Walmart, Galbraith

I'm slowly working my way through John Kenneth Galbraith's American Capitalism, the Concept of Countervailing Power. He's a wonderful writer, and I'd have finished it in a few days if I didn't have so much homework and access to a Game Cube.

The book is slightly out dated, though it only makes Galbraith seem smarter. He argues that, with some exceptions, all industries will tend towards monopoly, or at least an oligopoly of a few large businesses (which disrupt the supply and demand system of competition). The exceptions listed in my 1956 edition of the book are "... agriculture, the textile and garment industries, soft-coal mining, wholesale and retail trade, shoe manufacturing..." That's right, the industries dominated by Kraft, Nike and Walmart were at the time his examples of industries unimpeded by a few dominant companies.

What really interests me is his discussion of how the competitive system is supposed to work vs. the reality of the American markets. The forces of supply and demand and the competition between producers are supposed to determine prices, which can only work if no single business can effect prices on its own. If I, and 3000 other people, are selling wheat, I can't raise the price because no one will buy it, and if I lower it it won't force anyone else to do the same, and I'll just lose money. This ideal system, according to JKG, breaks down in a monopoly or oligopoly, where there are so few producers/suppliers that any of them can affect prices. To me, it sounds spot on.

What surprised me is that I was basically aware of the fact that large companies can choose to affect prices, and it was never portrayed as anything other than a good thing. Walmart's "Always Low Prices" don't result primarily from innovation, but from the fact that as the world's biggest retailer, they can simply force wages and prices down. What to do about that is something that there will be wide disagreement on (Galbraith certainly has his own solutions) but it seems fairly important to recognize that Walmart has an influence on the market that violates the competitive model just like Big Government(!) intervention or a Union might.