7 ms·

How America became uncompetitive and unequal

52 points by orlandob 12y ago

ivan_ah 12y ago
This opinion piece articulates something I've felt for a long time... consolidation is the biggest problem in America right now, scratch that, in the World. One thing that I can't comprehend is how right-wing free-market ideologues can get behind all the consolidation. Cant they see that consolidation is just like communism? Only a competitive market with many players can ensure progress continues.
- grondilu 12y ago
  The answer is simple : economic freedom. If companies have the right to merge, it's not because "right-wing free-market ideologues" think it is best for the economy, it's because it is their business and they are free to organize it as they will. Saying that only "many players can ensure progress continues" and thus prohibiting companies to merge is interfering with economic freedom in the name of "I know better", and that is planned economy. And that, is "just like communism", as you put it.
  - brazzy 12y ago
    You could not possibly be more wrong. Monpolies are the exact opposite of economic freedom and amount to a planned economy, except the plan is not even nominally for the good of everyone.
    - watwut 12y ago
      While I agree with you, I would point out that planned economy plans are rarely "for the good of everyone". Planmakers tend to enrich themselves and their buddies. I'm tempted to write never, but there might have been that one historical event when it went right.
      - brazzy 12y ago
        That's why I wrote "not even nominally for the good of everyone" - explicit economic plans, at least the socialist variety are usually for the good of all in theory but not in practice. A monopoly-based plan would not even claim to be. Also, I don't think the biggest problem with plans is self-enrichment by the plan makers, but inflexibility, the lack of good information, misaligned incentives and unintended consequences. And the biggest strength of a market economy is not the absence of any of these problems, but that they don't effect everything euqally and the companies that are affected the most just fail without dragging down everything.
      - crdoconnor 12y ago
        >While I agree with you, I would point out that planned economy plans are rarely "for the good of everyone". This is exactly how it works under our system too. Instead of economic planning being set in motion by the nomenklatura, it's done by the heads of major banks.
    - grondilu 12y ago
      I have not used the word monopoly and was merely talking about the right for people to work together. Do you have anything against that?
      - brazzy 12y ago
        You said > Saying that only "many players can ensure progress continues" and thus prohibiting companies to merge is interfering with economic freedom in the name of "I know better" Sounds like you're advocating that all mergers should be allowed, even if they produce monopolies, and that not having many players would be OK. The notion that regulation which disallows two billion-dollar companies with thousands of employees to merge because they'd afterwards dominate an important market has anything to do with "the right for people to work together" is somewhere between fundamentalist and disingenuous.
        grondilu 12y ago
        If a company ends up being the only one providing a product or service on a market, there is nothing wrong with that, as long as other companies are not prohibited to enter the market if they are capable to. And I repeat : you have no right to prevent people from working together if they want to. It's none of your business. If you're upset with a company dominating a market, just create your own company to compete with it.
        brazzy 12y ago
        Yes, there is a lot wrong with that, as there are often significant inherent barriers to enter a market, and lots of things an incumbent can do to hinder competition, not all of which can be made illegal. And a good government has every right to prevent this situation, that is exactly its business.
    - brc 12y ago
      Monopolies can only happen with a large and determined government to reinforce them. Actual monopolies are exceedingly rare, and nobody has ever provided me with an example where the monopoly power was not in part or wholly provided by the government. No monopoly can overcome the power of technological innovation and the desire for lower cost goods and services in even the medium term. Monopolies and planned economies are two sides of the over-sized/too-powerful government coin. I'm all for stopping monopolies from forming, but the solution to that is not anti-trust style laws, but a focus on preventing the conditions that allow monopolies to continue.
  - dougabug 12y ago
    Corporations are legal fictions. They exist through the power and authority of the State, their contracts are enacted and enforced through agents of the Courts. Corporations are manifestly not free to organize as they will. Is it economic freedom to have one choice for Internet broadband? For healthcare? Unregulated monopolies should supply us with food, water, power, and all other essential utilities/needs? Welcome to the age of thousand dollar a pill medicine. Every communication, location, every purchase, every mouse click or swipe duly tracked, recorded, and data mined. To imagine that as freedom merges the Dickensian with the Orwellian.
    - NoPiece 12y ago
      Welcome to the age of thousand dollar a pill medicine. Every communication, location, every purchase, every mouse click or swipe duly tracked, recorded, and data mined. You are exactly describing the world today, as provided by our big government.
      - willvarfar 12y ago
        How would "small" government change it? Being a European living in a country with a "bigger" relative government (as I understand the way Americans use the term) but with free healthcare and a big data mining debate ongoing, I'm a bit at a loss...
        NoPiece 12y ago
