The OP’s reasoning is based on a popular yet fundamental misunderstanding: an overvaluation of companies with many employees (a.k.a. “big” companies).
The key to economic growth is not firms with many employees, it’s firms with highly productive employees. You want a system that kills off unproductive firms, so that better uses can be found for their capital and employees.
You don’t want a system that kills off highly productive firms just because they stay relatively small. As an example Renaissance Technologies was founded in 1978 and has only about 310 employees today. Yet I can assure you that the US economy would not have been better off without it.
310 employees is not very small. Anyway, the sweet spot for company size depends on what the company does, as productivity gains in certain tasks can be bought through capital expenditure. Heavy industry is an obvious outlier on the bigger-is-better side. Software, on the other hand, arguably has very low returns on increased company size.
> As an example Renaissance Technologies was founded in 1978 and has only about 310 employees today. Yet I can assure you that the US economy would not have been better off without it.
Another example is Germany, even though the country has some massive companies there's a lot of quite productive medium/small companies (Mittelstand) doing specialised work.
This is a bit correllation / causation. Larger companies aren't better in themselves, otherwise state monopolies would be the best answer. Developing countries have lots of businesses sure. But "size" is not a problem itself. It's usually industry (e.g. lots of street vendors because it's the easiest way to make a living if you have nothing else) and lack of capital investment (e.g. people hammering steel by hand rather than having some machinery)
A lot of capital investments only makes sense at scale, though. The machines are more productive when manned 24/7, and the machines are often more efficient the larger they become.
I’m an engineer at a grocery chain that essentially has a monopoly in most of Texas. The chain has a good and well earned reputation for the public but it definitely uses underhanded monopolistic tactics to maintain dominance.
As it’s grown and expanded you can definitely tell that the ethics and how they treat workers / customers has gone down hill. Maybe it’s all the Amazon managers they’ve absorbed.
I have not even a rank neophytes understanding but these situations always remind me of the Hindu Trimurti, the balance of three powering the universe. Creation/dynamics gives way to preservation/ossification which eventually is destroyed/decays.
In the Vampire & Mage tabletop, there's Wild, Weaver, Wyrm, a direct parallel, which was a very fun cosmological tension.
Anyhow, this just feels like the lifecycle of companies. The young companies are dynamic & growing, but over times most orgs tend to ossify - even as they expand still becoming more deliberate & managed in their ways, punctuated by moments of renewed chaos & flourishing again. Extracting & preserving rather than growing. Until until until.
Those pesky moral principles are also getting in the way of growth. If you want real growth, force people to work for you for free. If they stop working you can always sell their organs.
> If you want real growth, force people to work for you for free
Countries with free labor bury slave economies. Every time.
I see the notion that slaves are more productive than free labor all the time. What is missing is any evidence of it.
For an example, the US initially divided itself into two countries - North and South, free labor and slave labor. Guess which one economically and then militarily buried the other. For another, Korea divided into two countries. One buried the other economically. Germany split in two. The free one buried the slave one.
> see the notion that slaves are more productive than free labor all the time
It's estimated "that emancipation generated aggregate economic gains worth the equivalent of a 4% to 35% increase in US aggregate productivity" [1]. To look at the slave economies favourably, you have to exclude slaves from per-capita measures of productivity [2].
That said, Southern farms were more efficient than Northern ones. Not because they used slaves. But because they embraced economies of scale.
They could have switched to food crops at any time.
BTW, the reason the South seceded was to protect itself from the Northern market economy.
The slave economy was also unable to supply its army with shoes, uniforms, guns, cannons, powder, etc. The reason General Lee was at Gettysburg is because he was marching towards Harrisburg, which had a shoe factory he wanted to loot to shoe his barefoot army.
They started. But as the article mentions, that happened amidst a drought and the beginning of the war, which destroyed distribution.
> slave economy was also unable to supply its army with shoes, uniforms, guns, cannons, powder, etc.
Sure. Not arguing for the strength of the Southern economy. Just pointing out that their farms were more efficient. But not because of slaves. Because of the thing this article is about.
That summary is overly simplistic. Northern textile mills did not get their cotton from free labor.
Also, "From an economical standpoint, the emancipation in the West Indies and the general abolishment of slavery was a failure for Britain", https://en.wikipedia.org/wiki/King_Cotton .
The US has non-free labor in the form of penal labor supplying some $10 billion in goods and services. Last I checked it was not being buried by countries with only free labor.
This but unironically. Communism arguably has pretty good "moral principles" behind it. I mean, how could you be against everyone being equal and laborers owning the means of production rather some fatcat capitalist who doesn't even work? However, we all know empirically how that worked out.
That argument collapses pretty quickly. Attempts to build Communist nations failed so completely from the start that all involved high levels of confiscation of property and forced employment and work rules which closely resemble slavery.
This article is thousands of characters long, but somehow doesn't manage to explain how exactly you're supposed to help "firms", especially without getting hammered by companies from developed countries, or without lining the pockets of people who will store that money in fiscal paradises. It doesn't dwell either on why companies stay small in developing countries.
It's a surprise, because the author claims there are hundreds of papers on the topic.
The basic point of the article is correct despite everyone here in comments coming up with ad hoc arguments against it.
This is Basic 101 microeconomics (pick some undergraduate text from economics and look it up.) There is also a whole subfield of economics called industrial organization that deals with this stuff.
