Monopoly of Corporatism Expands in Present Day Capitalism: Average Cost sfhits Rightward

The transaction cost of physical capital and information has significantly declined due to lowering the economic and political barrier of regulation across national borders in capitalism in the present. This expands the economics of scale and enables the specialisation of production so that both quantity and quality of goods and services have increased. The classical model of market multiple firms compete each other and constantly replace their market leader used to prevail when the economic of scale was smaller than nowadays.

Nevertheless, market competition is rather discouraged when market is freed because the market judges that selected firms capable to expand their production scale so that the classical model hardly prevails nowadays. When the economies of scale expands, a bigger production scale minimises the average cost of quantity produced. This also means that the firms having a big capacity of expanding their production scale take advantage of this expansion, and the other counterparts struggling to obtaining enough (physical and human) capital tend to suffer from losing in the market competition.

Big corporations and a few small firms succeeding in a remarkable innovation are those who are able to take an advantage of expanding their production scale to the optimum level minimising their average cost. By contrast, majority medium and small scale firms often struggle to compete with the wider productivity scale of the aforementioned counterparts taking advantage of their bigger capacity of expansion. This is one of the remarkable reasons why there are many merge and acquisition among various existing firms taking place.

Therefore, nowadays, instead of multiple firms with relatively small production capacity competing in a market, it is feasible to select a few firms which are capable enough to expand their production capacity. In another word, the production is more collectivised in capitalism in the present than capitalism in the past so that this sounds like the prediction of Vladimir Lenin about how capitalism eventually evolves has become reality.

Capitalism in the present has its benefit for not only the successful minorities owning means of production in a bigger scale than the past but also majority consumers enjoying goods and services with better quantity and quality available. Furthermore, those who have an innovative idea and some special talent are more easily discovered to be promoted thanks to the current development of information technology than the past.

The painful characteristic of this economic model in the present is that the number of those who are able to own means of production decreases. Due to the higher requirement of their production scale, less individuals are able to gain their access to run their business with an optimum cost required by the current market. On the top of it, not so many individuals can frequently innovate ideas guaranteed to contribute to an economy. If everyone were innovative enough to always have an equal opportunity to succeed, none would suffer from the constant threat of being deprived and everyone would be rich already.

The decreasing number of firms producing goods and services implies lowering the quantity of labour employed. Mere consumers not owning means of production have to compete with the others to gain their income source. Then, although majority consumers may enjoy higher quantity of goods and services with a lower price in a short run, their income level and their opportunity of gaining income may be repressed due to facing the higher competition of selling their labour. Therefore, they may have to restrict their expenditure in order to save their income in a medium-long run.

It does not necessarily imply to reincarnate the past economic model to shrink the current economies of scale because the current economic environment still has its benefit. What it should require is transforming the current model to adjust in order to maximise the happiness of individuals by minimising the pains from this market transition. It ought to innovate the method of mitigating the pains of this model such as restricted competition among individuals and access to owning means of production while taking an advantage of high productivity.


** Appendix **

Graph 1: Average Cost Curve shifts Rightward


Graph 2: Average Costs and Average Revenue = Demand Curve


Graph 3: Marginal Cost = Marginal Revenue