[ivansavz]

This opinion piece articulates something I've felt for a long time... consolidation is the biggest problem in America right now, scratch that, in the World.

One thing that I can't comprehend is how right-wing free-market ideologues can get behind all the consolidation. Cant they see that consolidation is just like communism?

Only a competitive market with many players can ensure progress continues.

[danmaz74]

The absolute belief that the free-market will always correct itself for the benefit of everybody is very much like the absolute belief of communists that in a communist world everybody will work at his/her best for the benefit of everybody. In many markets, the only way to avoid monopolies or tight oligopolies is with anti-trust legislation, but recognizing this is impossible for those who believe that all regulation is evil.

[collyw]

Exactly. Too little in politics is based on evidence.

(I think) I would vote for the first politician to admit that they are not sure what the outcome will be. Unfortunately in politics, and honest attitude is not well received.

[nl]

I think it would be more reasonable to complain about consolidation combined with regulatory capture being a big problem.

In some parts of the world regulation of corporate behaviour is an adversarial process. In the US it is often designed to improve the market for large companies.

(I also find it difficult to view a statement like "consolidation is the biggest problem in the world" as anything but lacking some perspective. I suspect you may like to revisit that idea)

[brc]

Except that it is nothing like communism.

Communism is defined by a complete lack of freedom to change the status quo. In turn, the lack of freedom to change the status quo means that development and progress is dramatically slowed, slowing down improvements in quality of life - as people themselves would prefer.

Consolidation only persists where it is either an effective way to deliver value (Walmart) or regulatory capture has occured (eg taxi licences, car dealerships). Todays consolidated behemoth is tomorrows has-been company - as long as the laws allow them to fall apart when they can no longer innovate and compete.

Inequality of income to me seems as though an economy is functioning well at the creating-value part. A lack of inequality (too much equality) is a danger sign that the creation of wealth and progress has been halted, most likely due to lack of freedom for individuals to pursue their own interests.

It's a misunderstanding to think that competition requires many players to be effective. In many cases, you only need two players and threat of entry to any others for competition to be successful at optimal use of resources. You only need two fighters and some contenders for a world champ boxing match to make them the best available at the time. And a fair referree.

I'll be the first to admit that the last part is the most difficult to achieve, but it's no reason to abandon the concept of the game.

[nhaehnle]

Communism is defined by a complete lack of freedom to change the status quo.

I agree that the comparison to communism is silly, but not for this reason. Ultimately, communism is about how the economy is structured, one important feature being that there is no private ownership of capital (though other forms of private property are okay). In other words, a world of capitalist consolidation/monopolies is indeed nothing like communism.

There could (and should) still be freedom to change the status quo in a communist economic system though.

Edit to add:

Consolidation only persists where it is either an effective way to deliver value (Walmart)

Putting Walmart in parenthesis here is a bit dishonest. Almost every kind of business benefits from consolidation, because of economies of scale. You might just as well have put Burger King, KFC, or any other chain of anything into parenthesis.

Same is true in the high-tech industry, by the way. Just look at the big players in the web, but also count the number of remaining chip foundries on the planet.

In all those cases, power is concentrated into few hands, which we know to be problematic from history.

[audunw]

"Communism is defined by a complete lack of freedom to change the status quo."

Communism is as diverse as capitalism, and this is neither the text-book definition, nor the real-world definition.

Is the definition of capitalism a complete lack of freedom to change the status quo because that was the case under Pinochet?

The text-book definition is the common ownership of the means of production. Is China still communist? The definition still applies somewhat in that they still have a lot of state owned businesses, and the banks which borrows capital to private business are state-owned. It can be argued. Does China have a complete lack of freedom to change the status quo? Only from a naive western perspective. There is only one party, but China's way is, if you want to change the state you join the party or work for the government (membership is not necessary to hold a government position). In other words, they consider it democracy through participation. A single person certainly has the ability to change the status quo, basically in the same way as in the west. Who really thinks voting actually matters much any more?

I don't condone China's way. I think the lack of acceptance for political dissent is disgusting. But that's besides the point. Point is, we can't fool ourselves into thinking China is like a dictatorship. They have other processes, but still achieves a decent meritocracy.

