Important question here – is Willy Hutton right?

No, don’t go with the important and obvious answer – you fuckin’ kiddin’ me that Willy might have got something right?

Let us examine the contention:

We live in a world of corporate goliaths and the trend to gigantism is accelerating. The new era of hi-tech data capitalism has an embedded proclivity to monopoly. The bigger the network, whether Facebook or Google, the more valuable it is to be connected. Big is good in the digital universe, while even bigger is better.

Meanwhile, analogue capitalism, confronted by the challenge of the new, is reacting by consolidating and merging into ever larger entities. Unless they do, comes the reply to any challenge from national competition authorities, they won’t have the heft and scale to meet the new competition. Increasingly, we are surrounded by the most awesome concentration of corporate power in the history of capitalism.

Well, that’s an interesting thought. Do we actually have an increasing concentration in the economy? Say that Google’s turnover is $100 billion. Not far off at least. Global economy (for it is a global company) is $100 trillion, not far off. Google is 0.1% of the global economy therefore.

Is this more or less of a concentration than the past? I don’t know myself although I would think it unlikely. More or less than, say, Standard Oil? Less, I think I insist. For it’s half the turnover of Shell today. (Yes, I know, turnover isn’t quite the right measure here but this is very rough indeed).

Then there’s this:

Last week came another small milestone, in Britain. Hammerson, a property company few will have heard of, swooped on its rival, Intu, even less well known, in a £3.2bn bid. Yet the outcome will affect us all. Many major shopping malls – London’s Brent Cross, Birmingham’s Bullring, Manchester’s Trafford Park, Oxfordshire’s Bicester Village – will be owned by the same company. Hammerson will be the arbiter of how we shop: what stores are positioned where, in what mall and at what rent; it can even determine the restrictions on forms of permissible public activity in its private spaces.

That’s the value of the property/land. The ONS just reported that this is, in the UK, worth £5 trillion (can’t recall if that’s land only or land plus property upon it). 0.064% is evidence of an increased concentration?

Can’t see it really, can you?

In every industry, reported the Obama administration last year, the market power of the biggest companies has been growing and mark-ups and profit margins with them. America’s era of the robber barons in the late 19th century had nothing on this.

Anyone looked at retail just recently? With Amazon steaming in that’s not really how it’s working out, is it? And I really am pretty sure I reject the idea that margins are like those of the robber barons. Observers here (and The Observer) are being fooled by IP. More of the value of production is in that IP these days, making those gross margins look larger simply because of the way in which we account for IP. After cost of sales that is, as part of gross profits, instead of part of the cost of sales.

Hammerson will argue that it had no choice. So much shopping is online that the mall is looking increasingly like a late 20th-century phenomenon, outdated and outmoded. E-shopping is booming and, with the advent of virtual reality, you can go beyond browsing online to “handling” the goods you plan to buy. Hammerson’s only option is to buy up its competitors and try to hold the digital invaders at bay. You can see its point, but its monopolistic grip on the market will be such that it is better empowered to resist declines in rent and will take any opportunity to lift them. Our competition authorities stand idly by, helpless onlookers rather than proactive interveners.

And isn’t that sweet? His proof of increased concentration and market power is the increased competition being faced?

Sheesh.

This is also entirely wrong:

Meanwhile, the digital invaders are getting bigger. One of the laws of economics, itself an analogue discipline teaching doctrines far removed from the realities of today’s markets, used to be that as companies grow they start to lose control of their capacity to be efficient and unit costs rise. This is called decreasing returns to scale. In this way, or so the theory went, we could trust a free market not to produce corporate goliaths because they become inefficient, the ideology that Brexiters so blindly believe. But one of the features of data capitalism is exactly the opposite: increasing returns to scale.

It’s not a law of economics that there are decreasing returns to scale. It’s an observation that returns to scale vary dependent upon scale. Sometimes they increase, sometimes they reduce, the correct answer being “it depends.” Sure there are network effects these days. But then so have there been in things like lorry repair. Those who have a network to repair lorries across the world (and the manufacturers do indeed run something very much better than the AA for their own lorries) can sell lorries into the long distance lorry market. Those that don’t cannot. Rolls Royce’s global jet engine repair network is the – yes *the* – major come on for buyers. Equally there have been diseconomies to scale – the cancerous mestastasizing of bureaucracy in large organisations for example. And as the gender wibble has shown at Google, the new firms aren’t immune to HR taking over now, are they?

