Competition


Its happening again. A firm grows from a darling, often mentioned glowingly in the media, that benefits consumers into a large corporation that is harming employees and communities, etc. If you want a lower standard of living, stagnant economy, no new jobs, and no new products then have the government try to fix the problem. It will stifle the dynamism a prosperous society needs.

Some critics call low pricing ‘predatory pricing’, supposedly to conjure scary images of a ravenous wild animal looking for its next prey.

Take this article by a writer who trades for a living.

New firms often use low prices to build market share and to get their products into more hands. They burn through investor’s cash, pay their employees with some cash and either shares of stock or products or some other way to save the cash for investing in business growth. Amazon never changed course.

People made a similar case against Walmart years ago when it was taking market share from other retailers: its harming other retailers, killing jobs, putting mom-and-pop shops out of business, etc.

Well guess what? Now Walmart is competing against Amazon and other brick-and-mortar retailers and other e-commerce sites. No government action against Walmart was needed. Indeed, it would have been harmful to consumers, its suppliers, and its employees.

The people who work at Walmart and now Amazon are doing something extraordinarily well. They have a successful strategy and business model and are executing. Don’t get in the way. Its up to others to figure out how to leap-frog over them in the marketplace. Other business models and strategies will emerge even though we cannot foresee what that will be. In fact, that success only becomes known after the fact because the growth of the firm will make the news. It will have survived the initial response by Amazon, Walmart and other competitors.

Yet we benefit from their low prices. It makes our family budgets go farther. The employees of the firms harmed by these super successful firms need to turn inward to management to demand they get their act together, or welcome outside investors to maybe buy the firm and install new management with new ideas. Its new ideas, new management, new/outside capital, new strategy, new business model that leads to dynamic growth.

Now, if Amazon is using the government to enact specific laws that benefit it, like, say, Net Neutrality, then that law or regulation should be eliminated.

If you want to help these firms, stop encouraging politicians and regulators to take sides and trying  to solve this problem. Its not a solve-able problem and government is a poor mechanism to solve problems.

UPDATE: Amazon May Be the Next Tech Giant Muscling Into Health Care. That’s what American health care needs. Smart, successful people in the private sector to figure out how to improve a highly government-controlled industry.

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President Trump:

Trump did not give details about what his administration would do to protect manufacturers, but he railed against tariffs charged by other countries and unfair trade practices.

“That includes cracking down on the predatory online sales of foreign goods, which is absolutely killing our shoppers and our shopping centers,” he said.

“Killing our shoppers”. Really? Shoppers enjoy shopping online, that’s why they do it. If they didn’t find it beneficial they’d shop in shopping centers. So its up to the shopper where to shop, not politicians. Shopping centers have to step up their game to compete with online. The heavy hand of government will stifle innovation, disadvantage their competitors, and freeze the current situation. Improvements will cease. That’s why the country of Cuba is stuck in the 1950’s.

That’s not sustainable. What is sustainable is free market competition that will continually produce what’s best for consumers and producers. That’s what he and Republicans claim to want in health care, so the same principle applies to retail.

Here.

The WSJ has a report by James Freeman (behind firewall) on the progress the Trump Administration is making reducing the power of Washington’s permanent bureaucracy, aka the Swamp.

At the State Department:

the State Department is one federal agency that was actually contemplated by America’s founders. Conducting foreign policy is an important and necessary task for our central government. But like so much of the Beltway bureaucracy State has been overfunded and undermanaged for years. Now, despite what you may have read about untouchable bureaucrats unaccountable to the public they are supposed to serve, Mr. Tillerson has found ways to clean house. . .

Furniture from now-closed offices crowded the hallways. Dropping in on one of my old offices, I expected to see a former colleague—a career senior foreign service officer—but was stunned to find out she had been abruptly forced into retirement and had departed the previous week. This office, once bustling, had just one person present, keeping on the lights. . . .

[Sec. of State] Tillerson is not reorganizing, he’s downsizing.

