23/09/2010

Vince's attack on capitalism

When I first heard, or perhaps I should say thought I misheard, Vince's attack on capitalism and that:
Capitalism takes no prisoners and kills competition where it can
I thought of all sorts of points to make along the lines of capitalism also creates competition whenever it smells an opportunity. I could have also made the point that it is politicians that make competition harder by creating barriers to entry by working with businesses to create every more and higher regulatory hurdles for new comers - a recent Cato podcast claimed that in some US States more than 1 in 3 jobs is in a licenced occupation including hairdressers and nail technicians FFS.

It would probably have been a rambling post and not very succinct so I'll leave it a Marxist to explain very succinctly why Vince Cable constinues to talk crap:

That “where it can” is doing a lot of work. There is no question that each individual capitalist tries to kill competition, by undercutting his rivals, offering a better product or - let’s face it - lobbying the government for special protection. Every businessman wants to be a monopolist - or at least, he should do.
However, it doesn’t follow that such efforts succeed. The empirical evidence suggests that Marx was wrong. There is no tendency for capital to become more concentrated. Studies show that firm growth is independent of size (or anything else!), and so the distribution of firm size doesn’t change much over time. The degree of competition or monopoly is roughly stable. Tesco or Wal-Mart might seem monopolistic, but they are less so than 19th century truck stores
One macroeconomic piece of evidence for this is the share of profits in GDP. If capitalism tended to kill competition over time, you’d expect this share to rise over time. But it hasn’t. Aside from a fall in the 70s and recovery in the 80s, the profit share seems trendless.
 If it wasn't for the BBC and Guardian Vince would have been confined to the history books years ago, as it is their love of him keeps a deluded population believing we can continue to have our cake and eat it and all we need to do is tax a few bankers a bit more.

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