Firm size matters for productivity. Larger firms are on average more productive than smaller ones. Partly it is because gains from increasing returns to scale but better access to resources, organizational capabilities, and international reach also matters. Large companies tend to offer higher compensation. The average pay per employee increases with company size. This is good for the economy.
Take for example Greece. People in Northern Europe like to think that Greeks are poor because they are lazy. However, they are among the hardest-working people in the EU—insane hours on average. But Greece has no large-scale industry. It can't compete within the rest of EU or internationally.
In the 90's, Microsoft proudly gave no money to politicians. Look what happened - an attack by the government on rather nebulous anti-trust charges. (Really - giving away a free browser harms consumers?)
This all stopped when Microsoft learned that when you're a big company, you'd better pay tribute (political contributions). The winning strategy is to contribute to both sides.
>This all stopped when Microsoft learned that when you're a big company, you'd better pay tribute (political contributions). The winning strategy is to contribute to both sides.
Source? It seems equally plausible that it stopped because Microsoft won on appeal and the government got spooked and didn't want to prosecute a losing case.
It’s a good thing we only have two sides in America. Can you imagine if companies had to contribute to as many parties as Europeans have? No wonder we’re more competitive here.
Yes, really. By using their profits from other areas to drive Netscape out of business, consumers were harmed. This was shown in trial and Microsoft found to have violated antitrust laws.
> The horrible, dirty deed Microsoft did was write a better browser.
No, the dirty deed was using their monopolist power to undercut another browser by bundling their offering with the OS.
Please, Walter, your takes are getting a tad way overboard with the anti-regulation stuff, you are stopping to think rationally to become an ideologue. You are smarter than that, at least by your technical achievements you should be.
In the 80s word processors came without thesaurus or spellchecker - you had to buy them separately and they were not cheap. Today they are included. Any modern OS comes with a browser and nobody blinks an eye. But the goalposts have moved: people complain about Amazon promoting their own labels - something any retailer has been doing since forever.
Face it - antitrust regulation does more damage than good. A healthy market is fully able to self-regulate. Healthy meaning with a free competition unimpeded by excessive government regulation.
> (Really - giving away a free browser harms consumers?)
Really, it does, and you were alive and on the internet at the time. You saw the rise of webpages that would only work on IE because it was bundled, you saw the demise of Netscape as a competitor because people wouldn't go through the motions of downloading another browser on a 28.8/56kbps connection.
Price dumping with extra steps is still price dumping.
I don't get it are operating systems and computers supposed to ship without web browsers? You could argue literally any feature is put into a product to 'bundle and dump' to kill competitors. Why is a web browser something that should be a paid product with a so called competitive market to begin with?
Windows also comes with USB drivers but hypothetically I could drive down to Best Buy and choose from a number of different USB drivers I would have to pay for separately (I guess I should pick up a web browser too apparently). This would be preferable why?
> I don't get it are operating systems and computers supposed to ship without web browsers? You could argue literally any feature is put into a product to 'bundle and dump' to kill competitors.
A browser was a separate product at the time, not a feature. Microsoft bundled, as they have done many other times, for anticompetitive reasons.
It’s also worth noting at that time downloading an alternative browser probably over “dial up” was likely to take a couple of hours when you also had usage quotas and fees based on connection duration!
> Microsoft released version 1.0 of Internet Explorer as a part of the Windows 95 Plus Pack add-on. According to former Spyglass developer Eric Sink, Internet Explorer was based not on NCSA Mosaic as commonly believed, but on a version of Mosaic developed at Spyglass[33] (which itself was based upon NCSA Mosaic).
> This period of time would become known as the browser wars. Netscape Navigator was not free to the general public until January 1998,[34] while Internet Explorer and Internet Information Server have always been free or came bundled with an operating system and/or other applications. Meanwhile, Netscape faced increasing criticism for "featuritis" – putting a higher priority on adding new features than on making their products work properly. Netscape experienced its first bad quarter at the end of 1997 and underwent a large round of layoffs in January 1998.
>And this was Netscape, not Firefox, you need to go back about ten years further.
Software tends to get bigger as time goes on, not smaller. Therefore the size of firefox in 2004 should be an upper bound for a browser back in the 90s.
"Rather nebulous"? What's nebulous about leveraging your position on the market to drown out competitors with a free browser bundled with your operating system?
If Amazon redirected all search results of a product to their own version of it, omitting all others - would that be nebulous as well?
The real reason Netscape failed was their browser stunk. I know because I used both of them. Netscape crashed constantly. Explorer crashed too, but not nearly as often.
That's why people switched to Explorer. Netscape ran crying to the government.
That whole shtick about Explorer being uninstallable was ludicrous and irrelevant. Nothing stopped a user from installing another browser and using it. These days, a free browser is included with about every device.
Too bad that European history is filled with former autocrats/dictators who had gotten into power especially on the back of disgruntled small/medium business owners, the Nazis themselves had in their programme at some point the dismantling of big (and Jewish-owned) general stores so that the small store owners could have a chance (that didn't happen once they got into power, they just took over ownership from the Jewish).
isn't firm growth just a symptom of the issue? which i guess the article is describing.
sometimes i feel like the best short-term path forward for a poor country is just to have some kind of heavy handed gov't (like a "benevolent" dictator, hear me out lol) dictate policy and brutally subsidize and consolidate industries. of course you have to magically do this this with minimal fallout from corruption and then somehow make the transition to more of a democratic model.
debatable if this nets out positive in the long run for the average citizen, but it will make your country "rich" (looking at you south korea). US is unique in this regard in that we have these huge firms and can also foster an environment for small/med to make that transition, although it's changing as well.
