Market Power and Economic Freedom

I found the Friedman reading quite interesting as I actually agreed with Friedman a lot more than I had expected. In particular, I appreciate that he addressed the issue of monopolies and acknowledgement that there will be instances in which the market does not operate perfectly or even might fail. Too often it seems that capitalist-minded individuals rail against concentration of government power without acknowledging the problematic aspects of sufficiently large concentrations of market power. Indeed, for Friedman, part of the main issue with excessive government involvement in economics and business matters seemed to be that the government would create effective monopolies or at least hold most of the market power. This concentration of economic power, combined with the concentration of political power, would easily deprive citizens of both political and economic freedoms.

It seems to me, though, that a concentrated government expanding into the realm of concentrated economic power is not the only thing those who philosophically favor freedom should fear. Recent events, perhaps uncommon in Friedman's time, suggest that the relationship between economic and political power is such that those who hold economic power can use it to achieve (and abuse) political power, as much as the reverse is possible. In particular, those who hold economic power and are very organized can disproportionately influence government. Such examples include labor unions (which, though they do not necessarily have concentrated economic power in the sense of financial wealth, do hold a certain degree of sway because of the labor power and voting power they potentially represent) as well as trade associations such as the Motion Picture Association of America (MPAA) and Recording Industry Association of America (RIAA). I have little doubt that Friedman would find certain aspects of the influence of labor unions on government troubling. I hope, too, he would see as trouble actions such as the promotion of the Stop Online Piracy Act (SOPA), which, if it did not directly restrict many personal freedoms related to use of the internet, would at the least pave the way for restriction of such freedoms. Ironically, what ultimately impeded the success of SOPA was a concentration of economic power and organization on the other side of the issue - through tech heavyweights such as Google, Wikipedia, and others actively protesting.

But what if the other side wasn't well organized and didn't have the resources to make their voices heard? If the same amount of "cost" resulting from a policy is spread out among a very disparate, very large group rather than concentrated among a small and organized group, the first group will necessarily be less active - and less capable of taking action - to combat the policy than the second group even though the total cost is the same. Clearly, concentration of the ability to influence politicians can lead to economically inefficient, if not downright unjust, outcomes. Insofar as concentration of economic power leads to concentration of the ability to influence politicians (and at this point in history I would say it does), then concentration of economic power can create such political outcomes, even restricting the individual freedoms of citizens.

I really wonder what Friedman would say about this sort of issue and what solution, if any, he might suggest. Certainly, he would consider a firm or a person's freedom to spend their money as they choose - including contributing to campaigns - to be important. But what of the freedom of citizens, and their right to "compete" to have their voices heard and needs considered by government? This seems, to me at least, to require the sort of check and balance between economic and political forms of power that Friedman was encouraging earlier. It does not seem right for large firms, monopolies or oligopolies, to be able to abuse their market power both in the market and through government to deprive citizens of political freedoms and even economic freedoms (through abuse of taxpayer money or otherwise). Perhaps Friedman would have some explanation for how the free market or existing freedoms and competition would ensure that such abuses would not happen. Yet given cases such as farm subsidies, I doubt that such a theory could be fully correct. Growth and changes in technology, like with the transportation monopolies Friedman discusses, can certainly help the situation, particularly through making organization easier for disparate groups, but certainly, technology alone cannot protect the freedoms of these individuals and firms. Of course, the "problem of freedom to combine and freedom to compete" is even today a complex issue and solutions are not easy to find and probably would not be even for Friedman.