Too much of a good thing: Profits are too high. America needs a giant dose of competition

Protectionism has been sold to the rubes as America First Policy.

 

Too many mergers creating too little competition equals higher prices and less accountability to the consumer. Didn't we bust up monopolies back in the day? Southern Bell/AT&T comes to mind but that's about it.

 

We have had decades of movement towards oligopoly and lower anti trust activity with the opposite effect on inflation. To blame current inflation on that and/or “corporate greed” defies the evidence.

Lower anti trust does lead to higher corporate profits. But at the same time it also (usually) leads to less redundancy and more cost efficiency.

 

Usually. This is 2022 and what has always been seems to wither away daily.

 

Standard Oil and DuPont back in 1911 come to mind.

 

I'd argue that over the last few decades, technology has greatly increased the ability of firms to take advantage of economies of scale. Second, managerial training has improved & folks are better at managing huge, complex firms. Third, a lot of "new economy" goods & services are characterized by network externalities. What that means is that the more people that use the good/service, the more valuable it becomes. Ever seen a non QWERTY keyboard? Where's betamax? Phones are a good example. As more people bought phones, phones becomes much more valuable to own. Facebook, twitter, Uber, etc def have network externalities. That quality along with what appears to be an endless ability to enjoy economies of scales (&, in some cases scope) lead to an environment favorable to huge, oligopolists firms.

 

The causes of current inflation have been well documented. Covid worldwide supply effects. Ukraine war supply impacts. Massive worldwide fiscal and monetary stimulus especially from the US. Tariffs. Deglobalization trends. Aging populations causing demographics changes and tighter it or the labor markets.

Continued high corporate profits are a result of the supply and demand impact those things, not greed or anti trust per se.

Higher competition doesn’t always lead to lower prices. Health care insurance and costs can be an example.

A chunk of the higher profits has to do with higher energy company profits, which are a result of worldwide supply and demand issues. The price of oil is set globally. If the price of energy goes up, energy companies make more profit. That is just a simple fact.

Finally higher profits also benefit the US as something near 50% of the profits of US corporations come from overseas. Higher profits directly benefit shareholders and indirectly benefit employees of those companies and other parts of the economy.

 

There is no doubt in my mind that companies are more concentrated than ever who h is bad for the consumer.

I’m sure there is some metric like percent of GDP by the top 500 companies or something to prove or disprove the competition theory.

 

Network externalities IMO are a form of barrier. It's well known that a better keyboard is dead in the water. A better operating sys is dead in the water. A better word processor is dead in the water. Better < widely adopted.

 

this is typically used...

Concentration ratio - Wikipedia


n economics, concentration ratios are used to quantify market concentration and are based on companies' market shares in a given industry. Market share can be defined as a firm's proportion of total sales in an industry, a firm's market capitalisation as a percentage of total industry market capitalisation or any other metric which conveys the size and dominance of a company relative to its competitors.[1] A concentration ratio (CR) is the sum of the percentage market shares of (a pre-specified number of) the largest firms in an industry. An n-firm concentration ratio is a common measure of market structure and shows the combined market share of the n largest firms in the market. For example, where n = 5, CR5 defines the combined market share of the five largest firms in an industry.

 

Energy companies are posting massive profits in 2022 on back of energy crisis | Fortune

Energy company profits. Supply and demand.

 

Concentrated may or may not be bad for the consumer.

Do you support single payer health care?

 

then why are corporate profits the number 1 contributor to inflation? why are they all increasing prices beyond cost input (energy, supply, labor) with little ot no fear of losing market

 

Who said they are the contributor to inflation?

Inflation is due to supply and demand issues. Corporate profits are a result of the inflation. You have the relationship backwards.

 

It’s interesting. We have a product line that has a US and EU market. We make 125% more gross margin in the US vs the EU.

 

We charge as much as we can to still win enough work in both locations. I’m not really sure why we can charge so much more in the US other than all our competitors do as well.

 

Doesn’t more profit mean more tax revenues?