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Competition, Concentration And Consolidation

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Pick this up via the twitters...

Thank you, thank you. As Barry mentioned, before I was a Senator, I was a law professor. What he didn’t say is that I taught contracts, secured transactions, and bankruptcy – all courses related to the functioning of competitive markets. I love markets! Strong, healthy markets are the key to a strong, healthy America.

That’s the reason I am here today. Because anyone who loves markets knows that for markets to work, there has to be competition. But today, in America, competition is dying. Consolidation and concentration are on the rise in sector after sector. Concentration threatens our markets, threatens our economy, and threatens our democracy.
Evidence of the problem is everywhere. Just look at banking. For years, banks have been in a feeding frenzy, swallowing up smaller competitors to become more powerful and, eventually, too big to fail. The combination of their size, their risky practices, and the hands-off policies of their regulators created a perfect storm, resulting in the worst financial crisis in 80 years. We know that excessive size and interconnectedness promotes risky behavior that can take down our economy – and yet, today, eight years after that financial crisis, three out of the four biggest banks in America are even bigger than they were before the crisis and two months ago five were designated by both the Fed and the FDIC as “too big to fail.”

Rest of the speech here, also as a video via U-stream, though it played so badly for me that it was really just audio with a picture that updated occasionally. (The U-stream itself is here.)

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This is a big one – and it should terrify every conservative who hates government intervention. Competitive markets generate so many benefits on their own that the government’s only role in those markets should be simple and structural – prevent cheating, protect taxpayers, and maintain competition. Concentrated markets dominated by a handful of powerful players, on the other hand, don’t produce the consumer benefits that flow from robust competition. Instead, the benefits are sucked up by a handful of executives and large investors, and their lobbying remains focused on protecting the giant corporations. Government intervention in concentrated markets inevitably becomes more and more complex and technocratic, as it attempts to impose complicated regulations in an effort to recreate the benefits of competitive markets.

It’s costly, it’s inefficient, and it plays right into the hands of the big guys, who can afford to throw armies of lawyers at the regulatory process. Small players end up having to shoulder regulatory compliance costs that make it even harder for them to compete, while big players use their resources and political clout to win loopholes, carveouts, and rollbacks that favor themselves and make it even harder for new competitors to survive. Over time, the result is a trifecta: more intrusive government, more concentration, and less competition.

Warren would have been such a good choice of running mate, it's a real pity Clinton wasn't (IMO) brave enough to go for an all female ticket.

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From Saving For a Space Ship's Global Industrial Economy Has Been Taken Over By A Handful Of Corporate Giants thread:

The rise of the superstars

The McKinsey Global Institute, the consultancy’s research arm, calculates that 10% of the world’s public companies generate 80% of all profits. Firms with more than $1 billion in annual revenue account for nearly 60% of total global revenues and 65% of market capitalisation.

[. . .]

“Competition is for losers,” says Peter Thiel, a co-founder of PayPal, a payments system, and the first outside investor in Facebook. On Wall Street the five largest banks have increased their share of America’s banking assets from 25% in 2000 to 45% today.

The picture in other rich countries is more varied. Whereas in Britain and South Korea the scale of consolidation has been similar to that in America, in continental Europe it has been much less pronounced.

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