December 11, 2010

Oligopolies -Who is at fault?

Who is at fault that the economy is in a stranglehold by the very large oligopolies that are preventing free enterprise from flourishing in so many of our industries? It is not the corporations.

Industries like banking, including wall street, insurance, health care, automotive and others are controlled by a small handful of firms that are doing what Adam Smith, the author of Wealth of Nations, published in 1776, advocated. They are pursuing their rational self-interest. The problem is how they are allowed to pursue it..

Adm Smith envisioned a corporations rational self-interest would be best served by providing the consumer with the best product possible at the lowest possible price. In this manner the rational self-interest of the consumer would be to buy the efficient producers products. What Adam Smith failed to adequately take into account was that if a corporation could  control a market it no longer needed to concern itself with what the consumer wanted. It controlled the market.

Milton Freidman, the deceased economist of the conservative right and a staunch supporter of free markets, in his book Free To Choose advocated a need for a referee if free markets indeed were going to remain free. This is the problem with today's "free markets". They are not free. The government has abdicated its role of umpire to to our free market system.

If indeed Obama wants to win back his base, he must take on these oligopolies that wield so much power and used it to buy off "our politicians". Until this happens; nothing else will.

1 comment:

  1. Thank you. I seldom agree with anything Milton Friedman has to say, but this is definitely an exception. Would that he hadn't said so much else destructive to our economic system but that appears all to attractive to those who want to find a justification for their own greed.

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