I’ve been reading bits and parts of “The Market For Liberty” - http://mises.org/daily/2220 - and I’ve stumbled upon a section where the writer is talking about coercive monopolies vs. monopolies in a free market. He says coercive monopolies “maintains itself by the initiation of force or the threat of force”… how exactly does a company or monopoly initiate force? Examples?
Example: Government
… and by “force” he later refers to it as physical force, if that helps.
Sure, but are there any real companies… I am doing a research paper and right now I’m looking at how monopolies would exist in a free market v. a gov. regulated market.
research the bell telephone monopoly
Hire some goons to go beat up the competition.
Any examples of when this has happened and why it wouldn’t happen in a free market?
All the “campaign contributions” that politicians get.
In a free market where there is an equilibrium of force, sending goons after the competition would just mean goons coming after you back.
Monopolies that use the government to restrict entry into a particular field. Like the USPS and first class mail.
Coercive monopolies rarely actually use force themselves, they usually just get the State to do it for them. A rare example of coercive monopolies that do their own dirty work are drug gangs.
Getting the state to do it for you is easy. Just buy some congressmen and get a law/regulation passed that will, either directly or indirectly, make it effectively illegal to compete with you or the rest of your cartel.
An example is the American sugar industry. It is mandated by the state that 80% of sugar used in the US is from a domestic source. The result is predictable: Sugar prices skyrocket and everyone switches to alternatives like HFCS.
Coercive monopolies cannot happen in a pure market economy by definition because coercive entities exist outside of the market. While it is impossible to eliminate drug gang-like tactics altogether, they can be greatly reduced by removing the exploitative institutions, i.e. the state.
Take the unions beating up potential incoming workers. The police, the supposed protectors of freedom, decided to remain indifferent. In a free market a security firm would protect the company, not claim indifference.
As others have said above and as mentioned in your quote, it’s the threat of force that matters that matters. Not many people or companies are stupid enough to directly oppose laws already on the books.
Even government support for a particular company falls into the category of force or the threat of force, even if there are no restrictions to entry or competition. The reason? All taxes are collected by the threat of force or force if the former doesn’t work.
Many true monopolies use both types of force - they are tax funded, and either completely prohibit competition (first class letter mail from the post office, or most city water / trash services, for example), or have such restrictive regulations and requirements for competing companies that it effectively outlaws competition.
Without force backing up those laws and regulations, they would be meaningless, anyone could compete without fear of being shut down.