"Lazy Corporate Monopolies Are Why America Can’t Have Nice Things"

[philnotfil]

An interesting thought on why "capitalism" in America is struggling.

nakedcapitalism

Throughout much of the United States, cell phone service is terrible (so is broadband, as Susan Crawford shows). And not just in rural or sparsely populated areas, but cell phone calls routinely drop in major metropolitan areas. You can’t use your phone underground in New York, and there are plenty of places on Capitol Hill you can’t get service. I actually once had trouble getting service near the Federal Communications Commission. This is a result of a lack of competition and increasingly poor regulatory policies. In the late 1990s, 50% of wireless revenues were invested in wireless infrastructure. By 2009, that number dropped to a little over 10%. What is it today? We don’t know, because the FCC no longer even collects the data. The result is that your cell phone drops calls. Cell phone service is also expensive, and the companies nickel and dime you - America is one of two countries where the person receiving the call has to pay for the call. A rough calculation shows that up to 80% of the cost of your cell phone service comes from corruption.

Our banking services are similarly terrible. We have an increasing amount of power in the hands of a few large consumer banks. In most of Europe and in the UK, consumers rarely use checks, they simply transfer money over the internet. A paper check is somewhat absurd – a check is a few bits of information, so there should be no reason to clear this through a paper-based system. But in the US, the backend is still rooted in a 1970s architecture called Automated Clearing House, which was itself layered onto a much older system. This system allows checks (and debit card transactions) to take up to five days to clear, and is remarkably insecure. The association that runs the ACH, known as the National Automated Clearinghouse Association (NACHA), refused to upgrade it after member banks voted to kill a measure to speed up our payments clearing system. In America, the largest banks – JP Morgan Chase, Bank of America, and Wells Fargo – are only now introducing products to allow internet transfers between bank accounts. I tried Chase’s Quickpay service a few weeks ago, and it’s pretty confusing and limited. Mostly, the fat and happy credit card oligopoly of VISA and Mastercard enjoys absurd margins, a roughly 2% tax on every transaction in the country.

No one quite knows why Safaricom, which is essentially a monopoly, has been able to make this system work in Kenya, whereas large banks and telecoms haven’t been able to make something similar work in the United States. There’s a good case to be made that the lack of banking services in Kenya left open a large business opportunity. There was a ready made culture for this service – workers in Kenya often send money they make in urban areas back home, and there are many small retail stalls run by shopkeepers which were quite willing to sell Safaricom services. M-Pesa first caught on among the unbanked. In the US, most people have access to banks, and remittances are only common among certain population sub-groups (the Consumer Financial Protection Bureau is actually beginning to regulate the space). Credit cards are common. But still, this doesn’t explain why I can easily transfer money from a checking account in Europe to a friend’s checking account in Europe, but can’t do it here. I spoke with representatives from Dwolla, which is a company attempting to build a similar system in the US, and they didn’t really have an answer. The Federal Reserve, which overseas check-clearing in the United States, hasn’t been able to force an upgrade to the clearinghouse that American banks use. The National Automated Clearinghouse Association (NACHA) hasn’t wanted to, and didn’t respond to my inquiry as to why they aren’t trying to make it happen. And unlike Safaricom, American telecommunications companies haven’t pushed into the banking space, largely resisting the ability to buy goods and services via text message or short codes.

