In an article entitled “The problem with profits” The Economist of March 23rd effectively agrees with those who say that the American political and economic system, once so vibrant and competitive, is broken (amazing, but refreshing, coming from the rather conventional Economist).

The Economist article says that in former times a profitable company would eventually have its profits competed away. Now there are monopolies everywhere.(Mention “monopoly” to a lawyer or economist and you get involved in a debate about the meaning of “monopoly”. But the man in the street recognises one when he sees it!). Ten trillion dollars worth of mergers since 2008 have increased concentration. The promises of savings seldom, if ever, benefit the public. The excess cash being generated domestically by corporations is running at $800 billion a year, over and above investment budgets. This represents 4% of GDP, and it is often not being hidden away in tax shelters (encouraged by the tax regime) or paid to the bosses.  Monopoly means artificially high prices, which, were they at normal levels, would reduce consumers’ bills by 2% or more.  

And then you have regulation. The Economist hates regulation, but regulation of companies and banks is essential to prevent the fraud, cheating and theft of consumers. Companies provoke new regulation by acting against the public interest, provoking new rules. Unfortunately, regulations cost companies and can be complex. This means that only the big boys have the resources to handle them, which in turn blocks the entry of smaller competitors.  Neat, isn’t it?  They complain, but actually the rules help the monopolists.

The system really is a self-perpetuating fraud.  We need more small companies and more competition. Unfortunately, this is not likely to happen given political corruption. The establishment dismisses Bernie, but he is right. And Epicurus would have deplored monopolies.