Needless but highly profitable forced-upgrades are the bread and butter of the tech industry.
– Charles Hugh Smith
One of the enduring mysteries in conventional economics (along with why wages for the bottom 95% have stagnated) is the recent decline in productivity gains (see chart). Since gains in productivity are the ultimate source of higher wages, these issues are related. Simply put, advances in productivity are core to widespread prosperity.
But that’s only half the problem–productivity gains have flowed to the top of the income-wealth pyramid as financialization and cartels have replaced real-world wealth creation as the source of wealth-income.
Longtime correspondent Zeus Y. recently identified one cause of declining productivity and the narrowing of financial gains in the top: the quasi-cartels that dominate our economy profit by introducing and maintaining inefficiencies, not eliminating them. This runs counter to the accepted wisdom in classical free-market capitalism that generating efficiencies increases profits.
Here is Zeus’s explanation of this perverse dynamic:
“With Big Data and Big Profit dominating the products, services, and platforms of everything from iOS operating updates to delivery of healthcare, let’s make the plain-as-day argument: PROFIT and EXTRACTION MEANS PRODUCING INEFFICIENCIES, NOT ELIMINATING THEM.
They make their money by creating inefficiencies, bottlenecks, and gatekeepings that they can profit from. Every middleman function they can stick in their system is a potential profit source for them. …
(…) The immense profitability of inefficiencies controlled by monopolies, quasi-monopolies and cartels is a key reason productivity has faltered and gains flow only to the top. There are other models for distributing software and services, for example, open-source software. There are other models of ownership, for example community ownership of resources and enterprises. But given the financial and political dominance of cartels, these options have been neutered or marginalized.