How We Have Killed The Free Market

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Over the past 30 years Corporate America has killed the one thing they claim to prize so passionately.  Yes the "Free Market".  But how?

 

First, fire your workers that are also your customers or your customers' customers (B2B).  Either send their jobs to a land in which you can pay much lower wages.  In fact, so low those workers will never be your customers or your customers' customers.  Or just simply fire them outright, change their status to part time and/or only hire on a temporary basis.

 

Eventually your customers or your customers' customers are becoming a lot poorer.  What to do? Lower prices to match declining incomes.  However, the only way to do that and still make a profit is to grow in size so profits can be derived from volume. So the M&A flurry begins.  Some don't make it and are left for dead.

 

Second, as you grow in size squeeze your suppliers.  So eventually your suppliers do what you did, they merge to stay afloat.  Some of them are left alongside the road side to die.

 

Naturally this means more firings and a greater move towards part time and contract workers.  In some cases companies reclassify their employees to 1099 workers, or independent contractors. 

 

What is the accumulative effect?  A huge race towards the bottom. And we are in it big time.

 

Want to know why there is so much overt hate now in this country?  It's because that little ship in the tidy bowl is becoming more and more crowded as corporations have their hand on the flush lever.

 

Consequently, the free market is dying.  A few big retailers dot the landscape. Some like Sears, Macy's, Radio Shack are slowly fading away.  The airline industry has been consolidated into a few major carriers.  The health care industry is morphing into a handful of major providers.  Ditto how ten banks hold over 80% of total deposits.

 

Free market?  Sorry that has been shoved aside for oligarchies. 

Comments

Bill H. Added Feb 11, 2017 - 5:00pm
 
George - you are right on the money with this article!
Yes, the big fish eat the little fish and spit out the bones since there are no controls or incentives to prevent it.
The end result is happy CEO's and stockholders, but a sad state of America.
Thomas Sutrina Added Feb 11, 2017 - 7:49pm
George the concentration of industries under few providers should be places them very close if not violating anti-trust laws.  The capacity to set the market price which large companies have done is opening them to anti-trust.  They are too big to not set the market price.  The heath insurance industry that is regulated by states and  the drop in the numbers of suppliers in many states is also creating another anti-trust situation.  
 
To do this politicians are harming the companies that feed there war chests and have resulted in them being re-elected multiple times.  So the politicians will only do so if they believe that the votes are so angry with the resulting corruption to throw them out.    George are we ready to throw them out? 
Stephen Hunter Added Feb 12, 2017 - 11:16am
Well done George, you have described what is happening very well, as usual. 
Is there an opportunity to take a longer view? Where can we generate new jobs and opportunities in today's reality. Is it the "disruptive" industries like alternative energy sources, a no car society, and so on? The traditional industries are fighting tooth and nail to keep us reliant on fossil fuels for as long as possible, for example. 
Same could be said for Big Pharma, doing everything possible to delay finding the cure for cancer, or probably more accurately, not promoting the prevention of cancer. 
 
Leroy Added Feb 12, 2017 - 12:06pm
Great article, George, and right on the mark.  I would also like to add the price fixing of salaries.  Many of the large companies collude on salaries.  My company just says it is using this database to know what to pay and seeks to pay the average wage.  If every company sought to pay the average wage, wages would go to zero.  The real effect is that wages are stagnant.  It uses various tactics to keep wages down.  I'm in a battle with my boss now.  I'm asked to evaluate myself.  I met my objectives.  I say I am 100%.  My boss, towing the company line, asks, "You mean you are perfect?"  He implies things that I should have done that are not stated in the objectives, like being responsible for what my predecessor should have done.  It is referred to as les trois verities, the three truths about you or, more precisely, three things that suck about you.  It is just a tactic to keep wages down.  It may not be the best of times, but my company is still making profits hand over fists by doing the things you mentioned and controlling wages and suppliers. Benchmarking against other companies is nothing short of collusion.
 
