AskProfWolff: Mergers & Monopolies

A patron of Economic Update asks: "I wonder about mergers. What is the rationale for ever more consolidation of businesses, as one company absorbs another, resulting in gigantic complexes of industries? What benefits are there, if any? What negatives are there? I imagine that profit-taking continues through every level of the consolidated businesses, which has to cost the consumer."

Follow Wolff ONLINE:

[seniorsleepcare]

It is always joyful moments with Dr. Wolf lectures, brief videos, any many other informative media.

[niceguy]

Love listening to Dr Wolf, he is so clear, and smart in explaining the topics he feels are important and that really are important to everyone.

[martinirving]

Thank-you, Prof Wolff, excellent as always.

[extradimension]

@Democracy At Work , I choose to make better more expensive shirts (made in the USA) using second hand equipment I purchased from companies that were forced to sell equipment as they were overfinanced. I am a small company.

[jjetta]

Monopolies stop employees the ability to control their destiny.

[alexgoslar]

What drives competition is the insatiable appetite for more which all of us, the consumers upfront are addicted to.

[lesliestenta]

I have a great example when I lived in Hawaii, my phone costs $700 and my bill was $180 a month, insane. In Thailand I paid $ 300 for a Inew I phone, my bill is 7 dollars a month for unlimited data. In Hawaii we only have a handful of cell phone providers. In Chiang. Mai, there is a whole floor of cell phone companies

[Sureal]

Love your work Richard. I have a Q? What insights can Richard offer into how working class people who have their future retirement nest egg tied up in Superanuation funds at a time when the corperate share markets along with our capitalist dependent "civil Society" are on the verge of catastrophic breakdown ?
Seems to me as an ecconomics professor your insights on this matter could be invaluable to your followers.

[LucreDenouncer]

Uber acquiring Postmates is pretty concerning for the gig economy.

[tomlee]

This is driven by the fundamental contradiction between the socialization of capitalist production and the private ownership of the means of production. The anarchy of production will cause a crisis of overproduction, which promotes monopoly.

[michellez.]

Dr. Wolf what about the co., that can force /manipulate the competition to close because the bank may give the owners an offer or big money to drive off the competition?

[Jane_under_a_tree_with_a_book]

Some people will only buy the most expensive shirt. Think Amani, Gucci, Versace.

[frederikhyrup]

How do get to ask Wolff a question? I have a few.

[ASTRA]

Corporations are the biggest mistakes we made, outside of slavery, and denial of basic human rights.

[unaffiliated]

This makes it seem like it’s either win or go out of business. There are lots of second place and third place businesses still competing though. In our society it’s the small business that’s starting to win and compete that gets bought up by the big companies. Big companies just buy the competition out of the market.

[isaacciego]

Prof Wolff, would a unique global currency work to solve some of our current economic problems?

[patrickmccormack]

Mergers & Monopolies are combinations. Competitions evolve to combinations. Do combinations evolve? Careful, a simple answer is one-sided and sharp. In fact, the answer is multi-dimensional and sharp on all sides.

"It's an important and popular fact that things are not always what they seem." - Douglas Adams
The Iron Heel
by Jack LONDON (1876 - 1916)

[fany.]

To be more specific, under the perspective of a communist, how capitalists make money is basically “not legit and not democratic” and it is called an exploit.

So how does this exploit happen? Let’s consider two cases: powers in feudalism and means of production in capitalism. Both power and means of production have the same characteristics, which can be described as Private Ownership, Limited Seats, Loose Censorship (which can be corrected by law in the later stage). In feudalism, since the powers are less supervised, a person could get a noble title by either a legal or illegal way. So he collects taxes from people in his realm (farmers, handicraftsmen, blacksmiths etc) by any means. He can literally do nothing but lies on the bed and get his wealth. Since the ownership is private, his elder son would just inherit his noble title and do the same thing without making any efforts. Remember, there are limited seats, only a few people could become powerful and most of the civilians have no chance. It leads to the consequence which a noble house exploits its people for generations until it gets overthrown by either riots or other nobles.

Then we jump into the industrialized world, where people have greatly improved productivity and realized the legal rights of human. This is good, people build up a democratic system which they have political rights to vote and personal possessions are protected by law. Therefore, political power in capitalism is supervised by most people and the way the nobles exploit no longer exist. However, if we look at the term “means of production” (the facilities and resources for producing goods) in the economic area, there is still a similar problem. If a capitalist gains farmland or a factory (either legal or black-box), he hires people and the payment to the workers is up to him. Always, the capitalist earns the most profits and employees have very little in return, even if we take market competition into account. His son will, of course, take over the facility after the capitalist’s death. Workers are always the people who get exploited and they seldom become a capitalist unless massive luck (or some abnormal ways)involves. All the means of production are carved and allocated to the rich already. If there is a scientific revolution (resulting in a market expansion), it’s for sure that capitalists buy the newest techs because mid-class or poor people can never afford them. As a result, the rich families get richer and the majority remains struggling. As long as they are not stupid enough to go bankrupt or be purchased by other companies, the vicious cycle will keep running. And even if they are so stupid to go bankrupt, for labors (employees), they just have another workplace to go, but nothing has really changed.

What I am saying is that obviously Law of Succession in political power in feudalism is a huge mistake and it causes injustice, corruption and so on. Capitalism fixed this and people all appreciate it. However, such an uneven way of succession does exist in the economic area, where a small group of people make the ownership of the most important social resources (aka means of production) private and hold them forever. Communists fight against this type of injustice and claim means of production should be shared by the public. Be aware, it doesn’t mean that ur private property will be shared or deprived by anybody else. Everything (well mostly) remains the same as capitalism (u work, u get paid and u work more, u get paid more), except the ways we produce goods (every worker involves in the decision-making and privatized means of production are prohibited). That’s real democracy.

If the means of production are controlled by the government, then we called it socialism. It is a transitive society before we reach the final stage. And that’s how China deals with production right now. However, based on past experiences, most societies achieved capitalism first. Then labors started to realize the injustice behind the system and communists movements began. In China, people had a very short time (from 1912 to 1949) of capitalism with industrialization after feudalism, in which most of them didn’t even have any democracy (people basically had no right to vote and the country was controlled by a bunch of warlords). After CCP rose up and established their own government, there came a tricky problem: if they made the society politically democratic first, just as most of the others did, there is no way they would sustain sovereignty of the proletariat and it would become a typical two-party election game. Since CCP had already taken over the power by force, they wouldn’t do that. So they decided to achieve communism in a reverse direction, which is a socialized economy leads to political democracy. This type of ideology is called “Socialism with Chinese Characteristics”, or called socialism at the early stage since the economy is under government control with still lots of individual capital investments. They believe if the government capital involves in the economy, people will get rich and live better. Then their sovereignty will be justified and supported, even if after people ask for political democracy and they get it. That’s why a lot of people criticize the political system of CCP, that’s normal and reasonable. But the economic system of China is a very good experiment for communism. Now the key question is how far China economy can go and will this reverse approach to communism work in the end? Prof Wolff actually talked about it before if anybody is interested.

[theskepticai]

completition = by product of monopoly.

[Redskirt]

And then you have collusion. Two companies with the same or similar product agree to charge a certain amount so both companies can make a bigger profit. If there isn't competition, is it still capitalism?