What John Oliver Could Learn from Mises

I usually enjoy watching John Oliver’s show, Last Week Tonight, because it is funny and informative at the same time. His latest episode on corporate consolidation was, alas, not one of the better ones.

The segment has Oliver talking about how certain industries are being dominated by a handful of firms and how that is bad for consumers. He particularly focuses on the airline and telecommunications industries. So far so good.

Everyone agrees that a lack of competition in the market is bad. Oliver then goes on to blame a lack of regulation for this and calls for the more aggressive application of antitrust laws.

Capitalism, Amirite?

This reminded me of one of my favorite Mises quotes:

As a rule, capitalism is blamed for the undesired effects of a policy directed at its elimination. The man who sips his morning coffee does not say, "Capitalism has brought this beverage to my breakfast table." But when he reads in the papers that the government of Brazil has ordered part of the coffee crop destroyed, he does not say, "That is government for you"; he exclaims, "That is capitalism for you.”

Corollary: Government regulation leads to calls for more government regulation to fix the problems created by previous regulation.

Mises wrote this outstanding paragraph right in the preface of his brilliant and insightful book Interventionism: An Economic Analysis, which I recommend to everyone.

Oliver’s segment on corporate consolidation is a case in point. He takes a problem created by government, namely oligopoly, and calls for more government control to fix it.

Government-Caused Oligopolies

Let us take the case of airlines. Why are there only four major airlines in the US? Robert W. Poole Jr., of the Reason Foundation, wrote way back in 2000 that the main obstacle to competition is the difficulty in obtaining gates at airports.

If a socialist cesspool like Europe has more, better, and cheaper airlines, clearly a lack of regulation is not the problem. Large airlines sign long-term leases with airport authorities, which gives them exclusive access to gates at airport terminals, shutting out competition from new entrants. It also gives airlines monopolies over certain routes. This, Poole shows, is due to the airports being government owned, and thus risk averse. A long-term lease gives them a steady revenue stream.

He compares it with Europe, where airports are run privately. Since these airports are for-profit businesses, they lease gates by the hour to individual airlines, thus preserving competition in the market.

More recently in 2016, David R. Henderson defended the merger of American Airlines and US Airways along similar lines, saying that the main constraint was gates, and not the number of airlines. He also pointed out that in Europe foreign airlines were allowed to provide domestic flights, unlike in the US.

If a socialist cesspool like Europe has more, better, and cheaper airlines, clearly a lack of regulation is not the problem.

This is not just restricted to airlines. Every monopoly or oligopoly that has been sustained over a large time period has been aided by government regulations and subsidies. For instance, there is the telecommunications industry, where government backs monopolies for firms like AT&T. The health insurance market in the US lacks competition because insurers were, until very recently, prevented from competing across state lines.

It is deeply troubling, then, that people blame free markets for problems created by government. As I write this on the eve of Mises’s birthday, I feel that there is an ever greater need to highlight the evils of government intervention; to direct people’s anger at the real source of trouble. During such times, brilliant minds like Mises will be sorely missed.