Sounds like Singapore.. without the transition to a more democratic model. Living standards there indicate it's been net positive for quite a long time.
What type of industries were consolidated/subsidized in singapore? My impression is that they had the advantage of being a liberal financial center, whereas all their neighbors were not.
Yeah the government does not disturb businesses here much. But they do heavily subsidize corporate costs. Theres a economic development board that provides lot of grants for companies. Most mncs use edb grants for setting up their initial business.
Early on in Singapores history, the government did seize a lot of land from farmers though. I believe they were compensated for it.
We also have these weird things called GLCs. China sort of copied this with their telecom industry. GLCs are corporations created by the government to handle certain things. They kind of have government level powers but corporate governances (worst of both worlds imo).
Im not sure about how much the dictator part is nessecarily true. For one when singapore was independent it was already wealthier than its neighbours. PAP loves telling us how theyre the best thing on earth, but Im not convinced. LKY did a lot of reforms but where practical he left colonial infrastructure as is. FDI and luck are also a big part of Singapores growth story.
Singapores success was mirrored by china in the 2000s. The trick was free market capitalism with socialist political policies (in both cases). Also singapore has mastered the art of Government linked corporations - something that china copied. From 2000-2012 China probably had one of the least dictatorial governments in its history. Adding a dictator back in the mix has slowed growth although i wonder if thats a symptom of slower growth.
What the article doesn’t explicitly state is that it’s talking about some kind of undefined sweet spot of growth and business size.
It seems intuitively true that businesses that are too small and too local stagnate the economy.
But they avoid talking about businesses that are too large (oligarchic monopolies) that can control wages and prices, or businesses that are not value add, (I’m thinking resource extraction like oil, gas and minerals) neither of these kinds of large businesses seem to contribute that much to a local economy.
lol large corporations were the least productive places I worked at. Growth came from the sheer inertia of a near monopoly paires with a bull run propped by very low interest rates.
Much to the opposite, large corporations should be weighed down by more strict taxation, to give smaller competitors an edge.
This article feels seriously below the standard of quality I've come to expect from Asterisk magazine. I don't think it should have made the cut.
Some problems:
- Lots of studies cited with no mention of replications or potential caveats.
- Lots of effects measured where causation-vs-correlation would be a real concern (in one of them apparently the control group is "firms that dropped out because of a lack of budget"? Wtf?), but the articles never mentions confounders.
- The whole article has a "for decades we've done development wrong" slant, but its ultimate conclusion is... We need less protectionism, more liberalization, and more information technologies? Hardly groundbreaking.
Overall some observations are interesting, but they're really not conclusive enough to form a single narrative that would justify the incendiary title.
we gotta stop chasing the whole "line go up" ideology. I know that's all capitalism is and how it exists, but we need to be okay with just simply doing well for the sake of doing well. You don't need to instantly go berzerk with investors and stocks and shit. unfettered growth will never truly pay off.
That's circular reasoning. You're defining "success" as "line go up" and then saying we made the "line go up" therefore we were successful. If you define success as GDP per capita, then sure, the countries with the highest GDP per capita won. However, even by other flawed metrics, such as Real GDP with purchasing power parity taken into account, India and Russia are also top of the list[1]. Even this metric is flawed, though, because humans are complicated and GDP != happiness or success.
Any single number is worthless for comparing quality of life, per capita or not. How do you use a number to take into account the fact that some people don't have access to healthcare in the US or "freedom" in Russia?
My point isn't that GDP per capita is the end-all-be-all of quality of life metrics. It's that pointing out that Russia and India are at the top of the GDP list, and therefore GDP per capita (your previous comment seems to conflate the two) is a flawed metric, is such a poor argument that you're not giving the pro-GDP side a fair shake and possibly misrepresenting their argument. No "line goes up" or "GDP = quality of life" proponent thinks India has high quality of life because their country level GDP tops the list.
Pick any measure you like. Free markets are the most prosperous.
> India and Russia
Do you really think their standard of living is higher than the US? Why is Seattle full of Russian and Indian immigrants? Why do you think zillions of immigrants are coming to the US? Because the US is a hellhole?
> GDP != happiness or success.
If you're happier being poor, just give away all your stuff to your favorite charity. Nobody is forcing you to be prosperous.
China is the worst example you can make for that point. They're sitting atop of a giant pile of debt, particularly in housing, and millions of people have lost their life savings as a result. China's economy is a house of cards just waiting to come crash down, and that's without the threat of the CCP wanting to take over Taiwan.
I agree with the sentiment. But I also think that big companies are somewhat immune to competition for various reasons. And that isn’t a “free market”. So above a certain size, let’s just say $100B in revenue, they need to face consequences like being broken up or higher taxes or whatever. Otherwise anytime someone makes a good product (Slack), a big company can copy it (Microsoft Teams) and bundle it to win the market without the real effort it takes to build a business from scratch.
But absolutely must ensure that it is free market. Since 90s the biggest threat to free markets is not socialism but monopolies and oligopolies. (Even good social safety net enhance freedom of economic activity).
How some mighty monopolies have fallen. Your examples don't refute GP's point, unless you'd like to assert that monopolies and oligopolies don't exist anymore.
