Why can’t you stream your favorite movie on Net­flix? And what does that have to do with a scle­rot­ic economy?

Econ­o­mist and invest­ment strate­gist Jef­frey Snider offers an intrigu­ing expla­na­tion. In a recent essay Snider recounts the bat­tle between Sony and Toshi­ba over stan­dards for DVD play­ers with HD capa­bil­i­ties to show how the robust com­pe­ti­tion that ben­e­fits the econ­o­my nat­u­ral­ly yields to an anti-com­pet­i­tive impulse that impairs it.

The sto­ry began in Japan at a lit­tle com­pa­ny called Nichia, which Snider describes as “small pur­vey­or and man­u­fac­tur­er of phos­pho­rs for flu­o­res­cent lamps.” Hard­ly excit­ing stuff. Until one of its employ­ees, Shu­ji Naka­mu­ra, devised a way to use a blue laser to increase the stor­age capac­i­ty of a DVD disk five­fold. Nakamura’s inno­va­tion would make it pos­si­ble to man­u­fac­ture DVDs that could store con­tent in high def­i­n­i­tion. As the research advanced, Sony formed a part­ner­ship with Nichia begin­ning in 2002, and in June 2006, Sony intro­duced its first Blu-Ray DVD player.

It was not first to mar­ket though. Toshi­ba had intro­duced its HD-DVD play­er in April 2006, and at a much more attrac­tive price. With mem­o­ries of its failed Beta­max VCR tech­nol­o­gy of the 1980s, Sony was not eager for com­pe­ti­tion. The com­pa­ny had worked with oth­er larg­er elec­tron­ic man­u­fac­tur­ers to cre­ate a sin­gle stan­dard for the new tech­nol­o­gy to avoid the sort of com­pe­ti­tion that had result­ed in the Beta­max deba­cle. But Toshi­ba would have none of it, stick­ing with its own stan­dards in the belief that it could best Sony in a direct competition.

So the two tech­nol­o­gy com­pa­nies waged a spir­it­ed bat­tle for con­sumers, offer­ing them an improved view­ing expe­ri­ence at afford­able prices. In the end, as we all know, Sony won. The turn­ing point came, Snider says, when the com­pa­ny decid­ed to install Blu-Ray tech­nol­o­gy on its Playsta­tion 3 devices. Putting the new tech­nol­o­gy on a gam­ing plat­form, rather than sell­ing it to con­sumers as a sep­a­rate device, was a big risk for Sony, and one it might nev­er have tak­en if not pushed to do so by its com­pe­ti­tion with Toshi­ba. Snider reck­ons that the com­pa­ny absorbed $3 bil­lion in loss­es as a result of the deci­sion. But Sony’s move proved even more cost­ly to Toshi­ba. With the Blu-Ray tech­nol­o­gy now avail­able on mil­lions of devices, Toshi­ba was forced to cede the field. It stopped mak­ing HD DVDs in ear­ly 2008.

Eager to recoup its loss­es after win­ning the com­pe­ti­tion, Sony then sought to con­sol­i­date its gains. The grow­ing pop­u­lar­i­ty of stream­ing tech­nol­o­gy rep­re­sents a threat. High speed inter­net is now broad­ly avail­able and new and more sophis­ti­cat­ed smart­phones and tablets give con­sumers the abil­i­ty to stream con­tent on mul­ti­ple devices no mat­ter where they are. You no longer need the Blu-Ray play­er in your liv­ing room to watch a movie. Now you can access that movie any­where on your iPad.

And that’s bad news for Sony. The com­pa­ny doesn’t want its plat­form to go the way of Beta­max, with the pub­lic choos­ing stream­ing over DVDs. Sony, which holds the rights to many movies and tele­vi­sion pro­grams in addi­tion to being a tech­nol­o­gy man­u­fac­tur­er, is lever­ag­ing those rights with online providers. One result is that com­pa­nies like Net­flix are not licensed to stream many movies. Last month, the com­pa­ny dropped near­ly 1800 titles from its “instant queue.” There are numer­ous rea­sons for this, includ­ing com­pe­ti­tion from oth­er stream­ing providers and the under­stand­able desire of stu­dios and cre­ators to extract the max­i­mum prof­it from their works. But Sony’s pow­er­ful incen­tive to sti­fle com­pe­ti­tion from a new plat­form is unde­ni­ably a factor.

Snider draws an impor­tant les­son from the Blu-Ray narrative:

“That is the nature and cycle of both cap­i­tal­ism and busi­ness­es. They inno­vate and grow suc­cess­ful, then become encap­su­lat­ed by the need and desire to pro­tect what they have made. It is far eas­i­er, as the Blu-Ray saga shows, to sim­ply prof­it from exist­ing tech­nol­o­gy than to try to win with a new one. Mature com­pa­nies do not always favor new inno­va­tion unless there is true com­pe­ti­tion to force it upon them…The one “flaw” in the cap­i­tal­ist design, if it can be called that, is that suc­cess­ful cap­i­tal­ist busi­ness­es will always end up as these kinds of mature companies.”

There is a cor­rec­tive for this flaw, Snider says:

“Per­pet­u­al inno­va­tion will either destroy the mature busi­ness or force it to adopt com­pet­ing inno­va­tion. In either case, the eco­nom­ic sys­tem ben­e­fits as new tech­nol­o­gy gains a poten­tial mass audi­ence where com­pe­ti­tion aims to reduce its cost as far and as fast as prof­itably (in the long-term sense) pos­si­ble. Insta­bil­i­ty is progress.”

