[HN Gopher] The missing middle: firms in developing countries
___________________________________________________________________
The missing middle: firms in developing countries
Author : falcor84
Score : 69 points
Date : 2024-10-08 06:59 UTC (16 hours ago)
(HTM) web link (asteriskmag.com)
(TXT) w3m dump (asteriskmag.com)
| llm_trw wrote:
| If the last 80 years of growth have shown: following the advice
| of western academics is the surest way to stay poor, while
| following any other advice grows your economy much faster.
|
| Least we forget that Communism lifted more people out of poverty
| in the last 20 years than Capitalism has in the last 200.
| gruez wrote:
| >If the last 80 years of growth have shown: following the
| advice of western academics is the surest way to stay poor,
| while following any other advice grows your economy much
| faster.
|
| I thought mainstream economists advocated for market
| liberalization reforms that lifted billions out of poverty in
| asia? Is there a score sheet of how many times "western
| academics" were right or wrong?
| dannyobrien wrote:
| Odd that communism pulled that off the moment that it adopted
| the market reforms documented and explored by western academics
| (and eastern ones too, to be clear -- just not doctrinaire
| Marxist and Maoist academics)
| llm_trw wrote:
| Odd that the USSR grew faster in the 1980s than the EU did in
| the 10s and 20s.
| gruez wrote:
| Odd for you to cherry pick two different time periods and
| regions to compare against. At least comparing china
| pre/post market liberalization you're not comparing between
| two countries.
| addicted wrote:
| The growth was fake which is why the USSR collapsed.
| inglor_cz wrote:
| You have no idea about conditions on the ground in the USSR
| in the 1980s. No meat, no consumer goods, people queued up
| for everything. The only thing that the regime could
| produce, besides weapons, were throughly false impressive
| statistics. Relying on Moscow for its growth figures is
| like relying on Charles Ponzi to multiply your savings.
|
| There is enough Eastern Europeans here on this forum that
| this kind of pro-Soviet misinformation won't fly here. We
| know precisely how things were.
| WalterBright wrote:
| China switched to a market economy 20 years ago, and abandoned
| the communist economy.
| inglor_cz wrote:
| They switched to a market economy more than 30 years ago.
|
| During the Xi tenure, e.g. in the last decade, they seem to
| be coming back to political control of the economy. It also
| seems that their growth is slowing down. Possibly those two
| developments are related.
|
| The government is notoriously bad at picking winners. For an
| example relevant to HNers, there was a government-run
| precursor of the Internet in France, called Minitel. It was
| an interesting technology, but horribly overpriced and unable
| to develop with the times.
| foldr wrote:
| Growth inevitably slows as an economy develops. China is
| still growing faster than the US.
| inglor_cz wrote:
| "China is still growing faster than the US."
|
| The bigger picture is not favorable to China. Especially
| the high unemployment among the young is troubling. China
| no longer publishes data on youth unemployment, the last
| known figure was 23 per cent. This would be comparable to
| Spain or Italy, mostly sclerotic economies of the
| troubled southern wing of the EU.
| gruez wrote:
| They started publishing figures again, after they
| "improved" the methodology
|
| https://www.atlanticcouncil.org/blogs/econographics/youth
| -un...
| foldr wrote:
| Sure, it's a complex picture. But you mentioned growth,
| and China's economic growth is still pretty high.
| black_puppydog wrote:
| That's partly true, but try proposing to organize the US
| economy the same way the chinese economy is organized on the
| large scale, and watch everyone left of Bernie up in arms,
| shouting about communism.
|
| Seriously, it's borderline funny to see what gets derided as
| "communist" in the US... If you're not in that country and
| having to do without health insurance etc...
| ookblah wrote:
| isn't firm growth just a symptom of the issue? which i guess the
| article is describing.
|
| sometimes i feel like the best short-term path forward for a poor
| country is just to have some kind of heavy handed gov't (like a
| "benevolent" dictator, hear me out lol) dictate policy and
| brutally subsidize and consolidate industries. of course you have
| to magically do this this with minimal fallout from corruption
| and then somehow make the transition to more of a democratic
| model.
|
| debatable if this nets out positive in the long run for the
| average citizen, but it will make your country "rich" (looking at
| you south korea). US is unique in this regard in that we have
| these huge firms and can also foster an environment for small/med
| to make that transition, although it's changing as well.
| antihipocrat wrote:
| Sounds like Singapore.. without the transition to a more
| democratic model. Living standards there indicate it's been net
| positive for quite a long time.
| ENGNR wrote:
| And South Korea
| gruez wrote:
| What type of industries were consolidated/subsidized in
| singapore? My impression is that they had the advantage of
| being a liberal financial center, whereas all their neighbors
| were not.
