Concentration of competition in the hands of a few mighty companies is mistakenly seen as a healthy development. A new report paints a startling picture of runaway consolidation.
David S. D’Amato is an attorney, businessman, and independent researcher. He is a Policy Advisor to the Future of Freedom Foundation and a regular opinion contributor to The Hill.
Cross-posted from Counterpunch
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We live in an era of unprecedented economic consolidation, with a handful of extremely large and powerful companies dominating the largest and most important industry sectors. That we mistakenly treat this as an environment of dynamic and intense competition demonstrates a lack of understanding underpinned by a concerted propaganda effort on the part of the companies themselves, the academy, think tanks, and politicians. A 2023 report from S&P Global Market Intelligence paints a starting picture of runaway consolidation and concentration, with the number of U.S. public companies falling almost 40% between 2000 and 2021, “driven by trillions of dollars of mergers and acquisitions.”
In 91 of the 157 primary industries tracked by S&P Global Market Intelligence, the five largest U.S. companies by revenue combine for at least 80% of total revenue among publicly traded companies in their respective industries, up from 71 industries in 2000.
This story spans all of the most important industries. In the managed healthcare industry, for example, the top five companies today control over 99% of market share by revenue (up from about 72% in 2000). The oil and gas industry, too, has witnessed unprecedented consolidation in recent years, with 2023 witnessing “a $250 billion buying spree” that ended with four companies in control of almost 60% of America’s largest shale-oil field. Other globally important sectors have witnessed similar trends. A paper published in 2018 by UC Berkeley’s Haas Institute for a Fair and Inclusive Society notes that in the less than 20 years between 1994 and 2013, four conglomerates sharply increased their market share in several related global agribusiness industries: BASF, Bayer-Monsanto, Dow-DuPont, and ChemChina-Syngenta went “from 21.1 percent to 44 percent in crop seed and biotechnology; from 28.5 percent to 62 percent in agrochemicals; from 28.1 percent to 56 percent in farm machinery; and from 32.4 percent to 55 percent in animal health.” As the paper’s authors point out, we have entered an era of “consolidation and collaboration, not market competition.” This trend of consolidation has often been propelled by a regulatory environment that makes market entry and the introduction of new products prohibitively expensive, “reinforc[ing] the predominance of the big firms, which are more capable of coping with” such a costly and Byzantine legal environment.
The trends of corporate consolidation and market concentration have also tracked another of the most salient trends of the past several decades, the ever-increasing financialization of the global economy. However it is measured—“by its share of GDP, by the quantity of financial assets, by employment, or by average wages”—the finance sector has become a much larger and more important factor in economic life in recent history. As the finance sector has grown relative to the real sector, inequality has grown alongside it, with more income and wealth concentrated in a smaller and smaller group of financial elites. This increasing financialization can be analyzed “as a process of [upward] income redistribution with two faces.” The first is the incredible success of an “increasingly concentrated and politically successful finance sector” in rent-seeking, drawing a larger share of income and profits into financial firms; the second is the related movement of even non-finance companies from traditional productive activities in the real economy toward investments and financial services.
As the finance sector has grown, it too has consolidated, with bank holding companies bringing “household and commercial banking, insurance, and investment services” within a single firm. Go back 40 years, and there were about 14,500 commercial banks in the U.S. By the end of 2022, the number was about 4,100. This “radical structural change” in the banking industry and the “substantial decline in the number of banks” was already startling several decades ago, and it has continued apace since then. Industry watchers have predicted a surge in bank consolidation in 2024 after a dip in M&A activity in 2023.
Attending these trends of increasing consolidation and concentration is the dramatic growth in the size and influence of the global asset management market. The three largest asset management firms together control over $15 trillion in global assets under management, “an amount equivalent to more than three-quarters of U.S. gross domestic product.”[1] The largest of these firms holds a stake of at least 5% in almost all of the S&P 500, and over 80% of assets moving into all investment funds during the 2010s went to these three firms.[2] They exercise an astonishing level of control over the global ETF market, with somewhere between 73% and 80% of that market in their hands and the largest 1% of asset managers controlling more than 60% of the assets.[3] We could go on and on—few Americans understand just how much power this new oligopoly wields.
The leadership of these firms is deeply intertwined with that of the United States government, with many of the most senior government officials landing at them after their time in government. It is simply not possible to achieve such an outsized role in the global economy “without being accompanied by political power and entanglements with government,” and the largest asset management firms have achieved a symbiotic partnership with the federal government.[4] These firms have created an extraordinarily powerful and influential “new ‘money trust’” that actively undermines economic competition and destabilizes the global economy, posing a constant threat of crisis. Such a crisis is inevitable as more and more wealth is concentrated in fewer hands and its holders become more and more detached from the reality lived by almost everyone else in the world.
Last summer, the New York Times Editorial Board joined in lamenting this trend of corporate consolidation, observing that “in industries ranging from air travel to veterinary medicine, big companies keep getting bigger and more powerful.” The editorial cites French economist Thomas Philippon for the claim that the U.S. economy would be bigger by $1 trillion today if the country “had simply maintained the level of competition that prevailed in 2000.” But while the authors are spot on in diagnosing the problem and calling for a more diverse marketplace and more robust competition, they neglect the government’s positive role in privileging mega-corporations at the expense of smaller-scale competitors. Many on the left associate these trends with unbridled economic freedom, global capital running wild in a world of “free trade,” in which nation-states no longer have the power or wherewithal to rein it in or exercise meaningful control over the natural resources and labor power within their borders. And there is some truth to the idea that global capital has created a new system of transnational governance under which national sovereignty as traditionally understood has been subordinated coercively to the rule of borderless corporate power.
