Tag: Opinion

Relevance Today of Adam Smith’s “The Wealth of Nations”

Smith’s book gives insight today into competition and monopolies.

The Book

The year 1776 brought forth our Declaration of Independence.  It was also the same year Adam Smith, an English professor of moral philosophy, published his book on economics of his day.  Officially entitled, “Inquiry into the Nature and Causes of The Wealth of Nations,” it is still in print and most copies run close to 1000 pages.

Smith wrote this in response to the behavior of the mercantilists of his day, whom he despised.  Mercantilists were business owners who favored government protection from foreign imports and pursued market domination.  He believed a country’s wealth should be based on the amount of consumption produced and not accumulation. 

He divides his work into five “Books”, each with multiple “chapters.”  Book I deals with the powers of labor, Book II focus on the role of stock, Book III on the opulence found in different nations, Book IV on the political economy and Book V on the role of the Sovereign.

What He Says

He describes many scenarios involving daily business dealings to prove points, but only in general terms.  In other words, he doesn’t mention any specific business by name and thus no case studies to independently verify.

At the end of chapter II of Book II he talks about the benefit of free competition vs. monopoly:

“By dividing the whole circulation into a greater number of parts, the failure of any one company, an accident which, in the course of things must sometimes happen, becomes of less consequence to the public.  This free competition too obliges all bankers to be more liberal in their dealings with their customers, lest their rivals carry them away.  In general, if any branch of trade or any division of labor be advantageous to the public, the freer and more general the competition, it will always be the more so.”

In chapter II of Book IV he argued that protectionism of home markets from foreign products may be counterproductive.

“To give the monopoly of the home market to the produce of domestic industry, in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must, in all cases, be either a useless or hurtful regulation….It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.”

Smith mentions laborers but does not get into the area of worker organization, employee safety or what specific amount is considered fair wages.  He does mention that those who labor are also consumers, and as consumers should earn enough to provide adequate sustenance to contribute to the economy:

“No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.  It is but equity, besides, that they who feed, clothe and lodge the whole body of people, should have such a share of the produce of their own labor as to be themselves tolerably well fed, clothed and lodged.”

He believed that business should be allowed to pursue their own interest.  Government should not place itself in the position of favoring specific merchant classes.

“Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest in his own way, and to bring both his industry and capital into competition with those of any other man, or order of men.  The sovereign is completely discharged from … the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of society.”

Conclusion

Adam Smith was of a different era in terms of commerce.  His generation did not have to deal with international corporations, labor unions, and Big Tech.  It is difficult to know what he would think of the influence of merger and acquisitions on commerce.  He did have to deal with monopolies, favoritism, and inequality.  In his book Smith covered a great deal of economic territory.  As a result, some can get lost trying to find a clear, concise message from it.  Today people with different economic views can find support from Smith.  Nevertheless, his work is still considered a pioneer in the history of economic thought.

Heard of the Robinson-Patman Act? If you spend money, you should.

Small retailers have a law to help them compete but is little used.

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Have you noticed a considerable decline in local and regional retail businesses over the years?

Small groceries, pharmacies, hardware, music shops, bookstores have lost out to what we now call “Big Box”.

Some of this can be contributed to changing shopping tastes.  Big Box can offer the stock and breadth of products that smaller retailers cannot.  I admit that I go to Big Box for this reason.  Also, Big Box has a stronger online presence that some retail businesses have either not adapted well to or refuse to. 

Robinson-Patman Act

Local and regional retailers do have the support of the Robinson-Patman Act.  It was enacted in 1936 by Senator Joseph T. Robinson of Arkansas and Representative Wright Patman of Texas.  The Act was designed to restrict price discrimination by large suppliers and protect small retailers from national chain stores.  Suppliers could offer discounts to retailers who bought in bulk, but criteria had to be available to any retailer, without favoritism to individual ones.

The 1980’s saw enforcement begin to wane, as challenges to price discrimination began being seen as anti-competitive.  Businesses were allowed to violate either the law or the spirit of the law and get away with it.

