On Mon, 5 May 1997, D Shniad wrote: > Unless I misunderstand what it is you're arguing, Tavis, I think you're > dead wrong. Telecommunications is based on local markets? There was a > piece in the LA Times recently about the big North American telecom > companies making an unprecedented move on Latin America, with an eye to > servicing the biggest of the big companies there. This is merely one > example. Please elaborate on this statement. Very well. It's not a question of the concentration of capital or the fact that the same firm may be serving the entire hemisphere. What I have in mind is this: Part (if not most) of the globalization idea is that firms now compete across borders. What this means is that they face higher own-firm supply and demand elasticities because both firms and consumers can substitute much more widely than before. This is true both in the product market (pants from New York or pants from Ecuador) and in the labor market (locate your firm in New York or locate your firm in Ecuador). This phenomenon does not directly depend on whether the plants in New York and Ecuador are owned by the same people. For example, if transportation costs were prohibitive (say this was fresh fish) the same firm would have to produce in New York for the New York market and in Ecuador for the Ecuador market. Similarly, McDonalds stores in New York compete with Burger King stores in New York, but not Burger King stores in New Jersey, let alone Ecuador. It is in this sense that I am calling much of telecommunications local (though you're right, I hesitated before putting it in there): Hardware services must be provided locally. Consumers must choose between local providers, regardless of who owns them. For most of us, this amounts to choosing between one local provider. There's a bit more competition in cellular service, but not much. This is certainly less true of long distance providers -- but then they too charge different rates in different areas. The more general point is this: Firms make profits by generating rents. They seek to minimize their own-firm demand elasticities. If they are less and less able to do this in manufacturing, then they will move out of manufacturing and into services. This is not a function of the concentration of capital, but of substitutability within product and labor markets. Is that dead wrong? Cheers, Tavis
