There’s a common misconception that somehow if the free market is left alone there will be monopolies popping up left and right. Therefore, it is the government’s job to “fix” this by using the “Anti-Trust” laws to break up these monopolies. It may come as a surprise to some, but really, it is the government who enables most monopolies to exist in the first place. By creating an environment that is unfriendly to start-ups and small businesses, government puts big corporations at an advantage.
Big businesses have the resources available to fight lawsuits, to get into politicians’ pockets and get a special “loophole” in various laws, and to avoid paying taxes. Small businesses don’t have these advantages. In fact, many small businesses don’t even file their taxes as corporations, but rather as individuals; in tern paying the regular income tax that the rest of us pay. Monopolies exist rarely, and when they do exist, it is often because the market has been twisted and manipulated by government.
The government uses these various anti-trust lawsuits to play god with the market, pick winners and losers, and try to decide what is “fair”. In 2011, the Department of Justice filed a lawsuit against Dean Foods, claiming that the dairy company owned “too much of the market” in a particular geographical area. So Attorney General Eric Holder, along with Wisconsin Attorney General JB van Hollen, ordered Dean Foods to sell off one of its subsidiaries – Golden Guernsey Dairy.
Unfortunately, the only buyer of Golden Guernsey was a Los Angeles company that closed the dairy over the weekend, laying off over 100 men and women. Was there an actual complaint against Dean foods? Did Dean foods have a monopoly on the milk market?
“The proposed settlements restore competition so that school children and consumers in Illinois, Wisconsin and Michigan, will pay lower prices for their milk,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “The divestiture of a significant milk processing plant and the provision that requires Dean to notify the department of future milk plant acquisitions will ensure that competition remains in this important industry.”
Right now, however, schools are scrambling to find out who can provide them with the milk for their lunch programs. Instead of having enough milk, the schools are faced with a shortage, which will in turn lead to higher prices, not lower prices. This is basic economics. Perhaps Christine Varney could learn a thing or two from Economics in One Lesson by Henry Hazlitt.
“… There is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences.”
It always astonishes me how little economic understanding people in government have, especially when their job title is “screwer of the market”. But really, lets remember why these people have the jobs they have, and what their incentives and constraints are. There is no reason to believe that Christine Varney, Eric Holder, or JB van Hollen have any interest in keeping businesses happy. Profits to a business are its lifeblood. But government doesn’t turn a profit, it just does things and never has to pay the consequences.
Government officials, especially unelected bureaucrats, do not have to live with the effects of their actions. The people who feel the pain are the workers who are laid off. When was the last time the Department of Justice laid off any employees? Hell, when was the last time any federal agency laid off any employees? Instead, the government kills jobs in the private sector, and then demands that the private sector kick up more money to fund the further growth of government. It is foolishness to assume that the government acts in “the people’s interest”, especially when the people making the rules were never elected by the people in the first place.
A small number of people will notice this dairy going out of business, but these kinds of events happen all over the country constantly. I’ll give the government the benefit of the doubt (I really don’t) and assume that they are trying to do what is right; but they pay no price for being wrong. When Barack Obama calls for people to have some “skin in the game” perhaps he should look at the various government agencies who answer to no one, and force the rest of us to deal with the fallout from bad policy. Does government have any “skin in the game”? I think not.