Initial Draft Report

Seeking public comments (in comments section)


How Politicians Created Every Major Monopoly and Economic Problem

By Mike Holly

Americans Against Monopolies


Table of Contents



Colonial Period (1660s-1776)

Federalist Era (1783-1820s)

Free Banking Era (1820s-1860s)

Gilded Age (1860s-1900)


Progressive Era (1900-1920s)

New Deal Era (1933-1945)

Golden Age (1950-1970s)


Deregulation Era (1970s-2000)

Globalism Era (2000-2016)

Nationalism Era (2016-)






Throughout American history, elected public officials have created virtually every major monopoly, monopolized every major industrial sector and allowed the monopolies to cause every major economic problem. The U.S. government has also used propaganda and imperialism to spread monopolies and misfortune worldwide.

Politicians have always favored authoritarianism over capitalism and monopoly over competition. They have directly created monopolies (including oligopolies) in all major industrial sectors by imposing authoritarian policies favoring preferred corporations and other special interests. The cronyism has denied others the freedom to compete with the monopolies on a level playing field.

Politicians are also responsible for the monopolization promoted by these politically-established monopolies throughout the economy, particularly among cronies, partners, referrals, suppliers, customers and bankers. Monopolies help each other by providing exclusive partnerships, preferential purchases, low-cost deals and support for political favoritism.

In 2017, University economists Jan De Loecker and Jan Eeckhout found monopolies are leading to basically every economic problem.(1) Monopolies have slowed economic growth and caused recessions, financial crises and depressions. They restrict the supply of goods and services so they can inflate prices and profits above competitive levels, while also reducing quality.(2) This has stressed the finances of consumers. In addition, monopolies have decreased wages for non-monopolists by decreasing the competition for workers. This has led to wealth disparity, underemployment, unemployment and poverty.

Monopolies have also led to many, if not most, societal problems. The poverty has led to crime and drug use.(3)  Monopolies discriminate against outsiders, especially women and minorities. They block innovation, the key to long-term prosperity. They prevent people from solving problems like cancer, pollution and climate change. Monopolies have led to imperialism and wars.(4)

Today, the eight major industrial sectors, controlling about 92 percent of the economy (GDP), are dominated by special interests receiving preferential political policies:

  • Banking (8%) is monopolized through the Federal Reserve central bank (Fed) that regulates the banks and favors big over small banks, especially when controlling interest rates through the buying and selling of bonds from and to the big banks, respectively. (5)
  • Housing (15%) is monopolized through the Fannie/Freddie home mortgage duopoly and Federal Housing Administration (FHA) that finance and promote larger homes and urban sprawl; while local politicians favor real estate developer cronies.(6)
  • Health care (18%) is monopolized through state licensure laws restricting the supply of doctors and other health professionals (according to Nobel Prize winning economist Milton Friedman(7)), certificate-of-need laws limiting the supply of hospitals, government and government-encouraged corporate buyer monopolies, and federal drug patent and other intellectual property laws.
  • Agriculture (8%) is monopolized through subsidies favoring traditional crops and the monopolies selling inputs for and outputs from those crops, including seeds (e.g., GMO), corporate mono-culture farms and junk food processors.(8) The subsidies discourage the development of alternative crops, diversified family farms and healthier foods. Subsidized crop exports traded by international conglomerates have been rendering agriculture in the developing world uncompetitive.(9)
  • Energy (12%) is monopolized through the U.S. government-encouraged OPEC oil cartel(10a) while U.S. electricity and natural gas markets are controlled by territorial utility monopolies.(10b) The utility monopolies conduct rigged bidding of power supplies favoring cronies.(11) The U.S. also creates energy monopolies by picking winners and losers among fuel types. Big Oil & Gas receives preferential exemptions from environmental regulations for fracking.(12) The natural gas by-product of oil fracking is favored over otherwise lower-cost coal in base-load electricity markets and for backing up favored wind and solar energy. Wind and solar energy, and also ethanol fuel made from corn and cellulose, receive tailored mandates and subsidies that block the development of other potentially lower-cost energies including renewables. (13)
  • Transportation (10%) is monopolized through government regulations, including bailouts, favoring the Big Three automakers(14) and airport favoritism for the four major airlines.(15)
  • Technology (8%) is monopolized through patents and copyright laws(16) while regulated territorial franchises are awarded to local telephone, cable and internet monopolies.(17)
  • Government (13%) has created public monopolies, especially education, through massive federal, state and local funding.(18)

These monopolies affect both consumer and government spending. Consumer spending, which is about 70 percent of the economy, is dominated by housing (36%), food (14), transportation (14), energy (9), health care (8) and education (3). The U.S. government spends mostly on health care (30-35%), defense (20), food (4), education (3), transportation (2) and housing (2). State spending is about 30 percent for education.

Education, health care and energy monopolies receive extreme favoritism, control nearly 40 percent of the economy and are likely responsible for most of today’s economic problems. Since the Great Inflation of the 1970s, monopolies in the education, medical and energy sectors have restricted supply, while demand has been growing, causing consumer prices to inflate more than wages have risen. Energy is nearly a third of transportation costs and a tenth of housing and agriculture.

Public education controls 92 percent of K-12 and 78 percent of higher education. Colleges achieved monopolies through preferential government funding that has covered the majority of revenues. Since 1980, college enrollment rose almost 150% while the number of four-year colleges rose only about 50%, thus increasing their market power. Market entry has been discouraged by the disadvantages of not receiving past, and even present, subsidies. Increasing demand and the suppressed supply of competitors has inflated total prices.(19)

The U.S. “health care cost crisis” started in 1965. The government increased demand with the passage of Medicare and Medicaid while restricting the supply of doctors and hospitals. Health care prices responded at twice the rate of inflation. (20)  These inflated costs have also increased the cost of clinical drug trials.(21) Since 1984, the drug industry has successively and successfully lobbied for overly-generous intellectual property rights (on top of patents) that have increased their profit margins to among the highest of all industries.(22)

The monopolized energy industry has failed to develop cost-competitive oil supplies outside of OPEC, while global demand has been increasing. The U.S. is the world’s marginal (highest-cost) oil producer. In addition, energy has been used as a market for agricultural crops to reduce surpluses and export subsidies. The oil monopolies of OPEC have manipulated supply and caused oil price spikes that have preceded the last five and 10 of the last 11 recessions. Saudi Arabia is threatening another major spike.(23) Economist Mark Zandi estimates that every $10 increase in the price for crude oil reduces U.S. growth by 0.10 to 0.15 percentage points in the year after the increase. Oil affects the economy quickly because the purchase of oil-based fuels comes out of consumer’s pockets or is financed with high-interest rate consumer debt that is more expensive than costs tacked onto government debts, like much of education and health care spending.

The unsustainable remedies used by government officials to stimulate the slow-growing monopolized economy are creating even more problems. Deficit spending has been tacked onto government debt and over the past four decades has been increasing interest payments that are now draining the nation’s annual budgets.(24) Cheap credit is encouraging private debt, a lack of savings and risk capital, and asset bubbles in housing, farmland and corporate stocks. The cheap credit has provided monopoly lenders, as well as corporate borrowers, with huge profits.(25) Large technology monopolies have led the stock bubbles. Meanwhile, home purchase is now too expensive for many.

Monopolies favored by politicians have damaged the industrial sectors comprising at least 62 percent of the economy (after adding banking and housing to education, health care and energy). It is 70 percent considering the agricultural sector and a case could be made it is over 90 percent. In addition, high costs, especially for medical benefits, have made U.S. manufacturing uncompetitive, leading to trade debt. Monopolies are now leading the nation toward economic crises involving education, health care and energy costs, public and private debt, more bursting of real estate and stock bubbles, and probably trade and even military wars.

Typically, monopolies secure preferential treatment from politicians in exchange for making financial donations and other contributions to their election campaigns. Monopolies also offer personal payoffs, such as investment opportunities. Monopolies provide politicians with political power, although some simply lack the courage to impose competition on them.

Politicians make excuses for their interventions favoring monopolies by alleging some kind of market imperfection or failure that may or may not exist. A market failure is defined as when a market left to itself does not allocate resources efficiently. Politicians have declared market failures without much proof, evidence or even analysis. Politicians control the electorate with propaganda supported by government studies. These analyses conducted by government bureaucrats, particularly economists, have been erroneous, superficial and biased against markets. 

America’s political parties have always supported monopolies. The current two major parties continually impose policies favoring monopolies. The minor parties haven’t had much of an opportunity to impose policies but, like the two major parties, don’t offer realistic solutions to monopolies either.

  • The Republican Party has favored private-sector monopolies. They cause even more problems by opposing many policies meant to protect the public from these monopolies and also market imperfections (e.g., environmental externalities). President Donald Trump and many in his administration, that became rich from political cronyism favoring monopolies, are blaming trade and immigration for problems. They are using it as an excuse to block foreign competition with tariffs and further strengthen domestic monopolies like autos and metals.
  • The Democratic Party has favored tightly-regulated, public-sector and labor monopolies. Recently, they introduced a new populist-leaning agenda that returns to the regulatory solutions, including antitrust, used with monopolies during the Progressive and New Deal eras. Regulation fails to address the political causes of monopolies.
  • The Libertarian Party favors private-sector monopolies by default. They dropped their 2002 platform that stated: “In order to abolish monopolies, we advocate a strict separation of business and State.” Even if it remained, they are unlikely to find public support for abolishing all government interventions in the markets without much more analysis of market imperfections. Libertarians also appear willing to abolish regulations meant to protect the public from monopolies before abolishing policies favoring monopolies.
  • The Green Party appears to favor tightly-regulated and public monopolies, like the Democrats.

Since America’s founding in 1776, economists have agreed that competition yields more productivity, income and economic growth than monopoly. Influential economists that have recognized the problems with monopoly include:

  • "the father of economics and capitalism" Adam Smith,
  • “the father of communism” Karl Marx,
  • Progressives Henry George and Thorstein Veblen,
  • “the father of today’s Keynesian economics” John Maynard Keynes and the leading Golden Age Keynesian John Kenneth Galbraith,
  • Austrians Ludwig von Mises and Friedrich Hayek,
  • neoclassicals Milton Friedman and George Stigler of the Chicago School, and
  • New Keynesian Joseph Stiglitz today.

However, economists have enabled political cronyism favoring monopolies, likely for professional benefits received from politicians. Economists appear to have unprofessionally ignored the economic analyses needed to evaluate the degree to which market imperfections actually exist and the policymaking that could be used to relieve the adverse effects of any market failures without creating monopolies. The dominant Keynesian economists have also falsely blamed markets and even technology for monopolies and problems. Although the Chicago school and Austrians have admitted "enduring" monopolies are created by government policies, these economists understate the pervasiveness of monopolies created by politicians.

The media has also enabled politicians favoring monopolies. Even though the media benefits from reporting on crisis anyway, they also receive payoffs like advertising payments and stock investments from monopolies and exclusive access and regulations creating telecommunications monopolies from politicians. In exchange, the media provides political cover with propaganda that ignores the pervasiveness of monopolies. When admitting monopolies cause problems, the media falsely blames capitalism.

The truth is politicians have thwarted competition by creating monopolies before markets even could have. America has never had anything close to free markets in virtually all but cottage industries. Sure, the nation has had private ownership of capital goods, but capitalism also requires that investments, prices, production and distribution are determined by competition in free markets. Competition is needed to motivate businesses to provide consumers with quantity, low costs and quality. Without competition, the economy must unrealistically rely on trusting monopolists or government micromanagement.

As science historian James Burke said: “You can only know where you're going if you know where you've been.” For more than three centuries, most of America has aimlessly suffered through disguised, evolving and perverse forms of authoritarian economies created with government policies favoring monopolies and ineffective regulation: mercantilism before 1900, then socialism until the 1970s and corporatism since.

Mercantilism used preferential policies to create monopolies. It fostered innovation and growth but also wealth disparity and led to numerous financial crises and wars including the Civil War and World War I. The problems caused by these monopolies during the Gilded Age have been falsely used by socialist politicians to blame capitalism as an excuse to institutionalize more tightly-regulated versions of today’s monopolies.

Socialism used tight regulation to create more enduring monopolies during the Progressive and New Deal eras. It failed to achieve much innovation and growth while leading to two depressions and World War II. It also inefficiently lowered wealth disparity with taxes. During the 1950s and 1960s, socialism attained short-term prosperity, but mainly because the U.S. was the only economy to survive the war. Moreover, this Golden Age led to the Cold War, Great Inflation and subsequent Great Recession. The problems caused by tightly-regulated monopolies have been manipulated by corporatist politicians to provide an excuse for partially and preferentially deregulating many of today’s monopolies.

Corporatism has led to corrupt partnerships between politicians and preferentially deregulated monopolies. It provides only moderate innovation and growth, increases wealth disparity with help from lower taxes, has already led to two financial crises and has set the nation up for much worse. Moreover, the cronyism is leading to the rise of far-right corporatist politicians falsely promising a benevolent leader (or dictator) while still supporting monopolies. Today’s internet provides an opportunity to expose the truth, but has offered mainly conspiracy theories, especially against a global elite. Even if true, responsibility still rests directly with politicians.

This report documents and begins to analyze the correlations between market imperfection analysis (or lack thereof), political policies, major monopolies and economic problems that have occurred under these three economic systems during the 10 periods of American history. The recommended solution is about the same as that found in any standard economics textbook that calls for leaving as much as possible to free markets, except when unbiased and extensive analysis determines market imperfections require government intervention, and even then, monopolies should be avoided.


Mercantilism has taken the form of a strong national government promoting wealth as monetary reserves accumulated by maximizing exports and minimizing imports. The government encourages domestic production and exports by regulating and rewarding monopolies, especially a national banking monopoly and manufacturers favored with loans, patents and high import tariffs. They limit consumption by discouraging wages and opportunities for the masses. Mercantilism tends to reward innovation but is doomed because it is inequitable, impossible for all countries to have surpluses and encourages imperialism and war (i.e., since state power is secured at the expense of rival national powers and results in war chests).

From the beginnings of America until about 1900, the mercantilists consistently got their way over the capitalists. The economy was always dominated by monopolies typical of mercantilism even though capitalism appeared to be increasing successively from the Colonial Period to the Federalist and Free Banking eras and Gilded Age. Mercantilism led to initial trade deficits that turned to surpluses, a wealthy elite, a low standard of living for the masses and eight significant wars including World War I.

Colonial Period

During the Colonial Period, Britain imposed the monopolies of mercantilism both domestically and among the colonies. British mercantilism tended to reward monopolies for innovation but appeared to slow economic growth and increase wealth disparity, especially compared to what could have been accomplished under capitalism.

Colonial America began during the Renaissance period in European history. The Renaissance marked the transition from the Middle (“Dark”) Ages ending in the 14th century to the Modern Era starting in the 17th century. After Christopher Columbus inadvertently landed in the "New World" in 1492, most naval powers in Europe began to colonize the Americas. From the time of the earliest colonial settlements within the current United States and Canada, European governments and colonists fought against various American Indian tribes in armed conflicts often called the American Indian Wars. Over the next century, attempts to establish colonies in America failed (e.g., Roanoke) due to high death rates from: battles against Indians and rival European powers, disease, starvation and inefficient resupply. In the early 1600s, the British Puritans were able to survive on relatively self-supporting farms in New England.

During the 16th century, British monarchs had begun to form the first large-scale mercantilist economy. By the 1660s, Britain was imposing authoritarian mercantilism on its colonies. They used them as captive markets for their industry. The government took their share through duties and taxes with much of it used by the Royal Navy to protect and seize colonies. They used government policies like trade barriers, regulations and subsidies to create monopolies for their merchants based in England. New England became an important mercantile and shipbuilding center, serving as the hub for trading between the southern colonies and Europe.

In the late 17th century, the southern colonies were settled by rich Brits receiving preferential land grants. They built large plantations that would monopolize export agriculture, especially tobacco. After 1700, indentured servants arrived to work on the plantations until they paid off the high cost of passage to America. With a decrease in the number of people willing to accept this deal, plantations began importing enslaved Africans. Tobacco soon exhausted the soil so fresh fields were cleared on a regular basis. Depleted fields were often used for crops, such as corn and wheat.

During the first industrial revolution from 1760 until the 1820s, Britain transformed a largely agrarian economy into the world's first industrial economy. They developed new manufacturing machines, chemical processes, iron production methods and steam power. The development of the steam engine and agricultural machinery brought an economic boom. The mercantile economy granted monopolies to banking, manufacturing, trade and guild special interests. The colonies were used as raw material sources, as well as captive markets, which led to political unrest.

Mercantilism was created by merchants and a major creator was English merchant Thomas Mun during the early 17th century. There were no real economists to formulate a more effective economy for Britain and its colonies. A possible market imperfection that needed analysis was whether the colonies required protection, taxation to pay for it and monopolies to manage the effort. Today, most economists believe indentured servitude occurred largely as an institutional response to a capital market imperfection.