| accurrent wrote:
| Yeah the government does not disturb businesses here much.
| But they do heavily subsidize corporate costs. Theres a
| economic development board that provides lot of grants for
| companies. Most mncs use edb grants for setting up their
| initial business.
|
| Early on in Singapores history, the government did seize a
| lot of land from farmers though. I believe they were
| compensated for it.
|
| We also have these weird things called GLCs. China sort of
| copied this with their telecom industry. GLCs are
| corporations created by the government to handle certain
| things. They kind of have government level powers but
| corporate governances (worst of both worlds imo).
| accurrent wrote:
| Im not sure about how much the dictator part is nessecarily
| true. For one when singapore was independent it was already
| wealthier than its neighbours. PAP loves telling us how
| theyre the best thing on earth, but Im not convinced. LKY did
| a lot of reforms but where practical he left colonial
| infrastructure as is. FDI and luck are also a big part of
| Singapores growth story.
|
| Singapores success was mirrored by china in the 2000s. The
| trick was free market capitalism with socialist political
| policies (in both cases). Also singapore has mastered the art
| of Government linked corporations - something that china
| copied. From 2000-2012 China probably had one of the least
| dictatorial governments in its history. Adding a dictator
| back in the mix has slowed growth although i wonder if thats
| a symptom of slower growth.
| logicchains wrote:
| Singapore got rich because so many foreign firms moved there
| to use it as their base of operations. That isn't a scalable
| approach for a larger countries (Singapore's population is
| only around 5 million) that can't rely on foreign firms to
| supply all their jobs. In terms of producing successful local
| firms Singapore has actually been quite unsuccessful.
| zoobab wrote:
| Politicians love Big companies.
|
| Look at the last EU's Draghi report, not a single small/medium
| company in the list of contributors.
| paganel wrote:
| Too bad that European history is filled with former
| autocrats/dictators who had gotten into power especially on the
| back of disgruntled small/medium business owners, the Nazis
| themselves had in their programme at some point the dismantling
| of big (and Jewish-owned) general stores so that the small
| store owners could have a chance (that didn't happen once they
| got into power, they just took over ownership from the Jewish).
| vvpan wrote:
| The guy who made Nomad List and a bunch of other websites said
| on twitter that he was contacted by Draghi for the report.
| WalterBright wrote:
| In the 90's, Microsoft proudly gave no money to politicians.
| Look what happened - an attack by the government on rather
| nebulous anti-trust charges. (Really - giving away a free
| browser harms consumers?)
|
| This all stopped when Microsoft learned that when you're a big
| company, you'd better pay tribute (political contributions).
| The winning strategy is to contribute to both sides.
| blackeyeblitzar wrote:
| Yes giving a browser away harms consumers. It's bundling and
| dumping to kill competitors.
| benoau wrote:
| It's also worth noting at that time downloading an
| alternative browser probably over "dial up" was likely to
| take a couple of hours when you also had usage quotas and
| fees based on connection duration!
| gruez wrote:
| Fact check: firefox 1.0 (released in 2004) was only 5MB
| [1], which takes only 15 minutes to download on a 54 kb/s
| dial up connection[2]
|
| [1] https://ftp.mozilla.org/pub/firefox/releases/1.0/win3
| 2/en-US...
|
| [2] https://www.wolframalpha.com/input?i=6+MB+at+54kb%2Fs
| benoau wrote:
| That was the fastest a dial up modem could be, many
| modems were a fraction of that speed.
|
| And this was Netscape, not Firefox, you need to go back
| about ten years further.
|
| Edit: redoing the maths properly makes the _15 megabyte_
| download in the late 90s take approximately:
|
| - 45 minutes at 56.6kb modem
|
| - 90 minutes at 28.8kb modem
|
| - 180 minutes at 14.4kb modem
|
| http://www.oldversion.com/windows/netscape/
|
| https://en.wikipedia.org/wiki/Netscape
|
| > Microsoft released version 1.0 of Internet Explorer as
| a part of the Windows 95 Plus Pack add-on. According to
| former Spyglass developer Eric Sink, Internet Explorer
| was based not on NCSA Mosaic as commonly believed, but on
| a version of Mosaic developed at Spyglass[33] (which
| itself was based upon NCSA Mosaic).
|
| > This period of time would become known as the browser
| wars. Netscape Navigator was not free to the general
| public until January 1998,[34] while Internet Explorer
| and Internet Information Server have always been free or
| came bundled with an operating system and/or other
| applications. Meanwhile, Netscape faced increasing
| criticism for "featuritis" - putting a higher priority on
| adding new features than on making their products work
| properly. Netscape experienced its first bad quarter at
| the end of 1997 and underwent a large round of layoffs in
| January 1998.
