One of the great myths of modern capitalism is that markets work. Moreover, the supposedly work on the way that economists like to think they do. The Conservative Party is built on that myth. So too is the American Dream.
The myth suggests that anyone can build a business from scratch, entering a market of their choice and end up, with hard work and determination, making a fortune.
This is not true. Modern capitalism has evolved to make sure that markets do not work.
Tax havens exist to hide the truth from markets, when effective markets need the data that is hidden to operate.
And far from being open and competitive, markets have become concentrated and monopolistic. The number of businesses engaging with most of us most of the time is falling rapidly as a result.
Martin Wolf illustrated this in an article yesterday. I may not always agree with him, but he does supply some useful graphs. This shows the declining number of companies on the US stock market, indicating increasing market density:
And this is the number of new companies floated per annum, suggesting very strongly that the American Dream is just a myth:
The conclusion is obvious and is that a more concentrated market is keeping out new entrants to preserve monopoly power at cost to consumers and society at large.
This is why a new economic epoch is inevitable.
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So because the number of companies floated per annum is declining you assume the “market is more concentrated and keeping out new entrants to preserve monopoly power”..how misleading a single chart can be!
What your conclusion fails to grasp is the size and growth of unlisted private companies such is the source of capital in this area..McKinsey in their Private Markets review in 2018 showed the private market grew 18% in 2018 and since 2000 it has grown by 7.5 times https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/mckinseys-private-markets-annual-review
The term “disrupter” is thrown around all the time and that is another definition for small businesses attacking the market share of established businesses. After all it matters not to the end consumer if a company is listed or not. Increasingly it matters less to investors as they can easily access private markets through managed funds.
Respectfully, 18% of what?
And respectfully, please do not treat us as stupid
Might you also disclose who pays you?
Who pays me? What relevance is that?
My point (and it is very very obvious) is you cannot look at public markets only as a source of financing. In fact start up and quickly growing businesses will almost certainly be unlisted. The McKinsey report is highly factual and gives a lot of insight into venture capital and development financing. So respectfully the chart you cite tells only part of a story and your conclusion is incorrect. After all there are a list of market leading company’s now which didn’t exist 10 – 20yrs ago. This will be the same in the future. This destroys your argument.
I am accusing you of trolling
I am quite sure you are
And you do not in any way destroy my argument: I was not discussing smaller private enterprises. You have distorted the debate.
Now very politely, please troll elsewhere
“Respectfully 18% of what”.
What’s fascinating about your response Richard is that tacitly concedes that (1) you don’t know the size (in either capitalization, sales, or anything else) of privately held companies and (2) you havn’t considered them in your grand pronouncement.
Many of your fellow bloggers won’t care because they just enjoy a good singalong. For anyone interested in rational discussion this is embarrassing …
With respect, would you say the same to Martin Wolf?
I bet not
And the point was about quoted markets, so as I noted previously, your comment really makes no sense at all
This is an exercise in distraction – and you have actually offered no evidence at all in support of it
“And far from being open and competitive, markets have become concentrated and monopolistic. The number of businesses engaging with most of us most of the time is falling rapidly as a result”.
The number of businesses engaging with us isn’t falling is is actually rising!! We engage with BOTH private and listed businesses and the number of private businesses have grown exponentially over the last decade. Indeed more listed businesses are going private just look at the UKs biggest satellite company Inmarsat has just gone private and it is valued at $6bn such is the scale of private finance.
To look at just listed companies and draw the conclusions you did is just plain wrong..and i would tell this to you, Martin Wolf or whoever spouted such nonsense..
There are millions of small businesses in the UK and they are not monopolies
The issue was about the failure of financial market capitalism and the creation of monopoly
And what you are doing is supporting that market failure
It;s really quite bizarre, unless of course unlike me you do not believe in the merit of markets
ED NOTE
I have good reason to believe you are either an astroturfer or you are using multiple identities.
Either way, this comment has been deleted.
OK, quick question please: how does this square with the requirement to invest in a private pension if they put their faith (and money – literally!) in the market?
It doesn’t
The sole purpose of business in a capitalist form is, through initial competition, to drive out the surrounding businesses and to prevent new entrants until such point as a few or a single business remains. Monopoly in many ways is an inevitable consequence of the system.
Adam Smith thought so…
So fundamental and extensive is your analysis here that I deny any of the usual apologists for ‘dynamic, free-market’ capitalism to even try. It’s like the 2007/08 banking crisis (and many governments’ responses to it) put a giant collosus monstrosity of dysfunction in the economy and everyone (well, the billionaires-owned free press and the BBC) refuses to acknowledge/mention it.
Media compliance aside and also the media’s abject failure to mount any journalistic investigation into the various dysfunctions, the misinformation (which you rightly refer to as a ‘myth’, Richard) persists because of large-scale, industrial lobbying.
Whereas the systemic dysfunction (or ‘a’) that neoliberalism inflicts on capitalism will require extensive and long-term self-correction by all of capitalism’s various stakeholders (customers, investors, regulators, workers, etc.,)themselves, it is highly appropriate that Labour has identified its need to reform and regulate Lobbying. Labour intends to abolish Cameron’s 2014 Lobbying Act,
Labour is right to use its manifesto to start talking about the giant colossus elephant in the room. Dodgy donations, dirty money, systemic abuse of donation conditions and, of course, drawing attention to the role of tax havens in this, will, hopefully, send the right signals to the markets that they need to use their amazingly adaptive qualities to fix their own machine and allow ‘late capitalsim’ to be something other than corrupt and a rigged economy.