In 1776, the Scotsman Adam Smith published “The Wealth of Nations” which extolled the virtues of free markets and especially free trade. However, the classical (capitalist) economist started a tradition among economists of “ignoring” monopolies.(26) Smith cried “furious monopolists” will fight to the bitter end to keep their privileges which no politician dare cross.(27) He provided little analysis to support his observations that the monopolies of the British mercantilist economy were inefficient and cheated the poor. He also claimed monopolies promote imperialism,(28) but pandered to the oppressive colonialism that led to the Revolutionary War against America from 1776 to 1783.(29)

Federalist Era

Generally, America has been assumed to have started as a capitalist country.(30) However, many economic historians have ignored that Federalist Party support for monopolies in banking and manufacturing led to something much closer to the mercantilism promoted by Britain. The first industrial revolution led by Britain produced relatively rapid economic growth before 1800, but it slowed to moderate levels until the 1820s. Productivity growth was low. Due to the Revolutionary War, the national debt started high, but was declining. Interest rates started relatively high but were declining from about 10 to five percent. Inflation was relatively high. Wealth disparity was fairly high.

In 1783, the economy appeared to begin as capitalism to the extent that it was comprised mostly of many poor farmers producing food for the family and small local markets. Agriculture produced mainly corn, barley and livestock. Most farming was inefficient but new areas were opening with expansion into native lands, the introduction of steamboats and the building of canals. In 1790, agriculture employed 90% of the workforce.

In 1789, George Washington was elected the first President after becoming recognized as the "father of the country." America’s first political party was established as the Federalist Party led by Washington’s treasurer Alexander Hamilton. Although Washington never joined the party, he supported their principles. The Federalists were essentially mercantilists calling for a strong national government that promoted economic growth through monopolies manufacturing machinery, especially for agriculture.

Washington and Hamilton led the foundation of the First Bank of the United States. The Second Bank was chartered by President James Madison in 1816. The banks provided a national currency and more money available for loans especially to manufacturers. The U.S. and Britain have had regulated, nationalized and monopolized banking since the 18th century, while suffering financial crises every 20 years or so.(31) The Panic of 1792 was precipitated by the expansion of credit by the newly formed Bank of the United States. The Panic of 1819-21 was caused by a change toward more conservative credit policies by the Second Bank of the United States. Throughout the country, banks failed and mortgages were foreclosed, forcing people out of their homes and off their farms. Falling prices impaired agriculture and manufacturing, triggering widespread unemployment. The national banks were precursors of today’s Federal Reserve banking monopoly.

Washington started protecting northeastern monopolies manufacturing agricultural and other machinery with high import tariffs imposed on lower-cost European competitors. The tariffs were used to finance the government and later the national banks. Domestic manufacturers also benefited from patent protections and later preferential bank loans from the national banks. These interventions protected a fledgling manufacturing industry. Total import tariffs ranged from 15 to 95 percent until reduced before the post-World War II boom.(32)

In 1792, the Democratic-Republican party was founded by two of America’s other founding fathers, Thomas Jefferson and James Madison. Jefferson led the belief that freedom from monopolies is a fundamental human right(33) and said the “monopoly of a single bank is certainly an evil.”(34) Both claimed the national bank and import tariffs benefited manufacturers, merchants and investors at the expense of the majority of poor farmers. They sought to pursue a national growth strategy based on allowing the nation’s agricultural cottage industries to develop unhindered by government. Both were brilliant thinkers but lacked the courage of their convictions. National banking and import tariffs continued during the Presidential administrations of Jefferson from 1801 to 1809 and Madison from 1809 to 1817.

After 1800, cotton became the chief crop on southern plantations using slave labor, and the leading U.S. export, while textiles was the dominant industry.  Import tariffs forced U.S. agriculture to pay extremely high prices for agricultural machinery and slowed the agrarian economy.(35) By 1820, America had only three power looms that weaved yarn and thread into fabric under steam power. Britain had 2000 power looms in 1800 and over 55,000 by 1830.

The U.S. lacked the military, especially navy, to practice British-style mercantilism with colonization. Still, the nation’s monopolists, and even Jefferson and Madison, supported imperialism while encouraging colonial expansion into Indian and Canadian (i.e., British) territories. The United States government and American settlers continued the American Indian Wars until the 1920s. American imperialism is considered a cause for the War of 1812 under Madison.(36) America failed to achieve any of its pre-war objectives and the costs of the war slowed economic growth and brought higher inflation. The Democratic-Republicans became the dominate political party because the Federalists were seen as unpatriotic for opposing the war against British forces.

During the 1700s, there were virtually no American economists. The Federalists were influenced by merchants. In the early 1800s, Daniel Raymond,(37) who had Puritan roots, became America’s first important political economist and provided ex post facto support for already established mercantilist policies. Jefferson and his Democratic-Republican party were influenced by European classical economists like Smith. There appeared to be no economic analysis of market imperfections or government policies favoring monopolies. Perhaps, both farming and manufacturing could have benefited much more cost-efficiently from government research and development grants financed through income taxes.

Free Banking Era

During the mid-1800s, capitalism gained a bit more support, starting under the populist leadership of Democratic President Andrew Jackson in 1829. Agriculture remained competitive and employed from about 75% of the workforce in 1828 to 55% in 1865. But the mercantilists forced Jackson to make compromises that largely preserved the banking and manufacturing monopolies, as well as creating new railroad monopolies. Interest rates were relatively high and debt low. Inflation was low. Economic growth was fairly high at about 4% until increasing to about 5% after 1850. Productivity growth was generally improving until the 1860s. Wealth disparity remained high. Although the period benefited from the development of important railroad and steel technologies in Britain, it wasn’t considered an industrial revolution. In 1861, the mercantilists returned to power under President Abraham Lincoln. His Republican Party(38) would largely remain there until the 1930s Great Depression.

Although Jackson dismantled the Second National Bank in 1836, the term “Free Banking Era” was a misnomer. The capitalists compromised with the mercantilists by allowing state regulation of banking from 1837 to 1864. Typically, states required new bank entrants to secure charters subject to a vote by the state legislature, which led to similar cronyism found previously at national banks. Other states required "free" banks to secure notes by purchasing state bonds and denied them the right to establish branch networks. These requirements caused the depreciation of securities that led to bank failures. The Panic of 1837-44 was caused by speculative lending practices in the U.S. and restrictive lending policies in Great Britain. Banks collapsed, businesses failed, prices and profits declined, unemployment increased and wages deflated. The Panic of 1857 was caused by the declining international economy and over-expansion of the domestic economy. Under the leadership of Lincoln, the National Banking Act of 1863 converted the state into nationally chartered banks.

Jackson started a period of declining import tariffs from a historical high rate of about 65% in 1828 to about 25% in 1857. But the South strongly opposed even the lower tariffs, which made their cotton less competitive on the world market. It was also likely a factor in pressuring them to continue the waning use of slavery. Jackson sympathized with the South but compromised with the mercantilists representing northern manufacturing monopolies on the lower tariff. He even threatened military force if South Carolina attempted to secede over it. Later, the mercantilists blamed low tariffs for the Panic of 1857. They increased the tariffs back up to almost 50% with the signing of the Morrill Tariff in March 1861. The next month the South attacked Fort Sumter in South Carolina and fought the bloody Civil War against the Union until 1865.(39) Lincoln didn’t demand an end to existing slavery in the South until 1862. He tried to use the abolition of slavery to rally support for the war.

Jackson’s Presidency saw the creation of railroad monopolies as the government introduced preferential subsidies favoring sole direct connections of lines between various destinations. The capitalists opposed federal subsidies, but political compromise with the mercantilists led to state and local government subsidies. After 1828, there was a rapid building of short line railroads. Over 80 percent of farms in the Midwest would become located within five miles of a railway. This facilitated the shipment of grain and livestock to national and international markets. By 1863, the transcontinental railroad monopolies were being built with subsidies granted by federal politicians,(40) starting with President Lincoln, who was associated with the tycoons.(41) These railroads were intended to connect farmers in the West, where life was cruel and harsh.

Nor did U.S. foreign policy promote free markets. Instead, Jackson started a new racism, nationalism, imperialism and expansionism into Indian, Mexican and British lands. He forced native Americans in the South to move off their lands on a deadly “Trail of Tears” to the West and gave their land to his monopoly supporters. From 1846 to 1848, his protégé, President James Polk, led the acquisition of lands from Mexico during Mexican-American War.

There were few economists in the country. Politicians who claimed to support capitalism like Jackson were influenced by Europe’s classical economists. Lincoln was supported by political economist Henry Charles Carey of the so-called American School of Capitalism.(42) The name of the school was a misnomer since the three core economic policies were closely related to mercantilism and contrary to classical economics: a national bank that promoted productive enterprises, protectionism of manufacturing monopolies through selective high tariffs, and government investments in infrastructure, especially transportation and railroad monopolies.

During the 1840s, Prussian economist Karl Marx started warning that capitalism was leading to monopolies, wealth disparity and eventual collapse.(43) Irish economist Dionysius Lardner challenged the monopolistic rates of U.S. railroads.(26) Economists largely ignored that the mostly poor agrarian U.S. economy was still dominated by mercantilism. Monopolies typical of mercantilism were created with state regulation of banks, patents, preferential lending and import tariffs favoring manufacturers, and subsidies for railroads.

There were few economic policy analyses evaluating market imperfections or government policies favoring monopolies. The shift from national- to state-regulated banking has been unjustly used by pro-regulation economists to blame capitalism for leading to financial panics. Even some capitalist economists have perpetuated the misconception by alluding to state-regulated banking as a trend toward capitalism and/or an improvement. There appeared to be no analysis to determine whether it was necessary to reward the railroads with subsidies to encourage rapid construction.

Gilded Age

During the late 1800s, the post-Civil War economy was called the “Gilded Age of Capitalism”(44) because serious social problems were masked by a thin gold gilding of economic expansion (as portrayed by writer Mark Twain).  The capitalists gained significant power but their failure to end the mercantile monopolies of banking, manufacturing and the railroads allowed these three sectors to create even more monopolies. The economy shifted from agriculture to industry(45) led by businessmen called “robber barons”(46) who created new industries but also monopolies through buying politicians and schemes. The economy grew rapidly from a second industrial revolution that included important technological developments in electricity and chemistry. Productivity growth was high. After the war, the national debt was declining and interest rates declined to only four to five percent. Inflation was low. But wealth disparity remained high and pollution became a new problem.

The National Bank Act of 1863 provided federal loans needed to finance the war with the South. It also established a national currency and created a national banking monopoly from the state banks. An Office of the Comptroller of the Currency chartered and controlled the banks. The banks were required to purchase government bonds and could issue their own notes up to 90 percent of the market value of the bonds. The legislation created $300 million in national currency, but mostly for monopolies in the Northeast.

The growth of the railroads and spin-off industries created massive capital requirements that far outstripped the limited resources of American banks. Investment banking emerged to serve as brokers bringing European investors with capital together with U.S. firms that needed it. From 1873 until the early 1900s, investment banking was dominated by Americans with ties to European banking oligopolies: German-Jewish immigrant bankers with ties to German-Jewish merchant bankers in London, expatriate Americans who had become merchant bankers in London, and the Kuhn Loeb bank with ties to German investment banking. These banking monopolies were implicated in the collapse of railroad overbuilding and shaky railroad financing that led to the severe financial panics(47) from 1873-8 and 1893-7.

From 1863 to 1910, the transcontinental railroads were built by robber barons, most notably Jay Gould, Charles Crocker, Leland Stanford, E.H. Harriman, Jay Cooke and Henry Villard. Their monopolies were built largely with European investment money. They were also heavily subsidized with low-interest loans, land grants and special frontier privileges from the U.S. government. Moreover, railroads had to be chartered by states, which sometimes granted monopoly privileges. For example, Stanford, a former governor and U.S. senator from California, used his political connections to have the state pass laws prohibiting competition with his railroad.(48)

Until 1871, virtually all railroad trackage was laid with some spe­cial privilege not granted to all enterprises. Some already appropriated privileges continued to be doled out into the 1880s. Their monopolies lasted even longer since competing railroads would have needed to be built without subsidies. The corruption created a heavy tax burden for state residents. It was common for state constitu­tions to later prohibit the investment of state money in any private enter­prise. At least for a while, since the practice continues today.

The transcontinental railroads were built as monopolies between specific locations on the eastern rail lines (i.e., spanning from the Atlantic coast to the Midwest) and Pacific coast. From 1863 to 1869, the first transcontinental railroad, the "Pacific Railroad", was built to link the existing eastern railroad network at Omaha to San Francisco. It was built by the Central Pacific Railroad, owned by Stanford and others, and the Union Pacific owned by Thomas Durant and Grenville Dodge, later Gould and later still Harriman. In 1881, the second transcontinental railroad was completed by Southern Pacific, run by Crocker and later Stanford and Harriman. In 1883, the Northern Pacific transcontinental railroad was completed from Minnesota to the Pacific Northwest by Cooke and Villard.

When they didn’t receive subsidies themselves, the railroad barons typically relied on gaining control of existing monopolies. For example, Cornelius Vanderbilt gained control of railway lines between New York and Chicago during the 1860s. He also acquired the New York & Harlem and Hudson Line. During a bitter winter when the Erie Canal froze over, he ruthlessly refused to accept passengers or freight from the New York Central Railroad. He cut them off from connections to western cities and forced them to sell him controlling interest.

James J. Hill started by negotiating an exclusive arrangement as a forwarding agent for the St. Paul and Pacific Railroad.(49) It helped him rise to the top of the local coal business. He organized his company with its chief competitors into a market-sharing monopoly in 1876. He bought the railroad with wealthy Canadians in 1878. Hill gained control of the Northern Pacific, and also Chicago, Burlington and Quincy railroad monopolies with help from New York financier J.P. Morgan. In 1893, Hill built the Great Northern Railway from St. Paul to Seattle without federal aid. But the government was no longer offering subsidies and the nation was wealthier then. 

The railroads used their monopoly to favor and create monopolies in related material industries. The material needs of the railroads, and the need to ship the materials, helped create other big industries that became monopolized. These included metals like iron, steel and copper, glass, machine tools and oil. The robber barons in these other industries used the railroad monopolies as a way to create monopolies of their own. New America’s Barry Lynn points out: “The most famous monopolies of that era were John D. Rockefeller’s Standard Oil and Andrew Carnegie’s steel company…..were leveraged off the railroad monopolies.”(50)

The government-established railroad monopolies created more monopolies by favoring their customer cronies, and also large over small customers. For example, the railroads favored Rockefeller’s Standard Oil(51) monopoly over smaller oil producers. From the beginning, Rockefeller succeeded in extorting preferential rebates from the railroads that gave him a major advantage over his competitors. The railroads even informed him on moves made by his competitors. They also collaborated on his side in price wars by raising the price of transport for given areas. The higher prices strangled smaller competitors and forced them to sell their refineries to Rockefeller at discount prices. The company's market share of refined petroleum rose from four percent in 1870 to 25 percent in 1874, 85 percent in 1880, and a high of 88 percent in 1890.

When the railroads practiced price discrimination, the other customers should have been able to find or build competing railroads. But they couldn't do it competitively because the government had preferentially subsidized the railroad monopolies. These disadvantaged customers included farmers, who were made less competitive in national and international markets. The new residents of the West couldn’t survive without the use of the railroads. They were forced to pay whatever high rates the railroad monopolies could get away with.(52)

When purchasing their material needs, the government-established railroad monopolies also favored their supplier cronies and large over small suppliers. The problem is monopolies aren’t penalized for practicing costly cronyism, corruption, fraud, waste and mismanagement, like firms facing competition.(53) 

Steel robber baron Andrew Carnegie benefited from being hired at age 18 by one of the nation’s largest railroads, the Pennsylvania Railroad Company. Soon, he was included in many corrupt investments made by his boss, Thomas Scott, and the railroad’s president, John Edgar Thomson. These consisted of insider trading in companies that the railroad monopoly did business with (e.g., iron, bridges, and rails). They also received payoffs for contracting with these parties. Later, Carnegie established businesses that supplied rails and bridges to the railroad, while offering the two men a stake in his enterprises. In 1875, he built the J. Edgar Thomson Steel Works, whose biggest customer was none other than the Pennsylvania Railroad. He paid “commissions” to the railroad’s purchasing agents. His special privileges forced competitors to sell their steel manufacturing plants to him. By 1890, the Carnegie Steel Company dominated the steel industry until its sale to J. P. Morgan in 1901.

During the latter part of the 19th century, farming and coal-gas were some of the few industries that appeared competitive. Many new developing industries were being largely monopolized by patents, including the telephone until 1893, auto until 1903, aluminum until 1909 and electricity until the early 1900s.

For example, the AT&T telephone monopoly started after Alexander Graham Bell patented the telephone in 1876. Shortly thereafter, Bell Telephone was formed to license local telephone exchanges in major U.S. cities and AT&T was formed to connect the local Bell companies in 1885. After key patents expired, competition would develop for short periods in the telephone and these other industries. But after they grew to more mature industries, they were monopolized again with other government regulatory schemes.

