The big corporate power grab

The increasing concentration of wealth and power among mega-corporations, facilitated in no small part by rigged rules of the global economy, is undermining democracy, economic security and planetary health. A report by the development organisation Global Justice Now – an excerpt from which is published here – delves into this problem of monopoly capitalism.

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THE global economy is dominated by gigantic corporations. These huge businesses wield enormous power, crossing borders, avoiding laws and taxes, compelling governments to compete with each other for investment. The biggest corporations have captured eye-watering wealth, which far outweighs the economic power of most countries on earth. And that wealth and power is only growing.

As the world is battered by a cost-of-living crisis, still recovering from the worst pandemic in a century, and struggling to cope with the effects of disastrous climate change, the profits of the biggest 500 firms on the planet nearly doubled, exceeding $3 trillion in 2021. Their combined income amounted to an almost unimaginable $38 trillion – equivalent to nearly 40% of the entire world economy. That’s more than the GDP of all but the very richest countries in the world combined.

The combined income of just the five biggest corporations in the world was more than the income of the poorest 2 billion people put together – one-quarter of the world’s population. One single corporation – Walmart – earned more than half-a-trillion dollars. That’s more than $1.5 billion every day, exceeding the GDP of even wealthy countries like Austria or Norway. Meanwhile, Apple, the most profitable private corporation in the world, saw its profits rocket by 65% to $95 billion.

These riches aren’t accidental. These gigantic corporations have captured the economy, giving them the power to set prices, in sectors including food and energy. So while food and energy costs rise dramatically for ordinary people, corporations in those sectors are under no pressure to lower prices even as their profits spiral into the stratosphere. The big five oil corporations, for instance, brought in record profits of $195 billion in 2022, funnelling around $110 billion straight into the pockets of mostly very wealthy shareholders.

Corporate concentration is growing, with those at the very top gobbling up more and more rivals. Just in the world of Big Tech – one of the richest sectors of the economy – the five biggest firms, Google, Amazon, Facebook, Apple and Microsoft, have bought out over 1,000 companies over two decades, and until last year no regulator, anywhere, stopped even one of them.

The problem is particularly acute in the US, where recent research finds that the top 1% of corporations account for a truly astonishing 81% of business sales and 97% of business assets. More worrying still, the top 0.1% alone account for 88% of corporate assets and 66% of sales. But the same trend can be seen across Europe and much of the world. And here too, the growth in corporate power has been met, at least until recently, with little action. Of 8,000 proposed business mergers the European Commission was notified of since 1990, only 30 (less than 0.4%) were blocked.

Part of the problem lies with the rules of the global economy – rules often designed by the very corporations who benefit from them, and which in turn hand more power to these same corporations in a vicious circle. Some of these rules have allowed and even encouraged corporations to put profiteering and speculation ahead of their supposed purpose, whether that’s making medicines or producing food. In this way, far from encouraging creativity and innovation, monopoly power has stifled it.

So monopoly capitalism doesn’t simply drive higher prices. It shifts wealth far more fundamentally from the 99% to the 1%, and from poorer to rich nations, driving huge inequality. What’s more, it is shifting power – undermining our democracy and making it harder to achieve the sorts of policies we desperately need to deal with, for instance, climate change. Indeed, monopoly capitalism entails the capture of vast swathes of decision-making by and for elite private interests. Only by reclaiming, breaking, decentralising and dispersing this power can we hope to make democratic decisions which meet the public interest.

The problem with monopolies

Monopolies erode our democracy

Economists usually focus on the economic problems of monopolies, but perhaps more important is the way private monopolies undermine democracy. The decisions which are being made by monopolies are deeply political in nature: what should society make for whom and how? Who should get to partake in these products and services and on what terms?

Particularly when we’re talking about the things we need to live – food and medicines – it’s obvious how economic concentration can warp and subvert resource allocation in a way which threatens basic human rights. But even if we’re talking about less essential products and services, how we utilise society’s resources is an important question that goes to the heart of what type of society we live in. As long as these decisions are in private hands, taken based on private rather than public interests, our vision of democracy will remain extremely limited.

Just look at the power corporations like Bayer and Monsanto hold over farmers, regulating, in effect, how farmers will grow their crops. Anti-corruption campaigner Zephyr Teachout believes the privatisation of these governing decisions not only makes corruption more likely, but is in fact corruption itself. Defining corruption as the use of public power for private and selfish ends, she says that we have built a system rooted in corruption because, ‘by definition, the corporations are going to act in a selfish and greedy way ... we know they are, we built them to. So we built a selfish power and then granted it governing power, we have built a system of corruption’.

