
Capitalism is becoming less competitive - doener
https://www.economist.com/open-future/2018/10/10/capitalism-is-becoming-less-competitive
======
dsfyu404ed
Two words: Regulatory capture.

I can't turn my hobby/side gig into a small business without navigating a
bunch of bureaucracy to obtain 9001 permits, some of which are inevitable "may
issue". Assuming I made it through that I'd be subject to all sorts of
government oversight to the point where I either have to sink all the
resources I would spend growing my business on compliance or just not think
about it and hope that by the time anyone notices my business is big enough to
afford the cost of compliance. For programmers, lawyers and other occupations
that don't deal with physical things the issue isn't as big but for blue
collar businesses this is a big deal. You literally cannot hope to comply with
everything when you're in the boostrap phase and that dissuades a lot of
people from striking out on their own.

The fundamental problem here is that laws and regulations written to deter
some mega-corp from systemically being sleazy to make a buck apply equally to
small businesses. turns out it's only the mega-corps that have the economics
of scale to make compliance possible while still making a profit.

~~~
fenwick67
On the other hand, small business owners shouldnt be allowed to be sleazy
either.

Maybe to stimulate small businesses, the government could advise business
owners how to navigate these regs, something like a social worker for a
business?

~~~
pg_bot
The classic example would be food companies requiring the use of a commercial
kitchen for selling food to the general public. There are a lot of fledgling
businesses that have been shut down immediately because they cannot build
capital while they are still in their cottage stage. While it is perfectly
fine to invite my neighbors over and cook for them, it immediately crosses the
line when I want to sell to them. I think it would be smarter to have
progressive laws based on the number of servings instead of immediate high
barriers to entry. So you still need to use a commercial kitchen, but only
once you serve more than say 5,000 customers per annum. I think most people
would believe that this is reasonable. There are countless industries that I
think should have similar cottage exceptions.

~~~
xvedejas
I'm not sure why you even need to accept the premise. Why is using a non-
commercial kitchen sleazy? Such a regulation doesn't make much sense to me for
either small or large businesses.

~~~
DontGiveTwoFlux
The regulation exists to keep people safe. Poorly handled foods kill people.

Now, if there are high capital requirements for starting a restaurant, it
sounds like there is a market opportunity for someone to make a low-capital
way to try out restaurant concepts. That's sort of what has happened with food
trucks. In Austin, many storefront restaurants existed as food trucks first.
Presumably, they got to see that they were a hit without having to spend a ton
up front.

~~~
xvedejas
I'm still not following. Is it harder to mishandle food in a commercial
kitchen? Why is the regulation against non-commercial kitchens, and not just
against mishandling of food, if that's the issue?

~~~
dsfyu404ed
>Is it harder to mishandle food in a commercial kitchen

Not really. The main difference is that everything you use is better designed
to be easy to clean and hard to break by someone putting in less than minimum
effort. For a small business that isn't being lazy to the point of negligence
there's really no difference. The same standard of cleanliness is indeed
possible in a noncommercial kitchen but beyond a certain scale it's not cost
effective. Also, it's not a binary thing. You have tons of hole in the wall
restaurants that use a mix of commercial and noncommercial facilities and
equipment. Somewhere that serves ice cream will probably have commercial style
freezers and mid-high end consumer grade stuff for everything else. You don't
need stainless counters to prepare ice cream and you don't need a three bay
sink or a commercial dishwasher to clean ice cream scoops. Bars in places
where they're forced to serve food by law often only have consumer grade
equipment for the preparation of said food.

------
40acres
How competitive is capitalsim anyway? What's the best measure for it?

When I look out in the economy I see massive industries that are being
protected by their governments for various reasons: some of it political, some
of it effective lobbying.

In many sectors private companies are building off of a platform that their
government has provided for them. For instance, the NIH is a major contributor
to pharmaceutical research, yet once a new drug comes to market, the profits
all go to the private company and the tax payer is essentially charged twice
for access to the drug (cost of research and cost to buy the drug).

I had one idea of what a free market was growing up, but as I've learned more
about the global economy it seems like the idea of a free market was just a
clever ruse.

~~~
nickpsecurity
"How competitive is capitalsim anyway? What's the best measure for it?"

I look at stuff like this among a group of suppliers:

1\. What suppliers offer in terms of product, capabilities, etc should be
going up.

2\. If comparing two versions of something in No 1 overtime, then...

    
    
      2.1. Quality/reliability/security should go up over time.
    
      2.2. Price should go down.
    

3\. Customer service should improve over time given it's an easy
differentiator.

4\. Convenience of any aspect of the business should go up over time. Low-
hassle in general.

You'll find in monopolies or cartelized oligopolies that these are all bad or
move super slowly in a way that keeps everyone high margin. In highly
competitive industries, things move fast with many players having low margin.

------
mabbo
Technology is playing a role. So it size.

Google/Amazon/Facebook/Netflix/Microsoft can drop a few million bucks on a
team of developers trying to squeeze some lemon for an additional drop of
juice. I've been on teams before where a 1% increase in success of our
software would pay for the team twice over. There were dozens of teams beside
us all doing the same thing.

A small business competing in the same market cannot do that, and so they find
themselves fighting a far more efficient giant.

------
djschnei
Better title: Corporatism was never competitive

------
purple-again
Interesting article. I wonder if anything major happened in the world around
the early 90's that could help explain why the big winners around the world
were suddenly able to use their economies of scale to grow even larger over
the next three decades...

