I borrow the word supercapitalism from Robert Reich. (Supercapitalism: The Transformation of Business, Democracy, and Everyday Life) It seems to be a reasonable way of calling attention to the fact that older notions of capitalism have lost touch with what is happening now. It is ironic that Mussolini also used the word to describe a concept in Italian Fascism.
Mussolini thought of the Marxist socialist system in terms of State Supercapitalism. According to Mussolini there were four types of state intervention, the first one was the one of the liberal states, this is the most used in supercapitalism, in most cases being a disorganized and sporadic intervention. The second one was the one used by communists in its State Supercapitalism. And the third one was the one used in America which he considered as a combination of the first two State Intervention systems.
Mussolini argued that although Italian Fascism did not support dynamic and heroic capitalism, he appreciated it for its contribution to industrialism and technical developments but claimed that he did not support or appreciate supercapitalism, which he claimed was incompatible with Italy's agricultural sector. Mussolini strongly criticized this stage of supercapitalism, saying:
At this stage, supercapitalism finds its inspiration and its justification in a utopia: the utopia of unlimited consumption. Supercapitalism's ideal is the standardization of the human race from the cradle to the grave. Supercapitalism wants all babies to be born exactly the same length so that the cradles can be standardized and all children persuaded to like the same toys. It wants all men to don the very same uniform, to read the same book, to have the same tastes in films, and to desire the same so-called labor-saving devices. This is not the result of caprice. It inheres in the logic of events, for only thus can supercapitalism make its plans.
I insert these ideas from Mussolini because they are interesting in the present context. Reich's use of the word is different:
Robert Reich Issues a Warning in 'Supercapitalism'
In Supercapitalism, Robert Reich argues that there's a growing conflict between democracy and capitalism. As citizens, we have ideals, but as consumers, we have needs. We abhor child labor, for instance, but we want a cheap pair of jeans. And we might be dismayed over Main Street's demise, but we still look for bargains at Wal-Mart.
Reich says that those two impulses have not always been at war. Between 1945 and 1975 — a period he calls the "Not Quite Golden Age" — the imperatives of business, government and labor were more or less in balance with one another. (The "not quite" refers to the fact that women and minorities were still lagging behind.)
But in the 1970s, according to Reich's analysis, advancements in technology and a growing, dynamic economy set the stage for corporate competition to enter politics. Today, companies battle it out with other companies, fighting for laws and regulations that favor them and disadvantage their competitors. Such pressures make it more difficult for citizens to have a meaningful say in public policy.
The lack of balance Reich describes in recent times is not new. It comes and goes but its seeds are always there because of the nature of the system. Read on below and we will discuss this with respect to what may be a natural evolutionary tendency: to become oligopoly.
Oligopoly is
a market form in which a market or industry is dominated by a small number of sellers (oligopolists). A general lack of competition can lead to higher costs for consumers. Because there are few sellers, each oligopolist is likely to be aware of the actions of the others. The decisions of one firm influence, and are influenced by, the decisions of other firms. Strategic planning by oligopolists needs to take into account the likely responses of the other market participants.
Some of the characteristics of oligopolies are:
Profit maximization conditions: An oligopoly maximizes profits by producing where marginal revenue equals marginal costs.
Ability to set price: Oligopolies are price setters rather than price takers.
Entry and exit: Barriers to entry are high. The most important barriers are economies of scale, patents, access to expensive and complex technology, and strategic actions by incumbent firms designed to discourage or destroy nascent firms. Additional sources of barriers to entry often result from government regulation favoring existing firms making it difficult for new firms to enter the market.
Number of firms: "Few" – a "handful" of sellers. There are so few firms that the actions of one firm can influence the actions of the other firms.
Long run profits: Oligopolies can retain long run abnormal profits. High barriers of entry prevent sideline firms from entering market to capture excess profits.
Product differentiation: Product may be homogeneous (steel) or differentiated (automobiles).
Perfect knowledge: Assumptions about perfect knowledge vary but the knowledge of various economic factors can be generally described as selective. Oligopolies have perfect knowledge of their own cost and demand functions but their inter-firm information may be incomplete. Buyers have only imperfect knowledge as to price,cost and product quality.
Interdependence: The distinctive feature of an oligopoly is interdependence. Oligopolies are typically composed of a few large firms. Each firm is so large that its actions affect market conditions. Therefore the competing firms will be aware of a firm's market actions and will respond appropriately. This means that in contemplating a market action, a firm must take into consideration the possible reactions of all competing firms and the firm's countermoves. It is very much like a game of chess or pool in which a player must anticipate a whole sequence of moves and countermoves in determining how to achieve his or her objectives. For example, an oligopoly considering a price reduction may wish to estimate the likelihood that competing firms would also lower their prices and possibly trigger a ruinous price war. Or if the firm is considering a price increase, it may want to know whether other firms will also increase prices or hold existing prices constant. This high degree of interdependence and need to be aware of what other firms are doing or might do is to be contrasted with lack of interdependence in other market structures. In a perfectly competitive (PC) market there is zero interdependence because no firm is large enough to affect market price. All firms in a PC market are price takers, as current market selling price can be followed predictably to maximize short-term profits. In a monopoly, there are no competitors to be concerned about. In a monopolistically-competitive market, each firm's effects on market conditions is so negligible as to be safely ignored by competitors.
Non-Price Competition: Oligopolies tend to compete on terms other than price. Loyalty schemes, advertisement, and product differentiation are all examples of non-price competition.
Some examples:
Many media industries today are essentially oligopolies.
Six movie studios receive 90% of American film revenues.[citation needed]
The television and high speed internet industry is mostly an oligopoly of seven companies: The Walt Disney Company, CBS Corporation, Viacom, Comcast, Hearst Corporation, Time Warner, and News Corporation.
Four wireless providers (AT&T Mobility, Verizon Wireless, T-Mobile, Sprint Nextel) control 89% of the cellular telephone service market. This is not to be confused with cellular telephone manufacturing, an integral portion of the cellular telephone market as a whole.
Healthcare insurance in the United States consists of very few insurance companies controlling major market share in most states. For example, California's insured population of 20 million is the most competitive in the nation and 44% of that market is dominated by two insurance companies, Anthem and Kaiser Permanente.
Anheuser-Busch and MillerCoors control about 80% of the beer industry.
In March 2012, the United States Department of Justice announced that it would sue six major publishers for price fixing in the sale of electronic books. The accused publishers are Apple, Simon & Schuster Inc, Hachette Book Group, Penguin Group, Macmillan, and HarperCollins Publishers.
And, of course, there are the
Pharmaceutical companies
You can see how large oligopolies work when you look at the pharmaceutical industry. Pharmaceutical companies have become multinational. There has been an estimate of 10,000 mergers and consolidation of Pharma companies in the industry in the past four years. Companies like GlaxoSmithKline and AstraZeneca were formed by mergers for the stated purpose of specializing in a few areas in research and development. In reality such mergers have resulted in less drugs being developed and the Pharma companies requesting extension time for their patents. The increase of sales globally and the selling of drugs across country borders has not resulted in a decrease of prices for buyers. We can all attest to the fact that here in the United States prices are artificially high when compared to prices in Mexico and Canada.
The trend is obvious. Their power is obvious. The real question seems to be whether or not government is capable of dealing with these systems any longer. What do you think?