Economics

A concentração do mercado está a ameaçar a economia dos EUA

Mar 11, 2019 Joseph E. Stiglitz

NOVA IORQUE –As economias avançadas do mundo estão a sofrer de uma série de graves problemas. Nos Estados Unidos, em particular, a desigualdade está no seu nível mais elevado desde 1928 e o crescimento do PIB permanece lamentavelmente morno em comparação com as décadas após a Segunda Guerra Mundial.

Após prometer um crescimento anual de “4,5 e até de 6%”, o presidente dos EUA, Donald Trump, e os seus facilitadores republicanos no Congresso, geraram apenas défices sem precedentes. De acordo com as últimas projeções do Congressional Budget Office, o défice orçamental federal atingirá os 900 mil milhões de euros este ano e ultrapassará a marca de um bilião de dólares por ano, após 2021. E, no entanto, a enorme euforia induzida pelo último aumento do défice já está a diminuir, com o Fundo Monetário Internacional a prever um crescimento nos EUA de 2,5% em 2019 e 1,8% em 2020, abaixo dos 2,9% em 2018.

Muitos fatores estão a contribuir para o problema de baixo crescimento/elevada desigualdade da economia dos EUA. A “reforma” fiscal imposta por Trump e republicanos, fracamente concebida, exacerbou as deficiências existentes no código tributário, canalizando ainda mais rendimentos para os mais ricos. Simultaneamente, a globalização continua a ser mal administrada e os mercados financeiros continuam a ser orientados para a obtenção de lucros (procura de rendimentos, na linguagem dos economistas), em vez de fornecer serviços úteis.

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Joseph E. Stiglitz

Writing for PS since 2001
320 Commentaries

Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University, is a former chief economist of the World Bank (1997-2000), chair of the US President’s Council of Economic Advisers, and co-chair of the High-Level Commission on Carbon Prices. He is a member of the Independent Commission for the Reform of International Corporate Taxation and was lead author of the 1995 IPCC Climate Assessment.

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0 Comments on this paragraph, 30 Comments on this article

Johnson John Apr 8, 2019

Known monopolists should attain some sort of Federal qualification to merge / acquire startups in US on a case to case basis. There's less evidence of whether monopolists acquire potential competition, and then shut down / fully alter such companies whom they acquire.
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Freedom protocol Mar 26, 2019

Stiglitz You are never as great as Chicago school economists
They got the most nobel prizes and made world prosper
don't demagogue people about your socialist fantasy world
Your idea will make America lead to places like Italy, Japan and Greece
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Douglas Leyendecker Mar 22, 2019

“Unprecedented deficits”? Isn’t that Obama’s accomplishment?

Didn’t Obama almost double Federal debt in his term while also requiring the collapse of interest rates and the growth of over $3T in the Fed balance sheet to keep the wheels on the US economy?

Wasn’t the Federal Reserve our only game in town because the Obama administration had zero worthwhile economic policy response to the Global Financial Crisis that surfaced because we let the kids manage the candy store when Clinton struck down Glass Steagall?

And where did this “market concentration” originate if it wasn’t from the economic policy management by the Obama administration?

The wealth and income gaps have been significantly fueled by this “money” based economic world. Making finance the driver of our economy has allowed the investor class to make billions while impoverishing the average Joe saver.

What we have today is a Keynesian Trap that's turning into MMT.

Because of our dismal policy, economy can’t sustain itself without ever more “money” stimulus, whether that’s from fiscal deficit spending, interest rate declines and private sector debt growth, accommodating bank regulation or Quantitative Easing. Do not be surprised when in a few years the Fed is buying US Treasury bonds, corporate debt and corporate equities. Why? Because economists thought it okay to gut America’s middle class to subsidize global prosperity? (Technology has also had a hand in this.)

Lower corporate taxes that supported equity values also provides institutional investors, like pension funds, a rate of return that helps them meet their future actuarial projection payments. It’s not just CEO pay that’s being supported here. It’s also the pensions of workers.

Are CEO's making too much relative to the average worker? Absolutely? Okay, so where was the Obama economic policy that focused on that problem?