        A smaller government wouldn't have a $52.6 billion budget for the NSA & CIA to data mine. A drug company can only charge a $1000 for a pill because the government is blocking competition by granting patents. Effectively creating a micro monopoly. Small government with extremely limited or no patents would allow competition to fix the $1000 pill. It is industries like healthcare and telecom, where the US has both very large companies and very big government that we have the worst outcomes.
      - sergiosgc 12y ago
        Small countries, like mine (.pt), kind of disprove this idyllic vision of small government. Small governments easily fall prey to large multinationals. USA's woes with oligopolies may have many causes. A government concentrated at the federal level isn't probably one of them.
  - ivan_ah 12y ago
    > The answer is simple : economic freedom. I'm all for freedom, and that is precisely why I'm opposed to consolidation. There are a couple of components required to make the free market work: (1) freedom for companies to grow [--> efficiency], (2) freedom for new companies to enter the market [--> competition], and (3) freedom for customers to choose from different offerings [--> competition]. Consolidation is all about (1) at the expense of (2) and (3). To clarify, when I said "communism" I meant "central planning" (not totalitarianism), which is what happens when a single corporation controls most of a market. Apologies for using this emotionally-charged term loosely. > prohibiting companies to merge I'm not sure what wing that puts me in, but I think we should prohibit large companies from merging and also dismantle existing large companies as well. The way I see it, a world with many small and medium-sized companies will run much smoother than one with a single large company. Specifically, keeping the chain of command short (height of the corporate pyramid < 7) will ensure informed decisions are made (instead of decisions based on office politics, and personal vision---the corporate version of "I know better"). Except for some exceptions (e.g. you need a pretty big company to manufacture planes) this would be possible.
- nl 12y ago
  I think it would be more reasonable to complain about consolidation combined with regulatory capture being a big problem. In some parts of the world regulation of corporate behaviour is an adversarial process. In the US it is often designed to improve the market for large companies. (I also find it difficult to view a statement like "consolidation is the biggest problem in the world" as anything but lacking some perspective. I suspect you may like to revisit that idea)
- brc 12y ago
  Except that it is nothing like communism. Communism is defined by a complete lack of freedom to change the status quo. In turn, the lack of freedom to change the status quo means that development and progress is dramatically slowed, slowing down improvements in quality of life - as people themselves would prefer. Consolidation only persists where it is either an effective way to deliver value (Walmart) or regulatory capture has occured (eg taxi licences, car dealerships). Todays consolidated behemoth is tomorrows has-been company - as long as the laws allow them to fall apart when they can no longer innovate and compete. Inequality of income to me seems as though an economy is functioning well at the creating-value part. A lack of inequality (too much equality) is a danger sign that the creation of wealth and progress has been halted, most likely due to lack of freedom for individuals to pursue their own interests. It's a misunderstanding to think that competition requires many players to be effective. In many cases, you only need two players and threat of entry to any others for competition to be successful at optimal use of resources. You only need two fighters and some contenders for a world champ boxing match to make them the best available at the time. And a fair referree. I'll be the first to admit that the last part is the most difficult to achieve, but it's no reason to abandon the concept of the game.
  - brazzy 12y ago
    > Communism is defined by a complete lack of freedom to change the status quo. Um, no. No, it's not. At all.
    - leaveyou 12y ago
      It's quite funny how little people know about communism, why it appeared, how it developed and what influence it had over capitalism & why it collapsed although less than 25 years passed since its collapse.
      - collyw 12y ago
        I find it quite amusing how people talk about communism failing, AFTER we bailed out the banks.
      - 12y ago
- danmaz74 12y ago
  The absolute belief that the free-market will always correct itself for the benefit of everybody is very much like the absolute belief of communists that in a communist world everybody will work at his/her best for the benefit of everybody. In many markets, the only way to avoid monopolies or tight oligopolies is with anti-trust legislation, but recognizing this is impossible for those who believe that all regulation is evil.
  - collyw 12y ago
    Exactly. Too little in politics is based on evidence. (I think) I would vote for the first politician to admit that they are not sure what the outcome will be. Unfortunately in politics, and honest attitude is not well received.
gremlinsinc 12y ago
Author has great points but too optimistic we're screwed, there's no fixing it as long as politicians are our only hope for change.
ergoproxy 12y ago