“Profits as a share of GDP in advanced industrial economies are rising and”

We need proof of this Willy, proof. And it’s not something I’ve seen much of to be honest. The labour share has fallen, certainly, but it’s not necessarily true that that means an increasing profit share. In the US economy domestic profits are a percentage point or two around where they’ve long been, in the UK similarly after that 70’s slump. We really do nee proof of this contention before we accept it.

International trade is not a game of cricket between equally matched teams, only disturbed by Brussels Eurocrats, as Jacob Rees-Mogg, Boris Johnson et al imagine, waiting for a Britain, energised by leaving the EU, to further stimulate it. It is a dog-eat-dog world in which the choice for a medium-size country is to make common cause with one of the three economic blocs capable of challenging the new monopolists and cartels – China, the US or the EU – or roll over and be plundered. Britain alone has no chance of challenging the West Coast tech giants over their policies on anything from tax to data or challenge any of the analogue goliaths over their stance, say, on diesel emissions or plastic packaging.

We’ve always been at war with EastAsia, haven’t we?

18 comments on “Important question here – is Willy Hutton right?

  1. On the internet, definitely. And it is a problem.

    It’s a problem that search, video, mobile and social media are dominated by three or four companies who are increasingly hostile to Western Civilization and increasingly throwing their weight around to push destructive narratives in the political sphere.

    Try saying you don’t want more “refugees” on Twitter or Facebook or YouTube (especially after their 10,000 strong army of new SJW censors come online) – you won’t last long.

    It’s a problem that free speech is being driven off the net by a trio of hyperglobohomomegacorps whose head nerds want us to shut up and turn into a colder, even shittier version of Afro-Asia already.

    The internet giants have more power – real power, power over the global flow of ideas and information – than Rockefeller or Morgan or the Rothschilds ever dreamed of.

    Time they were trust busted.

  2. Well, some large companies have also reduced their market share in the meantime: BT and just about any other incumbent, GE, GM, the old national airlines, etc. they probably don’t count in Willy’s world though as they were unionised and often state-owned

  3. So the in order to prevent being plundered by a large trading block we should allow ourselves to be plundered by a large trading block?

  4. 3 “sooper-blox”–all of whom are existing on thin ice of debt, massive misallocation of capital caused by their own meddling and endless thieving and bungling.

    Yeah–we can’t possibly survive. As soon as the US and Europe can arrange to borrow mega-more cash from the Chinese (so long as internal war don’t break out there due to the 400 mill of them that aren’t getting richer cos socialism) then the Dinos will wipe out all those pesky little mammals.

    So long as the rest of us are spared it would be poetic justice for Hutton to be exploded by a meteorite. It would need to miss his brain. It could do no more damage there.

  5. Britain alone has no chance of challenging the West Coast tech giants over their policies on anything from tax to data or challenge any of the analogue goliaths over their stance, say, on diesel emissions or plastic packaging.

    FFS. It would be utterly trivial for the British government to produce an alternative to Facebook or even Google. The Chinese actually have. So have the Russians, sort of. And their economy is smaller than Britain’s.

  6. So much shopping is online that the mall is looking increasingly like a late 20th-century phenomenon, outdated and outmoded.

    Presumably in shopping malls this sort of concentration can only occur in a declining industry. If people thought there was a future in it, they would be building more. No one could afford to buy them all. But if everyone is pulling out, then the most efficient managers will be the last people standing, and they can afford to buy declining assets. Not a lot of other bidders.

  7. Maybe it’s in anticipation that the fuckwits who keep calling for a turnover tax will win?

    Consolidation up and down-stream in any field of business will mean the same overall profit but much less turnover.

    Who knows?

    Who gives a fuck?

