Dr. Friedman, how much government intervention do you think is necessary to prevent the rise
of monopoly and oligopoly under the free enterprise system, or would it take care of itself if
left alone?
Well, I believe if you examine the - if you examine the sources of monopoly and oligopoly,
you will find that almost all those sources are government intervention. I think the situation
is almost precisely the reverse. Let me put it in a very simple way. Suppose I were to
ask this audience my favorite question along these lines: You have one law you can pass,
it's only purpose is to reduce the extent of monopoly, that's its only purpose. You
have one law. What law would be most effective in achieving that end? What law would you
pass?
(Laughter in audience)
I don't mean any gimmicks; you know it's not going to be something in which you can have
a law with four thousand different parts. I'm not asking a very complicated question,
what would you do?
Limit the size of the market that they could.
Well, that's one proposal, the limitist proposal, but you will agree with me, I'm sure immediately,
that mine is a much better one. (Laughter in audience.) And that's free trade. Eliminate
all tariffs and all restrictions on foreign trade, and you enable the world to come in
as competition to prevent domestic monopoly. Wouldn't that do a great deal more good in
preventing monopoly, than would a limit on the size of enterprises, with much less restriction
in human freedom? Now, if you ask yourself (laughter in audience), ask yourself where
do monopolies come from.
In the United States, the most important and the strongest monopolies are unquestionably
those that derive from governmental privilege. The monopoly of a TV license, granted by the
government at a zero price, that's a source of monopoly privilege that also has been a
source of wealth's for some notable Americans.
The grant of a tariff protection, would the steel industry in the United States have any
kind of monopoly or oligopoly position if it weren't able to get government to impose
restrictions on imports of foreign items and so on?
Trade Union monopolies, they get their strength and their support from Davis-Bacon Act, Walsh-Healey
Act, other governmental measures that interfere with competition by others. It's very hard,
in fact, I have tried to - I have tried to consider, and George Stigler's a greater authority
on this than I, so maybe we ought to get him in to add to this, what private monopolies
there are, that have been able to maintain themselves over any long period of time without
government assistance? And I have, myself, only been able to construct two. One is an
international one, the De Beers Diamond monopoly, it really is an extrodin-I don't understand
it, maybe George can tell us the answer, but it has been successful over a very long period.
And the second was the New York Stock Exchange. Not more recently, because since 1934 it's
had the help of the SEC, but before 1934 from about the Civil War to about 1934 so far as
I know it had no government support, and yet it did maintain an effective monopoly.
But almost every other case you have temporary monopolies develop, and if the government
doesn't come in to shore them up, they fall to pieces. The railroads became a monopoly
only because they were able to get the Interstate Commerce Commission established. Trucking
is a monopoly because the ICC keeps out competitors. And you can go down the line and find that
one hypothetical monopoly case after another derives from governmental assistance and support.
So I think the answer to your question, and you and I have the same objective here, is
less governmental intervention not more.
Thank you.