David Chaston on an existential crisis, how to save capitalism from itself, the challenge and what others, including billionaires are saying

David Chaston on an existential crisis, how to save capitalism from itself, the challenge and what others, including billionaires are saying

This week’s Top 5 is from David Chaston who has been watching fast changes, with new technology eating up the assumptions behind competitive capitalism and its place in a democratic society.

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.

And if you're interested in contributing the occasional Top 10 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 5s here.

1. An existential crisis.

In the US especially, but also here, the words 'socialist' and 'capitalist' are used as epithets. To be sure, many other bumper-sticker words are used the same way, especially "neo-liberalism". The primary use is to negatively brand another's view and shut down rational consideration of ideas.

I am certainly a 'capitalist' and even a fan of 'liberalism' (neo or otherwise). But the reasons aren't readily explained in a brief sentence. And, it is quite clear that both 'isms' have their issues, some serious, some very serious.

However, one thing is not clear and that is whether either will survive, at least survive in the form that made them attractive in the first place. Many people, including me, have increasing doubts. And that is making for a re-examination of what should try to be saved in capitalism and liberalism. The forces lined up to bury (or buy) the concepts are powerful, and driven out of Eastern Europe, Asia, and increasingly the US. The primary attack comes from oligarchs and strong-man politics. But the seeds of failure are in capitalism itself. Rising unrestrained by sensible competition policy, competitive capitalism is morphing into oligopoly. Just about every economic activity you can think of is now dominated by five or less large commercial enterprises.

And the shift is fast.

In New Zealand, the icon impact is the four large Aussie banks. But there are many more examples; insurance; groceries; fuel; electricity; building materials; etc. etc. etc.

The immediate commercial imperative to retain the status quo is strong. Only companies with scale can deliver low unit costs that consumers expect. And if they don't, they will lose out to the huge multinationals that can cherry-pick here (and usually without paying any tax - think Visa, Mastercard, but also the big tech companies). It is hard to see an alternative (TINA) which just reinforces the dominance.

But around the world the debate is growing.

In fact, savvy billionaires who owe their wealth and position to the current system are worried about its sustainability too.

I recently added this very old cartoon to a story and got my share of criticism for doing that. One even called it 'hateful' and 'disgusting' because he/she thought it held rich people up to ridicule.

But I think it does illustrate, in a pointed way, just how distorted the current version of capitalism has become.

In my view, real capitalism is all about commercial competition for the consumer's decisions - many sellers and many buyers - and not about building high walls (scale?) that prevents competition.

2. How to save capitalism from itself.

In my view, competition regulation has failed us, big time. And not only in New Zealand, but in almost every Western democracy. Bring back aggressive "anti-trust" laws and enforcement, I say, with real sanctions for market abuse. It is the only way capitalism - even liberalism - can be saved. Put some market responsibility back into the market.

The goal is not to make everyone equal, nor to remove painful consequences for making poor choices. But cosy monopolies (whether in the private or state sectors, or even in labour markets) naturally work to benefit the few by 'closing the shop' at the expense of the many. But buyers or sellers should have proper choices available, even if they make bad ones. In fact, market consequences for making bad decisions should be obvious, and painful. Otherwise how will others learn? And we just don't need an army of bureaucrats trying to protect us from ourselves. We have far too much of that now - but some of that is because capitalism and liberalism hasn't been nurtured. It has been abused by public policy of both the left and the right.

Actually, banking is a useful place to start a debate on competition because it has a regulator whose sole job it is to make sure the large incumbents never fail. Cosy market shares built on excessive leverage makes everyone vulnerable if one fails, reinforcing the imperative to protect the incumbents. And that situation only exists because the regulator allowed it to happen; they opened the regulatory door and of course the regulated walked right in. The primary fault lies with the Bank for International Settlements in 2006, but the RBNZ went along with the anti-competitive approach and now we are stuck with it. Even the very modest, slow and feeble attempt to get bank shareholders to back their own investments with proper capital levels is getting immense pushback and there is no certainty that the regulator won't cave before it is implemented in five years or so. To protect their sky-high returns, bank shareholders are fighting hard to ensure it is the taxpayers, and not them, who will be the ones hurt the most in a bank failure.

