Tuesday, September 18, 2007

Competition and monopolies

One thing that both Milton Friedman and J K Galbraith agreed on was that industrialists and businessmen hate free markets. They are too uncertain. What any executive really desires is a nice, cosy monopoly or, in the absence of that, a trust formed with their competitors, so they can milk their customers, free from the risk and uncertainties that accompany the market.

In the past couple of decades, Microsoft has used monopolistic practises to cement such a comfortable position for itself, and these have frequently been illegal. The complexity of the technology and a cynical use of delaying tactics has allowed Microsoft to profit from these practises, then pay out, in total, billions of dollars in deals, fines and out of court settlements. It has been good business for them. It's worth paying billions to make tens of billions. I touched on some of the specifics in this post.

One of the few proper functions of governments is to prevent the formation of trusts and monopolies and thereby guarantee the presence of competition. Without competition, you don't have a market. Consumers are faced with the choice of buying, or not buying, instead of a choice between different suppliers with different offerings.

It's always depressing to see free market advocates writing in support of anti-competitive practices, and there's another example of this today, at the Adam Smith Institute blog. Writing about the fine that was recently confirmed against Microsoft by the EU, it is argued that:

The effects that this decision will have on traders' confidence could be seismic, with some firms shying away from investment or research and development of new technologies, as the requirement to share such information would negate the benefits. This neo-protectionist economic agenda is forming a policy cloak for the anti-Americanism of many European Commissioners, and it is European citizens who stand to suffer from it.
There certainly is anti-Americanism in the EU, and it is destructive. But no force has done more to stifle innovation in the computer industry than Microsoft. Illegal anti-competitive tactics should not be supported by the ASI, and when they do things like this they give strength to the attacks on free market economics levelled by the left: that they are just special pleading by or on behalf of the abusive rich. In this case, they are.

No comments: