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this post was submitted on 21 Jul 2023
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Asklemmy
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I think you’ve written a good, neutral summary critique that increases our common ability to debate this. Thank you.
I would argue, however, that your example makes it sound especially egregious as the profit margin in your example is 95%. The advantage of capitalism, according the people who support it (like I do), is that other sprocket making companies exist and together they bring the profit margins down and down and down (due to competition), forcing continual innovation to bring it back up. Thus, not only is the profit margins typically much, much smaller (1-10%), but society collectively advances, which benefits the workers too as the produce they need to acquire increases in quality and lowers in price.
The truth is probably somewhere in the middle.
So I agree with you when arguing against monopolies.
This is a really good point, and I’m glad that someone who’s got a decent understanding of basic economics is replying to me.
The 95% profit margin was definitely to make a point, as you pointed out. And as you said, according to conventional thinking on capitalism, market forces should push that down to a fair equilibrium.
I think that the issue I was hinting at is that there is a fair amount of contemporary thinking that provides pretty convincing arguments that the nature of capitalism necessarily tends towards consolidation and monopoly over time. The classical model of a baker charging too much on an island, so someone else opens a bakery, doesn’t really work too well when we’re talking about telecom companies and media conglomerates. Once a high-tech segment has consolidated enough, it becomes impossible for anyone other than large companies to enter the market. And when those large companies are actually owned by a larger parent company, we start to see the failures of the classical market forces to produce a ‘fair’ equilibrium due to monopolization.
We definitely aren’t at the point of total failure yet, but in my opinion the trend line isn’t hard to spot. And I think the bigger issue is that due to regulatory capture, there’s not much we can do to patch the sinking ship.