'Free' market myths no. 5: competition works

Competition is an essential part of  our economy. The fact that companies compete with each other to provide us with better goods and services means that the goods and services on offer constantly improve and we get better value for money. It means that companies that don't perform well go to the wall and the best run companies thrive, and it also means that individuals work harder to do better and achieve higher rewards right? Wrong!

The idea that much vaunted 'free' market competition does all these things and is essential to the well-being of our economy just happens to be nonsense. Of course this is hard for many people to accept because we have been told this is the case all our lives, and most of us believe it. But the idea of competition that most of us have is based on real competition of the kind that you find in the Olympics where individuals and teams do battle to win prizes. This kind of striving for ever greater excellence is not the same thing as competition in a capitalist economy. In fact its possible to make a case that in some sectors there is little or no competition at all. Mature markets are where particular markets are dominated by a few major players, all the smaller operators having been squeezed out, usually by acquisition rather than competition. An obvious example of this which has been making the headlines recently is the energy sector, which has been accused of making excessive profits at the expense of hard pressed bill payers. And we have witnessed the neoliberal Coalition government's feeble attempts to 'regulate' energy prices for consumers. As the Guardian editorial said:

"But all Mr Davey is proposing is a change in billing, not pricing. And he is certainly not proposing to change the mechanics that place 85% of the retail market in the hands of the big six suppliers, and which mean that when one raises prices the rest follow soon afterwards. If it looks like an oligopoly, and acts like an oligopoly, then it probably is an oligopoly"

It was accepted, until fairly recently, by economists, that such 'mature markets' were examples of monopoly capitalism, until neoliberal 'free' market dogma came to dominate in the 1980's, and monopoly capitalism was conveniently 'forgotten'. Its well worth reading this article by Bellamy Foster, McChesney and Jamil Jonna, which describes how monopoly - not oligopoly by the way - is increasing and competition is decreasing, on a global scale. here is a telling quote:

"The desirability of monopoly, from the perspective of a capitalist, is self-evident: it lowers risk and increases profits. No sane owner or business wishes more competition; the rational move is always to seek as much monopoly power as possible and carefully avoid the nightmare world of the powerless competitive firm of economics textbooks. Once a firm achieves economic concentration and monopoly power, it is maintained through barriers to entry that make it prohibitively costly and risky for would-be competitors successfully to invade an oligopolistic or monopolistic industry—though such barriers to entry remain relative rather than absolute. Creating and maintaining barriers to entry is essential work for any corporation."

The reality is that competition in the capitalist global economy is just another 'free' market myth, slavishly maintained and adhered to by the capitalist media we all know and love so well.

We must Occupy the economy

The roller coaster ride of the world economic crisis continues. Elections in Greece and France have shifted the political ground slightly to the left, with a Socialist majority in France, and the spectacular result obtained by SYRIZA in coming second in Greece with about 27% of the vote. But the Eurozone crisis stumbles on and the 'free' market fundamentalists, the architects of the broken economic system, are still in the driving seat. Banks are bust and, under the current system, there is nothing to look forward to apart from years of economic stagnation at best. Meanwhile in the UK, millions are being pushed below the breadline by the governments cuts in benefits, tax credits, and increases in rents.

In 1966, the Marxist economist Paul Sweezy wrote a book, with Paul Baran, called Monopoly Capital, in which he said that the natural tendency of monopoly capitalism was economic stagnation, as capitalists struggled to use the surpluses of capital accumulation, and that they could only achieve this by increases in spend on marketing and defence spending, and increasing debt. Was Sweezy right? Its certainly true that US defence spending in WWII ended the Great Depression, and that a mountain of debt has been used to keep capitalism going in the past 30 years or so.

So what do we do? The market fundamentalists have no answer. They are like the mad person who repeats the same actions over again in Einsteins famous quote:

"Insanity is doing the same thing, over and over again, but expecting different results"

Einstein: described the madness of market fundamentalists

 
So we need an economic alternative. But what is that alternative? Neoliberalism, over the past 30 years has put commercial interests above democratic sovereignty. This has happened globally through organisations like the WTO and the European Union. We need to reverse this process and re-assert democratic control of our economy. This economic change must put governments in charge, actively planning and managing economic development, allow local decision making and create a mixed economy based on  genuine sustainable development to deal with ecological crises and halt endless growth. In the longer term the only answer to the domination of private commercial interests is to put the economy in the hands of the 99%. How can we do all that?

