No More Cozy Cartels

by: Larry MacDonald

Hurray for President Obama insisting on more restructuring in the auto sector. It gives me a little more optimism that the U.S., Canada and other developed economies may eventually produce a sustainable solution to this epic financial and economic crisis.

I see so many articles and books questioning capitalism and free markets these days, when the real problem, in my opinion, is that capitalism and free markets capitulated to rent-seeking behavior over the decades and became sclerotic from allowing domestic monopolies and cartels to take root. Consequently, the developed economies became less competitive.

The U.S. auto companies were once a cozy cartel. They lost that position many years ago, but their unions still had monopoly control over labor markets and maintained the uncompetitive status quo. To insist on more change in the auto industry, especially in the area of labor costs, would seem to be the right step forward.

Unfortunately, the auto sector is just one small part of a systemic problem. The misallocation of resources within developed economies remains pervasive thanks to the widespread suppression of free markets. Many of these concentrations of market power have been with us for so long that we don’t seem to see them anymore. I’ve hammered on some of them before. Here are a few choice case studies:

The real estate cartel: If it looks like a duck, quack like a duck …

School for thought: Some think tanks are asking important questions about the public school system.

Lawyers: Another conspiracy against the laity? The common law system is too complex and costly — let’s fix it.

Milking the Canadian consumer: It’s time to get rid of the dairy industry’s government-backed protection.

No doubt when one complains about vested interests, the complainer’s comments basket is likely to fill up with scathing denunciations from denizens of such vested interests. If that’s the price for saying it like it is, then so be it. I just hope other, more objective readers realize where those commentators are coming from.