Zero Hedge — Online Retail War Turns Ugly: Wal-Mart Responds To Amazon With Free 1-Day Shipping

Funny.

Zero Hedge
Online Retail War Turns Ugly: Wal-Mart Responds To Amazon With Free 1-Day Shipping
Tyler Durden

Jonathan Tepper — Competition Is Dying, and Taking Capitalism With It

We need a revolution to cast off monopolies and restore entrepreneurial freedom. First of two excerpts from “The Myth of Capitalism.”

Bloomberg Opinion
Competition Is Dying, and Taking Capitalism With It

Jonathan Tepper

See also a short review of The Myth of Capitalism

A lot of times, when you read reviews about books on the economy, you end up wondering what the reviewer’s ‘priors’ are as people like to say in economics. You read the review and wonder where the biases of the reviewer are, because that can tell you a lot about the review.

So I’m going to lay it out there.

The ‘Corporatist’ is a kleptocrat masquerading as a believer in liberty. He uses terminology based in liberty to construct an ideology solely as a means of furthering the gains of a specific strata of society allied with the corporatist and at the expense of other strata, by coercion if necessary.

That’s me, seven years ago on this very website in a post I called Corporatism masquerading as Liberty. So, those are my priors coming into this; I’m someone who sees the ‘ideology’ of freedom and liberty being used as a cloak and shield for people who are almost entirely self-interested. And what I believe has happened is that ideology has been injected into our form of capitalism as a way of disarming naysayers and allowing the ‘Corporatist’ to benefit at everyone’s expense.

So when I read “The Myth of Capitalism" (henceforth The MOC) was subtitled “Monopolies and the Death of Competition", I was intrigued because the question for me was how self-interested people are able to reap all the gains of our system, while avoiding a lot of the downsides....

econintersect
"The Myth Of Capitalism"
Edward Harrison, Credit Writedowns

See also

"Freedom" at the tip of a missile. Making the world "safe" for capitalism American style, or else.

AntiWar
Pompeo Promises New Liberal World Order – New Wine In Old Bottles?

Ron Paul and Daniel McAdams

See also

Huawei chief financial officer Wanzhou Meng is facing extradition to the United States after being arrested in Canada on suspicion of violating U.S. sanctions on Iran, the Globe and Mail reports.

Making the world safe.

Axios

Top Huawei executive arrested on suspicion of violating Iran sanctions

Zachary Basu

also

Mere hours after Chinese officials finally affirmed President Trump's description of Saturday's trade 'truce' - this after fears that the true nature of the agreement might have been "lost in translation" helped trigger the worst one-day market selloff since October - the DOJ has gone ahead and kicked the hornet's nest, seriously jeopardizing the prospects for a prolonged trade detente between the world's two biggest economies....

Zero Hedge
Trade Truce Over? Canada Arrests Huawei CFO At US Request

Tyler Durden

Douglas A. Irwin — Stigler on Monopolies: “Competition is a Tough Weed, Not a Delicate Flower”

Many of Stigler’s views on monopoly and antitrust were consistent through the decades. Even after his concerns of monopoly began to recede, he continued to believe that monopolies and oligopolies were still prevalent in the American economy and that they “should be a source of serious concern for public policy.”...

ProMarket — The blog of the Stigler Center at the University of Chicago Booth School of Business
Stigler on Monopolies: “Competition is a Tough Weed, Not a Delicate Flower”
Douglas A. Irwin | John French Professor of Economics in the Social Sciences in the Department of Economics at Dartmouth College and Visiting Professor at The University of Chicago Booth School of Business

Jon Walker — The ACA is Failing Because It Didn’t Account For Hospital Monopolies in Rural Areas

The logic behind the design of the Affordable Care Act does not hold up well when faced with the reality of how markets actually work outside cities. ACA exchanges were built on the fundamental idea that competition between regulated private insurance companies would improve quality and hold down prices, but competition is lacking in most rural counties. That’s very unlikely to ever change....

