Millions upon millions of ordinary Americans own real estate — homes, apartments, and the like — and thousands of independent builders and contractors create these buildings for them to purchase. Even more Americans own automobiles, but for some curious reason only a handful of companies build automobiles.
Rick Wagoner, the CEO of General Motors, discussed the problem of overcapacity in the automobile industry:
"It''s hard to take capacity out. It''s expensive. There are frequent union issues. There are government regulations," he said. "The auto industry has high barriers to entry and high barriers to exit."
Allow me to re-state this idea. The large automobile manufacturers, along with the labor unions, promoted intervention by government regulatory agencies to create high barriers to entry; not surprisingly the government also created high barriers to exit. The high barriers to entry prevent competition, encourage monopolies, and stifle creativity — all to the benefit of the established companies. But what goes around comes around; when competition finally arrived, from "foreign" manufacturers and non-union labor, the introduction of creative new ideas have succeeded in pushing domestic monopolies to the brink of extinction.
Topics: · business · government · manufacturing · transportation
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