The challenges this country faces are great because poor policy leadership of the last 30 or so years has naturally produced market concentration, a widening wealth and income gap and the inability to “grow” economy without throwing ever more money at it.

We have a President trying to fix this mess but he’s doing so with an army of bureaucrats trying to destroy him and another army of bureaucrats trying to turn us to socialism.
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Enrique Woll Battistini Mar 17, 2019

It seems likely that no single country, or region, will be capable of breaking the mold and bringing true competition to corporate giants, in order to provide a fair return on labor, be it basic or sophisticated. And this need, I believe, would require a total redress of taxation and investment, aiming at achieving a proper distribution of production, between corporations and laborers, and an intelligent assignment of savings to investment, private and public, within countries, and across regions and continents. There will be no control of global warming, or climate change without this. This sounds massive and even unreachable, but it is highly doable.
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Barry Rosenfeld Mar 17, 2019

US anti-trust laws and enforcement had emphasized market share. Thanks to Friedman and the other "market efficiency" fantasy promoters, the emphasis was placed solely on the effect of "restraint of trade" on prices. However, it is not possible to trace the full reasons to determine why prices rise or fall, but it is quite easy to measure market share.

Moreover, the monopolization of industry has led to a reduction in innovation - and entrepreneurship. As Schumpeter rightly noted nearly 80 years ago, the only real defense of capitalism is the ability of the system to promote both.

The "Gilded Age" has returned. Consumers are exploited. Productivity is stagnant. The Robber Barons are running the show. Government is a tool of business.
- Freedom protocol Mar 26, 2019
  
  You should study about 'regulatory capture' of Public Choice
  There are bunch of evidence it is the problem of bureaucrats not the market
  and for Anti Trust it was just a hoax. Richard Posner proved that just worsen
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Curtis Carpenter Mar 17, 2019

I'n not sure of the formal definition of "market power," and I wonder if anyone could shed some light on how it relates to "economies of scale."
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brian corbett Mar 17, 2019

One of the greatest achievements of the modern state has the been the ability to tax its citizens. From pole tax to a modern progressive system of income tax. This combined with the 3 most important advances of the last century. That is 1) access to public education 2) the rise of trade unionism 3) Government intervention in the economy. All led to a large extent in the creation of the new middle class and prosperity for all at the beginning of the second half of the last century. As a consequence, a reasonable balance between all participants within society was achieved.

The rise of technology changes everything, and faster then the mechanism's within society can adjust to. This was the opening for the strongest and the fittest to succeed at the expense of others, to an extent not seen since the rise of the original robber barons at the end of the 19th century. There are only 2 ways out...A timely and effective approach to incent all participants in the economy or the less than desirable course of increased rate of unmanageable disruption. Either way the situation will correct itself as revolution has always been the great arbiter throughout human history.

Meanwhile the elites sit on the biggest cash pile in history. Wealth separated from the general economy is a disaster. Unavailable for taxation (the common good) Unavailable for spending (no competition) Unavailable for investment (no growth)

What will it be?
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Janos Nagy Mar 17, 2019

Well how do you expect growth domestically when profits are globalized?
Only way to achieve real growth if profit is reinvested but ofcourse it is substituted with governments deficit spendings to cover for this shortcoming of globalization.
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Marc Batko Mar 17, 2019

Corporations spent $1 trillion in stock buybacks in 2018. After the 2008 financial meltdown, Wall Street banks received $18 trillion as "too-big-to-fail." According to the myth, higher profits would lead to more jobs and greater investments. Instead, corporations speculate on foreign currencies and buy back their own st6ock.
The disclosure of $0 Amazon taxes could be a turning point. The state must fulfill the public interest, fight poverty, and help those under the wheel. In the 1960s, corporate taxes made up 40% of federal revenue. That fell to 8% in 2018. The hypocrites say the state is the problem while taking trillions from the state and stealing away from their responsibility.
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Data DrivenFP Mar 14, 2019

In 1901, antitrust suits moved fast enough to be useful. In 2019, the battle of lawyers lasts long enough to make the issue moot. The argument about the evils of concentration is 100% correct, a clear and present danger for the US economy and the Republic.
To serve the same end of preventing concentration and monopoly/monopsony, we should use the power of markets, that is, recast corporate taxes as a tax on 'bigness' rather than 'profits.' As we've seen, big corporations are able to manipulate their books to eliminate or offset their profits so they don't pay ANY taxes. They don't carry their fair share of maintaining markets and the rule of law.

