The post recession world has, understandably, been a deeply cynical place, and a major indicator of this is the historically high level of distrust of corporations, if not the U.S. economy in general. As The Economist reported:
The share of Americans who hold “very” or “mostly” favourable opinions of corporations has fallen from 73% in 1999 to 40% today, according to the Pew Research Centre. Surveys by Gallup of views on big business show less extreme swings, but point in the same direction (see chart). Over 70% of America’s population believes that the economy is rigged in favour of vested interests.
Such growing hostility to business is in evidence across the rich world. Britain’s decision in June to leave the European Union was driven in part by popular discontent with big business, which had lobbied heavily to remain. Many continental Europeans are becoming ever more vocal in expressing their long-standing doubts about “Anglo-Saxon capitalism”.
This backlash against big business is already having an impact on policymakers. The antitrust division of America’s Department of Justice says that under President Obama it has won 39 victories in merger cases—deals blocked by courts or abandoned in the face of government opposition—compared with 16 under George W. Bush. Those victories included a string of blockbuster deals such as Comcast’s proposed bid for Time Warner Cable and Halliburton’s planned takeover of Baker Hughes. The European Union has launched a succession of tough measures against Silicon Valley’s tech giants, such as asking Apple to stump up billions of euros in allegedly underpaid taxes in Europe, and allowing European news publishers to charge international platforms such as Google that show snippets of their stories. Britain’s new prime minister, Theresa May, has said that she may cap CEO pay and put workers on boards. Governments worldwide have started co-operating to curb the use of tax havens.
Even the otherwise pro-business Economist finds good reason for this widespread skepticism: economies across the developed world, but especially in the U.S., are trending towards corporatism, with big companies growing into giants via mergers and buyouts, and doing everything possible to remain dominant, whether it is lobbying for friendly legislation, buying up patents, and luring away skilled talent from competing companies or the public sector.
These practices are also crowding out small businesses, which have seen their rate of creation plummet to the lowest level in four decades, as well as allocating corporate resources from R&D and employee payroll towards executives and shareholders.
Over-mighty companies exacerbate inequality because they reap abnormally high profits and allow senior managers to pocket an unseemly share of them. The proportion of corporate income going on the pay of the top five executives of large American public companies increased from an average of 5% in 1993 to more than 15% in 2013, even though research has shown that there is a negative relationship between CEO pay and performance.Such companies also create political problems by concentrating power in the hands of fewer people. The more entrenched companies get, the more unhealthy their relations with government are likely to become as they employ large numbers of lobbyists and put former politicians on their boards. The tech companies have added a new concern by amassing unprecedented volumes of information on ordinary people.
In short, an economy — and by extension, political system — that is dominated by a handful of big companies and investors will lock out most people from opportunities to advance upward. The main way to succeed is to fight your way up to the limited number of middle and upper management positions within a company (due to the prevailing pyramidal structure of most corporations), or to have the ample knowledge, resources, and connections necessary to succeed in finance, investment, or real estate, which are often risky endeavors heavily determined by luck — hence why only the wealthiest typically get involved.
The Economist also points out the increasingly xenophobic and nationalistic character of anti-business sentiment, which reflects an interrelated trend of people, often the poorest and most financially insecure, feeling as cheated by foreign workers and immigrants as they do by big companies. Obviously, this is an unfortunate, not to mention misdirected, source of otherwise understandable rage and frustration. It is not the fault of equally vested and exploited workers of another national or country that the economic powers that be have chosen to hoard more of their wealth, or to create and perpetuate a business culture that prioritizes shareholders value and executive bonuses over decent pay and benefits. There is plenty of capital and resources to go around, and no good reason why most big companies cannot have it both ways: pay workers well (be they domestic or foreign) and still give a decent return on investment to shareholders. The problem is when the demands for ever-bigger and more immediate payouts starts to exceed a reasonable point, forcing companies to draw their resources away from their average employees.
In any case, with practices like these becoming mainstream, it is no wonder so many people are losing faith in big business. Everything is short-term and cutthroat, and it feels like the only way not to get screwed is to sell your soul — or lose it — while trying to play the same nasty game.
In any case, given its aforementioned pro-business bend, The Economist article takes a relatively more optimistic tone regarding this issue. Among the silverlinings it highlights, which I have truncated:
First, the superstar companies at the heart of the current consolidation of capitalism are for the most part forces for progress. Apple’s iPhones and iPads have become people’s constant companions because they are portable miracles. In disrupting many industries, tech giants are changing them for the better. Uber provides a service superior to that of established taxi companies, and is forcing them to improve. Airbnb offers a cheap and convenient alternative to hotels. Some high-tech companies, such as Amazon and Uber, exert downward pressure on prices. Others, such as Google and Twitter, provide services without charge. McKinsey calculates that consumers in America and Europe alone get about $280 billion-worth of “free” services—such as search or directions—from the web that would once have cost their users a significant amount of money or time.
The second point is that government intervention can easily backfire. The European Union’s hard line on American tech companies such as Apple or Google threatens to provoke a trade war between the world’s two biggest trading blocks, partly because the EU’s rhetoric is so fierce and partly because its methods, such as trying to force Apple to pay taxes retrospectively, are so questionable. Regulation that is supposed to promote competition can often have the opposite effect, killing off small companies and protecting big ones by raising barriers to entry. Regulation meant to prevent companies from getting too rich can sometimes discourage them from making long-term investments in research. Policymakers need to balance consumers’ preference for lots of competition against businesses’ legitimate desire to reap appropriate rewards from their investments.
The third point is that the decline in entrepreneurialism is more often the fault of bad government than of big business. In the European Union the proposed single market in services is being strangled by national regulation. Even in supposedly freewheeling America, regulation has quietly become more obtrusive. The share of jobs that require licences has increased from 5% of the total in the 1950s to more than 25% today, including occupations such as hair-braiding and interior design. Doctors who want to be reimbursed by medical insurers have to fill in a form with 140,000 coding categories, including 23 different codes for spacecraft-related injuries. Firing a worker who is not pulling his weight is an invitation to file a lawsuit.
It is true that big companies can still create value; no one is denying that some, if not most, large corporations provide widely utilized goods and services, often cheaper or even free when they otherwise would not be. But do these achievements require beggaring workers at home and abroad? Is it necessary for virtual slave labor or environmental degradation to be underpinning so many of our consumer products, from clothes to gadgets? And could these valuable commodities and services just as well be accomplished with smaller, more nimble institutions, or with companies organized in a more democratic and horizontal fashion, with more worker input? These are the sorts of alternatives and cost benefit analyses that should be considered and discussed.
Perhaps government, which indeed more often than not colludes with big business, would be unnecessary to address the problem: why turn to the state if companies are already structured and run in a democratic and socially responsible fashion? Opponents of state intervention seem to forget that such calls for government action do not come from nowhere, but reflect a frustration with the unresponsiveness and exploitation of big companies. People would not turn to violence of the state if they felt there was no other recourse. If companies were run ethically and more fairly, without all these cutthroat and often immoral actions, any such coercion would be redundant, if not counterproductive.
It is also important to keep in mind that, aside from business, distrust of nearly all big institutions — organized religion, government, banks, large media companies — is at an all-time high. But it is not as if these were ever once trustworthy: corruption, inefficiency, and exploitation runs deep through almost every institution across human history. Rather, it is that people are more informed and aware enough of the goings on in these places to actually notice their issues and improprieties (and in the case of government and religion, have greater freedom to express their discontent). In a way, this growing discontent is a positive sign of the free and more informed world we live in. But whether this knowledge leads to any meaningful change of the status quo is a different story.
What are your thoughts?