I have a different take on this article than most. I'm a proponent of Classical economics, and I reject all modern schools of economics--neoclassical, Austrian, Keynesian, etc. Classical thinkers like Adam Smith expounded how rational self-interest and competition together lead to economic prosperity. There's a balancing act going on between self-interest and competition--competition is the economic faculty that restrains self-interest. Only in perfect competition do we get Pareto efficiency--the state in which it is impossible to make any one individual better off without making at least one individual worse off. Unfortunately, modern schools of economics have diminished the role of competition. Keynesianism lauds government monopoly power; while neoclassicism and Austrianism foster private monopoly power. Both are evil. The result has been a state of affairs wherein the vast majority of people are getting worse off. WRT government intervention in the markets, Adam Smith would not oppose intervention that fosters competition and stifles monopoly. The goal of the 1890 Sherman Anti-Trust Act was to foster competition, not to diminish "economic freedom." "Economic freedom" is a mostly meaningless buzzword that's thrown around by both libertarians and socialists. Indices of "economic freedom" as compiled by the Heritage Foundation and the Wall Street Journal serve no other purpose than propaganda. It's impossible to divorce politics from economics in the real world. Adam Smith understood this. The subject used to be called "politico-economics." Today, the Left favors reforms to give government more monopoly power. While the Right favors reforms that give firms more monopoly power. Until people start to wake up and realize all monopoly power is evil and what we need instead is more competition, things will continue to decline.
- nhaehnle 12y ago
  Keynesianism lauds government monopoly power; while neoclassicism and Austrianism foster private monopoly power. Both are evil. At least in the case of government, you may feel that it is evil, but it is necessary [0]. So the more pragmatic and productive approach would be to think about how this monopoly power could be used to further prosperity and equity of the people. Today, the Left favors reforms to give government more monopoly power. While the Right favors reforms that give firms more monopoly power. I think both those characterizations are a bit simplistic. Look at the discussion surrounding surveillance, secret courts and the police state, for example. [0] This is true even within the economy: having a common measure of value is important for doing business, so you need currencies to have large scopes. Whoever ultimately controls a currency necessarily has a lot of monopoly power. So the question is not whether such powers exist, but how they should be structured subject to goals that we need to set for ourselves as a society.
leaveyou 12y ago
Consolidation is also favored by cheap money (yes, back to money monopoly thingy). Above some threshold and especially if you are in good relations with a bank, it is far easier to buy your competitors and dismantle them by selling their assets than to compete with them. It's ironic how in the failed communist centralized economies, the economic policy was dictated by "elected" nomenklatura and it was BAD, while in the "free/democratic" market economies the control is held by unaccountable private banks and nobody worries much.
- leaveyou 12y ago
  As Arthur Clarke would say: Any sufficiently advanced "bread and circuses" is indistinguishable from freedom and democracy.
- spindritf 12y ago
  It's ironic how in the failed communist centralized economies, the economic policy was dictated by "elected" nomenklatura and it was BAD It wasn't judged as bad because of nomenklatura, or rigged elections. Few people care about these. It was bad because you couldn't get basic goods. There were shortages of sugar and toiler paper. Not war-time shortages, decades after the war. Which is why the current system will continue as long as it can carry out its basic obligations. American banks are a little behind the times but mostly because of all the backwards compatibility they carry, not scale-related dysfunction. Regular consumers don't feel that. They can still can get their credit cards, chargebacks work, fraud is policed, Amazon gets paid, etc, etc.
  - crdoconnor 12y ago
    There are currently shortages of another basic good: housing. It's a mistake to think that our economies are any the less planned. Fraud may be policed at the low end, but at the high end (servicer fraud; pension rip offs) it is rife and largely unpoliced.
    - spindritf 12y ago
      Shortage of housing in the US is only local, and it's a feature, not a bug. Voters want a shortage so that they can buy a house in a "good neighbourhood" to move away from poor people. It's almost never explicitly stated that way but that's the way the votes go. Whole new towns are incorporated around the US to avoid poor school districts. People impose new taxes on themselves, something otherwise unheard of, to do that. Proposition B passed in SF just this month to limit new developments and will probably lead to more limits in the future. Conservative south and urban liberals united at last. This is the system working as intended, fulfilling the wishes of its constituents.
dmitri1981 12y ago
Hospitals by their very nature are anti-competitive. There is no way that you as a patient can shop around. You do not have the necessary knowledge to compare the treatments, evaluate the options and decide on what represents the best value.
- antimagic 12y ago
  Yup. I had to get some surgery done a few years back, and I went surgeon shopping. The surgeons did not like that one little bit. They got quite upset with me when they realised I was talking to several different surgeons and checking out my options. Of course, as you point out, it is very difficult to evaluate medical professionals from a layman's perspective. I ended up talking to surgical nurses in the hospitals the surgeons worked out of. It was not easy finding the nurses, it took persistence and physically going to the hospitals in question and asking real nurses which nurses I need to talk to. Then I had to track those nurses down, and convince them to talk openly. It helped that I have a cousin that is a nurse, and she gave me some contacts / introductions. I was glad I did it though. One of the surgeons on my shortlist had a very poor reputation amongst nurses as to his skills in the operating theatre, so I managed to avoid him. As an aside, considering just how critical the nursing staff where about this guy's skills, it is incredible to me that he is still allowed to practice...