The Intercept
The ACA is Failing Because It Didn’t Account For Hospital Monopolies in Rural Areas

Jon Walker

ProMarket — The Rise of Market Power and the Decline of Labor’s Share

The two standard explanations for why labor’s share of output has fallen by 10 percent over the past 30 years are globalization (American workers are losing out to their counterparts in places like China and India) and automation (American workers are losing out to robots). Last year, however, a highly-cited Stigler Center paper by Simcha Barkai offered another explanation: an increase in markups. The capital share of GDP, which includes what companies spend on equipment like robots, is also declining, he found. What has gone up, significantly, is the profit share, with profits rising more than sixfold: from 2.2 percent of GDP in 1984 to 15.7 percent in 2014. This, Barkai argued, is the result of higher markups, with the trend being more pronounced in industries that experienced large increases in concentration.

A new paper by Jan De Loecker (of KU Leuven and Princeton University) and Jan Eeckhout (of the Barcelona Graduate School of Economics UPF and University College London) echoes these results, arguing that the decline of both the labor and capital shares, as well as the decline in low-skilled wages and other economic trends, have been aided by a significant increase in markups and market power....

ProMarket — The blog of the Stigler Center at the University of Chicago Booth School of Business
The Rise of Market Power and the Decline of Labor’s Share
Asher Schechter

Noah Smith — Bust Up America's Monopolies Before They Do More Harm

Economists have been sounding the alarm about this trend for a while now. John Kwoka, an economist at Northeastern University, has literally written the book on the follies of the modern age of antitrust. In a new report, he shows how much more complacent the government has gotten toward oligopolies. The government still doesn’t tend to let a single company dominate any industry, but it’s usually fine with just five or six. Kwoka traces the change in attitudes to the rise of the so-called Chicago school approach to antitrust policy:

Bloomberg View
Bust Up America's Monopolies Before They Do More Harm
Noah Smith, contributor

George Monbiot — We’re Not as Selfish as Economists Think We Are. Here’s the Proof.

In complex adaptive systems, optimization involves adaptation through feedback and learning, as well as taking into account return on coordination. This happens naturally and spontaneously not only cognitively but also affectively since it a positive evolutionary trait. Evolutionary success involves a combination of competition and cooperation through coordination, as in teamwork. Homo socialis is the reality rather than homo economicus.

Evonomics
We’re Not as Selfish as Economists Think We Are. Here’s the Proof.

George Monbiot

Mark Thoma — Paul Krugman: Robber Baron Recessions

Krugman on monopoly power.

Finally, some economists are waking up to the fact that it's the rent, stupid, and that economic rent flows from economic power that is based on political power.

Economist’s View
Paul Krugman: Robber Baron Recessions
Mark Thoma | Professor of Economics, University of Oregon

Henry Blodget — Sorry, but it's not a 'law of capitalism' that you pay people as little as possible — it's an excuse

It is not a law that they pay their employees as little as possible. 

It's a choice.

It's a choice made by senior managers and owners who want to keep the highest possible percentage of a company's wealth for themselves.

It's a choice that reveals that, regardless of what they say about how much they value their employees, regardless of what euphemism they use to describe their employees ("associate," "partner," "representative," "team-member"), they, in fact, don't really care.

These senior managers and owners, after all, are taking home record profits and earnings while choosing to pay their employees so little in many cases that the employees have to live in poverty.

It is no mystery why America's senior managers and owners describe the decision to pay employees as little as possible as a "law of capitalism." Because this masks the fact that they are making a selfish choice.

But that's exactly what they're doing.

If we want to get our economy humming again, we need to remember that the economy is an ecosystem and that healthy ecosystems are balanced. We need to encourage our companies to maximize value, not profit. And we need to encourage great companies and managers to serve three important constituencies — customers, owners, and employees — instead of just one.

Sorry, but you are wrong about this. Capitalism is based on competition and the way that competition works is that efficiency prevails.

