Skip to main content
No. of Recommendations: 1
Hi Cap,

So many truths, and happy to see them. We merely need to wright the fallen ones...

In many industries there are economies of scale that produce huge efficiencies. That is why we have walmart, because a million small grocery stores are ineffficient. That is why we have citibank rather than hundreds of little neighborhood banks. One big retailer can squeeze many efficiencies, centralize many aspects of the business process, etc. Most large corporations are oligopolists.

ALL true, so far.

This is a lot more efficient than free competition, which is almost nonexistent in any field were corporations operate.

No... none of your above true statements are exclusive of free competition. Such competition encircles aggregation as well. Microsoft "competes" with Agosoft (a one man software company in the financial industry.) Merely growing large and becoming more efficient (which is not a given) does not eliminate competition.

If the retail market were to return to free competition, Walmart's profits would disappear and it would go bankrupt, but consumer prices would rise because of rising inefficiencies.

Free competition NEVER LEFT the retail market. Walmart is in no way free of competition.

But the dynamic is more complex. OK
Competition drives efficiency up. Sure...
Efficiencies drive profits down. Only to a limit, but yes...

The industry consolidates to reduce competition and capture the efficiency premium.
Ahhh... no. You lost direction at the assumption of purpose. Industry does NOT consolidate for the purpose of eliminating competition, but rather to achieve better efficiencies, lower costs, and thus greater net profits. This action is taken at (often great) risks of inflexibility and immobility in the competitive markets.

The Shaquille O'Neal is not selected as the point guard for the basketball team regardless of how dominating he is... he lacks the speed & agility required to compete in that "market" of the position of point guard.

Consolidation drives down income and consumer purchasing power.

No, consolidation MAY have EITHER a positive OR negative effect on revenues and income, all depending on the inter-relationship within that market. The sonsuming markets will ruthlessly punish the consolidators that morph into the wrong direction.

Consumer purchasing power is OPTIMIZED by competition, and the consumer wields the weapon of discretion to reward or punish relative market strategies.

The rise in capacity usually exceeds the ability of oligopolies to protect profits.

You're being too nebulous and undisciplined in your terms...
When you say "capacity" are you referring to production capacity, consumption capacity, revenue capacity, what?

Oligopolies that over-produce (can we say "SUV's"?) quickly discover bleeding red ink all over their books... and once again, the competitive consumer markets clean it up... ruthlessly.

Overcapacity is a therefore a chronic problem. Without government intervention, the result is a cycle of business collapse, unemployment, unrest, etc.

"Without government intervention".... LOL... I am simply at a loss for words.....

To equate "government intervention" with the ELIMINATION of waste...

We are definitely from different universes, apparently.

This cycle happened many times until the Great Depression. Since then, government took the role of protecting profits by a mixture of consuming the excess capacity (mostly through war), redistriuting wealth and pumping credit. The difference between all post WW-II administrations is in the exact mix of these three tools.
So the point that contemporary government is inefficient is beside the point. It is, and so what?


This is surreal...
I am literally without words...

In any case, I wish you all the best, sincerely!
Dave
Print the post  

Announcements

This is a Politics Free Board
Politically charged posts are not permitted on the Metar Board. If you make a political post, and it is alerted, the post will be removed. Thanks!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.