The nation’s monopolies led to extreme poverty for most workers. They were at the mercy of the monopolists since there were few competitors and many unemployed laborers. Workers had to work six days a week and between 10 to 18 hours a day for 10 cents per hour. Factory work was very difficult, strenuous, tiring, dangerous and unhealthy. They breathed saw dust and toxic fumes. Many injuries and deaths occurred and the workers were usually blamed. Nearly a third of school age children worked full-time jobs.

The financial panics were particularly bad for workers. From 1873 to 1879, 18,000 businesses, including 89 railroads and hundreds of banks, and ten states went bankrupt. Unemployment peaked in 1878 at somewhere between 8.25% and 14%. As a result of the panic of 1893, fifteen thousand businesses failed, including five hundred banks and numerous farms, and stock prices declined. The unemployment rate exceeded 25% in several eastern states. Soup kitchens opened to help feed the destitute. Facing starvation, people chopped wood, broke rocks, and sewed clothes by hand with needle and thread in exchange for food. In some cases, women resorted to prostitution to feed their families. The abuses led to the socialism of the subsequent Progressive Era.

U.S. foreign policy also did not promote free markets. Throughout the age, the U.S. and most European countries had very high import tariffs, especially to prop up domestic farm prices. Although the U.S. suffered through the panics and recessions/depressions from 1873-8 and 1893-7, the nation grew well from 1878 to 1893 in spite of the tariffs, partly due to abundant natural resources. However, the tariffs contributed to causing the so-called Long Depression in much of Europe throughout the years from 1873 until 1896. The Long Depression led to the revival of colonialism called the New Imperialism period. Western European powers pursued raw materials and new markets for their surplus accumulated capital in Africa and parts of Asia. They used the money to corrupt their governments. Imperialism also led to the militarism and the military buildups that led to World War I.

After the panic of 1893-7, the U.S. also practiced imperialism. Monopolists financed the political campaign of Republican President William McKinley. His administration, which included Theodore Roosevelt as Secretary of the Navy, practiced global imperialism for them. In 1898, a U.S. victory in the Spanish-American War made the nation an imperial power while securing Guam, Puerto Rico, the Philippines and Cuba. During the conflict, the U.S. also annexed Hawaii including control of all ports, buildings, harbors, military equipment and public property. In 1902, the Philippine–American War produced a coaling station for U.S. military and commercial ships. During the early 1900s, the U.S. protected corporate interests by waging the Banana Wars in Latin American and the Caribbean.

Before 1900, there were few real economists in America and those few had virtually no institutional role in policy.(54) During the latter part of the 19th century, influential neoclassical economists in Europe favored laissez-faire capitalism. However, the nation settled for just limiting new government regulation without reversing the mercantilist policies favoring monopolies from the past. Future Russian leader Vladimir Lenin provided evidence for the Marxist theory that the economy was leading to monopolies by calculating the growth in the numbers of large U.S. companies. However, he also falsely blamed capitalism for what was actually still mercantilism.(55)

The Gilded Age is likely the most damaging period to the reputation of free markets because economists continue to use it as an example of capitalism. Economists note that the age brought lower prices but that was more likely due to technological advancement rather than competition. Classical and neoclassical economists claim the age brought economic growth but the socialists use it to show capitalism leads to wealth disparity. Economists often ignore that the economy remained mercantilism. Monopolies were created with national charters for banks, continued patent protections, preferential lending and high import tariffs of 40 to 50 percent for manufacturers, and subsidies for the railroads. Even more significantly, these government-established monopolies created many other monopolies that dominated much of the rest of the economy.(56) The railroads favored their big customers, suppliers and bankers.(57) (58)


Socialism is political and economic theories advocating government or collective control of the means of production and distribution of goods and services. Compared to mercantilism, socialism has taken the form of a stronger central government that owns or more tightly regulates monopolies. It also uses taxes to redistribute some of the profits to the public, including low-income earners through the funding of public services. Socialism is likely doomed because it ignores the incentives needed for cost control, innovation, the development of new industries and economic growth.

After 1900, the failure of mercantilism (disguised as capitalism) led to a form of authoritarian socialism. During the Progressive era, politicians like Theodore Roosevelt tightly-regulated and even nationalized monopolies. This led to the Great Depression. During the New Deal era, Franklin D. Roosevelt doubled down on regulation. This extended the depression and led to the authoritarian nationalism in Germany that led to World War II. During the post war boom or Golden Age, U.S. politicians relaxed the regulation of industry but the still monopolized economy benefited mainly from winning-the-war. This age ended with the stagflation of the 1970s.

Progressive Era

From the 1890s until the 1920s, the Progressive era was led by politicians like Republican President Theodore Roosevelt and Democrat President Woodrow Wilson. The politicians garnered support for the beginnings of socialism by inciting public fears about government corruption and capitalism leading to monopolies and financial panics during the Gilded Age. They falsely blamed the imperfections of markets for creating the monopolies so they had an excuse for institutionalizing them. They pre-emptively and blatantly granted preferential policies to many of today’s corporate, professional, labor and public (e.g., education) monopolies under the false public promise that they would be tightly or at least efficiently regulated.

In order to pay for government regulation of monopolies, and also social spending for the masses, politicians passed a 16th Amendment in 1913 that permanently legalized an income tax intended to be imposed mainly on the monopolists. By 1917, the highest marginal tax rate on the wealthy was increased to about 70%. From 1921 to 1931, a less progressive administration temporarily decreased the tax to about 25%. From 1900 to 1930, interest rates continued at about four to five percent except for a brief period of seven percent after World War I (1914-8) and during the late 1920s.

From 1900 to 1923, economic growth was at the lowest sustained rate in the nation’s history. By 1914, the second industrial revolution had been suppressed and much less technological innovation followed. Productivity growth had declined. From 1923 to 1929, cheaper credit and lower taxes stimulated consumer spending and high private debt, and eventually led to the Great Depression in 1930. Wealth inequality remained high and increased even more during the 1920s. The personal savings rate continued to average about six percent (since the late 1880s). The rate was temporarily much lower during World War I, the depression of 1920-1 and the early years of the Great Depression and much higher after World War I and during World War II. Inflation was also a problem, largely due to the wars. Public debt was low except during the war and after the depression.

Farming remained one of the rare exceptions to monopolization. Still, the merging of farms helped lead to a decline in agriculture’s share of the nation’s labor force from 40 to 25 percent. Trusts merged competitors in whiskey, linseed oil, sugar, cotton oil and cattle. But without much government support, the monopolies were localized and short-lived. Meanwhile, food safety laws protected quality.

From 1890 to 1925, investment banking was dominated by an oligopoly of four of the national banks: J.P. Morgan, Kuhn Loeb, Brown Brothers and Kidder Peabody. Since America had become wealthier, deposits from commercial banking could often be used to underwrite investments. Morgan helped the railroad monopolies pool management and markets into one conglomeration. It squeezed out competitors, forced down prices paid for labor and raw materials and charged customers more. The banking and railroad monopolies were both implicated in the panics in 1901 and 1907.(59) (60)

The federal government responded to the complaints of mainly farmers with the Hepburn Act of 1906. The Act made it illegal for the railroad monopolies to charge different rates to different customers. But the Interstate Commerce Commission over-regulated and strangled the industry. After 1910, new train tracks were rarely built.

As the power of the railroad monopolies was waning, so did the monopolies of Standard Oil and U.S. Steel. Yet, the federal government still pursued antitrust actions while other policies continued to favor their monopolies. Economists viewed the antitrust litigation as a failure.

The federal government led by Republican politicians sued to break up Standard Oil. In 1911, the Supreme Court found it guilty of monopolizing the petroleum products industry even though their market share had fallen to 64 percent. A breakup was ordered into 34 companies but five of the companies became part of the “Seven Sisters” oil oligopoly. Rockefeller became even richer as government policies continued to favor the oil oligopoly.(61) From 1914 to 1918, the U.S. established a government-sanctioned oil cartel while managing the World War I effort.(62)

After the war, President Calvin Coolidge extended the cartel by creating the Federal Oil Conservation Board to enforce the "compulsory withholding of oil resources and state pro-rationing of oil."(63) In 1919, the American Petroleum Institute (an industry trade association) was formed and started lobbying for regulatory schemes that restricted competition including state government production quotas. During the early l930s, the institute even endorsed the use of National Guard troops to enforce the production quotas in Texas and Oklahoma. The industry received preferential tax advantages for “intangible drilling costs” in 1916 and “depletion allowance” in 1926. Although the justifications and values are disputed, there is little doubt the special tax benefits at least helped discourage the development of alternative fuels.

In its first full year of operation, J. P. Morgan’s U.S. Steel made 67 percent of all steel produced in the U.S. However, heavy debts taken on during the company's formation weighed it down. They were able to maintain a monopoly at least partly by exploiting low-cost black labor laws in the South, including the use of unjustly convicted prisoners. But the steel market was expanding and prices were dropping significantly. In 1911, U.S. Steel's share of the market slipped to 50 percent. In that year, the federal government tried, but failed, to use antitrust laws to break it up. Soon, the industry became an oligopoly of several large companies protected by import tariffs. During the 1920s and 1930s, economic depressions helped reduce the number of competitors in manufacturing industries including steel. During the 1930s, U.S. Steel's market share was about 33 percent.

In 1903, Henry Ford won a lawsuit against the flimsy automobile patent owned by the Association of Licensed Automobile Manufacturers (ALAM).  After Ford started to make cars more affordable for the masses by 1908, the government helped the automobile begin to gain control of the transportation market through the construction of many new and improved roads. Many car manufacturers soon emerged. However, the severe depression of 1920-1 caused the industry to become dominated by three large companies based in Metro Detroit: Ford, General Motors and Chrysler. This oligopoly has received government support since.

Mainly Republican politicians used regulation to create new energy monopolies in the electricity and natural gas industries. In 1906, urban politicians started awarding territorial monopolies to investor-owned generation, transmission and distribution electricity companies, and also natural gas companies. Samuel Insull led the way in the power industry by buying a utility monopoly for the Chicago territory after contributing heavily to the Republican Party. The government has regulated these so-called public utilities on a cost-plus-profit basis, routinely allowing them to overcharge captive ratepayers higher service fees and increase profits by overvaluing purchases. It took economists (George Stigler and Claire Friedland) until 1962 just to determine there were no significant differences in prices and profits of utilities operating with and without state regulatory commissions from 1917 to 1932. Electric utilities have been allowed to use predatory price cuts with cost shifting onto smaller consumers to undercut competition from even self-generation including efficient co-generation.

The administration of Republican President William Taft allowed the creation of a physician oligopoly. In 1910, the American Medical Association lobbied the states with its own studies recommending the strengthening of medical licensure laws. The states allowed state AMA offices to oversee the closure or merger of nearly half of the medical schools and also the reduction of class sizes. Federal and state governments have been subsidizing the education of the number of doctors recommended by the AMA. Moreover, the restriction of supply using subsidies has also occurred in other health professions and institutions including hospitals. In 1925, pharmaceutical monopolies were created by the awarding of drug patents.

President Wilson led the nationalization of the telephone industry. After key patents expired, over 80 new competitors grabbed 5 percent of total market share by 1895, and 3,000 competitors captured about half of the telephone market by the early 1900s. In 1913, the federal government agreed with AT&T that they and its Bell System would become a regulated monopoly. As rationale, the monopoly promised to provide access to communications services for all Americans in exchange. The Federal Communication Commission (FCC) approved their prices and policies. In 1918, the federal government used World War I as an excuse to nationalize the industry.

In 1913, Wilson falsely blamed capitalism for past banking failures while nationalizing banking with the founding of the Federal Reserve (Fed). It is a quasi-public central banking monopoly made from an oligopoly of large favored private banks. The Fed was commissioned to alleviate financial crises by controlling the money supply. But that can’t effectively solve the economic problems caused by the nation’s monopolies, especially slow growth and inflation. The Fed has stimulated growth by ordering the printing of money by the U.S. Treasury and lowering interest rates for the banks. But that has brought risky and uneconomic investments, inflated asset prices (including homes and stocks owned disproportionately by the rich), increased consumer, business and public debt, and the devaluation of the dollar. When fighting inflation by reducing the money supply and raising interest rates, the Fed has brought recessions and depressions. Moreover, the Fed has strengthened bank monopolies by preferentially buying and selling the bonds from and to the large banks. Later, the duties of the Fed were expanded to regulate the banks and that too has favored the larger banks. The Fed has made the large banks too big to fail and allowed them to award huge salaries to executives.

From 1914 to 1918, the world was involved in World War I, ignited by German monarchial imperialism. Continental Europe and the Soviet Union were reduced to ruins at a time when the British Empire was having trouble maintaining its imperialistic holds. The Treaty of Versailles demanded that Germany repay every nation’s costs of the war. The U.S. became the preeminent global economic power by default. The Fed controlled post-war inflation by raising interest rates, which led to the depression of 1920-1.(64)  The depression bankrupted many companies and led to manufacturing(65) oligopolies.(66) In the 1920s, only 200 corporations(67) controlled over half of all U.S. industry. The richest one percent of the population owned 40% of the nation's wealth.

From 1923 to 1929, Republican President Calvin Coolidge didn’t do much other than cut taxes for the wealthy. He left industrial policy to Herbert Hoover, his Secretary of Commerce and successor as President. Hoover tried to practice scientific central planning and micromanaging, much like communist Russia. The Air Commerce Act of 1926 issued and enforced air traffic rules, licensed pilots, certified aircraft and established airways. The government created an oligopoly of four major domestic airlines that continued to dominate commercial travel for the rest of the 20th century: United, American, Eastern and TWA.

During the Roaring 1920s(68), the monopolists earned most of the profits. The Fed responded to an initially slow-growing monopolized economy by stimulating it with cheap credit and easy money. That encouraged the growth of financial services sector, consumer spending, uneconomic and risky investments, inflated asset prices, especially for the wealthy, and increased debt for both consumers and business. Later, the Fed tried to reign in the profligate spending by raising interest rates in 1928 and 1929. The result was declining spending and asset prices, and the Great Stock Market Crash of 1929.(69) In 1930, the passage of Smoot Hawley also brought increased protectionism.

The market crash, and perhaps also protectionism, led to the Great Depression.(70) (71) It was the worst financial crisis in U.S. history. Consumer spending continued to drop, leading to steep declines in industrial output and investment. As failing companies laid off workers, the unemployment rate reached 25 percent. Average incomes fell by 40%. By 1933, nearly half the country’s banks had failed. The financial services sector collapsed while government spending increased. The depression spread from the world’s largest economy globally.(72) The depression hit hardest those nations that were the most deeply indebted to the U.S., especially Great Britain and Germany.

Many Americans took whatever job they could working for a few dollars a day. People suffered from inadequate clothing, malnutrition, a lack of medical care and loss of their homes. Husbands felt like failures, drank, withdrew emotionally, left to work in other cities and/or deserted their families. Wives worked outside the home in low-paying jobs. Two million children worked in factories, canneries, mines and on farms. Many farmers were devastated by a dust bowl that had resulted from poor farming methods encouraged by the government. Four million people roamed the land living a "Grapes of Wrath" existence. People walked aimlessly, humiliated, filthy, hungry and just trying to stay alive. The suicide rate hit an all-time high. Labor unions pressured authorities to forcibly send 400,000 Mexican-Americans to Mexico. The poor had little time to think about the politics that caused their poverty. Meanwhile, some lucky families passed the time playing Monopoly. The popular new board game glorified the monopolization of markets.

During the Progressive era, foreign policies favored monopolization and imperialism. From 1890 to 1913, import tariffs were rapidly decreased from over 50% to under 20%, but then were increased just as rapidly back up to over 50% by 1930. From 1903 to 1914, Roosevelt, Taft and Wilson practiced imperialism while building the Panama Canal to facilitate trade with the Far East. Wilson also imposed a puppet government upon Haiti, occupied the Dominican Republic, made a U.S. protectorate of Nicaragua and purchased the Virgin Islands from Denmark.

A few socialist-leaning economists may have had some minor policy influence, like Thorstein Veblen and the previous writings of Henry George.(73) However, there continued to be little economic analysis of market imperfections and also government policies favoring monopolies. Politicians monopolized the telecommunications, electricity and natural gas industries without analyses determining whether problems were caused by the duplication of transport lines. They failed to consider whether universal service could have been provided without offering a monopoly to AT&T. Or whether electric generation could have been sold competitively to transmission and distribution monopolies. They didn’t analyze the need for restrictive medical licensing or just requiring higher quality medical education. Nor did they analyze the regulatory and monopoly causes of financial crises or consider free market banking.

New Deal Era

From 1933 to 1945, new Democratic President Franklin D. Roosevelt (FDR) led the nation as close to socialism as it has ever attained. This was evidenced by the dramatic decline of membership in the Socialist Party. While falsely blaming capitalism for the Great Depression, he strengthened the institutionalized monopolies of the Progressive era and their hold over markets, while supposedly increasing public protections. The corporate tax rate was increased from under 15% in 1933 to 40% in 1945. The highest marginal tax rate on the wealthy was increased from about 25% in 1931 to over 60% in 1933 and 90% in 1945, the highest level in the nation’s history. Government spending was high throughout the era. But public debt was not increased until spending on World War II resulted in the nation’s highest ever national debt (as percent of GDP). Interest rates were reduced from about five to two percent.