The only way to correct excessive efficiency that harms effectiveness is through public action that forces all firms to observe certain standards. It's what commercial law is about for instance. Some Libertarians that laws are unnecessary unless aggression against person or property is involved, arguing that the market is the ultimate corrective. That's just nonsense, as everyone with any experience knows. Markets don't automatically correct.

Competition based on efficiency results in a race to the bottom. This is supposedly beneficial economically in that everyone gets the lowest price and firms eventually compete profit away. There is no evidence for that being true in a modern monetary economy.

Evidence shows that firms will cut the wage bill as much as possible to compete against other firms. It's not a matter of sharing profit or anything of that sort. The market works to ensure that all firms act efficiently and those that don't eventually fail.

Without minimum wage laws and increasing the bargaining power of labor through collective bargaining, enforcing standards for imported goods, and the like, then firms will not do this on their own because competition.

That's the beauty of the market and why markets don't work, too, unless they are managed by voluntary association or by government. While there has been a certain amount of voluntary standard setting in industries, unless there are some enforcement of standards a few firms can free ride and some will. This is why law and regulation are needed to correct the insufficiency of markets.

Business Insider
Sorry, but it's not a 'law of capitalism' that you pay people as little as possible — it's an excuse

Henry Blodget

Drake Baer — Billionaire VC Peter Thiel Says Silicon Valley's 'Obsession' With Disruption Is Totally Misguided

Über-Libertarian Peter Thiel pushes monopoly as the entrepreneurial goal rather than "disruptive technology.'

This is interesting since Austrian economic holds that competition free of government interference results in a level playing field and that monopoly is only achievable through government intrusion. Monopoly is only achievable over time in the tech field through legal protection of intellectual property, which is a government intrusion in the free market. 

If there is no government, then there are no intellectual property rights through patents, trademarks, copyrights, etc. So some government intrusion is good, like privileging intellectual property, and others are bad like undertaking social welfare? What is the justification of criteria for deciding which intrusion is good and which bad? Other than self-interest or class interest?

Clusterstock
Billionaire VC Peter Thiel Says Silicon Valley's 'Obsession' With Disruption Is Totally Misguided
Drake Baer

DH Garrett — The Red Line

The Red Line has been crossed. It is a dangerous time. As it is, prospects are grim; the world is shifting to a climate from hell, and the powers that be are mostly just accelerating that demise; but if all of us, most of us, even many of us reach out, and grasp each other's hands, we just might make it across.

"An alternative, sustainable world is, of course, where resource regeneration is at least as great as resource depletion. It's a world where emissions are no greater than the ability of the planet to absorb and process those emissions. Of course it's a world where the population is stable or maybe even decreasing; where prices internalize all costs; a place where no one is hungry or desperately poor; a place where there is true enduring democracy."

Truthout
The Red Line
DH Garrett, Truthout | Op-Ed

The Economist — John D. Rockefeller Defended [Review of Titan: The Life Of John D. Rockefeller Sr. By Ron Chernow]

Nowadays, says Ron Chernow, most people imagine that American businessmen believe in competition. In fact, as he shows, in his thorough and thought-provoking biography of the greatest businessman in American history, combination has been as constant and perhaps as creative a force in the history of capitalism as competition. 

“It was forced upon us,” John D. Rockefeller said. “We had to do it in self-defence. The oil business was in chaos and daily growing worse.” And he spelled out his economic credo in words that were as shocking in the 1870s, when he built his great combination, or in the 1890s, when he had to defend it against the attacks of the muckrakers, as they may be to free-market theorists today. “The day of combination is here to stay. Individualism has gone, never to return.”...