- dnautics 12y ago
  that's generally not true. For most procedures done in hospitals there is nearly no reason why patients can't shop around. With basically the only exception being the ER, for true emergencies. Moreover, even if NOT ALL patients shop around, say, even just 10%, there would be enough momentum going to put pressure on doctors to improve quality of care and decrease costs.
  - watwut 12y ago
    It is hard to shop around because prices are not transparent. It is very hard to find out in advance how much exactly will everything cost you. You can get some partial information (how much they charge for room), but they will not tell you in advance about all the tests you will have to pay. Then there are small item hospitals charge a lot for: band-aids for example. Unless you know a lot about healthcare system, you will not be able to guess all of them. Plus, hospitals are not in habit of committing to agreed upon price in advance. So, even if you shop around the amount they will charge you still can be much different then the one you calculated.
chondos 12y ago
TLDR, Because of monopolies (or such as the opinion of the article). Is that really all it is? You see, I thought it may be something to do with the fact that my generation of kids (Gen X) growing up played 3 hours of video games and watched 2 hours of TV a day (Gen Y even more). Don't you think that may just slow down creative entrepreneurial minds a bit? What about the 20% of younger adults on antidepressants? 10% of them smoking pot (also known to quell ambition) What about the highest divorce rates ever? the most kids in day care (being raised by a stranger), the lowest availability of a family sanctuary to nourish a child growing up in the world. To encourage them and let them worry about things like learning without all the turmoil and drama. You don't think that may have made a difference did you? What about kids becoming sexually involved ever younger. You don't think that sexual infatuation would be any kind of distraction from things like ambition and education would you? Also, genXers and after are very lazy. They were given too much and too little asked/expected of them. Less time has been spent by parents raising their kids in every generation since the great depression. How are kids supposed to become responsible, hard working adults when they are left to their own devices and/or raised in day care? How can a country compete when 1/2-1/3 of the generation is lazy (low work ethic). Public education has been dumbed down to let the disadvantaged and minorities feel equal. I believe that his was never the proper approach. As such though, kids aren't even learning as much, when they actually should be learning more than the previous generations. The efforts to help minorities and inner city residents have been terribly mishandled, creating government dependent drones who end up in prison, or on welfare/disability over time. This has in many case become a growing and unhealthy co-dependent relationship between the poor/minorities/illegals and the Democrat party. Look at all the factors which go to play in creating a successful difference maker in a society. What would put someone at and advantage? I would say first of all a loving family who spends time raising their kids themselves. Teaching them all the right things to do in life. Next, an opportunity to learn. Not just an opportunity either, a proper education that makes it interesting. Thirdly, I think that certain demands have to be put on a child as they grow up. Responsibilities and duties. Not that I think kids should study and do chores all day. I believe that kids today do too much homework at a young age. Creativity cannot be taught. Bored kids with a little regulation and opportunity can create their own entertainment and it usually involves a whole lot of creative thought. A kid sitting in front of a TV or video game all afternoon will never experience this. These things foster ambition and all the tools needed to follow that ambition to fruition (Including the support system to keep them believing in themselves even after failing numerous times along the way) Last but not least. Free trade and illegal immigration fundamentally changed the workforce of the USA too quickly for us to react. Labor and manufacturing jobs went overseas, or went to illegals. Manufacturing was always a trade that would slowly disappear because of robotics and automation, but not in the span of 10 years. This rapid shift caused many people to gain massive amounts of wealth (the Walton's for example) and at the same time, put many people out of work. It happened so quickly that the workforce could not adapt fast enough to re-train or let people retire as manufacturing becomes obsolete. Illegals make a large amount of wealth for a few, but at the same time put a tax and health care burden on all of our backs as we pay for their education, welfare, and emergency room visits. I didn't hear any of this in that opinion article, only that monopolies cause these problems. Funny thing is that the monopolies are a mere side effect of a lack of all I have described that was missing from previous generations. Breaking monopolies into smaller pieces is only going to cause 80% of the countries wealth to be shared by 1.5% of the population instead of 1% (a poor solution IMO)
warmfuzzykitten 12y ago
I am pleased to see that all of the comments up to now deal with the "uncompetitive" aspect of the article and none with the "unequal" aspect. Indeed, it seems to me that "inequality" (the word appears 9 times in the article) was thrown in after the fact to decorate a piece about the adverse effects of monopoly, because post-Piketti it's stylish to talk about inequality. These aren't the same subject; the discussion of inequality is focused on person fortunes, not industrial domination. The former doesn't require the latter.
- esbranson 12y ago
  No more than dying requires getting shot in the face. But nonetheless getting shot in the face adds considerably to the likelihood of dying.

