Make big profit

5 Responses to “Why does big business believe in the free market for profit?”

1. Sitizen X, on November 26th, 2008 at 7:23 pm Said:

   corporate welfare costs the American tax payer Billions every year… No ones really anti socialism, that’s just a media spin campaign designed to make the common people resist what would be best for them.. it’s actually an amazing feet, proving that programming can be stronger than basic instinct… also Big business squashes competition, the notion of a free market is a total illusion, just ask the Exxon’s and the Wal-Marts.. there’s nothing left in the vacuum that’s created by multinational conglomerates..

   you wanna know how I know capitalism is a bust ? because the entire planet just about is unified by one thing… trade. Export import, money changing hands, and yet 2/3 of the worlds men women and children go to bed hungry every night……

2. ideogenetic, on November 28th, 2008 at 4:06 pm Said:

   Actually, big business has never believed in free market competition.
   John Kay in the Financial Times (FT, 03/19/2008, page 11) had an excellent follow-up op-ed about how Warren Buffett became a billionaire.

   [Mr Buffett's success demonstrates the weakness of one economic theory, the Efficient Market Hypothesis {EMH}, and the strength of another - the central role that the pursuit and defense of economic rents plays in modern corporate life.]

   What’s he’s saying is that competition is actually geared toward preventing competition in order to maintain monopoly or oligopoly pricing power. Warren Buffett was a master of seeing who had this pricing power (in the case of American Express in travellers checks, for example) and who didn’t. Buffett exploited the fact that the EMH was a myth.

   See Dean Baker’s excellent review of this in the U.S. below…

3. Graduate Student, on November 28th, 2008 at 5:31 pm Said:

   Economics literature and studies indicate that the free markets (i.e. supply & demand mechanisms) are the best way to organize commerce and allocation of resources (alternative failure example? - Soviet Union). - [note Adam Smith readings]

   However, the great depression has taught us that recovery from a market collapse (return of price levels) are ’sticky.’ In other words that they will not adjust quickly as previously thought prior to the great depression. Therefore the government (or some other outside investor, in the current case foreigners) must ‘inject’ funds for ’stimulate’ investment in order to help the market return to equilibrium in order for the free markets to work most efficiently again. I idea is to make the landing has ’smooth’ and painless and possibly to return to the best possibly scenario. This is what current Macroeconomic theory teaches us. -[Note the work of Keynes].

   This is also why most economist believe that another great depression is now completely and forever avoidable, all else being equal.

4. john_d_ayer, on November 30th, 2008 at 6:40 pm Said:

   This might be a little over your head but a few years ago we had a huge scandal with a company called ENRON.

   The US government refused to bail ENRON out and thousands lost their jobs, thousands lost their retirement benefits, billons of dollars were lost and the tax payer ended up paying through the nose.

   What would have happened if Enron had been bailed out by the government?

   The same crooks would have gone to jail. The corporation would have been reorganized and thousands would not have lost their retirement benefits.

   The net “profit” over time would have been beneficial to the US tax payer.

   There is a very fuzzy line between when the national profitability of bailing out a company is greater then allowing a corporation to fail.

   Nations do not bail out companies to make the companies profitable.

   Nations bail out companies to keep people employed and maintain their pension benefits to enhance their long term financial, tax collection, prospects.

5. Anthony O, on December 1st, 2008 at 7:35 am Said:

   It lines their pocket with golden coins when the going is good, a little sour cream, they dump the boat and bail out.

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