This is emblematic of the competition problem world-wide, and in most commercial corners of our life. Most of those corners don't even have proper competition regulation. Think insurance especially, where two large Aussie companies control 70%+ of our consumer insurance market, a position gifted to them by our own regulator (heck, even IAG didn't think it would get approval to roll-up a majority of the NZ insurance market when they applied with its CEO openly talking about what they would do with a first rejection - one that never came).

3. What others are saying.

I keep a reading eye out for people with all sorts of varying views (and of course not just on this topic). Here is what Joseph Stiglitz thinks should be done.

The prescription follows from the diagnosis: It begins by recognizing the vital role that the state plays in making markets serve society. We need regulations that ensure strong competition without abusive exploitation, realigning the relationship between corporations and the workers they employ and the customers they are supposed to serve. We must be as resolute in combating market power as the corporate sector is in increasing it.

...

Progressive capitalism is based on a new social contract between voters and elected officials, between workers and corporations, between rich and poor, and between those with jobs and those who are un- or underemployed.

Part of this new social contract is an expanded public option for many programs now provided by private entities or not at allIt was a mistake not to include the public option in Obamacare: It would have enriched choice and enhanced competition, lowering prices. But one can design public options in other arenas as well, for instance for retirement and mortgages. This new social contract will enable most Americans to once again have a middle-class life.

4. What some billionaires are saying.

Increasingly, this same diagnosis (that unrestrained capitalism is morphing into a dangerous place) is being accepted by those who benefited most from capitalism. This story gives the sense of dread some wealthy investors are feeling, sensing the same concerns American political hopefuls are channelling:

For the first time in decades, capitalism’s future is a subject of debate among presidential hopefuls and a source of growing angst for America’s business elite. In places such as Silicon Valley, the slopes of Davos, Switzerland, and the halls of Harvard Business School, there is a sense that the kind of capitalism that once made America an economic envy is responsible for the growing inequality and anger that is tearing the country apart.

And here is another, legendary investor Ray Dalio who has been writing specifically on the matter:

I think that most capitalists don’t know how to divide the economic pie well and most socialists don’t know how to grow it well, yet we are now at a juncture in which either a) people of different ideological inclinations will work together to skillfully re-engineer the system so that the pie is both divided and grown well or b) we will have great conflict and some form of revolution that will hurt most everyone and will shrink the pie. 

5. The challenge.

I am not trying to suggest that a coherent modern competition policy is an easy thing - it isn't. Dominant firms cross-subsidise, they acquire competitors, and they have cross-platform activities (services to both consumers and merchants, for example). No jurisdiction has got it right yet.

But doing nothing, or worse, not adapting to the modern competitive landscape, is just not helping. Doing something aggressively may be a better way to see how to control the perverse incentives oligopoly capitalism can unleash. What is needed is a regulator with flexible powers - and sufficient funding to be able to analyse and move fast. Underfunding undermines well-intentioned policy.

In the end we need competitive markets to ensure we get the benefits of productivity spread for the benefit of all society. What we don't need is prescriptive regulation. We can have it with a principles-based update to our competition policy and its enforcement.

6. Lighter afterthoughts.

This Top 5 has been pretty dense stuff. My bonus sixth item is a collection of aphorisms:

♦ I read that 24,069 people got married last year. Not to cause any trouble, but shouldn't that be an even number?

♦ I find it ironic that the colours red, white, and blue stand for freedom - until they are flashing behind you.

♦ When wearing a bikini, women reveal 90% of their body. Men are so polite they only look at the covered parts.

♦ Relationships are a lot like algebra. Have you ever looked at your X and wondered Y?

♦ America is a country which produces citizens who will cross the ocean to fight for democracy but won't cross the street to vote.

♦ You know that tingly little feeling you get when you love someone? That's your common sense leaving your body.

♦ My therapist says I have a preoccupation with vengeance. Well, we'll see about that!

♦ I think my neighbour is stalking me as she's been Googling my name on her computer. I saw it through my telescope last night.

♦ Money talks ... but all mine ever says is good-bye.

♦ You're not fat, you're just easier to see - and harder to kidnap

♦ If you think nobody cares whether you're alive, try missing a couple of payments.

