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Capitalism is becoming less competitive (US)
How different countries are tackling a growing economic problem
The Economist
Oct 10th 2018 | by C.W.
AMERICA’S airlines used to be famous for two things: terrible service and worse finances. Today flyers still endure hidden fees, late flights, bruised knees, clapped-out fittings and sub-par food. Yet airlines now make juicy profits. Scheduled passenger airlines reported an after-tax net profit of $15.5bn in 2017, up from $14bn in 2016.
What is true of the airline industry is increasingly true of America’s economy. Profits have risen in most rich countries over the past ten years but the increase has been biggest for American firms. Coupled with an increasing concentration of ownership, this means the fruits of economic growth are being monopolised.
High profits across a whole economy can be a sign of sickness. They can signal the existence of firms more adept at siphoning wealth off than creating it, such as those that exploit monopolies. If companies capture more profits than they can spend, it can lead to a shortfall of demand. Ordinary people pay higher prices than they should, for worse service.
The Economist published a big article on the competitive-intensity of capitalism in 2016. It focused on America. The piece divided the economy into around 900 sectors covered by America’s five-yearly economic census. Two-thirds of them became more concentrated between 1997 and 2012. The weighted average share of the top four firms in each sector rose from 26% to 32%.
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