Guest Post: 5 Ways To Create A Monopoly

Tyler Durden's picture

Submitted by Brian LaSorsa via The Ludwig von Mises Institute,

It’s hard to maintain monopoly status in a free market when you have to deal with all that competition and whatnot.

Between other companies’ low prices and new, updated products entering the market each day, it’s almost like Rich Uncle Pennybags is a thing of the past. But fret not!

The politicians of the world would like to offer anyone dead set on controlling an entire industry the chance to shine. So come one, come all — government agencies, cronies, and all their friends — as we present the five best ways to create a monopoly and to ensure you never have to compete again.

1. Regulations. When the cost of doing business is high, make it higher. Small firms can’t survive government imposed regulations while bigger firms can certainly bear the burden, at least temporarily. Taxes, mandates, and especially “safety regulations” (e.g., clinical trials at the Food and Drug Administration) will wipe out your competition before they even have time to ask what the new rules mean. Then hire a lobbyist in Washington. I’m sure he or she will come up with a good reason that the industry should adhere to stricter and more expensive guidelines.

2. Subsidies. There’s no such thing as a free lunch. But, when the government is paying for it, the lunch sure does taste free. Subsidies offer an alternative, consumer-driven focus to acquiring monopoly status. Arbitrary revenue-boosts from the government will allow you to reduce prices to essentially nothing, all while maintaining profitability. You can give away (what used to be) a $10.00 item for free and, with the help of $1 million in subsidies from our nation’s capital, you can stay afloat. Your competitors, however, will have to make do with reality. Even if they somehow manage to slash prices to $1.00 per unit, what kind of customer will pass up free? The subsidy doesn’t have to last permanently, either. It will only take a few weeks before your competitors begin to default on paychecks and other loans without transaction revenue.

You can also take this route without the government revenue injections if you have a contingency plan in the form of a bailout. Both you and your competitors will go bankrupt, but only one (fingers crossed it’s you) will receive CPR.

3. Nationalization. Shout out to government officials! This one’s for you. The easiest and most straightforward way to create a monopoly is to simply write the monopoly into law. Federal control over an entire industry — much like we’ve done with the United States Postal Service — is effectively the prohibition of competition from the private sector. But don’t ever reference the USPS. It’s a terrible (albeit realistic) example of a government monopoly, what with its inefficiency, perpetual deficits, and general lack of regard for any sense of advancement in mail delivery. Rather, tell everyone you want to monopolize “for the good of the people” and then talk about the Department of Education or some other public sector operation people don’t like to criticize in front of company.

4. Tariffs. Neighbors can be annoying. Some are loud and others are strange, but the absolute worst neighbors are the ones who compete with you in the marketplace (and then win). In the beautiful Southwest, this neighbor is Mexico. Companies south of the border produce certain commodities much more cheaply than American companies do, and they have the nerve to think that they can export their inexpensive products to the United States on a whim. We don’t think so. If Mexican companies sell sugar for $2.00 per pound and you charge $3.00, don’t let them satisfy customers like they own the place. Make sure they pay an import fee of $1.01 and it’s guaranteed you’ll win new business one cent at a time. Better yet, propose a complete ban on the sale of foreign goods in your state, city, and town until you’re so isolated from the rest of the world that no one has a choice to buy from anyone except you.

5. Intellectual property. If you have a good idea, why let anyone else have the same one? Take that idea, write it down in the broadest words possible, and send it straight to the United States Patent and Trademark Office, where public officials will (hopefully) grant you the exclusive right to use it. And don’t worry, if someone else thinks of the idea one day later ... too bad. You filed first. Even if someone halfway across the globe comes up with the same idea independently ... too bad. You filed first. Milk your monopoly for all it’s worth. Put a huge price tag on that beast and feel free to ignore quality. What are consumers going to do: purchase your exclusive product elsewhere?

We wish you the best of luck in your venture. You deserve it.

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DoChenRollingBearing's picture



You can get a sort-of monopoly by agreement...

We worked HARD to get our Korean suppliers (who at the time did not sell to Peru) to eventually give us the rights by selling a lot of their stuff.  Now we have a sort-of monopoly in Korean bearings.


mvsjcl's picture

Once you have the money printing monopoly, it's just a matter of time before everything else is sucked into your monopoly vortex.

