Pericles
>" there is a reason the "big are more powerful than the small". *They have become big by providing the customer with value.* <"

What you say is theory but in practice it doesn't work that way.
That assumes that the supplier doesn't get engaged in a myriad of market distorting unfair competitive practices.

>" Ultimately, they will become less powerful, as "the small" out-innovate them."<
in niche markets ...perhaps
>"Even Microsoft cannot maintain its anti-customer monolpolistic pricing tactics forever."<
In the meantime those fledgling innovations are denied to the public. not to mention 'innovative' smaller companies are broke or forced to sell their innovation to...... the big predatory corps.

The history of Microsoft is that it was made by a large dominant multinational. Much of Microsoft's new found 'competitiveness' was due to "govt intervention".
"> And history is littered with the bones of once-powerful companies whose time has passed.<" like buggy whip manufacturers ?
That is an outrageously simplistic take on the reality.

You know that there are a blinding array why big corps go much has little to do with up and coming 'small companies'.
You also ignore the corrosive impact of externalities like big corps get the ears of Governments. Are you really saying that the company behind Bhopal went out of business because of competition or that Hardies didn't hide behind corporate structures. or that the company who made dodgy breast implants went out of business because of competitive pressure.

I understand the theory clearly but practice is some what different.

Ok, examinator, let's dig a little deeper.

>>The history of Microsoft is that it was made by a large dominant multinational.<<

Microsoft, along with Hewlett Packard, Google, Apple, Dell etc. were all founded from scratch, with just a couple of fanatics and an idea. It was their competition that were "large dominant multinationals"

>>Much of Microsoft's new found 'competitiveness' was due to "govt intervention"<<

You couldn't be more wrong. Microsoft's eventual stranglehold on the market was the result of marketing practices that they created when they were still quite small. Some people regard these as somewhat devious and unethical, but they were not the result of a monopoly situation, they were the cause of it.

And their "new found competitiveness" - if by that you mean the fact that they are less able to exploit their monopoly - is to some extent the result of the various governments, EU etc, dismantling those practices that were considered unfair.

>>"And history is littered with the bones of once-powerful companies whose time has passed." like buggy whip manufacturers? That is an outrageously simplistic take on the reality.<<

I did not actually have buggy-whip manufacturers in mind.

General Motors dropped out of the Fortune 500 earlier this year, having been there for a hundred years. RCA was at one stage one of the giants of the fledgling IT industry, along with IBM, GE and the "BUNCH" - Burroughs, Univac, NCR, CDC and Honeywell. There is quite a long list of multi-billion dollar, non-buggy-whip companies who were strangled by their own inflexible business model, beaten by more agile competitors.

I take your point about the fact that some large corporations use their market weight to stamp on competition. But government protectionism, of any kind, is as corrosive a force in business as any home-grown monopoly.

Antiseptic,

There might, for example be a company run by the Australian govt that sells sawmill parts that you could purchase without paying the tax. There might be a global company selling petrol.

Perhaps a better question for you to be asking is, "What the hell has happened to the Australian manufacturing industry?"

As we pointed out earlier in the discussion, the cheaper manufacturing overseas comes in large part from a difference in wages and workplace rights rather than any genuine efficiency. Call that fair?

Pericles,

"no wonder your argument is being drowned in a sea of fact and logic."

What a classic! Unfortunately I don't credit you with the same wisdom as does Yabby.

"They have become big by providing the customer with value." Sometimes they have grown big by ripping off others!

"...with protectionist government policies. There is no opportunity in that environment for innovation to displace them, as potential competitors are disadvantaged from the get-go."

I am all for encouraging renewal and increasing efficiency within the economy through rewarding innovation in small business. Encouraging people to purchase from local businesses seems a good method to achieve this.

"If I produce shoes in my factory in Altona, and I'm protected through a range of geographic tariffs from competition (from Canning Vale, say, let alone from overseas) how do you suspect I will price my product?"

That is to your benefit. I am not suggesting however, that a tariff be set so high as to encourage continuing inefficiency or profiteering.

Comparative advantage doesn't count the costs associated with adapting productive assets to producing what we're relatively best at. That is a simple statement of fact.

"The theory of the international division of labour is one of the most important contributions of Classical Political Economy. It shows that as long as — for any reasons — movements of capital and labour between countries are prevented, it is the comparative, not the absolute, costs of production which govern the geographical division of labour." This is a quote from the website that Peter Hume was good enough to link for us.

*There might, for example be a company run by the Australian govt that sells sawmill parts*

ROFL Gilbert :) The Australian Govt can't even oversee the
installation of pink batts. What would they know about making
sawmill parts? Try Cuba, it doesen't work. It didn't work
in Russia either, they gave up, so did the Chinese. Don't you
learn anything from history?

*the cheaper manufacturing overseas comes in large part from a difference in wages and workplace rights rather than any genuine efficiency. Call that fair?*

Yet the majority of our imports come from Europe, USA, Japan
and Korea.

Its called value for money. Only some people want el cheapo products.
Oops Gilbert, there goes your theory.

*Encouraging people to purchase from local businesses seems a good method to achieve this.*

So encourage them by all means Gilbert. Don't go increasing the
input costs of their businesses, so that they too become
uncompetitive in the real world. We tried all that stuff in the
60s, it was a dismal failure.

All that you will create with your theory, is a heap of small
monopolies, just like we used to have

My thoughts on FT are well known so I won't repeat them here but I endorse Gilbert's approach and the idea that there really needs to be far greater scrutiny over the effects of free trade and some of the anomalies including the use of subsidies and cheap labour.

If we are to introduce tariffs within a generalised free trade system there is no harm in a tariff for goods deriving from those countries where subsidies are used to protect local agriculture or manufacturing industries or where cheap/slave labour is used; and even banning imports from those countries where governance is not strong enough in regard to pesticide use or other hygiene issues (or where there is a risk of pest infestation without the use of toxic fumigants at importation point).

This is one area where nation sovereignty is over ruled or dictated by international interests including disparities on foreign ownership laws etc.

It is an area where much more needs to be done and where Australia has to get out the 'only virgin in the brothel' mentality.

Thanks Pelican for the endorsement,

Rock on!

Did you see the bigger article that I put up on OLO titled 'Key to Power'? http://www.onlineopinion.com.au/view.asp?article=10886

It's about the potential for a green and independent alliance in opposition to the free market.

They also said that they would publish another article that I gave them this week about the 'invisible left hand and the invisible right hand', which looks at competition and cooperation as dual positive drivers within economics (so long as they occur in balance of course).

I'd love to hear your comments on those.

....and not to forget the rest of you of course!