♦ Denny’s has a slogan, "If it’s your birthday, the meal is on us." If you’re in Denny’s and it’s your birthday, your life sucks!

♦ Money can’t buy happiness, but it keeps the kids in touch!

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

50 Comments

Well put DC "Rising unrestrained by sensible competition policy, competitive capitalism is morphing into oligopoly".
Capitalists don't like competition. They don't like markets. While they may say they believe in free markets their behaviour reveals their profit and advantage comes from eliminating competition whenever possible. Outfits that have control of their markets, are the ones most valued. Ask any stockbroker.
To get free markets, you need a very very strong referee. Some might think that a contradiction, but that's the way it works.
The first thing that strong referee would do is break up the monopolies.

I thought the Commerce Commission is our referee. The last time I recall them tackling a monopoly was with Telecom. Apparently access to affordable, high speed unlimited broadband is much more important than affordable building materials or groceries.

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” Adam Smith, The Wealth of Nations

Yes. "The goal is not to make everyone equal, nor to remove painful consequences for making poor choices. But cosy monopolies (whether in the private or state sectors, or even in labour markets) naturally work to benefit the few by 'closing the shop' at the expense of the many. But buyers or sellers should have proper choices available, even if they make bad ones."

"24,069 ?" Didn't you know there are many different types of marriage these days.

To fess up, I was just playing with the data trying to be humorous. :) The actual StatsNZ data is for 'couples", so I was being a little loose with the facts there. In 2018, three types of marriages and civil unions were recorded, covering 24,069 couples. 318 (1.3%) were male-male, 579 (2.4% were (female-female) and 23,172 (96.3%) were female-male, as recorded.

As phrased an even number would indicate someone who was married twice in one year; quite feasible.

Really good, thoughtful piece.
Capitalism is the best system there is. But it certainly needs an overhaul! And much more than tweaks.

Capitalism is the best system there is.

But your understanding of capitalism is subjective, just like anyone elses. And let's look at NZ, which I "subjectively" think is based around credit- and bubble-driven consumer spending. Much like Australia. Forget the kiwifruit and milk powder. Consumer spending is the core of our economy and that has only really been driven by incremental spend from 1. The wealth effect from asset prices; and 2. Greater personal debt. Our institutions are all contributing and supporting the preservation of the status quo because 1. It seems to be working (even though there is no historical evidence of perpetual bubbles anywhere) and 2, they're nervous about what will happen to changes of the status quo (negating the possibility it eventually caves in on itself).

So maybe you're right and capitalism is the best system there is. But I do believe that you need to think that much of it is about perception, which is probably different from mine and also different from Grant Robertson's. I believe that most NZers are not really suited for "raw capitalism", which I think is probably like market dynamics in countries such as Russia. Incidentally, I was at a food expo y'day and received some free samples to take away from an American cheese brand. A little while later I witnessed a Russian exhibitor asking cash for their product or samples.

Of course. Capitalism can comprise an infinite variety of policy settings, within its broad overarching concept.
For me, one of the biggest issues with our system is that policy approaches get pigeon holed into neat but unfortunate political pigeon holes. I think the system could be made MUCH better if we made changes, some of which could be labelled ‘neo-liberal’ and some of which could be labelled ‘interventionist.’
Unfortunately, centre-right parties tend to stick with the former, and centre-left with the latter. But beyond politics, it’s perfectly possible to have a mix of approaches.

I think we need to be much more pragmatic, rather than ideological.

For me, a very good example of this is housing. Conceptually, I like the idea of a much more liberal planning system, but is coupled with the government being much more active in house building. This is similar to the current government’s policy, although we are yet to see much of the rhetoric behind this implemented. It’s an interesting combination of neo-liberal and interventionist approaches, and I like it.

We need much less binary thinking (and policy) in this world.

