Analysis of free markets

Let's recap the whole sordid saga about how "big, evil, corporate America" went wild and the gov't saved the day:

FACT #1: Standard Oil becomes a behemoth due to efficiency, very aggressive practices, and giving the consumer the best deal.

Quote:
Between 1870 and 1885 the price of refined kerosene dropped from 26 cents to 8 cents per gallon. In the same period, the Standard Oil Company reduced the costs per gallon from almost 3 cents in 1870 to .452 cents in 1885. Clearly, the firm was relatively efficient, and its efficiency was being transmitted to the consumer in the form of lower prices for a much improved product; for the firm, the efficiency meant additional profits.


Cheap products due to aggressive competition to give people the best product at the best value! Oh, the horror!

But, say the statists... LOOK! Standard Oil now controls almost 90% of the market! We are all doomed to suffer but for their mercy. Gov't come save us!

However, this leads to...

FACT #2: Standard Oil didn't gouge the consumers even at the height of its so-called monopoly. In fact, in order to retain its market share against would-be competitors, Standard Oil continued to improve its efficiency and continued to LOWER prices, even with 90% of the market!

Quote:
Finally, throughout the 1880—1895 period, refined oil products increased in quality, and the price to the consumer declined. Though Standard’s share of the refining market declined slightly (approximately 82 percent in 1895 compared to over 88 percent in 1879), the price of refined oil per gallon in barrels declined from 9 1/3 cents in 1880 to 8 1/8 cents in 1885, to 7 3/8 cents in 1890, and to 5.91 cents in 1897. In addition, Standard’s refining costs per gallon fell to 0.29 cents in 1896. Thus, at the very pinnacle of Standard’s alleged industry control, the costs and the prices for refined oil reached their lowest levels in the history of the petroleum industry.


So far, seems as though there is no problem--better quality at lower prices, even under the anti-trust statists' worst nightmare! But now the statists will holler: With >80% of the market, nobody will ever be able to emerge as a competitor and eventually Standard Oil will own 100% and THEN they will raise prices and screw us all! Help gov't!

Oh, but here comes the clincher...

FACT #3: Even at the height of its dominance, competitors were emerging and Standard Oil's share was falling. These competitors adopted efficient practices and smarter management in order to compete and offer prices similar to the oil giant, even though they weren't nearly as large or could control as much resources.

Quote:
By 1908 there were at least 125 independent refineries in the United States, among them Sun Oil, Union Oil, and the Tidewater company; and by 1911 there were at least 147. The petroleum industry was exploding faster and in more directions than any one man or firm could predict or control. The competitive market was taking apart Standard Oil of New Jersey’s position. As the Hidys so neatly put it: 'Thus even before the breakup of the combination, the process of whittling Standard Oil down to reasonable size within the industry was already far advanced.'


Ah, so it was the market which adapted and began to overcome the so-called monopoly without any aid from the gov't!

WHAT HAVE WE LEARNED BY THIS HISTORY LESSON?

-The left's nightmare came true! A company exploded into an almost 90% market share by shrewdly undercutting its competitors! BUT... prices were lower than ever, product quality improved, the economic boom carried on full bore, barriers to market entry were unable to materialize, the market adapted to compete, large numbers of competitors emerged, all the while consumers never experienced any of the horrors envisioned by anti-trust enthusiasts.

AND THIS IS SUPPOSED TO BE A CASE *FOR* GOV'T REGULATION AND AGAINST THE FREE MARKET??? ARE YOU KIDDING? THIS SHOULD BE THE POSTER CHILD FOR WHY FREE MARKETS WORK AND HOW THOSE WHO OPPOSE THEM RESORT TO SENSATIONALIST PROPAGANDA THAT DOES NOT FIT REALITY!

It is also the poster child for how a little knowledge (omg, Standard Oil had 90% of the market!) can be a dangerous thing in the hands of the lazy and disingenuous.


Sources of excerpts: THE PETROLEUM INDUSTRY: A Historical Study in Power, D. T. Armentano

A search of Standard Oil will yield similar findings, such as this from Wiki:

Quote:
By 1890, Standard Oil controlled 88% of the refined oil flows in the United States. Gradually, its market share fell to 64% by 1911. Standard's oil production as a percentage of total market supply fell to 11 percent by 1911, down from 34 percent in 1898. By 1911, it was in competition with Associated Oil and Gas, Texaco, Gulf Oil, and 147 independent refineries. (DiLorenzo, Thomas The ghost of John D. Rockefeller) Nevertheless, it was claimed by many to be a monopoly.

As the public became more aware of the Standard Oil trust in allowing its oil companies in different states to be headed by the same board of directors, there was more public support in calling for its dissolution. Eventually, the company was broken up after the United States Supreme Court declared the trust to be an "unreasonable" monopoly under the Sherman Antitrust Act. Thus, on May 15, 1911, though Standard Oil's share of the market had been steadily declining from 1900 to 1910 (Standard's share of oil refining was 64% at the time of the trial and in competition with over 100 other refiners), the Supreme Court of the United States ordered the dissolution of Standard Oil Company into 34 smaller companies, each with their own board of directors. John D. Rockefeller in 1897 had completely retired from the Standard Oil Company of New Jersey, though he continued to own a large fraction of its shares.

The notion that Standard was a monopoly is rejected by some economists, citing its much reduced market presence by the time of the antitrust trial. And, no one claims that they harmed consumers but rather the reverse --that their aggressively competitive practices drastically lowered prices for consumers.


We should be so lucky as to have an economic system that allows this to happen--not the opposite!