> The greatest lifting of people out of poverty ever seen.
How do you square that with the fact that United States, with your platonic ideal of economic policies, has the highest rate of poverty in the developed world?
Coming from Norway I highly recommend finding oil and having a socialist government. Great way to make the country rich. Hard for others to reproduce though.
1. An economy driven by physical commodities like oil are susceptible to corruption and stagnation.
2. Norways dependence on oil has prevented it from doing anything meaningful economically or technologically.
If the last 80 years of growth have shown: following the advice of western academics is the surest way to stay poor, while following any other advice grows your economy much faster.
Least we forget that Communism lifted more people out of poverty in the last 20 years than Capitalism has in the last 200.
>If the last 80 years of growth have shown: following the advice of western academics is the surest way to stay poor, while following any other advice grows your economy much faster.
I thought mainstream economists advocated for market liberalization reforms that lifted billions out of poverty in asia? Is there a score sheet of how many times "western academics" were right or wrong?
Odd that communism pulled that off the moment that it adopted the market reforms documented and explored by western academics (and eastern ones too, to be clear -- just not doctrinaire Marxist and Maoist academics)
Odd for you to cherry pick two different time periods and regions to compare against. At least comparing china pre/post market liberalization you're not comparing between two countries.
You have no idea about conditions on the ground in the USSR in the 1980s. No meat, no consumer goods, people queued up for everything. The only thing that the regime could produce, besides weapons, were throughly false impressive statistics. Relying on Moscow for its growth figures is like relying on Charles Ponzi to multiply your savings.
There is enough Eastern Europeans here on this forum that this kind of pro-Soviet misinformation won't fly here. We know precisely how things were.
That's partly true, but try proposing to organize the US economy the same way the chinese economy is organized on the large scale, and watch everyone left of Bernie up in arms, shouting about communism.
Seriously, it's borderline funny to see what gets derided as "communist" in the US... If you're not in that country and having to do without health insurance etc...
They switched to a market economy more than 30 years ago.
During the Xi tenure, e.g. in the last decade, they seem to be coming back to political control of the economy. It also seems that their growth is slowing down. Possibly those two developments are related.
The government is notoriously bad at picking winners. For an example relevant to HNers, there was a government-run precursor of the Internet in France, called Minitel. It was an interesting technology, but horribly overpriced and unable to develop with the times.
The bigger picture is not favorable to China. Especially the high unemployment among the young is troubling. China no longer publishes data on youth unemployment, the last known figure was 23 per cent. This would be comparable to Spain or Italy, mostly sclerotic economies of the troubled southern wing of the EU.
The OP’s reasoning is based on a popular yet fundamental misunderstanding: an overvaluation of companies with many employees (a.k.a. “big” companies).
The key to economic growth is not firms with many employees, it’s firms with highly productive employees. You want a system that kills off unproductive firms, so that better uses can be found for their capital and employees.
You don’t want a system that kills off highly productive firms just because they stay relatively small. As an example Renaissance Technologies was founded in 1978 and has only about 310 employees today. Yet I can assure you that the US economy would not have been better off without it.
310 employees is not very small. Anyway, the sweet spot for company size depends on what the company does, as productivity gains in certain tasks can be bought through capital expenditure. Heavy industry is an obvious outlier on the bigger-is-better side. Software, on the other hand, arguably has very low returns on increased company size.
> As an example Renaissance Technologies was founded in 1978 and has only about 310 employees today. Yet I can assure you that the US economy would not have been better off without it.
Another example is Germany, even though the country has some massive companies there's a lot of quite productive medium/small companies (Mittelstand) doing specialised work.
This is a bit correllation / causation. Larger companies aren't better in themselves, otherwise state monopolies would be the best answer. Developing countries have lots of businesses sure. But "size" is not a problem itself. It's usually industry (e.g. lots of street vendors because it's the easiest way to make a living if you have nothing else) and lack of capital investment (e.g. people hammering steel by hand rather than having some machinery)
A lot of capital investments only makes sense at scale, though. The machines are more productive when manned 24/7, and the machines are often more efficient the larger they become.
I’m an engineer at a grocery chain that essentially has a monopoly in most of Texas. The chain has a good and well earned reputation for the public but it definitely uses underhanded monopolistic tactics to maintain dominance.
As it’s grown and expanded you can definitely tell that the ethics and how they treat workers / customers has gone down hill. Maybe it’s all the Amazon managers they’ve absorbed.
I have not even a rank neophytes understanding but these situations always remind me of the Hindu Trimurti, the balance of three powering the universe. Creation/dynamics gives way to preservation/ossification which eventually is destroyed/decays.
In the Vampire & Mage tabletop, there's Wild, Weaver, Wyrm, a direct parallel, which was a very fun cosmological tension.
Anyhow, this just feels like the lifecycle of companies. The young companies are dynamic & growing, but over times most orgs tend to ossify - even as they expand still becoming more deliberate & managed in their ways, punctuated by moments of renewed chaos & flourishing again. Extracting & preserving rather than growing. Until until until.
Those pesky moral principles are also getting in the way of growth. If you want real growth, force people to work for you for free. If they stop working you can always sell their organs.
> If you want real growth, force people to work for you for free
Countries with free labor bury slave economies. Every time.
I see the notion that slaves are more productive than free labor all the time. What is missing is any evidence of it.
