An increasing number of mainstream economists are taking notice of the problems of growing mega-corporations, the negative impact they’re having on the economy, and how the decline in union power is leading to lower wage growth.
Today’s corporate growth can be traced in part back to the rise of the right in the 1980s. Politicians like Reagan, Thatcher, and Mulroney not only attacked union and worker rights, they also worked to expand the power of corporations through deregulation, free-trade agreements, “property rights,” regressive tax measures, and the weakening of anti-monopoly and anti-competition rules. Since then, we’ve seen a decline in unionization and the massive expansion and growing concentration of corporate power.
This year, two of the largest corporations passed significant thresholds: Apple reached a stock market valuation of US$1 trillion and Walmart’s annual revenues exceeded US$500 million — more than the annual GDP of all but two dozen nations in the world.
Corporations in advanced economies like the US and Canada have increased their average markup ratios (the difference between their selling price and cost) by almost 39 per cent since 1980. This has been led by mega-corporations that have become even larger and more dominant in their sectors at the expense of small and medium-sized businesses, achieving virtual monopoly status. And when industries become dominated by these giant corporations, investment and innovation declines. These corporations have also excelled at using tax havens to reduce their tax bills, giving them even further advantages over domestic rivals.
It’s all blatantly unfair, but so far most governments have pandered to these mega-corporations, which include Facebook, Apple, Google, Walmart and Amazon—and competed with each other to offer them incentives.
As corporate markups have increased, labour’s share has declined. In Europe, other research has identified declining union power as the major cause of lower wage increases and labour’s shrinking share of the economic pie.
There is finally greater recognition that increased corporate concentration and power and weakened union power have not only had negative social consequences, but also negative economic impact. We need to hold our politicians accountable, and make sure they stand up for workers and smaller businesses.