The Motley Fool Discussion Boards
Investing/Strategies / Mechanical Investing
|Subject: Re: OT: Wealth||Date: 3/7/2013 1:09 AM|
|Author: Radish||Number: 242131 of 264126|
Let's suppose farmers in one area of the country are dependent on one distributor who has obtained control of the only road to the ultimate market. That distributor could extract a share of the product value which is disproportionate to the costs of distribution (including compensation for cost of capital and typical risks).
In theory, perhaps. In real life there's a limit to the possible "disproportionate"-ness, unless a government grants a monopoly in some form. In your example, most likely someone seeing how much profit the distributor is making would build a new road, or a canal, or a rail line. Or perhaps the farmers would move, or switch to a crop that distributor doesn't handle well.
If our economic system allows or encourages the development of such concentrations, artificially locking out competition, we all suffer.
Concentrations in free-enterprise systems may limit competition to a degree, but I doubt they will ever lock it out. And we suffer far worse under the laws and regulations intended to "solve" this problem than from the problem, to the limited extent it can actually occur in real life, itself.
When the concentration of wealth and/or income starts to artificially limit genuine competition by cornering resources (including the creation of laws and regulations favorable to those controlling the resources) then our system is no longer equitable and the pursuit and benefits of free enterprise will not be obtained.
The "creation of laws and regulations favorable" is the key point there. As far as I can tell, studying the history of so-called monopolies, if someone starts cornering resources to boost profits, someone else sees that boost and finds an angle to get in on it. Unless the government does something to block free enterprise. In other words, it's not the cornering of resources that cause the "benefits of free enterprise [to] not be obtained", it's the application of government interference.
|Copyright 1996-2016 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us|