52 points by orlandob 12y ago

This opinion piece articulates something I've felt for a long time... consolidation is the biggest problem in America right now, scratch that, in the World. One thing that I can't comprehend is how right-wing free-market ideologues can get behind all the consolidation. Cant they see that consolidation is just like communism? Only a competitive market with many players can ensure progress continues.

grondilu 12y ago
The answer is simple : economic freedom. If companies have the right to merge, it's not because "right-wing free-market ideologues" think it is best for the economy, it's because it is their business and they are free to organize it as they will. Saying that only "many players can ensure progress continues" and thus prohibiting companies to merge is interfering with economic freedom in the name of "I know better", and that is planned economy. And that, is "just like communism", as you put it.
- brazzy 12y ago
  You could not possibly be more wrong. Monpolies are the exact opposite of economic freedom and amount to a planned economy, except the plan is not even nominally for the good of everyone.
  - watwut 12y ago
    While I agree with you, I would point out that planned economy plans are rarely "for the good of everyone". Planmakers tend to enrich themselves and their buddies. I'm tempted to write never, but there might have been that one historical event when it went right.
    - brazzy 12y ago
      That's why I wrote "not even nominally for the good of everyone" - explicit economic plans, at least the socialist variety are usually for the good of all in theory but not in practice. A monopoly-based plan would not even claim to be. Also, I don't think the biggest problem with plans is self-enrichment by the plan makers, but inflexibility, the lack of good information, misaligned incentives and unintended consequences. And the biggest strength of a market economy is not the absence of any of these problems, but that they don't effect everything euqally and the companies that are affected the most just fail without dragging down everything.
    - crdoconnor 12y ago
      >While I agree with you, I would point out that planned economy plans are rarely "for the good of everyone". This is exactly how it works under our system too. Instead of economic planning being set in motion by the nomenklatura, it's done by the heads of major banks.
  - grondilu 12y ago
    I have not used the word monopoly and was merely talking about the right for people to work together. Do you have anything against that?
    - brazzy 12y ago
      You said > Saying that only "many players can ensure progress continues" and thus prohibiting companies to merge is interfering with economic freedom in the name of "I know better" Sounds like you're advocating that all mergers should be allowed, even if they produce monopolies, and that not having many players would be OK. The notion that regulation which disallows two billion-dollar companies with thousands of employees to merge because they'd afterwards dominate an important market has anything to do with "the right for people to work together" is somewhere between fundamentalist and disingenuous.
      - grondilu 12y ago
        If a company ends up being the only one providing a product or service on a market, there is nothing wrong with that, as long as other companies are not prohibited to enter the market if they are capable to. And I repeat : you have no right to prevent people from working together if they want to. It's none of your business. If you're upset with a company dominating a market, just create your own company to compete with it.
        brazzy 12y ago
        Yes, there is a lot wrong with that, as there are often significant inherent barriers to enter a market, and lots of things an incumbent can do to hinder competition, not all of which can be made illegal. And a good government has every right to prevent this situation, that is exactly its business.
  - brc 12y ago
    Monopolies can only happen with a large and determined government to reinforce them. Actual monopolies are exceedingly rare, and nobody has ever provided me with an example where the monopoly power was not in part or wholly provided by the government. No monopoly can overcome the power of technological innovation and the desire for lower cost goods and services in even the medium term. Monopolies and planned economies are two sides of the over-sized/too-powerful government coin. I'm all for stopping monopolies from forming, but the solution to that is not anti-trust style laws, but a focus on preventing the conditions that allow monopolies to continue.
- dougabug 12y ago
  Corporations are legal fictions. They exist through the power and authority of the State, their contracts are enacted and enforced through agents of the Courts. Corporations are manifestly not free to organize as they will. Is it economic freedom to have one choice for Internet broadband? For healthcare? Unregulated monopolies should supply us with food, water, power, and all other essential utilities/needs? Welcome to the age of thousand dollar a pill medicine. Every communication, location, every purchase, every mouse click or swipe duly tracked, recorded, and data mined. To imagine that as freedom merges the Dickensian with the Orwellian.
  - NoPiece 12y ago
    Welcome to the age of thousand dollar a pill medicine. Every communication, location, every purchase, every mouse click or swipe duly tracked, recorded, and data mined. You are exactly describing the world today, as provided by our big government.
