Getting a Grip

admin May 26th, 2008

When Frances Moore Lappé has a question about something she does her research, reaches out, and asks away.

Recently she did just that, writing directly to Robert B. Reich, in response to her read of his 2007 book, Supercapitalism: The Transformation of Business, Democracy, and Everyday Life. Reich wrote back at length, clearly glad to engage in the back-and-forth. Below is the second installment of their correspondence. Keep checking back for future installments and please: share your thoughts by leaving a comment!

2. FML: You refer to the first period as one of oligopoly and the second as competitive. I am puzzled because my sense is that the last 25 years have been characterized by mergers consolidating industries. In most of the industries I have looked at — especially the agrochemical sector, livestock and meat packing, the grain trade and the media — concentration has continued to increase. The barriers to entry have grown. Farmers, for example, have fewer and fewer choices from whom to buy virtually everything from seeds to tractors and to whom to sell their products. They feel the squeeze of oligopoly power. In technology and communications, Google and YouTube prove that start-ups can break through to the top. But that capacity seem unique to the sector. I would appreciate your help in understanding why you feel we do not live within an oligopolistic economy today.

Also, you imply that the first period was devoid of significant innovation but computer technology began its development in the 30s and 40s and during the 60s and 70s the computer revolution took off with development of transistors and microprocessors. Of course, significant innovation occurred during the first period in other fields as well.

RR: During the first period, most industries were organized as oligopolies because economies of scale were so important as entry barriers. Autos, steel, chemicals, telecom, for example. Other oligopolies dominated local and regional markets or were maintained through regulation (banking, airlines, insurance, utilities). In the second period, almost all industries are “contestable,” in the sense that just about any large company can get into any other large company’s “space.” (Wal-Mart is becoming a bank, for example), and just about any clever start-up can have quick entrance to any market via venture capital or larger firms looking to buy innovation.

• Frances , Guest writer , Robert Reich