July 20, 2021 Reading Time: 14 minutes

George Orwell famously coined the term “newspeak” in his 1949 anti-utopian futuristic novel, 1984, in which commonsense words were reversed in their meaning. Thus, “peace” meant “war,” and “love” meant “hate.” In our current world of political correctness, “equal rights” means “privilege,” and “freedom” means “oppression.” Now, with President Biden’s recent executive order on “active” enforcement of antitrust laws, “more market competition” really means “greater government regulation.”

On July 9, 2021, the White House released Joe Biden’s “Executive Order on Promoting Competition in the American Economy.” The Executive Order begins by hailing the value and benefits of competition, economic freedom and consumer choice, and then highlights what is said to be the dangers to these positive elements of American society:

“A fair, open, and competitive marketplace has long been a cornerstone of the American economy, while excessive market concentration threatens basic economic liberties, democratic accountability, and the welfare of workers, farmers, small businesses, startups, and consumers… Yet over the last several decades, as industries have consolidated, competition has weakened in too many markets, denying Americans the benefits of an open economy and widening racial, income, and wealth inequality… We must act now to reverse these dangerous trends, which constrain the growth and dynamism of our economy, impair the creation of high-quality jobs, and threaten America’s economic standing in the world.”

The White House “Fact Sheet” accompanying the Executive Order for the media emphasized that, “Today’s historic Executive Order established a whole-of-government effort to promote competition in the American economy. The Order includes 72 initiatives by more than a dozen federal agencies to promptly tackle some of the most pressing competition problems across our economy. Once implemented, these initiatives will result in concrete improvements to people’s lives.”

Biden’s Antitrust War on Business Bigness

But when looked at in the summary of purposes and the specific actions expected from an alphabet soup of government departments, bureaus and agencies, what is really to be implemented is an even larger spider’s web of controls, restrictions and regulations over many corners of the marketplace than is even now the case. 

An underlying presumption in the entire document is that “bigness” in business is bad. No thought or question is raised as to why it may be the case that a market may have a few larger competitors as opposed to many smaller ones. No doubts are offered about why there may be various market ways of doing business in selling products or in hiring employees. No hesitation is present that those manning and directing the government bureaucracies have the knowledge, wisdom, and ability concerning the presumption that markets need political management and control. 

All the regulatory agencies, including the Federal Trade Commission, the Federal Communications Commission, the Interstate Commerce Commission, the Department of Agriculture, the Federal Reserve, and a panoply of others are to follow a “whole-of-government” approach in which wherever and whenever their duties and responsibilities overlap, they are to cooperatively and jointly work together to impose a seamless web of coordinated rules, regulations, and restrictions on the sectors and industries over which their jurisdictions commonly apply.

In addition, all these efforts will be overseen and organized by a White House “Competition Council” that will serve as a regulatory central planning agency to see that all goes smoothly with the long and strong arm of the government watching, judging, and deciding what is or is not “good,” “fair” and “just” forms of competition, along with general private sector market behavior. 

As part of this, Biden’s Order emphasizes that under the authority given to these government bureaus and agencies, they may reverse corporate and company mergers and acquisitions undertaken in the past based on prior regulatory approval or acquiescence. That is, new regulatory benchmarks and rules may retroactively apply to the business decisions and actions that were permitted at an earlier time by those same government bureaucracies. This may end up in the courts because it is easy to imagine some affected private enterprise claiming that this might be inconsistent with the Constitution’s “Ex Post Facto Clause” (Article 1, Section 9, Clause 3), which bars a new law from making criminal what was not so before the law was passed. This might arise because it could be argued that it is one thing for Congress to enact laws to which some such retroactive impositions may apply, but not necessarily on the basis of a Presidential Executive Order that extends or creates regulatory powers without legislative concurrence. 

Little Would Be Left Free of Government Control

What are central elements to Biden’s Executive Order are such things as greater imposition and enforcement of price controls and caps on the healthcare and pharmaceutical industries; enhanced power to prevent business mergers and acquisitions, and to threaten to break up or otherwise restrict the size of private enterprises in various sectors of the economy. The Executive Order particularly draws attention to social media and telecommunications sectors of the market, with a clear suggestion that how they manage their business internally and in relation to their, respective, customers and clients and employees may be determined and dictated by the government agencies having regulatory authority over them.

For instance, prices declared to be “too high” may be singled out as “monopolistic,” while prices below that of competitors could easily be classified as “predatory,” under the presumption of a goal to drive out the competition, leaving one or fewer rivals in that part of the marketplace. Or if several large competitors in a sector of the market were charging similar prices of their, respective, versions of a product, it might be labelled “collusive” and therefore “anti-competitive.” In other words, the regulators might get you whether you are “coming or going.” 