~~~
swebs
Globalism, essentially.

~~~
vectorEQ
internet? or more than that?

~~~
TomMarius
End of communism in Europe, open China, various free trade agreements...

------
DrNuke
At its best, regulatory capture is a mean to achieve basic quality assurance;
at its worst, it is a fence to protect the richest. Our mileage may vary, we
see the world through our own experience and rightly so.

------
rainhacker
Why is this post flagged ?

~~~
gricardo99
I'm guessing "off-topic"[1]

1 -
[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

------
bediger4000
How much of a role does secret government intervention play?

That is, we know the US government interferes in markets in secret. There have
been lots of revelations in the past few years about how the CIA boosted jazz
and modern art during the 50s to appear new and modern relative to communist
countries of the day. The NSA advised the creators of DES about how to make it
better. There have almost certainly been other secret and larger
interventions.

Has the CIA/NSA/whatever intervened to an extent that the resulting markets
are inefficient?

We'll probably never know, but my guess would be that at least secret
interventions have favored certain companies to the detriment of others in the
same market.

------
citilife
One thing that people seem to skip in Capitalism is the idea that you can't
have a tone of regulations. It appears the U.S. version of capitalism is
continuously granting the "winners" in sectors with such strong regulations
that it's limiting newcomers -- making it less competitive.

The current fashionable thing seems to be claiming that we need to become more
socialistic. Which IMO is just an attempt to fix over regulation with more
regulation... so down the rabbit hole we go.

~~~
zimablue
It seems like it's not more regulation vs less regulation but rgulation in the
interests of society vs regulation in the interests of the powerful. America
has very lax rules on political donations from corporations, allowing almost
unlimited lobbying. Plus a two-party system and the ration of
population=>votes being very uneven.

~~~
beaconstudios
regulations seem insanely hard to design well. It's very easy to claim you're
regulating for the good of society, but have said regulation have a completely
different effect. They're far from a panacea.

~~~
zimablue
The way I think about it: you have lots of problems in society which are
prisoners dilemma in nature.

The only way for the prisoners to escape their fate is to have some external
authority fix the incentives and that's basically the law.

Three ways to use the law: Regulation Sueing people for damages Complex
contracts

There are situations where some of these work better than others and we just
need to pick.

It's really hard to imagine sueing for damages working precisely for something
like preventing air pollution, the chain of causation is too long. You have no
choice other than regulation.

There's this libertatian politics common on HN but I've never seen a
convincing argument of how you solve air pollution using 2. or 3. Imo you will
always need regulation.

------
platz
Is it still Capitalism when the government prevents the "fair market" from
operating by issuing all sorts of subsidies, and allows all sorts of
exemptions to let specific employers avoid having to pay certain taxes, giving
them a competitive advantage over companies that don't get those exemptions?

How Government Creates Inequality - David Cay Johnston

[https://www.youtube.com/watch?v=VApBedmawnM](https://www.youtube.com/watch?v=VApBedmawnM)

~~~
johnchristopher
Is it still Capitalism when private companies lobby governements to implement
subsidies ?

~~~
platz
that exactly johnston's point, in case you misunderstood political intent

------
llcoolv
Saying that regulatory captured capitalism has failed is like putting Michael
Phelps in chains, throwing him into the sea and claiming that swimming has
failed.

~~~
tanderson92
Marxists would counter that capitalism will lead to a oligarchic elite, or at
the very least powerful industries which will seek to influence and capture
the political and regulatory system using the excess value taken from labor.
So, it's like timing Phelps in the rapids leading to a waterfall and blaming
the waterfall only for the rapid plunge.

~~~
llcoolv
Also a Marxist would claim that life is a zero-sum game. In the 21st century
is extremely easy even for a small kid to see how this is obviously wrong.

With it being a fundamental statement in their philosophy, I don't quite know
what to say.

~~~
monocasa
Life being a zero sum game is not a fundamental part of Marxism.

~~~
llcoolv
Really, then why nowhere in this philosophy creating new value or new means of
production is considered?

It is class struggle and for someone to have something they must take it from
someone else. It is disgusting how pure evil like this is masqueraded as
philosophy/ideology.

~~~
monocasa
> Really, then why nowhere in this philosophy creating new value or new means
> of production is considered?

Uhhh, it is. It's just that those who create new value are the wrokers making
that happen, not the holders of capital.

------
S0ckpupp3t
Is it still Capitalism when there is regulatory capture?

~~~
Buldak
To the extent that regulatory capture is itself an inevitable outcome of
capitalism, maybe.

~~~
TangoTrotFox
You can't have regulatory capture without regulations!

That is mostly tongue in cheek of course, but it does really bring up a point
in that if there were stringent controls on regulation it could help minimize
the issue. And if nothing else there's some beautiful irony in regulation
being in need of regulation.

~~~
dsfyu404ed
Automatic, mandatory scheduled review for regulations and mandatory sunset
provisions for laws would be a damn good start. It would solve a lot of social
issue too.

