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The New American Economy: Concentrating Business Power to Suit an Unequal Society

Summary: Corporate power is concentrating in America, quite suitable for society with growing inequality of wealth and income. A new business structure for a new society.

Today we look at some examples. This is one of the drivers of increasing concentration of wealth and power in America, pushing America from Republic to Plutocracy.

Cartels and monopolies were created in the Gilded Age of the late 19th century, especially during the depressions. Teddy Roosevelt and the great trust-busters restored some competition to the US economy. The New Deal began a new phase of cartelization. Now the US economy has entered a new phase of consolidation – a return to the Gilded age. In its extreme form entire industries fall under the domination of one company, which sucks the oxygen so that everyone else in the entire supply chain gasps for air.

It’s clearest in what’s misleadingly called the technology sector.

  • Apple nears dominance over the entire consumer electronics industry. Even the large telecoms must dance to their tune.
  • Amazon dominates the publishing business, especially electronic publications. Even the largest retailers and publishers fear them. And they’re expanding fast throughout the e-retail space.
  • Google dominates the e-advertising business.
  • On a smaller scale, eBay dominates the e-auction business.

More of these will emerge, as deep structural factors drive this trend. Technology today creates “winner take all” network effects. But there are other factors at work. Large companies can wield the patent system as a weapon, buy political protection and tax breaks, get government contracts, suppress unions, and often break the law with impunity. The banks and drug companies (see here for one of countless examples) illustrate these dynamics.

These giants destroy not just small but even large businesses as independent entities – they become dependent satellites, the business equivalent of Marx’s reserve army of the unemployed. Made or broken by whim, with profit margins set for the convenience of the megacorps in their field. The large regional corporations that were the mainstays of local politics and culture in America’s cities become branch offices, radically concentrating the social and economic patterns of the nation. This process has been running for decades, and now enters a new stage.

This trend of concentration on the industry level mirrors trends on the level of individual corporations, as senior officers take an increasing share of not just total wages, but also corporate profits. Their power is a means, not an end — and they as a group apply it to increase their wealth and income. As a result, the senior officers of these companies become plutocrats, members of our small and interconnected ruling elite – rich beyond the imagination of most people. None of their descendents need work for ten generations. Meg Whitman accumulates $1.3 billion as the senior manager at Ebay, and attempts to buy the Governorship of California as 19th century English plutocrats would buy an earldom.

For a more recent example, look at Apple, in this excerpt from a report by Indigo Equity Research (25 April 2012):

When Tim Cook was appointed CEO in August 2011 he was granted 1 million restricted stock units, worth $600 million at a share price of $600. … Also Mr. Cook’s salary was raised to $1.4 million. … Arthur Levinson became Chairman of Apple in 2011; he is also CEO of Genentech and is on the Board of Google.

These are the people who increasingly own America. They run for office (eg, Bloomberg; Senate has become a millionaires club called the US Senate). They buy newspapers and magazine, endow think-tanks, to advocate their views. They fund candidates for President to make their view the law of the land. Their wealth allows them to shape public policy as a hobby. They are becoming America; the rest of us will just live here.

These things do not “just happen.” We allow them to happen. Our actions and inaction will revitalize or destroy the Republic.

Toys for plutocrats

For more information

About the large-scale evolution of the US economy:

About the one cartel to rule them all – banking:

About inequality and social mobility: once strengths of America, now weaknesses:

This post originally appeared at Fabius Maximus and is posted with permission.

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