Last week we had the honor of speaking with Denise Hearn and Jonathan Tepper on their new book, The Myth of Capitalism: Monopolies and the Death of Competition.
Their main theme is the rise of monopolies and the rapid disappearance of competition in today's markets, painting a definitive picture of an America dominated by a small handful of firms in virtually every sector.
Not Enough Capitalism
Three major problems resulting from this: struggling workers, stagnant wages, and growing inequality.
Though many on the left argue these problems stem from capitalism itself, Hearn and Tepper argue differently: “We don’t have enough competition which is an essential part of capitalism, therefore it’s leading to all sorts of adverse effects,” Tepper said in a recent hour-long interview with FS Insider.
“People think there’s an inherit flaw in capitalism and that it’s doomed. Our argument is not that it’s doomed but rather that we don’t have enough capitalism—we don’t have enough competition—and that’s the problem.”
Killed or Be Killed
The rise in monopolies and oligopolies directly led to this lack of competition. “Any area that’s currently dominated by one of the large tech companies is just simply an area that won’t get funded [by venture capitalists]” Tepper said. People are not interested in competing with these giants, and if these tech giants enter new areas, there’s minimal incentive to compete.
In the last five years there have been almost 500 acquisitions by these giants. The acquired companies, though, are often bought for the sole purpose of being killed—their potential is not developed and that’s detrimental to growth.
This lack of growth and competition is effectively killing capitalism, according to Hearn and Tepper. Wages have remained relatively stagnant even as corporate profits rise. While stocks have increased, that profit is only going to the top 10 percent who own those shares—workers haven’t seen any of that profit.
Voting With Your Dollars
Hearn pointed to a Bloomberg survey that found 50 percent of average Americans had variable incomes; they didn’t know what they were going to earn in a given week or month and 62 percent of those surveyed couldn’t handle any surprise expense over 500 dollars. “I think we tend to forget there’s a huge [area] of American life where people really feel insecure and they’re struggling…” Hearn said.
So, with such a dismal picture painted, what can be done?
Hearn and Tepper offer a number of ideas and solutions in the book. Vote with your dollars and buy local, Hearn says. “One of the things we say in the book is capitalism is like an election and you vote with your dollars. So what can the average person do? Well I think they can certainly spend their money away from dominant firms and monopolist firms… buy local, there are things that do make a difference even at the very localized level.”
"If you want to understand the real cause of rising inequality, discard Piketty and read Tepper instead. This is a tract for the times with a rare bipartisan appeal.”
- NIALL FERGUSON
“Tepper and Hearn have written an impressive and important book. One hopes that it will have the impact that it clearly deserves.”
- MICHAEL SPENCE (Nobel Prize in economics 2001)
"Tepper and Hearn make the case that inequality is the symptom, not the disease. The problem is too little competition, not too much. They provide an immensely readable and persuasive account, superbly well-informed by a mass of recent data and research."
- SIR ANGUS DEATON (Nobel Prize in economics 2015)
To hear our full hour-long book interview with Denise Hearn and Jonathan Tepper on FS Insider click here. For a free trial to our FS Insider podcast, click here. For more information about Financial Sense® Wealth Management and our current investment strategies, click here.