Academics at Sheffield University make clear that this is a global problem when they say ‘the concentration and dominance of transnational corporations is profoundly restructuring the global economy’, adding that these corporations ‘have become central organisers of global economic activity and key decision-makers over who gets what, when, where, and how in the global marketplace’.Of course, corporate wealth and concentration does also give corporations undue influence over formal political power. This is most obvious through lobbying, but also through, for instance, buying (or discrediting) scientists and academics – which Teachout calls ‘corruption of thought’.

The more power corporations have, the more power they can buy. The lobbying power of major corporations is renowned and has enabled them to create economic rules which exacerbate that power. Corporations have lobbied for new tighter intellectual property provisions in trade deals, allowing them to extend their monopolies across the world. They lobbied for financial policies which allowed them to drive down their taxes to historically low levels. They even lobbied for special ‘corporate courts’ to be inserted into trade deals, a form of investment arbitration designed to ensure their ‘legitimate expectation’ of future profits which they can resort to should governments make decisions they don’t like.

Monopoly power has grown over sections of the economy whose job is to inform us of current debate, as corporate power has transformed the media landscape. In the UK, according to the Media Reform Coalition, just three companies, News UK, Daily Mail Group and Reach, own 90% of the national newspaper market (up from 71% in 2015). When you include online readers, the three giants have around 80%. In local news, just six companies account for nearly 84% of all titles. In the US, just six corporations dominate 90% of mass media consumption and distribution (including 24-hour news stations, newspapers, publishing houses, Internet utilities and even video game developers), a consolidation from 50 companies back in 1983.

Monopolies are destroying our planet

Food monopolies are intensifying agricultural production in ways that both produce more emissions and which leave us vulnerable to climate impacts by increased use of monoculture crops. But there are other ways monopolies fuel climate change too.

The energy sector is dominated by massive corporations. Oil giants are particularly well known: think Shell, BP, Exxon, Chevron and Total. As with food corporations, these conglomerates made profits, of $195 billion in 2022, at precisely the time so many people struggled to pay vastly inflated energy bills. These same corporations used around $110 billion to directly enrich their wealthy shareholders, rather than investing it into any form of energy transition. In fact, what funds they did invest were overwhelmingly in further fossil fuel production, not in renewables.

In the UK, energy supply is also highly concentrated in both production and retail. In 2019, more than two-thirds of all energy was produced by the largest six companies. While a plethora of smaller companies emerged in the retail market in the 2000s, during 2021 dozens of companies failed, further concentrating the big suppliers’ hold. Electricity infrastructure is similarly concentrated in the hands of six giants, the biggest run by Hong Kong billionaire Li Ka-shing. His CK Infrastructure Holdings was accused of doing too little to upgrade infrastructure, and when it does, passing costs on to consumers.

Monopolies have encouraged the growth of environmentally destructive practices like built-in obsolescence. Just look at Apple, which has for years been criticised for preventing third-party service and software installation, allowing it, in the words of Cory Doctorow, ‘to decide when an iPhone is beyond repair and must be shredded and landfilled as opposed to the iPhone’s purchaser … This is a very useful power to wield, especially in light of CEO Tim Cook’s January 2019 warning to investors that the company’s profits are endangered by customers choosing to hold onto their phones for longer rather than replacing them’.

There are indirect ways that energy monopolies fuel climate change too. We’ve seen how monopolies help fuel inequality. The biggest polluters by far are concentrated at the highest end of the wealth spectrum, with the investments of a billionaire effectively emitting a million times more greenhouse gas than the average person. More billionaires means more climate change. And monopoly capitalism is creating new billionaires every day.

On top of that, monopolies are able to apply direct political pressure, donating more money to lobby politicians to protect their interests. They can also afford to fund think-tanks which publish climate-sceptic propaganda rubbishing the scientific consensus. Oil major Exxon has recently been shown to have intentionally undermined climate change science for decades, even though corporate executives understood the damage they were doing.

The good news is that renewable energy tends to be less open to monopolisation than the fossil fuel industry, with much smaller businesses, but also cooperatives and groups of citizens able to produce renewable energy. But that doesn’t mean we shouldn’t be wary of attempts to monopolise renewable energy technology. While climate change declarations regularly stress the need to share climate-friendly technologies, in practice these technologies are often protected by strict intellectual property provisions, undermining the growth of independent economic development in most countries in the world. As with medicines, we need to immediately suspend these global trade provisions for climate technologies, and find new ways to reward innovation.