| gruez wrote:
| >And this was Netscape, not Firefox, you need to go back
| about ten years further.
|
| Software tends to get bigger as time goes on, not
| smaller. Therefore the size of firefox in 2004 should be
| an upper bound for a browser back in the 90s.
| benoau wrote:
| http://www.oldversion.com/windows/netscape/
|
| It seems like by the late 90s the Netscape installer was
| already around 15 megabytes.
| jakub_g wrote:
| Netscape went on first to become Mozilla (https://en.m.wi
| kipedia.org/wiki/Mozilla_Application_Suite), but it was a
| big and bloated; and only then came Firefox as a slimmed
| down Mozilla only for web browsing.
| benoau wrote:
| Yeah, and the important detail here is all of this
| happened _years after_ the "browser wars", which saw
| Netscape rapidly free-fall from being worth billions to
| being discontinued once IE was bundled with Windows 95.
| And then years later, Mozilla built Firefox from what
| remained.
| WalterBright wrote:
| Or you could get it on a CD.
| s_m_t wrote:
| I don't get it are operating systems and computers supposed
| to ship without web browsers? You could argue literally any
| feature is put into a product to 'bundle and dump' to kill
| competitors. Why is a web browser something that should be
| a paid product with a so called competitive market to begin
| with?
|
| Windows also comes with USB drivers but hypothetically I
| could drive down to Best Buy and choose from a number of
| different USB drivers I would have to pay for separately (I
| guess I should pick up a web browser too apparently). This
| would be preferable why?
| WalterBright wrote:
| Exactly. The whole case was simply an attack on Microsoft
| because Microsoft was a big target that (stupidly) dissed
| the DoJ.
| blackeyeblitzar wrote:
| > I don't get it are operating systems and computers
| supposed to ship without web browsers? You could argue
| literally any feature is put into a product to 'bundle
| and dump' to kill competitors.
|
| A browser was a separate product at the time, not a
| feature. Microsoft bundled, as they have done many other
| times, for anticompetitive reasons.
| WalterBright wrote:
| Cars today come bundled with stereos and navigators.
| Should they be charged?
| WalterBright wrote:
| Consumers at the time had other browsers they could install
| and use. There was no impediment to it.
| gruez wrote:
| >This all stopped when Microsoft learned that when you're a
| big company, you'd better pay tribute (political
| contributions). The winning strategy is to contribute to both
| sides.
|
| Source? It seems equally plausible that it stopped because
| Microsoft won on appeal and the government got spooked and
| didn't want to prosecute a losing case.
| WalterBright wrote:
| > A losing case
|
| And there you go. There was a picture just before that of
| Bill Gates riding on a golf cart with Bill Clinton. And
| then the case was dropped.
|
| Things that make you go hmmmm....
| labster wrote:
| It's a good thing we only have two sides in America. Can you
| imagine if companies had to contribute to as many parties as
| Europeans have? No wonder we're more competitive here.
| WalterBright wrote:
| When you're big, it's a cost of doing business.
| bantunes wrote:
| "Rather nebulous"? What's nebulous about leveraging your
| position on the market to drown out competitors with a free
| browser bundled with your operating system?
|
| If Amazon redirected all search results of a product to their
| own version of it, omitting all others - would that be
| nebulous as well?
| WalterBright wrote:
| The real reason Netscape failed was their browser stunk. I
| know because I used both of them. Netscape crashed
| constantly. Explorer crashed too, but not nearly as often.
|
| That's why people switched to Explorer. Netscape ran crying
| to the government.
|
| That whole shtick about Explorer being uninstallable was
| ludicrous and irrelevant. Nothing stopped a user from
| installing another browser and using it. These days, a free
| browser is included with about every device.
| bantunes wrote:
| Non-technical users leave defaults on all the time - do
| you really think there wasn't a sense in some people IE
| _was_ the internet? Don't you think MS wanted it that
| way? The "Connect to the Internet" icon on Windows 98's
| desktop had the IE icon on it!
|
| And this wasn't "these days" when "a free browser is
| included with every device", it was 1998.
|
| I think you're being dense on purpose.
| WalterBright wrote:
| Microsoft included a number of utilities with its
| operating system - like a text editor - that operating
| systems have included since the beginning. There's no
| magic line that says a browser cannot be included.
| fragmede wrote:
| Yes, really. By using their profits from other areas to drive
| Netscape out of business, consumers were harmed. This was
| shown in trial and Microsoft found to have violated antitrust
| laws.
| WalterBright wrote:
| No, nobody ever identified any "harm" at trial.
|
| I started out using Netscape (amazingly, it wasn't any
| trouble getting and installing).