Radical Marijuana's picture

I agree, mvsjcl, that that is the most important monopoly! After the application of the methods of organized crime have worked to achieve that goal, then everything else easily follows thereafter. The vicious spiral of backing up legalized lies with legalized violence automatically runs away after the public money supply has been privatized.

spine001's picture

The author is correct in several of his assertions, and I can say this from an insider perspective of an ex-corporate executve.

But he is WRONG in the intellectual property side. Furthermore, distortions to the IP law and recent changes affect severely the actual inventor in favor of the Corporation that OWNS the inventor by paying him a miserable salary.

I do take these things into account when I want to compete and enter markets with new cheaper technologies and know full well that if I affect the big ones they will kill me at the regulatory stage by forcing me to spend money I don't have, that's why it is key to find beach heads in markets they don't care about and where you can get local officials to align with you in protecting your interests.

Sean7k's picture

No, it is so much better, if like Walt Dismey, you steal your ideas from the public domain and then hold on to the patent for 100 years. Intellectual property rules are killing innovation in technology. Why? So, you can make a million bucks? 

If you have a good idea and you can't afford to develop it, we should all wait for some lawyer to send us a letter after millions are spent on development of an idea we thought was ours? 

Patent laws are innovation killers. Which is why tech companies spend more time in court, then in research.There is even a legal means around it now, create 2.0 and make them start the lawsuits all over again.

If you work for a corporation and develop an idea, they had nothing to do with the development? Really?

Patent laws do exactly what the author is talking about. Get rid of them all- then see just how well the corporations do when they have to compete.



wkwillis's picture

I'm an inventor. When you get tired of paying 100$ a barrel for oil, let me know.

prains's picture

Architects in North America have a regulated monopoly and their business model is so fucking stupid no one with talent wants to stay in the business, you can be a millionaire one year and bankrupt the next. Architects are a great illustration of how to fuck up a monopoly

layman_please's picture

north america is no exception. it's same everywhere in the world. architects basically still function as a medieval guild. i'm a young architect in europe and i'm still  trying to find a place to fit in without being too much in bed with the establishment.

prains's picture

It's an old school pyramid scheme, where the managing partner claims all the loot, the minute things go sideways he bankrupts the firm and disappears to start again elsewhere. The top of the pyramid loves to watch the underlings fight it out for their scraps. The ridiculous part is the industrial world is legislated to use architects and their stamped drawing for any major building yet they as a group can't share the wealth amongst themselves in what is a regulated monopoly and work together to pay a fair a decent wage. The most fucked up business model left in the world today, tantamount to modern sweat shops and people agree to it for the allure of being called an "Architect".......crazy

Amagnonx's picture

A monopoly by agreement is a cartel.

Acet's picture

So true, all of it.


Really like the Intellectual Property bit - it's not obvious to most people that Intellectual Property is a completelly artificial government given monopoly on something of which there is no scarcity at all: ideas.

Carl Popper's picture

They just copied the playbook of my industry. The sickcare industrial complex.

daemon's picture

"... monopoly on something of which there is no scarcity at all: ideas."

But there is a relative scarcity of "good" ideas .



tradewithdave's picture

Diane Feinstein will be deciding what's a good idea and what is not. Simply allowing just anyone to blog is unacceptable. Writing is for journalists...

SunRise's picture

Not when good ideas are compared to great ideas.

Amagnonx's picture

Intellecual property should pass immediately into the public domain, with a fixed rate of return on revenue derived from the implementation of the idea for the lifetime of the inventor - non transferable - after which, it expires.


This provides incentives, and also allows public exploitation of new technology (with a slight premium to the inventor).

daemon's picture

"Intellecual property should pass immediately into the public domain, with a fixed rate of return on revenue derived from the implementation of the idea for the lifetime of the inventor - non transferable - after which, it expires. "

That sounds interesting, but how would you solve some of the potential problems the article points at, like :

"..., if someone else thinks of the idea one day later ..."


"... if someone halfway across the globe comes up with the same idea independently ..."

Oracle 911's picture

-1 because some safety regulations are needed, for preventing food poisoning or fires caused by improper wirings e.g. electric cables are under-dimensioned, BUT current over-regulation is nod better either.

