Saving Capitalism

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Saving Capitalism

Postby KeithE » Thu Apr 06, 2017 10:40 am

I support a controlled capitalism. In theory, competition should be good at lowering prices of products and services and in encouraging innovation. But the uncontrolled capitalism we have in the US today is not working for the common person. Too much pseudo-colluding on prices is going on. By pseudo-colluding I’m mean incremental price leveling among too few competitors. And often when a lower price competitor/innovator comes along, they are glad to sell-out to (or merge with) a bigger business who just raises prices. That is great for the innovator/seller, good for the big business, but bad for the common person who faces higher prices. Thus the corporations and proverbial 1% have gotten richer at the expense of the proverbial 99%.

This effort: This Budding Movement Wants to Smash Monopolies aims to control such monopolistic actions by using a long forgotten mechanism, namely antitrust actions, and other regulatory measures.

I see this as critical to saving basic capitalism. So that's why I'm bringing it up here at BL. Some excerpts are:

In a conference room overlooking the Chicago River last week, 35 years of thinking about the economy came under direct challenge. It won’t get as much attention as a Sean Spicer press conference or a Bernie Sanders town hall, but decades from now it may prove much more important to how our economy is organized.

The University of Chicago Stigler Center’s three-day conference asked: “Does America Have a Concentration Problem? ... Virtually every major sector in our economy has been whittled down to a few major players. Two companies produce nearly all of America’s toothpaste. One, Luxottica, produces nearly all the sunglasses. There are four cable and Internet providers, who have divvied up the country and rarely compete. There are four major airlines. There are four major commercial banks. There are four major Internet platforms—Amazon, Facebook, Apple, and Google—controlling your information flow, your data, and your virtual life.

This market consolidation has wide-reaching effects beyond the higher prices monopolies can charge due to lack of competition. Quality suffers when consumers have nowhere else to turn. Supply chains become fragile—an outage from Amazon Web Services, the leader in cloud computing, took out half the Internet in February.

Inequality grows when a few at the top gather all the rewards in a market.

Our growing monopolization didn’t happen by accident. Starting in the 1970s, a group of academics led by failed Supreme Court nominee Robert Bork changed the view of antitrust law, which was originally intended to break up concentrated power. Without altering a word in the Sherman Antitrust Act, Bork and his colleagues—known as the “Chicago school” because of their devotion to University of Chicago neoclassical economic theories—rewrote history, determining that antitrust merely concerned “consumer welfare,” an economic study of prices, rather than effects on competition. Starting in the Reagan administration, the Chicago school’s capture of antitrust theory has brought us to a period of market concentration unrivaled since the Gilded Age

“America was founded to provide people the wherewithal to protect ourselves from enslavement,” said Barry Lynn of the open-markets program at the New America Foundation. Perhaps nobody in the New Brandeis movement has done more than Lynn to revive the Progressive-era conception of monopoly as a danger to American liberty. “Anti-monopoly, from the Boston Tea Party onward, was one of the key tools that we the people used to keep ourselves free,” he said

The New Brandeisians took a broad look at how the failure to stop monopolization has harmed America. John Kwoka of Northeastern University crunched the data to find that current enforcement techniques aren’t even working to protect people from price increases, let alone monopoly’s other effects.

The Chicago school, perhaps through its rigidity, has begun to lose its grip on antitrust theory. The Obama Council of Economic Advisers started taking antitrust seriously last year in a series of reports. Justin Pierce, a Federal Reserve economist, presented his research at the conference that manufacturing mergers are associated with price markups of between 15 and 50 percent without any statistically significant effect on productivity, undermining even the base Chicago-school case.

You might consider this an abstraction in an age when Trump has no regard for the boundaries between corporations and the agencies intended to regulate them. But ideas can live on beyond any one president.

I think this could be a very important transition except that Trump (and the likely addition of Grouch to the SC) will side with big business mergers and against any “regulation” (that evil word). Certainly they will not be a leader for enforcing seldom-used anti-trust laws.

Remember the “deregulation” of the financial services sector. That resulted in the financial crisis which hurt typical nest eggs by 30% or more and increased unemployment from 5% (Apr 2008) to 10% (July 2019). The defecto deregulation we have had in the US concerning anti-trust laws has caused (in part) the great inequality growth we have seen, with nothing done about it. This 3-day conference (ironically at the U of Chicago - birthplace of uncontrolled capitalism) will hopefully help; but unless the populace gets educated and goes to town halls, writes letters, I’m afraid the Trump regime/GOP congress/new SCOTUS makeup will side with big business.
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