|
| The "harm" I experienced was Netflix crashed constantly. So
| I tried Explorer. Explorer crashed about 90% less. That was
| the end of Netflix.
|
| The horrible, dirty deed Microsoft did was write a better
| browser.
| fragmede wrote:
| The harms identified in the trial were reduced consumer
| choice, stifled innovation, exclusionary tactics,
| predatory pricing, and monopoly maintenance.
| WalterBright wrote:
| Except that none of those hold up under scrutiny.
| _DeadFred_ wrote:
| Right, because post these events software didn't devolve
| to 'free software' that only costs 'all your privacy and
| personal information' as that is the only funding method
| able to compete with 'free'.
| piva00 wrote:
| > The horrible, dirty deed Microsoft did was write a
| better browser.
|
| No, the dirty deed was using their monopolist power to
| undercut another browser by bundling their offering with
| the OS.
|
| Please, Walter, your takes are getting a tad way
| overboard with the anti-regulation stuff, you are
| stopping to think rationally to become an ideologue. You
| are smarter than that, at least by your technical
| achievements you should be.
| WalterBright wrote:
| I competed against Microsoft in the 1980s in the compiler
| business. Microsoft failed at defeating my tiny (in
| comparison) company (Zortech). Zortech did quite well
| against Microsoft C, despite everyone telling me that the
| next Microsoft release would put Zortech out of business.
|
| Microsoft is one tough competitor. But I knew how to
| compete with them. I never had much sympathy for Netfix
| with their crummy (in comparison) browser.
|
| Microsoft could have made their compiler free, and it
| wouldn't have made the difference. Lots of companies
| successfully competed with the free utilities Microsoft
| bundled with their operating system. They did it the old
| fashioned way - by making a better product, not a worse
| product.
|
| BTW, did you know that the IBM PC came with a free BASIC
| compiler? That didn't even slow down competing languages.
|
| And the Gnu stuff. All free. Doesn't that undermine
| competition? Isn't that so unfair? Why doesn't the DoJ go
| after Gnu for unfair trade?
| piva00 wrote:
| > (Really - giving away a free browser harms consumers?)
|
| Really, it does, and you were alive and on the internet at
| the time. You saw the rise of webpages that would only work
| on IE because it was bundled, you saw the demise of Netscape
| as a competitor because people wouldn't go through the
| motions of downloading another browser on a 28.8/56kbps
| connection.
|
| Price dumping with extra steps is still price dumping.
| WalterBright wrote:
| As I remarked, I used Netscape first. I abandoned it for
| Explorer because Netscape crashed all the time, to the
| point of being unusuable.
|
| Explorer was simply better.
| ThrowawayB7 wrote:
| All preventing that got us was a Chrome browser monopoly
| instead by a business whose overwhelmingly dominant source
| of revenue was internet advertising, oops. Talk about going
| from the frying pan into the fire. We'd probably have come
| out better off with the Internet Explorer monopoly.
| tormeh wrote:
| Small companies don't have spare people to allocate to
| contributing to government reports.
| houseplant wrote:
| we gotta stop chasing the whole "line go up" ideology. I know
| that's all capitalism is and how it exists, but we need to be
| okay with just simply doing well for the sake of doing well. You
| don't need to instantly go berzerk with investors and stocks and
| shit. unfettered growth will never truly pay off.
| WalterBright wrote:
| > unfettered growth will never truly pay off
|
| It did for the US, Japan, Hong Kong, Germany, China, everywhere
| that free markets were tried.
| mschuster91 wrote:
| China is the worst example you can make for that point.
| They're sitting atop of a giant pile of debt, particularly in
| housing, and millions of people have lost their life savings
| as a result. China's economy is a house of cards just waiting
| to come crash down, and that's without the threat of the CCP
| wanting to take over Taiwan.
| CorrectHorseBat wrote:
| None of the problems China is facing is anywhere close to
| undoing 50 years of economic growth.
| Woeps wrote:
| Thank you for pointing this out! It did for them on the back
| of others. The line has to go up mentality just puts
| resources from place A to place B.
|
| Now lets get past that stage and make sure that it pays off
| for everybody.
| WalterBright wrote:
| On the backs of who?
|
| How free markets work is the creators of wealth get to keep
| it. I.e. it's on their own backs.
| myflash13 wrote:
| That's circular reasoning. You're defining "success" as "line
| go up" and then saying we made the "line go up" therefore we
| were successful. If you define success as GDP per capita,
| then sure, the countries with the highest GDP per capita won.
| However, even by other flawed metrics, such as Real GDP with
| purchasing power parity taken into account, India and Russia
| are also top of the list[1]. Even this metric is flawed,
| though, because humans are complicated and GDP != happiness
| or success.
|
| https://www.cia.gov/the-world-factbook/field/real-gdp-
| purcha...
