A few days ago I had a conversation with a friend of mine who teaches economics and finance at the university level. I wondered out loud why the invisible hand of the market didn’t generate increased production of N95 masks and other protective equipment for medical personnel, not to mention life-saving equipment like ventilators and respirators. It seems to me, I said, that the risk-taking entrepreneurs who drive free markets should have been able to recognize an upcoming requirement for expanded production by late January. Even if not sold immediately, these items will eventually sell, if only for government or health care system stockpiles.
My friend chuckled a bit and explained two things to me. First, the people who make decisions for late capitalist firms do not gamble. They are risk averse and wait for orders to come in so they don’t get stuck with inventory they cannot sell. This is why you can’t find bathroom tissue at your local grocery store. More importantly, my friend continued, late stage capitalists use their market power not to innovate but to block the threat of innovation by other firms by securing control of production and markets.
Reading the news this morning I happened to spot a good example of this.Continue reading