Homepage / Currency / Capitalism and the absence of creative disruption
Как Стать Стримером Казино%3F Что для Этого Нужно%3 Best Game Software How to Design Engaging and Effective Educational Events Winline Делает Разницу! Букмекерская Контора Winline Онлайн Ставки На Спорт Making Corporate Travel Arrangements Business Virtual Data Room Stock Market Tips For Beginners What to Look for in a VDR Provider Why You Need a Secure Data Room Learning in the Digital Age How to Apply For Business Loans VDR and Document Management Performance Management and HR Outsourcing Modern Business Integration How to Choose the Right Board Portal Software for Your Company How to Choose a Data Storage Room Why Startups Use a Data Room for Investors The Best Web Tools for Designers Use Cases For Using VDR Documents Subsidy Programs and Financing Innovative Technologies for Audit What Is Real Estate Management? Investment and Funds Inspiring Teaching Books What Are the Benefits of a Virtual Data Room? Startups and Business Ideas How to Improve Virtual Board Communication The Lego Company History Investing in the Biotech Industry Financial Startup Basics Jogue Por Dinheiro Actual Em Cassino Onlin Virtual Communication Methods for Remote Leaders How to Choose the Best VDR Providers How Successful Online Businesses Succeed How Business Experts Fuel Innovation and Create Competitive Edge The IT World and Business Deal Making Software and How it Can Help Your Business Virtual Data Room Software Types of Steel Materials and Their Uses Board of Directors Software Bonver Casino Cz Hrací Automaty S Bonusem Zdarm Magazyn Żużel Speedway W Polsce I Na Świeci What Is Logistics School? What Is the VDR for Acquisition? The Best Data Room Apps For Startups Best Practices for Creating an Effective Board Meeting Agenda How to Choose the Best Shareholders Online Platforms Ostdeutsche Biersorten Getting a Construction Management Degree How to Select an Online Data Room Provider Start Your Blog Without Investment What to Look for in a Board Room Provider Data Room Comparison – Which Data Room Is Right For Your Business? Zakłady Sportowe Online Autógrafo Bukmacherska 1xbe “Pin-up O Melhor Cassino Do Brasil Web Site Oficial ᐈ Jogar Caça-níquei Rotating Events in Our Time How to Choose the Best Business Software Choosing an Online Payment Processor Due Diligence Software Virtual Data Room Providers for M&A Due Diligence The Best Online Data Room Benefits of a Due Diligence Data Room Best Practices for Data Rooms Types of Corporate Governance What Is Virtual Data Storage? Benefits of Document Distribution Software The Benefits of a Data Room for Startups Effective Project Management Requires a Mix of Technical and People Skills Top 5 Free File Sharing Services Zakłady Sportowe Online Obstawiaj U Bukmachera Gg Be Speed Up Your Business Valuation With a Data Room How to Choose the Best Board Management Software for Business How to Write Effective Board Decision Papers Choosing Board Meeting Software The Benefits of Document Distribution Software Why Startups Need a VDR for Start-Up Virtual Data Room for Ipos and the IPO Process What is a Board Portal? What Industries Use Virtual Data Room? Advantages of a Data Room What Does a Board Room Provider Do? Data Room Analysis for Venture Capital Funding The Importance of Board Reporting Software Safe Uploading and Downloading Business Files How to Select the Best Board Management Software How to Organize the Work of a Company “gerçek Parayla En Iyi Slot Makineleri Ve Spor Bahisler Which is the Best Podcast For Stock Market Beginners? Virtual Data Room Facts How to Protect Confidential Documents for Boards Advantages of Online Meetings Business Issues to Consider When Choosing a Data Room Provider What Is a Data Room? Virtual Board Room Software Due Diligence Risk Factors How to Choose a Reliable Tool for Data Exchange test Users535352253 Board Software and VDR Programs Business Operations Management Software


Capitalism and the absence of creative disruption

NINE straight highs for the Dow Jones Industrial Average might suggest that all is well with capitalism. But on the contrary, they could be a sign that things have been going profoundly wrong with the way the system is working.  

The main driver for the surge in share prices this year has been the strength of profits; second quarter profits for S&P 500 companies are around 12.6% higher than a year ago, according to Andrew Lapthorne at SG, a French bank. As the chart shows, relative to GDP, profits seem to be regaining their levels of recent years. And those levels are much higher than they have been in much of the post-war era (see chart).

  • Why an eight-hour bus ride from Los Angeles to San Francisco might beat a flight

  • Pricey London property may push Labour voters into Conservative constituencies

  • A legal defeat for a pious prison gardener is good news for bosses

  • Capitalism and the absence of creative disruption

  • “Icarus” reveals the mastermind behind Russia’s doping programme

  • A Google employee inflames a debate about sexism and free speech

Jim McCaughan of Principal Global Investors says he is not too concerned about this since the nature of capital has changed; no longer is the economy dominated by manufacturing where businesses have to invest in heavy equipment, blast furnaces and the like. But that argument, which has been knocking around since the dotcom boom, strikes me as unsatisfactory. In essence, the argument boils down to the return on capital having risen. But if that is the case then entrepreneurs round the world should be piling in, creating new businesses and expanding existing firms – especially in the light of low interest rates. The resulting competition should drive profits back down.

That clearly isn’t happening, suggesting something about capitalism has changed. One reason could be that certain sectors are now in the hands of effective monopolies, particularly in technology where network effects favour incumbents (see our coverage of this issue).  Creative destruction may not be happening any more. And that may explain why economic growth and productivity improvements have been sluggish in recent years.

It is possible, of course, although three big caveats are needed. There have been several cases in the last 20 years when companies have thought they had an enduring advantage (AOL, Nokia and Blackberry, for example), only for events to overtake them. Secondly, big business was dominated by monopolies in the early 20th century, only for populism to strike back in the form of trust-busting measures. The same could happen today; barely a day goes by without a tech company facing public controversy. Third, the marginal cost of many tech products tends towards zero which suggests that price competition eventually ought to bite hard. The tech giants may yet be cut down to size.

When it comes to the stockmarket, Jeremy Grantham of GMO has a new note pointing out that investors tend to award high valuations to shares when, like now, profit margins are high and inflation is low and stable. But if one believes that margins are mean-reverting, this shouldn’t happen. When profits are high, investors should fear that they will fall and pay a low multiple of current profits; instead valuations have only been higher in 1929 and the late 1990s

Mr Grantham thinks that any shift to lower valuations would have to be accompanied by a sustained fall in margins or a rise in inflation (or both). And neither is going to happen soon. He may be right on both counts. But that should worry those who are hoping for a return to healthy economic growth. And all “this time is different” arguments should remind us of when Irving Fisher said, in 1929, that stocks had reached a “permanently high plateau”.

NextA tale of two markets

Source: economist
Capitalism and the absence of creative disruption

Comments are closed.