I have another article up in the FT. You surely subscribe? You should. Here it is.
I could add many thoughts to this piece. Even with the help of great sub editors it is difficult to capture every nuance. (None of what follows is in the FT piece. Please subscribe and click …)
Essentially, the article brushes against the big issue of competitive versus Schumpeterian growth.
What I mean is that: on the one hand you need strong competitive forces to drive growth, to keep the pressure on all the players in the capitalist economy. These count against the accumulation of massive fortunes. If you heard that your nearby cornershop owner was absolutely minting it you would a) realise someone was paying for those supernormal profits and b) expect some competition to come in pretty quickly. If not, you would c) wonder what on earth is going wrong; perhaps the State is maintaining him in a monopoly position. And that obviously happens: in badly run economies, de facto monopolies can be maintained in all sorts of ways. The state grants concessions, keeps unnecessary regulatory barriers around certain industries, helps to bully away the competitors.
On the other hand, and less acknowledged in my piece, you can need the prospect of monopoly returns to encourage innovation. The efforts of innovation are only worthwhile if they produce some sort of return, and that return takes the form of the innovator gaining some market power, some ability to charge a price well above the marginal cost. That could mean: a strong brand, a better manufacturing technique, a sales channel that can’t be assaulted. This is the Schumpeter position: as this paper says:
only companies that have market power, at the best the monopolist, can support the costs related to innovation, indeed, is the innovation itself determines that a monopoly position, the defense of which brings further innovation a virtuous circle.
My FT piece is written against an extreme naive view: that Britain’s failure to create tech billionaires indicates some fundamental failing in our economic model. In my view, this is garbage. You can imagine a brilliantly functioning economy that nevertheless kept eroding such fortunes. And you can imagine another that keeps generating billionaires – even “tech” billionaires – that nevertheless was both unjust, and inefficient.
My biggest concern is that so star-struck are some of the politicians by the tech-types they meet that they skew their economic policies towards the wrong target. “Pleasing the man in the meeting” is a tempting strategy when he is a wealthy winner. How this might happen is up to the imagination of the reader. But that is why I end the article as I do. How is that? Well, read the piece I say (some walls should be protected)