Walmart and Pepsi Collusion

In late 2025 The Institute of Local Self Reliance sued the Federal Trade Commission (FTC) to make public censored details from the case involving PepsiCo and Walmart.  Brought by three Walmart customers, the suit alleged that PepsiCo was informing Walmart what other retailers were paying for the product and conspiring with Walmart’s knowledge to charge them a lower price, in keeping with Walmart’s well-known message of having lower prices.  The Trump Administration subsequently supported the decision by the current FTC to not pursue it any further.

Legislation

On March 19, 2026, Senator Chris Murphy of Connecticut filed in Congress the Fair Prices for Local Businesses Act.  In effect it would strengthen the Robinson-Patman act by eliminating loopholes that currently allow large companies from striking better deals with suppliers than their smaller rivals.  In other words, it would further codify as illegal the arrangement that occurred between Walmart and PepsiCo. 

Conclusion

One thing I advocate is strengthening anti-trust laws to allow for a greater definition of what anti-trust and anti-monopoly behavior is.  This can allow judges have better clarity as to what is in violation and what isn’t.  I support this law.  Equally important, it should go further and eliminate bulk discounts to large retailers.  Testimony from local and regional retailers on this would be welcome, and the media picks up on it as a priority. 

Contact your Senators and ask them to support this legislation.  At the same time ask them to support the Break Up Big Medicine Act, a bi-partisan legislation by Senators Hawley and Warren.  This targets Big Pharma and its acquisitions of health care companies and pharmacies.

 

 

Breaking Up is Hard to Do

Senate legislation introduced to target Pharmacy Benefit Managers

Neil Sedaka, a singer, songwriter, and pianist who died last week, hit the charts in the early 1960’s with the hit single, “Breaking Up is Hard to Do.”  He liked it so much that he released a newer version of it some 10 years later, with a slower tempo.

The Break Up Big Medicine Act

Senators Josh Hawley and Elizabeth Warren are looking to put that phrase to the test when it comes to going after Pharmacy Benefit Managers in the health care industry.

The act, officially titled, “The Break Up Big Medicine Act”, was released in February.  The bipartisan measure seeks to reign in the monopoly they feel exists with both prescription drug claims and prescription drug wholesalers, and the insurance companies, physician groups and pharmacists who are involved.

On their official website, Senator Warren is quoted as saying:

“There’s no question that massive health care companies have created layers of complexity to jack up the price of everything from prescription drugs to a visit to the doctor. The only way to make health care more affordable is to break up these health care conglomerates.  Our bill would be a monumental step towards ending the stranglehold that corporate giants have on our broken health care system.”

Senator Hawley says:

“Americans are paying more and more for healthcare while the quality of care gets worse and worse. In their quest to put profits over people, Big Pharma and the insurance companies continue to gobble up every independent healthcare provider and pharmacy they can find.  Working Americans deserve better. This bipartisan legislation is a massive step towards making healthcare affordable for every American.”

Pharmacy Benefit Managers

Pharmacy Benefit Managers (PBM), are companies hired by health plans to manage prescription drug benefits. Which drugs are covered, how much they cost, and where patients can fill prescriptions are determined.  Such things as to what pharmacies are “in network,” prior authorizations, and obtaining price discounts in exchange for favorable positioning are selected.  They started out mainly as an administrative service but grew in power to issue decisions in the daily operations of the pharmacy web.

The largest PBMs in the United States are CVS Caremark, Express Scripts, and Optum Rx. Together, they process nearly 80% of all U.S. prescription claims. 

The largest prescription drug wholesalers in the United States are McKesson, Cencora (formerly AmerisourceBergen), and Cardinal Health. They control over 90% of the U.S. drug‑distribution market.

On their website Warren and Hawley state the companies involved are “vertically integrated”.  This means one company can own or control every part of the health care supply chain—from health insurance companies and PBMs to pharmacists and physicians.

“By controlling both the company that pays for health care services (e.g., a health insurer) and also the entity that sets the prices for those health care services (e.g., a health care provider), these conglomerates may be steering business to their own affiliates, evading laws intended to rein in corporate profiteering, or using providers they employ to boost government payments and pad their bottom lines.”

