> Even in the unconcentrated 18th
>century world, Adam Smith could recognize that members of the
>same trade rarely if ever met, even for the most innocent purposes,
>without the meeting resulting in a conspiracy against the public
>aimed at raising prices and reducing wages. Today such meetings
>involve far fewer firms and are quite regularized, making
>oligopolistic collusion (while laughing at antitrust laws if the
>participants even remember that they haven't been formally
>repealed) the norm.
The business press is full of tales of how companies can't raise prices. The car industry, once the paradigmatic oligopoly, is facing rising steel prices, but is unable to raise prices - in fact, 0% financing and other sales incentives have been increasing. Despite rising fuel prices, airlines have been unable to raise prices. Profit pressures in both industries are immense. It's not 1965 anymore, despite this:
>If (pace Galbraith c.1965) profit maximization
>is the economic norm under capitalism, then the sharing monopolists
>*do not control their own prices* since those prices are already
>at or close to the profit-maximizing level for the industry.
I thought Galbraith said the opposite. Quoting my own summary of The New Industrial State from Wall Street:
>Unlike Baran and Sweezy, Galbraith dismissed profit maximization as
>the goal of the giant firm in favor of the growth in sales and
>prestige. To accomplish its goals, it needed not maximum profits,
>but "a secure minimum of earnings" that will keep it from having to
>tap the troublesome capital markets or cope with stockholders who
>might complain about inadequate, shaky, or missing dividends (pp.
>151-152). But the technostructure had little to gain from high
>profits, which were passed along to shareholders, and which usually
>come only with higher risk, and risk could disturb managerial
>autonomy. His technostructure was modestly paid, and managerial
>compensation divorced from the stock price. "[T]he case for
>maximization of personal return by top management is not strong" (p.
>108). Secure mediocrity was the best regime of all, in the eyes of
>the technostructure. Growth in revenue, however, was a sure route to
>growing power, prestige, and employment: "Expansion of output means
>expansion of the technostructure itself" (p. 157). The totem of
>sales growth was magnified on the national level with the
>sanctification of GDP growth as the end of all economic activity.
Sounds like another world.
Doug