For an example, the US initially divided itself into two countries - North and South, free labor and slave labor. Guess which one economically and then militarily buried the other. For another, Korea divided into two countries. One buried the other economically. Germany split in two. The free one buried the slave one.
How much more evidence do you need?
> see the notion that slaves are more productive than free labor all the time
It's estimated "that emancipation generated aggregate economic gains worth the equivalent of a 4% to 35% increase in US aggregate productivity" [1]. To look at the slave economies favourably, you have to exclude slaves from per-capita measures of productivity [2].
That said, Southern farms were more efficient than Northern ones. Not because they used slaves. But because they embraced economies of scale.
[1] https://bfi.uchicago.edu/insight/research-summary/one-giant-...
[2] https://faculty.weber.edu/kmackay/economics%20of%20slavery.a...
> Southern farms were more efficient than Northern ones
I don't believe it. Evidence: they couldn't feed the Confederate army.
> Evidence: they couldn't feed the Confederate army
You can't feed an army with cotton, tobacco and sugarcane, the "main prewar agricultural products of the Confederate States" [1].
[1] https://en.wikipedia.org/wiki/Economy_of_the_Confederate_Sta...
They could have switched to food crops at any time.
BTW, the reason the South seceded was to protect itself from the Northern market economy.
The slave economy was also unable to supply its army with shoes, uniforms, guns, cannons, powder, etc. The reason General Lee was at Gettysburg is because he was marching towards Harrisburg, which had a shoe factory he wanted to loot to shoe his barefoot army.
> could have switched to food crops at any time
They started. But as the article mentions, that happened amidst a drought and the beginning of the war, which destroyed distribution.
> slave economy was also unable to supply its army with shoes, uniforms, guns, cannons, powder, etc.
Sure. Not arguing for the strength of the Southern economy. Just pointing out that their farms were more efficient. But not because of slaves. Because of the thing this article is about.
> North and South, free labor and slave labor
That summary is overly simplistic. Northern textile mills did not get their cotton from free labor.
Also, "From an economical standpoint, the emancipation in the West Indies and the general abolishment of slavery was a failure for Britain", https://en.wikipedia.org/wiki/King_Cotton .
Opinions of course differ: https://en.wikipedia.org/wiki/Atlantic_slave_trade#Effects_o...
The US has non-free labor in the form of penal labor supplying some $10 billion in goods and services. Last I checked it was not being buried by countries with only free labor.
This but unironically. Communism arguably has pretty good "moral principles" behind it. I mean, how could you be against everyone being equal and laborers owning the means of production rather some fatcat capitalist who doesn't even work? However, we all know empirically how that worked out.
That argument collapses pretty quickly. Attempts to build Communist nations failed so completely from the start that all involved high levels of confiscation of property and forced employment and work rules which closely resemble slavery.
This article is thousands of characters long, but somehow doesn't manage to explain how exactly you're supposed to help "firms", especially without getting hammered by companies from developed countries, or without lining the pockets of people who will store that money in fiscal paradises. It doesn't dwell either on why companies stay small in developing countries.
It's a surprise, because the author claims there are hundreds of papers on the topic.
The basic point of the article is correct despite everyone here in comments coming up with ad hoc arguments against it.
This is Basic 101 microeconomics (pick some undergraduate text from economics and look it up.) There is also a whole subfield of economics called industrial organization that deals with this stuff.
Firm size matters for productivity. Larger firms are on average more productive than smaller ones. Partly it is because gains from increasing returns to scale but better access to resources, organizational capabilities, and international reach also matters. Large companies tend to offer higher compensation. The average pay per employee increases with company size. This is good for the economy.
Take for example Greece. People in Northern Europe like to think that Greeks are poor because they are lazy. However, they are among the hardest-working people in the EU—insane hours on average. But Greece has no large-scale industry. It can't compete within the rest of EU or internationally.
Politicians love Big companies.
Look at the last EU's Draghi report, not a single small/medium company in the list of contributors.
In the 90's, Microsoft proudly gave no money to politicians. Look what happened - an attack by the government on rather nebulous anti-trust charges. (Really - giving away a free browser harms consumers?)
This all stopped when Microsoft learned that when you're a big company, you'd better pay tribute (political contributions). The winning strategy is to contribute to both sides.
>This all stopped when Microsoft learned that when you're a big company, you'd better pay tribute (political contributions). The winning strategy is to contribute to both sides.
Source? It seems equally plausible that it stopped because Microsoft won on appeal and the government got spooked and didn't want to prosecute a losing case.
> A losing case
And there you go. There was a picture just before that of Bill Gates riding on a golf cart with Bill Clinton. And then the case was dropped.
Things that make you go hmmmm....
It’s a good thing we only have two sides in America. Can you imagine if companies had to contribute to as many parties as Europeans have? No wonder we’re more competitive here.
When you're big, it's a cost of doing business.
Yes, really. By using their profits from other areas to drive Netscape out of business, consumers were harmed. This was shown in trial and Microsoft found to have violated antitrust laws.
No, nobody ever identified any "harm" at trial.
I started out using Netscape (amazingly, it wasn't any trouble getting and installing).
The "harm" I experienced was Netflix crashed constantly. So I tried Explorer. Explorer crashed about 90% less. That was the end of Netflix.
The horrible, dirty deed Microsoft did was write a better browser.
> The horrible, dirty deed Microsoft did was write a better browser.
No, the dirty deed was using their monopolist power to undercut another browser by bundling their offering with the OS.
