The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper

Author:Jonathan Tepper [Tepper, Jonathan]
Language: eng
Format: epub
Tags: Business & Economics, economics, General, Theory
ISBN: 9781119548140
Google: hzt7DwAAQBAJ
Publisher: John Wiley & Sons
Published: 2018-11-20T00:04:52.120523+00:00

Notice there is not a word of appeal to lower prices, consumer welfare, or efficiency.

After the election in 1914 Congress passed two laws to give teeth to the Sherman Act. The first was the Clayton Antitrust Act. The second was the creation of the Federal Trade Commission, providing the government with an agency that had the power to investigate violations of antitrust law and issue orders forbidding unfair competition practices.

Even after the Clayton Act and the creation of the FTC, there was little enforcement of antitrust laws. It was only a few years later in the 1920s that the United States experienced one of the largest merger waves in history. This second great merger wave coincided with the stock market boom of the 1920s. It should not be surprising that stock market booms accompany merger waves. Economists have now found that when stock prices go up, CEOs can use their inflated shares to build bigger empires.13

In many ways, it resembled today's landscape. Because of antitrust laws, companies didn't try to corner over 90% of any market, lest they be broken up like Standard Oil. Instead, they went for what has been called “merger for oligopoly” rather than outright monopoly. Industries organized themselves into a few leaders per industry that could tacitly collude, rather than one overall monopolist.14

Much like the first merger wave, the second ended with the Great Crash of 1929. It was not regulators who put an end to the merger frenzy, but the collapse in markets. However, by the time the Great Depression came around, many industries had become oligopolies (Figure 7.1).

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