Do Free Markets Lead to Concentration of Wealth?
It is frequently maintained, by the enemies of the free market, that “too much” capitalism leads inevitably to the monopolistic concentration of wealth in the hands of a few oligarchs. Citing the “robber barons” of 19th-century America, as well as the undeniable modern global trend toward more and more wealth being concentrated in fewer and fewer hands, foes of laissez-faire capitalism regard such inequities as inevitable outcomes of pure market forces, and urge various forms of government interventionism — wage and price controls, regulations to “level” the competitive playing field, and trust-busting legislation, for example — as remedies.
But in a true free market, government at all levels would, as far as practicable, have a policy of strict laissez-faire, that is, of non-interference in the workings of the free market. Men would thus be free to buy, sell, lend, produce, hire, and pay according to whatever rates and terms they mutually agree upon. Government’s role in such an economy would be only as a guarantor that neither force nor fraud goes unpunished. Competition among businesses would be confined to finding ways to produce more and better products for lower prices, to the benefit of the consumer; no measures to compel anyone as to their choices of what to buy or sell, or how much to ask or pay for economic goods, would ever be instituted. As a result, established businesses would compete on equal terms with startups, and wherever the latter are more cost-effective, the former will lose market share. The largest companies would always be those most effective at satisfying consumers, and would only enjoy their success as long as they are able to do so. Under such economic circumstances, a true “trust” is an impossibility.
The temptation is strong for businessmen to enlist the coercive apparatus of the state to stifle would-be competitors. For their part, politicians are always eager to expand their power by interfering in the free market on behalf of those willing to trade money and other inducements for political favors. Robert Fulton, who built the first commercial steamboat at the beginning of the 19th century, managed to secure an exclusive license from the state of New York to operate his vessel, boxing out would-be competitors. It was not until rival Cornelius Vanderbilt forced the issue in the courts, by illegally operating a steamboat of his own between New York and New Jersey, that the Supreme Court finally struck down Fulton’s monopoly.
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