Introduction to Sociology

Capitalism in Practice

As capitalists began to dominate the economies of many countries during the Industrial Revolution, the rapid growth of businesses and their tremendous profitability gave some owners the capital they needed to create enormous corporations that could monopolize an entire industry. Many companies controlled all aspects of the production cycle for their industry, from the raw materials, to the production, to the stores in which they were sold. These companies were able to use their wealth to buy out or stifle any competition.

In the United States, the predatory tactics used by these large monopolies caused the government to take action. Starting in the late 1800s, the government passed a series of laws that broke up monopolies and regulated how key industries—such as transportation, steel production, and oil and gas exploration and refining—could conduct business. The main statutes were the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. These Acts, first, restricted the formation of cartels and prohibit other collusive practices regarded as being in restraint of trade. Second, they restricted the mergers and acquisitions of organizations that could substantially lessen competition. Third, they prohibited the creation of a monopoly and the abuse of monopoly power.

The United States is considered a capitalist country. However, the U.S. government has a great deal of influence on private companies through the laws it passes and the regulations enforced by government agencies. Through taxes, regulations on wages, guidelines to protect worker safety and the environment, plus financial rules for banks and investment firms, the government exerts a certain amount of control over how all companies do business. State and federal governments also own, operate, or control large parts of certain industries, such as the post office, schools, hospitals, highways and railroads, and many water, sewer, and power utilities. Debate over the extent to which the government should be involved in the economy remains an issue of contention today. Some criticize such involvements as socialism (a type of state-run economy), while others believe intervention and oversight is necessary to protect the rights of workers and the well-being of the general population.

Figure 3. This chart shows how Amazon has developed monopoly-like power in retail when compared with other major corporations like Walmart, Target and JCPenny.

How do you think monopolies are in direct contradiction to the idea of competition in capitalist societies? Source: Visual Capitalist, https://www.visualcapitalist.com/extraordinary-size-amazon-one-chart/.