    - willvarfar 12y ago
      How would "small" government change it? Being a European living in a country with a "bigger" relative government (as I understand the way Americans use the term) but with free healthcare and a big data mining debate ongoing, I'm a bit at a loss...
      - NoPiece 12y ago
        A smaller government wouldn't have a $52.6 billion budget for the NSA & CIA to data mine. A drug company can only charge a $1000 for a pill because the government is blocking competition by granting patents. Effectively creating a micro monopoly. Small government with extremely limited or no patents would allow competition to fix the $1000 pill. It is industries like healthcare and telecom, where the US has both very large companies and very big government that we have the worst outcomes.
    - sergiosgc 12y ago
      Small countries, like mine (.pt), kind of disprove this idyllic vision of small government. Small governments easily fall prey to large multinationals. USA's woes with oligopolies may have many causes. A government concentrated at the federal level isn't probably one of them.
- ivan_ah 12y ago
  > The answer is simple : economic freedom. I'm all for freedom, and that is precisely why I'm opposed to consolidation. There are a couple of components required to make the free market work: (1) freedom for companies to grow [--> efficiency], (2) freedom for new companies to enter the market [--> competition], and (3) freedom for customers to choose from different offerings [--> competition]. Consolidation is all about (1) at the expense of (2) and (3). To clarify, when I said "communism" I meant "central planning" (not totalitarianism), which is what happens when a single corporation controls most of a market. Apologies for using this emotionally-charged term loosely. > prohibiting companies to merge I'm not sure what wing that puts me in, but I think we should prohibit large companies from merging and also dismantle existing large companies as well. The way I see it, a world with many small and medium-sized companies will run much smoother than one with a single large company. Specifically, keeping the chain of command short (height of the corporate pyramid < 7) will ensure informed decisions are made (instead of decisions based on office politics, and personal vision---the corporate version of "I know better"). Except for some exceptions (e.g. you need a pretty big company to manufacture planes) this would be possible.
nl 12y ago
I think it would be more reasonable to complain about consolidation combined with regulatory capture being a big problem. In some parts of the world regulation of corporate behaviour is an adversarial process. In the US it is often designed to improve the market for large companies. (I also find it difficult to view a statement like "consolidation is the biggest problem in the world" as anything but lacking some perspective. I suspect you may like to revisit that idea)
brc 12y ago
Except that it is nothing like communism. Communism is defined by a complete lack of freedom to change the status quo. In turn, the lack of freedom to change the status quo means that development and progress is dramatically slowed, slowing down improvements in quality of life - as people themselves would prefer. Consolidation only persists where it is either an effective way to deliver value (Walmart) or regulatory capture has occured (eg taxi licences, car dealerships). Todays consolidated behemoth is tomorrows has-been company - as long as the laws allow them to fall apart when they can no longer innovate and compete. Inequality of income to me seems as though an economy is functioning well at the creating-value part. A lack of inequality (too much equality) is a danger sign that the creation of wealth and progress has been halted, most likely due to lack of freedom for individuals to pursue their own interests. It's a misunderstanding to think that competition requires many players to be effective. In many cases, you only need two players and threat of entry to any others for competition to be successful at optimal use of resources. You only need two fighters and some contenders for a world champ boxing match to make them the best available at the time. And a fair referree. I'll be the first to admit that the last part is the most difficult to achieve, but it's no reason to abandon the concept of the game.
- brazzy 12y ago
  > Communism is defined by a complete lack of freedom to change the status quo. Um, no. No, it's not. At all.
  - leaveyou 12y ago
    It's quite funny how little people know about communism, why it appeared, how it developed and what influence it had over capitalism & why it collapsed although less than 25 years passed since its collapse.
    - collyw 12y ago
      I find it quite amusing how people talk about communism failing, AFTER we bailed out the banks.
    - 12y ago
danmaz74 12y ago
The absolute belief that the free-market will always correct itself for the benefit of everybody is very much like the absolute belief of communists that in a communist world everybody will work at his/her best for the benefit of everybody. In many markets, the only way to avoid monopolies or tight oligopolies is with anti-trust legislation, but recognizing this is impossible for those who believe that all regulation is evil.
- collyw 12y ago
  Exactly. Too little in politics is based on evidence. (I think) I would vote for the first politician to admit that they are not sure what the outcome will be. Unfortunately in politics, and honest attitude is not well received.

