Basically every problem in the US economy is because companies have too much power.
Competition is good. This might be the most basic tenet of economics. In a healthy economy, when one company is selling a product for well above what it costs to produce, other companies jump in that market to compete with them, reducing the resulting markup on goods. This is good for consumers and workers alike. Products are cheaper and more widely available, and more workers are needed to produce them.
But what happens if, for whatever reason, competition in an economy dwindles, and companies are able to ratchet up prices much higher than what it costs to produce them? It would have disastrous effects. Workers wages and employment rates would decline. People would switch jobs less often. Economic growth would slow.
According to economists Jan De Loecker of Princteon University and Jan Eeckhout of the University College London, this basically describes the US economy since 1980. In a recently released paper, De Loecker and Eeckhout analyzed the balance sheets of listed companies from 1950 to 2014. (In 2014, these firms accounted for around 40% of all sales.) They found that average markups, defined as the amount above cost at which a product is sold, have shot up since 1980. The average markup was 18% in 1980, but by 2014 it was nearly 70%.
Higher markups suggest an increase in what economists refer to as market power. In a perfectly competitive market, in which competitors offer the exact same product, companies have no market power. If one company charges higher prices than others, they will lose all of their business to cheaper competitors. In a perfectly competitive market, the only way to justify a higher markup is to make a product more efficiently.
https://qz.com/1062007/market-power-and-competition-explain-every-problem-in-the-economy-new-research-argues/
Angry Dragon
(36,693 posts)lapfog_1
(29,199 posts)are killing competition. Barriers to entry are mostly size related.
Think of huge markets in this country that are serviced primarily by a few huge companies.
Banking. Airlines. Computers. heavy equipment. phone service. Cable service. Movies. Credit. Oil.
The list is long.
The gilded age is back... and we need to break up the monopolies (again)
elleng
(130,865 posts)SharonAnn
(13,772 posts)Twas ever thus.
elleng
(130,865 posts)rurallib
(62,406 posts)and sometimes the two stroll together
democratisphere
(17,235 posts)BigmanPigman
(51,584 posts)modrepub
(3,494 posts)We've been had being told to purchase mutual funds. Nearly 80% of any given stock is institutionally owned through banks and mutual funds. That means most of us have no say in how a company is run except via some large state pension funds. While it might be more risky, imagine if workers owned a significant portion of their stock and actually voted on their CEO's compensation; they tell us that it's not safe to own lots of stock in the company you work for but many CEOs have millions of shares or stock options under their control. Right now banks and mutual funds get all the perks of proxy votes while the actual owners (you via your mutual fund) get all the risk and can't vote on company matters.