Analysis

In my opinion this is an uphill fight for the two Senators.  Breaking up here is hard to do.  But it is a step in the right direction.  Legislation or court rulings can be part of the solution.  It is better than simply using social media to bad mouth corporations and their executives.  Social media is freedom of speech and can draw a lot of attention but leads to no solution.  It is also better than cheering on those who assassinate health care executives. 

The health care monopoly is bigger than pharmacy benefit managers.  For example, this legislation does not address its historical acquisition mania and the power it has produced.   Nevertheless, I encourage all of you to contact one or both of your U.S. Senators and express your support.  I am not sure it will garner the support, let alone the attention, of the Trump administration.  But, as I said, it is a step in the right direction.

 

 

The Core of American Capitalism

Human interaction is an overlooked part of capitalism defined

In the News

I see where Warner Bros. Discovery is giving the Paramount offer a second look at being acquired.  Paramount initiated this acquisition pursuit way back in September, 2025.  It has gotten much media attention, in the national news outlets as well as the business news.

If someone was not a student of economics and relied on the news media for his or her information, you may get the impression that this acquisition, and other big ones that get media attention, are the center of our economic system.  In addition to this acquisition, there is also the constant chatter of how Big Tech is investing umpteen dollars in artificial intelligence.  This sure has had an effect, both positive and negative on the stock market recently. 

Where is this Core?

In my opinion, it started with thousands of men and women throughout the decades who, with some material and financial resources combined with inspiration, went on to create great companies, both large and small,  throughout this country.

I remember reading how both Apple and Microsoft got started in garages.  There is also Walt Disney starting out creating a Mickey Mouse cartoon called “Steamboat Willie.” 

However, since 1980 there have been individuals and companies involved in directions that have shifted much of our economy away from innovation and more about domination.  We have been introduced to such things as investment banks, leveraged buyouts, corporate raiders, hostile takeovers, private equity, private credit, stock buybacks, Pac Man defense, activist investors.  In my opinion they have all immensely deviated from this basic core.

The people involved in these activities are far away, literally and figuratively, from many people found on Main Streets throughout this country.  family and friends may work for local or regional businesses, where upper management has regular face-to-face contact with both employees and customers. 

This personal, human interaction is, in my opinion, where you find the core of our capitalist system.  Laws and tax reform should be in place to help keep businesses independent who want to be independent.  Legislators should give primary attention to small business issues more than corporate campaign contributions. Large corporations are not inherently bad, but the distant relationship between management and employees and customers located hundreds of miles away or across oceans, reduces these people to being mere statistics on paper or a screen.  Decisions can thus be made without the decision makers having any personal interaction with those on the front line.  Decisions based on statistics is important but should also include the personal input from employees and customers.

Final Thoughts

I have written before wondering what is going through the minds of Warner employees with all this acquisition talk.  Customers are also faced with the thought of less entertainment choices and possibly higher costs.  This is high dollar negotiations with huge financial consequences for everyone involved.  Fees and profits are to be earned by some, maybe not all.  Careers may also be on the line.   It is all very important.

It makes for high drama and entertaining news headlines, but has consequences.  Such corporate wheeling and dealing is far removed from what occurs on Main Street America.  Some may call this capitalism, and they may find sources to back that up.  But, in my opinion, this corporate world contributes to the decline in some American’s belief in the capitalist system. 

What do you think?

What the F.T.C. Can Learn from Al Capone

F.T.C. needs broaden anti-trust laws to better insure convictions.

Al Capone

A century ago, gangster Al Capone was alleged to have been involved with prostitution, illegal gambling and murder, including the St. Valentine’s Day murder.

I say alleged, because Mr. Capone was tried but never convicted of any of the above.  In 1931 the Justice Department changed its strategy and convicted him of tax evasion.  He was given an 11-year sentence and was released early, in 1939.  His health subsequently declined and he died in 1947.

Had there not been laws on tax evasion that could land a person in jail, Mr. Capone may very well have continued his crime spree.