This is such an interesting subject. I'm reading C. Northcote Parkinson at the moment and he lays much of the blame on centralisation. Personally, I think that bureaucratisation of everything is to blame. Sovereignty and independence are fractal qualities and centralisation acts to destroy both, it seems. Instead of the wealthy individual free to sponsor such activities as he sees fit, based on accumulated wealth from activities that have benefited society as a whole, we now have an array of Immortal Corporations and Immortal Institutions of vast wealth and power intent on spying on us and controlling our actions in fine detail. The fine details includes what we eat and what we think. Computers have enhanced their ability immeasurably, from the early days of the IBM punched card machines that enabled racial profiling in 1930s Germany onwards.
https://en.wikipedia.org/wiki/IBM_and_the_Holocaust

What to do? I'm not convinced more government will help much, they will just get captured by a special interest group. However, I do think the current rejection of career politicians is an expression of the backlash. Trump the outsider beat Clinton the trougher, Brexit opposed the will of the EUSSR, the gilet jaunes oppose les énarques.

Roger. A strong referee would be smaller government. The problem we have is the government has got involved in everything, rather than be an independent referee and protector. Yes bureaucracy is a problem, as well as the monopolist drive and aggressive growth agenda of government bureaucrats. We need law, not government micromanagement.
As for political backlash, add Zelensky to your list.

Thanks David. A good piece.
I cant help thinking that the inequality has gone so far now that, it must be starting to hurt even the super wealthy. I think of South American banana republics and consider a handful of people that own most of a small and struggling economy. They would actually be far better off if they empowered and enriched the rest of the population, and owned 30-40% of a robust and growing economy where every body benefits and is motivated to contribute and succeed. As we have seen before, if things carry on down this path there will be some sort of backlash and or catastrophe, that will re balance the system. It would be far wiser for government to head that off and manage the economy back to something more sensible and fair. Unfortunately our present government is showing no signs at following up on it's pre-election rhetoric and is only marginally different from National. It's sole goal seems to be holding onto power.
I have appended a couple of good links that graphically illustrate just how unequal the economy of the USA has become. (I doubt we are far behind)
https://archive.nytimes.com/www.nytimes.com/imagepages/2011/09/04/opinio...
https://www.nytimes.com/interactive/2017/08/07/opinion/leonhardt-income-...

My only criticism of the cartoon in (1) is that there was half of the pie left for the 90%.

I prefer ideas to fix capitalism 'from within' as opposed to attempts to regulate 'from the outside'. Problem with the latter being that, particularly in the US, the regulators are bought off, or if not bought off, scared off, by the status quo monopolists/capitalists.

Perhaps the answer is in making monopolists/capitalists better 'from within' - as per the example bill proposed by Sen E. Warren;

https://en.wikipedia.org/wiki/Accountable_Capitalism_Act

Thing about the US is that it really isn't a democracy (of the people, by the people, for the people) anymore. It is a military-industrial complex. And those in charge of that don't think/have no concerns for the individual citizen, or for the unequal society. In fact they rely on a growing poorer class to recruit the rank and file from.

You overstate a reasonable case to say the US is a military-industrial complex and not a democracy. Firstly they do have elections and get quite steamed up about them and secondly about half the time the preferred candidate for business and military actually lose. I can understand why you would prefer not to think about how the person least suited to the job became president.

Trump was immensely suited to the job where the DoD is concerned - highest defense budgets in history. He knows who his 'mates' are; has done from day one;

https://www.forbes.com/sites/dovzakheim/2019/03/12/trump-takes-a-risk-wi...

https://spacenews.com/trumps-2020-budget-increases-defense-spending-by-5...

They do have elections but one of the basic tenets of democracy is that, the demos/citizenry has long-term unity and continuity, from one decision-making round to the next, without secession of the minority. The increasingly divided state of their electorate suggests that the losers (or minority in the sense of a functioning democracy) refuse to accept the newly elected Commander in Chief. Hence the reason why POTUS' of recent times are using Executive Orders more and more frequently to 'run' the nation. How many times have they shutdown government because a budget cannot get passed/agreed? They could well be heading toward either secession (by a state or group of states), or military coup.

