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Monopolies: Silent Spreaders of Poverty and Economic Inequality

Author

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  • David Fettig
  • James A. Schmitz

Abstract

The Covid-19 crisis has exposed the vast inequalities that exist within the US economy. As the virus has spread silently, it has laid bare other crises that face our nation---especially the economic vulnerabilities of the country's poor and marginalized. Many of these vulnerabilities can, in fact, be traced back to a single cause that itself has spread silently, but over the last several decades, not months: Monopolies. That monopolies are "silent spreaders of poverty and economic inequality" was well known to economic and legal scholars of the 1930s and 1940s. Wendell Berge, who was Assistant Attorney General for Antitrust in the 1940s, wrote: "Monopoly conditions have often grown up almost unnoticed by the public until one day it is suddenly realized that an industry is no longer competitive but is governed by an economic oligarchy." The harm caused by these monopolies that have mostly avoided detection often exist in markets with small firms, low concentration levels, and small price-cost margins, as in residential construction, or wreak their harm in public institutions, where prices and concentration have no meaning. While there has been a very welcome resurgence in the concern about monopolies in the last decade or so, this has primarily involved vast corporations, and often about their threat to democratic institutions. Though greatly welcomed, we should not let apprehension with these larger companies distract us from the many hidden monopolies that have silently spread harm to the poor for the last 100 years -- not just the last 10 or so. We should stand on the shoulders of giants that taught us this about monopolies, not only Berge, but Thurman Arnold, Henry Simons, and others.

Suggested Citation

  • David Fettig & James A. Schmitz, 2020. "Monopolies: Silent Spreaders of Poverty and Economic Inequality," Working Papers 772, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmwp:89028
    DOI: 10.21034/wp.772
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    More about this item

    Keywords

    Monopoly; Competition; Inequality; Cournot; Sabotage; Harberger; COVID-19; Thurman Arnold; Henry Simons; Silent spreaders; Housing;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • K0 - Law and Economics - - General
    • L0 - Industrial Organization - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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