Yes, even constitutionally approved functions need reorganizing, and reorganizing can involve downsizing people and functionality. If ever there were monopolies, government is it. And government monopolies are susceptible to the same abuses as other monopolies. The people there become arrogant, careless, insular, lazy, corrupt. Absent competition, its inevitable no matter how well-intentioned.

There’s movement at the EPA:

Meanwhile over at the Environmental Protection Agency, new boss Scott Pruitt is not just draining the bureaucratic swamp in Washington, he’s taking away the agency’s power to oversee swamps nationwide. . . .

to dismantle another piece of the Obama administration’s environmental legacy, the rule that sought to protect clean drinking water by expanding Washington’s power to regulate major rivers and lakes as well as smaller streams and wetlands. . . .

In a speech at the Energy Department, the president promised to expand the country’s nuclear-energy sector and open up more federal lands and offshore sites to oil and natural-gas drilling.

. . . rescindment this week of the Obama administration’s clean-water rules that farmers and business groups found onerous.

. . . issued a special permit authorizing the construction of a new pipeline between the U.S. and Mexico that would carry fuels across the border in Texas

Its not all positive, though. Healthcare reform could fill the swamp rather than drain it. More military activity in the Middle East and Korea could fill the swamp.

 

The $85 billion acquisition of CNN parent Time Warner by AT&T could win antitrust approval by the Justice Department in the next 60 days, sources said.

During the presidential campaign, Candidate Trump said he would not allow this merger. I’m pleased to report that common sense prevailed as President Trump needs to focus on effective management of government operations instead of trying to managing economic activities for which the future remains unknown. Draining the swamp IS way more important. Disallowing this merger would fill the swamp more by adding more rules and regulations.

Pols and regulators should butt-the-hell out of corporate mergers and other actions that disrupt the status-quo. See Democrat primary loser and hypocrite for supporting corporate shill Hillary Clinton Bernie Sanders for example. Trump also said he opposes it.

Employees of the merging firms must figure out how best to serve their customers and shareholders.

Remember folks, firms have to work within the current regulatory and legal framework. If gov’t wants to do something useful it should deregulate telecom and scrap net neutrality. Those constrictions led the decision-makers in this deal to view a merger as a way to drive growth.

The interventionist fear is based on outdated definition of monopoly. Standard Oil’s so-called “monopoly” lowered kerosene prices “from 58 to 26 cents from 1865 to 1870. Competitors disliked the company’s business practices, but consumers liked the lower prices.” https://en.wikipedia.org/wiki/Standard_Oil.

Yet, some politicians and activists want to stop this merger because they are simply afraid of change.

You can let firms experiment and innovate to figure out how to serve customers and grow, or you can let politicians protect the status quo and continue with 1% GDP.

 

But instead of reform, congressional Republicans are moving forward with legislation that tinkers around the edges. Their bill adjusts retiree health care, hikes stamp prices, and retains six-day delivery despite a 40 percent drop in letter volume since 2000. The bill would also create “new authority to offer non-postal products,” thus threatening to increase the tax-free entity’s unfair competition against private firms.

The Democrats overseeing postal issues are happy as larks with the GOP bill, which appears to be a victory for unionized postal workers. You might wonder what the point of electing Republicans to Congress is if they are just going to let Democrats run the show in defense of unions and monopolies.

Here.

 

 

President Barack Obama will call for new government spending on infrastructure, education and research in his State of the Union address Tuesday. . .
While proposing new spending, Mr. Obama also will lay out significant budget cuts elsewhere, people familiar with the plans say, though they will likely fall short of what Republican lawmakers have requested.

Great that the president will identify spending cuts but, really, why is this spending going to be any different from the spending politicians have been doing for decades anyway? Even before the financial mess government spending was too high. It’s the same old, same old. There is no magic elixir that combines President Obama’s spending with the spending of the 2011 Republicans and Democrats to produce “We seek to do everything we can to spur hiring and ensure our nation can compete with anybody on the planet. . . ” to quote the president.

Here.

It will not produce the economic version of Love Potion Number 9.

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