Where’d my job go dude?

One of the greatest untold economic stories of the last 2-3 decades (there are so many) is how the economy (both US and global) has consolidated.  In industry after industry, there’s just not the level of competition or entry or innovation that we formerly had.  This is significant for many reasons.

One, historically the Great American Job Machine came from innovation, entreneurship, and new businesses.  As a practicing corporate planner and later as corporate strategic planning consultant I witnessed the phenomenon.  In the 1980’s and even early 1990’s, the route to success in business was make a better product, innovate, find new customers, adopt new technology to control costs, improve efficiency. All the textbook stuff.  That has long ago shifted.  That approach is old-school (showing my gray hair now).  Now business and corporate success comes from playing a financial gin game: buy companies, sell companies, cut employees and hollow-it-out, don’t get involved in the core business, and most of all:  eliminate competitors.  Use patents, use special government favors & legislation, illegal threats, buy your competitors, whatever.  Just eliminate the competitors. Then raise prices. Then eliminate consumer options and choice.  Eventually consumers become the “property” of your company (much like serfs).

Second, since the reality is that most industries are no longer competitive, it also means that macro-economic policies from the Classical-New Classical-Supply Side-Monetarist-Rational Expectations-Libertarian schools won’t work.  They all assume that all markets are competitive.  But they aren’t in reality!

In the real world, true radical innovation and invention (the stuff that really advances our living standards and productivity) rarely comes from large organizations and corporations.  They have too much to lose from upsetting the status quo.  The modern, large, hierarchical organization is actually designed and intended to squash innovation, despite all the consultant hype and buzz about “networks” and “learning organizations” (puh-leeze!).  I mean, if a large hierarchical, command-and-control organization brought innovation and invention, then wouldn’t we have a stereotype of Army Generals as the most creative inventive types around instead of our mythology of the mad scientist or the wild works-in-his-garage inventor?

Anyway, for more on this topic (and much better written) try Who Broke America’s Job Machine by Lynn and Longman in Washington Monthly.  Also, for the curious, there’s wealth of surprising info on how even your favorite little local business or product has become an oligopoly at Oligopoly Watch, although this nice little blog doesn’t seem to have been updated since 2009.

Interesting and Good Stuff from This Week

  • From the Wall Street Journal: Bring Back the Robber Barons I think I’ll pass. I mean why stop with the robber barons? Why not go all the way back to feudalism where most workers are the personal property of some monied rich baron who’s buddy-buddy with the king?
  • From Maxine Udall (girl Economist): Bring Back the Robber Barons? I don’t Think So. You go girl.
  • “The $800 billion federal stimulus bill has boosted employment by 1 million to 2.1 million and helped the economy grow about 1.5% to 3.5% larger than it would have without the stimulus, the nonpartisan Congressional Budget Office said Tuesday.”  Read more as the CBO smacks down the arguments of critics of the stimulus.
  • Rajiv Sethi on Intellectual Property and Guard LaborGreat article including good further links about how wasteful and unproductive copyrights, patents, and other forms of government-granted private monopolies on ideas.  Really such efforts as copyright and patent schemes are really another form of attempted thought-control by a minority at great expense to the rest of us.  [disclaimer: I own a patent myself, but have never attempted to restrict it’s use]
  • Gavin Kennedy at Adam Smith’s Lost Legacy with What Adam Smith Actually Identified as the Appropriate Roles for 18-century Governments responds to one of the latest attempts to claim Adam Smith was an advocate of tiny-government, libertarian policies.  Gavin has a very detailed list of the many functions that Smith specifically said governments should provide (and not outsource to a private profit-making firm). It’s not at all what the Republicans, Libertarians, or Chicago Boys claim.  I really wish people would read the books before they claim some dead author supports them.
  • For the student interested in economic history, particularly macro, the history of Say’s Law is essential.  It defines the difference between Classical theory vs. Keynesianism/Progressive. Brad Delong has an excellent post on this.