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from the what's-mine-is-mine-and-what's-yours-is-mine dept.
On 4 November 2019, Techcrunch published an interview with Thomas Philippon, author of the book The Great Reversal: How America Gave Up on Free Markets, where he discusses the diminution of competition in many US market sectors.
From the Techcrunch article:
Economist Thomas Philippon's new book, "The Great Reversal: How America Gave Up on Free Markets," went on sale this past week, highlighting the United States' failure to block the country's largest companies from inhibiting fair competition.
"The broad picture is that competition is good, but surprisingly fragile," he said. "In today's environment, the U.S. is moving from a place where it was at the forefront of having free markets that worked pretty well for most people to being a laggard in many industries."
Philippon's premise isn't exactly breaking news, but the interview and his book give some good background as to how we got where we are, and how other nations are addressing these issues more (in some cases, much more) effectively.
The deregulation of major U.S. industries like telecom and energy in the 1970s and 80s sparked competition that lowered consumer prices and drove product innovation between competitors. Europe, on the other hand, lagged behind with more expensive internet, phone plans, airline tickets, and more until around 2000 when a major reversal of this trend began. Strikingly, when the EU strengthened deregulation and antitrust efforts to open its markets to more competition, it was the U.S. that reversed course.
[...] Based on Organization for Economic Cooperation and Development (OECD) data, the U.S. now has more regulations for opening a new business than every EU country except Greece and Poland — a complete reversal since 1998, when only the UK had fewer rules than the U.S. Per capita GDP growth in the EU outpaced that of the U.S. over 1999-2017. On a purchasing power parity basis, Americans have experienced a 7% increase in prices (relative to EU residents) for the same goods, due specifically to increased profit margins of companies with reduced competition.
The reason for this divergence? According to Philippon, corporate incumbents in the U.S. gained outsized political influence and have used it to a) smother potential antitrust reviews and b) implement regulations that inhibit startups from competing against them. As a result, the U.S. regulatory system prioritizes the interests of incumbents at the expense of free market competition, he says.
What say you, Soylentils? Is competition truly dead in many sectors of the economy, or are there ways to bring it back and keep it?
(Score: 2) by sjames on Thursday November 14 2019, @07:57PM (9 children)
The problem there is that high barriers to entry prevent effective competition and so prevent the benefits of a market economy.
Pretty much everything Smith had to say about markets assumed that buyer and seller were within an order of magnitude or so in economic power. Of course, he also warned against grants of corporate charters unless there was truly no alternative and even then that the corporations be kept on a tight leash and held strictly to their charters including a public good clause.
It's also noteworthy that competition needs to have more independent players than you can count on one hand if it is to have any hope of delivering on the promise of keeping prices under control and maintaining reasonable service. Transparency of information is also necessary to the process. 30 resellers of two products where they randomly switch which one of the two they slap their name on is not effective competition.
(Score: 2) by The Mighty Buzzard on Friday November 15 2019, @01:07AM (8 children)
A) Waah! I don't want to have to earn my way or sell the idea to investors!
B) Only if you're an idiot. I've started more than one business with pretty much nothing I didn't already have at my house.
Now that we agree on. You need competitors or there is no competition. Without competition, you might as well be communists. That's not saying communism is a good thing, it's saying lack of competition is that harmful to capitalism.
My rights don't end where your fear begins.
(Score: 2) by sjames on Friday November 15 2019, @04:56AM (7 children)
I think you mis-understand my first point. There are many markets, some have fairly low barriers to entry, others have high barriers. The markets where the barriers are high will suffer from too little or no competition while people like you and me out of necessity go in to other markets that we can afford to enter.
The ISP is a great example. Back when 33.3K dialup was the best most people could afford, barriers were low and ISPs were legion. I personally knew more than one that started out in their garage. Prices slid downwards for several years while time limits went away. Then technology marched on, but the barriers to entry went WAY up, so many areas have only one or two to choose from. No amount of talking to investors fixes that, they're not interested in that market because the barriers are so high that ROI will not happen in a timeframe they like (if ever).
(Score: 2) by The Mighty Buzzard on Saturday November 16 2019, @07:43AM (6 children)
You think? Hasn't been what I've seen. Mostly I've seen established markets (as opposed to growth markets) causing the lack of available, excited investors. That's always happened and will continue to happen, barring someone seeing a good opportunity to take most of the market share for themselves.
My rights don't end where your fear begins.
(Score: 2) by sjames on Saturday November 16 2019, @07:47AM (5 children)
So you do not, in fact, believe that markets work?
(Score: 2) by The Mighty Buzzard on Saturday November 16 2019, @03:06PM (4 children)
Does not logically follow.
Most all markets eventually hit a point where they no longer offer much in the way of growth, only a steady profit. Investors don't generally like putting huge money into startups for these markets because growth makes them a better return on investment. That's not broken, that's just life. Nobody ever said you should be capable of starting any business you like and nobody ever said someone will invest in any business you start. Conducting whatever legal business you are able to should be an entitlement, conducting any business you want to is bloody stupid to even suggest.
Now a side effect of lightly regulated capitalism is there needs to be someone watching the landscape to make sure some asshole doesn't buy up every competitor so they can turn a competitive market into a monopoly or even just drive the amount of competition down to where it's no longer effective at driving innovation and keeping prices low. You know, some kind of commission to regulate trade, preferably on the federal level. Wait, we have one of those already. I guess what we need are some methods of better holding them accountable then.
My rights don't end where your fear begins.
(Score: 2) by sjames on Saturday November 16 2019, @07:12PM (3 children)
We have markets where there are less competitors than fingers on one hand with high barriers to entry that investors aren't interested in. That either means we will never have enough competitors there to bring market forces to bear unless those barriers are drastically lowered or the government itself enters those markets in some form.
This isn't about my (or anyone else's ) right or entitlement to enter those particular markets, it's about promoting the general welfare.
(Score: 2) by The Mighty Buzzard on Monday November 18 2019, @02:14AM (2 children)
Yes, and the solution to that is roughly the same solution as we used with Bell back in the day. Monopolies, duopolies, and such are extremely bad for capitalism. That's one of the few areas the government legitimately needs to swing its regulatory dick around.
My rights don't end where your fear begins.
(Score: 2) by sjames on Monday November 18 2019, @04:34PM (1 child)
Breaking the link between local and long distance worked out OK, but the rest of the breakup just caused a bunch of name changes while they re-assembled like liquid metal in T2. It also failed to create competition in local phone service
The whole line sharing thing to foster competition in DSL failed miserably when the free market uber alles crowd removed all the teeth from regulators and the baby bells prioritized requests from Covad et. al. slightly below polishing the payphones.
Try counting how many different places you can get various items. You might be surprised how frequently you only need one hand to do it and how infrequently you need to take a shoe off.
(Score: 2) by The Mighty Buzzard on Monday November 18 2019, @08:18PM
Yeah, dyed in the wool capitalists hate what's happened with the phone carriers, especially wireless, more than anybody. That the US government has fallen down massively on its anti-trust responsibilities, that's one bit everyone but the merging companies and the folks they've bribed can agree on. Capitalism requires competition or it dies. Still better than socialism but regulatory capture and abuse of monopoly or monopoly-like powers are definitely not on my Christmas list.
My rights don't end where your fear begins.