If insta­bil­i­ty is progress, then sta­bil­i­ty is not. Snider sees signs of sta­bil­i­ty every­where and that, he believes, helps explain both eco­nom­ic stag­na­tion and income inequality.

He notes that in the quar­ter cen­tu­ry between 1955 and 1980, there was a rather remark­able turnover in the com­po­si­tion of the 100 largest com­pa­nies. Since 1980, that churn­ing has sub­sided, a sure sign that the cre­ative destruc­tion of cap­i­tal­ist insta­bil­i­ty has been grad­u­al­ly yield­ing to the sta­bil­i­ty that is the bane of progress.

“In 1955, IBM was ranked #61 on For­tune’s 500 list, just behind such com­pa­nies as Nation­al Inter­group, Olin, Asar­co and Allis-Chalmers. By 1965, IBM was #9. Of those oth­ers, only Olin remained in the top 95…The turnover of tra­di­tion­al pro­duc­tive com­pa­nies near the top was reg­u­lar between 1955 and 1980, but less so after. Big com­pa­nies have tend­ed to remain the big com­pa­nies in the past few decades.”

Snider observes that one big excep­tion to this sta­bil­i­ty has been the rise of com­pa­nies in the finan­cial sec­tor, some­thing that pro­vides him scant com­fort. He sees last decade’s ascent to Fortune’s Top 20 of such bank­ing behe­moths as Cit­i­group, Bank of Amer­i­ca and JP Mor­gan Chase as symp­toms of what he calls “the unyield­ing finan­cial­iza­tion of the domes­tic econ­o­my.” And that, he argues, is not good news.

“Where pro­duc­tive, indus­tri­al busi­ness­es once ruled in tem­po­rary sit­u­a­tion, inter­chang­ing as liv­ing stan­dards con­tin­u­al­ly grew through the vital insta­bil­i­ty of inno­va­tion, the finan­cial firms have since forced their way into the top spots. In the first quar­ter of 1951, finan­cial busi­ness­es earned about $3.2 bil­lion in prof­its (annu­al rate) out of $40.2 bil­lion (8%) for total US cor­po­rate busi­ness­es. By 1981, it was $29.9 bil­lion (13.5%) out of $221 bil­lion total. By 2005, the finan­cial econ­o­my had “earned” $425 bil­lion (30.2%) out of $1.4 tril­lion. Where total prof­its grew 537% between 1981 and 2005, finan­cial prof­its grew by 1,323%. And as the num­ber of banks, bro­kers and insur­ance com­pa­nies gen­er­at­ing those prof­its shrank, they became more and more con­cen­trat­ed at the top of not only the indus­try, but the entire cor­po­rate landscape.”

Snider finds that change in the cor­po­rate land­scape to be espe­cial­ly trou­ble­some because “inno­va­tion in finance is not about increas­ing the liv­ing stan­dards of the eco­nom­ic sys­tem, it is the all-encom­pass­ing pur­suit of size.”

The sub­prime mort­gage deba­cle is the direct result of this pur­suit. Seek­ing to grow by expand­ing cred­it and run­ning short of cred­it­wor­thy bor­row­ers, banks sought out cus­tomers who weren’t so cred­it­wor­thy. When those loans began to sour, many banks were pushed to the brink of ruin. Gov­ern­ments around the world, spooked by the con­se­quences of bank­ing giants fail­ing, gen­er­al­ly spared them from the con­se­quences of their bad behavior.

Since then, cen­tral banks have con­tin­ued to favor the biggest banks, ply­ing them with cheap mon­ey through minis­cule inter­est rates and quan­ti­ta­tive eas­ing on the the­o­ry that what’s good for the banks is good for the econ­o­my. Quan­ti­ta­tive easing’s one “suc­cess” is the stock mar­ket boom. But that does lit­tle for tens of mil­lions of Amer­i­cans whose stan­dard of liv­ing depends more on their wages than on their stock port­fo­lios. The “wealth effect” of the Fed­er­al Reserve’s inter­ven­tions hasn’t reached most work­ers or job-seekers.

The per­verse rela­tion­ship between job­less­ness and equi­ty prices was on dis­play again Fri­day when a drea­ry employ­ment report helped spur a stock mar­ket ral­ly. The uptick in unem­ploy­ment and lack­lus­ter job growth con­vinced big investors that the Fed would con­tin­ue its bond-buy­ing pro­gram. Con­tin­ued high unem­ploy­ment = con­tin­ued Fed­er­al Reserve bond pur­chas­es = high­er stock prices = more income inequality.

Snider, unlike cen­tral bankers, isn’t at all sur­prised by this result. He believes that eco­nom­ic growth and broad improve­ments in liv­ing stan­dards result from com­pe­ti­tion among “pro­duc­tive, indus­tri­al busi­ness­es” in a per­ma­nent state of com­pe­ti­tion, not from large finan­cial insti­tu­tions in a per­ma­nent state of reliance on gov­ern­ment mon­e­tary interventions.

Maybe it’s time for pol­i­cy­mak­ers to con­sid­er the pos­si­bil­i­ty that Snider just might have a point.