Quote:
Originally Posted by GGG
I think the bolded is because of oligopolies. The cost of entry into the market makes it not possible to set up a competitive option which allows the current dominant groups in the market to set prices without the threat of competition. There is not real meaningful competition due to high barriers to entry.
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Agreed. In my opinion, this is the key factor behind the sustained inflation. It is especially bad in Canada, but it’s a world wide trend that has me incredibly worried.
Grocery stores, airlines, telecoms, etc… get the headlines, but almost every industry has been consolidated to the point of being an oligopoly.
Besides low barrier of entry service businesses (restaurants, landscapers, dry cleaners, etc..) can anyone here think of an industry with good competition?
For example, I work in the power industry. 90 percent of the gas turbine manufacturing industry is controlled by GE, Siemens, and Mitsubishi. None of which are Canadian. So if we’re building a new gas power plant, we are the mercy of three foreign companies and their above inflation pricing. And their above inflation SRP contracts.
And since the cost of building/producing power costs more, this gets passed onto customers and then this starts to snowball. Customers like Loblaws. Who can then raise prices because input costs are up and because they are a dominant market position where consumers have no choice but to shop there.
It is frustrating. Even if Canadians agreed politically on the approach to improve industry competition (and thus keep inflation in check), we don’t have the leverage in most industries.
Even more frustrating, most smartly run companies know this. We’re at the point now where we have to subsidize companies to keep jobs here.
I actually genuinely feel bad for today’s politicians (even the crappy ones). They are bearing the brunt of economic policies from decades ago that are hard to undo in our globalized world. A good honest politician would struggle to find a solution here, let alone the clowns we have at the various levels of government right now.