During the 1930s, the economy failed to rebound to 1929 GDP levels and unemployment continued at over 15%. The depressed economy led to World War II from 1939 to 1945. The war forced more rapid technological developments in transportation, chemistry, communications and medicine. Productivity growth was low until accelerating during and after the war. During the war, the U.S. economy grew but the standard of living didn’t improve much. Throughout the era, wealth disparity remained high, although declining due to increasing taxes on the wealthy.

In the beginning of his administration, FDR passed intended public protections from monopolies. In March 1933, FDR signed the Emergency Banking Act to end the bank runs that had plagued the Great Depression. It committed the Fed to supplying unlimited amounts of currency to reopened banks and providing deposit insurance. He criminalized the possession of monetary gold. During his first 100 days, FDR initiated his New Deal. The U.S. Banking Act of 1933 included the Federal Deposit Insurance Corporation to protect bank depositors’ accounts. It also included Glass–Steagall to separate investment from commercial banking and curb the use of depositor money for speculative investing. Later, the Securities and Exchange Commission regulated investment in securities and the stock market. The Social Security Act provided unemployment, disability and pensions for old age. The Works Progress Administration employed people while constructing public works such as dams and schools.

Then, FDR turned to regulating monopolies even tighter. FDR’s most comprehensive socialist legislation, the National Industrial Recovery Act (NIRA) of 1933, would have regulated prices and wages of the monopolies. However, it was ruled unconstitutional by unanimous decision of the U.S. Supreme Court in 1935. But his Democrats with support from monopolies succeeded with a piecemeal approach. They limited competition further with government takeovers of telecommunications, airlines and automotive. They manipulated and often restricted production and supply in cottage industries, like trucking, housing, farming, oil and medicine. They also strengthened trade associations and unions.(74)

FDR more tightly regulated the so-called common carrier monopolies. In 1934, the Federal Communications Commission was established to tightly regulate the telecommunications monopoly. In 1935, Congress passed the Motor Carrier Act, which authorized the Interstate Commerce Commission (ICC) to regulate and limit commerce in the trucking industry. In 1938, FDR signed the Civil Aeronautics Act to expand government authority over the fares and routes of the four major airlines.

FDR started increasing the regulation, subsidization, monopolization and socialization of necessities, specifically housing, food, energy and health care, that comprise most consumer spending and led to today’s higher costs.

FDR used taxpayer money to subsidize home loans at low interest rates including guarantees from the Federal Housing Administration (FHA)(75) since 1934, and securitization(76) by the Fannie Mae(77) secondary mortgage monopoly since 1938. The housing subsidies helped those wanting to buy more expensive homes but hurt those that couldn’t afford the inflated prices in the urban areas.

FDR used the Agricultural Adjustment Administration (AAA) to pay farmers to leave land uncultivated and cut herds, which inflated food prices. He also used taxpayer money to subsidize favored farm crops,(78) which discouraged alternative crops, leading to monoculture and agribusiness monopolies specializing in conventional crops.

FDR restricted domestic oil and gas production.(79) During the 1930s, the National Recovery Act empowered the federal government to support state oil production quotas to reduce output and increase prices. Interstate and foreign shipments of oil were strictly regulated so as to create regional monopolies. Import duties on foreign oil were raised to protect the higher-priced American oil from foreign competition.(80) In 1935, Congress passed the Connally Hot Oil Act, which made it illegal to transport oil across state lines "in violation of state proration requirements."(81) In addition, he nationalized some of the electricity industry by converting private into cooperative and municipal utility monopolies.

FDR allowed for even greater restriction of the supply of doctors after their incomes had declined at the beginning of the depression.

In 1934 and 1935, FDR used the National Labor Relations Act to expand union membership. The act gave private sector workers the right to form unions and engage in collective bargaining and required management to bargain with a certified union. These labor monopolies prevented many workers from offering their services.

Throughout the 1930s, FDR’s depression led to further consolidation of the automotive industry in favor of the Big Three. In February 1942, their manufacturing plants were requisitioned for the war effort and they weren’t allowed to manufacture any more automobiles until October 1945.

ALCOA has been cited, even by capitalist economists, as an example of a company that created and maintained a monopoly without preferential government regulations. However, the government encouraged the monopoly until they let markets end it. The last of ALCOA’s key patents didn’t expire until 1909. After that, they continued their aluminum monopoly using U.S. property laws to buy up limited low-cost bauxite raw material deposits. They also secured limited subsidized public hydropower sites for their electricity-intensive process. During this time, high import tariffs prevented competition in the U.S. from other countries. Potential new competitors may have even been discouraged from trying to compete in other countries. ALCOA could have dumped exports overseas while overcharging in the largest U.S. market. FDR discouraged competition during the depression and the company essentially admitted to benefiting from the World War II military procurement process during their 1947 antitrust trial. Then, Reynolds and Kaiser entered the market and essentially ended their monopoly. Although ALCOA is still the leading U.S. producer of primary aluminum from bauxite, the raw material is almost entirely imported.

FDR’s socialism failed. The attempt to alleviate deflation(82) by creating inflation with monopolization and restriction of supply was largely discredited for limiting economic growth and continuing the global depression. Already suffering under the Treaty of Versailles, the depression encouraged Germany’s support for Nazi leader Adolf Hitler and the authoritarian (fascist) nationalism and imperialism that led to World War II.(83) The demands of the war, with much of the world fighting against Germany, Italy and Japan, generated economic growth and ended deflation but at the expense of inflation and slow growth in the late 1940s. Even FDR admitted the Great Depression didn’t end with the New Deal, but rather “Winning-the-War.” The U.S. was not only on the winning side but benefited from its geographical location away from the destruction at the battlefields.

FDR did appear to learn the lesson of Smoot Hawley by supporting free trade. Throughout FDR’s administration, import tariffs fell sharply from over 40% in 1933 to about 15% during the war, while the U.S maintained small trade surpluses. His 1933 “Good Neighbour Policy” called for a shift to trade agreements and reciprocal exchanges, especially with Latin American countries. The marines ended their occupations of Nicaragua and Haiti, and diplomatic relations with Cuba and Mexico became voluntary. However, in 1944, FDR allowed William Churchill of the United Kingdom and Joseph Stalin of the Soviet Union to carve up post-war Europe into Western and Soviet spheres of influence. Moreover, FDR promoted monopolies worldwide, especially when leading support for the nationalization of foreign oil industries (e.g., Mexico)(84) and the use of military spending to defend dictators(85) in oil-rich countries (e.g., Saudi Arabia).

During the New Deal era, economists finally played a significant, but still minor, policy role.(86) FDR was influenced by Marx and English economists John Stuart Mill and John Maynard Keynes. During the 19th century, Mill was attributed with liberal corporatism or “interest group liberalism" that sought to give workers more influence with management. In 1936, Keynes provided theoretical support for the use of monetary intervention and budget deficits to stimulate the depressed economy. After the war, the professionalism of economists increased a bit more since they had helped the government manage mobilization.

However, economic analyses continued to ignore market imperfections and government policies favoring monopolies. Keynes called for evaluating the need for government intervention on a case-by-case basis and recognized the monopoly as a problem. But the pervasiveness of monopolies was largely ignored by Keynes and also his critics like laissez faire economists Ludwig von Mises and Friedrich Hayek.(87) It is unknown if FDR could have been successful using deficit spending to end the depression before World War II.

Golden Age

From 1950 until the 1970s, the U.S. enjoyed the so-called post-war boom, after five years of slow growth. It is still often referred to by the misnomer “Golden Age of Capitalism.”(88) The Presidents Harry Truman, Dwight Eisenhower, John Kennedy and Lyndon Johnson were Democrats, except Eisenhower who might as well have been one and even strongly considered running as a Democrat. They actually just pared back socialism a bit with reduced regulation of industry. Socialism continued with support for monopolies and social spending financed by high taxes.

The highest marginal tax rate remained at about 90% from 1945 to 1960 before being reduced to about 70% from 1960 to 1980. Corporate taxes were increased from 40% to about 50%. Any Keynesian stimulus was limited because the national debt remained flat and interest rates were increasing, although rates were still relatively low at under five percent until the 1970s. From the late 1960s to the early 1980s, America’s pervasive industrial pollution led to the passage of most current major environmental laws.

The U.S. and its monopolies enjoyed unprecedented, albeit declining, economic power primarily because every other major economy in the world was severely damaged during World War II.(89) Low import tariffs led rapid domestic and global growth. During the 1950s and 1960s, the financial services sector recovered from two to almost four percent of GDP and enjoyed about 15% of total domestic corporate profits. Easier credit led to rising private debt.

The U.S. became the world’s manufacturing center with plentiful high-paying jobs. Technological innovation spread from military to commercial applications especially automobiles and petrochemicals including agricultural chemicals. The nation became the world’s economic leader with about 4% annual growth and benefited from trade surpluses. Productivity growth was high.

U.S. corporate profits were about seven percent of GDP in the 1960s. From 1949 to 1965, the Dow Jones stock market, comprised largely of monopolies, tripled from about 2500 to 7500 (2018 dollars). From 1946 to 1973, the personal savings rate increased from six to 12 percent. Average Americans also benefited from social spending made possible by taxing the monopolists. By the late 1960s, wealth disparity(90) fell to a 20th century low. By 1975, the U.S. economy had grown to represent 35% of the entire world’s industrial output.

But hegemony proved to be no substitute for competitiveness. Foreign competitors were returning with new investments and technology. They were competing with lower costs for wages including health care benefits, environmental controls and taxes. Production from America’s manufacturing monopolies were declining. By the 1970s, trade surpluses turned to deficits. The post-war boom ended with energy and health care monopolies causing stagflation. Productivity collapsed. Financial companies still controlled less than 4% of GDP but enjoyed about 20% of profits, aided by the higher interest rates during the 1970s. U.S. corporate profits declined to under six percent during the 1970s. By 1982, the Dow Jones stock market had lost virtually all of its previous gains back to about 2500 (2018 dollars).

Mostly Democrats ramped up the subsidization, regulation, monopolization and socialization of necessities, specifically housing, food, energy and health care, that led to the simultaneous high price inflation and unemployment of the 1970s.(61) Even Democrat President John F. Kennedy failed to challenge monopolies after promising during the 1960 campaign that: “I believe in an America where the free enterprise system flourishes for all other systems to see and admire - where no businessman lacks either competition or credit - and where no monopoly, no racketeer, no government bureaucracy can put him out of business that he built up with his own initiative.”

After the war, the Fannie mortgage monopoly, and later the Fannie and Freddie duopoly, along with housing subsidies, led to unsustainable demands for more expensive (91) and larger(92) homes(93) for the middle class. This led to urban sprawl,(94),a shortage of affordable(95) housing and slums for the poor. Suburban housing developments were also encouraged by rising automobile ownership and vice versa.

From the 1940s to the late 1970s, U.S. scientists led a Green Revolution that increased agricultural production around the world using new technology (e.g., hybridization of cereal grains, fertilizer, pesticides, etc.). But U.S. agricultural subsidies were increased for conventional crops, strengthening crop and agribusiness monopolies and inflating prices for farmland.(96) Crop subsidies blocked the development of new and potentially-healthier crops. Since 1973,(97) politicians have subsidized food production,(98) leading to dumped exports that have retarded agricultural and economic development in the developing world.(99)

From 1955 to 1973, the U.S. government adopted oil import quotas to limit competition for domestic Big Oil & Gas monopolies. Two voluntary programs were followed by the Mandatory Oil Import Program in 1959. In 1960, the Organization of the Petroleum Exporting Countries (OPEC) was founded by low-cost oil-producing nations to control supply and prices. After 1970, U.S. production started declining as Big Oil & Gas found shrinking economically-recoverable oil and gas reserves under existing environmental regulations. From 1971 to 1983, the U.S. placed domestic price controls on petroleum products. In 1980, the U.S. government established and funded a Synthetic Fuels Corporation that tried but failed to manufacture alternatives to oil imports. Since 1973, the OPEC cartel has been able to manipulate supply and disrupt the global economy with alternating periods of gouging consumers and bankrupting competitors. They restricted supply and practiced price gouging for about 13 years after the Energy Crisis of 1973-4(100) (and later in 2001). They flooded markets(101) and practiced predatory pricing about the same length of time after 1986 (and briefly later in 2015).

Politicians claimed The Public Utility Regulatory Policies Act of 1978 was intended to create an electricity market for non-utility power producers. But it mostly failed because regulators allowed the utility monopolies to set the prices for the independents. The monopolization of the U.S. energy and agricultural industries blocked many potentially-economic alternative energy innovations (e.g., cogeneration, lower-cost biofuels from alternative farm crops, etc.).

In 1965, the U.S. nationalized about half of health care purchasing through Medicare and Medicaid. These government programs subsidized increased consumer demand while the supply of doctors and hospitals was restricted by the government. The doctor and hospital monopolies caused a Health Care Cost Crisis,(102) as well as a Malpractice Crisis. An oligopoly of physicians helped create monopolies among other health care providers. Even when some geographic locations have had a surplus of secondary care physicians, they didn’t compete on the basis of price. This is likely because primary care physicians, that refer patients to them, were not under competition to care about costs. Moreover, restricting the number of physicians limited the volume of patient care and thus competition rendered by institutions like clinics and hospitals. Costs(103) skyrocketed to nearly triple those of other developed countries. The high costs caused most of the national debt and a major loss of global competitiveness. Compared to Japan, U.S. health care costs are adding $1500 to the cost of a car.

Since 1945, U.S. monopolies manufacturing goods like steel, autos and petrochemicals have been losing global, and even domestic, market share. Conventional wisdom says it was largely due to comparatively high labor and environmental costs, and maybe also taxes. Some trade partners have been accused of manipulating their currency more than the U.S. does. But a case can be made that the problem has been a declining economy with government-established monopolies that have inflated costs while discouraging new entrants and innovation.

In 1945, the U.S. steel oligopoly controlled 72% of the world's production. After 1950, the industry grew but not as fast as those in the rest of the world. The U.S. became a net importer of steel, mostly from Japan. Since 1969, the U.S. oligopoly started moving most production away from using ore raw material and toward low-cost mini-mills using waste steel that requires less labor, energy and pollution control. By 1973, U.S. steel production peaked and has been declining gradually since, along with a slowing domestic economy. An international oligopoly of steel companies has been supported with preferential subsidies from their governments to meet at least most of their own domestic demands. The domestic oligopoly and stagnant demand have discouraged new entrants and innovation in the U.S. By 1980, the U.S. had a global market share of about 15% compared to 20% for both Europe and the Soviet Union and 16% for Japan.

From 1945 to the 1970s, the Big Three automakers dominated U.S., and with it also global, production. Preferential government regulations were used to prevent competition from the few domestic independent automakers left after the war and those that tried to enter the market. Studebaker-Packard and Kaiser-Frazier closed in the late 1950s because government-favored labor unions, whose membership was peaking, demanded even higher wages and benefits than they got from the Big Three. Entrepreneurs Preston Tucker and John DeLorean were harassed by the SEC and other government agencies until they had to close in 1948 and 1973, respectively. The 1979 government bailout of Chrysler assured America’s continued favoritism for the Big Three.

Since the 1970s, foreign competitors have captured significant U.S. market share as domestic auto production peaked and remained stagnant. The Big Three suffered from high costs resulting from union worker monopolies and their need for high-cost health care provided by medical monopolies. These higher costs also discouraged new entrants and innovation. Foreign automakers, especially in Japan, benefited from higher profits while developing more fuel-efficient cars needed for environmental control and to counter high costs from oil monopolies. Autos represent the largest part of the current U.S. trade deficit at about 38%.

In 1945, the big U.S. oil and gas monopolies started today’s petrochemical industry. Between about 1960 and 1980, they experienced a "golden era" for petrochemicals with very high growth led by the development of polymers (e.g., plastics). Petrochemicals has become the largest U.S. manufacturing industry. The energy crisis led to higher oil and gas raw material costs for petrochemicals, but the lower-cost Middle East OPEC oil monopolies still didn’t bother to enter the markets with much capacity until much later. The slowing of the domestic petrochemical industry was actually caused by the slow growth of the U.S. economy and shrinking exports. New petrochemical production capacity moved to the rapidly-growing and protectionist Asia Pacific, including Japan and China. The monopolization of the oil, gas, chemical, electricity and agricultural industries in the U.S., and also a declining economy, has discouraged new entrants. It has also discouraged innovation including potentially lower-cost and cleaner biochemicals, bioplastics and biodegradable plastics from new farm crops.

The ignoring of monopolies, especially for the energy and health care necessities, led to high inflation even while economic growth slowed to about 3%. (Necessities can inflate prices due inelasticity.) From 1965 to 1982, inflation was about 333% for energy and 280% for health care compared to well under 200% for the other remaining items excluding energy and health care. Monopolized industries selling necessities that relied on energy, especially transportation (auto and airlines), agriculture (food) and housing, inflated at about the 200% average rate. Education also inflated at about the average rate until 1981. In 1973, Nixon abandoned the gold standard and the Fed’s loose policies(104) allowed the price inflation to manifest as monetary inflation, instead of allowing the economy to go into recession. (In the past, inflation was primarily due to printing money for war.) The Energy (or Oil) Crisis resulted in the dreaded stagflation of the 1970s,(105) which is considered tied for the second worst financial crisis(106) in U.S. history behind the Great Depression.


