Friday, September 23, 2016

Big Corporations In The US - Concentrations of Power

As a result of many mergers and acquisitions in the US, today the top 100 companies control of the economy has grown from 33% of Gross Domestic Product in 1994 to 46%.  The five largest banks account for 45% of banking assets up from 25% in 2000.   All of this is not good for America.   Mergers and Acquisitions to gain efficiencies, when consolidations occur has resulted in the loss of millions of good paying jobs.  And though these companies are very profitable, Middle Class incomes have not risen in the process, in real terms in the last twenty years, while benefits have been cut.   The fat cats have done very well in these deals; but it has not translated into wide spread benefit for the US economy. 

Though this CEO Blogger is a staunch supporter of Free Market Capitalism, I do not support Crony Capitalism where very large companies with thousands of paid lobbyists collude with Big Government to game the system making it almost impossible for new entrants in an industry to compete because they don't have paid lobbyists and have to play by the rules related to taxes and regulations.   Big companies buy exceptions by supporting corrupt politicians that will do their bidding in Congress.  We then see all sorts of actions that in some cases look and smell like fraud.  While the government goes through the motions to charge big companies fines, no one is ever convicted of a crime.  All of this ultimately erodes support for Free Market Capitalism, which we clearly see coming from the left in the United States and other countries and that is not good. 

While many of these huge companies are very diversified into lots of different industries, their market position in a particular industry may still be the largest in that industry because they continue to acquire smaller competitors to get even bigger.  This results in a lack of competition, which is not good for the American consumer because it always leads to higher prices and poorer service.   Just as in the early 1900's government had to deal with monopolies, it may be time again for government to scrutinize more closely many of these mergers and acquisitions to determine the longer term impact of these consolidations.   While generally this CEO Blogger supports a Free Market Economy,  there is a role for government to play when and if we what we end up with is less competition. 

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