The Forbes list of billionaires, big-business and property limits

Adam Smith was the first to recognize that capitalists are not the best supporters of market capitalism. As he put it: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”.

Since then we moved from an epoch where capitalists and entrepreneurs were the same person, to a world of owner-capitalists and subsequently to a predominance of management-controlled capitalism through big public corporations. The latter are more prone to conspire against consumers than Smith ever envisaged because they may ally with anti-competition governments and workers.

Thus the major threat to market capitalism is not the accumulation of personal wealth but of corporate wealth. Big business is generally run by bureaucracies that are uniquely placed to take advantage of the separation between entrepreneurship, ownership and management. They do so by buying out successful entrepreneurs (naturally averse to management tasks) and by exploiting the opportunities created by an ever increasing regulation of business activities (by employing a legion of politicians, lawyers, accountants, and other professionals).

Wealthy owners are not in a position to exploit the consumers. They manage their assets through fund managers and family offices that generally prefer to keep at arm’s length in relation to the companies they own. At most they may take advantage of their fellow shareholders by accepting excessive compensation to serve in non-executive positions in public companies.

So the greatest challenge to managers’ capitalism of the kind we have now in America it is not to limit the ever increasing share of wealth owned by the top 1% of the population. It is more important to limit the share of assets controlled by the largest 1% of American companies.

Likewise the other challenge is to limit their relationships with the political establishment. In particular, it is essential to reassess their role in the so-called regulated industries. Here the scope for connivance against entrepreneurs and consumers is greater.

To oppose such trend is vital to keep alive a large share of market capitalism in a modern credit-based economy. Capitalists and their money managers’ interests are better served by vibrant communities of entrepreneurs and consumers in a system of market capitalism.