This isn’t just a problem of monopolistic behavior or excessive market power. Safaricom is a very powerful company in Kenya, and there is basically no competition to what they do. Yet they have produced a terrific system that companies all over the world are trying to replicate. Cell service on volcanos where no one lives except zebras and lions is more reliable than cell service on Fifth Avenue in New York. What seems to have happened is that American corporate executives are now more focused on financial engineering, which is essentially the extraction of capital from their enterprises and from the public, than they are at selling improved goods and services. For example, GE just got a tax break extended which added $3 billion a year in annual profit in the latest fiscal cliff deal. That’s a lot of money, and not one good or service was improved to drop that cash to the bottom line. As another example, the cable industry is projecting an average monthly bill of $200 by 2020, versus $86 today. At 73 million subscribers, that’s an additional $100 billion a year of revenue. Comcast alone has 22 million customers – that’s $30 billion a year for this one company alone. And let’s be clear, this is not going to better products, Americans tend to get worse internet and cable service than counterparts around the world. Investing in manipulative pricing schemes, lobbying for tax breaks and not investing in good infrastructure is a rational choice for American corporate executives, since their ethic is to extract as much capital as possible from the American economy. And yet, this is why America can’t have nice things.

[108]

can't have competition in the market when you don't regulate monopolies anymore, and allow them to legally bribe our elected officials

[gator10010]

Originally Posted by 108

can't have competition in the market when you don't regulate monopolies anymore, and allow them to legally bribe our elected officials

You also can't have capitalism when companies are "too big to fail".

[ChartsandGrafs]

Originally Posted by 108

can't have competition in the market when you don't regulate monopolies anymore, and allow them to legally bribe our elected officials

Yet you worship government, the biggest, most powerful type of monopoly ever conceived of. If you were truly interested in competition, you wouldn't worship government at all.

[ChartsandGrafs]

It's a mistake to believe capitalism is failing in America. We don't even have capitalism in America, and haven't had anything resembling capitalism in a long time. It didn't fail, it was replaced, intentionally. What we really have is crony capitalism and corporatism.

Most people believe we live in a system where the government and the banks and corporations are entirely separate, but we don't. The reality is, the government is a subsidiary of the banks and corporations. The government works for, serves, and represents them, not us. It doesn't matter which party is in office. It doesn't matter which politician is reading a teleprompter. They all work for the same corporations and banks. If you don't believe this is true, just look around you and observe what's been going on since early last century. Just consider how the election process works in America. It's simply intuitive that the government was usurped by the banks and corporations. No politician can get elected to a high political position in America without a combination of gobs of campaign financing and favorable media coverage. And who has control of campaign financing and favorable media coverage? Corporations and banks do. The peasants don't have this necessary combination to control the election process, but the ruling elites do. This is how the system works. The advent of the modern media in the early 20th Century made this reality irreversible.

None of these problems can be addressed until people face them honestly and recognize the system for what it is and how it functions.

[northgagator]

Charts, isn't the acronym CCF (Cronny Capital Federalism) a more accurate description?

[Row6]

Interesting article. It brings up the abandonment during Reagan of almost a century of successful anti-trust actions by the federal government dating back to TR and the Progressives.

[ChartsandGrafs]

Originally Posted by northgagator

Charts, isn't the acronym CCF (Cronny Capital Federalism) a more accurate description?

I've never seen that acronym used before nor have I heard of crony capital federalism. Referring to this system as a form of federalism doesn't compute in my mind.

The system really is closer to corporatism, at least as far as the agenda is concerned.

[G8trGr8t]

The ever increasing pile of regulatory compliance documentation is causing small to mid size companies to either go under or sell out to the monopolies. The economy of scale to comply with the regulatory requirements makes it almost impossible for the others to compete with the monsters. The gubmnt, through their own actions, are creating these too big to fail monopolies. Seems to be consistent with the fed gubmnt goal to centralize all power and authority.

[philnotfil]

Originally Posted by G8trGr8t

The ever increasing pile of regulatory compliance documentation is causing small to mid size companies to either go under or sell out to the monopolies. The economy of scale to comply with the regulatory requirements makes it almost impossible for the others to compete with the monsters. The gubmnt, through their own actions, are creating these too big to fail monopolies. Seems to be consistent with the fed gubmnt goal to centralize all power and authority.

Or consistent with the lobbying efforts of the large corporations?

[brainstorm]

Originally Posted by philnotfil

Or consistent with the lobbying efforts of the large corporations?