I was recently told that I didn't have the right attitude.  I try to protect my suppliers so they will be there when I need them.  The official position is that once a contractor commits to a price, we hold them to it, regardless whether we change our mind and cause them to do extra work or supply extra equipment.  We routinely blow up our suppliers, especially small ones.  They either suck it in and lose money with hopes of making it up on the next one or fight it and lose all future business.
Dino Manalis Added Feb 12, 2017 - 1:24pm
That's why the free market needs limited government intervention with simple regulations to keep it running smoothly and freely for everyone's sake.  Competition should be promoted, not monopolies, small businesses are the backbone of the economy and produce the most jobs.
George N Romey Added Feb 12, 2017 - 1:33pm
Thanks. As we are shoved onto the little boat in the Tidy Bowl (remember the commercial from years back) big corporate has dumped on us, thrown their dirty toilet paper on us and now we are just waiting for the big flush. 
Jeff Jackson Added Feb 12, 2017 - 1:39pm
Great article George. Leroy is correct, that firms look at compensation as "average wage" while seeking, of course, above-average workers. Guess what? Firms that pay average wages usually get average workers. I've seen plenty of above-average workers leave organizations because of the average wages they were paid.  As a trainer I have cultivated many a talented employee, who left when offered better compensation.  I always wished them well and and told them I would give them stellar references, something that bosses rarely offered me, because, I think, they knew they couldn't take credit for my solutions anymore. Want stellar employees? Offer stellar compensation.
George N Romey Added Feb 12, 2017 - 1:44pm
Jeff I've seen companies unwilling to hire good people simply because they wanted $5K to $10K more than what was offered.  You would think $5K to $10K, the company probably spends more on that than on toilet paper in a year.
 
It comes down to too many, in fact most, companies no longer see employees as assets.  They are simply a line item on SG&A that needs to be reduced by any means.  Plain and simple. 
Stephen Hunter Added Feb 12, 2017 - 1:54pm
White collar salaries is another attribute of the current situation, which I find distasteful. And this may not be what you think. 
An example of what I mean by "white collar" is young lawyers. Firms hire them on a fixed salary and work the living shit out of them. Burning many out mentally and emotionally but who cares, there are droves more lined up to take their places. 
George N Romey Added Feb 12, 2017 - 2:00pm
Stephen not to mention the constant threat of having the legal research done overseas.  Outsourcing threatens all types of occupations, not just Joe Lunchbox which the MSM claims. 
Leroy Added Feb 12, 2017 - 6:16pm
"An example of what I mean by "white collar" is young lawyers. Firms hire them on a fixed salary and work the living shit out of them."
 
I have little simply for lawyers.   There are in oversupply now.  Even partnered lawyers are abused today.  One lawyer I was working with told me the senior partners had decided they had to pay the expected income to the firm upfront.  In other words, they had to borrow the money to pay the firm a percentage of what they expected to bring in.  Anything over they amount, they were able to keep or keep a percentage of.  Talk about pressure.
Rich Purtell Added Feb 13, 2017 - 9:33am
You really have to get down to an individual level as well.  Groups such as the AMA have been lobbying for rent-seeking for over a hundred years.
Even the Obama administration put out a report which criticized the excessive use of occupational licensing. Rather than to "protect the consumer", licensing has turned into means to sustain scarcity and force up prices. We are almost back to the same problems as what existed with birthright job mandates (if your father was a blacksmith, then you were obligated to become a blacksmith) of hundreds of years ago.
Government professional licensing has been as damaging to the free market as anything else.  You can't leave this out in any discussion about free enterprise.
Patrick Writes Added Feb 13, 2017 - 7:33pm
What do we do about this now?
 
Trump seems to have the right idea (baby steps, get some manufacturing jobs back, get some infrastructure projects going, play with tariffs to get currency abusing countries under control). But these would be the first steps of a long road back to full employment.
 
I think the Republicans (under Trump) generally have the right idea and the Democrats generally have the wrong idea (put everyone on government benefits).
 