gremlinsinc 12y ago

Author has great points but too optimistic we're screwed, there's no fixing it as long as politicians are our only hope for change.

ergoproxy 12y ago

I have a different take on this article than most. I'm a proponent of Classical economics, and I reject all modern schools of economics--neoclassical, Austrian, Keynesian, etc. Classical thinkers like Adam Smith expounded how rational self-interest and competition together lead to economic prosperity. There's a balancing act going on between self-interest and competition--competition is the economic faculty that restrains self-interest. Only in perfect competition do we get Pareto efficiency--the state in which it is impossible to make any one individual better off without making at least one individual worse off. Unfortunately, modern schools of economics have diminished the role of competition. Keynesianism lauds government monopoly power; while neoclassicism and Austrianism foster private monopoly power. Both are evil. The result has been a state of affairs wherein the vast majority of people are getting worse off. WRT government intervention in the markets, Adam Smith would not oppose intervention that fosters competition and stifles monopoly. The goal of the 1890 Sherman Anti-Trust Act was to foster competition, not to diminish "economic freedom." "Economic freedom" is a mostly meaningless buzzword that's thrown around by both libertarians and socialists. Indices of "economic freedom" as compiled by the Heritage Foundation and the Wall Street Journal serve no other purpose than propaganda. It's impossible to divorce politics from economics in the real world. Adam Smith understood this. The subject used to be called "politico-economics." Today, the Left favors reforms to give government more monopoly power. While the Right favors reforms that give firms more monopoly power. Until people start to wake up and realize all monopoly power is evil and what we need instead is more competition, things will continue to decline.

nhaehnle 12y ago
Keynesianism lauds government monopoly power; while neoclassicism and Austrianism foster private monopoly power. Both are evil. At least in the case of government, you may feel that it is evil, but it is necessary [0]. So the more pragmatic and productive approach would be to think about how this monopoly power could be used to further prosperity and equity of the people. Today, the Left favors reforms to give government more monopoly power. While the Right favors reforms that give firms more monopoly power. I think both those characterizations are a bit simplistic. Look at the discussion surrounding surveillance, secret courts and the police state, for example. [0] This is true even within the economy: having a common measure of value is important for doing business, so you need currencies to have large scopes. Whoever ultimately controls a currency necessarily has a lot of monopoly power. So the question is not whether such powers exist, but how they should be structured subject to goals that we need to set for ourselves as a society.

leaveyou 12y ago

Consolidation is also favored by cheap money (yes, back to money monopoly thingy). Above some threshold and especially if you are in good relations with a bank, it is far easier to buy your competitors and dismantle them by selling their assets than to compete with them. It's ironic how in the failed communist centralized economies, the economic policy was dictated by "elected" nomenklatura and it was BAD, while in the "free/democratic" market economies the control is held by unaccountable private banks and nobody worries much.

leaveyou 12y ago
As Arthur Clarke would say: Any sufficiently advanced "bread and circuses" is indistinguishable from freedom and democracy.
spindritf 12y ago
It's ironic how in the failed communist centralized economies, the economic policy was dictated by "elected" nomenklatura and it was BAD It wasn't judged as bad because of nomenklatura, or rigged elections. Few people care about these. It was bad because you couldn't get basic goods. There were shortages of sugar and toiler paper. Not war-time shortages, decades after the war. Which is why the current system will continue as long as it can carry out its basic obligations. American banks are a little behind the times but mostly because of all the backwards compatibility they carry, not scale-related dysfunction. Regular consumers don't feel that. They can still can get their credit cards, chargebacks work, fraud is policed, Amazon gets paid, etc, etc.
- crdoconnor 12y ago
  There are currently shortages of another basic good: housing. It's a mistake to think that our economies are any the less planned. Fraud may be policed at the low end, but at the high end (servicer fraud; pension rip offs) it is rife and largely unpoliced.
  - spindritf 12y ago
    Shortage of housing in the US is only local, and it's a feature, not a bug. Voters want a shortage so that they can buy a house in a "good neighbourhood" to move away from poor people. It's almost never explicitly stated that way but that's the way the votes go. Whole new towns are incorporated around the US to avoid poor school districts. People impose new taxes on themselves, something otherwise unheard of, to do that. Proposition B passed in SF just this month to limit new developments and will probably lead to more limits in the future. Conservative south and urban liberals united at last. This is the system working as intended, fulfilling the wishes of its constituents.

dmitri1981 12y ago

Hospitals by their very nature are anti-competitive. There is no way that you as a patient can shop around. You do not have the necessary knowledge to compare the treatments, evaluate the options and decide on what represents the best value.

