
Competition Is Dying, and Taking Capitalism with It? - lgregg
https://www.bloomberg.com/opinion/articles/2018-11-25/the-myth-of-capitalism-exposed
======
ekianjo
> The American skies have gone from an open market with many competing
> airlines to a cozy oligopoly with four major airlines.

It is clear why we have reached this point. Most monopolies are allowed to
exist because of state influence (which happens thru many forms, regulation,
patents, or plain direct support), all increasing the barrier to entry for
would-be competitors. You see this in most heavily regulated markets.

There are other markets where the cost of entry is so high anyway (investment-
wise) that naturally very few companies can make it - this is something that
is not an issue per se.

~~~
nanny
>You see this in most heavily regulated markets.

Except airlines were heavily _de_ regulated in 1978. In my mind it's also
"clear why we have reached this point", except that I've come to the opposite
conclusion that you have.

~~~
pdonis
_> airlines were heavily deregulated in 1978._

With regard to the routes they could fly and the prices they could charge,
yes. But they were never de-regulated with regard to the safety requirements
they had to meet or the qualifications their pilots and crew and maintenance
workers have to have. Those regulations have, if anything, gotten more
stringent over time. And those regulations pose a huge barrier to entry for
new competitors, and favor large airlines over small ones because a large
airline can more easily absorb the costs of compliance.

~~~
thatfrenchguy
Yes but none of us want to die.

~~~
aidenn0
Driving is far less safe than flying, but people choose to drive all the time.

~~~
ekianjo
Yes, and even after 9/11 there is clear data showing that people stopped
flying en masse and took the wheel instead, resulting in increased overall
death count.

[https://www.theguardian.com/world/2011/sep/05/september-11-r...](https://www.theguardian.com/world/2011/sep/05/september-11-road-
deaths)

> However, Professor Gerd Gigerenzer, a German academic specialising in risk,
> has estimated that an extra 1,595 Americans died in car accidents in the
> year after the attacks – indirect victims of the tragedy.

------
randyrand
Milton Friedman always said it’s rare to find monopolies form in a free
market, and that by and large monopolies only form with government help.

Not sure how true this is, but seems worth evaluating.

~~~
nanny
The author specifically cites large tech companies (Google, Amazon, Facebook)
as examples of monopolies that have formed due to lack of state intervention.

He also says bad rules have led to monopolies as well (through regulatory
capture, lobbying, etc.).

So bad things (like monopolies) can happen due to the state or due to lack of
the state. Maybe the problem here isn't the state at all.

~~~
omeid2
I believe overreaching IP protection laws, specifically in regards to patents
and copyright are in large to blame for creation of these monopolies. In tech,
one of the largest hurdles is patent wars, where the player with the biggest
pockets and arsenal screws over little players just about all the time. So the
assertion that the lack of state intervention is to blame for formation of
these monopolies is perhaps true, but in a different light.

~~~
Eridrus
While I think copyright was a very relevant law when selling boxed products,
it's less clear that copyright is the relevant law in the age of SaaS. I think
trade secrets law is much more relevant these days.

And in any case, many tech giants exist around natural monopolies, either in
network effects, either obvious ones, or those from two sided marketplaces or
simply economies of scale.

~~~
freedomben
> _many tech giants exist around natural monopolies, either in network
> effects_

Yes, network effect is a huge part of the problem. So much in tech requires
user adoption, and typically users won't adopt until others adopt, thus
creating chicken and egg problem. Overcoming the network effect is extremely
difficult, as we've seen from competing platforms trying to unseat facebook
and twitter (tho network effect is not limited to social networks, but they
are the most obvious examples)

------
pdonis
I'm not sure how careful this author is with checking his facts. One example
that I quickly spotted:

"Delta has an 80 percent market share in Atlanta and 77 percent in
Philadelphia, while in Dallas-Fort Worth it has 77 percent."

The last two are fortress hubs for American Airlines (Philadelphia used to be
US Airways until they merged with American), not Delta.

~~~
mi100hael
That line stood out as a potential editing error to me due to the "while in"
suggesting contrast but the number being the same.

------
csdreamer7
Speaking of monopolies, anyone heard of JA Konrath?
[http://jakonrath.blogspot.com/](http://jakonrath.blogspot.com/) He wrote the
blog a newbie's guide to publishing. During that time he discovered publishing
his refused books on Amazon KDP because the big 6 publishing companies had
rejected them.

