The New American Economy: Concentrating Business Power to Suit an Unequal 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:
- A look at America’s future – grim unless we get smart and pull together, 12 March 2009
- Some Americans worry about we’ll have a lost decade. Bad news – we just had it., 31 August 2009
- Welcome to American, the new Japan, as we enter a new era of State Capitalism, 28 September 2009
- A look at the engines of American job creation, 12 January 2010
About the one cartel to rule them all – banking:
- Update: yes, the Paulson Plan was just theft, 14 February 2009
- The best way to rob us is to own a bank, 10 April 2009
- “The Greatest Swindle Ever Sold”, by Andy Kroll in The Nation, 28 May 2009
- More about “Government Sachs” (they own America; we just live here), 31 July 2009
See the FM Reference Page America – how can we stop the quiet coup now in progress?
About inequality and social mobility: once strengths of America, now weaknesses:
- A sad picture of America, but important for us to understand, 3 November 2008 — Our low social mobility.
- America’s elites reluctantly impose a client-patron system, 5 November 2008
- Inequality in the USA, 7 January 2009
- A great, brief analysis of problem with America’s society – a model to follow when looking at other problems, 4 June 2009
- The latest figures on income inequality in the USA, 9 October 2009
- An opportunity to look in the mirror, to more clearly see America, 10 November 2009
- Graph of the decade, a hidden fracture in the American political regime, 7 March 2010
- America, the land of limited opportunity. We must open our eyes to the truth., 31 March 2010
- Modern America seen in pictures. Graphs, not photos. Facts, not impressions., 13 June 2010
- A pity party for America’s rich and powerful, 8 September 2010
- News You Can Use to understand the New America, 14 March 2012
This post originally appeared at Fabius Maximus and is posted with permission.