good capitalism / bad capitalism
I've been reading a bit about late 19th/ early 20th century economic history and theory. One of the things that I find interesting about the period is that a fair number of economists at the time were concerned that capitalism seemed to be evolving from a classical, Smithian model into one based more on monopolies and finance capitalism.
This... seems relevant, and it has gotten me thinking about good and bad versions of capitalism. I am not a militant opponent of markets, at least not generally. I don't believe that they're the right tool to solve every problem, but they work in many cases. I'm absolutely opposed to monopoly capitalism, in which insiders work to manipulate markets, maximizing their returns and minimizing the benefit for consumers. As I see things, capitalist systems can exist in one of three states: a state of strong competition between firms, which benefits the consumer, through mechanisms that are widely understood and well-accepted, a state in which competition between firms is weak, but shareholders do well, and finally, a state in which the managers of firms do well, but in which competition is weak, and in which shareholders are not, in fact, well-compensated. These states descend in order of desirability, and each successive stage is defined by a further erosion of actual market structures. At the second, 'shareholder' tier, firms collude with one another, and work jointly to influence the rules of the marketplace through control of information and government - this reduced competition, and allows greater profits. At the third tier, corporate managers further sabotage the system by manipulating the structure of firms so that shareholders become weak and passive - sources of capital, but unlikely to reap the full rewards earned by that capital, which tend to be siphoned off by the hands of the corporate managers themselves.
Feel free to dispute any of these ideas - this is a big thought experiment on my part.
It seems to me that capitalist economies naturally move through these three stages - firms have incentives to prefer collusion and influence to innovation and competition, and managers have strong incentives to minimize gains for shareholders. It seems to me that in America we have a political system that is structured in such a way as to make this degradation of actual market structures both probable and swift. American politics is uniquely responsive to money. The need to get re-elected is constant and grinding. Politicians, as a result can be purchased for prices that seem like huge bargains when measured against the eventual profits that can be reaped by exploiting their influence. Corporations have every incentive to purchase politicians.
It seems to me that we might be able to have *either* a functioning market economy *or* our current system of politics, but not both, at least not over the long-term. Some of the most successful capitalist nations, after all (looking at you, Singapore), have political systems that are far less democratic than ours...
Thoughts?
This... seems relevant, and it has gotten me thinking about good and bad versions of capitalism. I am not a militant opponent of markets, at least not generally. I don't believe that they're the right tool to solve every problem, but they work in many cases. I'm absolutely opposed to monopoly capitalism, in which insiders work to manipulate markets, maximizing their returns and minimizing the benefit for consumers. As I see things, capitalist systems can exist in one of three states: a state of strong competition between firms, which benefits the consumer, through mechanisms that are widely understood and well-accepted, a state in which competition between firms is weak, but shareholders do well, and finally, a state in which the managers of firms do well, but in which competition is weak, and in which shareholders are not, in fact, well-compensated. These states descend in order of desirability, and each successive stage is defined by a further erosion of actual market structures. At the second, 'shareholder' tier, firms collude with one another, and work jointly to influence the rules of the marketplace through control of information and government - this reduced competition, and allows greater profits. At the third tier, corporate managers further sabotage the system by manipulating the structure of firms so that shareholders become weak and passive - sources of capital, but unlikely to reap the full rewards earned by that capital, which tend to be siphoned off by the hands of the corporate managers themselves.
Feel free to dispute any of these ideas - this is a big thought experiment on my part.
It seems to me that capitalist economies naturally move through these three stages - firms have incentives to prefer collusion and influence to innovation and competition, and managers have strong incentives to minimize gains for shareholders. It seems to me that in America we have a political system that is structured in such a way as to make this degradation of actual market structures both probable and swift. American politics is uniquely responsive to money. The need to get re-elected is constant and grinding. Politicians, as a result can be purchased for prices that seem like huge bargains when measured against the eventual profits that can be reaped by exploiting their influence. Corporations have every incentive to purchase politicians.
It seems to me that we might be able to have *either* a functioning market economy *or* our current system of politics, but not both, at least not over the long-term. Some of the most successful capitalist nations, after all (looking at you, Singapore), have political systems that are far less democratic than ours...
Thoughts?