When the left talk about the over concentration of wealth & growing disparity between top & bottom earners, they are pointing to something that is generally true, & worrying. What to do about it is the question as ‘redistribution’ done badly is a cure worse than the disease.

Over concentration of institutional wealth is a key part of equation, in my opinion, more so than over concentration of individual wealth. It’s more problematic as it undermines competition & creative disruption. Capital needs competition with capital managed by different teams.

What do I mean by that. Imagine you’re a hyper scale fund that’s made hundreds of large investments, performed well, attracted in more capital that you need to place. Do you invest in the things that may disrupt/kill your older ‘golden geese’ or do you try to protect them?

As over concentration takes place and that concentrated institutional wealth continues to balloon, where does it go if not to the unorthodox disruption end of the economy (where most healthy future growth comes from)? It goes to the old ‘golden geese’ in the portfolio.

It does that in the form of debt, to fund acquisitions or Tweedle Dum by Tweedle Dee. It does it in the form of paying, and inflating equity by too much concentrated institutional cash chasing too few publicly listed companies (far fewer new listings than 20 years ago).

Thing is, in capitalism’s ‘Capital Markets’ there is a supply shortage, it’s not a shortage of cash, ironically there’s an oversupply of it at that top level, the supply shortage is in new innovative disrupters of scale coming into those capital/public markets.

There’s a shortage of a sufficient scale of the new crop & over concentration of institutional capital tends toward trying to protect what they already have. In short, Professor Philippon’s big observation about the surprising fragility of the free market system is on target.

And though it is fragile, the free market’s ability to generate wealth & lift billions from poverty has never come close to being matched by any other system. It’s reason one why we have to really take a hard look at how to get its engine purring & delivering for ‘the little guy’

It’s not that every ‘little guy’ needs to become a tycoon, or a small business owner. That’d make for a dull world but free markets must deliver security & rule of law, jobs at home, & affordable living costs that make families, with children, a viable & attractive life choice.