Firstly, we need to nationalise the bust banks that are hoovering up resources which need to be spent on creating jobs. Its a scandal that the UK's bust banks have been bailed out but are still in private hands. This must end, some banks must fold, and we need banks to be broken up to provide finance to small businesses, and local and regional banks which can focus on reviving local economies;

Secondly, we need to take the creation of credit out of private hands and put it under democratic control. Debt creation is too great a power to be left in the hands of private enterprise - this is what caused the current crash;

Thirdly, we need to take control of the big utilities such the energy and water companies, and sectors which rely on massive public subsidy to continue such as the railways;

Fourth, we must institute a programme of investment in our economy to create jobs through green quantitative easing and a Green New Deal;

Finally, and most importantly, we must break the power of the corporations by mutualising the economy, providing the finance to set up co-operatives and giving employees the power to buy-out the companies they work for and control them. This latter measure is crucial in putting economic power into the hands of ordinary people. We need to create a new culture of doing business in which people work together to create successful mutuals which are focused on local communities. Co-operatives have a better success rate than companies and they don't outsource downsize, or export jobs overseas.

Its a little known fact but there was an expansion of mutuals in the USA during the last Great Depression and there are many successful co-operatives both in the USA and here. It is a sector that is already growing. 130 million (yes that is million) people in the USA are now involved in mutuals and if you want to find out more detail read this previous post. You should also take a look at Gar Alperovitz's excellent book 'America beyond Capitalism' which gives practical examples of how the 99% in America are taking control of their economy from the bottom up by creating co-operatives. This is economic democracy in action and something we should celebrate.

Think it can't happen? Well, we have to make it happen. Its likely that the failure of the global banking system is going to mean that states are going to have to take a much bigger role in managing the economy now that the failures of the market have been exposed, and that people are going to be much more willing to trust democratic control and planning after they have experienced the privations of neoliberal austerity. If we want to really cure the malaise of neoliberalism and avoid the stagnation of monopoly capitalism we need to participate in the most important occupation of all, we need to Occupy the economy.

Supermarket dinosaurs deserve to die

Tesco is in trouble. For the first time in many years sales at the supermarket behemoth are declining, and although I've been carrying out a one-man boycott of Tesco's for several years, unfortunately I can't claim the credit for this. When I say boycott, what I mean is that I never do my main weekly shop in Tesco. Sometimes I have had to buy something in a Tesco Express, partly because of expediency, but also because Tesco has now become so ubiquitous that it is hard to find an alternative store in many neighborhoods and city centres.


Why did I decide to boycott Tesco? There are two main reasons; Firstly, it is just way too big. Any company which takes £1 out of every £7 spent in the UK has to be a bad thing for the UK economy. This is monopoly capitalism at its worst, and much of the money made by Tesco is inevitably going to go out of the UK into the hands of foreign shareholders, but more of that later; The second reason is that I found Tesco poor value for money, and I didn't like the quality of the food much either.

Tesco, monopoly-capital Behemoth

It seems that I'm not the only one. Lots of other people have similar problems with Tesco. In fact, I'm sure that Tesco could learn a lot about why people don't like it by reading this article. Here is just one comment:

"The brand has been tainted by greed and cynical and exploitative practices. That means that no one has any feeling of affection or loyalty that could see it through a sticky patch. I actively avoid Tesco's and, like many others, would be pleased to see them cut down to size. So, I'm really not sure where they go from here as I can't imagine anything that they could do which would make me love them".

..... which I like because it took the words right out of my mouth. The problem with Tesco is that they epitomise all that is wrong with the over-mighty corporations which have arisen as a result of monopoly capitalism. We are told that these corporations are good for the economy because they are 'efficient' but this  so-called 'efficiency' means market domination (30% for Tesco), squeezing that market at both ends by shafting the supplier and customer, exploiting low paid workers to maximise profits, damaging the environment with megastores, and contributing to the devastation of local high streets by reducing diversity and putting small stores out of business.


This is what happens with monopoly capitalism, across the board not just in the food retail sector. When a few corporations dominate a mature market they don't compete on price anymore - though that's what they want you to believe - they focus on slashing costs and using advertising to maximise their profits, and this is at the expense of employees, customers and the environment. Corporations want you to believe the customer is king but to quote Fred Magdoff and John Bellamy Foster:

"Under a mature monopoly-capitalist system, people serve the economy and not vice versa. The much ballyhooed "consumer sovereignty" is transformed, as John Kenneth Galbraith pointed out, into "producer sovereignty".

This is from their excellent book - 'What Every Environmentalist Needs To Know about Capitalism' - which explains how monopoly capitalism works, and a book I would recommend everyone to read.

Of course its not just Tesco which is the problem, its all of the giant monopoly capitalist corporations which are devouring our planet in their insatiable drive for capital accumulation. But in the UK Tesco embodies this destructive monopoly more than any other corporation, and many people are conscious of this, despite all the advertising and hype. Maybe Tesco will be able to turn it around. But that would be a pity because what we need is thriving local businesses selling locally grown good quality food, not corporate giants devouring the environment and our high streets. I won't be shopping there ever again, if I can help it. The best thing for Tesco would be for it to be broken up into local co-operatives that really served the communities they are based in.

Twenty first century corporate capitalism is about creating monopoly, about endless growth and capital accumulation, not efficiency or building a socially useful economy, and it lies at the heart of the sociopathic disease of neoliberalism which is damaging our economy and destroying our planet, and we would all be better off without it.