Please, Walter, your takes are getting a tad way overboard with the anti-regulation stuff, you are stopping to think rationally to become an ideologue. You are smarter than that, at least by your technical achievements you should be.
In the 80s word processors came without thesaurus or spellchecker - you had to buy them separately and they were not cheap. Today they are included. Any modern OS comes with a browser and nobody blinks an eye. But the goalposts have moved: people complain about Amazon promoting their own labels - something any retailer has been doing since forever.
Face it - antitrust regulation does more damage than good. A healthy market is fully able to self-regulate. Healthy meaning with a free competition unimpeded by excessive government regulation.
The harms identified in the trial were reduced consumer choice, stifled innovation, exclusionary tactics, predatory pricing, and monopoly maintenance.
> (Really - giving away a free browser harms consumers?)
Really, it does, and you were alive and on the internet at the time. You saw the rise of webpages that would only work on IE because it was bundled, you saw the demise of Netscape as a competitor because people wouldn't go through the motions of downloading another browser on a 28.8/56kbps connection.
Price dumping with extra steps is still price dumping.
Yes giving a browser away harms consumers. It’s bundling and dumping to kill competitors.
I don't get it are operating systems and computers supposed to ship without web browsers? You could argue literally any feature is put into a product to 'bundle and dump' to kill competitors. Why is a web browser something that should be a paid product with a so called competitive market to begin with?
Windows also comes with USB drivers but hypothetically I could drive down to Best Buy and choose from a number of different USB drivers I would have to pay for separately (I guess I should pick up a web browser too apparently). This would be preferable why?
Exactly. The whole case was simply an attack on Microsoft because Microsoft was a big target that (stupidly) dissed the DoJ.
> I don't get it are operating systems and computers supposed to ship without web browsers? You could argue literally any feature is put into a product to 'bundle and dump' to kill competitors.
A browser was a separate product at the time, not a feature. Microsoft bundled, as they have done many other times, for anticompetitive reasons.
It’s also worth noting at that time downloading an alternative browser probably over “dial up” was likely to take a couple of hours when you also had usage quotas and fees based on connection duration!
Fact check: firefox 1.0 (released in 2004) was only 5MB [1], which takes only 15 minutes to download on a 54 kb/s dial up connection[2]
[1] https://ftp.mozilla.org/pub/firefox/releases/1.0/win32/en-US...
[2] https://www.wolframalpha.com/input?i=6+MB+at+54kb%2Fs
That was the fastest a dial up modem could be, many modems were a fraction of that speed.
And this was Netscape, not Firefox, you need to go back about ten years further.
Edit: redoing the maths properly makes the 15 megabyte download in the late 90s take approximately:
- 45 minutes at 56.6kb modem
- 90 minutes at 28.8kb modem
- 180 minutes at 14.4kb modem
http://www.oldversion.com/windows/netscape/
https://en.wikipedia.org/wiki/Netscape
> Microsoft released version 1.0 of Internet Explorer as a part of the Windows 95 Plus Pack add-on. According to former Spyglass developer Eric Sink, Internet Explorer was based not on NCSA Mosaic as commonly believed, but on a version of Mosaic developed at Spyglass[33] (which itself was based upon NCSA Mosaic).
> This period of time would become known as the browser wars. Netscape Navigator was not free to the general public until January 1998,[34] while Internet Explorer and Internet Information Server have always been free or came bundled with an operating system and/or other applications. Meanwhile, Netscape faced increasing criticism for "featuritis" – putting a higher priority on adding new features than on making their products work properly. Netscape experienced its first bad quarter at the end of 1997 and underwent a large round of layoffs in January 1998.
>And this was Netscape, not Firefox, you need to go back about ten years further.
Software tends to get bigger as time goes on, not smaller. Therefore the size of firefox in 2004 should be an upper bound for a browser back in the 90s.
http://www.oldversion.com/windows/netscape/
It seems like by the late 90s the Netscape installer was already around 15 megabytes.
Or you could get it on a CD.
Consumers at the time had other browsers they could install and use. There was no impediment to it.
"Rather nebulous"? What's nebulous about leveraging your position on the market to drown out competitors with a free browser bundled with your operating system?
If Amazon redirected all search results of a product to their own version of it, omitting all others - would that be nebulous as well?
The real reason Netscape failed was their browser stunk. I know because I used both of them. Netscape crashed constantly. Explorer crashed too, but not nearly as often.
That's why people switched to Explorer. Netscape ran crying to the government.
That whole shtick about Explorer being uninstallable was ludicrous and irrelevant. Nothing stopped a user from installing another browser and using it. These days, a free browser is included with about every device.
Small companies don't have spare people to allocate to contributing to government reports.
The guy who made Nomad List and a bunch of other websites said on twitter that he was contacted by Draghi for the report.
Too bad that European history is filled with former autocrats/dictators who had gotten into power especially on the back of disgruntled small/medium business owners, the Nazis themselves had in their programme at some point the dismantling of big (and Jewish-owned) general stores so that the small store owners could have a chance (that didn't happen once they got into power, they just took over ownership from the Jewish).
isn't firm growth just a symptom of the issue? which i guess the article is describing.
sometimes i feel like the best short-term path forward for a poor country is just to have some kind of heavy handed gov't (like a "benevolent" dictator, hear me out lol) dictate policy and brutally subsidize and consolidate industries. of course you have to magically do this this with minimal fallout from corruption and then somehow make the transition to more of a democratic model.
debatable if this nets out positive in the long run for the average citizen, but it will make your country "rich" (looking at you south korea). US is unique in this regard in that we have these huge firms and can also foster an environment for small/med to make that transition, although it's changing as well.
