A Guardian of Global Capitalism Warns Capitalism Has A Problem

LewisBraham

Interesting: https://npr.org/sections/money/2019/04/16/713615612/a-guardian-of-global-capitalism-warns-capitalism-has-a-problem

Chen and colleagues recently studied the price markups of a jaw-dropping number of companies — almost one million! — across 27 countries. They found that market power is growing, especially in advanced countries, where companies increased their markups by an average of 8% between 2000 and 2015. This increase in market power has occurred in a wide range of industries, from tech to pharmaceuticals to energy to finance.

"What is really remarkable here is that we find it's a small fraction of firms within each industry that's really driving this increase in market power," Chen said. These top-tier firms increased their markups by over 30% over the last couple decades.

This is about more than just consumers having to pay more at the store. The IMF's economists connect rising market power to a range of worrisome trends in the overall economy: lackluster business investment, sluggish productivity growth, declining innovation and increasing inequality. They estimate that if price markups had remained at their 2000 levels, GDP in the average advanced country would be about one percent higher. "If market power is not kept in check, these negative impacts might actually worsen," Chen warns.

Of course, this is nothing new. Both Adam Smith and Karl Marx noted the tendency towards monopolistic behavior in the market and both were concerned in different ways about the dangers it posed to free competitive markets in Smith's case and to labor and consumers in Marx's case. What is different I think is the lack of regulatory intervention to stop this behavior.

msf

"Of course, this is nothing new." Agreed, which is what makes the middle paragraph you quoted so curious, as it asserts how "really remarkable" this is.

In addition to weaker regulatory regimes, something else that is different is the reemergence of "natural monopolies". (The NPR story mentions Google.) Consider Facebook.

Contrary to Yogi Berra's observation, everybody goes there precisely because it's crowded. Look at how Google folded up its Google+ tent and left.

“What people failed to understand was Facebook had network effects," says Adams, the former Google+ user experience employee. "It’s like you have this grungy night club and people are having a good time and you build something next door that’s shiny and new, and technically better in some ways, but who wants to leave? People didn't need another version of Facebook."

https://mashable.com/2015/08/02/google-plus-history/#GdY9rGLqJsqP

It seems that in some technology-based areas, having market share makes you the default standard that in turn draws more customers.

davidrmoran

'twas ever thus in the corporate world, as in 'nobody ever got fired for recommending IBM' etc.