Markets and governments are often placed at opposite ends of a spectrum: more government intervention equals less competition, while deregulation and liberalisation always leads to more competition, innovation and growth. In reality, things are a lot more nuanced than that. Due to the existence of economies of scale in many industries, unfettered competition results in a high level of concentration and even, in some cases, in monopolies. In these cases, government intervention in the form of antitrust policies, are needed to retain competition. Online industries like Facebook and Uber show huge economies of scale, in the specific form of platform and network effects. And due to their borderless nature, antitrust measures are very difficult to implement and, more important perhaps, would destroy real consumer value. Blockchain technology could offer a way out of this dilemma. Capitalism — free enterprise — is a beautiful system. It was an enormous improvement over the medieval system in which enterprise was not free, but needed a license to operate — a license from a king, a guild or the church. In that system, competition was limited and the licensed craftsmen and chartered companies made excessive profits. This gave us, in the former Hansa cities , nice guild houses and lofty canal dwellings, but it did not bring a lot of other positive effects. A permit based system — artificial monopolies — is, by its very nature, conservative and not very innovative. Progress requires competition. Whoever thinks he can do better, has to have the opportunity to do so. Inefficient producers are defeated by smarter challengers — that is progress in a capitalist system. Joseph Schumpeter called it creative destruction , we now call it disruption . Competition, or even the threat of competition, makes sure that companies stay efficient and innovative, and that […]