antimagic 12y ago
Yup. I had to get some surgery done a few years back, and I went surgeon shopping. The surgeons did not like that one little bit. They got quite upset with me when they realised I was talking to several different surgeons and checking out my options. Of course, as you point out, it is very difficult to evaluate medical professionals from a layman's perspective. I ended up talking to surgical nurses in the hospitals the surgeons worked out of. It was not easy finding the nurses, it took persistence and physically going to the hospitals in question and asking real nurses which nurses I need to talk to. Then I had to track those nurses down, and convince them to talk openly. It helped that I have a cousin that is a nurse, and she gave me some contacts / introductions. I was glad I did it though. One of the surgeons on my shortlist had a very poor reputation amongst nurses as to his skills in the operating theatre, so I managed to avoid him. As an aside, considering just how critical the nursing staff where about this guy's skills, it is incredible to me that he is still allowed to practice...
dnautics 12y ago
that's generally not true. For most procedures done in hospitals there is nearly no reason why patients can't shop around. With basically the only exception being the ER, for true emergencies. Moreover, even if NOT ALL patients shop around, say, even just 10%, there would be enough momentum going to put pressure on doctors to improve quality of care and decrease costs.
- watwut 12y ago
  It is hard to shop around because prices are not transparent. It is very hard to find out in advance how much exactly will everything cost you. You can get some partial information (how much they charge for room), but they will not tell you in advance about all the tests you will have to pay. Then there are small item hospitals charge a lot for: band-aids for example. Unless you know a lot about healthcare system, you will not be able to guess all of them. Plus, hospitals are not in habit of committing to agreed upon price in advance. So, even if you shop around the amount they will charge you still can be much different then the one you calculated.

chondos 12y ago

TLDR, Because of monopolies (or such as the opinion of the article). Is that really all it is? You see, I thought it may be something to do with the fact that my generation of kids (Gen X) growing up played 3 hours of video games and watched 2 hours of TV a day (Gen Y even more). Don't you think that may just slow down creative entrepreneurial minds a bit? What about the 20% of younger adults on antidepressants? 10% of them smoking pot (also known to quell ambition) What about the highest divorce rates ever? the most kids in day care (being raised by a stranger), the lowest availability of a family sanctuary to nourish a child growing up in the world. To encourage them and let them worry about things like learning without all the turmoil and drama. You don't think that may have made a difference did you? What about kids becoming sexually involved ever younger. You don't think that sexual infatuation would be any kind of distraction from things like ambition and education would you? Also, genXers and after are very lazy. They were given too much and too little asked/expected of them. Less time has been spent by parents raising their kids in every generation since the great depression. How are kids supposed to become responsible, hard working adults when they are left to their own devices and/or raised in day care? How can a country compete when 1/2-1/3 of the generation is lazy (low work ethic). Public education has been dumbed down to let the disadvantaged and minorities feel equal. I believe that his was never the proper approach. As such though, kids aren't even learning as much, when they actually should be learning more than the previous generations. The efforts to help minorities and inner city residents have been terribly mishandled, creating government dependent drones who end up in prison, or on welfare/disability over time. This has in many case become a growing and unhealthy co-dependent relationship between the poor/minorities/illegals and the Democrat party. Look at all the factors which go to play in creating a successful difference maker in a society. What would put someone at and advantage? I would say first of all a loving family who spends time raising their kids themselves. Teaching them all the right things to do in life. Next, an opportunity to learn. Not just an opportunity either, a proper education that makes it interesting. Thirdly, I think that certain demands have to be put on a child as they grow up. Responsibilities and duties. Not that I think kids should study and do chores all day. I believe that kids today do too much homework at a young age. Creativity cannot be taught. Bored kids with a little regulation and opportunity can create their own entertainment and it usually involves a whole lot of creative thought. A kid sitting in front of a TV or video game all afternoon will never experience this. These things foster ambition and all the tools needed to follow that ambition to fruition (Including the support system to keep them believing in themselves even after failing numerous times along the way) Last but not least. Free trade and illegal immigration fundamentally changed the workforce of the USA too quickly for us to react. Labor and manufacturing jobs went overseas, or went to illegals. Manufacturing was always a trade that would slowly disappear because of robotics and automation, but not in the span of 10 years. This rapid shift caused many people to gain massive amounts of wealth (the Walton's for example) and at the same time, put many people out of work. It happened so quickly that the workforce could not adapt fast enough to re-train or let people retire as manufacturing becomes obsolete. Illegals make a large amount of wealth for a few, but at the same time put a tax and health care burden on all of our backs as we pay for their education, welfare, and emergency room visits. I didn't hear any of this in that opinion article, only that monopolies cause these problems. Funny thing is that the monopolies are a mere side effect of a lack of all I have described that was missing from previous generations. Breaking monopolies into smaller pieces is only going to cause 80% of the countries wealth to be shared by 1.5% of the population instead of 1% (a poor solution IMO)

warmfuzzykitten 12y ago

I am pleased to see that all of the comments up to now deal with the "uncompetitive" aspect of the article and none with the "unequal" aspect. Indeed, it seems to me that "inequality" (the word appears 9 times in the article) was thrown in after the fact to decorate a piece about the adverse effects of monopoly, because post-Piketti it's stylish to talk about inequality. These aren't the same subject; the discussion of inequality is focused on person fortunes, not industrial domination. The former doesn't require the latter.

esbranson 12y ago
No more than dying requires getting shot in the face. But nonetheless getting shot in the face adds considerably to the likelihood of dying.