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Quotations about Liberty and Power

About this Quotation:

Here is another quotation from Liberty Fund’s new “Library of the Works of Ludwig von Mises”. Mises debunks the idea that monopolies are an inherent feature of free market capitalist economies. They are instead the direct result of government intervention in economic matters, usually to provide benefits to a favored group or to counter previous failed government policies.

24 September, 2007

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Ludwig von Mises argues that monopolies are the direct result of government intervention and not the product of any inherent tendency within the capitalist system (1949)

Read the full quote in context here.

The great Austrian economist Ludwig von Mises argued that monopolies were the result of government intervention not that of the free market:

As has been pointed out already, there is no such tendency toward monopolization. It is a fact that with many commodities in many countries monopoly prices prevail, and moreover, some articles are sold at monopoly prices on the world market. However, almost all of these instances of monopoly prices are the outgrowth of government interference with business. They were not created by the interplay of the factors operating on a free market. They are not products of capitalism, but precisely of the endeavors to counteract the forces determining the height of the market prices. It is a distortion of fact to speak of monopoly capitalism. It would be more appropriate to speak of monopoly interventionism or of monopoly statism.

The full passage from which this quotation was taken can be be viewed below (front page quote in bold):

As has been pointed out already, there is no such tendency toward monopolization. It is a fact that with many commodities in many countries monopoly prices prevail, and moreover, some articles are sold at monopoly prices on the world market. However, almost all of these instances of monopoly prices are the outgrowth of government interference with business. They were not created by the interplay of the factors operating on a free market. They are not products of capitalism, but precisely of the endeavors to counteract the forces determining the height of the market prices. It is a distortion of fact to speak of monopoly capitalism. It would be more appropriate to speak of monopoly interventionism or of monopoly statism.

Those instances of monopoly prices which would appear also on a market not hampered and sabotaged by the interference of the various national governments and by conspiracies between groups of governments are of minor importance. They concern some raw materials the deposits of which are few and geographically concentrated, and local limited-space monopolies. However, it is a fact that in these cases monopoly prices can be realized even in the absence of government policies aiming directly or indirectly at their establishment. It is necessary to realize that consumers’ sovereignty is not perfect and that there are limits to the operation of the democratic process of the market. There is in some exceptional and rare cases of minor importance even on a market not hampered and sabotaged by government interference an antagonism between the interests of the owners of factors of production and those of the rest of the people. However, the existence of such antagonisms by no means impairs the concord of the interests of all people with regard to the preservation of the market economy. The market economy is the only system of society’s economic organization that can function and really has been functioning. Socialism is unrealizable because of its inability to develop a method for economic calculation. Interventionism must result in a state of affairs which, from the point of view of its advocates, is less desirable than the conditions of the unhampered market economy which it aims to alter. In addition, it liquidates itself as soon as it is pushed beyond a narrow field of application. Such being the case, the only social order that can preserve and further intensify the social division of labor is the market economy. All those who do not wish to disintegrate social cooperation and to return to the conditions of primitive barbarism are interested in the perpetuation of the market economy.

[More works by Ludwig von Mises (1881 – 1973)]