Sounds like Singapore.. without the transition to a more democratic model. Living standards there indicate it's been net positive for quite a long time.
What type of industries were consolidated/subsidized in singapore? My impression is that they had the advantage of being a liberal financial center, whereas all their neighbors were not.
Yeah the government does not disturb businesses here much. But they do heavily subsidize corporate costs. Theres a economic development board that provides lot of grants for companies. Most mncs use edb grants for setting up their initial business.
Early on in Singapores history, the government did seize a lot of land from farmers though. I believe they were compensated for it.
We also have these weird things called GLCs. China sort of copied this with their telecom industry. GLCs are corporations created by the government to handle certain things. They kind of have government level powers but corporate governances (worst of both worlds imo).
Im not sure about how much the dictator part is nessecarily true. For one when singapore was independent it was already wealthier than its neighbours. PAP loves telling us how theyre the best thing on earth, but Im not convinced. LKY did a lot of reforms but where practical he left colonial infrastructure as is. FDI and luck are also a big part of Singapores growth story.
Singapores success was mirrored by china in the 2000s. The trick was free market capitalism with socialist political policies (in both cases). Also singapore has mastered the art of Government linked corporations - something that china copied. From 2000-2012 China probably had one of the least dictatorial governments in its history. Adding a dictator back in the mix has slowed growth although i wonder if thats a symptom of slower growth.
And South Korea
What the article doesn’t explicitly state is that it’s talking about some kind of undefined sweet spot of growth and business size.
It seems intuitively true that businesses that are too small and too local stagnate the economy.
But they avoid talking about businesses that are too large (oligarchic monopolies) that can control wages and prices, or businesses that are not value add, (I’m thinking resource extraction like oil, gas and minerals) neither of these kinds of large businesses seem to contribute that much to a local economy.
lol large corporations were the least productive places I worked at. Growth came from the sheer inertia of a near monopoly paires with a bull run propped by very low interest rates.
Much to the opposite, large corporations should be weighed down by more strict taxation, to give smaller competitors an edge.
This article feels seriously below the standard of quality I've come to expect from Asterisk magazine. I don't think it should have made the cut.
Some problems:
- Lots of studies cited with no mention of replications or potential caveats.
- Lots of effects measured where causation-vs-correlation would be a real concern (in one of them apparently the control group is "firms that dropped out because of a lack of budget"? Wtf?), but the articles never mentions confounders.
- The whole article has a "for decades we've done development wrong" slant, but its ultimate conclusion is... We need less protectionism, more liberalization, and more information technologies? Hardly groundbreaking.
Overall some observations are interesting, but they're really not conclusive enough to form a single narrative that would justify the incendiary title.
See my comment https://news.ycombinator.com/reply?id=41774909&goto=item%3Fi...
This is 101 microeconomics. Not very controversial
we gotta stop chasing the whole "line go up" ideology. I know that's all capitalism is and how it exists, but we need to be okay with just simply doing well for the sake of doing well. You don't need to instantly go berzerk with investors and stocks and shit. unfettered growth will never truly pay off.
> unfettered growth will never truly pay off
It did for the US, Japan, Hong Kong, Germany, China, everywhere that free markets were tried.
That's circular reasoning. You're defining "success" as "line go up" and then saying we made the "line go up" therefore we were successful. If you define success as GDP per capita, then sure, the countries with the highest GDP per capita won. However, even by other flawed metrics, such as Real GDP with purchasing power parity taken into account, India and Russia are also top of the list[1]. Even this metric is flawed, though, because humans are complicated and GDP != happiness or success.
https://www.cia.gov/the-world-factbook/field/real-gdp-purcha...
>However, even by other flawed metrics, such as Real GDP with purchasing power parity taken into account, India and Russia are also top of the list[1]
Country wide GDP figures (PPP adjusted or otherwise) are worthless for comparing quality of life. You need to compare per capita figures.
Any single number is worthless for comparing quality of life, per capita or not. How do you use a number to take into account the fact that some people don't have access to healthcare in the US or "freedom" in Russia?
My point isn't that GDP per capita is the end-all-be-all of quality of life metrics. It's that pointing out that Russia and India are at the top of the GDP list, and therefore GDP per capita (your previous comment seems to conflate the two) is a flawed metric, is such a poor argument that you're not giving the pro-GDP side a fair shake and possibly misrepresenting their argument. No "line goes up" or "GDP = quality of life" proponent thinks India has high quality of life because their country level GDP tops the list.
> line go up
Pick any measure you like. Free markets are the most prosperous.
> India and Russia
Do you really think their standard of living is higher than the US? Why is Seattle full of Russian and Indian immigrants? Why do you think zillions of immigrants are coming to the US? Because the US is a hellhole?
> GDP != happiness or success.
If you're happier being poor, just give away all your stuff to your favorite charity. Nobody is forcing you to be prosperous.
Thank you for pointing this out! It did for them on the back of others. The line has to go up mentality just puts resources from place A to place B.
Now lets get past that stage and make sure that it pays off for everybody.
On the backs of who?
How free markets work is the creators of wealth get to keep it. I.e. it's on their own backs.
