By Con
George-Kotzabasis May 19, 2016
The
following is an unconsummated reply to professor Andrew Leigh’s lecture with
the title, “Markets Monopolies and Moguls…” held at Melbourne University, on May 19, 2016.
This was due to the chairman’s instruction that only a sprinkle of questions
would follow the end of the presentation and there would be no debate
I’m overly distrustful of people who use scarecrows,
in this case the “mogul” Richard Pratt, to make their argument. Moreover, it is
a term associated with sinister practices and easily tantalizes and incites the
feelings of the crowd to purge the evildoers. But more dismally it is wrong in
your case, as it is an exercise in a fallacy of composition: Just because there
are few rotten apples in the cart it does not mean that all apples are rotten.
The unprecedented prosperity of capitalism was not engendered by rottenness but
by the creative, innovative, and dynamic spirit of entrepreneurship.
The great economic historian, Fernand Braudel, depicts
the shifts of capitalist centres and their entrepreneurial moguls, from Venice,
Genoa, Antwerp, Amsterdam, London, to New York, spreading boundless prosperity
to these metropolises and their environs by means of the ceaseless division of
labour, international trade and the capitalist dynamic ethos of entrepreneurial
creation. It was the sun-king of entrepreneurial capitalism that had pulled
millions of people out of the sunless caves of poverty into the sunlit vistas
of capitalist plenitude, heightening their standard of living, for the first
time in history, on ever-higher plateaus.
(The scientific writer, Arthur Koestler, contends that
the great discoveries of science were motivated by ambition, competition, and
vanity, which happen also to be the inherent characteristics of capitalist
moguls.)
You have mentioned a lot of negatives about “bigness”
and market concentration but not the fact that they rather have a short life
since there is no blockage of entry in a competitive economy to other
entrepreneurs into these concentrated areas. One example, the entry of the
innovative entrepreneur ALDI into the food-chain services and its reduction of
the prices of its products in comparison to other chains, not only attracted
many consumers to its stores but also forced the other two major super markets
of COLES and WOOLWORTH to reduce their prices at the feel of the competitive
pinch of the newcomer. Competition does not discriminate between big and small
but it equally affects both.
But to deal with your argument that inequality should
be a major consideration in competition policy, and regulating mergers and
prices would be beneficial to the consumer. The competitive market in itself,
without the need of regulation, spreads
its cheaper products to an ever-greater number of consumers and therefore
decreases inequality. The competition of Telstra and Optus is an example.
The same applies to iPods. Ride a train, a bus, or a tram and you will see even
the lower classes fully equipped with these cheaper gadgets of a competitive
technology and once again the line of inequality is lowered down for the less
wealthy consumer.
It is not the business of government to regulate
mergers and pricing. This is the bailiwick of entrepreneurs who decide if such
a merger will be profitable, whether it will be able to compete with an already
established corporation producing the same product, and setting its price on
such a level that it will attract consumers to buy its product en masse. Furthermore, as far as the
regulation is close to the estimates and interests of the entrepreneurs it is
superfluous; and as far as it is distanced from these estimates and interests,
it is destructive. No businessman will invest his money in a venture where
profit is unattainable. Hence, your
regulation, that aborts the setting-up of a merger that would produce
cheaper products for the consumer, by depriving the latter from having these
goods, increases the inequality of the
mass consumer. Not surprisingly, as often happens, good intentions lead to
bad results.
Therefore, your proposal of government dirigisme as a
panacea in regards to competition and regulation is inutile, fanciful, and
fallacious, and more perniciously may turn out to be a destructive force.
I
rest on my oars: Your turn now
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