I'm beginning to think that democracy is a failure at the federal/union level. Look at the US and the EU. How functional is the democracy at that level these days? Maybe having so many people vote for a single/a few position makes democracy ineffective? I think these observations is why China is not jumping on the democracy bandwagon at the top level (they have implemented local elections).

[brc]

I wasn't trying to define communism - if I was doing that I would say it was the public ownership of the means of production - or something along those lines.

A better way of putting it would be 'all countries who have turned to communism have a lack of freedom to change the status quo'. It's not the definition of communism - or even one of it's stated goals - but the lack of ability for individuals to benefit from their efforts creates a situation where the status quo is difficult to change.

Your example of China illustrates this perfectly - all the while that mao-ist communism held sway, China went nowhere - or backwards - in terms of changing. The current weak-communism allows people to retain the rewards of their benefits - and so the dynamism of china has increased greatly.

I'm not talking at the single voter level - I'm more talking at the Bill Gates/Steve Jobs/Elon Musk level. You need strong individual change agents to move the whole game forwards, and in a publicly-owned, incentive destroying regime, these individuals never flourish. That is what entrenches the status quo, and that is why communism is characterized by a lack of status quo. There certainly is no argument that communism causes stagnation, the results are quite shocking even if you remove the tendency for brutal dictators to leverage themselves into the position of power and murder their opponents.

I agree that democracy at the federal level is very flawed, particularly in the EU, but also in the US, where Federal departments and laws overrule too many local and state laws. The success of Federalism lies in the reuiqrements of individual regions to compete in terms of opportunity and the ability of like-minded people to gather and control their destiny. Texas and Oregon should be allowed to evolve in different directions, as should Sweden and Greece. Forcing harmonious regultions and taxation on them makes both areas feel aggrieved. The benefits from Federalism are really about applicability of similar laws, common defense and completely free trade within the borders. The drawbacks are losing your voice by vote dilution. The balance has to be at the point where a federal government is limited as to the extent it can override state laws.

[rtpg]

>Consolidation only persists where it is either an effective way to deliver value (Walmart) or regulatory capture has occured (eg taxi licences, car dealerships). Todays consolidated behemoth is tomorrows has-been company - as long as the laws allow them to fall apart when they can no longer innovate and compete.

That doesn't hold up to reality, as proven by what has happen ed with banks, hospitals, and health insurance over the past 30 years (regulations make entry a bit more capital-intense, but if you have enough willpower and minimum capital you can start a bank).

>It's a misunderstanding to think that competition requires many players to be effective.

It's part of a definition of a free market : atomicity of actors. In a free market, no single actor can influence price.

>I'll be the first to admit that the last part is the most difficult to achieve, but it's no reason to abandon the concept of the game.

The concept of the game involves an infinite amount of really tiny boxers, not two world champions. All the math around free markets bringing prosperity is based around this fact (among a couple other prerequisites). You can't just abandon it.

Anti-trust and anti-monopoly laws are basically the most pro-free-market laws we can make.

[brazzy]

> Communism is defined by a complete lack of freedom to change the status quo.

Um, no. No, it's not. At all.

[leaveyou]

It's quite funny how little people know about communism, why it appeared, how it developed and what influence it had over capitalism & why it collapsed although less than 25 years passed since its collapse.

[leaveyou]

@collyw The original communism (the one "by the working class for the working class") is blue, cold and not coming back soon..

[collyw]

I find it quite amusing how people talk about communism failing, AFTER we bailed out the banks.

[nmrm]

> Consolidation only persists where it is either an effective way to deliver value (Walmart) or regulatory capture has occured (eg taxi licences, car dealerships).

Value for whom?

The problem is that "effective way to deliver value" is measured in terms of corporate profit (value to shareholders), not in terms of the actual thing being produced. So firms can produce less value to the economy at-large (fewer flights, worse beer, etc.), at greater cost to the consumer/supply chain, and still increase value.

The entire article is indicting this setup, where companies screw over their customers and suppliers in order to produce value for a few already very wealthy individuals who hold large stakes in the corporation.

This is how low-competitive environments work. Period. And it's not commie nonsense (unless Goldman Sachs are part of a massive commie conspiracy). From the article:

Goldman Sachs in February published a research memo advising investors to seek out “oligopolistic market structure[s]” in which “a smaller set of relevant peers faces lower competitive intensity, greater stickiness and pricing power with customers due to reduced choice, scale cost benefits including stronger leverage over suppliers, and higher barriers to new entrants all at once.”

