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?
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?