Free Market

Monopoly Government

The Free Market

The Free Market 17, no. 8 (August 1999)


Two events during the third week of May proved once again that antitrust regulation is nothing but a scheme to divert the public’s attention away from the real monopoly menace in society: the state. The first event was a phony “predatory pricing” lawsuit filed by the Antitrust Division of the US Justice Department against American Airlines for cutting its prices in response to stiff competition by lower-priced competitors. The company was just doing what is necessary to survive in a competitive market, but was accused of conspiring to drive all of its competition out of the Dallas market. Only a government lawyer trained at an Ivy League law school could believe such foolishness.

The second event was the US Supreme Court’s decision that it was unconstitutional for any state to attempt to reduce the burden on its taxpayers by reducing the welfare benefits payable to new residents. True federalism died in 1865 when the right of secession was abolished by force of arms, but every once in a while it attempts to resurrect itself.

High taxes and a large welfare population make a state unattractive to business owners, all other things equal, and some state politicians recognize this. So, in an attempt to become more competitive in attracting businesses (and population), some states attempted to reduce their welfare burdens. They were tired of being “welfare magnets.”

But that was quickly nullified by the Supreme Court which, for more than a century, has been the driving force for the centralization of governmental power; that is, for monopoly government. The Supreme Court’s decision establishes the court as a “cartel manager” that uses the coercive powers of the state to destroy any competition among the states that might lead to lower taxes. All states must provide uniform benefit levels to all welfare recipients, including new state residents. It is a blatant price-fixing scheme that would lead to prison if it was administered by private-sector entrepreneurs.

The Court’s decision is unequivocally unconstitutional if one uses the Constitution, rather than fanciful legal theories, as a guide. James Madison said, “I cannot undertake to lay my finger on the article of the Constitution which grants a right to Congress of expending, on the objects of benevolence, the money of their constituents.”

Another insidious, state-sponsored cartel scheme that is gathering momentum is so-called “regionalism,” a euphemism for the creation of monopolistic government in metropolitan areas. For the past thirty years state intervention has all but destroyed many American cities, which have become islands of socialism in a sea of capitalism. High taxes, failure to control crime (caused mainly by the government’s war on drugs), the awful socialized school system, the destruction of the family and the work ethic by welfare, and rampant political corruption have caused millions of Americans and myriad businesses to flee the cities.

Statists never admit their failures. Indeed, to the statist failure is “success.” For rather than acknowledging the interventionist “root causes” of urban decay (to borrow one of Janet Reno’s favorite phrases), they propose even more intervention. The proposal is to have state governments impose on metropolitan areas, without a vote of the citizens of those areas, a new “regional” taxing authority that could impose a new layer of taxation on the residents of all counties within a metropolitan area. The tax revenues would then be used to continue to fund the failed government school monopoly, welfare, government housing projects, and any number of equally destructive government programs. As Mises warned, one government intervention always begets another.

An additional aspect of so-called regionalism is Vice President Al Gore’s “livability agenda,” which also goes under the rubric of “smart growth” and addresses the phenomenon of suburban “sprawl.” The essence of this agenda is to make life more difficult for suburbanites by driving up housing and land prices with “growth control” regulation.

It is hoped that if tax and regulatory sprawl become sufficiently onerous suburbanites will be forced to move back into the cities, where they can live in less expensive, “low-density housing” (i.e., small apartments) and commute to work on dirty, inefficient, and often dangerous “mass transit.” Most importantly, they can also be more efficiently taxed by the urban political machines.

So-called regionalism is just another monopolistic price-fixing scheme concocted by the state. Indeed, virtually everything the state does is aimed at giving itself more and more monopolistic control over our lives, our wealth, and our bank accounts. That is why antitrust regulation has never been anything but a political smokescreen designed to confuse the public over the true source of monopoly power.


Thomas J. DiLorenzo is professor of economics at Loyola College.


DiLorenzo, Thomas J. “Monopoly Government.” The Free Market 17, no. 8 (August 1999).

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