Calexis

Capitalism is based on an exchange, usually goods or services for “consideration.”  Consideration these days is usually money, but in barter there is a trade of goods and/or services and sometimes the consideration is a favour.

For capitalism to work at its best, the two parties in the exchange should be relatively equal.  That is, two parties should have equal knowledge and equal leverage in the deal.  That produces a fair deal with both parties getting what they want.  That is how fair value is set.

If you want to sell something to your boss; however, you are at a disadvantage.  The boss has an advantage because of the social inequality of your relative positions.  You know the boss will, on average, get a better deal.  There is implied coercion where the bosses’ position is part of the consideration.

When the two parties are not equally informed, someone will likely get taken advantage of.  When the buyer can be fooled, that causes discontent with the capitalist structure and we create laws to try to level the playing field.  Way back when, there were purity laws to make sure the flour you were buying was not bulked up with plaster to bilk you.  The marketplace is not inherently honest; it usually needs a referee.

We still have laws today to try to keep the transaction on a level playing field because we need them.

Companies have grown larger, supply has been aggregated into larger and larger nexus points.  What percentage of searches use Google?  How many credit card companies are there?  How many automobile companies, how many computer chips companies, mobile phone companies and so on.

When your choices are limited to fewer than the fingers on your hand, the seller has tremendous advantage over you.  If you ever read your credit card agreement, you know your bargaining power is very small.  Agree with their terms or don’t use.

Concentration of supply also brings inequality and gives the seller out-sized advantage.  When there is a hurricane, profiteering can happen because supply will be limited and demand will be high.  Government steps in to assure a more level playing field and avoid exploitation of those suffering.

The larger the entity you are dealing with, the more they know about the transaction – its conditions, the quality of their goods, you name it.  They also know a lot more about you, your habits and what kind of credit risk you may be.

They also have the legal resources to win against you no matter what.  You have an unbalanced market.  Capitalism doesn’t work in an unbalanced market without some kind of objective oversight that levels the playing field.

More and more, large corporations have also exerted their influence on governments (who should be the purveyor of efforts to enforce fairness).  That influence allows the larger entity to alter the rules just a little to create an even larger advantage and tip the playing field while distracting the referee.  The result of all of this unbalancing and inequality is wealth inequality.

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