He used to be an advocate for signing with a big publishing company, and
suffering their 17.5% royalty + marketing costs. Most large published books
never out earn their advances your chops.

But his refused books kept growing in sales with Amazon Kindle. The books he
did publish with traditional publishes kept insisting on high prices to keep
the paper backs competitive. Eventually he switched to just publishing on
Amazon KDP as the future and eventually got the rights to his books back.

The above book is published by Wiley. The digital version listed on Wiley's
site is $14.95, the hardback is $27.95, while the amazon hardback is $18.27.
The Kindle version is listed for $11.99.

------
rjplatte
In many of the industries listed, competition is regulated out of existence,
thanks to the large corporations' deep lobbying pockets. I looked into
starting an ISP when Spectrum left New York, and wow. It's not too cost
prohibitive, except for the licensing and regulatory fees. It's absolutely
incredibly expensive.

------
geofft
Why does the author refer to this as "fake capitalism"? Isn't this what
capitalism _is_?

It reminds me of the arguments that communism must be a good idea because we
haven't seen _true_ communism yet. We've seen true capitalism for much longer
and much more clearly than we've ever seen any form of communism, and it's
exactly what the US has. You can't just hope that maybe with a little more
regulation, or a little less regulation, or something, capitalism will
magically work. Capitalism sets up incentives for people to figure out
regulatory capture and lobbying in whatever regime you come up with.
Capitalism sets up incentives for companies to influence the public to believe
that certain forms of government intervention are perfectly natural (take
copyright, for instance - if you convince everyone to get rid of copyright,
you'll just set up incentives for companies to convince everyone to bring it
back). If you think this isn't working right, please work with the folks who
want to figure out an alternative.

~~~
lgregg
I think when people say "fake capitalism" or "true capitalism" they're talking
about unrestricted and unregulated free markets. It's also important to
realize that the thought tied to Communism and Capitalism is one in the same;
I'm sure most would be surprised that Karl Marx and Friedrich Engels were the
ones that coined the phrase and idea of Capitalism.

> Capitalism sets up incentives for people to figure out regulatory capture
> and lobbying in whatever regime you come up with. Capitalism sets up
> incentives for companies to influence the public to believe that certain
> forms of government intervention are perfectly natural (take copyright, for
> instance - if you convince everyone to get rid of copyright, you'll just set
> up incentives for companies to convince everyone to bring it back). If you
> think this isn't working right, please work with the folks who want to
> figure out an alternative.

I like your line of thought but I'm unsure if I agree with the fact that
copyright could be incentivized to come back but that's just an opinionated
view of mine. It started with the structure of the government from the
beginning making it was a day 0 idea. There are also different types of
capitalism; China's capitalism is different from US capitalism. So, that also
is something to consider with the "fake capitalism" issue you brought up.

Overall, I think one baseline to be able to tell if capitalism is working is
if one can actually go from rags to riches in today's time. I also think what
people are picking at is the imbalance that happens at an economy of scale
when a company becomes so large that it is the market.

~~~
TangoTrotFox
I think the key distinction is capitalism vs corporatism. Corporatism is
feudalism wearing a capitalist mask. The elite companies in the top do operate
in a free market, but the story for the rest of society is radically
different. I think in the US today we have a corporatist society. Your kid
wants to setup a lemonade stand on the lawn? Get ready for a visit from the
police. A multinational corporation wants to produce and sell a product that
involves a real possibility of poisoning the groundwater? Sure, we're all
about capitalism!

It's a really ridiculous system and it's the consequence of the fact that
regulatory organizations have started to become a tool for multinationals to
exploit at their whims, rather than a tool to effect positive change in
society as a whole. So it ends up in a system where individual to small
business capitalism is hyper over-regulated whereas big business and
multinational capitalism is regulated on paper yet laissez faire in practice.

~~~
int_19h
Capitalism is simply the private ownership (including ability to transfer) the
means of production. This is still true of the corporatist variety - unlike
feudal fiefs, corporations can be bought and sold, and that makes all the
difference. The only way for a feudal to aggregate more power is to go to war
with other feudals for more lands, because a fief is land tenure, not
property. In capitalism, because capital _is_ property, it can be aggregated
by buying it, and the more you aggregate, the more powerful you become,
letting you acquire more capital etc - a positive feedback loop which means
that monopolies are inevitable in pure unregulated capitalism.

Regulation is orthogonal to all that, so long as it does not interfere with
the ability to aggregate capital. You can tax the corporations heavily, you
can impose various safety standards on them, you can have consumer rights
commissions etc - it makes it harder for them to make money from the capital
that they own, but it doesn't change the fundamental equation of capital ->
money -> more capital, and therefore the result is still capitalism. The only
way you can stop this cycle is by imposing a limit on how much capital can be
held in one hands.

