Sometimes you read something and you almost can't believe that it is a serious attempt at an idea. Such was the case when I perused Michael Lind's recent essay, "The Case for Goliath." To briefly summarize: bigger is better.
In a twist on the stale discussion of regulation v. deregulation argument, Lind proposes that the United States should seek to resurrect what he calls "utility capitalism," characterized by cartels, regulated oligopolies, and higher prices. His rationale is that such a system--particularly in finance, automaking, aerospace, energy, and much of the nontradable service sector--would restore middle-class prosperity and promote innovation. The latter would occur, according to Lind, because large, oligopolistic companies have more incentives to invest in innovation. (He predictably relies on Schumpeter's famous capitalism-to-socialism prediction, but apparently someone failed to tell him that Schumpeter's prediction was actually semi-ironic. Thomas McCraw discusses this well.)
There's really not much to say here except, wow. Lind proposes, for example, that we should consolidate the domestic auto industry down to one national champion to enhance global competitiveness. Wait, is he saying that the bankruptcies of GM and Chrysler came about because we had too many auto companies? As it happens, I read Lind's essay shortly after reading Jonathan Zittrain's intriguing op-ed in yesterday's Times in which he highlighted the threats to freedom and creativity of bigness on the Internet. The dangerous irony touched on by Zittrain, one that Lind would do well to keep in mind, is that the world-changing Web 2.0 innovations we all like to think are propelling us into a glorious world of individual creativity are highly dependent on a handful of extremely large companies like Google and Microsoft. You don't get the globe-spanning impact of Facebook and Twitter without Google's ginormous server farms.
At any rate, there are really three small points I wish to make regarding Lind's piece. First, he either badly confuses or purposefully conflates the monopoly power of dominant firms (a bad thing) and the temporary monopoly profits that serve as the reward for entrepreneurs and the incentive for persistent innovation (a good thing). There is a big difference.
Second, in support of his cumbersome-is-best argument for "utility capitalism," Lind says, "Most of the major breakthroughs on which the modern technological revolution depends took place before the era of deregulation--and often in the labs of monopolistic corporations like IBM, AT&T, and Xerox." True, but you really shouldn't stop reading history in the 1970s: Bell Labs did not use the transistor to launch the semiconductor revolution; Xerox PARC did not take the graphic user interface and launch the PC revolution. These inventions would not have been breakthroughs but for the work of entrepreneurs who worked outside the confines of large companies. This is the recurring pattern of economic history.
Finally, there is this: "The fact that such unfunded regulatory mandates would drive many small service-sector enterprises out of business might be a blessing, not a curse. After all, what is the point of celebrating job creation by small business if thejobs are awful and unstable?"
Well, you know, JOBS.
(Two of my points here--regarding the Internet and job creation--are not to gainsay the importance of high-growth firms. This, in fact, is an as-yet incompletely worked out area--the tripartite tension among new, young firms, the rapid growth of a handful of them, and their transformation into large companies. A subject for another day.)
why there is no comments here?
Posted by: jimmy choo | May 06, 2010 at 08:19 AM
You don't get the globe-spanning impact of Facebook and Twitter without Google's ginormous server farms.
Posted by: fast online degree | September 30, 2010 at 03:19 AM