In some instances of social interaction, it may be said that “size does not matter,” but for Biden’s antitrust enforcers, they are given clear and direct instruction to consider the market shares of firms in some part of the economy as a strongly possible sign of “monopolistic” threats that need to be challenged and if necessary reversed with breaking up such companies or otherwise restricting their freedom of action in the marketplace. 

To assure this, Biden’s Order says that the bureaucracies are to pursue: “the investigation of conduct potentially harmful to competition; the investigation of conduct potentially harmful to competition; and the design, execution, and oversight of remedies.” Anything that any firm, business, company, or corporation does would come under even greater scrutiny and suspicion than is already the case in these long-existing government agencies. 

At a time when the Biden Administration and its newly appointed regulators are shouting about increased “concentration” in various industries, a recent report by the Information Technology and Innovation Foundation (ITIF) details that in fact, estimated “concentration” of markets in the hands of fewer competitors has, in fact, been diminishing over the last 20 years. It seems that “only 4 percent of U.S. industries are highly concentrated – and 45 percent have become less concentrated since 2002.” 

Bureaucratic Interest in Finding What Justifies Regulation

But somehow any such similar finding is unlikely to come out of the regulators’ own “investigations.” Since Joe Biden has said that market concentration is real and is a problem, those appointed by him to solve the concentration “problem” are highly motivated to get the results that confirm what the man in the White House says. Besides, the more “monopolistic” the conduct discovered, the stronger the case for maintaining and enhancing the authority and responsibility of the bureaus and agencies concerned with permanently fighting these “bad” tendencies when markets are left free of the paternalistic hand of government. 

As Henry Manne, one of the developers of the law and economics field, expressed it back in a 1977 article on, “Individual Constraints and Incentives in Government Regulation of Business:”

“All things being equal everybody prefers more job security to less, but because of the Civil Service rules, people who are more interested in job security than in other forms of reward tend to be attracted to those kinds of jobs… The main concern for the career staffer… is with security and secondly with not making waves or work for themselves… That is why any ‘old hand’ in Washington will tell the potential career bureaucrat that it is always safer to say ‘no’ than to say ‘yes,’ to deny a request than to authorize it. There is less chance of getting into trouble and less chance of having to explain why something unusual was allowed… 

Their interest lay only in preserving the system of regulation. And if it be pointed out to them that this regulation may be needlessly costing the public vast sums of money, it would make little difference. Under our postulates [that those in government also operate on the basis of their perceived self-interest] they will generally behave as though the regulation is desirable, regardless of the fact. Only in this way can they protect their jobs… And rationalizations are cheap.” 

Antitrust Regulation Meant to Punish Market Success

But guiding this new push for more government control and regulation over business based on the claim that “concentration” in an industry – which means a small number of competitors in a sector of the market, with high percentages of market share – is the notion that being more successful in winning a higher proportion of consumer business in a market than one’s rivals is, per se, an indication of a socially negative situation. There was a similar push made among the regulatory elite half a century ago. In an article on, “The Attack on Concentration” (1978), University of Chicago economist, Yale Brozen, warned and explained:

“There is a strange notion brewing in the Antitrust Division of the Federal Trade Commission… it is the notion that we must penalize any firm (or group of firms) that, by operating efficiently and producing greater values for consumers, wins a large share of the market. Perhaps this notion emerges from the passion for equalization of results that has come to pervade public policy; perhaps it is simply envy; or perhaps it is the final erosion, perversion, or transmutation of democracy from individual sovereignty into mobocracy – tyranny of the majority.

“Whatever the roots of the strange flowers not blooming in the fields of antitrust, the fact is that the antitrust agencies are attempting to remake antitrust law to penalize success in serving consumers… Once we gave high regard to those who created great enterprises by designing desirable products, producing them at low cost, and offering them at such attractive prices that they won a large body of consumers. 

Henry Ford in his day was looked upon as an industrial hero. Today, he would be regarded as a monopolizing fiend upon whom the antitrust prosecutors should be unleashed. The 1921 Ford Company, with its more than 60 percent share of the market, would today be called a dominant firm and charged with violating the antitrust laws…

“Dominant firms, that is firms which sell a major part of all products sold, remain dominant only if they charge the competitive price and are more efficient than other firms in their industries. If they are less efficient, they soon find their market share dwindling despite selling at competitive prices.”

The Meaning of “Monopoly” in the Market

Rather than starting with the presumption that bigness is bad, which in this context means there is only one or a small number of private enterprises producing and supplying within a market, we should ask why and how might such a situation emerge within some part of the market. In the extreme case, why might there be a monopoly seller in a market?  