Monopolies drive poverty, inequality and economic fragility

The most obvious impact of monopoly power is economic. Monopolies protect businesses from the pressures to either invest in better products or lower prices for consumers. Instead, they can keep prices high to reward shareholders, which entails a transfer of wealth from ordinary people to elites. This can drive cost-of-living increases, but there are wider problems too. For instance, without strong unions, the market power of monopolies can allow them to pay their workers less, contributing to wage inequality.

It’s no wonder that monopoly power has dramatically shifted society’s resources from labour to capital. The share of global income that accrues to workers (as opposed to owners and shareholders) has fallen by around six to eight percentage points since 1980. According to the Balanced Economy Project, that shift is massive, with workers losing out to the tune of around $6 trillion a year: ‘an order of magnitude greater than the estimated $400-$600bn in annual losses to tax abuse’. While corporate concentration is not the only factor at play, it’s certainly a big one.

It’s a point made eloquently by economist Paul Krugman in a 2016 piece entitled ‘Monopoly power is killing US economy’, where he says ‘profits are at near-record highs, thanks to a substantial decline in the percentage of GDP going to workers’. In fact, for Krugman, this inequality is actually driving the whole economy into a death spiral, because these profits aren’t being invested in ‘plant, equipment, and technology’ or other productive activity, but ‘mergers and acquisitions’ and returning wealth to shareholders. The economy begins to eat itself.

Monopolies can feed other forms of inequality too. They tend to remove value from communities in myriad different ways. Think of smaller farmers more likely to see their livelihoods squeezed. Or the closure of small businesses, more likely to be owned by people from traditionally marginalised groups. The US alone has lost 65,000 small independent retailers in just 10 years, with one in three local banks closing, leaving one-third of US counties without a local financial institution.

There’s also evidence that monopoly pricing affects poorer groups more strongly, with the poorest households on average using markets that are 30% more concentrated than markets faced by the richest households, and ‘likely to be at a greater risk of the effects of concentrated markets, as they are more reliant on goods and services that are characterised by such an industry structure’.

Monopolies also make our economy fragile. The drive towards ever-longer supply chains under corporate control, allowing ‘just in time’ production, makes us highly vulnerable to a crisis, to climate change – even to a trading ship getting stuck in a canal. Big business has told us not to worry about our economic security: we don’t need to grow the food we eat, or make the computers or clothes we use. But there is now a growing understanding that security is necessary, with the US Trade Representative recently saying we need to accept a less ‘efficient’, but more secure, trade model.

The rules that enable monopoly rule

Corporations have a long history, tied to empire and exploitation. Some of the first corporations were vehicles for economic colonisation. They extracted wealth for the benefit of elites in imperial centres, working closely with their home governments.

While formal empires have, to a large degree, been consigned to history, the global economy is still neocolonial in many ways, and corporations play a leading role in perpetuating this dynamic. It’s true that some emerging economies, particularly China, now host many of their own big corporations. This fuels inequality within Global South countries, creating billionaires even though extreme poverty thrives across society.

But monopoly capitalism also distorts the economy at a global level, exacerbating inequality between countries, especially between the Global North and the Global South. Big business is still overwhelmingly based in the Global North. With the very significant exception of China, only 26 of the largest 500 corporations are based outside high-income countries. This fundamentally affects global inequality because it means that even where corporations are operating in the Global South, they are able to return their money to Northern financial centres – exploiting the labour, resources and environment of the Global South to enrich elites in the Global North. The revenue of just the richest 500 US-based corporations was nearly three times the GDP of Latin America, and eight times that of sub-Saharan Africa.

This is particularly relevant to the work of Global Justice Now, in our struggle for a more equal world. Since our foundation we have focused specifically on the way that the rules of the international economy exacerbate injustices in the Global South. Today, rules which encourage and exacerbate corporate monopolies sit at the centre of the global economy. Our role is to expose and challenge those rules, whether they are global trade rules that impose stringent intellectual property standards everywhere or financial rules that enable tax avoidance.

Trade and monopolies

These problems can be seen in the global trade system. Trade can be good for Southern countries, allowing them to stimulate their economy, build employment and learn from technologies developed in richer nations. But current trade rules are premised on the idea that governments should intervene as little as possible in their economy, discouraging use of local-content requirements to stimulate the economy, allowing corporations to repatriate their profits, and clamping down on the copying of technologies developed elsewhere. Countries are robbed of the tools to make trade work for them, so that corporations can enhance their power.

