Politics of Price
May 27, 2019

What determines prices? Supply and demand, says anyone with a modicum of training in economics.

Right, says Barry C. Lynn (Cornered): "In any open market that is populated by many small buyers and many small sellers, if the producers try to raise their prices high enough to make themselves richer than their neighbors, other producers expand production or enter the market until prices go back down. If the prices fall below what an individual producer needs to sustain his business, and his home, the producers will cut production and in some cases exit the business entirely until the prices rise." Adam Smith was right.

But this simple scenario ignore the role of politics in determining the actual supply of a product on the market. Lynn observes, "whether a government builds (or approves the building of ) a road to a particular tract of timber or a port near a particular mine helps to determine the amount of lumber and copper that the participants in those markets can bring to market."

Lynn's book is about the concentration of the American economy into a small number of gigantic producers and distributors, a process that he describes as a form of "socialism." Markets aren't being controlled by the state, but by corporations that can impose their will on all lesser players on the field. Writing in the aftermath of the financial crisis of 2008, Lynn writes, "American financiers had erected a particular form of socialism that enabled them to dump all the risk in the industrial and banking systems they control onto us, even as they jetted away with all the profit" (vii). International firms like Wal-Mart operate in a "socialist" fashion.

In a situation of concentration, prices can have a tax-like quality. He writes: "Henry Osborne Havemeyer, who in 1887 consolidated seventeen sugar refineries into the trust that eventually gave birth to Domino Sugar, stated the basic truth succinctly when he said, 'Who cares for a quarter of a cent a pound?'" No consumer, in other words, is going to object to a small hike in price. Few consumers will even know.

Lynn continues: "Translated into the world of real political economic actions, what Havemeyer meant was that he did not intend to use the power he had amassed over our supply of sugar to gouge us suddenly and violently. Rather, he intended to collect his quarter of a penny tax from us quietly and steadily, the same way our local governments collect a few pennies from us quietly and steadily every time we buy a Slurpee at 7- Eleven" (47).

His complaint against today's monopolies isn't that they raise prices too high. He objects to the disparity of power between the monopolists and everyone else, other producers and lowly consumers both. This, he says, was the motivation behind anti-trust law: "anti- monopoly laws was not to prevent one company of men from charging 'too much' for, say, cotton or vegetable oil. It was to prevent that company of men from using its corner on the supply of some item to increase their political power relative to the rest of us in a more or less permanent fashion" (47-8).

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