Failed Attempt

The New York Times reported on January 20, 2026 that the Federal Trade Commission (FTC) announced it will reopen its pursuit of anti-trust charges against Meta, parent of Facebook, regarding its acquisition of both Instagram and What’s App.

The judge in the original case, Judge James E. Boasberg, ruled that Meta did not violate anti-trust law with the two acquisitions. 

Judges should interpret the law and not legislate from the bench.  If Judge Boasberg believes that Meta did not violate anti-trust law with these acquisitions, it is important to know where in federal law he justifies his position.  The F.T.C. originally sought charges that the Sherman Anti-Trust Act of 1927 was violated.  Meta argued that it faces competition from apps like You Tube and Tik Tok. 

There is a video on YouTube from 2010 where Mark Zuckerberg states at a company address that Facebook does not acquire companies for the company itself, but to acquire the individual or individuals behind it.  In other words, he explained this as his method of acquiring top talent.  However, as a result, the companies these people started, all tech companies, simply disappeared.  Nice way to quietly get rid of any rising competition, isn’t it? 

Analysis

If the F.T.C. is serious about revisiting this, the people there really need to look at why they lost the first time.  If they apply the same evidence, they may get a similar result, even if ruled by a different judge.  Perhaps looking at Meta’s (previously Facebook) ENTIRE acquisition history may provide additional evidence of anti-trust, monopolistic behavior.  If they feel they still have a weak case, perhaps amending federal law to provide them with a wider net would bring Meta, and possibly others, to justice. 

Hostile Takeovers – How to Cease Hostilities

Businesses need help from wasting time and money on this.

In the News

Paramount continues to pursue Warner Brothers Discovery, though management has clearly indicated the Netflix deal is in the company’s best interest.

At the same time, Cincinnati based Cintas Corporation has announced a third attempt to acquire Massachusetts-based UniFirst.  Both companies provide employee uniforms and related services but in separate parts of the country.

What is the link between the two?  They both involve using the tactic known as the hostile takeover.

Definition

A hostile takeover is an acquiring company seeking to obtain control of another company, often a competitor, against the recommendation of either senior management or the board of directors.  The pursuer will sometimes appeal to the shareholders directly to force a vote on the bid. 

This tactic was used by Standard Oil Company to acquire refineries a century ago.  Since the Depression it was rarely used until the 1980s.  The Reagan administration pursued deregulation, which led to a different, and sometimes aggressive, approach to corporate governance. 

Anheuser-Busch

One that made headlines in 2008 was the acquisition of Anheuser Busch by Belgian-based InBev.  It is now known as AB-InBev, which is now the world’s largest brewer.  By the way, it was the world’s largest brewer PRIOR to the acquisition.  During negotiations InBev promised not to close any breweries, but it did not promise to maintain current employees.  As a result, some 1,400 jobs were eliminated—jobs perfectly legitimate one day were now gone the next day.

Analysis

In my opinion, hostile takeovers deviate far from the founding principle of capitalism.  That principle is having an idea for a product and service and acting on it in an environment where those ideas can become real and make a profit.  Having to battle competition is also part of this principle.  Hostile takeovers are nothing more than a power grab meant to either dominate the market or specific companies.

Some may argue that they are pursuing growth.  They also argue that some companies are bloated and inefficient and an outsider needs to come in and straighten things up.  Nothing wrong with pursuing growth.  But growth can (and should primarily) be pursued through internal research and development.  As for inefficiencies, some companies may have them.  But they should be urged to change through persuasion rather than bullying tactics.  Some may not change, and they may fail.  Business failure is also a principle of a capitalist economy.

How to stop this

Some pursued companies have adopted tactics known as a “poison pill,” meant to provide roadblocks.  An example would be issuing additional shares to existing shareholders, thus making it difficult for the acquirer to obtain a majority stake.

The federal government could also create a law that would allow the victim to declare a hostile takeover has been pursued.  The aggressor would then be prohibited by law from making any further attempt to acquire the other.  If the victim does not declare, the pursuit may continue.  This would allow the pursued to keep its resources and not waste either time or money with lawyers to try and fend it off. 

Does this make sense? 

Should this not be pursued?