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Pure Capitalism Is Unworkable


Pure capitalism is unworkabale because human greed (for money and/or power) gets in the way.  A scenario best illustrates the problem.  A new market opens.  Dozens of new businesses are building customer sets for some new product or service.  We're all doing our own thing, strenuously competing over who can deliver the better quality and price.  That's "free market" — that's the entrepreneurial experience — and there's nothing like it!

But some of the businesses are a little more capable than others — and the less capable merge into the more capable (or they fail and the more capable pick up their customer set).  But then one of the more capable decides they want to grow faster.  So they go looking for money (aka, VC, venture capital) so they can grow faster and/or buy out some of their competitors.

But now the game has changed.  The VCs' business is to make money on their money — so the emphasis of the acquired business shifts from skill (delivering the best possible quality/price) toward showmanship (more salespeople, more advertising).  It's at this point the entrepreneur starts to lose out, the better businessperson takes over — and the acquired business becomes a money game.

Now dominating the market becomes the goal.  If I can put my competitors under or buy them out, that's what I'll try to do.  But there are always a few competitors playing the same game — and we'll fight among ourselves, trying to capture the others' customers by all means possible from putting them out of business to acquiring them.

But now there are only 2 or 3 or 4 of us.  And our market has pretty well plateaued — collectively we're selling about all our customers are willing/able to buy.  We'll need to venture into other markets to keep growing.  But sales are still good in this market — bumping up the price a bit won't affect sales.

If I'm the lone survivor (ie., I've become a monopoly),  there's nothing (other than government/law) stopping me from continuing to raise price until I reach a max profit point — and if I have a product/service my customers NEED, rather than just want, I have a goldmine. 

But even if I'm not the sole survivor, the 2 or 3 others are in the same boat as I am, and there's nothing (other than government/law) preventing us from getting together and cooperating to maximize our profits (ie., operating as an oligopoly) — after all, we're all striking out for new markets and we need those max profits to capture those markets. 

So that's the weakness of capitalism — because of human greed, it becomes a winner-take-all game.  Government/law needs to step in to contain it — otherwise we all become slaves to the winner(s).  We'd like that government interference to be minimum, but that's the job of society via politics.  But when politicians are for sale to the winners, that's not possible — and that appears to be the state we're in today.

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