Details of Labour’s anti-Lobbying measures can be found here. https://labourlist.org/2019/12/labour-unveils-detailed-plan-to-clean-up-politics/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+LabourListLatestPosts+%28LabourList%29
Will Hutton said as much in an article in the Observer. I offer this only as a form of triangulation:
https://www.theguardian.com/commentisfree/2019/dec/01/america-is-not-the-land-of-the-free-but-one-of-monopolies-so-predatory-they-imperil-the-nation
If anything is stifling small businesses, it’s aggressive taxation and licensing, not the free market. Which is also why we can’t call the market we currently have, ‘free’, in any sense of the word
So you’d like a free for all in which people suffer without licensing?
And anyone else but business to pay tax when they reap many of the rewards?
Politely, please tale your deeply anti-0social attitudes elsewhere
I never mentioned anything about what I would like, just pointed out a couple of facts
If you’re starting a small business, excessive regulation and taxes will be the biggest hurdles
Some licensing is necessary, but excessive licensing works toward creating the very monopolistic situation you are complaining about
All taxes come from the consumers pocket at the end of the day
I like the way you engage with different opinion: ‘Who funds you?’ ‘You’re a troll’, or simply, ‘Get orf my blog’
I have set up small businesses
I have advised countless more
And I can tell you, that’s utter nonsense
Tax for small business is not hard or costly
And nor does it all come from the consumer
And licensing? It’s there to protect the public, for good reason. But you don’t like that
And I love engaging with different opinion. I have a real problem engaging with fools, I admit
Bucko
Something else that hurts small business is the ingrained late payment of invoices – by large businesses. It causes all sorts of cash flow problems.
<> Reiterating the old adage “The system isn’t broken; it was made this way”.
I’ve also set up a small business, as have many people. I’ve worked with many small businesses. I’m glad I didn’t have the benefit of your advice
“I have a real problem engaging with fools, I admit”
Yes. I have the same problem…
800 clients did not complain
Will Hutton and Martin Wolf are both good examples of commentators who are pro business and capitalism, but highly critical of the form of capitalism we have today. Id suggest that their views are shared by many in the business world who are deeply resentful of the monopolistic, value extracting, free-riding, anti-competitive behaviour of some, encouraged by the City and financialisation. For them, good regulation is about creating a level playing field and raising standards.
I just wish the current Labour leadership would recognise this and make at least some attempt to get them onside. Apart from being good economic policy, they might find they had some surprising allies.
@Robin Stafford,
I couldn’t agree more. It isn’t for politicians with aspirations to govern to name and shame specific individuals whose behaviour may be condemned. This is just offering up more political red meat to the already converted to provoke even more intense adulation. And it is profoundly counter-productive. It is the job of these politicians to propose reforms to empower and resource effective competition policy and economic regulation to prevent and constrain the damaging behaviour of the monopolies and oligopolies and to remedy the damage they are doing to thousands of smaller businesses, their employees, their customers and to society in general.
But it can’t be personal, or seen to be personal. There has to be a thorough-going due process entirely separate from the political and policy process with a compelling evidence base. But the current Labour high command is pathologically incapable of seeing this. They are infected by a naive belief and conviction that all those in any position of power, direction or authority in the capitalist system are the epitome of evil, while all those who would administer and perform the activities of state-owned or state-directed agencies and firms are paragons of virtue.
What they can’t see is that millions of voters have a justified and abiding horror of armies of bureaucrats, activists and jobsworths intruding in to and directing their daily activities. And that, I fear, will contribute to a Tory majority.
Who are these people you vilify?
Why do you think it appropriate to vilify civil servants in this way?
This is a yellow card warning – such far right tropes are unacceptable here
Having worked across private, public, and third (NGO & charity) sectors I don’t subscribe to the simplistic view that the public sector is necessarily full of bureaucrats and jobsworths. Every sector has them, good and bad. My experience of working with organisations as a supplier and then as a consultant (focused on strategy and operations) was that for example the big insurance companies were dreadful (and complacent) compared to say HMRC. Similarly, building societies as mutuals were and are way more cost efficient than the big private sector banks. Anyone who has experienced say BT’s call centres will have similar stories.
It is also the case that most public sector organisations tend to be tackling problems that are far more complex and at a much bigger scale than the private sector – and yes, Ive dealt with some of the largest banks and private sector businesses. Their success criteria are far more complex than just making a profit, with the added dimension of having politicians at every level introducing their own agendas – right or wrong. And having the challenge that the ‘customers’ who make most use of your services are very often not those who contribute the most towards them.
Which explains why senior business people who move into the public sector find it rather more difficult than they expected and often fail. And goes some way towards explaining why outsourcing public services to private sector companies so often fails – and yes Ive first hand experience of a few of those.
Well said Robin
And agreed
Long ago I came to the conclusion that there is a contradiction at the heart of the western capitalist market system – that while competition is good, winning is bad. Or as I put it about one businessman ‘He’s in a caucus race – but he hasn’t realised the first rule of caucus racing: “Thou shalt not win”‘