rc3.org

Strong opinions, weakly held

What corporations actually think of capitalism

In school we learn that capitalism is the most efficient system known for allocating scarce resources, but real life has taught me that very few corporations agree with economists on this point. Take, for example, how a banking analyst reacts to the news that the credit card legislation that just gone into effect has led to credit card issuers competing more aggressively for customers with high credit scores:

The CARD Act is leading all issuers to the top of the credit food chain, and more competition is never a good thing in any industry, regardless of the product, but particularly in the relatively homogenized card space,

Make no mistake, what “competing more aggressively” means is offering lower interest rates and better benefits to customers. The takeaway here is that this is what corporations are after when they spend money on lobbying — reduced competition, and of course, reduced regulations. So here we have a policy that regulates the worst behavior of corporations and that has led directly to competition that benefits customers. This is exactly the sort of thing Republicans are against.

7 Comments

  1. Corporations don’t always lobby for reduced regulations. Some regulations, for instance, favor established corporations by raising barriers to market entry, or otherwise reducing competition.

    Which is why it’s always worth closely examining proposed regulations that corporations seem to be favoring.

  2. ISTR (but it’s a long time ago) that we learned that an “ideal free market” is the most efficient system known for allocating scarce resources – not quite the same thing, technically, as “capitalism”.  But that doesn’t mean anybody thinks an ideal market (or capitalism) is perfectly, or even truly, efficient – it’s just not as inefficient as other methods.  And the ideal free market is as common in nature as the frictionless sphere so beloved of the physics classes – real life is messy and fuzzy, which is why real markets require regulation, which is never perfect either.

    And a private business obviously, duh, aims to make a profit, as much profit as possible.  That’s what it’s for.  Every businessman naturally wants a monopoly, and the purpose of regulation is to prevent him having one.  That’s real life, bubele.  Does that mean all capitalism is evil?  Try the other thing before you say so.

  3. Of course capitalism is not evil, in fact, that was my point. I think capitalism is great, and I think we need to keep an eye on the the places where business and government intersect to undermine it.

  4. He’s right – “more competition is never a good thing in any industry” – IF you are a supplier in that industry. If you are a consumer, it’s great!

    Of course, the increased competition doesn’t explain why Citibank just send me a letter saying they are going to add a $60 annual fee to one of my cards. I guess I don’t make them enough in transaction fees. Goodbye, Citibank! Oh wait – I have another card from you without an annual fee. 🙂

  5. Of course the counter argument, which I don’t agree with, is that if it was truly a free market then competition for clients would drive the credit card companies to be as little evil as possible to make a buck. Unfortunately, I believe this is only valid when competitors aren’t able to leverage external tools to compete in another area. Think of IE vs. Netscape.

  6. Businessmen, by and large, are about as keen on being exposed to market forces as biologists are interested in being subject to natural selection. Members of both groups, however, will bang on all day about how critical these forces are in producing a desirable world.

  7. The only thing about this that surprises me is that they came right out and admitted it.

    “This could lead to increased competition, which we don’t want — did I say that last part out loud?”

Leave a Reply

Your email address will not be published.

*

© 2016 rc3.org

Theme by Anders NorenUp ↑