These cartels sound like super agile organizations that can execute any possible business plan, in any industry, legal or illegal.
In reality, of course, no such super-organizations exist. If and when the industry they have a comparative advantage in disappear, so will the organizations.
As long as the right cartels are able to skim value, I could see this being successful regardless. Cartels are businesses at the end of the day- and they won't totally destroy an industry as long as it's making them money long term. The problems occur when smaller groups start fighting over access to the resources.
Do you have an example of this happening in other industries? I am skeptical. That, and the dynamics of the market (more suppliers than demand, lots of kids who want in, easy outsourcing) make it hard to maintain a cartel.
To be a cartel, you simply need to agree to limit supply to keep prices higher. So it sounds more like a cartel of survival rather than to make obscene profits.
Well, you can't really be a small cartel. Even if the other businesses are profitable, a cartel needs a certain size to pay for constant expenses like bribes, armed forces etc. Politicians and the police don't give you a discount because you're small and people still need to be just as intimidated even though you're doing less shit.
Just removing one illegal activity might knock the sum value of dangerous, illegal activities below the threshold where cartels can work.
I think you've got this wrong. Any firm that defects from the cartel will tend to gain market share at the expense of all the firms that remain in the cartel. Thus, its really the firms in that remain in the cartel that die. So the whole thing looks a lot like a Prisoner's Dilemma game played between the firms looking to cartelize.
Now, they might do things like sign contracts between each other to prevent defection, or buy each other's stock to make defection less profitable than profitable than playing along, but then you have to worry about disruption from outside the cartel. Or you could forcibly cartelize industries like FDR tried to do with the National Recovery Administration if the government really wants an industry to be profitable when it wouldn't otherwise be.
And when I think of successful cartels in history I think of DeBeers and OPEC and... well, those are the only two I could name that lasted longer than a few years.
> And when I think of successful cartels in history I think of DeBeers and OPEC and... well, those are the only two I could name that lasted longer than a few years.
Another would be drug cartels. They keep prices artificially high so that everyone gets a share of the profits. But cartels in general always have players that "cheat" by independently lowering/raising the price. If a player is caught cheating, the cartel usually punishes the rogue player by excluding them from future pricing meetings and use their market share to kill the player both figuratively and literally when drugs are involved.
In reality, of course, no such super-organizations exist. If and when the industry they have a comparative advantage in disappear, so will the organizations.
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