Large companies in noncompetitive markets can greatly influence governments

In the Gilded Age, big companies needed the government to turn a blind eye or lend a helping hand for their dubious schemes. They used their economic power to influence the government, like when Rockefeller convinced them to withhold permits for building oil pipelines to eliminate competition.

Oligopolies, dominated by a few companies, also exert their influence by lobbying the government with aligned interests, like the US pharmaceutical industry spending $116 million to prohibit Medicare from negotiating lower drug prices and earning $90 billion per year in additional revenue. The math is in their favor – it’s easier to organize a few like-minded companies than millions of diverse citizens.

Thus, concentrated industries can convince the government to give them goodies like tax cuts or subsidies to maintain their monopolies. It takes a serious assertion of authority for the government to push back against them.

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