NickVegas's picture

6. Use NSA data to blackmail, subvert existing relationships, and destory the competition thru dirty tricks.

7. Never enforce the Sherman anti-trust act, and buy out your competitors with fiat straight from the Bernanke.

Singelguy's picture

8. Collusion. Partner up with your biggest competitor and fix prices, supply, and distribution. You all make big profit and squeeze everyone else out.

SillySalesmanQuestion's picture

Have a magical printing press, helicopters, be Ben Bernanke or Mrs. Debtfire, Chair the FED...and poof, instant monopoly.

ThirdCoastSurfer's picture

Government mainly serves to fill a void.  When it's citizens cannot manage an issue on their own, when their greed and hate and ignorance collectively becomes too much to bear,  for too long, or by too many, like an untreated wound it allows the infection of government to enter the process. History (and especially the Bible) is repleat with examples of how mankind is incapable of self control and indeed, so is government,  so that the continuum constantly swings back and forth, to and fro. This epoch is just the last throughs of one end of the see-saw, enjoy the ride.

PT's picture

You tried to tell 'em, but some just didn't want to hear you.  I think you explained that quite well.

LetThemEatRand's picture

"It’s hard to maintain monopoly status in a free market when you have to deal with all that competition and whatnot."

Fucking Miller.  No, it's not.  That's what happens in a "free market."  They grow and destroy competition.  Without regulation, monopolists destroy their competitors by private force.  Monopolies are broken up by government.  Without it, they thrive.   Ask Teddy Roosevelt.

Carl Popper's picture

The closer a market is to being pareto efficient the less need ultimately to break up a monopoly. If government avoids creating barriers to entry and if everyone is given the same access to information, then monopolies simply cannot exist in a pareto efficient market.

Due to regulatory capture, most regulations tend to create barriers to entry to a particular market in the guise of safety. This is how monopolies flourish WITH regulation.

LetThemEatRand's picture

So the book says.   And there is no force without elected government.  So it is written, so it shall be done.

NickVegas's picture

"Due to regulatory capture, most regulations tend to create barriers to entry to a particular market in the guise of safety."

I'm serious, this should be in a textbook given to every 5th grader in America. If you want to peel the onion a little more, ask yourself why this information, in such a cogent form, isn't taught to every member of our "capitalist society" from the earliest day they can understand economics. One wonders about the carefully crafted curriculum taught to the future slaves.

This type of writing is dangerous, like a knife, like a blackjack, like a thunderbolt from the heavens.



PT's picture

After a while, people notice that the occasional house keeps burning down due to the same cheap wiring mistakes.  Sometimes, without regulation, everyone does not have the same access to information.

TrulyBelieving's picture

This (monopoly) can never happen in a "free market". For once a monopoly or any other abheration of a free market has inforced itself, then at that instant a free market no longer exists.

Ivan K's picture

You conflate economic force and political force. They are separate.

Economic force can only make you an offer. Political force points a gun at you.

Do modern (and Teddy Era) corps use both to their advantage? Yup. That doesn't mean it's right.

LetThemEatRand's picture

The oligarchs of the early 1900's had plenty of guns.  But the free market sounds fun  in Freshman class.  So we agree on that.

Dr. Destructo's picture

"Economic force can only make you an offer"

Yeah: silver or lead?

Economic force can have the same authority as a government in domestic, social, economic, or military arenas. Actually it often does.

therevolutionwas's picture

Give me one instance where economic force can have the same authority as government.

Dr. Destructo's picture

International Swaps and Derivatives Association

Actually this has MORE authority than a government.

Greece is a great example.

therevolutionwas's picture

That's private like the FED is private.  In name only.

NickVegas's picture

Coins were invented by the aristocracy as a method to pay their armies. They would then collect tax only payable in the coin of the realm. Think about it slaves. 

tradewithdave's picture

Does a Sunsteinian "Nudge" to involuntary organ donation count as economic? He is a behavioral economist and all.

Sean7k's picture

Well LTER, provide an example. Every monopoly Teddy "broke up" was government sponsored. So, what happened? Cartels and foundations which allowed the same thing, but people like you were too stupid to figure it out. ANY government intervention results in less competition. Of course, you would need to understand economics to realize this. Thankfully, that isn't the case.

