Perhaps the moment where I was convinced of the validity of capitalism as a completely sustainable and self-regulating system was reading this article by former colleague of Ayn Rand Nathaniel Branden. My largest objection to the unfettered, and unregulated free-market, had been my concern that the greed and selfishness that capitalism uses for public benefit would eventually create a monopolistic society with large companies unable to be stopped. But as Branded wrote:
The question is often asked: What if a large, rich company kept buying out its smaller competitors or kept forcing them out of business by means of undercutting prices and selling at a loss—would it not be able to gain control of a given field and then start charging high prices and be free to stagnate with no fear of competition? The answer is: No, it would not be able to do it. If a company assumed heavy losses in order to drive out competitors then began to charge high prices to regain what it had lost, this would serve as an incentive for new competitors to enter the field and take advantage of the high profitability, without any losses to recoup. The new competitors would force prices down to the market level. The large company would have either to abandon its attempt to establish monopoly prices—or else go bankrupt fighting off the competitors its own polices would attract.
There are many other remedies the free market has to bring about equilibrium - and shift market power away from large companies: defection.
Imagine for a moment that you are working for a widget company which, because of innovation in production, enjoys a 90% share of the market. You are getting paid $200,000 a year and you basically run the widget making system. If those above you begin to profit at a greater and greater margin than your work profits, then at some point you will decide it is worth the risk to defect and either start your own widget company or join the 10% competitor.
Many innovations in industry have come about because of this market-made incentive. In fact, Google is about to face new competition from within their own ranks:
[Anna] Patterson instead intends to upstage Google, which she quit in 2006 to develop a more comprehensive and efficient way to scour the Internet… Cuil had kept a low profile while Patterson, her husband, Tom Costello, and two other former Google engineers - Russell Power and Louis Monier - searched for better ways to search. …Patterson believes that’s at least three times the size of Google’s index, although there is no way to know for certain. Google stopped publicly quantifying its index’s breadth nearly three years ago when the catalog spanned 8.2 billion Web pages.
As Google grew larger, and made more and more money (by fulfilling customers wants and need at a better price and with better quality) their threat from competition also grew. That’s right, as a company comes closer and closer to monopoly, they will have a harder and harder time maintaining it - just the opposite of what many who support anti-monopoly legislation proclaim.
This offshoot of Google will be three times the size of its brother company, and possibly obtain even more profit. All of this to the benefit of consumers who can basically sit back and watch while the dollars stay in their pocket (from cheaper prices) and the products are made in greater abundance and with a higher quality.
Capitalism, if left to its own devices, with no regulation from government, will constantly move towards balance and fairness in business transactions. That even includes one of the greatest spectres invented to promote government intervention: monopolies.
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