I don't grasp your basic tenants of democracy and long term unity of the citizenry. The basic tenants would be most votes wins, complete honesty of those who run the election and count the votes. No reason voters couldn't live as isolated hermits who only see one another at an election. The USA has a political system designed to prevent the leader becoming a dictator - the writers of your constitution were alarmed by the powers of the French King and other absolute rulers and they had noticed how previous republics had descended into dictatorship - eg Greece, Rome, Florence. That divison of powers has led to these executive orders and govt shutdowns; not good but better than whn Hitler was elected. I expect USA to survive Trump and his biggest badest legacy will be giving the Russians and Chinese a reason for keeping their current authoritarian regimes.

Most votes wins is definitely not a basic tenet of democracy - for example, that is not the case in the US (republic), or NZ (Westminster) democracies. But no matter what the electoral system, there does need to be a willingness by the citizens to accept the outcome of an election between the voting cycles (this is what is meant by long term continuity and unity of the demos from one decision-making round to the next).

You can see that lack of unity and continuity in the US in many ways. 'Drain the Swamp'; 'Not my President'; the focus of mid-term elections becoming a vote against whichever side holds the executive; the never-ending challenges of the executive via the courts; the citizens belief in an active Militia, i.e., the need to arm themselves in the event they need to fight their own government (the basis of the 2nd amendment); discussion of secession by numerous states;
https://www.washingtontimes.com/news/2017/jun/13/secession-movements-in-...

Yes, nothing much can change while (neo)liberal democracies operate in a one-dollar-one-vote fashion:

https://talkingpointsmemo.com/livewire/princeton-experts-say-us-no-longe...

NZ is better than many nations but would still benefit from radical reform of election funding. Either:
a) Make all election spending public-funded, or:
b) Limit all political donations to actual persons on the electoral roll, with a fairly low limit per person.

Until something like that happens, nothing much else will.

Agreed but why not both.

The reason capitalism and democracy in crisis is because of the role of the central banks, who have consistently for around 30 years done everything possible to try and avoid recessions a natural part of capitalism these interventions have consequences. Central Bank interventions have destroyed natural pricing mechanisms, the true cost of capital and have caused massive malinvestment in economies. The distortions are now so great they cannot normalise interest rates and monetary conditions. Any attempt to do is now always met with a potential financial market meltdown, the most recent event December 2018, John Mauldin summarises very well. Crony capitalism is also a major factor.
https://www.interest.co.nz/opinion/99061/john-mauldin-mauldin-economics-...

I agree Colin. Central Banks are at the heart of the problem. When you step back and look at what the have done buying toxic assets and recording them as whole on their balance sheet. Surely there will be blow back if a central entity is trying to remove the risk of capitalism for a select few.

Yes. Not wanting to be overly cynical, but I agree about the destruction of pricing mechanisms. This is all part of "taking care of the people", but ultimately someone's going have to carry the burden.

Central banks are out of control. Orr still wants to drop interest rates. What does he think will happen when the next recession hits? It's totally irresponsible.

Once they go down the route of negative interest rates, which at this point seems inevitable, it's all over as far as the current financial system goes.

I have gone on about this before, probably ad nauseum.
The CPI inflation/OCR model seems totally flawed when interest rates are lowered in response to low inflation. All economic text books tell us that a freely operating and competitive market will drive down prices . We see this in many consumer items (mostly imported stuff. What does that say about our economy). This is the public benefiting (as they should) from competition and ever increasing innovation. The reserve bank is legally required to operate under a model that requires positive inflation above a certain set point. This means that across a whole economy the population cannot enjoy the lower living costs that should naturally flow from a freely operating economy. What happens is the RB pumps money into the economy as we have just witnessed, and a large proportion of this extra money ends up being invested in fixed assets and creating slackness in the economy that allows uncompetitive companies to raise their prices at will. Net effect is that the RB achieves its goal because the fixed asset based prices like housing rise and uncompetitive monopolistic type companies raise their prices.
This means that the model ensures that the benefits of increasing productivity can only end up in a limited number of pockets and the general public are increasingly and steadily impoverished. You cannot beat it, it is the system and this government is not going to do a thing to change it despite all their bleating and rhetoric.
I shall repeat the link that I have given above as it very clearly shows these forces in action.
https://archive.nytimes.com/www.nytimes.com/imagepages/2011/09/04/opinio...

There are many good comments in this thread but I think you just nailed a big/biggest part of the problem. Our monetary system is inherently flawed and this is why we get the same results whether it’s labour or national in charge.