> In many cases, you only need two players and threat of entry to any others for competition to be successful at optimal use of resources.

First of all, there's not much of a threat to entry when one or two companies own the entire market and there's a huge cost to entry. Have you seen many airline start-ups in the past half century or so?

Furthermore, it's possible to price like a monopoly when you only have one or two major competitors and everyone is part of a gentleman's agreement. Implicit, of course, but these aren't pricing cartels in the same sense that PACs don't coordinate with political campaigns.

The boxing match analogy is inherently flawed because these companies can still win big without wiping out all their competition. There is no gold medal when everyone's happy splitting the enormous pot of gold.

In fact, most seem to desire a situation where they have one "friendly" competitor so that they get all the perks of monopolistic position via an implicit gentleman's agreement on pricing, while still having the luxury of pointing across the street whenever regulators come around.

[fennecfoxen]

Value for who? PLEASE! Get real! Wal-Mart delivers value for shareholders because they attract customers because they're cheaper and more efficient.

But I suppose some people rather vilify its customers, under the delusion that tens of millions of America's poorest could magically lift themselves out of poverty by spending more money on manufacturing and transportation costs and on people working at cash registers. Bah.

(And the grocery market in general is anything but low-competition.)

[nmrm]

> Value for who?

Well they sure as hell aren't passing it on to their employees; meanwhile, their stock is doing quite well...

> Wal-Mart delivers value for shareholders because they attract customers because they're cheaper and more efficient.

> (And the grocery market in general is anything but low-competition.)

Okay, so you've double turned yourself. Walmart faces lots of competition from local chains, which prevents it from screwing consumers on prices. Competition is good.

I'd argue they compensate by leveraging their market position to place pressure on their increasingly de facto vertical supply chain and by poorly compensating their employees.

> by spending more money on manufacturing and transportation costs and on people working at cash registers.

Of course, this ignores that many of those poor are the ones in the factories, warehouses, trucks and behind the cash registers.

[fennecfoxen]

> Okay, so you've double turned yourself... Competition is good.

What? This isn't a double-turn at all. I'm not defending uncompetitive environments and monopolistic exploitation, I'm asserting Wal-Mart as example uncompetitive environment is, in the general case, nuts.

> Of course, this ignores that many of those poor are the ones in the factories, warehouses, trucks and behind the cash registers.

Not ignoring that fact, NOTWITHSTANDING THAT FACT. No one is better off if one person working minimum wage pay extra money to have another person working minimum wage drive a truck further (and burn more fuel for that matter). Recognize a simple truism: no group gets better off by engaging in waste. (You could make a case that someone-else making substantially more than minimum wage paying extra for that would increase overall well being by paying more for these services, because of diminishing marginal utility of that richer person's wealth, but making groceries cost more is a freakishly regressive sort of way to attempt to redistribute wealth... and wealthy people aren't shopping at Wal-Mart anyway, they're all at Target or Whole Foods...)

[nmrm]

> I'm not defending uncompetitive environments and monopolistic exploitation

Okay. Well that's what the article is attacking. So I guess I don't understand your point w.r.t. the thesis of the original article. Do you agree with the article but disagree that Wal-Mart is an example? Or what? Could you clarify?

> I'm asserting Wal-Mart as example uncompetitive environment is, in the general case, nuts.

To repeat myself, there's more than one way for companies to behave anti-competitively.

Wal-mart cannot afford to screw consumers, so they find other ways to leverage their status as a mega-corp -- squeezing local government via tifs (this corn field/park/10 year old walmart is "blighted", so give us 15 year tax break to build a new one), paying poorly compared to other players in the market, abusing or undercutting supply chain partners, etc..

> but making groceries cost more is a freakishly regressive sort of way to attempt to redistribute wealth

Well, we could one-up Wal-Mart and make all the groceries completely free by enslaving all those involved in food production. So this is clearly an over-simplification.

It's also a false choice. Wal-Mart could instead decrease its profits and play nicer with everyone (like many of its local chain competitors do, arguably because they don't have the huge legal/PR/marketing team and cash reserves which can buy F-U leverage against local governments and labor groups -- this coercive power that comes with being so big is at the heart of the article's thesis).

Also, the price difference vs. wage difference between Walmart and its competitors also puts the lie to this claim -- even an extra 1.00+ an hour way more than offsets an extra .10 cents on the dollar for groceries.