~~~
TangoTrotFox
Artificially limiting the 'means of production' (which is such an increasingly
inappropriate and dated concept to use for these sort of discussions) is
precisely the issue. Imagine a kingdom where a king created rules that, in
effect, named exactly one black smith owning [puppet], one tavern owning
[puppet], one brothel owning [puppet], etc. And these individuals were free to
buy, sell, and trade these businesses so long as the transactions remained
within the regulations of the king. That's not capitalism, not even a little.

And that is really the issue. The further you limit the ability of people to
engage the market (as buyer _and_ seller) the further away you move from
capitalism. And that is precisely what our current system is doing. Repeating
the same example just because it's so stupefying. In most places in America
today you cannot legally setup a lemonade stand and start selling lemonade on
your own property. We're creating a culture of passive consumers driven by
extreme regulations against everything except such!

~~~
int_19h
We don't have a problem with monopolization of lemonade stands, though. But we
do have a problems with large corporations monopolizing their respective
markets, and they are doing that not because they are granted said monopoly
from up above, but because they are able to consolidate it.

Limiting the amount of capital one can own is not equivalent to your scheme,
by the way. The rule isn't that only one guy can own a tavern, or that there
can only be one tavern - the rule is that one guy cannot own _more than one_
tavern (just as an example - I don't think that's the level at which we should
actually cap capital).

~~~
TangoTrotFox
The issues are intrinsically connected. People don't just start out e.g. going
from nothing to building let's say a telecoms company. Entrepreneurship and
creating businesses is a cycle of growth. For instance Bezos' first 'gig'
followed a summer of work at McDonalds, which he hated. The next summer he
setup a week long education camp for younger kids. He only got a dozen or so
signups, but he probably made more from those signups than he did in last
year's work at McDonalds. When you start making entrepreneurship difficult
from the bottom up, you're going to end up with a really distorted picture of
capitalism at the top since you're going to have some sort of strange bias in
the companies represented.

And this is where I think corporatism excels. There are now just an immense
number of rules and laws that are all increasingly esoteric even to operate
quite simple businesses. And that's before you get into the countless fees and
costs the government demands before you've even sold your first product. In
other words when you kill off entrepreneurship and start moving away from
capitalism, you invariably head towards corporatism which is itself headed
much closer to feudalism than capitalism.

As for the king example, this was relating to the feudalism -> capitalism ->
corporatism -> feudalism loop, not your specific suggestion. As for your
suggestion, there are two big issues. The first is the same as discussed here.
Capitalism and competition is a growth system. The reason e.g. Elon Musk was
able to create a competitive rocket and vehicle company was because he earned
hundreds of millions of dollars in another venture. No individual has any
personal need for hundreds of millions of dollars, but it is strictly required
if this individual wishes to engage in large scale ventures - the sort of
which stand to massively improve society.

The second issue is probably the bigger point. We already have countless laws,
on the order of thousands of pages, of laws relating to competition,
anticompetitive behavior, restrictions on mergers and acquisitions, etc. These
were all geared minimizing anti-competitive ownership. But the general rule in
a corporatist society holds true. We have the FTC approve mergers between e.g.
AT&T/Time Warner/Charter while rejecting mergers between far smaller companies
that could eventually become the competitors for these sort of behemoths that
increasingly stand above the law, and perhaps even above government.