Thanks for kind comments. Unfortunately I am a voice in the wilderness.
I think that the problem that I have outlined is also very tied up the banks seeming ability to print money. They lend money, some of that is deposited back in the banking system and it goes round and round with a sort of multiplier effect. I suspect that positive inflation is required to fuel that, so if we have negative inflation then the banks are in trouble. Accordingly to address the issue we also have to fundamentally look at how we manage banks and money supply. Lots of very strong vested interests to overcome there I am afraid. So my fear is that we will struggle on with this very flawed system until there is a financial crisis from which there is no way out of other than a complete reset. Wipe all debts, deposits, heavily redistribute the wealth and rebuild our financial system in a totally different way.

While I completely agree with your criticism of the central banks I do not see how their ( ultimately harmful ) actions to prevent recessions account for concentration of monopoly power we are seeing ; this is a problem that predates central banks ( and was in its most acute before central banks were even created ).

Colin,

Your analysis is way too simplistic. There are many strands to the state of the global economy and these are well explained in Robert Reich's Saving Capitalism,for the many,not the few. In the UK, the BOE was not given its independence on the monetary policy until 1997.

A lament for capitalism. I think you're right David, we may have reached peak capitalism, which is the part you have before it all goes boom. Too many oligarchs with too little real regulation. Again the Aussie bank story shows how the regulators let the big 4 banks off with almost everything, until we get to the stage where all the bad stuff adds up to so much, it's everywhere. Continually functioning capitalism is not an unregulated beast.

David has had many chances to reconsider. Funny how we stick to our beliefs, then reference stuff (like Lomborg's nonsense) to back us up.

Capitalism may well work as a trading mechanism, inter-player.

But it flies completely blind in terms of one overshot species, drawing-down the finite resources of the planet (finites, renewables and sinks) at an exponentially-increasing rate, best-first. It totally ignores the inconvenient - duck-shoving that lot under the wishful heading 'externalities'.

The whole thing resembles a religion at this stage, economists being the priests and theologians, the elite being bishopry and above. We need to adapt to physical, ecological sustainability, then fit our trading system to fit. All else is arrogance.

Re: Neoliberalism. It’s the root cause of the problem, and it’s easy to define. Privatisation, Austerity, Deregulation and “Free trade”! Trouble is that the current political compass, which has a left-right vs liberal-authoritarian x and y axis, doesn’t describe neoliberalism.

Really wonderful writing David. On a day the Herald puts up a paywall, this kind of thoughtful and well argued journalism shows where New Zealand's real talent is. I will right now be giving Interest.co.nz my Herald subscription money and I urge everyone else reading this to do the same.

No, I'd argue that, given what he's had put in front of him over the years, this isn't well-argued journalism. Id argue that this is, though:

https://www.resilience.org/stories/2019-04-25/dare-to-declare-capitalism...

Come on, that’s basically saying anything that isn’t perfectly inline with your view is wrong. You have many good and valid points but don’t seem to acknowledge that we will need a functioning monetary and economic system moving forward and that starts with trying to correct what’s wrong now, some of which David was highlighting.

One thing that you should also note, is lack of real competition is also hurting the planet. Consumers who are more and more eco-conscious are supposed to decide who to support by buying products/services from the competitor with the most green credentials. If there is a oligopoly (or duopoly/monopoly), then there is little choice who to buy from and therefore little incentive for the organisations involved to green their game.

And the same could be said for enhancements and building of new technology.

Has anyone else noticed that we have stopped inventing new things? All "new" technology from the past 20-30 years or so (since deregulation really kicked in), is simply a refinement of what was already created. The time when capitalism was reaaaally working (1950's to 1980's) saw massive leaps in new technologies, which birthed the information age. Since then? Only refinement and combining of existing technologies. The reason why is pretty clear - companies that are natural monopolies have little interest in spending money on R&D. Why start big risky projects which could return nothing when you are already making bucket loads of dosh? And can make more just by improving the process a bit more, or making the thing a bit smaller etc. Why try something hard with little chance of reward?