[tomp]

> Wal-Mart delivers value for shareholders because they attract customers because they're cheaper and more efficient.

That doesn't really follow; it could also be, for example, that Wal-Mart delivers value for shareholders because they drove out all the competition and attract customers because they are the only place to shop at.

I'm not saying that's necessarily true for Walmart, but it's obviously true for US internet providers, to give just one example.

[brc]

>Have you seen many airline start-ups in the past half century or so?

Yes, several.

Virgin Atlantic, Virgin Australia and Virgin America were all startup airlines that have gone on to have success despite being in highly regulated businesses. Virgin Australia was started in 2000 with $4 million and two planes and now has a market cap of $1.5 billion. It entered an oligopoly market with two airlines and cracked it wide open.

Even companies with gentlemans agreements are susceptible to entry by new competitors - even if it requires large amounts of cash - there are plenty of people with large pools of cash looking for opportunities. It happens so often that I am genuinely shocked that people think it doesn't.

[grondilu]

The answer is simple : economic freedom. If companies have the right to merge, it's not because "right-wing free-market ideologues" think it is best for the economy, it's because it is their business and they are free to organize it as they will.

Saying that only "many players can ensure progress continues" and thus prohibiting companies to merge is interfering with economic freedom in the name of "I know better", and that is planned economy. And that, is "just like communism", as you put it.

[dougabug]

Corporations are legal fictions. They exist through the power and authority of the State, their contracts are enacted and enforced through agents of the Courts. Corporations are manifestly not free to organize as they will.

Is it economic freedom to have one choice for Internet broadband? For healthcare? Unregulated monopolies should supply us with food, water, power, and all other essential utilities/needs? Welcome to the age of thousand dollar a pill medicine. Every communication, location, every purchase, every mouse click or swipe duly tracked, recorded, and data mined. To imagine that as freedom merges the Dickensian with the Orwellian.

[grondilu]

> Corporations are legal fictions. They exist through the power and authority of the State, their contracts are enacted and enforced through agents of the Courts.

When I enter a shop there are a few things I can not do. I can't steal, threaten the staff or set the place in fire for instance. That does not mean that the concept of a shop does not exist. Corporations are nothing but an association of people working together and/or sharing the ownership of means of production. The fact that the Law puts a frame around this organisation does not stop it from existing. The concept preexists to what Law says it is.

If you deny it it's probably because that suits your political views so I don't have much hope in changing your mind about it.

PS. Someone who has a job also makes a contract that is enforced by the State, so do you think employment is a legal fiction as well?

[dougabug]

You certainly can steal, threaten the staff, or set the place on fire. To the extent that shop and its people are recognized and protected by laws and government agencies such as the police, you'll likely face serious repercussions. But say the shop is liquidated in Chapter 7 proceedings by Bankruptcy Court, appeals exhausted, ownership of all assets transferred, the building condemned. The shop no longer exists, and in fact may be lawfully demolished.

You could setup a table in the middle of a busy intersection, put some items on it, and declare it to be a shop. That does't make it a shop (or for that matter yours).

What is "ownership" absent law? Is it something you can measure, like gravity, velocity, field strength, pH or temperature? Without the law, a manifestation of government, ownership is simply a belief (which is the antecedent of the law).

[NoPiece]

Welcome to the age of thousand dollar a pill medicine. Every communication, location, every purchase, every mouse click or swipe duly tracked, recorded, and data mined.

You are exactly describing the world today, as provided by our big government.

[dougabug]

> You are exactly describing the world today, as provided by our big government.

Of course I am. Orwell would be astounded.

I perceive a false dichotomy of big government vs big corporations. While it may be possible to have one without the other, we have the latter (as you point out) courtesy of the former.

[sergiosgc]

Small countries, like mine (.pt), kind of disprove this idyllic vision of small government. Small governments easily fall prey to large multinationals.

USA's woes with oligopolies may have many causes. A government concentrated at the federal level isn't probably one of them.

[NoPiece]

My rebuttal would be that the oligopolies exist in heavily regulated areas (health, banking, telecom), and that isn't a coincidence. You don't need a big government to protect yourself from multinationals, you need a non corrupt government.

[willvarfar]

How would "small" government change it?

