Capitalism is becoming less competitive
economist.com
economist.com
I can't turn my hobby/side gig into a small business without navigating a bunch of bureaucracy to obtain 9001 permits, some of which are inevitable "may issue". Assuming I made it through that I'd be subject to all sorts of government oversight to the point where I either have to sink all the resources I would spend growing my business on compliance or just not think about it and hope that by the time anyone notices my business is big enough to afford the cost of compliance. For programmers, lawyers and other occupations that don't deal with physical things the issue isn't as big but for blue collar businesses this is a big deal. You literally cannot hope to comply with everything when you're in the boostrap phase and that dissuades a lot of people from striking out on their own.
The fundamental problem here is that laws and regulations written to deter some mega-corp from systemically being sleazy to make a buck apply equally to small businesses. turns out it's only the mega-corps that have the economics of scale to make compliance possible while still making a profit.
Maybe to stimulate small businesses, the government could advise business owners how to navigate these regs, something like a social worker for a business?
Now, if there are high capital requirements for starting a restaurant, it sounds like there is a market opportunity for someone to make a low-capital way to try out restaurant concepts. That's sort of what has happened with food trucks. In Austin, many storefront restaurants existed as food trucks first. Presumably, they got to see that they were a hit without having to spend a ton up front.
Not really. The main difference is that everything you use is better designed to be easy to clean and hard to break by someone putting in less than minimum effort. For a small business that isn't being lazy to the point of negligence there's really no difference. The same standard of cleanliness is indeed possible in a noncommercial kitchen but beyond a certain scale it's not cost effective. Also, it's not a binary thing. You have tons of hole in the wall restaurants that use a mix of commercial and noncommercial facilities and equipment. Somewhere that serves ice cream will probably have commercial style freezers and mid-high end consumer grade stuff for everything else. You don't need stainless counters to prepare ice cream and you don't need a three bay sink or a commercial dishwasher to clean ice cream scoops. Bars in places where they're forced to serve food by law often only have consumer grade equipment for the preparation of said food.
I don't think that's the _fundamental_ problem, because there are problems leading to that. Capitalism strongly incentivizes against respecting externalities, and regulations are the only effective tool we've found to stop us from (more aggressively) killing ourselves for profit.
That regulations have a cost and this strangles smaller businesses is a serious problem, but the regulations are usually solving an even more serious problem. A more fundamental issue is simply that capitalism left unchecked incentivizes behaviours which are crippling, while checking capitalism to prevent this causes powerful inefficiencies to form.
I don't know if there's a good answer here. Having regulations not apply to small businesses doesn't work, because small businesses are not intrinsically more likely to act against their own financial interests in order to respect externalities than large businesses are.
Perhaps the model of "run a business" is wrong altogether? Or maybe a simple check... Margin cap. Capping margins is liable to not harm efficiency at all but might instead freeze out some sectors from the market... Hard choices.
Big Corporations helped introduce/fuel more Rules & Regulations to impede smaller rivals who could less afford them.
The Government comes out with some new Rules and Regulations that become Law and will cost you a substantial amount of money year after year creating a more difficult business environment and directly affecting your profitability. In most cases Big Corp will actually support and help implement these new Rules and Regulations knowing full well they can shoulder the additional expense and you can't. Eventually driving you out of the market. This happens with a lot of small businesses. The cost of entry is prohibitive.
Have you experienced this first hand? In my experience, this gets overstated by those who think any regulation is burdensome. Even the crazy regulatory environments I've been in (like the CO marijuana industry requires separate, complete audit trails of each individual plant "from seed to sale"), the regulations really aren't that bad to comply with. The same people who were complaining about the regs were also complaining about how they had to have benefits for full time employees and the like. There's a very vocal "society shouldn't stop me from making a buck" crowd.
And on top of that, I'm afraid that these people will remove a lot of the good regulation we've built up over the past century as new ways to screw over the public have been discovered.
