The End of Power Read Online Free Page B

retained, used, and lost, whether in a market or elsewhere.
    Some barriers to entry stem from underlying conditions. They have to do with an industry’s technical characteristics: manufacturing aluminum, for instance, requires massive, expensive-to-build, energy-consuming smelters. The underlying conditions may also reflect how much the industry is tied to a particular geographic location. For instance, does it require natural resources that are found only in a few places? Or does the product need to be processed or packaged close to where it will be sold, as in the case of cement, or can it be frozen, as with shrimp from China or lamb from New Zealand or vegetables from Mexico, and shipped around the world? Is a very specialized set of human skills required, such as a PhD in physics or mastery of a particular computer programming language? All of these questions point to requirements that explain why it is easier to open, say, a restaurant, a lawn-mowing company, or an office-cleaning firm than to enter the steel business, where you not only need capital, expensive equipment, a large factory, and expensive and specific inputs but also might incur big transportation costs.
    Other barriers to entry result from laws, licenses, and trademarks; examples include bar membership for lawyers, a doctor’s license to practice medicine, and the zoning, sanitation, facilities inspection, liquor license, and other hurdles one might face when trying to open a restaurant. Such barriers—whether they stem from scale, access to key resources, access to specialized technology, or legal and regulatory requirements—are structural barriers that confront any firm wishing to compete in the market. Even for firms already operating in that particular market, these barriers are hard to change—although firms that have grown large and powerful are often able to influence their regulatory environment.
    Alongside these more permanent structural barriers are strategic barriers to entry. Incumbents create strategic barriers to prevent new rivals from emerging and to prevent existing rivals from growing. Examples include exclusive marketing agreements (e.g., the one between AT&T and Apple wheniPhones were first launched), long-term contracts that tie suppliers to sellers (e.g., oil producers and oil refiners), collusion and price-fixing (e.g., the infamous effort in the 1990s by Archer Daniels Midland and other firms to fix the price of animal-feed additives), and lobbying politicians to extract unique governmental advantages (e.g., a license to run a casino as a monopoly in a certain area). They also include advertising, special promotions, product placement, frequent-user discounts, and similar marketing tools that make entry difficult for would-be competitors. Indeed, it’s hard to break in, even with the most exciting product, when you need an enormously expensive advertising budget to let potential customers know that your product exists and an even larger one to persuade them to actually try it. 3
F ROM B ARRIERS TO E NTRY TO B ARRIERS TO P OWER
    So it is no surprise that quite a bit of competitive ardor, not just in business but in other fields as well, goes into building up or breaking down the barriers to power—that is, affecting the game by changing its rules and requirements. This is especially true in politics, where parties and candidates often expend tremendous energy in battles over drawing up congressional districts (the infamous practice known in the United States as gerrymandering), or over mandating gender parity in parliament and on candidate slates, as in Argentina and Bangladesh, where a quota of seats in parliament is reserved for women. In India, where Dalits (once known as the caste of “untouchables”) have reserved seats in parliament and regional assemblies, intense political and legal battles have raged over extending these benefits to the so-called Other Backward Classes (OBCs). In many