Apple’s 21-year journey from near bankruptcy to heights once unimaginable — it is the first US tech company to reach a valuation of $1 trillion — is a success story that would appear to call for an extraordinary celebration of capitalism. Apple and a clutch of other gigantic companies now dominate the US economy. But does such unprecedented consolidation of corporate profits have a flip side? Consider:
Economists have been focusing on the links between the rise of the “superstar firms” and slow wage growth, a thinning middle class, and increasing economic inequality. Some four decades ago, around 100 companies bagged about half the profits of publicly traded companies; today, this share is split among just 30 companies, according to research quoted in The New York Times. Almost 50% of all assets in the US financial system are now controlled by five banks; two decades ago, this was about a fifth. Once shares start to lose sheen — as they inevitably will — other players will struggle to keep the indices flying.
Consolidation has been linked in research to a shrinking share of wealth for workers. Some scholars believe the dominant players can now rake in huge profits without needing to spend on labour; others say fewer companies as a result of consolidation mean less competition for employees and less pressure to raise wages.
Research suggests greater corporate power means weaker antitrust enforcement. Tech companies are in trouble with governments around the world, including in India. European antitrust regulators last month fined Google $5 billion for abusing its dominant market position.