| gruez wrote:
| >However, even by other flawed metrics, such as Real GDP
| with purchasing power parity taken into account, India and
| Russia are also top of the list[1]
|
| Country wide GDP figures (PPP adjusted or otherwise) are
| worthless for comparing quality of life. You need to
| compare per capita figures.
| myflash13 wrote:
| Any single number is worthless for comparing quality of
| life, per capita or not. How do you use a number to take
| into account the fact that some people don't have access
| to healthcare in the US or "freedom" in Russia?
| gruez wrote:
| My point isn't that GDP per capita is the end-all-be-all
| of quality of life metrics. It's that pointing out that
| Russia and India are at the top of the GDP list, and
| therefore GDP per capita (your previous comment seems to
| conflate the two) is a flawed metric, is such a poor
| argument that you're not giving the pro-GDP side a fair
| shake and possibly misrepresenting their argument. No
| "line goes up" or "GDP = quality of life" proponent
| thinks India has high quality of life because their
| country level GDP tops the list.
| WalterBright wrote:
| > line go up
|
| Pick any measure you like. Free markets are the most
| prosperous.
|
| > India and Russia
|
| Do you really think their standard of living is higher than
| the US? Why is Seattle full of Russian and Indian
| immigrants? Why do you think zillions of immigrants are
| coming to the US? Because the US is a hellhole?
|
| > GDP != happiness or success.
|
| If you're happier being poor, just give away all your stuff
| to your favorite charity. Nobody is forcing you to be
| prosperous.
| pyrale wrote:
| This article is thousands of characters long, but somehow doesn't
| manage to explain how exactly you're supposed to help "firms",
| especially without getting hammered by companies from developed
| countries, or without lining the pockets of people who will store
| that money in fiscal paradises. It doesn't dwell either on why
| companies stay small in developing countries.
|
| It's a surprise, because the author claims there are hundreds of
| papers on the topic.
| twelvechairs wrote:
| This is a bit correllation / causation. Larger companies aren't
| better in themselves, otherwise state monopolies would be the
| best answer. Developing countries have lots of businesses sure.
| But "size" is not a problem itself. It's usually industry (e.g.
| lots of street vendors because it's the easiest way to make a
| living if you have nothing else) and lack of capital investment
| (e.g. people hammering steel by hand rather than having some
| machinery)
| tormeh wrote:
| A lot of capital investments only makes sense at scale, though.
| The machines are more productive when manned 24/7, and the
| machines are often more efficient the larger they become.
| gottorf wrote:
| Economies of scale are real, but there are also diseconomies
| of scale. Machines are often more efficient the larger they
| are, but organizations tend to become less efficient the
| larger they get!
| otikik wrote:
| Those pesky moral principles are also getting in the way of
| growth. If you want _real_ growth, force people to work for you
| for free. If they stop working you can always sell their organs.
| WalterBright wrote:
| > If you want real growth, force people to work for you for
| free
|
| Countries with free labor bury slave economies. Every time.
|
| I see the notion that slaves are more productive than free
| labor all the time. What is missing is any evidence of it.
|
| For an example, the US initially divided itself into two
| countries - North and South, free labor and slave labor. Guess
| which one economically and then militarily buried the other.
| For another, Korea divided into two countries. One buried the
| other economically. Germany split in two. The free one buried
| the slave one.
|
| How much more evidence do you need?
| JumpCrisscross wrote:
| > _see the notion that slaves are more productive than free
| labor all the time_
|
| It's estimated "that emancipation generated aggregate
| economic gains worth the equivalent of a 4% to 35% increase
| in US aggregate productivity" [1]. To look at the slave
| economies favourably, you have to exclude slaves from per-
| capita measures of productivity [2].
|
| That said, Southern farms _were_ more efficient than Northern
| ones. Not because they used slaves. But because they embraced
| economies of scale.
|
| [1] https://bfi.uchicago.edu/insight/research-summary/one-
| giant-...
|
| [2] https://faculty.weber.edu/kmackay/economics%20of%20slaver
| y.a...
| WalterBright wrote:
| > Southern farms were more efficient than Northern ones
|
| I don't believe it. Evidence: they couldn't feed the
| Confederate army.
| JumpCrisscross wrote:
| > _Evidence: they couldn 't feed the Confederate army_
|
| You can't feed an army with cotton, tobacco and
| sugarcane, the "main prewar agricultural products of the
| Confederate States" [1].
|
| [1] https://en.wikipedia.org/wiki/Economy_of_the_Confeder
| ate_Sta...
| WalterBright wrote:
| They could have switched to food crops at any time.
|
| BTW, the reason the South seceded was to protect itself
| from the Northern market economy.
