[Davisgig] Fwd: Krugman supports DavisGig

Robert Nickerson rob at omsoft.com
Mon Apr 18 15:59:29 PDT 2016

*Paul Krugman: We're Living in a Second Robber Baron Era*

*/Verizon's unregulated monopolistic behavior hurts everyone./*

/By//*Janet Allon* <http://www.alternet.org/authors/janet-allon-0>/ / 
*AlterNet* <http://alternet.org/> /April 18, 2016/


Paul Krugman explains why the Verizon strike of last week points out a 
much deeper problem than what goes on with one telecommunications 
company in Monday's column 
We are living in a time of corporate monopolies that rivals those of the 
robber baron age, and they are harming workers, consumers and the 
economy itself.

The issue, he writes, is not just wages and out sourcing; it is the fact 
*that "Verizon has shown a remarkable lack of interest in expanding its 
Fios high-speed Internet network, despite strong demand."*

The reason for that peculiar bit of seemingly self-destructive corporate 
behavior is that it does not have to. Verizon's customers have nowhere 
else to go and are forced to put up with shoddy service. And Verizon's 
case is far from alone. Krugman:

In recent years many economists, including people like Larry Summers and 
yours truly 
have come to the conclusion that growing monopoly power is a big problem 
for the U.S. economy — and not just because it raises profits at the 
expense of wages. Verizon-type stories, in which lack of competition 
reduces the incentive to invest, may contribute to persistent economic 

The argument begins with a seeming paradox about overall corporate 
behavior. You see, profits are at near-record highs, thanks to a 
substantial decline in the percentage of G.D.P. going to workers. You 
might think that these high profits imply high rates of return to 
investment. But corporations themselves clearly don’t see it that way: 
their investment in plant, equipment, and technology (as opposed to 
mergers and acquisitions) hasn’t taken off, even though they can raise 
money, whether by issuing bonds or by selling stocks, more cheaply than 
ever before.

How can this paradox be resolved? Well, suppose that those high 
corporate profits don’t represent returns on investment, but instead 
mainly reflect growing monopoly power. In that case many corporations 
would be in the position I just described: able to milk their businesses 
for cash, but with little reason to spend money on expanding capacity or 
improving service. The result would be what we see: an economy with high 
profits but low investment, even in the face of very low interest rates 
and high stock prices.

And such an economy wouldn’t just be one in which workers don’t share 
the benefits of rising productivity; it would also tend to have trouble 
achieving or sustaining full employment. Why? Because when investment is 
weak despite low interest rates, the Federal Reserve will too often find 
its efforts to fight recessions coming up short. So lack of competition 
can contribute to “secular stagnation” 
<http://krugman.blogs.nytimes.com/2013/11/16/secular-stagnation-coalmines-bubbles-and-larry-summers/> — 
that awkwardly-named but serious condition in which an economy tends to 
be depressed much or even most of the time, feeling prosperous only when 
spending is boosted by unsustainable asset or credit bubbles. If that 
sounds to you like the story of the U.S. economy since the 1990s, join 
the club.

Increased monopolies, and decreased competition are bad for the economy. 
And Ronald Reagan is the man we have to thank for that. Known best for 
lowering taxes and deregulating banks, he also weakened enforcement of 
anti-trust regulations. He was assisted in this effort by George W. 
Bush, and Obama has been too distracted to deal with it, though Krugman 
suggests he is finally giving the problem some attention.

Better late than never.


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