A tax on GROSS income would fill that bill. Companies can't manipulate gross income, and a tax of 30% on our 'grossest' corporations would harness the magic of markets to break each into 100 smaller (but still HUGE!) companies, which would create and maintain vibrant market competition. Now that corporations are deliberately eliminating competition, it's the role of the government to restore competition, not through the heavy and clumsy hand of litigation, but by the subtle and invisible hand of the market.

The same regulations that determine 'closely related' businesses for benefits could be used to determine companies that are not really separate entities. Similarly, a 10% M&A tax on gross value of merging and acquiring companies would discourage nonproductive M&A activity.

Governments create markets. It's our responsibility to shape markets to benefit the nation, not shareholders and executives.
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Freedom protocol Mar 13, 2019

How come Chicago school economists got the most noble prizes? (40% of all, No.1)
You are very unprofessional and disrespectful that you keep defaming 'chicago school economists' who worked so hard unlike you. They are the prestigious scholars.
They don't demagogue people like you, krugman and piketty Instead, they work hard.
Robert Lucas is aged but still write decent working paper without saying anything.
(https://scholar.harvard.edu/shleifer/publications/age-milton-friedman)
Read this. At least, Andrei Shleifer have some respect for truth and other scholars.
If you really hate Oligopoly, then start studying 'public choice theory' 'government failure' 'special interest group' and 'regulatory capture'. Keynesianism and bureaucracy created lots of monopolies and Cartels (Many proven data sources)
- Barry Rosenfeld Mar 17, 2019
  
  "They don't demagogue people". And yet you do. Everything Chicago says is in perfect conformity with Econ. 101, but if one looks at the real world, it is clear that just about everything they advocate is wrong. The so-called Nobel MEMORIAL Prize in Economic Science is not awarded by the Nobel Prize Committee. It is the product of a bank endowment. It promotes economics as a "science", although it is no more scientific than astrology.
  
  Only one "prize' has been awarded to research in institutional economics, although all economic activity in the modern world depends on laws, taxes and subsidies. Chicago economics also ignores institutional power relationships between owners of the several resources employed in production and distribution. A truer picture of the economy, as seen by the Chicago school can be seen with the methodology of Medieval Scholasticism.
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- David Garland Mar 13, 2019
  
  Because the last depression proved them wrong. Too bad Milton did not live to see the fruition of the 'Origin of the Worlds dumbest idea': https://www.forbes.com/sites/stevedenning/2013/06/26/the-origin-of-the-worlds-dumbest-idea-milton-friedman/#39608ee5870e
  - Freedom protocol Mar 14, 2019
    
    There is no credible, absolute source that Friedman was wrong. No Scholars have found out that he was wrong. He was right for many, maybe not the all things but compared to krugman, stiglitz who told too much nonfactual fake to people. Just name calling him because they just don't like his political stance and they couldn't argue agianst him when he was alive. So much of losers' mind.
    - Barry Rosenfeld Mar 17, 2019
      
      "There is no credible, absolute source that Friedman was wrong." Correct. And there is no absolute source that he was "right". And that is why "political economy", rather than "economic science", is the correct frame of reference for studying and evaluating economic activity. It all depends on your political persuasion, so be honest and admit that your evaluation of various economists depends on your political ideology.
      
      There is no scientific content to economics despite the use of mathematical "models". Marshall had a mathematical appendix that he thought illustrated his Principles. But we know that the real world of economics deals with finite not infinite changes, therefore, simplifying assumptions have limited uses. One can study birth and death rates for demographic purposes, for example, without assuming that the reality of human life merely is what transpires between these two events.
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    - James Lowden Mar 17, 2019
      
      The "credible, absolute source that Friedman was wrong" is the abundant lived experience since his prediction failed to come true.
      
      If the money supply had a direct link to inflation, we'd have inflation. But we don't have inflation. Hence the increased money supply didn't cause the inflation we don't have. Hence Friedman was full of hot air.
      
