Earlier this month, Democratic Senator Elizabeth Warren took aim at so called “mega-mergers,” calling on the Trump administration to fight back against corporate consolidation within the U.S.
Speaking at the Open Markets Institute in D.C., Warren shed light on a growing issue of concern for many Americans: Multibillion-dollar corporations are cementing their control over the economy while small businesses struggle.
Putting Warren’s political gesturing aside, most Americans can at least agree on the core danger of monopolistic and anti-competitive practices. Even the staunchest free market advocates understand that too much consolidation can be a bad thing.
Of course, there are disagreements as to where exactly we should draw the line and how to prevent this kind of consolidation from arising in the first place, but the danger is something everyone understands.
Even Milton Friedman, the poster economist of free markets, recognized that monopolies are dangerous institutions. To many people that might sound counterintuitive, because the common assumption is that we eventually need the government to break up monopolies, but that’s not necessarily true.
Friedman, in fact, argued that the exact opposite is true: Government meddling is what allows monopolies to exist in the first place.
Here’s a quote providing the basic gist of his argument:
You have temporary monopolies develop and if the government doesn’t come to sure them up, they fall to pieces. The railroads became a monopoly only because they were able to get the interstate commerce commission established. Trucking is a monopoly because the [Interstate Commerce Commission] keeps out competitors. And you can go down the line you’ll find that one hypothetical monopoly case after another derives from governmental assistance and support.
In Friedman’s eyes, the greatest offense against monopolies wasn’t instituting anti-trust law but rather unleashing other businesses to take them down. As the old saying goes, it takes a thief to catch a thief.
There’s no doubt that Warren and her progressive constituents would take issue with this premise. Chances are good they’d paint Friedman as a villain and corporate shill, which would be a shame considering both parties ultimately share the same objective.
During her speech to the Open Markets Institute, Warren set her sights on one merger in particular: Bayer AG’s (ETR: BAYN) $66 billion bid to acquire global seed giant Monsanto Company (NYSE: MON).
Warren’s main complaint?
If the Bayer-Monsanto merger is approved, one gigantic company would supply one-quarter of the entire world’s seeds and pesticides.
There’s no doubt that the Bayer-Monsanto merger is a prime target for public outrage and a politically strategic target for Warren. Having earned the title of “the world’s most evil corporation,” Monsanto is widely disliked by the general public.
From questionable lawsuits to carcinogenic chemicals, there’s plenty of ammunition to push back against a deal that would effectively make a bigger Monsanto.
But what would a free market enthusiast like Friedman have to say about government intrusion into our nation’s agriculture business?
Well, it’s likely Friedman would point out the recently leaked “Monsanto Papers,” which show regulatory collusion between Monsanto and U.S. regulators. It’s likely he would point to the FDA’s, EPA’s and USDA’s rigorous regulatory processes that have kept Monsanto’s competitors at bay.
As Forbes explains about our current regulatory review process of genetically modified crops, the end result is that “it typically takes over 13 years for a new trait to go from an idea to the field.”
Friedman would surely align with the position that Monsanto’s market dominance in GMOs has been floated by this government meddling. More crucially, though, Friedman would point out how, if allowed to compete, other companies would be able to take Monsanto down.
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As difficult as it may be to believe any newcomer could take down a $50 billion giant like Monsanto, it’s not as far-fetched as it might seem. As we’ve seen countless times before, competitive innovation can take down even the most dominant players, and in brief periods of time.
Take Nokia, for example. At the time the iPhone was released by Apple in 2007, Nokia held 48.7%, or nearly half, of the global market share for mobile phones. That’s nearly double what Monsanto and Bayer would control of the seed industry if they merged.
Yet today, where is Nokia? Do you know anyone who owns a Nokia phone? I sure don’t… and it sure wasn’t government regulation that made this the case. It was disruptive innovation and free market economics that spearheaded Nokia’s fall.
Practically no one saw the fall of Nokia coming, as almost no one sees Monsanto’s fall, either, but believe me when I say Monsanto is going down in a similar fashion, as one little-known agriculture company positions itself to render Monsanto’s entire business model obsolete.
Notably, this company has bypassed the rigorous GMO regulation process being used to keep Monsanto’s competitors at bay. Its genetically engineered seeds technically don’t fall under the GMO label, which is cutting its time to market by nearly 75%.
Perhaps most importantly, this company’s seeds do not require the spraying of Monsanto’s Roundup, which the World Health Organization recently recognized as a probable cancer-causing agent.
Bayer merger or not, Monsanto is about to run into competition stiff enough to take it down, and, as long regulators don’t decide to meddle, it’s going to be a benefit for consumers and farmers alike.
We’re talking higher crop yields without the use of poisonous herbicides and healthier, cheaper produce packed with nutritional benefits.
The good news for investors is that this company, like Apple during Nokia’s era of dominance, is still widely unrecognized as a threat. Simply put, you actually have the opportunity to make money while supporting Monsanto’s downfall.
If that opportunity at all interests you, be sure to keep an eye out in the coming weeks, as we’ll have all the information on how to invest.
Until next time,
Jason Stutman
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