re: New Rule: If your company is to big to fail, your company is too big to exist. The next Prez. needs to split up huge companies like we did with AT&T.
Exactly right. Companies too big to fail have massive negative externalities that should be managed through regulation. And the discussion (see link) of this claiming that the huge, anti-capitalist, companies that exist now are not monopolies and therefore anti-trust laws should not be used makes no sense. Anti-trust laws are not for monopolies. Trusts were huge anti-competitive organizations that sought to eliminate the free market and extract benefits by distorting the market. Those laws were adopted not to regulate monopolies but to regulate anti-competitive behavior.
The free market theory formulated by Adam Smith et.al. was based on perfect competition where no one entity could influence the market. In reality that is not possible but approximations of it can exist (we are far from such a state today, however). Fine, the anti-capitalist large corporations are not monopolies – they are oligopolistic that can still extract profits through their ability to distort the free market. Is the fact they are not a monopoly really that relevant?
Enforcing rules that prevent businesses from using their size and power to extract outsized profits is the right thing to do. Anti-trust laws are the proper tool. when politicians are paid lots of money by people with the gold to allow them to cripple the free market and create large corporations that profit, not by competing in a free market, but by manipulating the market that is a bad practice. It won’t change until people stop electing politicians that reward those that pay them for favors. And that is unlikely to happen anytime soon.
What we can hope is that there is some limit on how egregious the favors politicians grant those paying them money are. Maybe this latest escapade (and the costs of those favors to bankers) will cause a reduction in the favors granted. I don’t have high expectations for the changes though.
It doesn’t really matter about the economic argument. There are several different economic arguments (and then tons of variations on the broad themes):
1) Capitalism as defined by Adam Smith et. al clearly said you must have government regulation to allow the markets to operate. Obviously companies will attempt to consolidate power to extract profits that would not be possible in a free market. One role of government is to prevent that. And also regulation of negative externalities (such as pollution, too big to fail…) is important.
2) Those that believe “free market” means no regulation or protections against anti-competitive behavior.
3) Those that believe the government should control the behavior of firms. Not just regulate to allow the free market to work but to impose laws that society chooses to favor…
4) Keynesian management of the economy…
In the USA as long as people for politicians that focus most on providing favors for those that pay them lots of money we get what we have now. That seems to be what we want.
The economic argument is not going to sway the politicians (we rarely vote for types that would be, so why would we expect them to be). Maybe the economic arguments can sway some people to elect people that have different economic priorities. Once people decide they don’t want to bear the costs of the current system they will elect people that will change it. Or if they decide they support the current system they will elect those they have been. There does not seem to be much of a mood for actual change (just some minor changes here or there and a bunch of rhetoric).
There has been real change before. Politicians actually enacted trust busting legislation. They actually enacted financial reforms in the 1930′s. It will likely happen again. People just forget how bad things normally have to get before we actually support real change.
It is possible for people to actually chose to do the smart thing because it is a better solution. It just isn’t all that common for a society to chose to do the smart thing if those will the most gold might have some of their wealth endangered by the change. Normally that type of change requires quite a bit of effort to through the obstruction of the entrenched interests.