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Confirmed User
Industry Role:
Join Date: Oct 2005
Posts: 9,512
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Well, let's mention a real example of what can cause the concentration of power in few hands - the country I live in.
The example may serve as a very interesting illustration since until 1989 there was NO private capital (as this was against the system). It's a very interesting premise for what followed and how it is 24 years from then, after almost all the country's capital and property was privatized and redistributed.
Before the break - all private enterprises were nationalized in 1948. There was no "capital" in the typical sense of the word, nobody could oficially attain wealth, officially - nobody could get rich and officially - nobody was rich. There was no means of private enterprise, everything was owned by the government.
The only way to attain wealth or luxury was to get involved in illegal activity, working off the books, stealing government owned property and reselling it on the black market, smuggling black market goods from the west or exchanging and dealing foreign currency, which was illegal to posses back then.
There obviously was no "middle class" in the typical sense of the word, meaning small businesses, people being self employed etc. There was only mass employment and everybody got paid enough to make a living but not enough to being able to afford luxury, which was not even offered.
So there was no capital in private hands, everyone's income was more or less equal, of course there were differences between the levels of income, but the prime minister of the country only made about 5 times more than what was the average wage, it may have been the best paid job in the country. The only export market was the Eastern block.
After the break in 1989 - the capital got privatized, it was either:
a) the heirs of those who formerly owned properties got their posessions back if they applied for restitutions.
b) voucher privatization - every adult citizen was given 1 000 "shares" that all had the same money value in the "voucher privatization" he could invest his money in the big privatized companies that were supposed to get public shareholders and then further trade or sell their shares.
c) Small businesses such as shops or restaurants were auctioned and the trade licenses paid for in cash.
The goal was to privatize existing enterprises, that had no past private ownership, and create the non existing class of self employed / small businesses - basically to create a free trade market.
Who benefited the most from the model? The capital!
Anyone who could put together money (immigrants with access to cash, foreign investors, crooks, the mob) immediately started to buy out the vouchers for cash, for as much as twenty times what was their initial money value (before one invested into anything).
There were so called "investment funds" that attained a great wealth of those vouchers thus also shares or full ownership of existing (and in many cases profitable) companies,
What followed is the history - there's countless stories of Wild East that are quite unbelievable. A major portion of property was stolen or dissolved in untrackable criminal schemes, banks and companies were ran to the ground, and the citizens that lossed their money were bailed out by the government (which is a little bit ironic).
At the end of the day, pretty much every industry segment with high barriers of entry consolidated to the hands of few, either multinationals or very few trusts or investment funds if you want to call it that way.
Fast forward to today - as of the end of the nineties - most of the previously profitable companies were either ran to the ground (in many cases on purpose - it doesn't help business when all the liquid funds get "tunneled out" or property sold under its market value by someone who hadn't paid it's market value in the first place to somebody else just to do the same).
The redistribution of wealth pretty much lead to the following capital holders:
a) multinationals (that either bought out functional big enterprises or started a local branch)
those control mainly:
- the energy market
- the water market
- telecommunications
- banking
- consulting and administrative services (aka the big four)
b) investment funds (that usually have history of crime behind them)
there is about three, four dominant ones, those control mainly:
- the real estate development market
- coal and heavy industry
- pretty much own the media (press etc., including one group's influence on the national, state owned TV) which they use mainly to dig up dirt on political parties they don't finance
- lately they are even buying out properties back from the multinationals or starting their own banks!
c) government (there are still some national companies)
- post services
- railways (not exclusively)
- plus the rest of the whole huge and everexpanding underpaid (again ironical) government sector (schools, universities, jail system etc.)
d) small businesses (sole traders and limited liability companies)
- usually either regional or very specialized
- there are a number of those that started small, became very succesful and later sold out (AVG is a good example)
Basically there's usually three to four players in each field, the result is for example:
- cartel prices on energy (although the market was liberalised and you can choose, you won't save)
- some of the highest banking fees in the world (banks make 53 pct. of their revenue on fees - meaning regular acccount holders, talk about a cartel)
- the second most expensive cell phone plans in Europe (although it may have gotten better recently)
- tax breaks for multinationals in exchange for jobs (which totally distorts the market and pushes competing businesses out of the game)
- three main grocery chains that are offering terrible quality, anything half decent costs about three times more than the "regular" crap (unfortunately this has lot to do with local consumer culture)
So if you're a regular citizen and would like to have a "regular type of life" you can be assured that:
- you'll pay a cartel dictated price for energy
- you'll pay the cartel dicated, highest possible price for your cell phone plan (all the three provides have totally )
- you'll only get paid a cartel dicated salary, since there's only so much the multinationals pay, and they definitely don't share profits with employees
- you'll get robbed by the banking cartel (with the highest fees in EU)
Plus:
- the multinationals rarely pay taxes, since lots of them, no matter of their market coverage inevitably end up in "loss"
- most of the companies profits move around the globe and never contribute anything that would be by any means local
- your salary will be just as much as "they" pay in "their" industry which will be in most cases just enough to more or less get by but not enough to save or start a business.
- the government usually passes laws in order to support those that delivered the "government officials". The percentage of diletants at the helm is purposefully corresponding with it too.
As a result, we have several tycoons and multinationals controlling pretty much any part of the market, that has high barriers of entry, such as several multinationals controlling the energy or banking business, we have one person in Fortune's top 100, several billionaires and some of the highest earning banks in Europe - one would say that this has to increase the quality of life yet...
The purchasing power of an average citizen in 2013 (aka how much real basic needs, such as housing, food, energies can one cover for an average income) is at about the same level as in 1989 (note that you're comparing a communist country with equal wealth distribution with "free market"). One was governement dicated prices, the second is cartel dictated prices.
Basically - the extra price for every overpriced cost of service or product is steered on the consumer, including major taxation of consumption (VAT at 21 pct.) while the price of doing business and making a profit for the big multinationals or those who use convenient business / tax schemes is diminished.
The system is basically built to leech out the most it can from the working man, and to enable the multinationals to leech out the most out of the system. It doesn't make the living conditions for one better, there's no motivation to do so.
At the end of the day, there's absolutely no "dripping down" of wealth to the poor - and I'm not talking about social or deadbeat cases, but about regular, educated, working people.
I'm not making any ideological stance - just an observation in order to fuel the discussion - that being - if you want to live a regular type of life in this environment, you may be up for hard times, and it won't get any better anytime soon.
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