If you walk from Causeway Bay to Wan Chai in Hong Kong, you pass through a district of home improvement stores - small proprietorships that stock high end faucets from Grohe and Kohler, kitchen cabinets and other materials for refitting a kitchen or bathroom. Some stores are high end, and others are 2-car-garage holes in the wall manned by a smoker in a vest sitting on a plastic stool watching the passers-by. One sees the same retail structure in China. Adam Smith’s description of Britain as a “nation of shopkeepers” certainly applies.
Yesterday as I walked through this area of Hong Kong, I was impressed with the incredible variety and selection of products available, and the large number of small stores competing with one another. It’s a far cry from shopping at Home Depot and Lowe’s in the United States. The prices here are a lot higher than we’d pay in America, since each company doesn’t have the buying power of our big-box retailers. On the other hand, the choice is more diverse, without the “central planning” of a few corporate buyers.
I contemplated the inefficiency of the Hong Kong retail system. Hong Kong is like stepping back in commercial time, to an era when American downtowns looked like this too. But perhaps this is what capitalism and competition are supposed to look like in Adam Smith’s frame of reference. You have the benefit of the “statistics of large numbers” where thousands of small companies compete and come and go while the macro system remains stable.
Perhaps America is now in a post-Capitalist phase, where large numbers of small players have given way to small numbers of large players, in the interests of efficiency and financial market logic. It sounds like a logical evolution.
But when the stability of aggregating a large number of entities disappears, do you get companies that are so large that they’re “too big to fail”?