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Won’t Big Businesses Abuse Their Power in a Free Market?

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(From the Ask Dr. Ruwart section in Volume 20, No. 5 of the Liberator Online. Subscribe here!)

QUESTION: Won’t big businesses abuse their power in a free market? What if the only choices you have are bad businesses? For example, what if such companies grew so big that they could control the entire market?

MY SHORT ANSWER: In today’s society, you could indeed have a sector where all businesses are “bad,” because government lets some companies have a monopoly (e.g., local utilities, AT&T before deregulation, etc.) or a cartel (e.g., banks).

In a libertarian society, however, this would be much less likely. A sector with only “bad” businesses would soon be invaded by competitors who recognized that they could earn and retain customer loyalty (and profits) by being “good.”

In today’s society, many businesses are bigger than they would be in a libertarian one, because the high cost of regulation drives small firms out of business. For some examples, check out the cases of the small businesses that the libertarian Institute for Justice has tried to protect from over-regulation.

We are told, usually by government entities, that the free market creates monopolies, but actually it is the government that does so. For more on this subject, check out Chapter 7 in my book, Healing Our World (the 1992 edition is a free read on my website, www.ruwart.com).

LEARN MORE: Suggestions for further reading on this topic from Liberator Online editor James W. Harris:

Antitrust: The Case for Repeal by Dominick Armentano. This outstanding 100-page book — available as a FREE ebook from the Mises Institute — shows that anti-trust and anti-monopoly regulation, far from serving and protecting the public, is merely a tool used by powerful businesses against their competitors.

* “Federal Regulations Have Made You 75 Percent Poorer“ by Ronald Bailey, Reason magazine. This short and very readable 2013 article summarizes research by economists John Dawson and John Seater. The two compared U.S. economic growth with the growth in federal regulation since 1949, and calculated that federal regulations cost the average American household more than a quarter-million dollars in lost income — annually.



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