The word “monopoly” originates from the ancient Greek: “mono,” meaning single, and “poly,” meaning seller.  But there are a variety of reasons why there may be only one seller in a market at or over a given period of time. First of all, it may be because an entrepreneur has creatively developed a new or significantly different product, and as a result he is the first and only supplier of this good on the market. After all, every new idea must begin in some individual’s mind, and that person’s willingness to undertake the entrepreneurial task of bringing it to market.

To the extent that he has correctly anticipated future consumer demand for this new or different product, the very profits that he may earn will attract the competitors who will enter his market and, over time, compete away the profits he has been earning by their devising ways to make similar versions of his new idea with more attractive features and offered at lower prices than the “monopolist” initially was charging.

If, on the other hand, this single seller has misjudged future market demand for his product and suffers losses, it would not be socially desirable for rivals to enter his market and waste more time and resources producing a loss-making product – unless, of course, they see a way to make profitable that which the initial “monopolist” could not.

Second, there may be a single seller in a market because the consumer demand is too limited to make it profitable for more than one seller to operate in that market. Imagine the small, rural town with one general store. The owner may be making a profitable go of it, but if a rival entered the area and opened a competing general store, the sales and revenues now divided between the two of them may not be enough to cover their respective costs of operations; the end result being that both face losses. The market is too limited to sustain more than one seller.

Third, there may be a single seller in a market due to their ownership or control of vital resources or a raw material without which a product cannot be successfully produced and marketed.  This was a hypothetical possibility pointed out by Austrian economists Ludwig von Mises and Israel M. Kirzner.

The Dynamic Workings of Free Market Competition

However, if we allow time to pass; that is, if we look beyond the situation at a moment in time, we can see countervailing market forces that likely will be set in motion if there are potential profits to be made from selling this resource-specific product.

First, this situation would create incentives to prospect for and extract any possible alternative supplies of this resource or raw material outside the control of the “monopolist,” so competitors could enter his market at some point in the future.

Second, and more immediately as well as over time, if this is a profitable product, there would be incentives for competitors to market substitutes to his product out of alternative types of resources or raw materials outside of the monopolist’s control, and offer their substitute products at lower prices than the monopolist’s price. Thus, over time, competitive market forces would either eliminate or weaken even a “monopoly” position of this type.

The Austrian-born economist, Joseph A. Schumpeter, argued that the essence of the dynamic market economy is the innovative entrepreneurs who introduce the new, better, and improved products as well as new methods of production. To understand what Schumpeter called the competitive process of “creative destruction,” it is necessary to look beyond any seemingly “monopoly” situation at a moment in time, and take the longer historical perspective of the market as a dynamic process through time.

Textbook conceptions of “perfect competition” and “monopoly” are of little relevance or help, therefore, for understanding how markets actually work. As Schumpeter explained it in Capitalism, Socialism and Democracy (1942):

“In dealing with capitalism we are dealing with an evolutionary process . . . that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.

“The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.

In capitalist reality as distinguished from its textbook picture… The kind of competition which counts… [is] the competition from the new commodity, the new technology, the new source of supply, the new type of organization… The competition that commands a decisive cost or quality advantage…

“It is hardly necessary to point out that competition of the kind we now have in mind acts not only when in being but also when it is merely an ever-present threat. It disciplines before it attacks. The businessman feels himself to be in a competitive situation even if he is alone in his field.”

Market Competition Best Understood as a Process Through Time

The market economy, to the extent that it has a noticeable degree of competitive freedom, is an arena of change, transformation, and creativity. But looking at things over a short period of time often makes it difficult to fully understand this. 

Suppose you are shown a single frame of a motion picture, one that contains the image of a person hanging in midair just off the edge of a cliff. What conclusions are we to draw from this image? It all depends upon what preceded that frame, and what follows it. Suppose that the person was cornered by an attacker who has thrown this unfortunate fellow off the cliff with the intention of killing him on the rocks far below. But what if he saw his attacker coming, and this person chose to jump off the cliff to escape this aggressor, hoping to survive the fall by successfully landing in a river below and swimming to safety?

We do not know how to evaluate and judge the situation captured on that single frame taken out of the motion picture. It all depends. And in the same way, we do not know how to evaluate a market situation of a single seller, or even a few sellers, in the market unless we know the market processes before and after that diagram-depicted moment in time.

To show the relevance of taking this longer view of competitive and monopoly situations, we may draw upon an interesting article published a few years ago by economist Mark Perry on the website of the American Enterprise Institute. He compared the lists of Fortune 500 firms in 1955 with those six decades later in 2017.

Only 60 enterprises were on the list in both these years, or less than 15 percent. Many of the companies on the 1955 Fortune 500 list were not only not on the 2017 list, but they no longer existed. Many of the companies on the list both of those years held different relative positions, with some higher and others lower in 2017 than in 1955. And a good number of companies on the 2017 list had not even existed sixty years earlier and therefore could not be on the 1955 list.