Mr Chernow has written a worthy biography of a truly titanic figure. He conceals none of the seamier side of Standard Oil's practices, but his overall view is sympathetic. In his opinion the vast accumulation of Rockefeller's fortune and the almost equally fabulous disbursements of his philanthropy were not in contradiction, but were two sides of his Protestant capitalist ethos. “Many of Rockefeller's critics alleged that he divided his life into compartments and kept two separate sets of moral ledger books: one governing his exemplary private life, another sanctioning his reprehensible business behaviour,” Mr Chernow writes. “But he saw his entire life guided by the same lofty ideals.”

 Like Ayn Rand, he must have liked Nietzsche, too.

"Combination" = oligarchy, cartel, trust

The Economist
John D. Rockefeller Defended

Bank Lobby Still Trying To Kill Credit Unions (blind pursuit of profits over nation and citizens)

   (Commentary posted by Roger Erickson)

Starts out as a local issue raised by one lobby.

Runs amok when that lobby loses sight of all other inter-dependencies, and forgets that there must be tolerance limits on everything. Or else we don't have a culture. Only a mob. 

Instead of blind competition, what about the return on coordination?

http://www.frbsf.org/education/publications/doctor-econ/2005/march/credit-unions-regulation-supervision 

http://www.stlouisfed.org/publications/pub_assets/pdf/re/2013/b/banks_creditunions.pdf 

https://thefinancialbrand.com/29640/credit-unions-fight-banks-over-community-charters/

(hat tip Tom Hickey)

You want context? Consider the words of Marriner Eccles, 1932:

"The operation of our money world has failed to be our servant and instead is our tyrant and master." 

"We must correct the causes of the depression rather than deal with the effects of it!"

That was 82 years ago!!! Has the US electorate lost sight of Public Purpose? Have we lost sight of national goals?

Ira Chernu — If Only the Tea Party Crowd Knew Where Their Ideas Came from

It all began when I was re-reading Gordon Wood's The Radicalism of the American Revolution (trying to escape from obsessively tracking the DC rollercoaster.) As Wood observes, the Jeffersonians and Hamiltonians divided over basically the same issue that plagues us now: How much of a role should government play in people's lives? (Though the clash back then was so fierce, and split American society so sharply, that it makes today's politics look rather mild by comparison.

But Wood takes us deeper into the substance of the issue. Jeffersonians were willing to limit government only because they assumed that there was "a principle of benevolence ... a moral instinct, a sense of sympathy, in each human being." They were founding an American nation upon the European Enlightenment's belief that "there was 'a natural principle of attraction in man towards man' [as Hume put it], and that these natural affinities were by themselves capable of holding the society together."

This was exactly the point that frightened Alexander Hamilton most. He summed up his opponents' view quite accurately: "As human nature shall refine and ameliorate by the operation of a more enlightened plan," based on common moral sense and the spread of affection and benevolence, government eventually "will become useless, and Society will subsist and flourish free from its shackles." Then Hamilton, the greatest conservative of his day, dismissed this vision of shrinking government as "a wild and fatal scheme."

The Republicans who now control the House obviously have a very different view of what it means to be a true conservative. But that doesn't mean they have become Jeffersonians. Not by any means. In many ways they would be closer to Hamilton, who scorned Jefferson's trust in human nature.

AlterNet
If Only the Tea Party Crowd Knew Where Their Ideas Came from
Ira Chernu

David Atkins — How an Ayn Rand-Loving Libertarian Destroyed The Company He Runs With His Cultish Objectivist Theories

How Eddie Lampert blew up Sears by introducing internal competition instead of cooperation.

AlterNet
How an Ayn Rand-Loving Libertarian Destroyed The Company He Runs With His Cultish Objectivist Theories
David Atkins | Hullaballoo

Michael Snyder — Corporatism: A System Of Control Designed By The Monopoly Men Of The Global Elite

In early America, most states had strict laws governing the size and scope of corporations. Individuals and small businesses thrived in such an environment, and the United States experienced a period of explosive economic growth. We showed the rest of the world that capitalism really works, and we eventually built the largest middle class that the world had ever seen.

