There are many concerns in America. One such concern is the many monopolies and their impact on the economy. Monopoly can be defined as a situation when one company controls the entire or almost complete market for a product or service. You might say, for instance, to your friend that prices have gone up at taco shops around my town. He would then respond with, “All the owners are the same owner.” Monopoly can be viewed from many angles depending on its merits or detriment. Barry C. Lynn of theatlantic.com states that the effects of Monopoly are causing the economy to slow down. The owners of all these services are simply making more money by charging more. Because there is no alternative, they can charge more for their services even when high demand exists. Groceries can do this when they increase prices in less-developed areas or have fewer options. Monopolies are also less likely to be inspired or motivated to invent, as they don’t have to produce new or improved products. According to a Nation Bureau of economic Research, a majority of American businesses have spent less on their products/services since 2000. Because they don’t depend on cable for tv or movies, disruptive technology is a major threat to their monopoly. To establish monopoly power and drive out potential competitors, firms also employ tactics. One example is that a wealthy firm may set prices below their competitors’ and make losses. Another example is that a firm with high prices can force the other company to close its doors as they cannot afford to lower their prices. This is because the firm increases their prices to compensate for the loss and to establish a market dominance.
Monopoly has its downsides, but it can also be beneficial. It almost guarantees the consistent delivery and payment of products or services that have a high price. The most obvious example is electric plants and new dams. These industries are regulated by the federal governments to protect consumers. The companies could also set prices in order to make back the money they lost. In certain instances, deregulation was proposed in the 1990s. Monopoly has another way Monopoly can benefit the economy. Research and development makes exceptional profits that can be used as capital investment to finance high-cost research. This, assuming that successful research is conducted, can be used to improve products and reduce costs over the long-term. This is particularly important in the pharmaceutical and telecommunications industries. Therefore, monopoly power does not mean that medical drugs can be developed in a monopoly-free environment. This is because the funders of research cannot afford it. There is also a high chance of developing drugs. With monopoly profits, a firm has more confidence as they can make mistakes and finance research that could fail. Many people believe that there will not be any competition for monopoly. However, a domestic company may hold monopoly power within its country but still face competition on global markets. It is essential that a company has monopoly domestically to remain competitive in international markets. The other reason why monopoly can be useful is to avoid duplicate services. So if there are four bus companies in a small city, monopoly will fix it. Although some bus companies might go out business, it will benefit the town’s residents and the people.
The United States has many monopolies. Here’s what the U.S. did to end them. The “American Tobacco and International Harvester” companies were the first to suffer a monopoly. “International Harvester” was an agricultural equipment company that made low-cost equipment for the majority of America’s farmers. It was also considered untouchable. American Tobacco, on the other hand was accused for charging skyrocketing cigarettes prices and boasting that it could cure everything from asthma and menstrual cramps. Under Benjamin Harrison’s presidency, the Sherman Antitrust Act (1890) allowed certain business operations that were deemed to have potential to compete. The Sherman Antitrust Act also encouraged the federal government to pursue trusts. A trust, in its broadest sense, is a legal arrangement that transfers property from one party to another to be held for the benefit of a beneficiary. The act also prohibited monopolistic combinations, giving the government the power to destroy them. Over the next 50 year, more monopolies were formed. The potential benefits of being a monopolist was demonstrated by Standard Oil. While there were many other competitors, Standard Oil used leaky pipe and pumped the waste into the atmosphere. However, Standard Oil used some devious business tactics to monopolize it. This allowed it to take over other projects that other Oil Companies could not. The United States became an industrial country by building a reliable infrastructure. U.S. Steel is another contributor. It had 70% of the world’s steel production resources but it did little. Meanwhile, 30% more efficient firms had their 30%. U.S. Steel was eventually able to monopolize the steel industry, even though they lost a court case with Sherman Act.
You have now learned about the history of America’s monopolies, and how they impacted American history. The U.S. is doing a good job in handling monopolies and I hope they continue helping consumers.
