Politicians, mostly Democrats, talk a great deal about affordability and inflation. Republicans, not so much because policies they and their President implemented are part of what is causing inflation. I’ve heard little from either party about policies that have any chance of tamping down inflation much less lowering prices, other than ending Trump’s war of choice and tariffs.
Even ending the Iran war and eliminating tariffs won’t bring down inflation much and will certainly not lower prices. It takes a serious recession or depression to cause prices actually to fall unless the underlying problem is tackled. What’s that? It’s the small number of sellers in many important markets.
Here are some of the most highly concentrated markets and the share of sales controlled by the top firms according to IBIS World, which tracks industry data. Computer search engines, 98.5%; food and entertainment complexes, 96.2%; sanitary paper product manufacturing, 92.7%; wireless telecommunication carries, 94.7%; satellite TV, 94.5%; soft drink production, 93.7%; food service contractors, 93.2%; light bulb manufacturing, 91.9%; tire manufacturing, 91.3%; major household appliances, 90%; and meat packing, 85%.
Most economists consider markets in which the top firms have 90% or more of sales to be effective oligopolies or monopolies. They would also say the main things oligopolists and monopolists do is charge higher prices and deliver poorer quality goods in smaller quantities than would be the case if markets were effectively competitive.
The Federal Trade Commission, the Justice Department antitrust division, as well as several industry specific regulators are the parts of government intended to prevent market concentration and protect consumers from uncompetitive markets. Ultimately Congress is charged with making laws that prevent the concentration of sellers in order to protect competition and consumers from exploitive sellers. That’s another job Congress has abdicated.
Some of the industries mentioned above supply inputs to firms that sell to consumers. For example, food service contractors and meat packers supply grocers, restaurants and other eateries. Their higher prices are costs to restaurants who have to pass along higher costs to diners by raising grocery and menu prices. Others sell directly to consumers or through franchises, such as local soft drink bottlers, or their own retail outlets.
Unfettered capitalism leads to highly concentrated markets. Laws and regulations are supposed to counter that trait of capitalism and protect competition, allowing the benefits of capitalism to flow to consumers. Otherwise, owners of firms capture the lion share of capitalism’s benefits. This isn’t the market failing us; it’s government failing us.
My advice to politicians, run on proposals that constrain market concentration and the power of firms to charge high prices. Only those who do so can truthfully run on the affordability issue.
Patrick Taylor lives in Ridgeland.
