What a great article! Also, this paragraph was incredible to read:
To celebrate Tesla’s US$788 billion market cap in comparison to BYD’s $93 billion is to confuse incentives with outcomes. Both companies receive generous tax breaks and other government goodies. That Tesla is far more profitable than BYD while EVs have far less market penetration in the US is evidence of policy failure, not Elon Musk’s brilliance. Tesla pocketed the incentives while BYD (and competitors) delivered outcomes.
and this:
What we want from the butcher, the brewer and the baker are beef, beer and bread, not for them to be fabulously wealthy shop owners. What China wants from BYD and Jinko Solar (and the US from Tesla and First Solar) should be affordable EVs and solar panels, not trillion-dollar market-cap stocks. In fact, mega-cap valuations indicate that something has gone seriously awry. Do we really want tech billionaires or do we really want tech?
That Karl Marx and Adam Smith had the same end goal seems not to be well understood.
What Adam Smith got right and Karl Marx got wrong is that the profit motive can produce superior outcomes, but only when it operates paradoxically. In other words, profits need to be competed away – at least in the long term.
What did they mean by this, anyway?
The only “sense” I can make out of “profits need to be competed away” is by going purely abstract. Suppose an industry X is profitable. As such, it will attract more participants. For simplicity, suppose also that total profits are fixed; then more participants in X means lower profits per participant. Supposing this trend repeats itself across all industries, profits will be reduced to 0.
This of course assumes everyone can become an entrepreneur (no barriers to entry), and there are no boom and bust cycles with inevitable consolidation.
tl;dr - this only makes sense in some hypothetical capitalism that never has or will exist.
More simply, it’s just the delusion that unlimited competition results in high quality outputs, and that these will be rewarded by the market.
Something something falling rates of profit yet more not only commodities, but capital, through this system?