The UN agency UNCTAD has found that the majority of global trade takes place within supply chains controlled by transnational corporations. In 2021, they described the global economy as ‘a rentier economy dominated by large corporations. Their control over key strategic assets and long global reach affords them a dominant market position from which abusive, and oftentimes predatory, business practices proliferate’.

In this context, simply arguing for more trade and investment for developing countries as a route out of poverty completely misses the point. Unless these global rules are rewritten, and economic structures reshaped, more monopoly capitalism will only fuel global inequalities rather than redress them.

Finance and monopolies

The concentration of corporate power is also connected with the role of finance in the economy. Access to finance is a key weapon in a corporation’s armoury. Loans and debt allow corporations the financial firepower to, for example, sell goods below cost for a period of time, or even to take over other corporations. Both debt and mergers and acquisitions have boomed in recent decades, cementing corporate concentration. As the Balanced Economy Project puts it: ‘Finance likes to throw cheap, plentiful credit at powerful, wealthy monopolists like Amazon, while starving their competitors. Venture capitalists talk of “kill zones” where innovative firms can’t access reasonable financing because lenders judge them to be operating in areas where the monopolists can kill them at will.’

This has been helped by a tremendous concentration within the financial industry itself. A new aristocracy of finance has increasingly monopolised access to credit and favoured large, increasingly globalised corporations. In turn, chasing the capital necessary for expansion means corporations are not simply competing to make better products within a specific sector, but competing against every other corporation for investment from a concentrated financial sector, hardwiring a tendency across the economy to seek short-term profit maximisation as opposed to sustainable businesses.

Increasingly, the largest shareholders in all major transnational corporations are made up of the same enormous investment funds, with three massive asset management firms – BlackRock, Vanguard and State Street – responsible for $20 trillion in assets. As Common Wealth finds: ‘Today, the Big 3 dominate global financial markets: in the US, one of the Big 3 firms is the largest shareholder in 495 out of the 500 S&P 500 companies, a basket comprising the largest US corporations, which includes everything from Exxon to Tesla, and Pfizer to Facebook. Together, they control a staggering 20 percent of the average company in this index, and a recent study suggested this ownership concentration could double to 40 percent within the next 20 years.’

In an economy where access to capital is the highest priority, these corporations have enormous power. One columnist writes in The New York Times: ‘their rise has come at the cost of intense concentration in corporate ownership, potentially supercharging the oligopolistic effects of already oligopolistic industries … in the future, about a dozen people at investment firms will hold power over most American companies’. Similar consolidation has taken place in other parts of the financial sector.

The connection between finance and monopolies is an old one. US President Franklin D. Roosevelt spoke of the way ‘industrial empire building, unfortunately, has evolved into banker control of industry’, saying ‘[s]uch control does not offer safety for the investing public’ but rather robbed business of ‘virility, independence, adaptability and daring’. Any attempt to confront monopoly capitalism requires strict financial regulation.

Intangible assets, tax and speculation

Real value in corporations is increasingly embedded in so-called ‘intangible assets’. Brand recognition, patents and copyright have become more valuable to corporations than ‘real’ assets like factories or workforce. While these intangibles are nearly impossible to accurately measure, corporations nonetheless try to put a high value on them and spend a fortune protecting them. Precisely because they aren’t physical, these intangible assets are much easier to register in low-tax jurisdictions. They also convey real monopoly power – encompassing brands, recipes and identities which it’s illegal for others to use.

Studies have found strong evidence of a correlation between investment in intangible assets and industry concentration. Patenting, in particular, is a highly concentrated field, with a small group of corporations increasingly owning a huge quantity of patents. As Cedric Durand and Cecilia Rikap write, corporate concentration is increasingly ‘based on depriving others of access to knowledge. Legal monopoly is already very well advanced, with just 2,000 corporations owning 60 per cent of the patents simultaneously obtained at the world’s five leading patent offices’.

The growth of tax avoidance more generally has allowed an incredible situation to arise wherein many of the wealthiest corporations on earth pay a lower rate of tax than their lowest-paid member of staff. Larger corporations tend to face a lower effective tax rate than smaller firms, further increasing their wealth and power.

