Large corporations control much of the economy and politics in Western Europe, a power they abuse to increase their profits
Aidan Regan is professor at University College Dublin, School of Politics and International Relations
Cross-posted from Democracy Challenged
The US corporate landscape has morphed into a winner-takes-all economy, where a handful of multinational firms control the lion’s share of profits and market power. The data is stark. Across all US firms, nearly 99% of after-tax profits are captured by the top 10%, with the top 1% alone accounting for more than 93% (Figure 1). At the extreme apex, the top 0.1% of firms – just one in a thousand – have a gravitational pull over profit flows that dwarfs the rest of corporate America.
This profit concentration is no longer an anomaly but a structural feature of the American political economy. Decades of consolidation, intellectual property dominance, profit-shifting and network effects have created a corporate elite capable of extracting rents on an unprecedented scale.
The Knowledge Sector’s Profits Boom
The trend is most pronounced in the knowledge sector – particularly big tech and big pharma – where intangible assets and digital platforms generate winner-takes-all dynamics. As Figure 2 shows, the top 1% of firms in this sector consistently pocket almost all profits. There was a brief decompression after 2011, with the top 1% share falling to 64%. But since 2016, the tide has turned, and by 2022, 92% of total profits were captured by the top 1%.
This dominance is not just about innovation. Knowledge-intensive firms leverage scale without traditional costs, turning intellectual property into cash machines. Patents, software, and proprietary algorithms are global profit engines – but the revenues they generate are concentrated in the hands of a few players like Big Tech and Big Pharma.
Traditional Firms Lag Behind
Traditional industries – manufacturing, commodities, and other brick-and-mortar sectors – still show high concentration, but the picture is less extreme (Figure 3). After 2010, the top 1% share of profits in these sectors dropped sharply, reaching a low point in 2019. Even with a rebound, the top 1% in 2024 account for around 79% of all profits – significantly lower than the 90%-plus dominance in the knowledge economy.
The divergence between sectors highlights a structural shift in the nature of corporate power. Traditional industries face higher capital costs, price competition, and slower growth, while knowledge firms can scale revenues globally with marginal costs close to zero.
Tax Advantages Amplify the Divide
If profits are concentrated, taxes should in theory offset this advantage. But the opposite is true. Figure 4 shows that while traditional and knowledge sector firms faced similar effective tax rates in the mid-1990s (around 35%), a gap has since opened up. By 2024, top knowledge sector firms pay nearly 10 percentage points less in effective tax than their traditional-sector counterparts.
This tax gap is the product of aggressive profit shifting, intellectual property transfers to low-tax jurisdictions (such as Ireland), and favourable treatment under regimes like the US Tax Cuts and Jobs Act (TCJA) and Ireland’s favourable treatment of profits from IP-based intangible assets. For firms like Apple, Amazon, Abbvie and Pfizer, the combination of market power and tax arbitrage has turned corporate profits into lightly taxed global rents.
Market Power Is Concentrated Too
Profit concentration goes hand in hand with market concentration. Figure 5 shows that tech and pharma dominate on multiple indices of market power. The top 10 pharma firms control nearly 70% of their sector’s market share, with tech firms not far behind at around 50%. Even the top three pharma giants alone account for over a third of total market share.
By contrast, sectors like services or manufacturing show much lower concentration levels. The knowledge economy is structurally more oligopolistic, with network effects and intellectual property protections allowing leading firms to entrench dominance and fend off competitors.
A Broken Corporate Landscape?
The data suggests that US capitalism has long drifted away from competitive markets towards a rentier economy, or what some call Techno-Feudalism. A tiny fraction of multinational firms – particularly in tech and pharma – are capturing almost all profits, paying lower taxes, and consolidating market power at the expense of smaller competitors and consumers.
This concentration is not just an economic issue; it’s a deeply political one. Corporate groups with disproportionate profits and global tax strategies wield outsized lobbying power, influencing everything from trade rules to digital privacy. When profits are this concentrated, wealth and political influence follow suit, fuelling the inequality that underpins democratic malaise.
The Winner-Takes-All Economy
The rise of the oligarchic winner-takes-all economy reflects structural changes in the American and global political economy:
- Intangibles and IP: Knowledge assets scale without traditional cost structures, giving first movers enormous advantages.
- Network effects: Platforms like Amazon, Apple, and Google create ecosystems where dominance breeds more dominance.
- Global tax arbitrage: IP-based profit shifting allows top firms to shield vast earnings from domestic taxation.
- Weak antitrust enforcement: Decades of leniency towards mergers and monopolistic behaviour have entrenched market power.
Unless these dynamics are politically constrained, the next decade could see profit and corporate wealth concentration intensify further.
Where Next?
The question is not just how to tax these firms effectively but how to rebalance market power. Stronger antitrust enforcement, coordinated international tax rules, and limits on IP abuse could all play a role. Without political intervention, the top 0.1% of firms will continue to operate as de facto global rentiers, extracting value while contributing less to the economies they dominate.
The data from Figures 1 to 5 paints a sobering picture: US corporate profits have become a pyramid, with almost all value concentrated at the top. This is not just an economic imbalance but a democratic threat. When a handful of firms control profits, markets, and taxes, they also control policy. Their lobbying muscle, campaign funding, and global tax manoeuvres undermine public trust, hollow out state capacity, and destroy market competition.
The challenge is not only to tax these corporate giants but to break their grip on markets and politics. Without decisive action – from antitrust enforcement to international tax reform – the corporate pyramid will harden into an oligarchy that democracy can no longer contain.
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