State Protection of Monopolies

From The Truth About Liberty: How the Tea Party Can Save America

You were probably taught that the only thing that stands between you and gigantic monopolies is a benevolent government. Like a lot of things taught in government schools, the exact opposite is true; monopolies only exist when the state grants a business a unique privilege — the privilege of eliminating all competition by force. In free markets, monopolies are impossible.

A monopoly is when a single company has total control of a market. For instance, if Zappem Corporation is the only entity with the right to distribute electricity in your area, it has a monopoly. As you well know, your utility companies all have special protection against competition. If you ask why, they’ll say it’s because competition can’t work in providing water or electricity.

This is obviously baloney. If it were true, they wouldn’t need government protection to avoid competition; they could simply establish the business and the natural impossibility of competition would mean they had nothing to worry about. But you have never heard a utility say “Go ahead and compete; it won’t work anyway, so our market is safe!” Instead, they run to politicians and beg them to carve out a monopoly for them like they did for the railroads. The railroad barons didn’t get their wealth and power because of capitalism; they got it because politicians admitted them into the state’s power structure. “Give us votes and we’ll give you protection.”

Monopolies only exist when backed by the threat of force. If you thumb your nose at the government and start a competing electrical utility, Zappem Corporation will get a court order and show up at your construction site with armed deputies. They’ll tell you to stop selling electricity, and if you refuse they’ll pile on top of you and beat you with sticks or even shoot you with a gun. Then they’ll cuff you, squeeze the cuffs hard on your wrists, and put you in a concrete and metal cell. Zappem wins because of state-sanctioned force.

In a free market the use of force to create or protect a monopoly is illegal. If Bob the Baker uses force to stop Frank Bunns from running a competing bakery, Frank can legitimately defend himself, and so the competition goes on. But when the state grants Bob a monopoly, it uses force to protect the monopolist. Thus we see that in a free market the only legitimate use of force is that which is used to protect competition, whereas monopolies can exist only when the state uses force to sustain them.

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