In other words, write the laws and expect to see you and I only be able to own
e.g. one tavern. But expect to see the king's friends somehow manage to own
thousands. Corporatism in a nutshell.

~~~
int_19h
Our anti-monopoly enforcement is actually much scaled back compared to what it
used to be for most of 20th century. More importantly, the focus was changed.
The original monopoly busting approach, at its peak under FDR, was all about
ensuring that the markets stay competitive - it was hindrance to competition
that had the feds cracking down on you, not e.g. jacking up prices on
consumers.

That was changed under Reagan, and the new approach was that monopolies were
only to be regulated if they start to affect consumers. And that's very much
by design - according to the people who devised this regime, monopolies are
not in and of themselves bad, because they're more efficient due to economy of
scale. So, for example, if a merger happens, the reason why they can block it
is if they can demonstrate that it would raise prices or reduce quality of
service. If they can't _prove_ that, that's too bad - even if the sheer size
of the resulting behemoth is obviously a problem for market competitiveness,
it's just out of scope.

I don't think it's a coincidence that monopolies dominate the market under
these new rules, in a way that they haven't done before.

~~~
TangoTrotFox
Mostly agreed - we're saying the exact same thing here.

You'll also find that going back in time there were also far fewer rules
against individual entrepreneurship. And where there were rules they were
enforced in a more sane fashion. E.g. - even if a kid's lemonade stand isn't
obeying regulation 3753 section 3, or city ordinance 4725-4 or whatever, you
don't go and shut down the stand as the stand is doing nothing but good for
everybody.

But as we transition towards corporatism rules against large companies start
to disappear or fail to be enforced, while those rules against small companies
and individuals start to grow and become unreasonably burdensome as well as
extremely actively enforced.

The one part we don't agree on is why corporations are allowed to merge. For
instance it's quite evident that Time Warner alone has already exploited their
monopoly to increase prices unreasonable. Internet service in America is far
more expensive than in many parts of the world, yet the quality is not
particularly remarkable. And there's no justifiable reason. It's just
companies agreeing not to compete and then jacking up their prices. Because of
this it's not reasonable to suggest they're being technically allowed to
merge/acquire further competitors because there's no evidence that they won't
do what they're already doing. This is just another aspect of corporatism
where rules disappear as companies grow large enough.

------
dvasdekis
Both The Economist and Bloomberg have focused on new monopolies in the past
few months, and a key problem has been quantifying the "moat" that provides
companies with a lasting advantage.

Seems to me that a "moat" is most easily quantified by the share market total
capitalization, and to disrupt monopolies, simply introduce a tax on total
market value for a firm.

------
titzer
"Competition is the essence of capitalism, yet it is dying."

Sorry to have to point out something that should be blatantly obvious, but
_no_. The essence of capitalism is capital, the accumulation of wealth in
private hands that own the means of production. And capitalism has a nasty
tendency toward fewer, more powerful players as they gobble up market share,
muscle out competitors, erect legislative and logistical barriers. This is
what capital does. It buys the power to continue itself. What you are seeing
is _absolutely_ capitalism running its normal course.

~~~
113
This misinterpretation is all over this thread.

"Capitalism is an economic system based on the private ownership of the means
of production and their operation for profit."

I wish people would do some cursory research before trying to argue about it.

~~~
ionised
The person you are responding to said exactly that.

~~~
113
Yeah, I know.

------
notacoward
There are many ways in which the big get bigger, until they become
oligopolies. Some are fair (network effect, economies of scale). Others are
not (predatory pricing, regulatory capture). Regulation alone can slow this
process and mitigate its worst effects, but it can't stop the process entirely
because there are just so many mechanisms involved. If you're OK with the idea
of companies large enough to rival or even exceed the power of governments (as
with the East India Company mentioned in the article) then that's the end of
the story and I'm not here to argue that point. If not, then sooner or later
you'll have to come to grips with the idea of a tax on size itself. Few people
start out liking it (I didn't), but it's really the only alternative to the
imposition of a corporate state.

------
molteanu
I've commented about this before with the same quote. But since the propaganda
campaign against all that is coming from the East has left an enduring mark in
US, it will always be received with a sneer. But, irrespective of that, Lenin,
more than 100 years ago, said something like this: _This transformation of
competition into monopoly is one of the most important — if not the most
important — phenomena of modern capitalist economy._ He gives ample evidence
of this with official market and financial data regarding the steel industry.
Even then, a few conglomerates dominated the marked.

But, again, since the story of how capitalism is the greatest, the one and
only salvation of the people (does it sound like religion?) is so pervasive,
no amount of evidence can undermine its foundations. If reality proves that it
doesn't work, the reason HAS to be that "it wasn't implemented right in this
or that country. So we must take bolder steps to implement it right". Sounds
like slaughtering goats to me. If the gods didn't favor our army in battle it
surely must be that we didn't slaughter enough goats at the altar and NOT that
our army was ill prepared for the task at hand.

