Australia PM Rudd says free market fundamentalism is personal greed dressed up as economic philosphy, calls for new era of "social capitalism"

[Tahoma 2,291]

John Rockefeller did not provide a product that everyone needed at a "price that couldn't be competed with". He simply refused to compete. Instead, he drove any potential competition out of the market before they could even begin to compete. For example, if a competitor tried to ship their product by railroad, Rockefeller would either buy the railroad (and not allow his competitor to use it), or he would threaten to pull his business from the railroad. Also, any threat of competition would be met by his product's price cuts (to a point of selling below cost) until the competitor was driven out of business. Then he would raise his prices again. He (and the other robber barons) had a whole bag of dirty tricks.

Aye, that is pretty much what I recall reading in American Economic History in college.

Careful AJ...Matt tells me we are talking about market theory and not Econ.

[mRx 16]

Matt, you are entitled to your own opinions. However, you are not entitled to your own facts. John Rockefeller did not provide a product that everyone needed at a "price that couldn't be competed with". He simply refused to compete. Instead, he drove any potential competition out of the market before they could even begin to compete. For example, if a competitor tried to ship their product by railroad, Rockefeller would either buy the railroad (and not allow his competitor to use it), or he would threaten to pull his business from the railroad. Also, any threat of competition would be met by his product's price cuts (to a point of selling below cost) until the competitor was driven out of business. Then he would raise his prices again. He (and the other robber barons) had a whole bag of dirty tricks. This is how a "free" market operates outside of text books.

As for your assertion that lack of capital is "largely" irrelevant and an entrepreneur is "likely" be able to find a lender in order to enter a field (note that we are not talking about a business, but an entire industry), you seem to be hedging your argument. I don't blame you, because the fact is that Rockefeller was rich enough that he could squash any and all competition without resorting to competing against them. Can you imagine how much capital would be needed to come into the market if you were planning on competing against an entire industry...from the oil wells all the way through the refining stage to (and including) the gas stations? Rockefeller had a unassailable monopoly for a very simple reason...the free market could not provide enough capital to challenge him. How does unlimited wealth which prevents competition fit into your free market model?

And you completely sidestepped my questions about Walmart. How about their deathbed conversion? What do you attribute that to? Why do they routinely fight minimum wage increases? Is it possible that they fight them because they believe in a slippery slope idea of wage increases? I noticed you used the misleading assertion about Walmart paying higher than the current "national average minimum wage". This is entirely misleading because each and every state sets it's own minimum wage, with the federal minimum wage acting as simply the floor for minimum wage. Walmart does not pay Washington State's minimum wage (well above the federal minimum wage) to all of their workers in states where the state minimum wage is lower, especially the states where the minimum wage is down to the federal minimum wage level. They pay as little as they can in any particular state. Further, you don't say anything about starting wages. The idea that Walmart is driving Mom and Pop out of business through higher wages is ignoring the relevant factors. Nowhere do you talk about economies of scale and the fact that Walmart is big enough to dictate their product costs to the manufacturer. Nowhere do you talk about Walmart abandoning their "Buy American" philosophy in order to chase the cheapest labor costs to the sweatshops of Third-World countries.

I applaud you for having a social conscience regarding child labor. However, there are many more labor issues involved with sweatshop labor than just child labor. Environmental concerns are also a major issue. The free market does not address the issues of labor exploitation and pollution. People knowingly buy products that come from manufacturers that abuse labor and pollute the environment. Does it make it any better if people choose not to look at where their product come from? Instead of businesses capitalizing on these issues, they simply join the rush to those countries which have the cheapest labor and the laxest environmental laws.

Also, maybe you could give me a real-world example of where collusion to fix prices has raised demand and led to competitors entering the market. History must be full of gilded-age examples of price fixing and the resulting market adjustment. Of course, that subject could bring up another inconvenient problem with the very foundation upon which your free market theory rests...the market concept of perfect information...another concept that exists only in text books. While you are at it, maybe your market theory will explain why people and businesses don't always act rationally. This free market stuff is yesterday's news.

Pangga, you too are entitled to your opinion, but, also are not entitled to your own facts.

Rockefeller's Standard Oil dramatically decreased the price of oil, due to his superior business practices. It cannot be disputed that he didn't efficiently bring us a product at a price lower than his competitors.

While his competitors were dumping petroleum into rivers and dumping waste, Rockefeller was making a profit off of his waste by selling his petroleum's byproducts. This innovative efficiency helps explain how although he entered the industry nearly ten years after the big oil rush, he commanded over 90% of the market at his peak. Rockefeller created innovations that were impossible to his competitors, and are still utilized to this day(see Vaseline). He wasted nothing which could be turned into a profit. (I could easily segue into the fact that the transformation of environmental waste into "profit" was made possible by free-market efficiency.)

