It’s deeply worrying that discussions of capitalism and markets are dominated by those at the extremes of the political spectrum. One side sees markets as bound to fail and as a force to deprive the majority, for the private gain of the few. The other sees markets as essentially inviolable, with government interference and regulation, by definition, the cause of inefficiency, which in turn causes poverty and restricts growth. The level of economics underlining these political discussions are simplistic, but both sides are based upon sound theory. In reality, it’s clear that while some markets fail, when they do function well, markets can be better for everyone.
It’s previously been suggested that inequality is necessary in order for an economy to foster innovation. But more recent research has suggested that this is just not the case. This suggests that some thinking about ‘good markets’ and justified inequality may be deeply flawed. Rather than inequality being a sign of a well-functioning market it should be seen as a sign of a market being broken.
Apple is often held up as an example of capitalist virtue as one of the richest companies on earth and an example of the new innovative economy. The high pay packets of its executives are argued by some as justified and a result of a technology company founded on innovation with high margins and few employees. But that can only come from a skin deep analysis of their business. Apple’s biggest product lines like the iPhone rely on technology derived from publicly funded research. At the same time it avoids tax using low tax jurisdictions. Rather than actively embracing competition, Apple has purposefully fought against software competition on its devices and sought to avoid competing through the market place by using massive amounts of litigation against competitors.
Rather than single Apple out as a bad company, it’s worth looking at market structures. Facebook, Google, Amazon, Samsung and many other tech giants can be accused of similar offences to Apple. Companies who are seen as innovative and perfect examples of a competitive economy are often actually deeply anti-competition, willing to smother innovation in order to advance their position.
Aside from driving economic growth, greater competition helps reduce income inequality, with high pay booming in organisations and industries that aren’t open to challengers forcing them to compete. Oxfam identified that the 85 richest people in the world have more than the 3.5 billion poorest and it’s no coincidence that the two richest amongst those 85 are known for their monopolistic tendencies. Bill Gates wealth comes from Microsoft’s stranglehold on the PC market and Carlos Slim’s fortune comes from control of the market in Mexican telephony.
Whilst many are keen to talk about how the market pushes down the wages of the low skilled, they fail to discuss how competitive markets could and should effectively function to prevent high pay from reaching ridiculous heights. With the power of technology to reshape both the workforce and markets showing no sign of letting up, these issues of market competition, high pay and low wages are becoming increasingly important. One way to ensure that more technology doesn’t mean more inequality is for a watchful eye to be kept on anti-competitive practice and crony capitalisms in all its guises.
Tim Stacey, Policy and Campaigns Officer