|
| The slave economy was also unable to supply its army with
| shoes, uniforms, guns, cannons, powder, etc. The reason
| General Lee was at Gettysburg is because he was marching
| towards Harrisburg, which had a shoe factory he wanted to
| loot to shoe his barefoot army.
| JumpCrisscross wrote:
| > _could have switched to food crops at any time_
|
| They started. But as the article mentions, that happened
| amidst a drought and the beginning of the war, which
| destroyed distribution.
|
| > _slave economy was also unable to supply its army with
| shoes, uniforms, guns, cannons, powder, etc._
|
| Sure. Not arguing for the strength of the Southern
| economy. Just pointing out that their _farms_ were more
| efficient. But not because of slaves. Because of the
| thing this article is about.
| WalterBright wrote:
| The North didn't have problems with drought or
| distribution. Even though they were invaded by the
| Confederate army.
| mountainb wrote:
| This is a big subtopic within this period.
|
| They had trouble with feeding the people because Southern
| policy to deter the war (Cotton is King speech) was to
| stop the cultivation of cotton. The CSA decreed that all
| the cash croppers convert to food farming. This did not
| work very well, they self-collapsed their own economy,
| and the hoped for British intervention never happened.
| eesmith wrote:
| > North and South, free labor and slave labor
|
| That summary is overly simplistic. Northern textile mills did
| not get their cotton from free labor.
|
| Also, "From an economical standpoint, the emancipation in the
| West Indies and the general abolishment of slavery was a
| failure for Britain",
| https://en.wikipedia.org/wiki/King_Cotton .
|
| Opinions of course differ: https://en.wikipedia.org/wiki/Atla
| ntic_slave_trade#Effects_o...
|
| The US has non-free labor in the form of penal labor
| supplying some $10 billion in goods and services. Last I
| checked it was not being buried by countries with only free
| labor.
| WalterBright wrote:
| > Northern textile mills did not get their cotton from free
| labor.
|
| The North continued to prosper after the war, and their
| economy was not based on textiles. They also imported
| Egyptian cotton.
| eesmith wrote:
| That doesn't affect my point that the North and the South
| cannot so easily be described as free labor vs. slave
| labor.
|
| Just like how England didn't have slavery in the 1700s,
| but the English still profited from slavery elsewhere in
| the British Empire.
| otikik wrote:
| They failed because they didn't sell their dissidents'
| organs.
| marcosdumay wrote:
| It works on a smaller scale too. Higher minimum wage, more
| (reasonable) employment benefits, and less control of the
| firm over the employers also tend to lead fast growing
| economies.
|
| But people will discuss endlessly about what direction the
| causation goes.
| gruez wrote:
| This but unironically. Communism arguably has pretty good
| "moral principles" behind it. I mean, how could you be against
| everyone being equal and laborers owning the means of
| production rather some fatcat capitalist who doesn't even work?
| However, we all know empirically how that worked out.
| m0llusk wrote:
| That argument collapses pretty quickly. Attempts to build
| Communist nations failed so completely from the start that
| all involved high levels of confiscation of property and
| forced employment and work rules which closely resemble
| slavery.
| carlosjobim wrote:
| I don't think "everyone being equal" was ever a stated or
| practiced goal in communism. Even if the means of production
| was owned by laborers (the state), all aspects of society is
| still ordered hierarchically in all real-life examples of
| communism. The Soviet Union, China, both had/have big
| businesses with company leaders, bosses, middle managers, and
| so on. Not to speak of the military forces, academia, or the
| arts. If anything, the communist nations had meritocracy
| instead of equality. At least in how claimed their nations
| were organized, and many times in practice as well.
| awongh wrote:
| What the article doesn't explicitly state is that it's talking
| about some kind of undefined sweet spot of growth and business
| size.
|
| It seems intuitively true that businesses that are too small and
| too local stagnate the economy.
|
| But they avoid talking about businesses that are too large
| (oligarchic monopolies) that can control wages and prices, or
| businesses that are not value add, (I'm thinking resource
| extraction like oil, gas and minerals) neither of these kinds of
| large businesses seem to contribute that much to a local economy.
| bjornsing wrote:
| The OP's reasoning is based on a popular yet fundamental
| misunderstanding: an overvaluation of companies with many
| employees (a.k.a. "big" companies).
|
| The key to economic growth is not firms with many employees, it's
| firms with highly _productive_ employees. You want a system that
| kills off _unproductive_ firms, so that better uses can be found
| for their capital and employees.
|
| You don't want a system that kills off highly productive firms
| just because they stay relatively small. As an example
| Renaissance Technologies was founded in 1978 and has only about
| 310 employees today. Yet I can assure you that the US economy
| would not have been better off without it.