By looking at the "facts" of oil prices during the time of Rockefeller and his Standard Oil: at his 1890 peak, at nearly 90% control of the oil industry, the price per barrel of oil was $0.78(average over 5-years[1888-1892]) compare this to the 1870 price of $3.82 per barrel(average over 5-years[1868-1872])(Source for prices was Forbes).

How does the monopoly theorist and inefficient company sympathizer explain this 490% decrease in crude oil prices? It is the competition that occured between Rockefeller and the dozens of other oil refining companies that kept these prices so low. So your statement that "Rockefeller did not provide a product for a price that couldn't be competed with" is total bunk. In fact, such a low price was forged due to competition.

The charge of predatory price cutting is a common attack against the free market in general, one that was thrown in Standard Oil's face by it's inefficient competitors. Firstly, cutting prices to levels below cost simply makes no sense from an economic perspective, and certainly wouldn't to a capitalist like Rockefeller. What if a competitor resisted the pressure to stay out of the market? What if this competitor limited their production? How long would the vile Rockefeller allow himself to be bled to death by losses? There's no such thing as "infinite wealth and capital" as you suggest, even the biggest and wealthiest corporations can feel pain and loss. Furthermore, the raising of prices after the losses that you suggest, still doesn't explain why even though he had nearly complete uncoerced control of the market, that prices fell and remained consistently low throughout the Standard Oil lifespan.

The charge of buying out competitors for predatory reasons, really can't stand on it's own either. When companies expand, they create the economies of scales that enable lower prices and higher productivity. To buy each and every company just to shut them down is damaging, wasteful, and an act of futility.

The truth about the oil industry is that the real robber barons of that era were the companies that pandered to government to create coercive laws to break up efficiency monopolies that were the gift from free competition. Is it any wonder that the staunchest objectors to Rockefeller's business practice were closely connected to inefficient oil companies that couldn't compete with his prices, product, or service? Nope, it's no surprise to me.

Now, onto Walmart. First off, I never intended that Walmart closed Mom and Pop shops solely due to wage pandering, I was merely trying to illustrate the fact that the wage pandering by Walmart was not due to "Good PR" or "deathbed conversion", but due to the advantage of coerced market control that could be gained by it. The good PR quite possibly could've been an added benefit, but clearly wasn't the intent.

I see the current Walmart as a symptom of inflation, as much as I see aggravated importation the same way. As inflation sucks the wealth from society, companies as Walmart have found innovative ways to bring products to our homes at prices that are difficult to compete with.

If your argument is a "Buy American" protectionist one, then decrying low prices and high quality is quite paradoxical. It was the actions of consumers (and certain instances of pandering to government as I've illustrated) that created the Walmart we know today. That this primarily imported franchise rose to power was due to the demand for lower prices amidst lowering standards of living. American producers no longer able to compete, should decry inflation, which is chasing labor and products overseas, and not Walmart, which has found a way to effeciently bring those low prices back Stateside.

If your argument is of Walmart exploiting children, then you are clearly not forced to shop there, and neither is anyone else. Just as if Walmart, or any corporation for that matter, was uncovered as employing an army of 5-year-olds working in deplorable conditions, in order to bring such low prices, then I'm sure the company wouldn't fare too well with consumers. And if it had stooped to such immoral levels to create such low costs, then I'm sure one of it's competitors would have revealed this damaging information as soon as they learned of it. In 40+ years of operation, only certain frivolous cases involving American teenagers not possessing a permission slip from the State to earn a wage.

Not able to defeat the Walmart loved by consumers, it's competitors, in-line with previous robber barons, turn to the State to intervene. In propping up inefficient American firms, unable to compete with Walmart, the State places tariffs and additional taxes on importation, the additional cost of which is usually absorbed by the consumer. So inefficient companies + government intervention = higher prices for us all.

As far as environmentalism is concerned, clearly, if a company were dumping toxic waste in a river that is used by the population for drinking water and bathing, then I would consider that to be criminal. Cutting down a tree for logging, on property that you purchase, I consider to be frivolous. I don't know why enviromental pollution is constantly brought up in attack of the free market. Pollution is waste, and waste is unprofitable, as Rockefeller has shown. So waste is a form of inefficiency, punished by the market as any other inefficiency. But the EPA, FDA, SEC, and other coercive controls thought to be for our own good, actually work in favor in the big corporations which employ their roster of lawyers who know how to jump through bureaucratical loopholes, ones which smaller businesses cannot. Again, more smoke and mirrors.

Here's your example of a fixed price, governmental monopoly in which competition entered and not only lowered prices but vastly innovated the product and it's service: The telephone. Up until government relinquished control of the spectrum, phones were prehistoric and expensive, and controlled by politically connected Bell Telephone. Once the spectrum was given up enough in the mid-90's to allow competition, the market swarmed with innovation and drastic price cuts.

The free market economy isn't some theory in a textbook inapplicable to reality, but in fact it is the very action that occurs despite the governmental controls used to restrain and coerce it.