The “Curse” Of Competition: How The US Can Abolish The Quasi-Monopolies In The Economy

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Apart from the problems stemming from the 2008 financial crisis, the U.S. economy is now also being weighed down by little monopolies, or quasi-monopolies, which reduce economic efficiency, slow economic growth, and reduce the average income of every U.S. household. Can the U.S. government once again unleash the “curse” of competition on businesses, in order to revitalise the economy?


Apart from the problems stemming from the 2008 financial crisis, the U.S. economy is now also being weighed down by little monopolies, or quasi-monopolies, which reduce economic efficiency, slow economic growth, and reduce the average income of every U.S. household. Can the U.S. government once again unleash the “curse” of competition on businesses, in order to revitalise the economy?

The U.S. economy, the greatest the world has ever known, is slowly losing its prowess.  Economic growth rates are gradually slowing, decade by decade. Debt is piling up as companies, individuals and the U.S. government use borrowing and loans to help maintain the illusion of economic progress.

The borrowing game, however, is nearing its end. The U.S. faces the threat of prolonged economic decay during the 21st century as it struggles to fund entitlements, balance budgets, pay down debts, and make investments for the future. If the U.S. economy is destined to grow only 1 or 2 percent a year in real terms, the economic future of the U.S. is a bleak panorama.

But what if the real growth rate of the U.S. economy were 5 or 6 percent a year, on average?  The U.S. budget could easily be balanced. The total debt level could be paid down each year.  Major investments for the future could be made, and the U.S. would easily maintain its world economic leadership. High rates of economic growth would minimize unemployment, raise living standards, possibly improve the nation’s health standards, and help fund a strong military. Rapid economic growth could extricate us from the mess we have created for ourselves.

The economic solutions proposed by the major political parties offer little hope. Politicians, for the most part, do not really understand economics or how to create a rapid-growth economy, nor do they have stomach for the tough decisions ahead. There are no simple, easy solutions. No sound bites. We need the best thinking and the hard work of everyone in the U.S. to build a high-growth economy. Here are some ideas about how we might build and sustain a high-growth U.S. economy by unleashing the “curse’’ of competition.

Every Nook and Cranny

Businessmen love nothing better than a monopoly (despite their public speeches to the contrary).  Unions love to create labour monopolies. Governments are quasi-monopolies and they love little monopolies; government-granted monopolies and economic protectionism are such wonderful ways to transfer spoils to political supporters and cronies. In fact, almost every organized group in our society (and indeed in every society around the globe) strives to create its own monopoly or protected enclave to avoid the ill winds of competition.

Virtually no company or organized group really wants any competition. Competition puts the company or organization at risk; its economic wherewithal and survival are constantly in peril if competition is allowed to roam unchecked. No business or organization, it seems, is actually in favour of competition. The spectre of competition intimidates all. If everyone hates competition, why not just eliminate it? Would that not solve the problem?

[quote]The problem is that every little monopoly, quasi-monopoly and governmental protectionism (and these are legion) reduce economic efficiency, slow economic growth, and reduce the average income of every U.S. household. No one individually benefits from direct competition, but all of us collectively benefit from a competitive economic system. If economic well-being and economic growth are the goals, then governments (federal, state and local) should promote and protect competition.[/quote]

Governments must create markets and regulatory regimes that stimulate and encourage competition wherever possible throughout the economy. It will take decades to find and abolish all of the little protected enclaves and quasi-monopolies in our economy, where governments, organizations, unions, and companies are shielded from competition. Without the stimuli of open competition and fair markets, there can be little hope of achieving high rates of economic growth. We must foster competition in every nook and cranny of the economy.

Related: Fix The Enterprises, Fix The Economy: Henry Mintzberg

Related: Capitalism’s Pallbearers: The Companies That Run, & Could Destroy, The Global Economy

The Sports-Model Market

Think of a sporting event like basketball, baseball or football. The playing-field boundaries are clearly marked. The rules are published for everyone to read, and the rules apply equally to all players on all teams. Referees and umpires enforce the rules (i.e., similar to the proper role of governments). And, by the way, the game is played out in the open for all to see. It’s totally transparent.

[quote]All markets should operate like a basketball game or a baseball game. Honest, transparent and fair markets are capitalism’s greatest engines of economic growth. Regulation of these markets is essential and productive, so long as regulation follows the sports model – and anyone can field a team. Unregulated competition doesn’t work too well, as Prohibition taught us in the 1920s, and as the drug wars in Mexico are teaching us today.  [/quote]

The Patent System

Either eliminate all patents as barriers to competition, or greatly limit the scope of patents.  As presently conceived and operated, the U.S. patent system primarily assists large companies in achieving and maintaining monopolies or quasi-monopolies. Small companies cannot afford to seek patents or defend patents in court. The current system helps create and protect monopolies and provides a playground for patent trolls.

If retained, the patent system should be focused narrowly on physical, technical improvements of substance and importance, not on trivialities and certainly not on process patents. One could easily build a plausible case that all patents should be completely eliminated as barriers to competition.

Related: Infographic: Patent Trolling: When Too Many Patents Serve No Purpose

Related: Infographic: The Dark Side of The Patent Wars

Governmental Subsidies

Government subsidies tend to play favourites and reward some groups or industries at the expense of everyone else. Why is agriculture subsidized through food stamps, price supports and ethanol requirements? Why is the housing industry subsidized through government-guaranteed mortgages, interest deductions on home mortgages, and other favored tax treatments?  Why are state and local governments subsidized through tax-free bonds? Why are charities and churches granted exemptions from many taxes? Why are some banks subsidized by the Federal Reserve? 

The list of subsidies is endless. All of these subsidies are anti-competitive distortions that tend to reduce the growth rate of the U.S. economy. Subsidies in their many forms and disguises must be phased out.

Nothing to Lose

We can create a high-growth, sustainable economy in the U.S.  It will take decades of diligence, creativity, enlightened leadership, and an emphasis on fair and transparent sports-like markets, open competition, and the elimination of subsidies. Let the curse of competition drive economic growth. We have nothing to lose but our debts, and a world to gain. 

By Jerry W. Thomas

Jerry W. Thomas is president and chief executive officer of Dallas/Fort Worth-based Decision Analyst Inc. (www.decisionanalyst.com), a global marketing research and analytical consulting firm. The company serves the Fortune 500 as well as leading governments, organizations and individuals around the world. In addition to its traditional research methodologies, Decision Analyst operates the world’s largest online consumer opinion panel, with 9 million participants around the globe. Thomas may be reached at [email protected], 1-800-262-5974 or 817-640-6166.

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About Jerry W. Thomas PRO INVESTOR

President and chief executive officer of Decision Analyst Inc., a global marketing research and analytical consulting firm.