| piva00 wrote:
| > As an example Renaissance Technologies was founded in 1978
| and has only about 310 employees today. Yet I can assure you
| that the US economy would not have been better off without it.
|
| Another example is Germany, even though the country has some
| massive companies there's a lot of quite productive
| medium/small companies (Mittelstand) doing specialised work.
| fakedang wrote:
| As a counter example, I see a shit ton of Indian firms in
| sectors such as pharma or tech, which employ hundreds or even
| thousands of people in tech, but they collectively make much
| less in revenue than a similar competitor in the US, even
| though their business is mostly international.
| tormeh wrote:
| 310 employees is not very small. Anyway, the sweet spot for
| company size depends on what the company does, as productivity
| gains in certain tasks can be bought through capital
| expenditure. Heavy industry is an obvious outlier on the
| bigger-is-better side. Software, on the other hand, arguably
| has very low returns on increased company size.
| doctorpangloss wrote:
| > key to economic growth
|
| At a national level, there are no single keys, there aren't
| even major factors. You're kind of trading in the same
| narrative rhetoric of the article you are ackshuallying.
|
| The Renaissance Technologies example is funny anyway. My dude,
| literally nobody but bankers thinks hedge funds are good for
| the economy, let alone a good use of "productive employees."
| closeparen wrote:
| I think it's good that pension funds can get returns.
| fakedang wrote:
| Yeah but Renaissance is funny because they have 2 funds.
| The Medallion fund which only has employee money makes the
| amazing returns, while the normal fund for pension funds
| barely outperforms the market.
| gottorf wrote:
| For Renaissance specifically, their signature fund has been
| closed to outside investors (with all funds returned) for
| decades, so pension funds aren't able to take advantage of
| their outperformance. I believe their publicly-available
| funds don't have nearly the same kind of returns.
|
| With all that aside, better liquidity and pricing of risk
| is the overall systemic value that all speculators in the
| market provide. You be the judge as to whether the
| remuneration is commensurate with that value.
| cjbgkagh wrote:
| Not if the economy collapses before you can collect / spend
| your pension. I think such an event is inevitable even
| though it may be a long time away. Pending global conflicts
| could bring it forward. If you need a pension and don't get
| it there isn't really much you can do about it.
| DontchaKnowit wrote:
| Can you explain what utility renaissance actually provides? And
| don't say _liquidity in the market_ cause that 's a line of
| bullshit
| actionfromafar wrote:
| I'm not saying they provide _cover_. But such a company could
| provide cover better than most.
| gottorf wrote:
| > don't say liquidity in the market cause that's a line of
| bullshit
|
| It's not a line of bullshit. For every notable prop shop
| (that is, attempting to trade one's own money for profit,
| which you may view as an illegitimate market activity) there
| is in the market, there are 100x as many portfolio managers
| (who manage other people's money, such as pension funds,
| which you may view as a more legitimate use of the market).
|
| Every trade that a "legitimate" entity puts on has a
| counterparty, and the more counterparties there are from
| speculative activity[0], the more liquidity there is and the
| more efficiently things can be transacted. Everyone ends up
| happier.
|
| You could argue that the field of managing money in general
| pays more than it is "worth", but that's kind of an argument
| of cosmic morality. Who should be paid more, elementary
| school teachers or firefighters?
|
| [0]: https://www.cmegroup.com/education/courses/introduction-
| to-f...
| PoignardAzur wrote:
| This article feels seriously below the standard of quality I've
| come to expect from Asterisk magazine. I don't think it should
| have made the cut.
|
| Some problems:
|
| - Lots of studies cited with no mention of replications or
| potential caveats.
|
| - Lots of effects measured where causation-vs-correlation would
| be a real concern (in one of them apparently the control group is
| "firms that dropped out because of a lack of budget"? Wtf?), but
| the articles never mentions confounders.
|
| - The whole article has a "for decades we've done development
| wrong" slant, but its ultimate conclusion is... We need less
| protectionism, more liberalization, and more information
| technologies? Hardly groundbreaking.
|
| Overall some observations are interesting, but they're really not
| conclusive enough to form a single narrative that would justify
| the incendiary title.
| nabla9 wrote:
| See my comment
| https://news.ycombinator.com/reply?id=41774909&goto=item%3Fi...
|
| This is 101 microeconomics. Not very controversial
| marcosdumay wrote:
| > Lots of studies cited with no mention of replications or
| potential caveats.
|
| The one about Brazil got my attention because of the entirely
| absurd idea1. Turns out it's a computer model trying to predict
| how to retrain people when industries change in size.
|
| 1 - International commerce liberalism? In Brazil? And
| unemployment at the same time? The only time Brazil tried the
| first on recent history, we got a strongly growing middle class
| and the least amount of unemployment of recent history.
