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A giant problem: The superstar company (Bulking up is a global trend…
A giant problem: The superstar company
It is the entrenchment of a group of superstar
companies at the heart of the global economy
Some of these are old firms that have reinvented themselves
Some are emerging-market champions, like Samsung, which have seized the opportunities provided by globalisation
The elite of the elite are high-tech wizards--Google,Apple, Facebook and the rest--that have conjured up corporate empires from bits and bytes.
The superstars are admirable in many ways
They churn out products that improve consumers' lives, from smarter smartphones to sharper televisions
They provide Americans and Europeans with an estimated $280 billion-worth of "free" services--such as search or directions--a year.
They have 2 big faults
They are squashing competition
They are using the darker arts of management to stay ahead
Bulking up is a global trend
The annual number of mergers and acquisitions is more than twice what it was in the 1990s
Concentration is at its most worrying in America
The share of GDP generated by America's 100 biggest companies rose from about 33% in 1994 to 46% in 2013
The five largest banks account for 45% of banking assets, up from 25% in 2000
The number of startups is lower than it has been at any time since the 1970s
More firms are dying than being born
For many laissez-faire types this is only a temporary problem
Modern technology is lowering barriers to entry
Flaccid incumbents will be destroyed by smaller, leaner ones
But the idea that market concentration is self-correcting is more questionable than it once was
Slower growth encourages companies to buy their rivals and squeeze out costs
High-tech companies grow more useful to customers when they attract more users and when they gather ever more data about those users
The heft of the superstars also reflects their excellence at less productive activities.
About 30% of global foreign direct investment (FDI) flows through tax havens
Big companies routinely use "transfer pricing" to pretend that profits generated in one part of the world are in fact made in another
Paying tax seems to be unavoidable for individuals but optional for firms
Rules are unbending for citizens, and up for negotiation when it comes to companies
Nor do profits translate into jobs as once they did
In 1990 the top three carmakers in Detroit had a market capitalisation of $36 billion and 1.2m employees
In 2014 the top three firms in Silicon Valley, with a market capitalisation of over $1 trillion, had only 137,000 employees
A tough-but-considered approach to issues such as tax avoidance
The OECD countries have already made progress in drawing up common rules to prevent companies from parking money in tax havens,
Prudent policymakers must reinvent antitrust for the digital age.
That means being more alert to the long-term consequences of large firms acquiring promising startups
It means making it easier for consumers to move their data from one company to another, and preventing tech firms from unfairly privileging their own services on platforms they control
It means making sure that people have a choice of ways of authenticating their identity online
Policy making is increasingly influenced by lobbyists employed by multinational companies to influence decisions on taxes and on other aspects that may impact on their activities.