What is the future of the free market economy? Where will the American economy be in 100 years? Will there still be a free market economy in 100 years? These are all questions that are commonly speculated on, by both market analysts and ordinary citizens alike. In a capitalist society like ours, economics and business play an irreplaceable role in our past, present and future lives.
Though it is still impossible to predict the future accurately without the aid of super-natural power, there are current trends and patterns that we may use to speculate on the future of our economy. From what I see of the American market economy now, the over-whelming trend seems to be, “The rich get richer, and the poor get poorer (or die.)”. Every year, more and more smaller businesses (some new, some old) go bankrupt and are forced to close down. Every year, the few elite, larger businesses grow larger and larger, at a faster and faster rate. If this trend continues, there’s only one place that the American free market is headed to: a complete market monopoly.
I believe that, without government control and intervention, the American free market economy would inevitably fall into an accelerating plummet towards complete market monopoly by a single, colossal corporation. This is caused by a series of chain reactions triggered by the following factors: the competition amongst businesses to provide the lowest prices and maximum convenience for the consumers, the competition to obtain and dominate the cheapest source of supply, and the high barrier of entry in a quasi-monopolistic economy caused by the domination of supply and demand.
In the garden of a free market economy, the consumers are the air, water and nutrients that all plants, the corporations and businesses, need to survive. As the foundations of this economy and garden, consumers will forever be in high demand, and every business esteems to take as many of us as possible. This fact alone gives these consumers an incredible and frightening power: the power of choice. They have the freedom to choose when to buy, what to buy, how much to buy, and most importantly, who to buy from. And whom do they buy from? Well, whoever offers them the lowest price and the most convenience, obviously. A price cut here, an added product there; these are all changes that seem relatively small, and virtually unnoticeable to everyday consumers and even whole stores. But on a grander scale, on the scale of an entire national corporation, these changes have an enormous effect on their sales and profits. These corporations realize this, and so they are constantly competing with each other in cutting prices, and adding in new goods. They are constantly expanding and expanding, to attract the most customers. They are constantly racing against each other to become larger- for in the race of market domination, you automatically lose if you fall too far behind. Smaller stores without the capital or power to expand and slash prices like the larger corporations are forced out of the market and close down. In turn, this steady elimination of competition only gives the larger corporations more opportunity to expand and slash prices even more heavily, effectively driving out more and more competition. This cycle will continue until there is only one corporation left, and the market becomes an one hundred percent, pure monopoly.
As a plant grows larger, its roots grow deeper. This is the same with corporations. As a corporation eliminates competition and expands, it is also able to expand its range of supply. Because of its growing monopoly, a company will earn more and more profit as it expands. From its profits, the company can afford to spend more capital on supply and invest more in growth, whether it’s building more factories, or buying out sources of supply in foreign countries. This way, the corporation is not only feeding itself a vast supply of goods, but is also cutting off supply or buying out supply to other companies. With less supply at higher prices, the competing companies can no longer afford to cut their prices, and so, they are eliminated from the market in this manner. And the single monopolizing company will continue to grow and expand.
As more and more companies are eliminated and more and more of the supply and demand markets are dominated by these few elite companies, the barrier to entry will only build up higher and higher. The barrier will grow and grow until it is virtually impossible for a new business to even approach the market. Supply is completely cut off by the largest companies, and even if a new business COULD obtain supply, it would be at a far higher cost than the larger companies. With a high supply cost, the smaller businesses cannot afford to offer the cheap prices that the elite businesses can, and so they are unable to establish themselves at all, or close down within the first year (or less). And with every day, barrier of entry will continue to grow.
Although my predictions may seem a little extreme, they are, I believe, more or less, relatively accurate predictions of the future of free market economy. Perhaps there will never be a perfect 100% monopoly by any company, but if our economy is allowed to go free like it is now, we’ll definitely end up with something pretty close. Even now, as I write this, the chain reaction cycle I have described is already being set into motion, through the monstrosity we know as Wal-Mart.
In the next five years, Wal-Mart expects to double its sales to $480 billion, as it continues to expand across a plethora of market categories, from groceries, to home-goods, to oil and cars (Saporito). Every year Wal-Mart takes over more market shares, not only from smaller grocers and stores, but also from larger competition, such has Kroger and K-Mart. According to Linda Kristiansen, a retail analyst for UBS Warburg Equity Research, Wal-Mart aims to control 30% of the shares of all major business they are currently in. What’s worse, Wal-Mart plans to invade the market of not only the United States, but also plans to spread its growth across the world, dominating their markets as well. Wal-Mart currently has over 1200 stores in over nine countries, successfully feeding them about 16% of its sales. At this rate, not only would Wal-Mart dominate domestic business and international supply, but it also might end up dominating international business while it’s at it!
I conclude that the garden of the American economy has gone too long with a proper pruning. Corporations such as Wal-Mart have grown too much and expanded too far, protruding outside of its assigned flowerbed. It steals the nutrients and market shares from the corporations around it, killing them, only to grow even larger at a faster rate. It is now time for the gardener to step in. As the gardener of our country, it is the United States’ government’s responsibility to give these plants that have grown out of hand, such as Wal-Mart, a good trimming. The government should be able to set progressively higher taxes on companies that control too much of a market’s shares, in order to regulate their control over a market, and prevent excessive growth and monopolization. Using this extra tax money, the government then should provide a subsidy for newly established businesses and companies, in order to promote market variation and competition. Or, the government could set regulations on how much supply a single company can import from foreign sources, effectively preventing supply market domination, freeing up the foreign labor market for smaller businesses with less capital and revenue.
In the face of such powerful corporations and businesses such as McDonalds and Wal-Mart, it is easy for both the government and smaller businesses to become overwhelmed by a feeling of helplessness and futility. But even so, we must remember that although a chain reaction runs quickly and smoothly, it is as fragile as it is efficient. Its weakest point is at any point on the chain. One single link, or one single factor is all you need to disrupt this impending chain reaction that threatens to carry our economy to monopolization. There are many places at which to cut. Cut it at its supply, with government regulations. Cut it at its source of growth with higher and more progressive taxes. Cut it at its cause of growth, by the choices and decisions of individual consumers. The possibilities are only infinite.
Perhaps, viewing it in this light, saving the future of the American economy might not seem so difficult after all.