Writing a few days ago in The New York Times, David Leonhardt began his op-ed column on monopoliesobserving the Boston Tea Party of 1773 occurred in opposition to the Tea Act of 1773, which granted a legal monopoly over tea in the Americas to the East India Company. Writing earlier in the month, also in The New York Times, Columbia Law Professor Tim Wu began his op-ed on monopolies noting economic concentration in 1930s Europe and its role in the rise of fascism. Increasing market concentration in the U.S. is worthy of attention, but neither Leonhardt's nor Wu's arguments apply as straightforwardly as they suggest to indict increasing market concentration in the U.S. today.
Both exemplify monopolies created or facilitated by government. Today we call this “rent seeking” or “crony capitalism.” It is decried as much on the Right as on the Left. Leonhardt's example of the British-government created monopoly over colonial tea exemplifies crony capitalism. Parliament passed a law that granted the East India Company, itself a quasi-governmental entity, a legal monopoly over tea in the colonies. The result? A reduced supply of tea and a higher price than would have existed with a free market. Government protection was critical to the monopoly power exercised by the East India Company.
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