Monopoly Rents
•Not Free to Choose
•Data Oligopoly
•Puerto Rico, Dallas, Houston, Cleveland, New York, and Austin

The Soviet Union’s collapse and spread of semi-free markets through Eastern Europe seemingly ended the socialism vs. capitalism argument. Capitalism had won. Collectivist economies everywhere began turning free. Even communist China adopted a form of free market capitalism although, as they say, with “Chinese characteristics.”

The fruits of capitalism: millions of people freed from abject poverty and a few who got rich indeed. Nor is this a recent phenomenon. Capitalism in the last three centuries, with all its faults and problems, with all its contradictions, generated the greatest accumulation of wealth in human history. From a few hundred years ago when the vast majority of the people of the world lived below the poverty line, barely above subsistence levels, today we have less than 10% doing so and that number is shrinking every year.

Yet now, perhaps because this prosperity is so easily taken for granted, some on the left are again embracing socialist ideas and irrationally high tax rates. What drives this thinking? One problem is “capitalism,” in practice, does indeed provide many points for justifiable criticism. It is, to paraphrase Winston Churchill, the worst of all systems, except for everything else.

Today’s capitalism has a contradiction that is increasingly hard to ignore: lack of competition in key markets. That’s a problem because competition incentivizes producers to get more efficient and reduce prices for consumers. Without competition, you end up with bloated monopolies that may be highly profitable for the owners, but don’t serve the greater cause of economic growth.

My good friend Jonathan Tepper, with whom I wrote Code Red and Endgame, has an excellent new book on this: The Myth of Capitalism: Monopolies and the Death of Competition. He and co-author Denise Hearn explain why this is a serious problem with world-shaking consequences. I highly recommend the book and today I want to give you a brief taste of it, plus a few more thoughts afterward

Monopoly Rents

Before we get to the book, let’s deal with one contradiction. People think capitalism and government are opposing forces. Certainly, there’s tension between them, but in fact they need each other. The government needs a thriving economy to generate tax revenue, and business needs the civil order that government protects.

Capitalism in its current form would not exist unless governments had sanctioned corporate business structures distinct from their human owners. The Romans had something like this, but it really took off with 17th-century mercantilism. That’s when the Dutch East India Company emerged along with similar groups in England like the South Sea Company (now often used to describe asset bubbles).

Corporate structures shield business owners from personal liability, which lets them take greater risks and ultimately produced the economy we have today. But that protection depends on a government guarantee. And because governments are prone to corruption, capitalists almost immediately began using their influence to reduce or eliminate competition. This is nothing new. It dates back centuries