    Am I frightened by gigantism among corporate goliaths? Not really, sounds like a re-make of Pacific Rim and that wasn’t so much scary as something to snigger at.

  8. What Steve says. Media companies have a degree of power which is not reflected in their turnover or market cap. Hence why Bezos bought the Washington Post – he’s buying influence, not a revenue stream.

  9. “No, don’t go with the important and obvious answer – you fuckin’ kiddin’ me that Willy might have got something right?”

    Wrong Tim. Do go with the obvious and important answer – and stop wasting our time with an attempted rational analysis of Willy’s irrational shit.

  10. Judging by the number of persistently empty units in my local Intu they can’t dictate rents to unrealistic levels whether they want to or not.

    Town centre shopping malls need regular makeovers so they don’t look shabby compared to the likes of Westfield and Bluewater / mega mall in your part of the country. That must require massive capital investment.

  11. NHS has a pretty big share of its market.
    And the EU seems to have a big share of the action in regulation.

    And for further comparison, there’s this quote from ‘When Money Dies’ on 1922 Germany
    “Hugo Stinnes .. whose empire of over one-sixth of the country’s industry had been largely built on the advantageous foundation of an inflationary economy, paraded a social conscience shamelessly”

  12. Will wants massive and increasing regulation of capitalism.

    Will is surprised and disturbed that small companies are few and that large companies are getting larger.

    Will hasn’t worked out that massive and increasing regulation gives the largest companies an advantage over the competition, as they can afford the vast bureaucracies required to manage them.

  13. “Hammerson will be the arbiter of how we shop: what stores are positioned where, in what mall and at what rent”

    Like fuck they will. Key renters have way more influence over this than the landlords. If, say, M&S want space, Hammerson will have to bend over with no lubrication, if that’s what they want.

    “it can even determine the restrictions on forms of permissible public activity in its private spaces.”

    So can Pub landlords. I think a clue may be hidden in the words “private spaces”.

  14. “The new era of hi-tech data capitalism has an embedded proclivity to monopoly. The bigger the network, whether Facebook or Google, the more valuable it is to be connected. Big is good in the digital universe, while even bigger is better.

    Meanwhile, analogue capitalism, confronted by the challenge of the new, is reacting by consolidating and merging into ever larger entities. Unless they do, comes the reply to any challenge from national competition authorities, they won’t have the heft and scale to meet the new competition. Increasingly, we are surrounded by the most awesome concentration of corporate power in the history of capitalism.”

    This just low-grade, simplistic rubbish, and if you want to know why newspapers are dying, it’s because a non-newspaper person like me, with no degrees, who isn’t in a top job at a college can take this shit apart effortlessly.

    It’s not fantastically massive internet scale that killed bricks and mortar retail. It’s just internet. Back in the early 90s I used to buy classical and opera CDs from a mail order company with 4 employees because they were nearly half the price of HMV. Not employing staff sitting around waiting for customers or paying for expensive rents makes things much cheaper. And what the internet did was make the catalogue and payment stuff better and cheaper. I know someone who was running a profitable internet bike spares company and undercutting bike shops. He’d be a millionaire now, if Amazon hadn’t started including retailers who put him out of business (he quit while he was ahead).

    I’ve heard this all before about tech monopolies: IBM, Microsoft. The Guardian thought that MySpace would be an eternal monopoly 10 years ago.

    Youtubers are leaving YouTube for Twitch and other places because YouTube have become a load of normies censoring their activities. Facebook is uncool for kids, because that’s where your parents are.

  15. Willy Hutton’s diatribe missed the UK-USA Cinema deal

    In USA Malls are going bust with many being “nationalised” by State, County or City/Town.

    In UK, Edinburgh City centre St James Centre (Mall/Hotel/Offices) has been demolished with plans to rebuild – I would not be surprised if the retail part is not replaced in full.

    Change happens, trying to prevent is pointless – adapt (applies to alleged Global Warming too).

  16. Since almost the entire customer base at Bicester ‘Village’ is Arab and Chinese* (buying goods made in China!), it seems only reasonable that they should end up owning it.

    * Chiltern Rail make announcements in those languages for trains stopping there.

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