But now we have replaced capitalism with something that I like to call "corporatism". In many ways, it shares a lot of characteristics with communism, and that is why nations such as communist China have embraced it so readily. Under "corporatism", monolithic predator corporations run around sucking up as much wealth and economic power as they possibly can. Most individuals and small businesses cannot compete and end up getting absorbed by the corporations. These mammoth collectivist institutions are in private hands rather than in government hands (as would be the case under a pure form of communism), but the results are pretty much the same either way. A tiny elite at the top gets almost all of the economic rewards.

There are some out there that would suggest that the answer to our problems is to move more in the direction of "socialism", but to be honest that wouldn't be the solution to anything. It would just change how the table scraps that the rest of us are getting are distributed.

If we truly wanted a return to prosperity, we need to dramatically shift the rules of the game so that they are tilted back in favor of individuals and small businesses. A much more pure form of capitalism would mean more wealth, less poverty and a more equitable distribution of the economic rewards in this country

The Economic Collapse
Corporatism: A System Of Control Designed By The Monopoly Men Of The Global Elite
Michael Snyder
(h/t Zero Hedge)

Thoughts On The New Red Scare

The essential condition for the existence, and for the sway of the bourgeois class, is the formation and augmentation of capital; the condition for capital is wage-labour. Wage-labour rests exclusively on competition between the laborers. The advance of industry, whose involuntary promoter is the bourgeoisie, replaces the isolation of the labourers, due to competition, by their revolutionary combination, due to association. The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie, therefore, produces, above all, is its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable.

The Communist Manifesto, Section 1

Karl Marx & Friedrich Engels

This is a central point of Marx and Engels. The bourgeoisie (ownership class) finds it to their advantage to treat the proletariat (workers) as a commodity and to arrange the economy institutionally so that workers compete for scarce jobs. This allows owners to ensure a supply of low wage workers through a competitive market in the same way as non-human resources are traded. Indeed, it has been compared with the way that slaves were traded, too. This "commoditization of labor" is an essential aspect of "the free market."

Part of the "free market" myth is the myth of Horatio Alger, that is, that anyone can raise himself or herself from the bottom to the top, although for women, this is largely presumed to be through marrying well. Thus, the potential for achieving freedom is social mobility. As a result, a great deal of attention is placed on promulgating this myth as a cultural meme. the corollary is that is one is not free, then it is one's own fault. Since social mobility is so low presently, it has been augmented with the lottery, which has been successfully incorporated into the myth.

What would act against this institutional arrangement is worker association through trade unions to increase the bargaining power of labor. Through their association to further their common goals, including increasing labor share as well as improving working conditions, individual competition for scarce jobs is reduced and the so-called free market is undermined in the estimation of owners of means of production aka capital.

In order to realize such goals through association, several things are necessary. First, workers must become aware of the potential for association and its possibilities. At the time Marx and Engels were writing, this was far some understood by workers, let alone a practical reality in the work place. This education of workers would take many decades.

Secondly, owners could not be expected to sit idly by and watch workers kill the goose that lays the golden eggs for them. They would respond with whatever it might take to prevent this from occurring, and that is just what happened historically.

It was not until the time of the Great Depression, when owners where actually afraid of socialism and even communism coming to the fore in the West as it had in Russia, that they relented their opposition to some extent. Moreover, favorable legislation was enacted under a more liberal political climate.

Since then, and especially after the fall of the Berlin Wall that signalled the end of the red threat, owners again mounted the fight against worker association. In addition, more conservative governments rescinded previous worker-friendly legislation and past new limits on organizing the workplace and restrictions on association.

That is where we are now, and given the economic situation, workers are again pushing back. The push back has been more forceful in europe than in the United States so far, but the situation is dire some countries there. However, the Arab spring in MENA was not only political but also economic, and it began for economic reasons rather than for political ones.

This is entirely consistent with the analysis of Marx and Engels, who reasoned that it is not ideas that lead history but external conditions, and the conditions that are most motivating are economic.