The Fed eventually had to respond to the inflation by raising interest rates from about 7 percent in 1976 to 16 percent in 1982. The high interest rates priced many people out of new cars and homes. This led to the Great Recession of the early 1980s,(107) the Savings and Loan Crisis(108) and spread abroad as the Latin American Debt Crisis. The Great Inflation of the 1970s and Great Recession of the early 1980s hurt countless people and wrecked many businesses.

During the entire Golden Age, U.S. politicians spread economic hardship worldwide by promoting global monopolies. After World War II, the U.S. enjoyed unprecedented global political power(89) that came with being the only remaining economic and military power. When presented with these advantages, Presidents Truman and Eisenhower continued to press for free trade with allies. The nation quickly relinquished direct military control of Germany, Austria, Japan and Korea. The U.S. offered financial assistance and trade preferences as its monopolies benefited from the rebuilding of foreign competitors. In 1953, when Charles Erwin Wilson, President Eisenhower’s nominee for defense secretary, faced the Senate Armed Services Committee, the General Motors CEO said: “what was good for our country was good for General Motors, and vice versa.”

Moreover, from 1947 until the late 1980s, the U.S. waged a Cold War against the Soviet Union for control of the global economy that included an arms race with nuclear proliferation.(109) Both nations sought hegemony, raw material sources and markets for their monopolies. The U.S. didn’t want to work with the Soviet Union’s brutal dictator Joseph Stalin and his successors Nikita Khrushchev and Leonid Brezhnev. The Soviet Union claimed the U.S. wouldn’t treat them as a legitimate part of the international community. The military spending on both sides helped pump up the global economy but at the long-term expense of national debts, global prosperity and world peace.

During the Cold War, the U.S. practiced informal and sometimes formal imperialism. It tried to maintain global economic dominance for its international monopolies as well as protect the property and investments of its corporations and citizens in foreign countries. The nation used its military-industrial complex to assure the security of friendly foreign governments especially in Europe, Asia, Latin America and the Middle East. When economic and political control was threatened, they resorted to covert action, backing dictators and involvement in wars in Korea, Vietnam and the Middle East (especially over oil).(110)

During the post-war boom, economists tried but failed to make economics more deserving of authority and a science by using mathematical synthesis with the pro-regulation theories of Keynes.(111) Mathematical modelling proved unrepresentative of the actual economy. The professional and institutional authority of economists may have increased into the 1960s, but lawyers still dominated competition policy into the 1970s.(112) During the 1970s, Keynesian economics was discredited for failing to explain simultaneous rapid inflation (5 to 10%) and high unemployment (5 to 9%).(113)

Galbraith, the most influential economist of the 1950s and 1960s, joked that “economics is extremely useful as a form of employment for economists.”(114) He admitted economists had neglected monopolies,(115) found most of the economy was controlled by them, blamed both capitalism and government, and decided nothing could be done. Economist Milton Spencer explained: "U.S. policy-makers can achieve full employment with appropriate fiscal and monetary policies. However, they face the constraint of inflation resulting from monopolistic elements in the economy." He added that monopolies are not addressed "because of the political costs it may entail."(117)

In 1958, economists started using the term “market failure.” Thereafter, Keynesian economists increasingly referred to the concept and even made some minor efforts to analyze them. For example, many claimed free markets couldn’t work in energy and health care. The theory of peak oil, based on theories originally proposed by economist Thomas Malthus, would be proved incorrect by the increased production from non-OPEC countries during the late 1980s. But the unproven theory that “the supply of doctors can create their own demand” was used to continue restricting supply and prevented a test of whether markets could control health care costs.


Corporatism is a strong central government controlled by powerful interest groups. Compared to socialism, corporatism has more policy-making by special interests, favors private-sector monopolies, and doesn’t emphasize public-sector monopolization, taxes and social spending. Innovation is limited to industries favored by the government and monopolies and new industries that don’t threaten favored monopolies. Authoritarian corporatism is doomed due to cronyism, corruption and wealth disparity. Corporatism leads to fascism, a far-right type of authoritarian corporatism and nationalism, because a benevolent dictator or supreme leader can promise to stop the corruption of the corporatists. But fascism is also doomed because it leads to dictatorship, conflict and war.

Since the late 1970s, the problem for corporatist politicians has been their inability to sustain prosperity for the middle class. They have been trying to delay a crash with Keynesian stimulus while showing de-monopolization is not possible.  During the Deregulation era, politicians promised capitalism but corporatists sabotaged efforts with favoritism for monopolies while offering cheap credit for the middle class and establishing global trade to control inflation. During the recent Globalism era, the corporatists blatantly favored monopolies and created massive public and private debt and global trade deficits. During the Nationalism era, President Donald Trump has blamed foreigners for the problems created by monopolies.

Deregulation Era

From 1978 to 2000, the U.S. experienced a modified repeat of the Gilded Age. U.S. Presidents including Democrat Jimmy Carter to some extent but more significantly Republicans Ronald Reagan and George H.W. Bush and Democrat Bill Clinton promised a move to capitalism through deregulation, and also privatization as needed. However, they just delivered mainly less, and in some cases more, regulation of monopolies under another type of authoritarian economic system, which this time resembled corporatism. Reagan also championed lower taxes, and perhaps inadvertently deficit spending, as means to stimulate economic growth but those mainly benefited the monopolists (i.e., “supply side” or trickle down” economics). After 1982, the Fed actively manipulated and generally lowered interest rates. Both economic growth and wealth disparity increased, although not as much as during the Gilded Age.

Economic growth was strongly correlated to the success of efforts at reducing the costs demanded by energy and health care monopolies. Overall, growth benefited mostly from stopgap solutions for high energy prices and health care inflation. The Great Recession of the early 1980s slowed economic growth and decreased consumer demand, which led to lower oil prices and health care inflation. Lower oil prices and inflation and higher productivity were extended by a boost in global oil production (stimulated by the previous high prices). Lower medical inflation was continued through tighter regulation at the expense of quality. Lower inflation, near the historical average of about three percent, allowed for generally declining interest rates. The Fed did raise interest rates temporarily to combat reemerging health care inflation in the late 1980s. Then oil prices spiked after Iraq's invasion of Kuwait in 1990. These two events led to the 1990-2 recession, the period’s only exception to sustained growth. The highest growth occurred after the Asian crisis of 1997 sent oil prices plummeting until 2000. From 1983 to 2000, lower inflation and interest rates helped return economic growth to an average of about 3%. It also sent the stock market back up to about 7500 (2018 dollars) by 1995.

Higher costs for health care continued as a major drag on growth since costs were already high and even low inflation of higher costs leads to much higher costs. Education inflation mirrored that of health care and become another, albeit smaller, drag due to its smaller fraction of the economy. The effects of both health care and education costs were muted by tacking most of the spending onto the national debt.


The monopolized economy shifted to fast-growing service industries from manufacturing, which was declining due to global trade. Health care grew from eight to 13 percent of GDP, due to rising demand and increasing prices, and was the largest industry. Professional services, which included those needed to move manufacturing to other countries, grew rapidly from about six to 11 percent of GDP. Education grew from about seven to nine percent of GDP. The financial services sector (e.g., banking, insurance and real estate) used credit increasingly available at lower interest rates to double to an unprecedented eight percent share of GDP (“financialization”). In the late 1990s, technology, one of the few industries benefiting from technological innovation and contributing to productivity growth, doubled to over two percent of GDP. From 1994 to 1996, information technology profit margins increased from about eight to 12 percent (before collapsing in 2000). The tech heavy NASDAQ grew from about 1000 in 1995 to over 5000 in early 2000. The Dow Jones doubled to about 15,000 (2018 dollars). The additional tax receipts temporarily eliminated annual national budget deficits.

However, the economic growth and stock market gains of the era were aided by Keynesian stimulus from deficit spending prior to 1995 and lower interest rates after 1990. Deficit spending was achieved by increasing spending and reducing taxes. Spending was primarily used for government health care programs and the military (who took credit for ending the Cold War). The corporate tax rate was reduced from about 45% to 35% in 1986 and the highest marginal tax rate dropped from 70% to under 50%. Meanwhile, the Fed loosened monetary policy, including a general lowering of interest rates overall,(118) to finance the increasing household, corporate and public debt used to help grow the economy. The Fed set interest rates low enough to promote economic growth without reigniting inflation. Interest rates were usually well above the historically typical 4%. The private credit market debt to GDP ratio continued to grow at the same constant rate it had been growing since 1946 until 1996. U.S. corporate profits remained under six percent from the 1970s to 1995. The only exception was after the Fed responded to the 1990-2 recession by lowering rates to about 3% from 1992 to 1994. This was the same low rate before the Great Depression. After 1996, the private credit market debt to GDP ratio grew at faster rate and was greater than the Great Depression peak. Profits exceeded six percent from 1995 to 1997, before dropping back under from 1997 to 2000.

The policies benefited many monopolists at the expense of the nation. Health care monopolies continued to possess the market power to demand excessive payments from consumers, corporations and government. Public education monopolies did the same and inflated prices even more than health care in the late 1990s. Nothing was done about energy monopolies and high prices would return after 2000. Other monopolists, particularly in banking and technology, benefited when the government and Fed banking monopoly used Keynesian stimulus to respond to growth suppressed by high costs demanded by monopolists. After their share of total domestic corporate profits plunged to a low of about 10% during the early 1980s recession, financial companies were able to capture an incredible 25% throughout the rest of the century. After 1994, tech monopolies also saw their share of profits increase. Lower interest rates increased asset, especially stock, prices for monopolists in many industries. Higher stock prices benefited executives. Lower rates also helped monopolists finance more mergers and acquisitions. The lower taxes made them even richer.

Meanwhile, the policies supporting monopolies and debt hurt nearly everyone else. Real wage growth was stagnant. Personal debt increased. The savings rate fell from about 12 percent during the 1970s to seven in 1990 and four in 2000. Lower savings meant less money for retirement and investment. Investment dropped for developing new businesses and technologies, including robotics needed to compete with low-wage nations. High medical costs made auto and other manufacturing companies less competitive. Lower interest rates created bubbles such as the dot-com bubble. In the late 1990s, home prices started its rise (toward the 2007 housing collapse). The rising national debt led to increasing debt payments (including interest) that will continue to limit discretionary spending and slow future economic growth.

Throughout the era, politicians claimed to be trying to foster competition through partial deregulation(119) of private-sector monopolies. Instead, corporatist politicians allowed regulated monopolies to write the deregulation rules(120) and created even nastier deregulated monopolies. This was a major problem for banking,(121) and eventually for housing. It also occurred in several common carrier industries, including airlines(122) in 1978, electricity and natural gas utilities after 1992, and telecommunications(123) in 1996. Monopolies also had a role in writing the rules for trucking in 1980, oil and natural gas production in the early 1980s and agriculture in 1996, but deregulation appeared to have less effect in these industries. Deregulation and lower subsidies for new potential entrants benefited existing education monopolies. The main exception was health care, where the monopolies became even more tightly-regulated (surprisingly by Reagan).

In 1980, Carter signed the Depository Institutions Deregulation Act which phased out restrictions on interest rates that depository institutions could offer on their deposits and shifted banking from lending to trading. Reagan deregulated interest rates on savings accounts. He also gave the Fed more control by allowing all depository institutions to borrow from them in time of need in exchange for placing a certain percentage of their deposits with the central bank. The Garn-St. Germain Act of 1982 allowed savings banks to now issue credit cards, make non-residential real estate loans and commercial loans. In 1999, Clinton signed the Financial Services Modernization Act that partially deregulated banking by repealing part of the Glass–Steagall Act of 1933 that had prohibited any one institution from acting as any combination of an investment bank, a commercial bank and an insurance company. But the Fed still had a monopoly and that would lead to the financial crises of the 2000s.

During the early 1980s, the OPEC cartel and Big Oil & Gas continued to monopolize their industry with excessively high prices. The Reagan administration deregulated wholesale markets for oil and natural gas. It didn’t result in much increased domestic production. However, production did increase among other non-OPEC producers, including Canada, Mexico, Brazil, China, Norway, Russia and Kazakhstan. This forced OPEC, and especially Saudi Arabia, to cut oil production and market share in order to maintain high prices. By 1985, Saudi Arabia had to abandon the strategy to preserve market share by increasing supply and allowing a price collapse. During the 1990s, new environmental regulations placed on coal-burning, a glut of cheap natural gas and the development of fuel-efficient combined cycle gas turbines made natural gas the cheapest fuel for U.S. electricity generation. Low oil and gas prices temporarily benefited the global economy but also made non-OPEC producers less profitable. In the early 2000s, the monopolies, shortages and high prices for oil and gas started to return.

The federal Energy Policy Act of 1992 allowed state politicians to preserve their regulated utility monopolies by simply opting out of deregulating electricity and natural gas retail markets. Moreover, the 20 or so states that started to deregulate these markets typically allowed regulated utilities (e.g., Enron) to create deregulated monopolies by designing and manipulating the rules. Manipulations included rigged trading schemes,(124) preferential access to monopoly transport lines and the sale of regulated utility assets to deregulated affiliates at bargain prices. Deregulated states failed to protect consumers by selling old utility nuclear and coal plants at market prices. These old plants had received unfair grandfather exemptions from environmental and safety regulations established during the 1970s and 1990s, respectively. (This author’s 1997 demand that deregulation rules be designed by energy agencies before attempting stakeholder meetings was ignored by national and state politicians in Minnesota.)

The Federal Agriculture Improvement and Reform Act of 1996 (or “Freedom to Farm Act”) failed to deregulate agriculture. Many policies favoring conventional crops were retained, including the marketing loan provisions for the major crops (corn, wheat, cotton, rice, soybeans, etc.). The Act also failed to solve the problem of crop over-production before tighter regulation was quickly reinstated. Alternative markets couldn’t be penetrated anyway since the energy and chemical industries remained monopolized.

The transportation industries were deregulated early. The Airline Deregulation Act of 1978 removed FDR’s government-imposed restrictions on airlines for market entry, routes and prices. However, a new form of regulation developed to deal with market imperfections. The allocation of the limited number of slots available at airports resulted in corporatist cronyism and deregulated monopolies. The Motor Carrier Act of 1980 deregulated the trucking industry. Deregulation didn’t appear to increase trucking monopolization much, likely because it started as a cottage industry.

Education is comprised of both public institutional and teacher monopolies that enjoy little competition. Public schools control 92 percent of primary and secondary (K-12) education. They achieved territorial monopolies through almost total and exclusive funding by state and local governments. Because consumers don’t spend much of their own money on them, they don’t contribute significantly to the Consumer Price Index (CPI) for education. However, the CATO Institute found inflation-adjusted government spending per student for K-12 tripled from 1970 to 2011, while student test scores for reading and math remained flat. Competition could reduce costs, government spending and provide students with better quality. A possibility is private schools funded by public vouchers (if politicians would provide enough funds for poor families).

Public colleges control about 78 percent of higher education. They achieved monopolies through majority and preferential funding by federal and state governments. High-priced private colleges, where many wealthy monopolists send their kids to gain influence with each other, control a 22% share niche market. Because consumers (e.g., students and their families) have provided much of the funds at public colleges, and even more at private schools, higher education is the major contributor to the CPI for education.

Since the 1970s, the demand for a college education has increased rapidly due to monopolies in virtually all economic sectors, declining entrepreneurial and employment opportunities since the end of the Golden Age and less significantly global trade. Students are forced to impress monopolists with more and prestigious education. Since 1980, college enrollment rose almost 150% while the number of four-year colleges rose about 50%. Increasing demand and suppressed supply inflated total prices. From 1979 to 2010, total prices and tuition and fees increased rapidly and faster at public than private colleges, although private colleges remained much more expensive due to limited government subsidies. The market power of the college monopolists increased and they responded by inflating costs, especially administrative. They also restricted enrollments to increase prestige at the expense of expansion.

Meanwhile, federal and state governments have been cutting their share of payments for college education since the 1970s. This has forced students to increase their share from a third to a half of the total and now inflating costs. They had to borrow heavily to pay increased tuition and fees. A total of 44.2 million borrowers now owe over $1.5 trillion in student debt (in 2018). Much of this debt will have to be justifiably bailed out by the federal government. Moreover, monopolization of the economy stressed the finances and home life of parents and students. The stress hampered their ability to study. Tax credits provided some relief for families.

Tax credits also provided some fairness for potential new colleges that may have wanted to enter the market. However, market entry was still discouraged by the disadvantages of not receiving past, and even present, subsidies (e.g., like the railroad monopolies of the Gilded Age). Economists at colleges failed to examine how government funding created monopolies for their institutions. The government could have prevented inflation by simply funding expansion through new colleges until there was a level playing field and competition between all colleges. Eventually, direct subsidies to colleges could be eliminated by replacing them with commensurate subsidies funded through students (tax credits, vouchers, etc.). Student subsidies could be reduced as competition reduces prices.

