That’s the headline given to my latest piece in Inside Story
Here’s the opening para
Two hundred years after the birth of Karl Marx and fifty years after the last Western upsurge of revolutionary ferment in 1968, the term “monopoly capitalism” might seem like a relic of outmoded enthusiasms. But economists are increasingly coming to the view that monopolies, and associated market failures, have never been a bigger problem.
and the conclusion
The problems of monopoly and inequality may seem so large as to defy any response. But we faced similar problems when capitalism first emerged, and Western countries came up with the responses that created the broad-based prosperity of the mid twentieth century. The internet, in particular, has the potential to enhance freedom and equality rather than facilitate corporate exploitation. The missing ingredient, so far, has been the political will.
{ 10 comments }
hix 03.09.19 at 10:14 am
Good read, just one minor complaint, why not just use a random stock screener to get current market cap data instead of 2016 ones:
https://finance.yahoo.com/screener/unsaved/ca63a480-28d8-4809-bd40-fab28b414da2
Glen Tomkins 03.09.19 at 5:25 pm
“Monopoly” is such an ugly term. We prefer to call it “market power” these days, because of course it’s a good thing if the job creators and their enterprises have more power to do all the good things they do for us. It’s clearly class warfare, if not racism, to use the term of abuse, “monopoly”, when you mean “market power”.
Dipper 03.09.19 at 8:51 pm
Of all the examples to choose, airlines would seem to be a bad one. They come and go with rapidity, and airlines are now being used as an example of how to reform banks.
Running the modern air industry needs lots of infrastructure and lots of regulations, so would seem to be an obvious place to have monopoly airlines. The critical thing that has happened has been the splitting of the infrastructure from the market-facing entities. So the booking systems, airport handling, and other services are all done by firms who don’t directly face the paying customer. Pretty much anyone can set up an airline, and they can become quite big
Banking regulation is going in the direction of the airline industry. The idea being to split up the major systems and financial risk repositories from the market-facing companies. Hence, again, anyone can set up a bank.
One significant issue behind the growth in monopolies is regulation. The debate in the UK over the EU has included much discussion of regulation, much of it from a Remain/pro EU angle being that more regulation is a costless good. But there is an obvious and well-known cost, that regulation acts as a barrier to new entrants, and hence destroys innovation and creates conditions for monopolies, cartels, and oligopolies. It is surely no coincidence that the EU, an organisation that cannot look at any object without trying to regulate it, is sliding into recession and has effectively zero productivity increase this century. If you regulate what you have now, you just make the status quo your future. In the end, you just end up like the CBI, reduced to demanding more and more cheap labour to fuel your dinosaur members’ wishes for more profit.
So. Split the resource-heavy stuff from the market-facing stuff, and try to avoid regulating your economy into a coma.
Collin Street 03.09.19 at 9:11 pm
Sure, monopoly’s a problem.
But.
A significant fraction of the population can’t keep track of their actual cost structures and will, cheerful and unknowing, sell at a loss. Unless you can exclude them from the market — unless you have some mechanism for excluding people from the market — the clearing price will be below the cost price: no market that does not have exclusion mechanisms can possibly be profitable.
That is to say: a profitable sector of industry requires exclusion mechanisms and all profit relies on rent.
The question we have to ask is, then: how do we distribute rent opportunities? We used to be able to use transport costs to create rent “naturally”, but we can’t do that any more: at least with monopoly some things still get made and some people still make money.
[honestly? I think uniform tariff barriers coupled with socialism [or socialism-approximating structures like dirigisme among firms with effectively-universally-held shares] are the only real solution.]
bad Jim 03.10.19 at 7:24 am
Um. “Monopoly” triggers thoughts of a scotty dog and a flat iron. Regarding the minimum wage, I’m encouraged to see oligopsony mentioned, not just because I love rare words; it’s only recently than in such discussions the more common word “monopsony” was used. But how else to explain how Walmart greeters and burger flippers, despite their disparate productivity and different employers, are paid the same meager wage?
It says something about our common discourse, by which I mean American politics, that people preach as though market power was as unimaginable as ethical conduct, the first of which is tacitly assumed and the second generally acknowledged as nonexistent.
John Quiggin 03.10.19 at 7:36 am
@Dipper I’m sure you’ll sympathize when I observe that Australia is different from other places (a point you’ve often made about Britain), at least with respect to airlines.
We’ve only had one successful entry on a substantial scale in the history of commercial aviation (when Virgin Blue displaced Ansett in 2001). Against that, there has been a long string of failed attempts to break up the duopoly (now consisting of two full-service airlines each with a low-cost subsidiary).
So, in an Australian publication, airlines are on obvious example.
mpowell 03.11.19 at 3:52 pm
You argue that what has been missing is political will, but at the same time you acknowledge that new versions of the old solutions for these problems must be found. I would focus more on the latter than the former. Yes, the EU is creating stronger privacy protection now, but one of the main impacts will be to strengthen existing large players. Do we really want to move to a regulated monopoly model so quickly? These new markets have been evolving rapidly over the past 15 years and models of the internet economy that made sense even 10 years ago are now out-dated. I think we still need to figure out what people need out of these new provided services and how to get there. It seems a lot harder than simply breaking up the producers and distributers of basic commodities.
hix 03.11.19 at 6:01 pm
And here i was thinking Dipper would try to make his weak case with the strongest arguments- Ryanair or Easyjet*. Virgin Atlantic, really? While airlines in Europe are probably not the most obvious easy to comprehend example for monopoly or oligopoly one could pick, those terms are still quite accurate as a description of the current situation in most submarkets.
*The crux with those two is that there are and were a gazillion other discount carriers, but non of those are sucesfull, Ryanair in particular in contrast produces an insane return on equity.
Ronan 03.12.19 at 12:38 pm
Have you read ‘Game of Mates’ about cronyism among the elite in Australia ? Kind of interesting and eye opening(at least for an outsider like me) Might be of interest if you havent.
https://www.smh.com.au/opinion/game-of-mates-how-billionaires-get-rich-at-our-expense-20170526-gwe0dp.html
Daniel 03.12.19 at 8:58 pm
Speaking of monopoly, I read one (or more) of your contributors say, “buy my book on Amazon.” Amazon is the most dangerous monopolist, stay away.
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