31 Competition
“Monopoly produces competition, competition produces monopoly” (Marx).
If you want to capture lasting value, look to build a monopoly- competition is for losers. (Peter Thiel)
Fix
Concentration through acquisition
At this point we’ve got some fairly incendiary evidence. The ‘crime’ of elite wealth concentration seems to be tied directly to corporate oligarchy. But before we put the case to rest, let’s consider the testimony of the defense’s expert witnesses. I’m talking, of course, about neoclassical economists.
Ostensibly, neoclassical economists love competitive markets and hate monopoly. But beginning in the 1980s, a weird thing happened; economists at the University of Chicago started to argue that despite lacking competition, monopolies could still be ‘efficient’. Their reasoning was that if monopolists actually behaved badly, they would be undercut by competitors, and their monopoly would be undone. Therefore, if a monopoly exists, it must be because the monopolist is doing what the market wants.
Now the logic here is torturous. We’re positing imaginary competition to justify a lack of real-world competition. But then again, neoclassical economists have never let the real world get in the way of their imaginations. And in this case, the goal of the imaginary theorizing was always obvious: it was designed get government out of the way and allow big corporations to purchase their way to power.
Savvy corporations are always looking for a better route to power. And that better route is to buy instead of build.
When you buy your competitor, you solve two problems at once: you accumulate power and reduce your competition. The difficulty, though, is that this buy-not-build tactic has the appearance of being a blatant power grab. So there’s the risk that an entrepreneurial government might get in the way.
That’s where Chicago-school theorists come in. Starting in the 1980s, they successfully preached an ideology that got the government out of the way. The net result is the modern corporate landscape, forged in large part by a string of government-approved corporate acquisitions.
The consolidated corporate landscape of the 21st century was forged by a massive, neoliberal wave of mergers and acquisitions.
The buy-to-build ratio takes the value of corporate mergers and acquisitions and divides them by the value of greenfield investments. The greater this buy-to-build ratio, the more that corporations are buying (and not building) their way to power.
The neoliberal era saw a massive wave of corporate mergers and acquisitions. As a result, from 1980 to 2000, the US buy-to-build ratio jumped nearly tenfold. And guess what accompanied this acquisition wave. That’s right … a sharp rise in corporate concentration.
Rockefeller, did you know that he was one of the principle funders of the University of Chicago? Ironic, isn’t it. Rockefeller, like Thiel, spoke openly about his pursuit of power and personal enrichment. So if, during Rockefeller’s life, someone had connected elite wealth concentration to corporate consolidation, the reaction would have been “Well, that’s obvious.”
Fast forward to the 1980s and the connection became not-so obvious, at least to economists. And that’s thanks in large part to Rockefeller’s Chicago-school investment, which pumped out decades worth of pro-oligarch propaganda.