But concepts like economic freedom and free trade are heavily laden normative concepts that can be applied to real-world conditions only with great care and attention. As we have discussed, John Bellamy Foster and Robert W. McChesney argue there is great confusion and ambiguity around the notion of competition. The confusion arises out of “the opposite ways in which the concept of competition is employed in economics and in more colloquial language.” Economics tends to a carefully constructed, theoretical notion of “perfect and pure competition” under which a large number of small firms stand in essentially non-rivalrous positions relative to one another; they can exercise “no significant control over price, output, [or] investment.” But as Foster and McChesney observe, “today’s giant corporations are closer to the monopoly side of the equation.” And although monopoly is “the inverse of competition,” it ironically resembles the ordinary usage of the term competition as personal rivalry, as it involves a small number of oligopolistic firms. It is worth putting a fine point on the definitions of these concepts—and confronting the ambiguities head on—because too often even (perhaps especially) experts employ terms like competition in confused, equivocal ways. It is furthermore worthwhile to point out at this juncture that concepts like competition, individual rights, and free markets were once understood very differently, deployed by left-wing friends of labor to describe a version of small-scale, decentralized socialism. It is encouraging to see the contemporary left reengage with the idea of competition as the opposite of capitalist monopoly.
Importantly, the current age of runaway consolidation and oligopoly has also been defined by a pronounced expansion of the federal regulatory and administrative state, a fact too often overlooked in the analysis of the ongoing trend of national and global corporate consolidation. In this correlation, we see the reflection of a much broader and more general historical trend: the inextricable connection between the growth of the modern state and that of the modern corporation. Surface perturbations and political trends belie the truth that corporate power was created by and depends fundamentally on the state. Individual political actors and groups may see the state as a tool for curbing corporate power in society, but they are seldom able to zoom out enough to see what classical anarchist luminaries like Peter Kropotkin and Benjamin Tucker understood so well. The modern state and monopoly capital are twin aspects of a centralized, authoritarian system and operate codependently.
For Kropotkin, the state was the personification of monopoly—its source and protector. Indeed, the state’s final purpose in the era of capitalist modernity was to institute, through force, the privileges of the monopolists. Rather than seeing the state as a counterpoise to the power of the capitalist class, then, Kropotkin correctly understood the state as the force that structures markets for the benefit of a small group of insiders.[5] Witnessing the growth in the power and influence of the great trusts of his time, Tucker addressed those on the left who imagined they could confront this exploitative power through the state. Like Kropotkin, Tucker understood that it would prove impossible “to abolish privilege by centring all production and activity in the State to the destruction of competition and its blessings.” It was the state that was “the main support of that system” of monopoly privilege.
This strand of the left-wing political and economic tradition—the critique of the state as “the instrument for establishing monopolies”—is an area of regrettable neglect. Most of the contemporary left regards state power as the savior and source of deliverance from capitalist social relations. It has been the traditional domain of anarchists to unite a rejection of the coercive, hierarchical state with a repudiation of capitalist privilege. This makes anarchism unique on the left as a decentralist and libertarian vision of anti-capitalism; it asks whether the left can truly damn economic competition and freedom if we have neither, as is so clear empirically.
Despite this clear and measurable connection between rising corporate consolidation and an expanding regulatory apparatus, the causal mechanisms at work remain under-studied and little understood. Many observers on both the left and right have apparently chosen to treat the connection as merely accidental. Yet the very purpose of the corporate form from its birth was to cement a position of privilege and inequality, “to elevate the economic and legal rights of the corporation in question above those of their actual and potential competitors.”[6] As an object of historical study, the corporation is an extension of state power and inherently a restriction of economic freedom. Corporations are able to control so many aspects of daily life not because the choices of free people have given them that power—as capitalism’s apologists would have us believe—but because of deep structural violence imposed by the state.
Historically, this has taken the shape of land and resource theft, enclosure, and monopolization; arbitrary restrictions on cooperative mutual credit; a vast and complex system of subsidies, protections, and privileges; intellectual property rights that give the ownership of ideas themselves to the few; laws that take away labor’s most effective tools of organization and struggle; and an ever-expanding list of requirements that force us into unwanted contracts with financial, educational, and insurance institutions. At the level of specificity, the list of ways the state props up capital would continue for thousands of pages. The state has organized social and economic life in a way that allows concentrated capital to dominate us. No conscious conspiracy is necessary because the mechanisms are culturally and sociologically defined, recreated decidedly unconsciously all the time. If they are acknowledged at all, our relationships with capital and the state seem immutable.
Examined empirically, the economic system we find today is nothing like a hypothetical free or fair one. The capitalists have come to wealth and dominance not through competition, but “by abolishing the free market,” using the coercive power of the state to create a system of concentration, monopoly, and pervasive inequality. Capitalism’s right-wing “libertarian” apologists twist themselves into pretzels defending a system of state-created monopoly power even as they trumpet the benefits of freedom and competition. We must begin to think much more carefully about the practical relationship between the abstract theoretical frameworks we employ to analyze economic relations and the actual and material conditions we observe. A more grounded approach reveals the key macro trend of modernity: the civil society-crushing partnership between capital and the state.
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