China is the worst example you can make for that point. They're sitting atop of a giant pile of debt, particularly in housing, and millions of people have lost their life savings as a result. China's economy is a house of cards just waiting to come crash down, and that's without the threat of the CCP wanting to take over Taiwan.
None of the problems China is facing is anywhere close to undoing 50 years of economic growth.
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> The central question of development economics is simple: how can poor countries become rich?
Adopt free markets. It works every time.
Want to become a poor country? Switch to the government running the economy.
Edit: I know saying that is unpopular, but the historical record is pretty clear.
I agree with the sentiment. But I also think that big companies are somewhat immune to competition for various reasons. And that isn’t a “free market”. So above a certain size, let’s just say $100B in revenue, they need to face consequences like being broken up or higher taxes or whatever. Otherwise anytime someone makes a good product (Slack), a big company can copy it (Microsoft Teams) and bundle it to win the market without the real effort it takes to build a business from scratch.
> But I also think that big companies are somewhat immune to competition for various reasons
See the list of failed monopolies in another post here I made.
But absolutely must ensure that it is free market. Since 90s the biggest threat to free markets is not socialism but monopolies and oligopolies. (Even good social safety net enhance freedom of economic activity).
How the mighty monopolies have fallen:
IBM Sears RCA Intel GE Disney Kmart Kodak Novell Lotus Wordstar AT&T Microsoft
without any push from the government.
> Even good social safety net enhance freedom of economic activity
No actual evidence of that. The US boomed for 150 years before there was a social safety net. The greatest lifting of people out of poverty ever seen.
> How the mighty monopolies
How some mighty monopolies have fallen. Your examples don't refute GP's point, unless you'd like to assert that monopolies and oligopolies don't exist anymore.
> The greatest lifting of people out of poverty ever seen.
How do you square that with the fact that United States, with your platonic ideal of economic policies, has the highest rate of poverty in the developed world?
Coming from Norway I highly recommend finding oil and having a socialist government. Great way to make the country rich. Hard for others to reproduce though.
1. An economy driven by physical commodities like oil are susceptible to corruption and stagnation. 2. Norways dependence on oil has prevented it from doing anything meaningful economically or technologically.
Don’t forget about our pretty large aluminium industry, arms exporter or salmon exporter.
Any economy can be rich if it's floating on an ocean of oil.
And yet the Norwegians, unusually, have managed to do it in a way where ordinary people benefit.
It's still irrelevant to this topic as Norway did not create wealth, it just pumped it out of the ground.
I strongly disagree, as long as you frame the topic more reasonably as 'Want growth (that doesn't only benefit a small group of kleptocrats)?'.
This can go both ways. Have you heard of Venezuela?
Too bad it didn't work out for Venezuela.
It didn't work for Angola, either.
A communist government will manage to convert any riches into abject poverty. Every single time.
If the last 80 years of growth have shown: following the advice of western academics is the surest way to stay poor, while following any other advice grows your economy much faster.
Least we forget that Communism lifted more people out of poverty in the last 20 years than Capitalism has in the last 200.
>If the last 80 years of growth have shown: following the advice of western academics is the surest way to stay poor, while following any other advice grows your economy much faster.
I thought mainstream economists advocated for market liberalization reforms that lifted billions out of poverty in asia? Is there a score sheet of how many times "western academics" were right or wrong?
Odd that communism pulled that off the moment that it adopted the market reforms documented and explored by western academics (and eastern ones too, to be clear -- just not doctrinaire Marxist and Maoist academics)
Odd that the USSR grew faster in the 1980s than the EU did in the 10s and 20s.
The growth was fake which is why the USSR collapsed.
Odd for you to cherry pick two different time periods and regions to compare against. At least comparing china pre/post market liberalization you're not comparing between two countries.
You have no idea about conditions on the ground in the USSR in the 1980s. No meat, no consumer goods, people queued up for everything. The only thing that the regime could produce, besides weapons, were throughly false impressive statistics. Relying on Moscow for its growth figures is like relying on Charles Ponzi to multiply your savings.
There is enough Eastern Europeans here on this forum that this kind of pro-Soviet misinformation won't fly here. We know precisely how things were.
China switched to a market economy 20 years ago, and abandoned the communist economy.
That's partly true, but try proposing to organize the US economy the same way the chinese economy is organized on the large scale, and watch everyone left of Bernie up in arms, shouting about communism.
Seriously, it's borderline funny to see what gets derided as "communist" in the US... If you're not in that country and having to do without health insurance etc...
They switched to a market economy more than 30 years ago.
During the Xi tenure, e.g. in the last decade, they seem to be coming back to political control of the economy. It also seems that their growth is slowing down. Possibly those two developments are related.
The government is notoriously bad at picking winners. For an example relevant to HNers, there was a government-run precursor of the Internet in France, called Minitel. It was an interesting technology, but horribly overpriced and unable to develop with the times.
Growth inevitably slows as an economy develops. China is still growing faster than the US.
"China is still growing faster than the US."
The bigger picture is not favorable to China. Especially the high unemployment among the young is troubling. China no longer publishes data on youth unemployment, the last known figure was 23 per cent. This would be comparable to Spain or Italy, mostly sclerotic economies of the troubled southern wing of the EU.
They started publishing figures again, after they "improved" the methodology
https://www.atlanticcouncil.org/blogs/econographics/youth-un...
Sure, it's a complex picture. But you mentioned growth, and China's economic growth is still pretty high.