Better still, there is NOTHING wrong with a monopoly, if there are no barriers to entry or special treatment from government. If the monopoly results in an acceptable product at the best price, how is the consumer hurt? Can he not just refuse to use the product if the situation changes? If something better comes along?

No, you would have us believe it is the word monopoly that is bad. That is blatant propaganda, without any analysis.

Amagnonx's picture

In area's where no special privilege exists, then monopolies must be maintained by govt intervention - regulation, subsidy etc.


Special privilege howevers exists in many area's that people are not aware of after cursory examination.  Rail and road for example - if there is an existing railway, then that is an effective monopoly, the same is true for a highway.  There are also monopolies like a dam on a river, that might be used for power generation.  Most of the time these monopolies exist due to the finite nature of land itself - whoever gets in first, or gets a go ahead installs a special privilege.


Because human beings are not responsible for creating land, nor rivers, or sunshine, or air for that matter - and we all require them to survive - then we all have an equal interest.  Apportioning ownership to the first guy who turned up is incredibly short sighted, reckless, unujust and also fails to consider a future filled with other human beings who could never have had that lucky opportunity to achieve a monolpoly because they turned up first.


Human property should be inviolate, but it needs to be more widely understood that real estate, water, air, the cycle of living things and sunshine (to name a few) are not human property - that in fact they are equal possessions of all human beings.  Human property is all things contingent upon the human being, their body, mind, speech and especially their labor and products of labor which are valued by other human beings.  Land is not private human property - and the idea of owning and monopolizing it will always lead to social inequality.  Rent is an income that requires no effort, and the value of rent is always dependent on the entire society - and has nothing to do with the guy who owns the land.  What is built on the land is property - but land is not.


This should be reflected in the fact that income derived exclusively from the privilege of use of any of the naturally occuring monopolies should be distributed to the rightful shareholders - that is the community, or more broadly the nation.

Singelguy's picture

If you take a closer look at the emminent domain laws, you will see that no individual really has property rights. The government can take your land whenever it feels like it. Yet, even on vacant land, the "owner" is required to pay property taxes. If you are going to abolish official private ownership of land, then get rid of the property taxes as well. Oh, and if the land does not belong to you than you are not liable for anything that happens on it, so you can abolish the insurance as well.

Radical Marijuana's picture

I liked this little video on the topic by Larken Rose:

How To Be a Crook


RaceToTheBottom's picture

This whole Bankstering episode has altered my belief a bit. 

I now think that the US should have nationalized the Banks and IBanks.

They should have lopped off the top level of each bank and said to the next guy in line to be CEO (not lopped off) you have 3 months to clean up and Uncle Sam and the FED will help you and then you will be a real company again, Mr New CEO.  Watch how fast each of those sharks will turn on their bosses.

If TBTF, break them up and do the same thing with the remaining parts.  Use basic rules like Glass-Steagall to determine the boundaries.

Once the three months are up, you remove banking insurance for everything but savings accounts that are required by law to charge only low interest and have NO risk.  Outlaw fractional bankstering and return the banks covered by insurance to simple utilities.  The gambling IBanks need no US Insurance.

Does this mean I lose my Misesian secret decoder ring?

RaceToTheBottom's picture

Pardon me, the reference does not mean anything to me.  Expand?

Amagnonx's picture

Removing fractional reserve bankstering is not possible unless you sever the link between money and debt - in other words monetary reform.  If you abolish fractional reserve, and don't allow for some other method to at least temporarily increase the currency supply, then there will be a deflationary collapse as all the old existing debts eat the entire currency supply.


There are two quick a dirty methods to achieve the outcome (of a stable money supply), one is simply print off anough money to pay out the total govt debt and pay it out with crispy new notes, and then the govt can buy all the private debt from banks and as the debts are paid off print out new money at the same rate as the currency and debt cancel each other out.


Or if you are particularly viscous, which I highly endorse - you can just have a debt jubilee and wipe out all debts and creditors get to suck it up.  This of course has its own problems - but at the end of either of these processes you would be able to cease printing, and abolish fractional reserve.

On the other hand you could just remove legal tender laws and allow gold, silver and other currencies to circulate - and make it illegal for debtors to insist in repayment in other than FRN's - which would eat all the FRN's and leave many debts with no way of repayment.