It's just economies of scale at play. When it comes to food it makes perfect sense. Gov policy is not about farmers, its about keeping food supply plentiful and prices low. Big Ag are better at absorbing shocks. People can complain about profits and wages because we have never had to worry about famine.
I agree. Seems like a pretty obvious & inevitable transition to me. Corner bodegas got replaced by national chains. Local grocery stores got replaced by national chains. Local clothing manufacturers got replaced by national chains. Local bookstores got replaced by national chains. Local airlines got consolidated. Local car companies got consolidated. Local stock exchanges got consolidated.
It is pretty hard to find many examples where there's still a widespread set of small producers successfully staving off national consolidation.
It isn't clear to me how you, as a general matter, deal with the massive economies of scale that national chains have access to. Everything from much cheaper cost of capital to being able to cross-subsidize stores to better pricing power due to bulk buying to being able to simply hire better management due to have more free cash flow etc etc etc.
Every company has to get bigger by swallowing others, or instead be swallowed by another company that does it.
The board game "Monopoly" is a pretty good simplified simulation of the system's structures and operation. Fun for all in the early stages, not so much in the end game.
Remember when ma bell was split up? Now there's a strong distaste for breaking up: https://en.wikipedia.org/wiki/History_of_United_States_antit... - The FTC seems to prefer to prevent monopolies by considering and blocking acquisitions... but this clearly has blind spots.
Like all economic systems, a strong and independent state/gov't is required to force-fix issues that don't make financial sense to fix (ex. FDA creation after The Jungle). I think our current system is suffering from regulatory capture, and I don't see a way to resolve this kind of near-corruption. Corporatism will continue until the system is no longer sustainable, which likely will never happen (within our lifetimes).
I feel like most governments speed up this process, ie by giving tax cuts to huge businesses to set up operations in their jurisdiction. Which in practice means actively punishing smaller businesses.
I have gripes with capitalism, but this isn't one. Capitalism essentially allocates resources to where they are most efficient (although IMHO not as purely as most Austrian economists would argue, because people aren't all that rational and information asymmetry makes rationality impossible in many other cases). Sometimes (ok often) that goes to huge megacorps due to economies of scale, but in return you take on massive bureaucracy that makes you less efficient, opening the door for disruption. Disruption happens all the time to big players that don't continue doing the best for the least[1]. Now that said, as barriers of entry continue to accrete due to regulatory capture and deep tech, I do worry that the ability for startups and small business to compete may decline.
Monopoly is a vastly over simplified model that doesn't consider much of modern economics. Interestingly, it was actually invented to demonstrate to people how evil capitalism is[2].
> Monopoly is a vastly over simplified model that doesn't consider much of modern economics. Interestingly, it was actually invented to demonstrate to people how evil capitalism is[2].
Close. Monopoly was created by Lizzie Magie, a Georgist, and its purpose was to demonstrate how evil land ownership by monopolies/rent seekers is and to advocate for a Land Value Tax [1]. Many of the forces you describe that apply to other areas in economics do not apply to land. You cannot create new land, after all.
The most direct message it sends is that even though everyone can start in the same place with the same resources, chance will ultimately and quickly lead every other player being in debt to the winner. Georgism is a socialism, believing that land is part of the common-wealth, so it should be rented, not owned.
Monopoly is simplified not only in its portrayal of one market, but in the fact that it's only concerned with one market. The reality of capitalism also includes this dynamic of new markets being created organically and deliberately, particularly as some markets close up. Innovation and entrepreneurial endeavors enabled by legal profit incentive are a big part of the full landscape of capitalism and are missing from any lessons we might try to project from Monopoly.
> Easy enough to solve: tax wealth and redistribute it with a UBI.
These are extremely independent problems.
The problem with concentration isn't taxes, it's a regulatory environment that promotes concentration. You take money from Bezos, it doesn't change the size of Amazon.
A UBI would help some by making it easier to start a small business, but unless you address the underlying regulatory problems that give every advantage to consolidated megacorps, that's not enough.
One of the big problems is taxes though, specifically the taxation of dividends that get reinvested. Under the existing system, if you're Apple and you make iPhones and pay dividends to shareholders who invest them in a separate company that makes microprocessors, they pay more tax than if Apple keeps the money and makes its own microprocessors. And it works that way for everything, so corporations grow without bound and the tax system encourages that.
The easy fix is to make investment a tax deduction but sale of an investment fully taxable instead of only on the gain. We already try to do this in a hundred places, 401k and Roth IRAs and not taxing gains until they're realized, because it's obviously a good idea and promotes investment. But because we specifically don't do it in the case where you take profits from one company and invest them into an independent one, we've been promoting indefinite corporate expansion for decades.
What do you think reduces consolidation? Genuinely curious. I think there are other strategies that will work, but taxation is extremely effective at reducing variance of wealth distribution.
What reduces consolidation ultimately is a real recession. Not these fake ones we have had in recent times which get propped up with QE, but a real recession. The type that kills big companies.
Then in the ashes you will get a verdant crop of new companies started by fresh people and a new period of massive growth with follow.
Might not be a cost that people actually want to pay though.
front page headline above the fold in the pre-millenial Hunter Gatherer Times,
> This is happening to every industry. Sickening
the article goes on to say:
There is an obvious consolidation and massive wealth transfer still ongoing. There are people among us settling down on plots of land and growing more food than they can eat themselves, putting both hunters and gatherers out of work. Some of those unemployed hunters and gatherers are now sitting around and making more mocassins than their families can wear, and trading them with the farmers. Since there is already too much food and footwear, still others are reduced to making purely decorative clay objects and toys and trading them for food and footwear! And what about our shamans? There's this guy Moses who's got all the rules carved in stone for easy reference instead of oral story telling. All in the name of productivity and efficiency, alien ideas in our lands. These are scary times!