Libertarians and conservatives love tossing out Schumpeter’s gale, the observation that new stuff destroys and replaces old stuff. The automobile destroyed the buggy whip business, but created whole new industries for the repair of cars. That’s fine and largely true, but Marx, from whom Schumpeter stole the idea, was also right. Capitalism will, if allowed to operate unfettered, destroy itself. It’s why Buckley said “The trouble with socialism is socialism. The trouble with capitalism is capitalists.”
We are seeing this maybe in the cable TV business. Every home in America has cable or satellite now. There’s no growth in that business. The cable companies and content providers are trying to wring out more money by raising fees and charging more for the product. The response is people cutting the cord. News reports claim that the number of homes dropping TV has gone from under two million to over five million in the last few years. I know a few people who have pulled the plug. I’m considering it.
Some like to argue that the new services are driving the cord cutting. Why pay for cable when you can get Hulu or Amazon? Well, those services are pretty crude, so it’s unlikely that they are driving the trend. Instead, it is people responding to the declining quality and rising cost of cable television. There’s also a cultural element. If you are white, television is now an endless assault on your dignity and patience. You can only be called a racist for so long before you accept it and turn off the television.
The reason you need government to prevent consolidation in the marketplace is to not only protect customers, but to protect markets. In the case of natural monopolies, like power and gas, the state has to provide the role the market would play in setting prices and protecting consumer rights. By allowing cable companies to bundle channels and monopolize whole areas of the country, the cable business is in trouble. In other words, the market needs to be protected from itself in order to survive.
Another area where uncreative destruction is creeping into the discussion is cell phones. This is a huge scam based on cheap credit. That iPhone really costs something like $800, but the phone company finances it over the two year contract. With the juice you pay $1500 a year to send pointless texts to friends. You also get to carry around a devise that tracks your every movement and sells that data to marketing companies who beam ads back to that phone.This is good for Apple and Google, but very bad for you.
Some call this late stage capitalism, but I think they just think the term sounds clever, so they say it without thinking about it. In reality, this is late stage democracy. Once the voter rolls expand to cove all adults, the system becomes a bust-out. The elected officials no longer care about voters or public good. They are hired men paid for by a donor class who controls politics, by controlling the parties. It’s not an accident that politicians that lose election end up in cushy six figure jobs as lobbyist and consultants.
