> Consolidation only persists where it is either an effective way to deliver value (Walmart) or regulatory capture has occured (eg taxi licences, car dealerships).
Value for whom?
The problem is that "effective way to deliver value" is measured in terms of corporate profit (value to shareholders), not in terms of the actual thing being produced. So firms can produce less value to the economy at-large (fewer flights, worse beer, etc.), at greater cost to the consumer/supply chain, and still increase value.
The entire article is indicting this setup, where companies screw over their customers and suppliers in order to produce value for a few already very wealthy individuals who hold large stakes in the corporation.
This is how low-competitive environments work. Period. And it's not commie nonsense (unless Goldman Sachs are part of a massive commie conspiracy). From the article:
Goldman Sachs in February published a research memo advising investors to seek out “oligopolistic market structure[s]” in which “a smaller set of relevant peers faces lower competitive intensity, greater stickiness and pricing power with customers due to reduced choice, scale cost benefits including stronger leverage over suppliers, and higher barriers to new entrants all at once.”
> In many cases, you only need two players and threat of entry to any others for competition to be successful at optimal use of resources.
First of all, there's not much of a threat to entry when one or two companies own the entire market and there's a huge cost to entry. Have you seen many airline start-ups in the past half century or so?
Furthermore, it's possible to price like a monopoly when you only have one or two major competitors and everyone is part of a gentleman's agreement. Implicit, of course, but these aren't pricing cartels in the same sense that PACs don't coordinate with political campaigns.
The boxing match analogy is inherently flawed because these companies can still win big without wiping out all their competition. There is no gold medal when everyone's happy splitting the enormous pot of gold.
In fact, most seem to desire a situation where they have one "friendly" competitor so that they get all the perks of monopolistic position via an implicit gentleman's agreement on pricing, while still having the luxury of pointing across the street whenever regulators come around.