Adam Smith on narrowing competition
Adam Smith's name is often brought up as the champion of free-market
capitalism. But he foresaw the perils of excessive concentration and
urged legislators to consider carefully any change in laws pushed by
the class of stock owners and dealers. Here's a passage from Chapter IX
of The Wealth of Nations:
The interest of the dealers [the stock holding class], however,
in any particular branch of trade or manufactures, is always in some
respects different from, and even opposite to, that of the public. To
widen the market and to narrow the competition, is always the interest
of the dealers. To widen the market may frequently be agreeable enough
to the interest of the public; but to narrow the competition must always be against it,
and can serve only to enable the dealers, by raising their profits
above what they naturally would be, to levy, for their own benefit, an
absurd tax upon the rest of their fellow-citizens. The proposal of
any new law or regulation of commerce which comes from this order ought
always to be listened to with great precaution, and ought never to
be adopted till after having been long and carefully examined, not only
with the most scrupulous, but with the most suspicious attention. It
comes from an order of men whose interest is never exactly the same
with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.
[emphasis added]
Smith had it right, and he would be appalled at the way in which big
money from oligopolies influences and even dictates economic and social
policy. Free-market capitalists who spout Smith like scripture all too
often blandly approve of anything that big companies do. As Smith
points out, what makes individuals rich is not the same as what makes a
nation rich. Look no further than Venezuela or Saudi Arabia (or even
Italy) for examples. The logical conclusion of some current trends is
government regulated by the oligopolies, no the other way around. [Oligopoly Watch]