Big business is the engine that drives the economy. Small businesses are the future big businesses. Economies where big business is discouraged don't do very well. Small business doesn't have economy of scale, nor can it raise the capital to do big projects.
> extreme concentration of wealth
Big business does not concentrate wealth. What you're seeing is the creation of wealth. This created wealth then flows out into the rest of the economy, via paying the workers and buying plant&equipment, etc.
They absolutely do. If for no other reason than each of their revenue goes to fewer entities.
> What you're seeing is the creation of wealth. This created wealth then flows out into the rest of the economy, via paying the workers and buying plant&equipment, etc.
This is the flawed reasoning behind "trickle-down economics"[0], which was called "horse and sparrow" in the 19th century. It didn't work in the 19th century when labelled as the latter nor in the 20th when reframed as the former.
Any company which has earnings beyond those of operating costs is a concentration of wealth by definition. Whether that wealth is distributed to shareholders, kept as retained earnings, or otherwise transferred to specific entities is irrelevant.
> Any company which has earnings beyond those of operating costs is a concentration of wealth by definition
Let's say I buy $20 worth of art supplies, and I paint a landscape and sign it with my moniker, "bright". Since "bright" paintings are very rare and go for a million bucks each, I now have created a million bucks of value. Who did I transfer the wealth from? Nobody. I took nuttin from nobody. Yet I have become wealthy.
Let's say I sell it to you for a million bucks. Did I take your wealth? Nope. I traded a million dollar painting for a million bucks. You are exactly as wealthy as you were before.
Now, if you decide to use my painting as compost (sob!), you are dissipating the million dollar value. That's not me concentrating wealth, it's you destroying your wealth.
If you stole the painting from me, then you concentrated wealth. But we're not talking about theft here.
Your art supplies and time didn't create wealth in the economic sense ("the annual produce and labour of the nation" as Smith defines it, <https://en.wikisource.org/wiki/The_Wealth_of_Nations/Book_II...>), but a financial asset, in the form of a (presumably) uniquely identifiable durable store of financial value.
This is contrasted with economic wealth in which some inputs (capital, labour, raw materials (themselves generally considered as capital) are transformed into some immediately useful consumable product (say, food or fuel), a durable good (clothing, furniture), a service ("immediately extinguished" in the terms of some economists, but still having potential lasting positive value), or capital which can itself be used in future economic activities (machining equipment used in the manufacture of widebody aircraft, or the aircraft themselves).
All else equal ("ceteris paribus"), the result of creating a novel but valued painting would be the same as that of inflating any other durable store of value: the relative prices of competing assets would fall proportionate to the price of the artwork. Ordinarily the drop is small and the bucket large such that this isn't noticed, but it is the net effect.
David Ricardo is amongst the first economists to deal with the economics of collectibles and durable assets of which I'm aware, e.g.,
Ricardo’s value theory applies only to those commodities that ‘can be increased in quantity by the exertion of human industry, and on the production of which competition operates without restraint’; it is thus not applicable to ‘rare statues and pictures, scarce books and coins, wines of a peculiar quality [...]’ (Works, I, 12)
From The Anthem Companion to David Ricardo, Edited by John E. King, p. 169.
>> Any company which has earnings beyond those of operating costs is a concentration of wealth by definition.
For context, here is the second sentence related to the above:
Whether that wealth is distributed to shareholders, kept as
retained earnings, or otherwise transferred to specific
entities is irrelevant.
I believe this relevant to the below.
> Let's say I buy $20 worth of art supplies, and I paint a landscape and sign it with my moniker, "bright". Since "bright" paintings are very rare and go for a million bucks each, I now have created a million bucks of value. Who did I transfer the wealth from? Nobody. I took nuttin from nobody. Yet I have become wealthy.
This scenario is not relevant to "big business", but instead describes a sole proprietorship with an assumption of a known fungible value. It also does not account for consumable goods and/or transient services. In any event, by your own definition below:
> Let's say I sell it to you for a million bucks. Did I take your wealth? Nope. I traded a million dollar painting for a million bucks. You are exactly as wealthy as you were before.
Either you have not "become wealthy", as you "traded a million dollar painting for a million bucks" or the effectual value of money exceeds the purchase value of the "million dollar painting". Both cannot be true.
Back to my statement of corporate earnings beyond operational costs being a concentration of wealth. I believe we can agree on the following:
- Any for-profit company has as its purpose the goal of accounts receivable (AR) exceeding accounts payable (AP) over time.
- There are a limited number of recipients regarding profit distribution for any given company.
- Those having no direct or indirect ownership of a given company do not receive profit distributions.
If we agree on the above, then the larger the profits, the larger the distributions. Since the set of people qualifying for profit distributions are less than the set of all people having no investment relation to the company, it follows that said profits are enjoyed by fewer entities than those strictly involved in the AR side of the ledger.
Hence a concentration of wealth into the organization.
> Either you have not "become wealthy", as you "traded a million dollar painting for a million bucks" or the effectual value of money exceeds the purchase value of the "million dollar painting". Both cannot be true.
I became wealthy by creating wealth, not concentrating it. Concentrating it requires it be taken from somewhere else. There is no taking going on, there is creation and exchange.
>> Either you have not "become wealthy", as you "traded a million dollar painting for a million bucks" or the effectual value of money exceeds the purchase value of the "million dollar painting". Both cannot be true.
> I became wealthy by creating wealth, not concentrating it. Concentrating it requires it be taken from somewhere else. There is no taking going on, there is creation and exchange.
The scenario you have described is logically consistent while being representative of a tiny subset of commerce. Revisiting the original use-case:
Let's say I buy $20 worth of art supplies, and I paint a
landscape and sign it with my moniker, "bright". Since
"bright" paintings are very rare and go for a million bucks
each, I now have created a million bucks of value.
Assuming all of the above, this business model does not account for at least the following:
A - Businesses having more than one employee.
B - Asset deprecation, such as when purchasing a new automobile.
C - Consumable goods, such as food, petrol, etc.
D - Services such as commercial/residential rent and physical security.
E - Taxes.
F - Stock dividends and/or performance bonuses.
A and E involve direct wealth transfer from the business to relevant parties.
B is a second order effect only realized when the buyer attempts to sell the asset to a third party.
C and D are direct wealth transfers as the seller retains the remuneration for as long as they desire (excluding applicable cases identified above) and the buyer eventually does not have a physical equivalent. Note that this often remains a valuable exchange for both parties.
> extreme concentration of wealth
Big business does not concentrate wealth. What you're seeing is the creation of wealth. This created wealth then flows out into the rest of the economy, via paying the workers and buying plant&equipment, etc.