The Telecommunications Act of 1996 allowed monopolies to simply opt out of competition.(125) The Federal government didn’t eliminate government-protected monopoly franchises for local phone, cable and internet services. The local exchange carriers were not required to provide competitors access to their facilities (i.e., considered a market imperfection). Moreover, local governments and public utilities have also continued to block access by making it unnecessarily difficult and expensive to build additional networks.

During the 1980s and 1990s, Microsoft acquired a software monopoly using overly-generous government intellectual property protections, including laws awarding patents for 17 years and copyright for 75 years. After 1995, the tech industry started growing rapidly and generating large tax receipts used to reduce deficits. In 1998, Microsoft’s antitrust trial revealed they were using their monopoly power to suppress smaller companies, startups and innovation.

Since the 1990s, U.S. high tech manufacturing monopolies, often protected by patents, have been increasingly combining recently-developed electronics and digital technologies. Products include computers, communication and navigational equipment and medical monitoring devices. Electronics has become the second largest U.S. manufacturing industry. However, the use of toxic materials and the failure to develop technologies for recycling electronics led to serious waste disposal problems. Since 2006, electronics manufacturing, along with innovation, has been rapidly moving to China aided by much lower labor and environmental costs. For example, cell phones produced in the U.S. would likely be too expensive for most consumers and Apple’s stock price would plummet.

Since the 1980s, the health care purchasing and delivery system has been more tightly regulated and monopolized by corporatist government-private partnerships, called “managed competition.” The federal government started using its buyer monopoly power, through its Medicare and Medicaid programs, to effectively set price and quality controls (e.g., underpayments) on physicians and hospitals (Stagg-Elliot 2012). Moreover, federal laws encouraged large corporations to form buyer monopolies and negotiate lower cost deals with larger providers. For example, the Employee Retirement Income Security Act of 1974 exempted employee health benefit plans offered by large employers (e.g., managed care HMOs) from state regulations and lawsuits (e.g., brought by people denied coverage). Buyers encouraged providers to became more monopolized with the merging of clinics and hospitals. Tighter regulation reduced the rate of increases in total annual health care spending but also led to standardized care, rationing and lower quality. The reduced quality led to increased malpractice costs. Administrative costs and executive salaries also increased. Other costs were shifted onto small companies, many of which would drop medical insurance for employees.

In 1984, the Drug Price Competition and Patent Term Restoration Act strengthened patent and other intellectual property protections and created new prescription drug monopolies. Meanwhile, high medical costs had increased the clinical costs required for pharmaceutical testing, which increased the need for higher drug prices to compensate for research costs. In addition, the government also allowed the pharmaceutical monopolies to bribe physician monopolists to prescribe more expensive drugs. By the 1990s, drug costs began to increase rapidly.

Shortly after 2000, economic crises resulted from the tech and energy monopolies, and also health care monopolies, as well as interest rate manipulation, low taxes and accumulated debt. Regulated energy monopolies led to shortages of natural gas and higher prices for both the fuel and electricity. The manipulation(126) of deregulation rules by utility monopolies led to even higher electricity prices in deregulated states, especially the California Energy Crisis of 2000.(127) Even more significantly, it soon became clear that the tech industry, including telecommunications, software and electronics, was also monopolized. In 1996, Fed Chairman Alan Greenspan warned that stock investors were exhibiting “irrational exuberance” aided by low interest rates. In 2000, the Fed increased interest rates to over 6%, leading to lower asset values, the bursting of the so-called tech (“internet”(128)) stock market bubble(61) and the early 2000s recession. By 2002, the Dow Jones stock market had fallen from a high of about $15,000 to a low of about $10,575 (2018 dollars). The tech heavy NASDAQ collapsed from a high of over $5000 in early 2000 to a low of under $1200 in 2002. Most investors lost their money while the insiders, that had the time and money to research the political manipulation, made fortunes.

During the Deregulation era, free trade(129) with countries, also dominated by monopolies, helped grow the global economy, suppress inflation and reduce pollution in the U.S. By the mid-1980s, the U.S. trade deficit grew to over $100 billion per year. Lower-cost imports of cars and machinery poured in from Japan, who offered wages comparable to those in the U.S. In the late 1980s and early 1990s, U.S. exports and the trade balance recovered. However, after the 1994 passage of NAFTA, the trade deficit grew to nearly $400 billion by 2000, including $25 and $100 billion deficits with Mexico and China, respectively. After allegedly(130) receiving campaign contributions from China, President Clinton granted the nation 2001 entry into the World Trade Organization and other trade advantages. This led to even higher future trade deficits.

U.S. formal imperialism continued especially against the Soviet Union and in the Middle East and Latin America. Reagan and Bush intensified the Cold War, including the arms race, until the collapse of the Soviet Union between 1989 to 1991. The U.S. was involved in conflicts over oil in Iran and Iraq: Iran–Iraq War from 1980-8, Gulf War in 1990-1 and Operation Desert Fox in 1998. In 1986, the Reagan administration was caught breaking U.S. and international law in the Iran–Contra Scandal. They used proceeds from covert arms sales to Iran during the Iran–Iraq War to fund the Contra rebels fighting against the left-wing government in Nicaragua.

Reagan and Bush also used informal imperialism to spread corporatism throughout much of the collapsing socialist world. They promoted the sale of state assets to the private sector (i.e., privatization(131)) as a means of increasing cost efficiency. But widespread corruption led to sales of the public monopolies to those with political connections at bargain prices. This created private monopolies and massive wealth for oligarchs. During the 1980s, Margaret Thatcher and successor John Major of the United Kingdom experienced some of these problems while privatizing steel, energy, transportation and telecommunications monopolies. Latin American countries certainly did while privatizing transportation, telecommunications and water monopolies. In the early 1990s, extensive privatization in the former Soviet Union was corrupted with assistance from the World Bank, U.S. Agency for International Development and German Treuhand. The ex-CIA director Bush ruined an opportunity to promote competitive markets with reformist Mikhail Gorbachev. The corruption led to the rise to power of an ex-KGB officer, and now dictator, Vladimir Putin.

During the era, the economics profession was led by neoclassicals that favored laissez-faire capitalism (like during the Gilded Age). The most influential were likely Milton Friedman and George Stigler, both Nobel laureates teaching at the University of Chicago. Stigler(132) noted: "most important enduring monopolies or near monopolies in the United States rest on government policies. The government’s support is responsible for fixing agricultural prices above competitive levels, for the exclusive ownership of cable television operating systems in most markets, for the exclusive franchises of public utilities and radio and TV channels, for the single postal service—the list goes on and on. Monopolies that exist independent of government support are likely to be due to smallness of markets or to rest on temporary leadership in innovation."(133) Friedman found high health care costs were caused by government increasing demand and restricting supply.

But corporatism was also revived in response to the new economic threat from stagflation. In the 1980s, attempts to create neo-corporatist arrangements between corporate and labor monopolies were advocated by unsuccessful Democratic Presidential candidates Gary Hart and Michael Dukakis. As Secretary of Labor during the Clinton administration, economist Robert Reich had more success promoting neo-corporatist reforms. Meanwhile, Republicans could have been considered to be practicing a version of corporatism with corporate monopolies.

Deregulation and privatization were discredited and essentially ended with the economic crises in 2000 and 2008. Capitalist economists failed because they had ignored market imperfections and that corporatist politicians, regulators and economists were allowing monopolies to write the deregulation rules. Although economists have praised privatization in Latin America, opinion polls and protests suggest the public disagrees. Corporatists continue to blame capitalism for the failure of deregulation, privatization and tax cuts. The blame is undeserved especially since the economics profession has generally accepted Stigler's “theory of regulatory capture.” It says governments regulate at the behest of producers who control the regulatory agency to thwart competition.(134)

Globalism Era

From 2001 through 2016, big business Republican President George W. Bush and big government Democrat President Barrack Obama unabashedly led the movement to full-blown corporatism.(135) The economy resembled that of the Progressive era in that both eras were institutionally monopolized while falsely blaming capitalism for the monopolistic failures of the past era. In 2013, the U.S. House Budget Committee admitted: “In too many areas of the economy – especially energy, housing, finance, and health care – free enterprise has given way to government control in partnership with a few large or politically well-connected companies.”(136) Corporatist politicians granted preferential policies to their moneyed special interest cronies for the development of these industries and their favorite technologies. Meanwhile, they also tried to buy time for the development with extreme and harmful Keynesian stimulus.

By the end of the era, the monopolized economy was over a half energy, housing, finance and health care. Monopolists were granted the market power to demand excessive prices and profits, especially in the finance (banking and housing), technology, education, health care and energy sectors. The economy had the slowest annual growth rates in the nation’s history with an average of only about two percent, even lower than that during the Progressive era. As the politicians and their monopolist cronies got richer and real wage growth remained stagnant for workers, wealth disparity reached levels not seen since the start of the Great Depression.(137) Deficit spending increased the national debt (as a percentage of GDP) to near the nation’s historical record levels accumulated during World War II. Moreover, the corrupt economic development has largely failed.

Health care and education costs provided a large and consistent drag on the economy. The U.S. continued to use regulation to limit health care inflation at the expense of quality. However, total costs remained high and rising. The nation continued to pay the high-priced bills required by health care monopolies for an incredible 50th straight year, literally wasting a couple trillion dollars annually by 2016. Inflation of education costs increased even far beyond that of health care and also became a significant drag, albeit at a lower fraction of the economy.

What little economic growth there was during this era was strongly correlated with controlling the costs demanded by energy monopolies. The favorable economic growth, increasing consumer demand and declining production of the late 1990s helped oil and gas monopolies, like OPEC and Big Oil & Gas, to strengthen control of the energy markets by 2000. Inflation of gas and oil prices returned and reached peaks in late 2005 and 2008, respectively.

Higher gas prices encouraged U.S. shale gas production (fracking) and led to declining economic growth starting in 2005. The slower economic growth led to lower gas prices after 2005 except for a brief return to near peak prices in 2008. After rising natural gas prices had increased electricity prices in deregulated more than regulated states before 2008, declining gas prices reversed this trend.

Higher oil prices led to the Great Recession of 2007 to 2009, which led to lower oil prices during 2009 and 2010. The lower oil prices led to higher economic growth again in 2010, which led to higher oil prices and slower economic growth from 2011 to 2014. Meanwhile, high-cost U.S. shale oil production with low-cost gas by-product skyrocketed from 2011 to 2015. This led to lower oil prices and higher economic growth from 2014 to 2016. However, the low prices forced the domestic industry to retrench in 2016, causing slower economic growth, before it picked up a bit in 2017 as the industry started to recover with rising oil prices. In 2018, moderate oil prices returned along with moderate economic growth.

High health care and energy costs suppressed growth in other sectors. The auto and other manufacturing industries continued to decline, largely from much higher costs paid to health care monopolies than paid by global competitors in their countries. Agriculture, at about 8% of GDP, suffered from rising energy costs, closed energy and chemical markets and supplier and manufacturing monopolies strengthened by subsidies favoring traditional crops and blocking alternative crops offered by entrepreneurs. In addition, the U.S. government spent mostly on health care programs and oil-related wars in the Middle East while running up the national debt. Meanwhile, higher education inflation and costs devastated the finances of many students and their families.

From 2000 to 2012, technology stocks grew poorly and the tech sector failed to contribute much productivity growth after 2004. However, technology was still the major innovator and growth sector after 2012, grew to over 5% of GDP by 2016, realized 20 to 25 percent margins and led bull stock markets. Even though technology was further monopolized with patent and copyright laws, it was not institutionally monopolized like other industries yet (i.e., with telecom industry as the major exception in the tech sector). But today's Twitter and Facebook don't provide comparable economic booms like those of the past, according to the Minneapolis Fed's Neel Kashkari.

Like during the Great Depression era, the Fed banking monopoly tried to stimulate the monopolized economy with cheap credit. They literally loaned trillions of dollars of low interest money to its large banks, and with it, gave million-dollar job opportunities to Wall Street bankers, the Fannie and Freddie home mortgage duopoly and other financiers. Since 1998, the financial sector has spent over $6 billion lobbying Congress.(138) Since 2000, financial companies have had among the highest profit margins at 20 to 25 percent. After 2008, politicians forced the Fed to pump $4.5 trillion in monetary stimulus into the economy. The Fed provided corporations and consumers with cheap credit at incrementally and increasingly lower interest rates. The private credit market debt to GDP ratio continued to grow at the high post-1996 rate and far exceeded the Great Depression peak.

Lower interest loans increased the profit margins, profits, asset prices and stock valuations of the monopolies. They even borrowed to buy back their own equity and drive up their stock prices further. U.S. corporate profits more than tripled to $1.6 trillion. Profits increased to over ten percent of GDP (i.e., with the main exception being a temporary decline during the Great Recession). Financial and technology monopolies captured an unprecedented 35 and 25 percent of total domestic corporate profits, respectively. By 2015, 46% of the S&P 500’s net income was generated by just 23 corporate monopolies, including 16.8% by seven in tech, 13% by five in finance, 4.9% by three telecom, 4.1% by two medical, 3% by two in energy and chemicals, 2.1% by two automakers and 1.8% by two airlines. From late 2002 to late 2016, the Dow Jones stock market nearly doubled from 10,575 (2018 dollars) to 21,000, the S&P 500 nearly tripled from 800 to 2260 and the tech heavy NASDAQ more than quadrupled from 1300 to 5400.

Lower rates also facilitate mergers that allow bankers and corporate executives to bleed profits from large corporations, who receive preferential tax treatment, especially abroad.(139) Banks loaned to corporate raiders who bought companies with high-interest bonds, raising debt/equity ratios. They forced companies to cut costs for the short-term, lay off workers, and cut back on research, development and long-term projects. Corporate executives were paid according to how much they raised their companies’ stock prices in the short run. Lending to small business continued to fall sharply. Startup firms, the foremost source of job creation and GDP growth, decreased in number.

The monopolized economy continued to depress real wage growth. Consumers also saw higher bills. Low interest rates encouraged debt, discouraged saving and investment, decreased the incomes of many retirees and forced big pension plans to shift from safe to riskier investments. Fees from actively managed mutual funds took about 65% of the profits. Homebuyers put up as little as 3-percent down payment for a mortgage guaranteed by the government agency Freddie Mac. Cheap credit created asset bubbles, especially stocks, real estate and housing, that led to the Great Recession of 2007-9. Blackstone, a private-equity firm, become the largest single-family-home landlord in America, since it had the money to buy properties up cheap in bulk following the financial crisis. Now, a new real estate bubble driven by even cheaper credit threatens future financial crises.

Bush led the creation of new energy monopolies by politically picking winners and losers among fuel types. Bush imposed policies favoring certain energy sources without conducting comprehensive analyses determining the economic and environmental costs and benefits. The monopolies continue to lead to high costs and pollution, while limiting opportunities for others to do anything about it. The monopolized global oil industry has failed to develop cost-competitive supplies outside of OPEC, while worldwide demand has been increasing.

The former oil and gas man Bush created new energy monopolies among domestic oil and natural gas producers. In the Energy Policy Act of 2005, the Bush administration led the passing of preferential exemptions(140) from environmental regulations and damages for fracking of oil and gas (i.e., often called the Halliburton loophole). The preferred producers use patented technologies that require the injection of toxic chemicals, sand and abundant water supplies into the ground at high pressures. The primary environmental concern has been the toxic chemicals getting into the groundwater. Often producers don’t even clean up or properly dispose of their wastewater. In the U.S., underground resources tend to be held by private landowners, who invariably choose money from the oil and gas industry over environmental and health concerns. (This author’s Republican Representative to Congress owned thousands of acres of farmland in North Dakota during passage of the 2005 bill.)

The nation doesn’t allow such groundwater exemptions for any other technology, few nations allow it for fracking, and no competing coal or nuclear technologies receive comparable environmental exemptions for new facilities. Bush also ignored that fracking technology can cause methane leaks, that can lead to even more greenhouse gas emissions than coal burning, and earthquakes. These environmental exemptions are favoring the natural gas by-product of oil fracking, and possibly also from fracking for gas alone, over otherwise lower-cost coal in base-load electricity markets.

Yet, the oil produced from fracking is still expensive. The U.S. is the world’s marginal (highest-cost) oil producer at about $60 or $70 per barrel. The cost of the natural gas by-product of oil production is three to four dollars per thousand cubic feet. Costs are higher when natural gas is produced without oil. These high costs have occurred even though the 2005 exemptions opened the oil and gas industry to the lowest-cost of previously idle sites for fracking, which will likely decline. Fracking is capital intensive because wells produce most of their output in the first year and then decline rapidly. Even when oil and gas prices have covered costs, profits have been low and have relied on cheap credit from the central banking monopoly. U.S. crude oil inventories have been falling even at today’s high prices.

