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Monopolies: Silent Spreaders of Poverty and Economic Inequality

David Fettig and James Schmitz

No 772, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: The Covid-19 crisis has exposed the vast inequalities that exist within the US economy. As the virus has spread silently, it has laid bare other crises that face our nation---especially the economic vulnerabilities of the country's poor and marginalized. Many of these vulnerabilities can, in fact, be traced back to a single cause that itself has spread silently, but over the last several decades, not months: Monopolies. That monopolies are "silent spreaders of poverty and economic inequality" was well known to economic and legal scholars of the 1930s and 1940s. Wendell Berge, who was Assistant Attorney General for Antitrust in the 1940s, wrote: "Monopoly conditions have often grown up almost unnoticed by the public until one day it is suddenly realized that an industry is no longer competitive but is governed by an economic oligarchy." The harm caused by these monopolies that have mostly avoided detection often exist in markets with small firms, low concentration levels, and small price-cost margins, as in residential construction, or wreak their harm in public institutions, where prices and concentration have no meaning. While there has been a very welcome resurgence in the concern about monopolies in the last decade or so, this has primarily involved vast corporations, and often about their threat to democratic institutions. Though greatly welcomed, we should not let apprehension with these larger companies distract us from the many hidden monopolies that have silently spread harm to the poor for the last 100 years -- not just the last 10 or so. We should stand on the shoulders of giants that taught us this about monopolies, not only Berge, but Thurman Arnold, Henry Simons, and others.

Keywords: Monopoly; Competition; Inequality; Cournot; Sabotage; Harberger; COVID-19; Thurman Arnold; Henry Simons; Silent spreaders; Housing (search for similar items in EconPapers)
JEL-codes: D22 D42 K0 L0 L12 (search for similar items in EconPapers)
Pages: 12
Date: 2020-09-22
New Economics Papers: this item is included in nep-com, nep-his, nep-hpe, nep-ind, nep-law and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmwp:89028

DOI: 10.21034/wp.772

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