      That's been going on a long time. I remember reading him in the WSJ in 1984 or so, predicting the coming great inflation.
      - Freedom protocol Mar 26, 2019
        
        No Inflation crier in 1980's was Paul Krugman(your lover) not Friedman
        Money supply means M2 not the M0 How silly answer of you
        QE is not the direct money supply into the market
        That is asset purchasing program to reduce the yield rates
        If you love keynesian economics, good then you may have to experience of 1970's stagflation when the inflation was around 20%
        Good luck
        
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Freedom protocol Mar 13, 2019

No, Stiglitz You are lying and provoking people like demagogue again.
You should check the fact from credible source not on your pathetic assumption.
(source: https://tcdata360.worldbank.org/indicators/hh.mkt?country=BRA&indicator=2370&countries=USA&viz=line_chart&years=1988,2015)
The best weapon ever created against Market concentration is "Free market System"
and "Free Trade & Deregulation". Market concentration has been drop since 1990s.
More competition, less government bureaucrats involvement, Low barriers work.
You might hate 'neoliberalism' but it prospered the world and especially US.
Surprising, Market concentration was peak when keynesian economics what you love
was implemented and there is a proven working paper that "New deal" created massive amounts of Cartels all over the industries. (if you want a source, I will give)
Just like 'Anti Trust' actually made things even worse by impeding competition.
If you want less concentration, then break down more barrier and induce competition.
- David Garland Mar 13, 2019
  
  That data only goes to 2015
  - Freedom protocol Mar 14, 2019
    
    Yeah pathetic excuse for denying the fact. You think that trend have suddenly go up since then? Where is your latest proven data dor that?
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Yoshimichi Moriyama Mar 13, 2019

We can't change Newton's law of gravitation. But we can change the law or rules of the market like we can change the rules of baseball games, because these are not the rules of nature but our own artificial rules.

In baseball three strikes and the batter is out, and four balls and he can walk to the first base. But these rules could be, five strikes and the batter was out and three balls and he could walk.
What we call the market is a bundle of regulatory or non-regulatory rules in which some activities are not regulated and some others regulated, and we could change them so that the 10 percent or the 90 percent would have more money or profit or that the gini co-efficient would be bigger or smaller.
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Michael Pettengill Mar 12, 2019

Low investment is common in the more conservative places, but very high in liberal places.

You can't find a bigger investor than Elon Musk, except Jeff Bezos who has been investing longer and not trying to sell much more than what people already buy, but at lower cost, but not always lower price.

Bezos is merely replicating what the mangers of Sears did for about half a century. Fans of capitalists know Sears invested in everything, even selling homes by mail order. Sears created an insyrance company. Tried to start a bank. Became a manufacturer to ensure it offered quality tools is could stand behind. Opened up stores where stuff could be ordered, delivered, and returned, and for many items examined as bought instantly.

Elon Musk can be seen as a programmer who is building factories to build computers that can fly to Mars or drive on the streets, really fast, on electric power. While vehicle makers in conservative places ard closing factories to focus on higher priced vehicles, Elon is building tents to expand factories faster to increase production to lower costs AND PRICES. And Elon welcomes competitors, having started both Tesla and SpaceX expecting to go bankrupt. He and Bezos compete on their vision of space travel.

And both place profits low on their priority list. Which is why they pay no taxes on profits. Neither pays workers less than revenue when counting all the labor costs of building capital exponentially. (Which depreciates exponentially producing operating costs charged against revenue.)

The question is, how are more Jeff Bezos and Elon Musks created?

Cutting taxes on profits when the "richest" capitalists have zero profits will not increase their number.

Higher taxes on profits to pay workers to fix public assets like roads needed by Amazon and Tesla, teach students who become employees of both, and to buy from both, like buying rocket services or computer cloud services benefit both. And for others who object to paying taxes on profits, they simply pay workers to build factories, delivery services, etc, and thus eliminate their profits with depreciation expenses.

Keynes would be proud.
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Jag Patel Mar 12, 2019

The expensive and endless lobbying habits of big business is insulating them from being usurped by agile and innovative start-ups which, in turn, is preventing wealth being spread about, as predicted by Adam Smith.