Probably both. An unholy alliance.

[mocgator]

Capitalism >> Armed Government Control

[Matthanuf06]

And to add, a corporation has to 'pay' off politicians in order to compete. If you don't, your competitors will. And even still, in a vacuum, you'd want a firm you own to exert its influence on elected officials. You want them to maximize its value to its shareholders, it's owners, you.

The problem, and what we don't want, is a political system and politicians easily bought off.

[108]

Originally Posted by ChartsandGrafs

Yet you worship government, the biggest, most powerful type of monopoly ever conceived of. If you were truly interested in competition, you wouldn't worship government at all.

Sidetracking

[108]

Originally Posted by ChartsandGrafs

It's a mistake to believe capitalism is failing in America. We don't even have capitalism in America, and haven't had anything resembling capitalism in a long time. It didn't fail, it was replaced, intentionally. What we really have is crony capitalism and corporatism.

Most people believe we live in a system where the government and the banks and corporations are entirely separate, but we don't. The reality is, the government is a subsidiary of the banks and corporations. The government works for, serves, and represents them, not us. It doesn't matter which party is in office. It doesn't matter which politician is reading a teleprompter. They all work for the same corporations and banks. If you don't believe this is true, just look around you and observe what's been going on since early last century. Just consider how the election process works in America. It's simply intuitive that the government was usurped by the banks and corporations. No politician can get elected to a high political position in America without a combination of gobs of campaign financing and favorable media coverage. And who has control of campaign financing and favorable media coverage? Corporations and banks do. The peasants don't have this necessary combination to control the election process, but the ruling elites do. This is how the system works. The advent of the modern media in the early 20th Century made this reality irreversible.

None of these problems can be addressed until people face them honestly and recognize the system for what it is and how it functions.

Agree in part, though I think Capitalism needs a leash regardless, as profit gets put before the common good

This really should be an issue that all citizens and voters can fine common ground, but the 2 party system does its best to provide cover and distract voters

[wgbgator]

Crony capitalism is capitalism, because capitalism needs the state. You either tame it democratically or let it control your government. The choice is yours.

[Matthanuf06]

Originally Posted by wgbgator

Crony capitalism is capitalism, because capitalism needs the state. You either tame it democratically or let it control your government. The choice is yours.

No it doesn't. Capitalism can morph into corporatism if you have a weak corruptible political system. It's a natural progression. And if you have a weak constitution, as we do, democracy/republicanism will slide into socialism/mob rule. It's natural as well.

The way you stop both is by having a a strong government with a strong constitution that clearly outlines the freedom maximizing rights of its citizens.

[G8trGr8t]

but the people voting aren't engaged and informed so corporations and unions and other special interests entertain them long enough to get the vote before the next american idol show comes on..

the vast majority of the electorate is incompetent and lazy and easily manipulated

[G8trGr8t]

Originally Posted by Matthanuf06

No it doesn't. Capitalism can morph into corporatism if you have a weak corruptible political system. It's a natural progression. And if you have a weak constitution, as we do, democracy/republicanism will slide into socialism/mob rule. It's natural as well.

The way you stop both is by having a a strong government with a strong constitution that clearly outlines the freedom maximizing rights of its citizens.

we have that but the freedoms are being taken away...and we keep electing people whoa gree to do it, mainly by increasing the debt so that we have to pay more, kind of like indentured servants being charged high rents and food prices so they will never be free..see above comment re: average voter

[wgbgator]

Originally Posted by Matthanuf06

No it doesn't. Capitalism can morph into corporatism if you have a weak corruptible political system. It's a natural progression. And if you have a weak constitution, as we do, democracy/republicanism will slide into socialism/mob rule. It's natural as well.

The way you stop both is by having a a strong government with a strong constitution that clearly outlines the freedom maximizing rights of its citizens.

You're saying the state is essential, and you either let it take over (and become something else?) or you take measures that it doesnt. And that's basically what I said.