United In Cartels

Hey did you see this United deplaning business on the news?  If you are here on the internet, I suspect you know exactly what I am talking about, but, in case you are reading this post in the far future or found it stapled to a tree or something, here is what happened: United Airline needed some seats on a full flight in order to move their staff around.  Instead of bribing their customers to take a different plane, the airline coerced the passengers with the fine print of the ticket contract (which, as you can imagine, allows airlines to do anything they want in exchange for zooming you across the continent at 700 miles an hour). One customer was aggrieved and refused to leave his seat, so they called in militarized corporate guards (or the police? Who can tell these days?) to beat him up and drag him off the plane. The United CEO then issued a statement basically saying “We can do as we like. Our market is guaranteed.”

As you can imagine, this has stirred up some hard feelings among the general public, but the CEO was right.  There is a cartel of four carriers which controls the majority of flights around America.  If you wish to fly, you must do so at the cartel’s terms (or else you need to buy a plane).  This consolidation has allowed the airlines to cut service, increase fares, and add a proliferation of fees. Most markets are under the thumb of a single carrier and, if you want to fly where they have suzerainty you will have to use that carrier or not fly.  Good luck getting a train or even a bus in America.

I don’t mean to pick on the airlines: cable service provider, pharmaceutical companies, oil conglomerates, insurance companies, major banks…even toy companies all operate the same way in today’s deregulated society.  America has a monopoly problem: but today’s companies are smart enough to avoid having one entity take complete control of a market.  Business schools and the school of hard knocks have taught the heads of these companies to be slightly subtler about the way they fix prices and collude.   With their record profits, they have also bought up politicians and control the relevant legislation that goes in front of them.  Do you care about flight regulation legislation enough to lobby your congressperson?  I personally do not, but I bet United sure does!

The bigger takeaway here is that capitalism is facing challenges of extreme success which are causing it to morph into naked oligopoly.  This in turn is stifling competition and innovation.  It is also breaking our political process. The Republican mantra that “government is the problem” and cartel companies like United or Aetna should be allowed to run everything for the benefit of a tiny number of great aristocrats does not really seem like a platform which was drafted by groundlings!  The Democrats pretend otherwise but they abandoned responsible attempts to reign in business cartels back in the 70s.  The parties have different favorites, but they are both content that the game is rigged.

It is not supposed to work this way.  In an ideal market, you could punish United and its smug multimillionaire CEO by spending three dollars more to take an airline that doesn’t beat up its passengers and drag them off the plane screaming.  In a better democracy, you could vote in a district where the winner was not already predetermined by gerrymandering.

This sort of thing means we are going to have to pay attention. We all need to be aware of regulatory capture: an endemic species of corruption whereby giant companies write rules which look reasonable, but which actually price smaller competitors out of the marketplace.  Politicians rubber stamp these rules and claim they are looking out for the public interest (while the cartels support their subsequent careeers).  We are going to need to be more attentive and smarter, or we are all going to be doing what giant corporations and their pet politicians tell us to do.  The moment where we can act is quickly passing. We must push for effective new antitrust measures or we will all have to take our tiny expensive seat and shut up while brownshirts probe and beat us to their hearts’ content… not just when we fly but everywhere all of the time.

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