According to Marx & Engels, since workers so greatly outnumber owners worldwide, continued oppression of workers depends on a low level of collective consciousness of workers. Thus, it is to owners advantage to see that institutional arrangements, education in particular but also media, contribute to maintain the myth of the market.

I surmise that this may explain a lot of the otherwise "crazy talk" about the "Democrat Party" (sic) and President Obama being socialists and even communists.

Tyler Durden — Americans Aged 18-29 Have A More Favorable Response To Socialism Than To Capitalism

Interesting charts. Younger people seem to realize that cooperation and coordination are more significant for well-being than competition. Older people seem to have more a knee-jerk reaction to "socialism" and "capitalism."

Zero Hedge
Americans Aged 18-29 Have A More Favorable Response To Socialism Than To Capitalism
Tyler Durden

Woj — ECB's Means (Lost Decade With High Unemployment) To An End (Structural Reform)

By working to prevent an all out collapse of the EMU, Draghi is merely taking the necessary actions to maintain his position. If Spain or other European countries must “suffer from a decade of recessions with unemployment over 20%” in order to implement the desired structural reforms than so be it. Whether or not that outcome is politically feasible remains an open question, but I have my doubts. Draghi was not the first to claim “it will be enough" and won’t be the last to make that claim either.

Read it at Bubbles and Busts
ECB's Means (Lost Decade With High Unemployment) To An End (Structural Reform)
Woj

The not so hidden agenda. The race in the West — Europe, the UK, and the US — the work force of the developed world to compete at the same level of wages and benefits as the emerging world is on. The belief is that wages and benefits in developed countries will fall as they rise in the emerging world, splitting the difference. The good news — outsourcing no longer a threat to employment in the developed world. The bad news — falling standard of living and rising inequality as the global economy heads toward a world of have's and have-not's in a neoliberal "paradise."

They actually think that this is workable politically. I suspect they realize it is not possible without political repression. So get ready for soft fascism.

Just as policy direction leads to totalitarian communism as the extreme on the left, so too does it lead to institutional fascism as the extreme on the right.

Adrian Pabst — Building a civil economy

Game theory [competition] or gift society [voluntary cooperation for mutual benefit]? The narcissistic vision of the homo oeconomicus has failed to acknowledge long-documented evidence of the primacy of cooperation. In this Friday essay, Adrian Pabst explores the liberating potential of an anthropologically informed economics for the age of austerity.

Our Kingdom — Power and Liberty in Britain
Building a civil economy
Adrian Pabst

(h/t Energy Bulletin)

Neoliberalism aims for growth as the chief objective based on meritocracy that reward initiative, regardless of distribution. Social liberalism aka modern liberalism and social democracy aim for distributed prosperity based on social justice, recognizing that no one makes it on their own in modern complex society.

Note that the foundation of the universe of discourse is classical liberalism, which provided the intellectual underpinning of the U. S. Constitution. Liberalism traces its history to the Magna Charta in England and to Athenian democracy. The is the meaning of the saying that history has a liberal bias.

The tension within liberalism in general arises socially, politically, and economically from the trifecta of individual freedom, the equality that the rule of law requires, and the exigencies of community and social life. The rule of law and institutional arrangements mediate between individual liberty and social responsibility. Therefore, rule of law and institutional arrangements largely determine the balance of freedom in community. However, the rule of law and institutional arrangements are insufficient. Culture and the level of collective consciousness are also crucial in the balance.

Increase in complexity requires increasing adaptive rate through coordination. Increased coordination involves increased costs. The goal is to secure return on coordination exceeding cost of coordination.

The global economy can never hit a steady state that avoids the increase in complexity as long as population is increasing. One solution is allowing "natural order" to resolve the issue through the eliminationism that results from competition. This is social Darwinism. The other solution is to rise to the challenge together. This is the use of human consciousness and intelligence in a coordinated way.