Lobbying, protection, and companies preserved in mediocrity

There are two basic paths for a company to make a profit. Innovate: reduce costs, improve the product, win customers. Or lobby: secure state benefits, protection, and exceptions.

Where people get richer more through lobbying than through innovation, the share of the richest 1% rises and social mobility stalls: the rich close the door behind them. Companies with greater organizational capacity secure special tax regimes, cheap credit, and protection. This makes inputs more expensive for the rest of the economy and diverts qualified people from engineering into bureaucracy.

The result is a country full of mediocre companies that survive under protection, without being replaced by better companies, and productive renewal stops happening.