When I look out in the economy I see massive industries that are being protected by their governments for various reasons: some of it political, some of it effective lobbying.
In many sectors private companies are building off of a platform that their government has provided for them. For instance, the NIH is a major contributor to pharmaceutical research, yet once a new drug comes to market, the profits all go to the private company and the tax payer is essentially charged twice for access to the drug (cost of research and cost to buy the drug).
I had one idea of what a free market was growing up, but as I've learned more about the global economy it seems like the idea of a free market was just a clever ruse.
I look at stuff like this among a group of suppliers:
1. What suppliers offer in terms of product, capabilities, etc should be going up.
2. If comparing two versions of something in No 1 overtime, then...
2.1. Quality/reliability/security should go up over time.
2.2. Price should go down.
4. Convenience of any aspect of the business should go up over time. Low-hassle in general.
You'll find in monopolies or cartelized oligopolies that these are all bad or move super slowly in a way that keeps everyone high margin. In highly competitive industries, things move fast with many players having low margin.
In general the lower, the more competitive. Historical average in US is 8.5%, 9-10% more recently. This is pretty competitive! Although a bit less recently because profit margins went up ~1.5%.
This is also, generally, why different industries have different profit margins. Here, its even more obvious.
Google/Amazon/Facebook/Netflix/Microsoft can drop a few million bucks on a team of developers trying to squeeze some lemon for an additional drop of juice. I've been on teams before where a 1% increase in success of our software would pay for the team twice over. There were dozens of teams beside us all doing the same thing.
A small business competing in the same market cannot do that, and so they find themselves fighting a far more efficient giant.
That is, we know the US government interferes in markets in secret. There have been lots of revelations in the past few years about how the CIA boosted jazz and modern art during the 50s to appear new and modern relative to communist countries of the day. The NSA advised the creators of DES about how to make it better. There have almost certainly been other secret and larger interventions.
Has the CIA/NSA/whatever intervened to an extent that the resulting markets are inefficient?
We'll probably never know, but my guess would be that at least secret interventions have favored certain companies to the detriment of others in the same market.
The current fashionable thing seems to be claiming that we need to become more socialistic. Which IMO is just an attempt to fix over regulation with more regulation... so down the rabbit hole we go.
The only way for the prisoners to escape their fate is to have some external authority fix the incentives and that's basically the law.
Three ways to use the law: Regulation Sueing people for damages Complex contracts
There are situations where some of these work better than others and we just need to pick.
It's really hard to imagine sueing for damages working precisely for something like preventing air pollution, the chain of causation is too long. You have no choice other than regulation.
There's this libertatian politics common on HN but I've never seen a convincing argument of how you solve air pollution using 2. or 3. Imo you will always need regulation.
How Government Creates Inequality - David Cay Johnston
Also, how could two entities be counter-weights to each other if both aim for the same thing - wealth.
The only solution I see is to strip all the societal roles, who claim to be driven by good faith, of all property and relationships. But this is even more ridiculous than what we have right now.
With it being a fundamental statement in their philosophy, I don't quite know what to say.
It is class struggle and for someone to have something they must take it from someone else. It is disgusting how pure evil like this is masqueraded as philosophy/ideology.
Uhhh, it is. It's just that those who create new value are the wrokers making that happen, not the holders of capital.
That is mostly tongue in cheek of course, but it does really bring up a point in that if there were stringent controls on regulation it could help minimize the issue. And if nothing else there's some beautiful irony in regulation being in need of regulation.
It would just shift attention to the organs of government controlling said regulation. The insight of democracy is it seeks to balance, not suppress, human nature. Capitalism and democracy healthily co-exist because the former produces the private property rights that keep state power in check. Keeping that checking function itself balanced is the crisis–and opportunity–of our modern era.
We need to accept that capitalism seems to be prone to problems relating to regulatory capture and find a solution that resolves these issues. The idea of a perfect and pure "capitalism" is a myth.
Regulations, regulatory capture, corruption, market failures; that's all broadly orthogonal.