Pure Capitalism
November 3rd 2006 16:58
Its interesting to consider that, were not for government intervention in the economy, the capitalist system, as predicted by Karl Marx in the nineteen century, would have long ago exploded and extinct.
What Marx said, and makes sense to me today even though I reject Marxism, was that, when in an environment of free competition, enterprises tended to buy out their competitors and form monopolies which then terminate the original free competition regime.
We all know that this is true: monopolies, once created reduce supply and increase prices together with a potential decrease in quality and range of products or services offered. The main feature of monopolies is that they are in control of a particular level of demand for their products.
It’s not without some irony that Ruppert Murdock, the Chairman of News Corporation, recently said that monopolies are pretty awful things until you discover that you've got one.
It’s also interesting that, for apparently most people living in capitalist countries, there is a perception that the capitalist system, in its purest form, is something to cherish. The reason is that capitalism is about competition and with competition the consumer wins.
He wins better products, wider ranges and, specially, cheaper prices. And it’s to preserve this that governments create legislative regimes and authority bodies aiming at protecting free competition in the market. In Australia some of these bodies are ACCC, ASIC and APRA.
It’s no less interesting to notice that, everywhere, the most sought after markets are the unregulated ones. They are less restrictive and so allow for a wider range of behavior on the part of companies, often approximating the conditions of capitalism in its pure form.
If these markets grow enough then comes regulation, some enterprises exit it and, generally, a search for a new unregulated market starts so forming a spiral that seems to go on forever.
Sounds like there are two forces in play: one, the capitalist enterprise and, two, the civil society where it operates.
The first looks for maximum freedom of action and the second, knowing the probable loss of advantage, like low prices, attempts to restrict and generally reign in the capitalist enterprise with laws and regulations.
The compromise achieved defines the political and economic solution found by each country in our planet.
What Marx said, and makes sense to me today even though I reject Marxism, was that, when in an environment of free competition, enterprises tended to buy out their competitors and form monopolies which then terminate the original free competition regime.
We all know that this is true: monopolies, once created reduce supply and increase prices together with a potential decrease in quality and range of products or services offered. The main feature of monopolies is that they are in control of a particular level of demand for their products.
It’s not without some irony that Ruppert Murdock, the Chairman of News Corporation, recently said that monopolies are pretty awful things until you discover that you've got one.
It’s also interesting that, for apparently most people living in capitalist countries, there is a perception that the capitalist system, in its purest form, is something to cherish. The reason is that capitalism is about competition and with competition the consumer wins.
He wins better products, wider ranges and, specially, cheaper prices. And it’s to preserve this that governments create legislative regimes and authority bodies aiming at protecting free competition in the market. In Australia some of these bodies are ACCC, ASIC and APRA.
It’s no less interesting to notice that, everywhere, the most sought after markets are the unregulated ones. They are less restrictive and so allow for a wider range of behavior on the part of companies, often approximating the conditions of capitalism in its pure form.
If these markets grow enough then comes regulation, some enterprises exit it and, generally, a search for a new unregulated market starts so forming a spiral that seems to go on forever.
Sounds like there are two forces in play: one, the capitalist enterprise and, two, the civil society where it operates.
The first looks for maximum freedom of action and the second, knowing the probable loss of advantage, like low prices, attempts to restrict and generally reign in the capitalist enterprise with laws and regulations.
The compromise achieved defines the political and economic solution found by each country in our planet.
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