Preferential government policies favoring higher-cost wind and solar power may be blocking innovation and the development of new potentially lower-cost alternative fuels and energies, including renewables, even more than oil and gas. Wind and solar are granted renewable energy monopolies by tailored mandates and subsidies that reduce costs below the cost of electricity generation from all other energy sources including natural gas and cogeneration fueled by free waste fuel by-products. They also lower the prices that other liquid fuel production technologies can get for electricity fuel by-products thereby blocking alternatives to oil-based vehicle fuels. Wind and solar energy require gas, not solid fuels like biomass wastes, for backup for both economic and environmental reasons.

First, wind and solar are mandated by states trying to develop renewable energy to prevent the environmental problems caused by fossil fuels. Wind and solar are favored over other renewable energy technologies with massive subsidies through tax equity financing with federal tax credits and accelerated depreciation that cover 60 and 75 percent of the installation costs, respectively. The Department of Energy has estimated federal subsidies for wind energy at 5.6 cents per kilowatt-hour and even greater for solar. Wind and solar are even favored over other renewable energies that are lower-cost and more reliable for base-load, like biomass and geothermal. The American Wind Energy Association admits wind needs subsidies to compete. The U.S. Energy Information Administration projects there will be no more wind power projects after subsidies end. Moreover, politicians ignore the environmental costs of wind including the use of rare earth elements, turbine disposal, bird kills and local sound and warming effects. Since wind turbines reduce wind speeds, the resource is likely more limited than claimed and also more expensive in the future.

Second, preferential grid rules don’t penalize the intermittent generation from wind and solar for the added costs to the grid. Transmission and distribution costs are two or three times greater. Moreover, the world has failed to produce a single study showing high levels of wind energy can be backed up with even expensive fast ramping gas turbines. Wind energy may not even reduce air emissions including greenhouse gases. A true free market grid would value electricity sources by their reliability but the U.S. has not attempted it. In addition, intermittent renewable energy generation, like wind and solar, benefits from regulations favoring natural gas because gas is the lowest-cost source of back up. Meanwhile, trying to back up wind part-time with natural gas is driving up the cost of operating gas generators.

Third, wind and solar favors monopolies. Both regulated and deregulated states mandate the responsibility for developing renewable energy to the utility monopolies, who either build the wind and solar themselves or more often purchase it from cronies. The federal wind production tax credit requires passive taxable income found mainly at large corporations and among other wealthy investors. Obama provided preferential grants to political supporters that started businesses developing solar energy, batteries and electric cars.

Ethanol fuel made from corn and cellulose also receive tailored mandates and subsidies that block the development of other potentially lower-cost fuels, including renewables. In 2003, Bush tried to solve the simultaneous problems of high oil prices and crop over-production by pursuing preferential government policies,(141) including subsidies (crop insurance and commodity payments), favoring increased renewable ethanol fuel production from corn. Meanwhile, more soybeans, wheat and other crops were exported to compensate for lower corn exports and increased imports of horticultural crops. But diverting corn feed for fuel, rising oil and gas prices (i.e., that increased crop costs), and low stockpiles (i.e., required by the World Trade Organization WTO to help developing countries compete against subsidized corn and wheat from developed nations) led to the 2007-8 Food Crisis.(142) The WTO is now calling on an end to export subsidies.

Then, Bush went to the other extreme by essentially halting growth by requiring that ethanol be made from higher-yielding albeit too expensive-to-process celluose,(143) which also received even larger subsidies and also grants. Meanwhile, the U.S. blocked ethanol made from high-yielding and cheap-to-process alternative crops that could have provided an answer without subsidies if the country would have also allowed for the use of by-products for electricity generation. From 1980 to 2012, the U.S. protected uneconomical ethanol from corn by imposing a huge tariff against just such a crop, namely Brazilian sugar cane.

Politicians are risking future energy and environmental crises by blocking the development of other alternative energy sources with policies favoring primarily high-cost fracking of oil and natural gas with even higher-cost wind and solar energy. The value of electricity generated from natural gas benefits from the need to back up favored wind and solar energy. Secondarily, they have favored electric vehicles and ethanol vehicle fuel made from corn in the past and cellulose more recently. They have hyped all of the new mandated and/or subsidized technologies with false propaganda.

Recently, low-cost oil producers, especially in OPEC, decimated the U.S. fracking industry by increasing production and decreasing prices. Then, they caused prices to spike higher by cutting or maintaining production even while demand was rising. Although they allowed much of the industry to recover, they could likely run the U.S. oil industry out of business anytime they wanted and then create another energy crisis. Moreover, the Trump administration has signaled that oil buyers must stop buying Iranian crude by November 2018.

After 2000, the government increased payments for the inflated bills demanded by medical monopolies. In 2003, Bush used the Medicare Prescription Drug, Improvement, and Modernization Act to provide subsidies to the elderly for drugs. In 2014, the Patient Protection and Affordable Care Act of 2010 (“Obamacare”) provided mandates, subsidies and insurance exchanges for workers, and the expansion of Medicaid for the poor. Quality deteriorated, so many states restricted malpractice awards. High health care costs have resulted in a major loss of global competitiveness,(144) and most of the national debt.(145) In the future, Obamacare(146) could allow bureaucracies to control patient treatments and prices, while lobbied by the industry. The Democrats also favor a nationalized single-payer monopoly.

Since the 1970s, genetic engineering has had the potential to revolutionize health care, agriculture, energy, chemicals and materials, and create economic booms in these industries. Granted, the technology must overcome fears of unhealthy impacts on medicines, foods and the environment. However, government-favored monopolies have discouraged innovation. The cost of simple personalized genetic testing and health care treatments have been unaffordable for even many carrying insurance. The Monsanto seed monopoly has been offering mainly only GMO versions of a few traditional crops (used for food, energy and industrial products) that tolerate their Roundup weed killer.

Since 2000, education costs have inflated at an even faster pace. A relatively affordable college education can still be obtained by attending the first two years at a community college followed by two years at a public college. However, the problem remains that the good ole boy network of corporatist monopolies in other industries are hiring and rewarding people according to the prestige of the college attended, especially very expensive private Ivy league colleges (so-called meritocracy).

The seven tech monopolies dominating the stock market - Apple, Google, IBM, Intel, Microsoft, Cisco and Oracle - have been relying on government patent and copyright laws. Just because these companies are the first to patent or copyright doesn’t mean they should control the technology for 17 and 70 years, respectively. For example, all radical technologies behind the iPhone were funded by government, mostly through defense research funds: this includes the internet, GPS, touchscreen display, and even the new voice-activated Siri personal assistant.

The corporatists have supported housing and banking monopolies, including the Fannie and Freddie duopoly, the Fed’s big banks and insurance companies like AIG. The Fed has been loaning trillions(147) of dollars at low interest rates to the big banks. Lower rates encouraged financial engineering,(148) including home remortgaging.

Bush promoted home loans(149) guaranteed by the FHA and securitized through the monopolies while encouraging the Fed to lower interest rates, leading to a bubble in home ownership and prices. The Fed repeated the same mistakes that led to the Great Depression. Soon after the Fed started raising rates, the bubble burst leading to the 2007-9 Subprime Mortgage Crisis, 2007-8 Financial Crisis or Great Recession (considered tied for the second worst financial crisis in U.S. history), 2008-12 Global Recession and 2008-10 Automotive Crisis. Even after the first housing bubble burst into the Great Recession and required bailouts, they continue to encourage potentially risky home loans.(61)

The subsequent bailouts of the banks and automakers assured support for the monopolization of these industries. Moreover, the bailouts could have been justified considering the pressure on financiers from politicians to make risky loans, except the Fannie and Freddie duopoly lobbied(150) the politicians to do it. In the future, bailouts are guaranteed since home loans are now being financed through the FHA(151) and a nationalized Fannie/Freddie duopoly. In 2010, Dodd Frank(152) gave politicians more oversight over the Fed’s big banks, increasing influence peddling and risks of crises.

During Bush’s first term, the Fed had to deal with the 2000 economic crisis caused during the previous administration. The Fed responded by reducing interest rates from about 6% in 2001 to 1% in 2004. Bush added deficit spending with tax cuts and high spending on government health care programs and the military.  Economic growth increased from about 1% in 2001 to 4% in 2004. The stock markets became a bubble again as the Dow Jones increased from a crisis low of 10,575 (2018 dollars) in late 2002 to over 14,000 (2018 dollars) in early 2005. A housing bubble also formed.

During Bush’s second term, the interest rate and debt manipulations of the first term continued and created an even more serious financial crisis. The stock market and housing bubbles grew. The Dow Jones stock market rose to a high of 16,800 (2018 dollars) in 2007. But, when the Fed tried to raise rates back up to over 5% in 2006 to control the bubbles, they burst, leading to the Great Recession of 2008, tied for the second worst financial crisis(153) in U.S. history. People lost investments and homes while the Fed monopoly had to rescue its large banks with government bail-outs totaling trillions of dollars. By 2009, economic growth had retracted to a negative 2% and the Dow Jones stock market dropped back to under $8,400 (2018 dollars).

During Obama’s two terms, the government continued to rescue the banks and economy with even lower interest rates and more deficit spending. The Fed lowered interest rates to Great Depression era lows at near zero and held them there for a prolonged period from 2009 to 2016. The Fed even purchased Treasury bonds and other securities from the market to lower interest rates and increase the money supply to promote increased lending and liquidity (i.e., “quantitative easing”). Corporate debt returned. Meanwhile, Obama added record amounts to the national debt, while giving away money to cronies, especially those in the banking and the renewable energy industry as part of his 2009 stimulus package.

Under Obama, economic growth returned but was slow. Unemployment dropped consistently but very slowly from a high of 10% in 2009 to 8% in 2012 and 5% in 2015 and 2016. Meanwhile, the interest rate and debt manipulations created an even bigger stock market bubble with the Dow Jones increasing to over 15,000 in 2012 (2018 dollars). The tech sector led the market to 21,000 by 2016. The housing bubble returned and real estate stocks are even more expensive.

Obama created bubbles and piled on debt that delayed the full effects of the 2008 crisis but left the next administration with possible even more serious financial crises ahead. The Fed must now increase interest rates back up to prevent more inflation, bubbling and toxic debt while side-stepping a recession or depression. Monopolies, and the bubbles and debt needed to prop up the current monopolized economy, have certainly been wrecking the economy for the long-term. Now, there is no longer much room to lower rates and increase debt to promote much of any growth or rescue the economy. Nor can the country afford to raise rates much on the weak economy and national debt.

Prominent indexes are warning the stock market has become a bubble that could burst into a financial crisis at any time. The “Shiller” price to earnings (PE) ratio of the S&P 500 is currently at 33 compared to the long-term average of about 16. It was at 30 before the Great Depression, 44 before the dot-com bubble and 27 before the Great Recession. The most overvalued stock sectors are real estate at 47 and technology at 39. Other sectors are overvalued at 33 including health care (e.g., pharmaceuticals), basic materials (metals, fossil fuel and chemical products, etc.) and consumer cyclicals (auto, housing, retail, etc.). Industrials (building construction in the real estate sector) is at 27, while utilities and financials are at 25. In addition, the “Buffet” market capitalization to GDP ratio is currently 138% compared to 137% before the 2000 dot-com crash and 105% in 2007.

However, forecasting is a crapshoot, especially in the short and even medium-term. Politicians will likely continue to try to delay a Great Depression-like crisis with even more harmful long-term policies like quantitative easing, negative interest rates, “helicopter” money and deficit spending (e.g., Trump’s tax bill and infrastructure plan). Moreover, there are still many emotional small investors that could be sucked into the promise of temporary wealth creation offered by the stock market bubble. Many may think they can predict the peak. But they are just making the eventual collapse even worse.

The causes of the Great Recession largely originated in the United States, particularly the real-estate market. The recession began in December 2007 and ended in June 2009. The Great Recession was related to the financial crisis of 2007 to 2008 and U.S. subprime mortgage crisis of 2007 to 2009. The Great Recession resulted in the scarcity of valuable assets in the market economy and the collapse of the financial sector (banks) in the world economy. The banks were then bailed out by the U.S. government.

Since 2012, another housing bubble has formed. The Case-Shiller national index of home prices hit all-time highs in December of 2016 and has continued to rise. Median family home prices are about the same amount above the long-term inflationary trend as in 2005 before the bubble burst. In 2017, the Housing Bellwether Barometer, an index of homebuilders and mortgage companies, skyrocketed like it did in 2004 and 2005.

The bubble has been driven by a severe lack of supply of homes for sale and near record low mortgage rates making homes more affordable. However, home builders are focusing on high-end properties. This is because after homebuilders caught up with demand before the first bubble in 2006, supply outpaced demand, housing prices fell and the asset bubble burst in 2007. Now a shortage is driving up low-end house prices and making it harder for people to buy starter homes. In addition, home sales are lower because the recession damaged young people's ability to start a career and buy homes. Faced with a poor job market, many furthered their education. As a result, they are now burdened with school loans. That makes it less likely they can save enough to buy a home. That will keep demand down and is causing concerns that market growth could be unsustainable.

Meanwhile, lending institutions have been loaning 95% or more of the value of the home, which makes it easier for the home buyer to walk away from that mortgage when home prices come down. In Freddie Mac’s 2016 Annual Report, the agency said 36 percent of its obligations are ‘credit enhanced,’ meaning they carry mortgage insurance of one sort or another, which is typically used for weaker mortgages. That's about the level in 2006. Moreover, Fannie and Freddie lowered their definition of subprime from 660 to 620. If these weak subprime mortgages begin to fail in large numbers, so also will the insuring companies.

Affordable housing is dropping. From 2010 to 2016, the percentage of rental units across the country affordable for low income households dropped from 11 to 4 percent. Meanwhile, foreign buyers are no longer propping up the high-end market. Now the Fed is increasing interest rates and threatening to burst the current bubble. The next recession would likely to send prices down hard over a period of only a year or two. In 2017, 58 percent of those surveyed agreed that there will be a "housing bubble and price correction" in the next two years.

Since creation of the Federal Reserve Bank in 1913, the Fed has been manipulating the perpetually-monopolized U.S. economy with alternating low and high interest rates causing alternating increased economic growth and inflation control, respectively. The result has been a roller coaster of bubbles and recessions or depressions benefiting mainly informed and politically-connected investors. Average investors have been advised to keep their money in their IRAs and are even penalized for taking it out. Major stock losses have occurred only during the five periods when the Fed raised interest rates significantly over a sustained period (see graph below).


The Bank for International Settlements, or so-called ‘bank of central bankers’, warns another global debt crisis(154) is coming, and the debt-trap is now even worse than before 2007.  The U.S. led many nations lowering interest rates(155) and accumulating private and public debt.(156) Now, a number of factors could make the debt toxic and lead to a financial crisis that would be hastened as the Fed raises rates.  The Bank warns: “It is unrealistic and dangerous to expect that monetary policy can cure all the global economy’s ills.”

The era is most distinguishable for globalism only because monopolies have always been favored anyway, politicians diverted sustained attention away from monopolies, and globalism has subsequently led to nationalism. The immigration problem has been overblown. After the Great Recession, the U.S. population illegal immigrants(157) has dropped.

Although the annual U.S. trade deficit grew to between $400 and $800 billion and the nation lost five million manufacturing jobs, at least the deficit offered cost-competitive products and only represents about four percent of the economy and employment.

During the Globalism era, China benefited from much lower labor costs but also weaker environmental regulations.(158) “China Inc.“(159) started to gain a global manufacturing monopoly representing over 30% of the nation’s GDP including steel, autos, petrochemicals, electronics, clothing and pharmaceuticals. But China also became heavily polluted. From the 1970s to 2016, total U.S. manufacturing declined from over 25% to under 12% of GDP. Japan at 17% and Germany at 22% have maintained higher levels largely by moving to more value-added manufacturing. But China is trying to clean up the environment now, including refusing to accept waste plastics.

On March 5, 2002, Bush placed tariffs on imported steel. The tariffs took effect March 20 but were lifted by Bush on December 4, 2003. Research shows that the tariffs adversely affected U.S. GDP and employment. Today, the U.S. produces only about 5% of the world's steel production compared to over 50% by China. But the U.S. still produces 70% of the steel bought for use in the country. Four large producers, including U.S. Steel and Nucor, control over 80% of the U.S. and Canadian market.

Since 2001, the U.S. has been involved militarily in Afghanistan. In 2003, Bush used the 911 attacks and claims of weapons of mass destruction as an excuse for the invasion of Iraq.(160) Fed Chairman Alan Greenspan said the purpose of the war was actually to increase oil production from the (monopolized) industry in Iraq and lower future prices for the global economy. Since 2011, Obama got the nation involved in the Syrian Civil War. The U.S. has spent trillions of dollars in the unstable Middle East.

In 2016, Nobel Prize winning economist Joseph Stiglitz said “today’s markets are characterized by the persistence of high monopoly profits.”(161) Nobel laureate economists Joseph Stiglitz and Michael Spence announced they will co-chair a new independent commission on the global economy to find solutions to a dysfunctioning market economy that is leading to major economic problems, especially wealth disparity.

