Some people have been surprised that I have been critical of capitalism. I deny that I have been critical of capitalism. First, let me say, I have been critical of what has happened to capitalism, not capitalism itself. It is appalling what has happened to it. Monopolies are not capitalism. They are predators of capitalism. They destroy capitalism. Subsidies for capitalists are not capitalism either. What we need is capitalism!
Hari Sreenivasan pointed out to Scott Galloway, “One of the interesting things about the pandemic is that it has been exceptional for the big 4–Google, Apple, Facebook, and Amazon.”
Scott Galloway, a defender of capitalism, and Professor of Marketing, not socialism, agreed, and added this,
“If you owned shares in those 4 companies they have risen 47% so far in the pandemic. And it might be just the middle of the pandemic…Markets have spoken. They have said monopolies are good.”
Galloway also said,
“If you think of the market as an organism that absorbs millions of data points and then spits back a verdict, the market is saying those unregulated monopolies and these are fantastic companies, but let’s be honest, they’re monopolies, they are able to extract rents like other companies can’t, and also companies that are too big to fail like airlines that have reinvested 93% of their free cash back into stock buy-backs which juices the equity based compensation of their CEOs and then on the way down they wrap themselves in the American flag and say ‘we’re all in this together’ and look for bailouts.”
As Galloway said,
“One the way the up in the markets, capitalists love to be rugged individualists. On the way down they want to be coddled and entitled socialists.”
That is modern capitalism. It is sickly capitalism, good for only a few corporations. According to Galloway,
“The Big 4 have come out of the pandemic stronger. So far at least. The Pandemic has treated monopolists kindly like the child of a rich man. Which of course is what they are.
60 cents of the digital marketing dollar pre-pandemic went to Facebook and Google. Coming out of the pandemic it will be 80 cents, because there’s a culling of the herd right now in business. And the biggest elephants will come out of this with more foliage to feed fewer elephants. ”
And monopoly power is never a good thing. It is not good for capitalism. It is bad for capitalism, but some monopolists benefit enormously. And all of this is very bad for the economy. As Galloway said,
“We’ve had a very scary trend towards more and more consolidation of power across fewer and fewer companies. It’s bad for the economy because typically the companies that generate jobs are small and medium-sized companies. There are half as many companies being formed today as there were during the Carter administration! The consolidation of power, the tyrannical march of big tech taking shares from everybody else continues unabated.”
Massive stimulus is good for the economy. We’ve had that. Galloway said, what capitalism needs to oxygenate the economy would be to drastically increase the funding of regulators like the Department of Justice. They have to restore their historic role of reigning in big companies that are destroying the economy. As Galloway said, a company like Amazon can become so big that it can make an announcement that scares the crap out of the entire “free” market. For example, he mentioned how Amazon announced that it would start delivering prescriptions to home and immediately retail pharmacies and pharmaceutical companies shed billions of dollars of market capitalization. As he said,
“we need to go to these companies, and not only big tech, but also big Pharma and big Ag. and break them up and restore and oxygenate the marketplace. If you go back to the AT&T breakup all 7 companies were more valuable than the original one. So, you have more jobs, more acquisitions, more funding, broader tax base. Typically, everybody wins in such a breakup except for one stakeholder the CEO.”
Capitalism needs regulation. Monopolies don’t want it. Real capitalists know that they need it.
Economics writer, Will Hutton, agrees with this. He believes what American capitalism needs is more, not less regulation. Regulation can often be good for business. Business needs good government. A government like that led by Trump is not the answer. He tried his best to eliminate all regulations. There are many on the right who think that is the right approach. It isn’t. It would have been disastrous. According to Hutton, that is why European companies are in many cases doing better than American companies. They are regulated better. So they can’t get fat and lazy.
When these giants are broken up you have more robust and vigorous corporations and it is better for everyone, in particular the public but also the organizations. They all benefit. So, the United States needs a strong President, unlike Trump, who can do this. Is Biden the one? I doubt it, but I hope I am wrong. He certainly will be better than Trump, no matter what he does or does not do.
Capitalism needs smart regulation. Without it, capitalism starves.