The fact is: Politicians have thrown billions of taxpayers’ money out of the window for state intervention, which – as so often – does not have the desired effect. Instead of abolishing the law again, the spiral of intervention is now being continued. And the opportunity is being used to mobilize populist emotions against the “cartels” and “monopolies”. ‘Break up corporations’, ‘against cartels’ and so on – this not only resonates with people on the left, but also with conservatives and even some liberals. When it comes to “monopolies” and “multiples” there is a broad consensus. Almost everyone uses their products, but almost everyone is suspicious of them.
In particular, large mineral oil companies, but also companies like Google, Facebook, Amazon and Apple appear omnipotent today – just like earlier monopolists.
Strictly speaking, these are not monopolies, but oligopolies. But Adam Smith also used the term “monopoly” in his work “Wealth of Nations” to describe not only a company that is the sole supplier, but also companies that “never fully satisfy the effective demand” to sell their goods “far above the natural price”. for sale. As a “natural price” Smith understood the price that would be achievable under the conditions of free competition. Some modern economists also define monopolies in this broader sense as “firms that have gained some price control through market supply control, even if they are not the only supplier in their market”.
But history teaches us that the so-called monopolies are, in most cases, far less enduring than people realize at the height of their power. Some examples:
The company Myspace was founded in 2003. As early as June 2006, Myspace was the most visited site in the US, ahead of Google. In 2007, Britain’s leading left-wing newspaper The Guardian asked, “Will Myspace ever lose its Monopoly?” At the beginning of 2008, Myspace had a 74.4 percent market share of social networks. But just six months later, Facebook overtook Myspace in the US and by the end of 2009 the market share had fallen to just 30 percent. Today, Myspace hardly plays a role.
A second example: In November 2008, Forbes magazine ran a big story about the mobile phone manufacturer Nokia. The headline on the front page of the magazine read: “One Billion Customers – Can Anyone Catch the Cell Phone King?” Although Nokia developed the first smartphone in the 1990s, it only recognized the importance of apps for the attractiveness of the cell phone when when it was already too late.” In 2013, Microsoft bought Nokia’s mobile division, which by then had only a 3 percent global market share.
A third example, Xerox invented the first photocopier in 1960 and dominated the market in 1970 with a market share of almost 100 percent. Just as the word “google” is used to describe the search on the Internet today, the term “xeroxing” was used in the USA back then and in some cases still today when you want to photocopy something. In 1973, Xerox was charged with violating antitrust laws and a lengthy legal battle ensued. But just in those years the problem was being dealt with in a free-market way, because companies like IBM, Eastman-Kodak, Canon, Minolta, Ricoh and others entered the market and produced smaller and cheaper photocopiers. Xerox’s market share shrank from 95 percent in 1972 to 49 percent in 1979. Today it is less than 2 percent worldwide.
A fourth example is Kodak, which in 1976 still had a market share of over 90 percent in the US film market and 85 percent in the American camera market. Then Kodak missed the digital camera trend, and today powerful cameras dominate in smartphones. In 2012, the company filed for bankruptcy and later tried other business areas.
And every time the critics tell us: This time everything is very different and this time the monopoly will last unless the state intervenes.
It can be shown that activities by the state to eliminate real or supposed monopolies were mostly superfluous or counterproductive. While the American economist Israel M. Kirzner emphasizes that monopolies that arose from competition, because one company satisfies the needs of consumers better than others, are by no means harmful but actually important for economic progress, some thinkers saw that associated with the ordoliberal tradition, such as the German economist Walter Eucken, pose a great danger in any monopoly and cartel. Some of these “Ordoliberals” – in addition to Eucken, the economist Alexander Rüstow should be mentioned here in particular – envisioned an ideal state of free competition between many small companies. This unrealistic utopia and the assumption that cartels and monopolies are always harmful led them to advocate powerful antitrust authorities that should break up trusts and cartels. Although they were otherwise skeptical about too large a role for the state in the economy, here they advocated all-powerful state institutions to avoid agglomeration of power in the economy.
The Russian-American author Ayn Rand took a counter position and wrote cynically – in criticism of the US anti-trust legislation: “The conception of free competition, enforced by law, is a grotesque contradiction in terms. It means forcing people at gunpoint to be free. It means protecting the liberties of the people through the arbitrary rule of unenforceable edicts.” Competition, she argued, cannot be legislated because there are no standards by which to define who should compete with whom, and how many competitors there should be in a given field, what their relative strength or so-called “relevant market” should be, what prices they should charge, and what methods of competition are “fair” or “unfair”. “None of these questions can be answered precisely because these very questions can only be answered with the mechanism of the free market.”
Big companies that really or supposedly occupy a position similar to a monopoly have a hard time because they have many opponents: the less successful competitors, i.e. those who were less successful in satisfying customer needs at a reasonable price, are just as much their enemies as the media, which are often guided by anti-capitalist resentments. Less successful corporations and media form an ominous alliance with state regulators and agencies united in their mission to break the “power of monopoly.” They supposedly do this on behalf of the consumers, but in reality mostly out of their own interests or for ideological reasons. Monopolies find it difficult to hold their own against these attacks because they have staunch opponents even in the pro-market camp. An example of this is Ludwig Erhard, whose great merit it was to implement the market economy in West Germany as Minister of Economics after the Second World War, and who sharply polemicized against all monopolies and cartels, which he regarded as harmful per se. So monopolies – and large companies in general – have many opponents, but few defenders.
Many critics who harshly attack private monopolies simultaneously accept or justify the existence of state monopolies. An example of this is Sahra Wagenknecht, who constantly polemicizes against large monopolies, but advocates the nationalization of many companies (e.g. banks). The attacks of the anti-capitalists and the state on real or supposed monopolies also have a diversionary function, because the most dangerous monopoly is precisely the state monopoly. The enemy of permanent monopoly is not socialism but capitalism.
Parts of the article are taken from Rainer Zitelmann’s new book: “The 10 errors of the anti-capitalists. Criticism of the critique of capitalism.”
In the Amazon shop – Rainer Zitelmann: The 10 errors of the anti-capitalists. critique of the critique of capitalism
