This week’s Trend Analysis takes several steps back from the market hub bub and frenzy to take a reflective look at a subject that has been on the mind of this strategist and those of other analysts for many years now: Monopolies and market concentration. The seminal moment for the control of monopoly power in the capitalist world occurred with the passage of the Sherman Anti-Trust act in the US in 1890. The legislation sought to curb concentrations of power that interfere with trade and reduce economic competition. It was named for U.S. Senator John Sherman of Ohio, who was an expert on the regulation of commerce. This led to the breakup of the giant “trusts”, the then fashionable name for monopolies. Standard Oil of New Jersey to name but one, was broken up into what later became eight enormous energy firms in their own rights. In 1980 the US telecoms giant American Telephone and Telegraph, was broken up into 12 operating firms. Since that time however, the US, less so Europe and surely not China at all, have seemed to turn a blind eye to the concentrations of monopoly powers. Viz Amazon, Google, Facebook, the airlines, Walmart, these firms, have come to control the markets in which they operate with no visible boundaries or limitations emanating from the government regulators.
These regulators use, at least up until the very recent past, the view that as long as price was not constricted by the firm, in other words the consumer did not face price rises as a result of the merger or firm’s market domination, then the undesirable effects of market concentration in fact did not exist and thus there was nothing to regulate. This view, on brief reflection simply does not serve the purpose of the Sherman anti-trust act. Google gives most of its service offerings away to the customer free of charge as does Facebook. Walmart has lowered the prices on thousands of products for consumers in the US. But as we are becoming more aware, the firms mentioned here do indeed “charge” for their services and products in ways that are not calculated in currencies. The fact that Facebook measures our activities and sells those measurements, or that Walmart, controls the supply of goods to their shelves so forcefully that they reduce the choices available to us because they only stock goods from the largest producers of goods, all have an inherent cost to us as citizens of the capitalist world. As the concentration of the US economy, shown in the graph, illustrates, a new paradigm for monopoly power besides “price” in its traditional usage, must evolve. The sooner the better.
Andamento del mercato - 18/01/2018