Government Intervention as the Cause of Monopoly Problems

What, then, may be the cause behind a single seller situation, a “monopoly,” that may be considered as “anti-competitive” and “socially harmful?” This requires us to appreciate the role of the state in creating and perpetuating such a situation.

There may be a single seller in a market (or a small number of sellers) because of a legal privilege given by the government to be the only producer and/or seller of a good or service within a part or the whole of the geographical area over which the government has political authority. This is one of the oldest meanings or definitions of monopoly frequently used by economists since Adam Smith published The Wealth of Nations (1776).

In this case, the privileged monopolist may be in the position to limit supply and raise his price to generate higher profits because he is protected and sheltered from any direct market competition, since the government has made it illegal for all others to compete in this market. This is the one case in which the “frozen picture” of the textbook monopoly diagram is most appropriate because market competition cannot change the “picture.” The government prevents any market process from working over time from generating the competition that would likely emerge in a more open market.

However, it would be expected that potential competitors might still try to develop and offer various substitutes for the government-protected monopoly product; to the extent they could do so without breaking the law. Also, it might still occur that illegal, “black markets,” might emerge if profits were sufficiently high to make it attractive to run the risk of being caught and imprisoned by the government.

In modern American history, for instance, it was the government that legally provided a monopoly position to AT&T in the provision of telephone services around the United States through most of the 20th century. It was government regulation that limited market entry and controlled pricing and routes to a handful of passenger airline carriers from the mid-1930s to the end of the 1970s. It was government control of the airwaves that restricted radio and television broadcasting to a limited number of companies, again, until the late 1970s.

But once these government-created and protected monopoly or near-monopoly situations were abolished through legislative repeal, the markets for communication, travel, and information and entertainment exploded into the vibrant and diverse array of far more competitive providers and suppliers and offerings that we now happily take for granted, than under the system of government privilege and restriction.

Taking the market process longview, the appearance of single sellers and seemingly “monopoly” or near-monopoly situations is easily shown to be limited moments in the wider horizon of dynamic and creative competition over and through time. As long as government secures and protects private property rights, enforces all contracts entered into voluntarily and through mutual agreement, and assures law and order under an impartial rule of law, “monopoly” as an economic or social problem is virtually nonexistent. But introduce government intervention into the market system, and “monopoly” invariably becomes a social harm and an economic problem.

Government Regulation as the Serious Source of Concentrated Power

If there is a dangerous concentration of control and power in society, its source is the government, with its coercive authority to impose changes different or even opposite of the patterns and relationships that would and do emerge on the basis of voluntary association and exchanges. It is this heavy hand of government that has intruded and distorted the workings of the consumer-oriented free marketplace. 

Antitrust laws have been in existence since the late 19th century. Regulatory agencies have been around beginning with the Interstate Commerce Commission in 1877 over the railway industry. There seems to be no authoritative and complete list of all U.S. government departments, bureaus and agencies, but the best count seems to be almost 450 of them. Look through such lists and ask yourself, what corner of personal and business life is not regulated, controlled, restricted and managed by one or more of these government branches over everything we do in our private and interpersonal activities? 

But according to the Biden Administration, we are living in a world of “wild west” free markets untouched by the caring and paternalistic hand of government. Oh, and by the way, those estimated 450 federal departments, bureaus and agencies looking over and managing every move we make does not include all the state, county and municipal rules, regulations and restrictions that affect each of us in our particular geographical corners of the United States. 

If there is a “laissez-faire” present in the country, it is laissez-faire government, that is, government is free with the power, discretion and authority to do almost anything it wants to us. The motto of virtually all federal, state, and local levels of government is: “leave us alone” to do anything and everything we want to those living under our political jurisdiction. Unrestrained government is the problem, not unrestrained private enterprise, because the latter does not exist in America. 

If Joe Biden’s Executive Order is fully implemented we will be that much closer to a comprehensively managed economy, with nothing done by any private enterprise free from the intrusive hand of government. Prices will not be set by the free interaction of market supply and demand; entry and exit from different sectors of the economy will be surveilled and sanctioned by the federal regulatory agencies; and any attempts to innovate and introduce new, better, and less expensive goods and services to the buying public that results in growing market share will be subject to potential charges of “anti-competitive” conduct.

So welcome to President Biden’s Orwellian newspeak – “freedom of enterprise” really means “government control of business.” 

Richard M. Ebeling

Richard M. Ebeling

Richard M. Ebeling, an AIER Senior Fellow, is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel, in Charleston, South Carolina.

Ebeling lived on AIER’s campus from 2008 to 2009.

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