Skip to main content

What market failure?

The front page of today's print FT reveals a masthead intro for yet another article/editorial on the supposed "market failure" that has brought about the recent global financial panic and a synchronized world recession.

Rather than bore you with the details of the entire piece, entitled, "Let us put markets to the service of the good society", allow me to reproduce one excerpt which purports to show that "market-generated monopolies" have driven out smaller competitors and led to the growth of "too big to fail" firms in banking and retail.

The following is the author's description of the modern oligopoly system at work in retail shopping today:

"If markets tend to monopoly, creating banks too big to fail, it follows that similar cartels exist elsewhere. Indeed, such “Chicago school” monopolies predominate.

In Britain, four supermarkets control more than 70 per cent of food retailing, while in the US, Wal-Mart has eviscerated competition. Local businesses from pubs to post offices are eroded by conglomerates that benefit from hidden subsidies and whose costs to society are not priced in. They out-compete everything else on economies of scale."

There is no question that the large chain stores have come to dominate the American retail landscape. But is this a good example of a market-generated monopoly or a "market failure" at work?

As Timothy Carney and economist Robert Higgs would point out, the success of a firm like Wal-Mart might actually highlight big business' skillfull use of government and taxpayer subsidies and business regulations in defraying operating costs and reducing competition.

As both Carney and Higgs illustrate in their discussions on the alliance of big business and big government, these companies and the "too big to fail" financial firms are not, as popularly supposed, true champions of laissez faire economics. They are merely opportunists who will use free-market rhetoric when it suits their purpose and cry out for government assistance when the threat of failure (or even just a bit of honest competition) looms.

Related articles and posts:

1. Tim Carney on big business & big government - Finance Trends.

2. Boudreaux on market failure, government failure - Econtalk.

Popular posts from this blog

New! Finance Trends now at FinanceTrendsLetter.com

Update for our readers: Finance Trends has a new URL!  Please bookmark our new web address at Financetrendsletter.com Readers sticking with RSS updates should point your feed readers to our new Finance Trends feedburner .   Thank you to all of our loyal readers who have been with us since the early days. Exciting stuff to come in the weeks ahead! As a quick reminder, you can subscribe to our free email list to receive the Finance Trends Newsletter . You'll receive email updates about once every 4-8 weeks (about 2-3 times per quarter).  Stay up to date with our real-time insights and updates on Twitter .

Moneyball: How the Red Sox Win Championships

Welcome, readers . T o get the first look at brand new posts (like the following piece) and to receive our exclusive email list updates, please subscribe to the Finance Trends Newsletter .   The Boston Red Sox won their fourth World Series title of t he 21st century this we ek. Having won their first Se ries in 86 years back in 200 4, the last decade-plus has marked a very strong return to form for one of baseball's oldest big league clubs. So how did they do it? Quick background: in late 2002, team own er and hedge fund manager, John W. Henry (with his partners ) bought the Boston Red Sox and its historic Fenway Park for a reported sum of $ 695 million. Henry and Co. quickly set out to find their ideal General Manager (GM) to help turn around their newly acquired, ailing ship. This brings us to one of my fav orite scenes from the 2011 film , Moneyball , in which John W. Henry (played by Ar liss Howard) attempts to woo Oakland A's GM Billy Beane (Brad Pi

Jukebox

Tonight's jukebox is a blast back to the mid-1980's with a live in studio performance by New Order for BBC Radio 1. There are some very noticeable flubs in their performance (I think Bernard may have been feeling a little "rushed"), but the songs are amazing and it's like being an eyewitness to a studio rehearsal. An excellent video snapshot of one of the most inventive modern pop groups doing their thing. Enjoy, and thanks Adz! New Order, live 1984: "Sooner Than You Think" , "Age of Consent" , "Blue Monday" , "In a Lonely Place" , "Temptation" .