But that is by no means true in all cases (ex: Citizens United is still a terrible Supreme Court decision, forcing Mexico to pay for a southern wall would do irreparable damage to the national reputation for generations to come). 
George N Romey Added Feb 13, 2017 - 7:47pm
My concern is will Trump ever get an agenda through with all the hoopla that is going on?  Nothing has been said about infrastructure.
 
Also how committed are companies going to be to expanding and hiring?  We are still caught in this Catch 22 where companies won't hire without really strong demand and the ability to raise pricing and the demand won't come without the good jobs and full employment. 
 
The last time this occurred it took a huge war to finally jumpstart the economy.  In lieu of war, what then?
Michael Cikraji Added Feb 14, 2017 - 10:00am
John D. Rockefeller murdered the Free Market, and it will never return. We unfortunately have to have government red tape to protect small business at home, and nationalistic interests abroad. Otherwise, we'd end up with one giant company that rules the world and doesn't care about us (see the fictional Resident Evil's The Umbrella Corporation). In money and power, capitalism has become a Will to Power. It makes me sad....
George N Romey Added Feb 15, 2017 - 2:40pm
Michael I remember the 1980s when the M&A crazy started.  We were sold on the idea that big business would mean career opportunities beyond our wildest imagination.  Fancy maybe moving to Sydney. Well if your firm becomes a MNC that will be very possible.  We didn't understand the real dark side, which was job cuts, outsourcing to cheap labor, limited social mobility and the end of career growth.
Thomas Sutrina Added Feb 15, 2017 - 5:27pm
Michael Rockefeller did not create the regulations that cost more then the highest taxes in the world.  The ~ 1943 FDR Second bill of rights that said citizen have a right to health care, a home, food on the table, a job etc.  That is right out of the principles of Marx and socialism.  And to pay for that wealth has to be transferred.  And since the people will now willing give their money to the government the government does not ask them but tell them, tyranny.  
George N Romey Added Feb 15, 2017 - 5:44pm
Thomas if this is so true why did we have such a strong middle class and a much narrower income distribution in the 1950s and 1960s?  If business was suffering as much as citizens you would have an excellent point.  Yet over the past 30 years as the New Deal has been deconstructed competition has folded, corporate profits have soared, and bigger keeps getting bigger while most Americans have been suffering from income declines, lost job opportunities, less social mobility, increased debt and more economic instability.  Is a future of Uber drivers where the US wants to go?
 
Have you ever heard the corporate elite talk about driving for Uber or Lyft?  I have.  They talk as though its some kind of liberating, freedom of choice experience.  No clue that most Uber/Lyft drivers barely make minimum wage after expenses.  No clue that people need income stability and security.  BTW, the person talking this way is Podesta a Democrat that is involved with Lyft.  By no means is this a one party or another issue.
Thomas Sutrina Added Feb 15, 2017 - 8:16pm
George what was the change between the 1960 and 2000's?  Regulations have been increasing, and the size of the banks have increased and the number of small banks has decreased.  That equals less competition  which means profits go up.  Main street of the 1960's are deserted and all those small businesses gone.  They have been replaced by malls with chain stores, big business.  As the number of competitors decrease profits go up.   All the competitors pay for the same regulations so even with a large number of competitors the cost will be passed along.   With fewer competitors there is less pressure so they at a profit to the cost of regulations as they pass it on to the customer.
George N Romey Added Feb 15, 2017 - 8:19pm
Thomas its been the relaxation of anti trust that has allowed big business to flourish and competition to be squashed.  Most of this is tied to limiting competition not getting around regulations.
Peter Corey Added Feb 15, 2017 - 9:39pm
>First, fire your workers that are also your customers or your customers' customers (B2B).
 
So if we pass a law making it illegal to fire any employee, then we'd have more of a "free" market? I don't think so.
 
The essence of a free market is (duh!!!) FREEDOM; which includes the freedom to hire employees AND fire them, if necessary.
Thomas Sutrina Added Feb 16, 2017 - 8:48am
George they all enhance the growth of big and eliminate small, regulations  that favor big companies with lots of attorneys, lax anti-trust, gov welfare to businesses, etc.

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