Economic Update with Richard D. Wolff

[S9 E46] Competition and Monopoly in Capitalism

Date: December 6, 2019
Host: Richard D. Wolff

Episode Overview

This episode delves deep into the dynamics of competition and monopoly within capitalism, addressing the recurring argument that many of capitalism’s ills can be solved by “restoring competition.” Richard D. Wolff systematically critiques this narrative, contending that competition and monopoly are not opposed or fixable “phases” but rather two interlocking features of capitalism that produce recurring cycles and systemic problems. Wolff argues for an analysis that focuses on the capitalist system itself rather than merely targeting monopolies as the root of economic hardship.

Key Discussion Points & Insights

1. The Comforting Myth: Competition as the “Good” Capitalism

• [00:10] Wolff introduces the episode by identifying the widespread belief that monopoly is an external malady corrupting the otherwise healthy system of competitive capitalism.
• Quote:

  “It's comforting ... to get the idea that this isn’t the problem of capitalism as a system, but rather the problem brought in somehow from the outside. Monopoly.” (Richard D. Wolff, 02:10)

2. Three Big Mistakes About Monopoly and Competition

• (a) Monopoly is Not an Aberration but a Recurrent Feature
  • “Capitalism has been wrestling with the problem of monopoly from day one.” (07:10)
  • Antitrust efforts, like "trust-busting," have occurred repeatedly because monopolies keep reemerging.
• (b) Competition is Not an Unmixed Blessing
  • Competition itself can cause significant harm, such as unemployment from offshoring, automation, cost-cutting on safety, and even historical abuses like child labor.
  • Quote:

    “Competition is no unmixed blessing. ... It’s sort of advertising thinking ... The people who promote competition use advertising logic. We're not going to do that here.” (Richard D. Wolff, 10:00)

• (c) Competition Itself Leads to Monopoly
  • The core dynamic of competition is that winners absorb losers, consolidating markets and creating monopolies or oligopolies over time.

3. The Dark Side of Competition: Real-World Examples

• [09:00] Wolff lists several concrete harms caused by capitalist competition:
  • Offshoring jobs to China, leading to unemployment in the US.
  • Destructive automation, displacing workers for efficiency’s sake.
  • The use of potentially unsafe or unhealthy ingredients in food to cut costs.
  • Safety shortcuts in industries (e.g., Boeing 737 Max disasters).
  • Intensification of labor (Amazon’s practices) causing worker harm.
  • Historical child labor justified on grounds of competitive necessity.
• Quote:

  “Competition, the company said, required them to use the more productive and the lower wage children rather than adults. So child labor was also a result of competition.” (Richard D. Wolff, 14:30)

4. Competition and Monopoly: Two Sides of the Same Coin

• Both are phases within capitalism, and each produces its own problems.
• “We shouldn’t bemoan the one in favor of the other any more than vice versa. These are neither of them solutions. They are both phases of the problem.” (17:15)

[Second Half: Monopoly in Focus]

5. What is Monopoly?

• [21:00] Monopoly is defined as a market with only one (or a few) sellers; "oligopoly" is the term for a small handful, but for the purposes of this discussion Wolff combines them.
• Real-world example: Dozens of car companies narrowed to Ford, GM, and Chrysler post-WWII.

6. Why Monopoly is Criticized

• The lack of competition allows price increases and higher profits, as no competitors force prices down or improve quality for consumers.
• With a small number, cartels or tacit agreements can keep prices high.

7. How Competition Produces Monopoly

• [25:20] The logic of competition leads to winners absorbing losers.

  “Company A produces ... a better quality and/or a lower price than company B. So we all go to company A. Company B can’t compete, ... declares bankruptcy. ... A, the winner in the competitive struggle, eats, absorbs into itself what’s left of company B.”

• This process repeats, reducing hundreds of firms to a few, creating monopolistic or oligopolistic conditions.

8. The Entrepreneur's Dream: To Become the Monopoly

• Monopolistic profits are the incentive for winning in competition.
• Quote:

  “It is the great dream of every entrepreneur to become the last one standing in the competition, to win the competition. ... The reward for having out-competed the others is that you’re now in a position to jack up the profits and the prices way beyond what you could have done before.” (Richard D. Wolff, 27:30)

9. Monopoly Maintenance: Barriers to Entry

• Monopoly profits invite new competition; thus, monopolies create barriers:
  • Advertising: Coke and Pepsi’s dominance isn’t due to better products, but prohibitively expensive advertising other entrants cannot afford.
  • Regulation: Large firms support regulatory measures only they can afford (e.g., costly pasteurization equipment for milk) to squeeze out small competitors.
  • Political Influence: Tariffs, regulations, or national security claims block foreign or small-firm competition. (Huawei, European car manufacturers, etc.)
• Quote:

  “What you pay for when you buy Pepsi and Coke is the advertising that got you to buy it. You’re paying for being hustled. But it works.” (Richard D. Wolff, 31:35)

10. Cycles of Competition and Monopoly

• Industries pass from competition to monopoly and sometimes back, as new entrants or foreign firms break up old monopolies, only to see consolidation repeat again.
• Example: US auto industry monopoly challenged by Toyota, Nissan, Peugeot, Fiat; now consolidation is recurring in Europe.

11. The Real Problem: Capitalism as a System

• The oscillation between competition and monopoly is integral to capitalism, not an external aberration.
• Fighting monopolies without changing the system simply restarts the cycle.
• Quote:

  “We need to get beyond that stale old debate, competition versus monopoly, and face the underlying reality: capitalism is the problem, and getting beyond it the solution.” (Richard D. Wolff, 39:30)

Notable Quotes & Memorable Moments

• "Competition is no unmixed blessing." (10:00)
• "Competition provokes and produces automation." (11:30)
• "Child labor was also a result of competition." (14:30)
• "The reward for having out-competed the others is that you’re now in a position to jack up the profits and the prices way beyond what you could have done before." (27:30)
• "What you pay for when you buy Pepsi and Coke is the advertising that got you to buy it. You’re paying for being hustled. But it works." (31:35)
• "We need to get beyond that stale old debate, competition versus monopoly, and face the underlying reality: capitalism is the problem, and getting beyond it the solution." (39:30)

Important Segment Timestamps

• 00:10 — Introduction and framing the monopoly issue
• 07:10 — History of monopoly and antitrust efforts
• 09:00 — Harms caused by competition
• 14:30 — Child labor as a byproduct of competition
• 17:15 — Competition and monopoly as dual capitalist problems
• 21:00 — Transition to monopoly explanation
• 25:20 — How competition leads to monopoly
• 27:30 — Entrepreneurial incentives and monopolistic dreams
• 31:35 — Advertising as a barrier to entry
• 36:00 — Regulatory and political barriers
• 39:30 — Conclusion: capitalism is the underlying issue