Today’s economists practice a mixture of neoclassical and Keynesian economics that assumes market imperfections but ignores regulations favoring monopolies. Economists essentially blame capitalism, as the world heads toward a global debt crisis(162) (especially with rising interest payments and rates). Central bankers no longer have as much confidence in their models to 'fine-tune' the economy as they had in the 1960s and early 1970s. Harvard economics professor and former George W. Bush adviser Gregory Mankiw claims: "Few propositions command as much consensus among professional economists as that open world trade increases economic growth and raises living standards."

Nationalism Era

In 2016, Republican candidate Donald Trump was elected President, largely for his opposition to globalism, both immigration and trade. He also appeared to benefit from a perceived need among much of the electorate for a “benevolent dictator” that could stop the widespread corruption practiced by the corporatist politicians.

Trump is pursuing a far-right version of corporatism while leading a movement toward nationalism. He retains typical Republican corporatist support for policies favoring private-sector monopolies and opposition to many regulations meant to protect the public from these monopolies and also market imperfections (e.g., environmental externalities). But he differs in that he formulates the policies himself even though he has a penchant for thinking superficially, forming policy by watching cable television, communicating in short tweets and making zero-sum deals for photo opportunities. He largely ignores reading, advisors and scientific and economic policy analysis. He diverts attention from his corporatist policies by blaming immigration and unfair trade for the loss of jobs even though both represent a small part of the economy. He opposes both free markets and free trade while favoring Keynesian policies with deficit spending and low interest rates.

Trump’s methods include gaining political support using demagoguery and solving economic problems using an economic system resembling fascism. The rabble rouser gains political popularity as a populist by blaming foreigners (“build the wall”), offering to be the savior of the angry and desperate Americans while dishonestly exploiting the prejudice, ignorance and passions of the crowds, and shutting down reasoned deliberation with personal attacks. Trump promotes dictatorial regulation of the government and economy with narcissistic claims that only he can solve the nation’s problems, exalts nation and race above other individuals (“Make America Great Again”), and suppresses the opposition through abuse of office and cultish loyalty demands. Trump has rejected limits on his power as an executive as laid out in the Constitution, attacks the press and complains about the judicial system.

Trump boasts of being a great businessman that can solve problems as a politician. But even he has admitted that the nation’s problems are actually caused by the same politicians that he bought to favor his business. His private family real estate business benefited and continues to benefit from buying special monopoly privileges from local politicians, including tax reductions, zoning and eminent domain. Although he has promised to ban “pay for play” and “drain the swamp” in Washington, preferential regulations continue to favor politically-connected businesses, including those of his family, cabinet, associates and donors. He blames foreigners even though he started financing his business ventures with foreign money, especially from Russian oligarchs, after a string of failures left him unable to raise money from U.S. banks. Trump has been a master at generating hype in the media to promote public and political support for his business and political projects.

Trump has accomplished little as President (as of 2018) other than cutting corporate tax rates, mostly for monopolists, at the expense of adding an estimated $150 to 200 billion per year to the projected national budget deficit. The tax cuts produced a temporary increase in stocks, corporate profits and economic growth. He promised but failed to enact legislation reducing health care costs, which is considered America’s biggest problem according to polls. Moreover, the mid-term elections will likely prevent him from securing the increased power he needs to further his agenda. But he is still trying to:

  • maintain government-sanctioned doctor and hospital monopolies while denying government health care coverage to people who can’t afford the high costs by repealing Obamacare without replacing it with a better solution,
  • maintain overly generous intellectual property protections for pharmaceutical monopolies while imposing minor reforms,
  • support the kingdom of Saudi Arabia and their oil monopoly,
  • steal oil from Iraq (In January 2017, Trump said the U.S. "should have kept the oil" after the Iraq invasion and "maybe we'll have another chance"),
  • work with Russian President Vladimir Putin to regulate global oil prices,
  • preferentially cut even more environmental regulations on fossil fuels and chemicals produced by favored domestic Big Oil & Gas monopolies,
  • mandate and subsidize the production and research of coal and nuclear energy generated by utility monopolies,
  • end the public education monopoly in a way that could cause even bigger problems if private-sector monopolies are favored by new policies and vouchers don’t cover student costs (a distinct possibility given his appointment to head the Department of Education was billionaire Betsy DeVos of the Amway ponzi scheme),
  • maintain Federal Reserve banking monopoly favoring the big banks while repealing Dodd Frank and other protections,
  • maintain subsidized agricultural monopolies while cutting food stamps for the poor who already can’t afford healthier foods,
  • threaten to impose tariffs on U.S. companies that move their operations to Mexico, including Ford Motor, Carrier and Mondelez,
  • create domestic manufacturing monopolies and increase consumer prices by imposing import tariffs on various goods including cars and metals,
  • close "certain areas" of the Internet,
  • maintain internet monopolies awarded to telecommunications companies while repealing net neutrality protections, and
  • limiting opposition to preferential policies only for the Amazon monopoly (e.g., tax and postal advantages) because they own the Washington Post that criticizes him.

Trump politically favors and protects his favorite industries against foreign competition, especially autos and metals. Trump proclaims unfair trade simply based on having a U.S. trade deficit with a country. He has violated trade agreements by enacting tariffs. He bullied Canada with false claims that they are a national security threat when exporting steel and aluminum to the U.S. so he had an excuse for enacting tariffs against them. Then, he got angry when they retaliated in kind. Trump has demanded total free trade to apply pressure even though he knows it won’t happen. Trump is confusing trading partners by failing to analyze and/or document trade deals and offer factual specifics about how each trade deal is unfair. America could be caught in trade wars and lose trading partners. 

Trump was elected as a backlash against “elite” policymakers, especially economists who are largely irrelevant during his regime. Kevin Hassett, Trump’s Chair of the Council of Economic Advisers, believes both free trade and immigration spur economic growth. Hassett justified the administration's move toward imposing new tariffs on steel and aluminum as a starting point in negotiations for lower trade barriers. The president's top economic advisers, formerly Gary Cohn and now Larry Kudlow, have both advocated for free trade and Kudlow openly opposes Trump's tariffs.

Yet, the nation’s current political and economic trajectory appears headed toward an even further far right version of authoritarian corporatism and nationalism, like fascism, in the future. A far-left version, like communism, is also a possibility under the leadership of politicians like Bernie Sanders but that seems unlikely without a violent revolution, regardless of who is in control of the White House, considering the need for a major change to public ownership of property.

Since Trump’s short-term objectives, lack of policy analysis, policies and results appear consistent with those of Nazi Germany, this might provide some insight into the future. Hitler used the threats of inflation and national deficits to convince the public to support his goals of a fascist dictatorship, forcibly acquiring raw materials from other nations and achieving world domination. He nationalized monopolies and re-privatized them with his cronies in control. Favored businessmen received preferential policies like subsidies in exchange for obedience to the state's production, wage and price directives. He controlled deficits by forcing companies to comply with short-term schemes. He used import tariffs to create autarky (i.e., self-sufficiency). Unemployment fell significantly by cutting wages and taking control of labor unions, public works spending and large-scale military spending. He jawboned those that didn’t follow his plan. Foreigners, especially bankers, were blamed for economic problems.


This paper does what politicians and economists should have done long ago: correlate the simple and direct historical relationships between market imperfections (claimed), government policies, monopolies and economic problems. Throughout American history, politicians have been claiming market imperfections as an excuse for imposing government policies creating monopolies for their cronies in all sectors of the economy, which has led to every major economic crisis.

Of course, this doesn’t mean the market imperfections didn’t exist and wouldn’t have led to monopolies and/or other problems. The following is an inventory of potential market imperfections claimed by politicians (and economists) grouped into four categories:

MARKET POWER economies-of-scale, too big to fail, natural monopoly, predatory pricing and price gouging by low-cost foreign monopolies, technology advantages, small markets, limited raw materials, universal service, captive markets

PUBLIC GOODS national security, war, protect foreign property, imperialism, crime, national currency, research costs (government spending vs copying versus patents versus trade secrets), capital shortages (equity and loans), start-up costs, immigration costs, spending on necessities especially for poor and elderly, disadvantaged by monopolies (farm, labor, etc.), duplication, common carrier transport lines (electricity, gas and telecommunication), railways, roads, airports and other public services

ASYMMETRIC INFORMATION consumer ignorance, fraud (consumer and investor), occupational licensing, supply creates own demand

EXTERNALITIES impact of economic activity on outsiders, secondary benefits and costs (need for zoning, eminent domain, etc.), environmental protection, disruptions caused by inconsistent regulation, safety (food, workplace, etc.)

The following are some of the leading examples of potential market imperfections used as an excuse to impose regulations creating monopolies in the current eight major industrial sectors:

BANKING capital shortages necessitate need for national bank

HOUSING capital shortages necessitate need for national mortgage banks and tax subsidies; private property violates rights of neighbors without land zoning

HEALTH CARE doctors con “ignorant” consumers to undergo more and expensive health care; research costs necessitate patent monopolies for drugs

AGRICULTURE crop overproduction necessitates need for controls and subsidies

ENERGY predatory pricing by OPEC; duplicate electricity and natural gas lines adds costs; environmental externalities requires subsidies

TRANSPORTATION foreign governments favor their producers; automakers too big to fail require bailouts; fraud by entrepreneurs necessitates need for securities control; need for common carrier transport lines and facilities like airports

TECHNOLOGY duplicate telecommunication lines add costs; research spending requires intellectual property protection for software

GOVERNMENT children for poor families require public education

Some or even all of these market imperfections could exist and cause significant economic, social and environmental problems. One almost certain market imperfection is environmental externalities. For example, a nation could become a low-cost producer by simply dumping waste into the ocean and air that other nations share. Even Murray Rothbard of the Austrian School of economics recognized environmental externalities as a market imperfection while trying to prove it wasn’t by reasoning that landowners should be able to sue over environmental transgressions. If one imperfection exists, there could be others.

Unfortunately, the nation’s politicians have consistently failed to commission apolitical, impartial, realistic, thorough and transparent economic and public policy analyses to determine the extent to which each market imperfection actually exists and the regulations that could be used to relieve adverse effects without favoring monopolies.

Global trade opportunities should be analyzed when examining market imperfections (and regulations favoring monopolies). For example, some potential trade partners may not have or are not enforcing environmental, labor and intellectual property regulations, or they may be national security concerns. Some fledgling industries may need protection for startup. But only after analysis should trade policies and regulations be formulated and agreements negotiated. Moreover, America will surely continue realizing trade deficits if it doesn’t demonopolize to reduce costs for industry and workers, and develop existing and new industries, trade or no trade.

The economic analyses should have been most appropriately led by economists. They can be divided into two major camps: the current majority of mainstream economists practicing Keynesian economics, and the minority practicing neoclassical and/or classical economics, like the Chicago and Austrian schools, respectively. Unfortunately, the unproven nature of economics has allowed both camps to consistently conduct failed analyses that are political, partial, impractical and neglectful.

POLITICAL Most influential economists have been reactive in siding with politicians with similar ideological tendencies, especially when they are in power. Keynesian economists have confirmed the need for the regulations creating the tightly-regulated private-sector or public-sector monopolies supported or already imposed by liberal politicians, while providing little economic analyses to support their profuse claims of market imperfections. Milton Friedman explained why most economists are Keynesian: “jobs for economists has arisen out of government regulation. So the special interests of economists is to be in favor of government regulation.”(163) Classical economists, like Friedman, have supported or at failed to oppose versions of lighter regulation favoring more loosely-regulated and deregulated private-sector monopolies favored by more conservative politicians. The search for the truth requires a less political examination of market imperfections.

PARTIAL Most influential economists are partial along ideological lines. Today’s Keynesian economists assume markets are not efficient at allocating resources on their own and so governments must actively reallocate resources through regulation. They believe market imperfections are common, create private-sector monopolies and a regulated economy is necessary. Economists supporting offshoots of classical economics advocate laissez faire (i.e., minimal regulation) capitalism with a predisposition toward the belief that free markets are the best way to allocate resources. They believe there are few if any market imperfections and often ignore the need for regulations that deal with market imperfections, which may result in private-sector monopolies and other problems (i.e., especially once the inevitable regulations are demanded by the public to protect against perceived market imperfections). The search for the truth requires a less partial examination of market imperfections.

IMPRACTICAL Economics is theoretical and often relies on unrealistic, simplified and/or unverifiable assumptions. Yet, Keynesians and the Chicago school have typically used overly mathematical models that have little transparency and validity in the real economy. Many mainstream economists, including Keynes, have admitted that economic models designed to explain observed phenomena are subjective approximations of reality. Even Paul Joskow, one of the founders of empirical regulatory economics, pointed out that economists studying actual economies, such as oligopolies, tend to use informal models based on qualitative factors specific to particular industries. But critics point out that promising approaches have been excluded in major mainstream publications by a focus on problems amenable to formal modeling. Austrians are on the other extreme by relying on simple logic and general economic laws with limited use (e.g., restricting supply causes higher costs, profits incentivize new competitors to enter a market, etc.). The search for the truth requires analyses of market imperfections that maximize the practical use of quantitative and qualitative methods and data.

NEGLECTFUL Economists tend to try to solve economic problems by focusing on the supply of money on the macroeconomic level while ignoring the pervasiveness of regulations creating monopolies on microeconomic level. In most economic models, economists still assume that the economy is capitalism, oligopolies are easier-to-quantify competitive markets and innovation, which drives long term economic prospects, just happens. Keynesians believe economic problems should be solved by regulating the supply of money, government spending and monopolies assumed to result from market imperfections. The monetarists of the Chicago school support mainly increasing the money supply at a certain constant rate while also supporting deregulation that has been ineffective even though they blame regulations for creating monopolies. Austrians believe the economy will heal itself if the money supply is not manipulated even though they realize regulations are creating monopolies. The search for the truth requires the realization that the overuse and limited effectiveness of monetary manipulation results from regulations favoring monopolies and possibly market imperfections.

The author advocates for a single school of economics supporting the view of standard economics textbooks that call for leaving as much as possible to free markets except when market imperfections require government intervention in any industry. Potential market imperfections should be analyzed using impartial, realistic, thorough and transparent methods for formulation of regulations that relieve the adverse effects, without favoring monopolies.

The analyses should include economic models that go as far scientifically as they can along the continuum of the four model types before the need for qualitative art takes over. Visual models may include simple graphs (e.g., supply and demand plots). Mathematical models add the use of equations, empirical models add the use of both equations and data and simulation models solve the equations with available data using computers.

The author offers an example of a necessary economic analysis of a potential market imperfection as the updated and condensed version of his 1980 MBA thesis entitled “How Government Regulations Made Health Care So Expensive” that was published by the Mises Institute in 2013. The study uses an examination of actual demand increases to test the likelihood of the claimed market imperfection that “demand is created by doctors.” Incredibly, it still appears to be the only economic study to test whether high medical costs since 1965 could have been caused by actual demand increases especially those created by Medicare and Medicaid outstripping the restricted albeit rising supply of doctors. The study was reviewed by a health care economist at the University of Minnesota, who said it was a breakthrough.

The study focuses on the historical period from 1965 to the 1980s because the potential market imperfection and resulting high medical costs led to extreme regulation of the health care industry beginning with the Reagan administration. The study offers graphic illustrations of supply and demand plots as visual qualitative models while incorporating available price elasticity data. The laws of supply and demand are impartially tested against other appropriate and available data, including annual spending by the private and public sectors, costs, malpractice premiums and medical school applications and admissions. Mathematical modelling was ruled out as unrealistic, largely due to the lack of data accounting for the quality of care, whose absence has been accepted by health care economists. The study provides much more empirical evidence than the typical logic study conducted by Austrian economists while providing a much more realistic and transparent analysis than the typical Keynesian and neoclassical model.

The supposedly free market Reagan and Clinton administrations refused to consider the apolitical study as their policies regulated and monopolized the industry even further. During the 1990s, the Republican majority in Congress did claim to have seriously considered the study. However, they contacted Milton Friedman, who refused to support the conclusion of the study, that the medical monopoly should be prevented by increasing the supply of doctors to meet demand, because he wanted to prevent the monopoly by ending medical licensing and also Medicare and Medicaid. The author viewed these government interventions as possible solutions to potential market imperfections that would also require thorough analysis before elimination from consideration. There appears to be no such analysis even today.

The study was rejected during the 1980s by mainstream economic publications for not using econometrics. Even in 2013, the prestigious Journal of Health Economics refused to consider publishing the study unless more coverage was given to the theoretical market imperfection used by “Keynesian” economists that physicians were creating their own demand (i.e., convincing “ignorant” consumers to purchase unnecessary care.) This requirement was unjustified since this theory had been analyzed since the 1970s using econometrics and qualitative models by many economists with predispositions toward both Keynesian and neoclassical economics without reaching a consensus whether it actually existed to any significant degree.

In conclusion, American voters need to require that currently unprofessional economists conduct such apolitical, impartial and practical studies to examine if market imperfections actually exist, and if so public policy analyses to determine the regulations that could be used to relieve any adverse effects, before the nation’s largely corrupt politicians are allowed to continue to impose regulations favoring monopolies.


Showing 1 reaction

  • Mike Holly
    published this page 2018-11-03 12:28:36 -0500
Spread the word Contribute