This is further complicated by the fact that, markets in which the Government is the only customer are highly susceptible to cronyism – the nexus between the governing elite and the business elite that contrives to put the interests of business first, at the expense of the national interest. Not least, because the twin evils of lobbying and corruption rear their ugly heads every time taxpayers’ money crosses the boundary between the Public Sector and the Private Sector.

Here in the UK, there is a fear among free marketeers that uncompetitive businesses will intensify their lobbying efforts in the run-up to Brexit day 29 March 2019, to shield themselves from being exposed to foreign competition. This is further exemplified by the fact that in some markets, regulators have allowed themselves to be captured by incumbent firms, which then rewards them with special treatment.

For example, in the market for military equipment, the role of the regulatory authority and sponsoring agency has been combined in one department of state, the Ministry of Defence – which means that the independent scrutiny function, free from political interference, is non-existent.

Whereas it is considered a necessary evil in well-functioning democracies for big business to lobby Government to skew the market in their favour (at the expense of small and medium-sized enterprises whose voice is drowned out), what is distorting the market even more is the ill-considered actions of Government itself, as it goes about its business of procuring assets for public use.

The UK Government is committed to pre-competitive market engagement with industry – in what are called Industry Awareness Days – to relay details of each individual defence equipment procurement programme – and has been for decades now.

However, far from serving as a forum for conveying the Ministry of Defence’s requirements to military equipment manufacturers and offering them an alluring prospect of networking with like-minded people with common interests, Industry Awareness Days (instigated and hosted by MoD) have become nothing but a gathering of the great-and-the-good (on overheads) from competing firms where talk, in huddled groups, immediately turns to how to carve-up the product market, snuff-out new market entrants, subvert the competition process, contrive to nullify its use altogether or fix prices!

A much more effective way of transmitting MoD’s requirements to all-comers in the defence manufacturing industry is through the vehicle of a carefully constructed and worded invitation to tender, whose formal release marks the start of the multiple-phase, winner-takes-all competition and concludes with down-selection of the single defence contractor for the final Manufacture, In-Service Support & Disposal phase.

If ITT recipients need to take on first-tier Supply Chain partners for dissected workshare parts of their Technical Solutions, then they should be chosen through open competition, on the basis of best value for money – not at a gathering where price-fixing is on the agenda!

The Government would do well to heed the words of Adam Smith, the Scottish philosopher and economist who wrote in The Wealth of Nations (1776) that “…… people of the same trade seldom meet together even for merriment and diversion, but the conversation ends in a conspiracy against the public or in some contrivance to raise prices”.

Adam Smith goes on to say “It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary”.

Not only does this ill-considered action illustrate the complete failure of Government policy when it comes to spending taxpayers’ money, it also reinforces the view that people in the pay of the State haven’t got a clue about what it is that drives the behaviour of for-profit organisations in the free market – not least, because they have not spent a single day of their lives in the Private Sector!

It’s not so much a lack of skills in Whitehall that is the problem, but a surplus of people with the wrong skills. Some people say that they can be retrained to equip them with the necessary skills which will enable them to deal with today’s challenging public service tasks. But the inescapable truth is that these people are simply beyond repair!
@JagPatel3
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Yoshimichi Moriyama Mar 12, 2019

President Ren of the Chinese mammoth company, Huawei, said to a Japanese journalist that he employs seven hundred mathematicians, eight hundred physicists, one hundred and fifty chemists and over six thousand scientists engaged in basic researches; he said over sixty thousand engineers of high ability are working.
The UN Security Council is said to publicize a report on sanctions on North Korea in a week or so; according to it North Korea got about five hundred and seventy million dollars by cyber-attack from foreign countries during the twenty months from January 2017 through September 2018. This is of course illegal.

Rent seeking is not illegal; it is legal simply because it is not outlawed. But to which does it better compare, Huawei or North Korean cyber-attacks?
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Per Kurowski Mar 11, 2019

Nope! Market concentration has also its benefits. The bigger they are, the easier it is to tax them, like with a market share progressive tax.
http://perkurowski.blogspot.com/2008/08/keeping-big-lean-tax-market-rate-based.html
- David Garland Mar 13, 2019
  
  ...If that actually happened.
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