Some good points. However, I am not that convinced that a large proportion of our population are really that eco-conscious, beyond superficial stuff. I think it's still a minority. And in a very small country, like NZ, there are insufficient economies of scale for these niche areas to really prosper.
NZ was quite a progressive country until the 1990s. I would argue that we've really lost our progressivism, I'm not totally sure why, although I might hazard a guess that the reforms of the 1980s went too far and created much more of a 'law of the jungle' mentality.

@ blobbles. There are otherways monoplies crush innovation and efficiency as well.
We have a supermarket duopoly. We also have a nation rich in quality food, and innovative individuals who can produce wonderful food products.
The small businesses cannot break out of local markets because they cannot get their products onto supermarket shelves. Even if their products are superior the two big chains keep them out.
If we had 12 supermarket chains, small innovators would have a chance.

The majority of the readers here are probably in the top ten percent globally. That only requires a net worth of around 150k. Yes, you are that overweight middle-aged white dude in the cartoon. Think about that when coming up with ideas about how to distribute your wealth to the other 90%.

What is the purpose of competing then, for crying out loud? Isn't it to win? And therein lies the problem, because now, what we see is that capitalism has pretty much done what its purpose is to do, that is, end up with a few winners and a whole bunch of losers, we think more competition is the answer. Sheesh.

If you want choices, you should value competition. (Real choices, for things you might actually need. Choices of things that are actually better than what you had. Sure, most things offered, you won't see any extra value in, but others probably will. And if you don't want choice or improvement, why should anyone deny that to others?)

I do value being able to choose, however, I do not think competition provides that in the end. Try filling your shopping cart with only NZ produced food, you will soon starve. It is competition that has taken us to that, because competition's aim is to find winner and ELIMINATE choice. I do actually buy from small NZ producers for a number of things, mostly done on line, it is very much in a bid to reduce plastic in my life, for instance, shampoo and conditioner bars rather than store bought, plastic, non recyclable containers. The people I buy from could easily be "competed" out of business by someone far bigger.
By the way, if you put things in place so that protects variety and smaller enterprise, that will quite naturally shut down competition. That, as far as I am concerned, would not be a minus.

Not sure how you would organise society so that PocketAce's choices are all virtues that others should be encouraged to 'want', and the choices of most other people are vices that shouild be regulated away. Yes, it will be tough if everyone else chooses something different to what you want. Perhaps a 'plus' for you and a 'minus' for most others isn't likely to catch on.

You said it yourself "capitalism is morphing into oligopoly" but what you haven't understood is that is precisely what competition is supposed to do. Smh that you do not grasp this. Competition is a game of winners and losers, the winners get bigger and stronger, the losers basically feed the winners, so it is not MORE competition that is needed, it is preventing it from growing into what you describe, and in doing that you have to put competition to the sword at some point, at the very least.
I think we are arguing the same thing but we see different aspects of it. I am just stating what seems glaringly obvious to me.

That is a complete misunderstanding of the theory. It’s supposed to be competition to maximise the benefits for the consumer. What you see with entities that are accruing market power is them wielding that power to increase their benefits and to build moats as Warren buffet calls them. The purpose of regulation is to put bridges on those moats.

Economic theory holds that markets should have low barriers to entry or exit but that just doesn’t exist in nearly every case.

Theory and practice are often at odds with each other. Competition IS something that naturally finds winners and losers. You compete to win.

I’m late to commenting on this article but the point about the lack of competition and the absence of effective regulation cuts to the heart of something that has been bothering me for a long time.

As David points out so many of the critical markets that we rely on aren’t competitive. And yet the political and regulatory frameworks assume they are. It’s not that business needs to be penalised, that is too crude, rather a more effective regulatory framework would get better outcomes for consumers.

Clearly building related industries are problematic and not just big firms. The way smaller firms operate and the whole Phoenix building company model is problematic.

Power companies - generation and lines companies are a big problem as well.

The first steps are first of all dealing with the dogma that the market knows best. This is a misreading of economics which recognises that most markets are imperfect and therefore need regulation. The other key step is for people to understand than commonsense regulation is in everyone’s interests. There is too much status quo bias.

Capitalism - the best system ever conceived for the exponential consumption of finite resources.

Yep - and it's one minute to 12 in the bacteria jar