This all affects the economy in a fundamental way. The great theorists of monopoly capitalism, Paul A. Baran and Paul M. Sweezy, writing in the 1960s, believed that, by concentrating resources in the hands of big corporations and those that own them, and shifting the balance strongly away from working people, monopoly capitalism inevitably tended towards stagnation. In order to overcome this and maintain profits, a number of ‘tools’ were developed which themselves had undesirable consequences: high levels of military spending, which pushed public resources into the private sector while also encouraging conflict; a highly proactive sales and marketing industry, which manipulated people into buying (often on credit) while fuelling climate-destructive consumerism; and the development of new financial markets and forms of speculation, boosting profits while also injecting massive instability into the economy, which only benefits gigantic corporations that can weather the instability better than small producers. As Business Week wrote in 1985: ‘Slow growth and today’s rampant speculative binge are locked in some kind of symbiotic embrace.’

Hope and activism

Global Justice Now is part of a movement that has long campaigned against corporate power and the rules that underpin it. At times, we’ve won. But we believe a movement that can go beyond individual corporate sectors or individual rules is needed. We think talking more about monopoly capitalism can help foster such a movement.

Of course, this will mean debating different ideas and alternatives. Ultimately, we need a very different economy. Not everything in that economy needs to be small. But where monopolies are unavoidable, we need to look at who controls those monopolies and who can hold them to account. There’s not a one-size-fits-all approach, but potential solutions to monopolistic practices might include:

•     breaking up big firms and decentralising economic power

•     stopping the endless train of mergers fuelling greater concentration

•     regulating corporate power in the public interest

•     constraining the role of financial corporations in the economy

•     taking companies into government ownership and running them accountably in the public interest

•     promoting smaller economic units, including importantly cooperatives, collectives and non-profit production, and giving workers and communities more control over the places they work in

•     new measures and practices to better determine monopolistic behaviour

•     increasing trade union density in firms and across industries.

You can be part of this movement at many different levels. You might join one of our campaigns to change the rules of the global economy. The People’s Vaccine movement, which challenged monopolies over COVID-19 medicines, has helped spawn a wave of alternative research, development and manufacturing initiatives throughout the world. Meanwhile, the insulin monopoly in the US has spurred states like California to begin public production of the medicine.

You might get involved in challenging monopoly hold over a specific sector of the economy – the fight for a different food model for instance, like the food sovereignty movement led by millions of small-scale producers around the world in La Via Campesina. At a local level, in the US, there are dozens of examples of local initiatives fighting big business – such as the struggle in North Dakota to maintain a local banking sector resulting in more capital available for local businesses and farms, or the example of Cleveland shifting 39% of its procurement budget to local, small and minority- or women-owned businesses.

Or you might join a campaign aimed at a specific corporate monopoly, like Make Amazon Pay, the international campaign to force Amazon to pay fairer wages and taxes. Whether you work at a local, national or global level, this work is all part of the bigger pushback against monopoly capitalism.

And there’s a growing network of organisations dedicated to tackling monopolies head-on, a burgeoning antitrust movement, including the Balanced Economy Project, the Institute for Local Self Reliance and the Open Markets Institute.

And this is having an effect. In a sweeping executive order, US President Joe Biden promised to implement ‘full and aggressive enforcement of our antitrust laws’, saying: ‘We’re now 40 years into the experiment of letting giant corporations accumulate more and more power ... I believe that experiment failed.’ He appointed antitrust expert Lina Khan to chair the US Federal Trade Commission, one of the world’s most powerful economic regulators. According to Nicholas Shaxson and Michelle Meager, ‘If these gains can be consolidated and extended, and expanded outside the US, it is no exaggeration to say that this could transform our societies and economies for the better.’

There are a plethora of perspectives on how to tackle the concentration of wealth and power in our economy. From reframing what competition policy is, to transforming ownership in the economy and much else besides. We hope we can inspire people to come together in a movement where we can reflect, debate and analyse the differences so that we can shape a liberatory future in the interests of people and the planet.              

The above is an extract from ‘Monopoly Capitalism: What Is It and How Do We Fight It?’, a report published by Global Justice Now in March 2023 and written by Niall Glynn and Nick Dearden. The full report, including references, is available at https://www.globaljustice.org.uk/resource/monopoly-capitalism-what-is-it-and-how-do-we-fight-it/.

Global Justice Now campaigns for a global economy where people come before profit, and works in solidarity with social movements to fight injustice and inequality.

*Third World Resurgence No. 355, 2023, pp 10-15