Being a European living in a country with a "bigger" relative government (as I understand the way Americans use the term) but with free healthcare and a big data mining debate ongoing, I'm a bit at a loss...

[NoPiece]

A smaller government wouldn't have a $52.6 billion budget for the NSA & CIA to data mine.

A drug company can only charge a $1000 for a pill because the government is blocking competition by granting patents. Effectively creating a micro monopoly. Small government with extremely limited or no patents would allow competition to fix the $1000 pill.

It is industries like healthcare and telecom, where the US has both very large companies and very big government that we have the worst outcomes.

[brazzy]

You could not possibly be more wrong.

Monpolies are the exact opposite of economic freedom and amount to a planned economy, except the plan is not even nominally for the good of everyone.

[watwut]

While I agree with you, I would point out that planned economy plans are rarely "for the good of everyone". Planmakers tend to enrich themselves and their buddies.

I'm tempted to write never, but there might have been that one historical event when it went right.

[brazzy]

That's why I wrote "not even nominally for the good of everyone" - explicit economic plans, at least the socialist variety are usually for the good of all in theory but not in practice. A monopoly-based plan would not even claim to be.

Also, I don't think the biggest problem with plans is self-enrichment by the plan makers, but inflexibility, the lack of good information, misaligned incentives and unintended consequences. And the biggest strength of a market economy is not the absence of any of these problems, but that they don't effect everything euqally and the companies that are affected the most just fail without dragging down everything.

[crdoconnor]

>While I agree with you, I would point out that planned economy plans are rarely "for the good of everyone".

This is exactly how it works under our system too. Instead of economic planning being set in motion by the nomenklatura, it's done by the heads of major banks.

[brc]

Monopolies can only happen with a large and determined government to reinforce them. Actual monopolies are exceedingly rare, and nobody has ever provided me with an example where the monopoly power was not in part or wholly provided by the government. No monopoly can overcome the power of technological innovation and the desire for lower cost goods and services in even the medium term.

Monopolies and planned economies are two sides of the over-sized/too-powerful government coin.

I'm all for stopping monopolies from forming, but the solution to that is not anti-trust style laws, but a focus on preventing the conditions that allow monopolies to continue.

[grondilu]

I have not used the word monopoly and was merely talking about the right for people to work together. Do you have anything against that?

[brazzy]

You said

> Saying that only "many players can ensure progress continues" and thus prohibiting companies to merge is interfering with economic freedom in the name of "I know better"

Sounds like you're advocating that all mergers should be allowed, even if they produce monopolies, and that not having many players would be OK.

The notion that regulation which disallows two billion-dollar companies with thousands of employees to merge because they'd afterwards dominate an important market has anything to do with "the right for people to work together" is somewhere between fundamentalist and disingenuous.

[grondilu]

If a company ends up being the only one providing a product or service on a market, there is nothing wrong with that, as long as other companies are not prohibited to enter the market if they are capable to. And I repeat : you have no right to prevent people from working together if they want to. It's none of your business.

If you're upset with a company dominating a market, just create your own company to compete with it.

[brazzy]

Yes, there is a lot wrong with that, as there are often significant inherent barriers to enter a market, and lots of things an incumbent can do to hinder competition, not all of which can be made illegal.

And a good government has every right to prevent this situation, that is exactly its business.

[ivansavz]

> The answer is simple : economic freedom.

I'm all for freedom, and that is precisely why I'm opposed to consolidation. There are a couple of components required to make the free market work: (1) freedom for companies to grow [--> efficiency], (2) freedom for new companies to enter the market [--> competition], and (3) freedom for customers to choose from different offerings [--> competition].

Consolidation is all about (1) at the expense of (2) and (3).

To clarify, when I said "communism" I meant "central planning" (not totalitarianism), which is what happens when a single corporation controls most of a market. Apologies for using this emotionally-charged term loosely.

> prohibiting companies to merge

I'm not sure what wing that puts me in, but I think we should prohibit large companies from merging and also dismantle existing large companies as well. The way I see it, a world with many small and medium-sized companies will run much smoother than one with a single large company. Specifically, keeping the chain of command short (height of the corporate pyramid < 7) will ensure informed decisions are made (instead of decisions based on office politics, and personal vision---the corporate version of "I know better"). Except for some exceptions (e.g. you need a pretty big company to manufacture planes) this would be possible.