Monday, January 9, 2012

Monopoly: Not just a board game

In this article by William Cohan, the author describes a brief history of how Wall Street has been run by the same small group of companies for almost a century. "The Cartel," as he calls it, is a group of investment firms that has succeeded in maintaining a stranglehold on the fees and business of Wall Street banking since the early 20th century. They have muscled out smaller competitors and, for all intents and purposes, have monoplized the markets.

Because there is a group of companies and not just one or two, the cartel has avoided legal action as a monopoly, since they can claim to be competitors. But historical evidence has shown that this group, so integrated with each other that they are practically a single entity, operates more like a single organization than a group of competing lenders.

The question then becomes: what do we do about it? There has been some recent success in stopping further consolidation, as pointed out in the article. But what about breaking up these groups that have such a clear hold on our economy?

Legal action would be the most likely course, but we all know that such action is almost meaningless against such powerful and wealthy enterprises. And unlike organizations on Main Street, one cannot boycott the market. It simply exists, a system of trading that produces huge amounts of wealth for people without producing a single good or service that can be protested. Without legal or economic means, there is little that can be done, except legislatively.

The only possible solution, it seems, would be to take down this cartel with government regulations. I don't know enough about these things to know how to fashion such legislation, but I know that the response would be quick, decisive, and entirely negative. After all, it would be going after a group of obscenely profitable, highly influential institutions that have operated for nearly 100 years in their capacity. There is going to be a lot of resistance. How do you go about dismantling a monopoly when that monopoly has influence over courts, and very likely over government officials?

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