What’s Killing Capitalism In America?
There’s no doubt that capitalism in America is in bad shape. Higher market share concentration in industry is leading to higher profits for corporate giants, but also to higher prices and lower wages along with decreased innovation and productivity growth as well as a long-term decline in entrepreneurship.
You would think that the rise of progressive politicians like Bernie Sanders and Alexandria Ocasio-Cortez would be responsible for the decline in the power of capitalism and the demise of free markets. However, a new book by NYU finance professor Thomas Philippon, called The Great Reversal, argues exactly the opposite.
In fact, he shows through meticulous research how capitalists themselves are killing capitalism. Through the charade of “pro-business” policies, industry leaders have been increasing regulation and limiting competition over the past 20 years. We need to right the ship and return to an embrace of free markets, entrepreneurship and innovation.
A Rise In Rent Seeking And Regulatory Capture
The goal of every business is to defy markets. Any firm at the mercy of supply and demand will find itself unable to make an economic profit — that is profit over and above its cost of capital. In other words, unless a firm can beat Adam’s Smith’s invisible hand, investors…
