1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
|
<HTML>
<HEAD>
<TITLE>C.6 Can market dominance by Big Business change?</TITLE>
</HEAD>
<BODY>
<p>
<h1>C.6 Can market dominance by Big Business change?</h1>
<p>
Capital concentration, of course, does not mean that in a given market,
dominance will continue forever by the same firms, no matter what. However,
the fact that the companies that dominate a market can change over time
is no great cause for joy (no matter what supporters of free market capitalism
claim). This is because when market dominance changes between companies all
it means is that <b>old</b> Big Business is replaced by <b>new</b> Big Business:
<p><blockquote>
<i>"Once oligopoly emerges in an industry, one should not assume that
sustained competitive advantage will be maintained forever. . . once
achieved in any given product market, oligopoly creates barriers to entry
that can be overcome only by the development of even more powerful forms
of business organisation that can plan and co-ordinate even more complex
specialised divisions of labour."</i> [William Lazonick, <b>Business Organisation
and the Myth of the Market Economy</b>, p. 173]
</blockquote><p>
Hardly a great improvement as changing the company hardly changes the impact
of capital concentration or Big Business on the economy. While the faces
may change, the system itself remains the same.
<p>
In a developed market, with a high degree of monopoly (i.e. high market
concentration and capital costs that create barriers to entry into it),
new companies can usually only enter under four conditions:
<p><ol>
1) They have enough capital available to them to pay for set-up costs and
any initial losses. This can come from two main sources, from other parts
of their company (e.g. Virgin going into the cola business) or large
firms from other areas/nations enter the market. The former is part of
the diversification process associated with Big Business and the second
is the globalisation of markets resulting from pressures on national
oligopolies (see section <a href="secC4.html">C.4</a>). Both of which increases competition
within a given market for a period as the number of firms in its
oligopolistic sector has increased. Over time, however, market forces
will result in mergers and growth, increasing the degree of monopoly
again.
<p>
2) They get state aid to protect them against foreign competition (e.g.
the South East Asian "Tiger" economies or the 19th century US economy) -
<i>"Historically, political strategies to develop national economies have
provided critical protection and support to overcome. . . barriers to
entry."</i> [William Lazonick, <b>Op. Cit.</b>, p. 87]
<p>
3) Demand exceeds supply, resulting in a profit level which tempts other
big companies into the market or gives smaller firms already there excess
profits, allowing them to expand. Demand still plays a limiting role
in even the most oligopolistic market (but this process hardly decreases
barriers to entry/mobility or oligopolistic tendencies in the long run).
<p>
4) The dominant companies raise their prices too high or become complacent
and make mistakes, so allowing other big firms to undermine their position
in a market (and, sometimes, allow smaller companies to expand and do the
same). For example, many large US oligopolies in the 1970s came under
pressure from Japanese oligopolies because of this. However, as noted
in section <a href="secC4.html#secc42">C.4.2</a>, these declining oligopolies can see their market control
last for decades and the resulting market will still be dominated by
oligopolies (as big firms are generally replaced by similar sized, or
bigger, ones).
</ol><p>
Usually some or all of these processes are at work at once.
<p>
Let's consider the US steel industry as an example. The 1980's saw the
rise of the so-called "mini-mills" with lower capital costs. The
mini-mills, a new industry segment, developed only after the US steel
industry had gone into decline due to Japanese competition. The creation
of Nippon Steel, matching the size of US steel companies, was a key factor
in the rise of the Japanese steel industry, which invested heavily in
modern technology to increase steel output by 2,216% in 30 years (5.3
million tons in 1950 to 122.8 million by 1980). By the mid 1980's, the
mini-mills and imports each had a quarter of the US market, with many
previously steel-based companies diversifying into new markets.
<p>
Only by investing $9 billion to increase technological competitiveness,
cutting workers wages to increase labour productivity, getting relief
from stringent pollution control laws and (very importantly) the US
government restricting imports to a quarter of the total home market
could the US steel industry survive. The fall in the value of the dollar
also helped by making imports more expensive. In addition, US steel
firms became increasingly linked with their Japanese "rivals," resulting
in increased centralisation (and so concentration) of capital.
<p>
Therefore, only because competition from foreign capital created space in
a previously dominated market, driving established capital out, combined
with state intervention to protect and aid home producers, was a new segment
of the industry able to get a foothold in the local market. With many
established companies closing down and moving to other markets, and once
the value of the dollar fell which forced import prices up and state
intervention reduced foreign competition, the mini-mills were in an
excellent position to increase US market share.
<p>
This period in the US steel industry was marked by increased "co-operation"
between US and Japanese companies, with larger companies the outcome.
This meant, in the case of the mini-mills, that the cycle of capital
formation and concentration would start again, with bigger companies
driving out the smaller ones through competition.
<p>
So, while the actual companies involved may change over time, the economy
as a whole will always be marked by Big Business due to the nature of
capitalism. That's the way capitalism works -- profits for the few at the
expense of the many.
<p>
</BODY>
</HTML>
|
