Thursday, January 7, 2016

Competition is Good

And mergers are almost always bad for consumers:
Next time you go shopping for a new cellphone plan, you're likely to find that the options are a lot better than they were a couple of years ago. Prices are lower. You don't have to sign up for one of those annoying two-year contracts. You'll probably get unlimited phone calls and text messages as a standard feature — and a lot more data than before.

If that happens to you, you should thank the Obama administration — specifically, the antitrust watchdogs at the Department of Justice.

Many of the positive developments of the past four years have been driven by T-Mobile, which until recently was the smallest of the nation's four national wireless providers. Back in 2011, AT&T was on the verge of gobbling up T-Mobile, which would have turned the industry's Big Four into the Big Three and eliminated the industry's most unpredictable company.

"Even prior to the merger, T-Mobile was known as being this maverick competitor," says Brent Skorup, a researcher at the Mercatus Center. If the merger had gone through, the industry's maverick would have disappeared.

But then the Obama administration intervened to block the merger. With a merger off the table, T-Mobile decided to become a thorn in the side of its larger rivals, cutting prices and offering more attractive service plans. The result, says Mark Cooper, a researcher at the Consumer Federation of America, has been an "outbreak of competition" that's resulted in tens of billions of dollars in consumer savings.
Capitalism only works if there is competition; every economist will tell you this. So why do we ever permit mergers?


G. Verloren said...

"Capitalism only works if there is competition; every economist will tell you this. So why do we ever permit mergers?"

Because much of the culture of Capitalism promotes personal greed, and it's a lot less work to rig the game so you always win without trying rather than having to make the effort of dealing honestly and still having a chance of losing out regardless if someone else can compete better.

Some people go into business to provide a service and to contribute to society. But far more people go into business to line their own pockets at the expense of others. This is why laws exist, and why governments impose regulations - to protect society from those who would lie, cheat, and steal.

But the same culture of personal greed also exists in politics. Some people become politicians because they want to make the world a better place, but most people enter politics because they want personal power over others.

Now combine the two fields, and see how they feed off each other symbiotically. The greedy capitalist wants exemptions from laws and regulations, giving them a competitive edge and allowing them exploit others to achieve financial gain. The greedy politicians wants campaign funding and slush money, the better to win elections in our fickle and superficial system.

Bring the two together, and they come to a natural arrangement - the politician grants exemptions that make the capitalist rich, and the capitalist gives money which secures the politician's continued governmental dominance. Each enables the other to avoid fair competition and achieve personal profit at the expense of society at large.

leif said...

That's hard to argue with.