This time the thread is from Whistle Stopper, where the turn the conversation took afforded me an opportunity to combine many previously-disparate thoughts about what I think when I mean when I talk about people running the same race in a capitalist system (or a “competitionist” one, to use my own previously-coined term). Here’s what I was responding to:

Sounds good, but how do you make sure individuals are equal at the start of the race? Is it as simple as the education system? The massive number of potentially productive people that do not get to participate in the “race” for whatever reason is very sad.

I think access to education is a large part of it, but not all of it. Access to financing and markets are also part of it, and worth discussing for a while.

We’ve all heard the joke that the way to get a loan is not to need it, but it’s really no joke. Banks and such are notoriously risk-averse, to a degree that is almost certainly not optimal with regard to developing new products and markets. Venture capitalists, by contrast, are more likely to take risks, but aren’t exactly paragons of equal opportunity either. I’ve probably dealt with them directly, face to face, more than anyone else here; they definitely have their own dance they want you to do, and who you know really does matter very much. It’s not a completely closed system, but it’s not really all that open either. Similarly, having a robust middle to upper-middle class – educated people with enough money to risk going without a paycheck for a while, but not so much that they can do so forever – is important. As the middle class shrinks or becomes bogged down in debt, entrepreneurial risk-taking suffers. Social security, ensuring that the result of failure is not as dire as starvation, also plays a role.

As for access to markets, that should be obvious. Economies of scale etc. are natural, but large companies have other advantages over small ones – which are the engines of economic growth – that they needn’t have. I’m not just talking about monopolies and oligopolies, trusts and cartels. There’s also the predatory pricing and rent-seeking that large companies can do to lock out small competitors. There’s the Wal-Mart effect that allows large companies to pressure suppliers into giving them deals unavailable to smaller ones. Large companies can swamp smaller ones with legal trouble, particularly in the area of intellectual property. There are preferential tax deals and subsidized services and even custom laws (or exemptions from laws) which large companies can get from states and municipalities in return for the dubious honor of locating a business there, but which a small company would be laughed at for demanding. Government has an essential role in ensuring access to open, transparent markets that consumers and investors can have faith in, through laws and courts and fiscal policy, and quite honestly ours doesn’t do enough in that regard.

Can equality be perfect? Of course not. Nobody will know the same people, or have the same geographic reach, or the same relationships with suppliers, etc. Some inequality is inevitable, and even necessary because if we were all equal then there would be no basis for competition. However, when such factors systematically benefit big business at the expense of small and/or stifle meaningful competition, there is a problem for which remedies must be sought.