Capitalism in its beginning breeds competition as people exploit any niche or demand there is and fight to do better than their competitors breeding more and better supply. But after a competitor has beat out all of its competition and has become so strong that it can stop new competition as soon as it begins, hence stopping competition and in a sense killing itself. ]
An example of this today would be companies like Walmart and other large corporations that essentially own the market and can not be beaten out because they are simply to large.
Is this so? And that as this trend continues eventually most/all markets will be taken up by few unchallengeable powers if not only a single one? Which in turn kills what capitalism sets out to do, allow for competition?
The originator of Capitalism, Adam Smith, already mentioned the potential for monopolies to arise and gave his blessing to break them up. Breaking up monopolies is pro-Capitalist.
On the other hand, lots of times, the companies which get big and clobber everyone else, become too slow and behind-the-times to keep up with competition. Microsoft, for example, is still a monster, but they’re on a pretty straight path downhill. One of their large competitors, Google, barely even existed a decade ago.
Actually, walmart might be a great example of the opposite of the OP. I hate walmart. bad service, bad products, and more frustrating that anything. I will go to target or something similar because the experience is worth the pennies I might pay more.
Our anti-monopoly laws do a fairly good job at preventing the condition in your OP. Can you give a few more examples of “large corporations that essentially own the market and can not be beaten out because they are simply to large?” I’m having a hard time thinking of any. Take just about any large industry in the US:
Automotive: After 100 years of competition, the Big 3 are still duking it out.
Communications/broadcasting: there may be small areas where one company has a virtual monopoly due to coverage/reception issues, but these areas are constantly getting smaller. Most people have several cable and cell phone providers to choose from.
Retail: You mention Walmart, but Target, K-mart, and regional stores like Fred Meyer all compete with Walmart. And of course there are still many different grocery store chains.
Banking: Plenty of banks to choose from.
About the only one I can think of is Ticketmaster.
Being large is good in that there are economies of scale but it can also be bad because layers of bureaucracy slow decisions down. When IBM had such dominance of the computer industry that it was targeting for prosecution by the Justice Department. When they decided to go into personal computing it found that it could not design an operating system because it would take too long to get it approved. So they found that the guy who wrote Basic for them was willing also willing to license an operating system he had purchased. Unfortunately for them he also licensed it to other personal computer makers and they almost went out of business.
This type of story is typical of capitalism, a business is great at serving its customers and gets huge. Then someone starts serving the customers better and the giant company withers and may not even survive. There used to be a BlockBuster Video in every community in America, their size did not save them. GM used to be so big that it was said that the only reason it allowed Chrysler and Ford to exist was to avoid anti-trust laws. It went bankrupt a couple years ago. There is a list as long as your arm of companies who dominated their industries but when the market changed vanished like a fart in the wind. Companies are great at partnering with government to quash their competition but they are usually able to only delay their own demise.
Yes, but conservatives, who generally style themselves pro-capitalist, are consistently against breaking up large corporations.
For example, all the “Too Big To Fail” banks should arguably be broken up … banks that are too big to fail are too big to govern. In a fine bit of irony, it is generally progressives who advocate breaking up monopolies.
Also, the problem with capitalism is that, without strict and responsible regulation, it tends to convert democracies into oligarchies, as the money gets increasingly concentrated in the hands of a few powerful families, groups, etc. It doesn’t matter which company profits, when one behemoth goes down, they simply shift their funds to buy another.
Hence the one percent who now control the majority of the wealth in this country. Economically, we have become a Banana Republic.
I think most conservatives did not want to bail out the banks, they did want them to fail, even knowing the costs to the economy. I think it was just the party-line republicans[sup]*[/sup] who wanted to prop up the banks, who of course would do absolutely anything to scratch the back of business using legislation.
[sub]We’re just talking about “the right,” obviously democrats were involved in this as well.[/sub]
This makes no sense. When one behemoth goes down all the investors lose money. The more they have invested the more they lose. If they keep buying companies and losing money on them they are going to be broke very quickly.
If they are investing in small companies on the way up then they are investing in the behemoth’s competitors which hastens the demise of the behemoths.
True monopolies only exist in industries where a grid network is in place. Water, gas, cable, etc. It’s what economists would call a “high barrier of entry.”
So you want to get in the business of selling electricity to people? OK, not only do you need to build a power plant, but you’ve also got to set up lines to get to everyone. And who is “everyone” anyway? Problem is that your established customer base is finite and already with company #1, so how much are you willing to invest to get a select number of customers to come to you? And how many power lines does one community need anyway?
Sure, it’s possible that two companies are in the same area providing the same services, but it’s rare. And most of the time that industry is regulated by government precisely because it’s so prone to monopolies and the first company on the scene is often the only one on the scene.
But that’s a grid network type of business. Everything else? Very very difficult to become a monopoly. Huge =/ monopoly. Too big to fail =/ monopoly.
And KMart was itself the 800-pound gorilla of its day. In fact, history tends to suggest that calls to break up a monopoly tend to occur not long before the monopoly gets broken anyway.
I’ll agree a lot of ideological conservatives did not want to bail out the banks because it was government intervention in the marketplace. And many liberals did not either, because the banks had caused the mess. But as you noted, both Democratic and Republican politicians voted to bail the banks out, because the banks own the politicians. When the interests of the nation conflict with the interests of the moneyed elite, the nation loses, every time.
It makes all kinds of sense. Have you not heard of a “diversified portfolio”? Wealthy people keep their money in a lot of places, because they know that over time some companies will go up and some will collapse. You may get rich by owning shares in IBM or Microsoft, but if you have any brains, you diversify as soon as you can. Corporation A or B may fail, but the wealthy families that invest in them just sell and shift their funds elsewhere. THEY don’t fail. Hence, oligarchy.