Journal Original Replica's Journal: Too big to fail, and Monopoly law. 1
Various corporations around the world have recently been in danger of collapse because of poor financial choices. However they were deemed "too big to fail" and were bailed out by taxpayers, because the failure of said companies was deemed a great danger to the global economy. Now let us turn to ideas behind anti-trust law and see what light this shines on companies whose influence is so great that their failure could endanger the global economy.Now anti-trust laws came to be in order to deal with companies that controlled such a high percentage of a commodity, that they could unfairly influence or destroy other businesses trading in that commodity, and that they could restrict supplies to the public in such a way that would allow for price gouging or denial of that resource to the public. Standard Oil had such a monopoly, both on oil and on jobs in the oil industry. They would use unfair influence and market leverage to destroy or absorb competing companies and they would use their control of the oil job market to unfairly manipulate their workforce. They controlled the flow of oil and they held hostage the jobs in the oil industry. Standard Oil controlled roughly 88% of the US refined oil market. But is such a high percentage of control necessary to present those same dangers when the commodity in question is money itself, and what percentage of the GDP does a company need to present a national or international danger if it were to suddenly go bankrupt?
I'm far from the first person to ponder such things. Some say that you cannot disallow banks to be too-big-to-fail " since substantially all the major banks are at this point TBTF. And you can't just break up a bank like you might break up a monopoly, along natural lines of business, since even if JP Morgan spun off its derivatives desk into an independent trading house, that independent trading house would still be TBTF."
While others argue "the anti-capitalist large corporations are not monopolies - they are oligopolistic that can still extract profits through their ability to distort the free market. Is the fact they are not a monopoly really that relevant? Enforcing rules that prevent businesses from using their size and power to extract outsized profits is the right thing to do. Anti-trust laws are the proper tool." Being forced to buy up the bad investments of those companies (because of their size) isn't all that different then the use of size to extract outsized profits, or simply extorting money from the taxpayers.
Regardless of whether the market would have corrected itself had those companies been allowed to collapse, the situation we are in now has made every giant corporation a potential liability to the taxpayer. Does that liability justify maximum limits on the economic size of a corporation? Does that mean that Communism has achieved the same kind of victory that Capitalism did in the 80's, proof of superiority through the economic collapse of the opposing ideology?
Kevin Phillips wrote in his book, Wealth and Democracy: "The current of extreme economic disparities are simply not sustainable without serious damage to the country's productivity patterns and performance." Perhaps this collapse is just a symptom of a terribly unbalanced system.
This economic implosion was predicted back in 2002.
I'm far from the first person to ponder such things. Some say that you cannot disallow banks to be too-big-to-fail " since substantially all the major banks are at this point TBTF. And you can't just break up a bank like you might break up a monopoly, along natural lines of business, since even if JP Morgan spun off its derivatives desk into an independent trading house, that independent trading house would still be TBTF."
While others argue "the anti-capitalist large corporations are not monopolies - they are oligopolistic that can still extract profits through their ability to distort the free market. Is the fact they are not a monopoly really that relevant? Enforcing rules that prevent businesses from using their size and power to extract outsized profits is the right thing to do. Anti-trust laws are the proper tool." Being forced to buy up the bad investments of those companies (because of their size) isn't all that different then the use of size to extract outsized profits, or simply extorting money from the taxpayers.
Regardless of whether the market would have corrected itself had those companies been allowed to collapse, the situation we are in now has made every giant corporation a potential liability to the taxpayer. Does that liability justify maximum limits on the economic size of a corporation? Does that mean that Communism has achieved the same kind of victory that Capitalism did in the 80's, proof of superiority through the economic collapse of the opposing ideology?
Kevin Phillips wrote in his book, Wealth and Democracy: "The current of extreme economic disparities are simply not sustainable without serious damage to the country's productivity patterns and performance." Perhaps this collapse is just a symptom of a terribly unbalanced system.
This economic implosion was predicted back in 2002.
slick point; but truth means nothing (Score:1)