capitalism

Profitable Scarcity: How Capitalism Manufactures Shortages

T Jackson

08 Dec 2025 — 4 min read

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Abstract

Under capitalism, scarcity equals profit. Powerful companies use government to manufacture shortages, blocking competition to keep prices high and wages low.

Why are medicines that people need to survive so expensive? Why don't more companies start selling them for less? And why is food so costly?

A fundamental conflict drives much of it: our economic system often performs best when people create or impose scarcity. But people thrive when there is plenty available for everyone.

In some cases, big companies take advantage of this. They can use laws and government regulations to limit supply and create shortages, even when this action harms most people.

The Scarcity Business Model

In a market economy, scarce goods command higher prices. When something becomes abundant and freely available, its market value sharply declines. This creates a key conflict: companies that can produce a lot often choose to limit supply instead. And they don't limit their own production; they use government power to prevent anyone else from competing.

Manufacturing Scarcity Through Government

Patent Abuse: Drug companies skip patenting new medicines. They push for strict patent laws. Then, they use "evergreening" to keep monopolies going forever. They make minor changes (switching a pill to a capsule) and file new patents, blocking generic competition for decades. The result: insulin, discovered over a century ago, costs $300 per vial in the U.S. versus $30 in Canada.

Zoning Laws: In cities with high rents, housing developers and homeowners push for rules that prevent new construction. They support zoning laws that only allow single-family homes of a certain size. This keeps housing scarce and prices high.

Telecommunications Monopolies: Cable companies secure laws preventing towns from creating public internet services. In many areas, residents face one or two providers who can charge whatever they want. The barrier isn't technology; it's legislation designed to block competition.

Non-Compete Agreements: Fast-food chains are asking workers to sign contracts. These contracts stop them from working at nearby competitors. When workers can't leave for better opportunities, they lose all leverage to negotiate wages or conditions.

Trade Restrictions: U.S. sugar producers lobby for strict import rules that force Americans to pay double the world price. Steel tariffs help domestic steel profits. However, they also increase costs for the automotive, construction, and manufacturing sectors.

Food Destruction: The government has made many payments to farmers to destroy food, keeping prices high. During the Great Depression, the Agricultural Change Act paid farmers to kill 6 million pigs and plow under crops. In 2020, during the COVID-19 pandemic, farmers dumped millions of gallons of milk. They destroyed vegetables and killed chickens and pigs when restaurants closed. The government also runs programs paying farmers not to plant crops. These programs say they tackle environmental issues. However, they also cut food supply and raise prices. This isn't about safety. It's about creating artificial scarcity to boost profits.

The Human Cost

Higher Prices: Americans pay more for prescription drugs, internet access, healthcare, and housing than people in other developed countries. This isn't due to market forces but laws that restrict competition.

Suppressed Wages: In towns with few major employers, workers have nowhere else to go. Companies exploit this, knowing employees can't negotiate for raises or better conditions.

Job Insecurity: Government-protected monopolies can mistreat workers who have nowhere else to turn. Amazon warehouses deal with tough conditions. This is partly because they reduce retail competition in smaller cities.

Stifled Innovation: Great ideas that could change industries often get blocked by high compliance costs and legal rules. These rules focus on keeping scarcity, not on ensuring safety.

Wasted Potential: We have the tools and know-how to create affordable housing. We can also make life-saving medicine available to everyone. The roadblock isn't technology; it's a legal framework written to keep things scarce.

Food Insecurity: Picture the Great Depression: families lined up for bread, hoping for food. But at the very same time, farmers were being told to destroy their crops and dump milk. The food was right there, but it never reached the hungry people.

We saw the same thing happen in 2020. Food bank lines were long, but farmers were plowing vegetables back into the ground and killing livestock they couldn't sell. People were paying more at the store while good food was being buried or thrown away.

Why? Because the system had a choice: help get that food to people or protect prices. It chose prices. The government paid to destroy food rather than find a way to share it.

That's the real problem. When the system decides that scarcity is better for business than abundance, everyone loses. People go hungry while food rots in the field. It doesn't make sense, but it keeps happening.

The Free Market Myth

Capitalism claims to champion free markets and competition. In practice, successful capitalists work to block competition. They want the government to grant them monopolies. They also push for rules that block new competitors and set tariffs to protect their profits.

The system rewards people who twist the law and the rules. They make things complicated to get ahead. By keeping things scarce on purpose, they can keep prices high and wages low. This leaves people struggling to put food on the table, even though there's plenty to go around.

A small, influential group makes money from these shortages. And they use their connections and influence in politics to keep things this way. They protect their profits, no matter what it costs the rest of us.