INT 200: Global Capitalism and its Discontents Bad Capitalism

Monopoly the exclusive possession or control of the supply or trade in a commodity or service monopoly power— sufficient market power to influence the price, output, and investment of an industry and to limit new competitors entering the industry Monopoly vs. competitive markets – No sane owner or business wishes more competition – Monopoly is the logical result of competition

Oligarchy where political or economic power rests with a small number of people – Russia today 110 billionaires own 35% of all wealth – top 400 wealthiest Americans have more wealth than half of all Americans combined

Crony Capitalism an economy in which success in business depends on close relationships between business people and government officials Corruption: to misuse one’s position for personal benefit Socialist would say that crony capitalism is a natural product of capitalism A free-market capitalism would argue instead that crony capitalism is the result of an excess of government interference in the market

Rent-Seeking an economic rent is the difference between what people are paid and what they would have to be paid for their labor, capital, land etc. to remain in their current use people’s lobbying of government to give them special privileges: “privilege seeking.”

Resource Curse Natural resource abundance a good thing? – OR, natural resource abundance increases the likelihood that countries will experience negative economic, political and social outcomes – In short, resources can be a curse Poor economic performance – international commodity markets were inherently unstable – ‘enclave’ nature of natural resource activities – multinational enterprises in these sectors tended to repatriate profits – “Dutch disease” – a condition whereby a resource boom leads to appreciation of the real exchange rate and in turn damages manufacturing and other tradable sectors Currency Appreciation; Decline in competitiveness; Growth in real wages; Few jobs; Income inequality; Tax Revenue

Resource Curse Poor political performance – civil war – low level of democracy – Results in monopolies, oligarchy, crony-capitalism, rent-seeking, and corruption

Good vs. Bad Capitalism Vices of “bad capitalism” (monopolies and cronyism) vs. virtues of “good capitalism” (competition and innovation) Employability vs. employment Prosperity vs. security