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.