| (Probably due to completely unrelated factors.)
| JohnBrookz wrote:
| I'm an engineer at a grocery chain that essentially has a
| monopoly in most of Texas. The chain has a good and well earned
| reputation for the public but it definitely uses underhanded
| monopolistic tactics to maintain dominance.
|
| As it's grown and expanded you can definitely tell that the
| ethics and how they treat workers / customers has gone down hill.
| Maybe it's all the Amazon managers they've absorbed.
| jauntywundrkind wrote:
| I have not even a rank neophytes understanding but these
| situations always remind me of the Hindu Trimurti, the balance
| of three powering the universe. Creation/dynamics gives way to
| preservation/ossification which eventually is destroyed/decays.
|
| In the Vampire & Mage tabletop, there's Wild, Weaver, Wyrm, a
| direct parallel, which was a _very_ fun cosmological tension.
|
| Anyhow, this just feels like the lifecycle of companies. The
| young companies are dynamic & growing, but over times most orgs
| tend to ossify - even as they expand still becoming more
| deliberate & managed in their ways, punctuated by moments of
| renewed chaos & flourishing again. Extracting & preserving
| rather than growing. Until until until.
| nunez wrote:
| How so? There are many grocery store chains in Texas (not that
| this matters, as they are all merging with each other).
| DontchaKnowit wrote:
| H.E.B?
|
| cause yeah, I don't care if they're underhanded, HEB is the
| shit
| nabla9 wrote:
| The basic point of the article is correct despite everyone here
| in comments coming up with ad hoc arguments against it.
|
| This is Basic 101 microeconomics (pick some undergraduate text
| from economics and look it up.) There is also a whole subfield of
| economics called industrial organization that deals with this
| stuff.
|
| Firm size matters for productivity. Larger firms are on average
| more productive than smaller ones. Partly it is because gains
| from increasing returns to scale but better access to resources,
| organizational capabilities, and international reach also
| matters. Large companies tend to offer higher compensation. The
| average pay per employee increases with company size. This is
| good for the economy.
|
| Take for example Greece. People in Northern Europe like to think
| that Greeks are poor because they are lazy. However, they are
| among the hardest-working people in the EU--insane hours on
| average. But Greece has no large-scale industry. It can't compete
| within the rest of EU or internationally.
| logicchains wrote:
| >Larger firms are on average more productive than smaller ones
|
| Do you have any references for this that demonstrate it
| empirically? Theoretically, larger firms have economies of
| scale, but they also run into the same internal
| coordination/incentive problems that communist countries do,
| due to internal resource allocation being driven by internal
| politics rather than a market. I.e. command economies (and the
| average corporation is a command economy internally) face
| diseconomies of scale.
| marcosdumay wrote:
| > This is Basic 101 microeconomics
|
| Interesting. I've only read one intro to microeconomics book,
| but I remember it having a hand-waved graph with a clear peak
| on some unspecified point. And an explanation that the peak's
| position depends on a lot of factors.
| surgical_fire wrote:
| lol large corporations were the least productive places I worked
| at. Growth came from the sheer inertia of a near monopoly paires
| with a bull run propped by very low interest rates.
|
| Much to the opposite, large corporations should be weighed down
| by more strict taxation, to give smaller competitors an edge.
| red-iron-pine wrote:
| been my experience with F500 telco and mining orgs.
|
| they managed to jam their way into a sweet spot years ago, for
| whatever reason. now they're the antithesis of agile and
| productive, but they have so much inertia and marketshare
| they're hard to beat.
|
| the corporate structure means there is little reward for real
| changes internally, and in a lot of cases serious growth or
| losses came from externalities, like the Chinese economy
| demanding Australian iron... and then not.
|
| they paid for my certs, though...
| nunez wrote:
| I see Karthik's point (that small businesses operated by people
| who just want to make an honest living doesn't grow countries
| like big businesses can), but:
|
| 1. Every big business started as a small business
|
| 2. Not everyone who starts a business wants a big business for
| many valid reasons,
|
| 3. The countries he uses as examples are flat or stagnating for
| many reasons other than firm size or productivity, and
|
| 4. In these countries, the only way to have a shot at becoming a
| big business is to be close to power (that tends to hoard
| wealth). Given that these countries also tend to have weak
| workers rights, "killing" small businesses == fewer options and
| opportunities for workers.
| Eddy_Viscosity2 wrote:
| By logical extension, the best growth model would then be a
| single big business that runs everything in the economy. I'm not
| sure that history would agree with that conclusion.
| tharmas wrote:
| Its not size of Firm, its new work from old work. See Jane
| Jacobs, The Economy of Cities and her other book Cities and the
| Wealth of Nations.
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