Full text: Growth and Stagnation

To explain the effects of the tranition from a competitive 
to an oligopolistic economy we have to start from the idea 
of competition. Competition for me was not a harmless 
thing like a horizontal individual demand curve, it was 
the kind of aggressive competition which aimed at ruining 
competitors* cut throat competition. I regarded it as the 
function of competition to eliminate excess capacity. 
In doing so it would also limit the size of the profit margin 
at normal utilisation of capacity ( the mark-up ). 
There is always a tendency for this profit margin to rise 
on account of innovations and discoveries of raw material 
sources which would give at least temporarily edtra profits. 
kt the same time this implies expansion of capacity,of 
capital, while simultaneously the increase in the profit 
margin limits the market. Competition, ideally, acts 
against both the excess capacity and the increase in 
profit margin: By eliminating some excess capacity 
directly, and by loosening the distributive constraint on 
the market ( thus indirectly reducing excess,4apacityJ < 
The competition comes mainly from new entrants. 
In my book I did not sufficiently appreciate this. I overrated 
the role of the large firms in innovation, their dynamism 
and the part they played in pushing out competitors. 
It stands to reason that the function of competition 
will be greatly impaired once a sizeable part of the 
economy is transformed by the emergence of large oligopolistic 
concerns. The transition has been often described 
for example by A.P.Chandler ( The visible hand. 
Cambridge Mass 1977 ). The reason is that cut throat

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