~~~
notacoward
> If the gods didn't favor our army in battle it surely must be that we didn't
> slaughter enough goats

Excellent analogy. Thank you.

------
ako
Problem is that big money, aka capitalism, has been winning from government
froms like democracy, and communism.

You can see this in rusia where after 1990 communism has been replaced by big
money government, not democracy. In china same thing, communism has been
replaced with big money government, a capitalist economic system.

And you see the same trend in the US where a democratic government has been
replaced by a big money capitalistic government, only interested in serving
the needs of money making.

And without a government system making rules to minimize the negative impact
of the economic system, we can see all the negative aspects of capitalism.
Exploitation of humans, winner takes all.

Capitalism is winning even at the level of government, and this is what it
looks like.

Just like we see the need to separate state and religion, we should also
separate state from the economic model. Democracy and capitalism aren't one
and the same thing. Democratic governments have multiple economic models to
choose from, depending on the problem they want to solve.

~~~
suddenstutter
What were in is not capitalism, uts crony capitalism aka not capitalism. The
question is, if every form of economy/government is bound to be corrupted, is
this form of fake capitalism the best option? Or is there an untested
alternative?

------
thisisit
IMO, the ease of credit has led to lots and lots of consolidation and
companies getting into markets where they don't belong. This has indirectly
led to big companies getting bigger and even bigger and "competition slowly
dying".

But, I think this is temporary. As and when credit tightening starts to
happen, and it will with time, many of the companies will be hard pressed to
pay what they are owed. And with time companies will start to restructure
their businesses back to where things were.

------
shmerl
Anti-trust was diluted to the point of being completely toothless. Not sure
why the public went along with it.

------
maxxxxx
People are always confusing capitalism with competitive markets.

~~~
PinkMilkshake
Few ever bother to separate Money, Markets, Capitalism and Corporatism when
discussing this stuff. There's probably others I'm also not differentiating
properly. It makes talking about what is and isn't working difficult.

When I argue with commie friends, they frequently conflate collaboration with
collectivism. One claimed that the internet was greatest communist project
ever.

We're so screwed.

~~~
113
What would be the point in separating those ideas, when capitalism is the one
that's the biggest problem?

You're arguing semantics.

~~~
PinkMilkshake
Because they are separate ideas and not all of them are dependent on one
another. Money and/or markets can (and did) exist without capitalism.

The point is not to throw the baby out with the bath water.

------
AstralStorm
Another person who writes that essence of capitalism is competition. No, the
essence is capital and company which will try to squash any competition.

------
touristtam
Anyone read "Bad Samaritans: The Myth of Free Trade and the Secret History of
Capitalism" and care to compare?

------
suddenstutter
What were in is not capitalism, its crony capitalism aka not capitalism. The
question is, if every form of economy/government is bound to be corrupted, is
this form of fake capitalism the best option? Or is there an untested
alternative?

------
xiphias2
With the current low interest rates there's no capitalism in the world, just
crony capitalism, which inflated some asset classes, like the housing market,
stock market and private companies that plan to go to the American stock
market.

This problem will be corrected in the next 10-15 years, but it won't be an
easy ride.

------
fithisux
The title states something obvious as news. Have we reached the bottom?

------
thwy12321
Big tech companies arent really monopolies. A ton of them can disappear
overnight, its just a trendy thing to harp on. Look at the irrelevance of IBM,
CISCO, HP, Intel, Oracle, etc. The list goes on and on, companies fail to
innovate after a certain point and most die. Enough with the monopoly
narrative.

~~~
nanny
Are you trying to say that because a company can disappear overnight, it isn't
currently a monopoly? Because I don't think that makes any sense.

~~~
thwy12321
I'm saying that its true that some are monopolies, but none really stay that
way for long, and so its completely overrated to worry about. It's a similar
talking point to how we are in an "AI bubble", good for clicks on an article.

Look at FB stock, it just dropped from 220 -> ~130, they saw almost half of
their market cap wiped away in a few weeks. The monopoly idea is a narrative
invented to stoke fear, outrage, and page clicks. It's a talking point for
psuedo educated people.

~~~
msiyer
Monopolies, whether ephemeral or eternal, are bad. Disappearance of a monopoly
does not mean the data collected disappears nor does it repair the torn social
fabric.

