Brian Linse ponders the nature of monopoly and capitalism on his blog AintNoBadDude. Rather than answer him directly, I will give him my modern Austrian school economics influenced perspective on the nature of markets and monopoly.
The nature of modern capitalism is significantly different to that of, say, capitalism in the 19th century. The vastly enhanced flow of information and the global nature of enormous pools of fungible capital means that market mechanisms that worked sporadically in years past now work more smoothly and with tidal inevitability when allowed to. The larger the pool of possible market entrants and participants, the more liquid and inexorable the markets become.
Thus paradoxically, there is only one method by which monopoly and oligopoly can really occur for extended periods in a ‘harmful’ form, and that is in market niches protected from globalization. That is why Microsoft is so obviously only a transient ‘problem’ rather than a market ‘failure’ as its market position is not the result of adapting to regulation and protection. As big as Microsoft is, it is dwarfed by the pool of global capital looking for alternative uses. There is a good reason that in spite of its huge market share that MS products are really not that expensive. New entrants are impossible to keep out: if MS were to create ‘excessive’ profit margins, they would be quickly faced with hordes of new competitors as the software market does not require huge start up costs to enter. Thus the MS ‘monopoly’ is of little concern in reality. Apple products are actually more expensive and yet no one is accusing them of abusing a monopolist position. The reasons for that are not so hard to understand. In essence, the only way MS can remain a near monopoly is by not acting like a monopolist. Multi-billionaire Nelson Bunker Hunt thought he was ‘bigger than the market’ and it ate him alive because he was trying to mess with a truly global commodity market. Bill Gates is under no such illusions.
It is ironic that left wingers and protectionist paleo-conservatives who fret about ‘monopolists’ are the same people who create the conditions for them to flourish by hampering the progress of continuing to globalize ownership, and by raising the cost of market entry with vast teetering towers of regulations designed to prevent precisely what they are in fact enabling. Capitalist ‘conspiracies’ that the left are so fond of fretting about inevitably come to nothing if the pool of capital and potential entrants is larger than the ‘clique of conspirators’ can in reality control, which in the case of truly global markets is the norm rather than the exception.
