
The rise of the corporate colossus is a giant problem - mudil
http://www.economist.com/news/leaders/21707210-rise-corporate-colossus-threatens-both-competition-and-legitimacy-business
======
pipio21
Blame "too big to fail" and negative interest rates.

When big banks had problems, the solution was to make even bigger banks and
giving them free money in order to look good.

They take savers money with negative interest rates and give it free to big
banks and companies like Google, Microsoft or Deutsche Bank.

Given that if you(as a person or small company) ask a bank for money you will
have to pay 20% interest rates or so, this is a tremendous advantage for them.

Big companies have free money because they can ask for a loan and give back
later less that what they took after inflation!!!

This means big companies could buy the competition instead of competing with
them , like facebook with wassapp, with stock, being cheaper than having their
overvalued stock go down with competition.

It also means big companies could buy their own stock in the market and pump
up their value, making the stock acquisition cheaper and increasing board
bonus(from stock owners) look reasonable.

Central banks and politicians are obliterating middle class and business
owners. This is a terrible thing because History teach us this always happens
before a (violent)revolution.

~~~
guelo
This argument doesn't make any sense to me. Neither Google or Facebook or
Apple have been using cheap loans to fuel growth. They have more cash flow
from operations than they know what to do with, they don't need loans.

~~~
greeneggs
They also can't borrow at negative real interest rates. Only some governments
can. And you can't blame the governments for low interest rates. At least in
the medium term, interest rates are mostly set by the market, supply and
demand for loans. There's not a lot of demand.

~~~
GenWintergreen
Sure they can. AAPL issued bonds in 2015.

~~~
greeneggs
I didn't say they can't issue bonds. I said they can't borrow at negative
interest rates, or even negative real interest rates.

Here's what they sold in February 2016, for example (annual inflation was
1.0%):

\- $500 million in 1.3% two-year notes issued at a spread of 60 basis points
over similar-maturity Treasuries

\- $500 million in three-year FRNs (floating rate notes) issued at three-month
LIBOR + 82 basis points

\- $1.0 billion in 1.3% three-year notes issued at a spread of 60 basis points
over similar-maturity Treasuries

\- $500 million in five-year FRNs issued at three-month LIBOR + 113 basis
points

\- $2.25 billion in 1.7% five-year notes issued at a spread of 80 basis points
over similar-maturity Treasuries

\- $1.5 billion in 2.25% seven-year green notes issued at a spread of 105
basis points over similar-maturity Treasuries

\- $2.0 billion in 2.85% ten-year notes issued at a spread of 135 basis points
over similar-maturity Treasuries

\- $1.25 billion in 3.25% 20-year bonds issued at a spread of 150 basis points
over similar-maturity Treasuries

\- $2.5 billion in 4.5% 30-year bonds issued at a spread of 190 basis points
over similar-maturity Treasuries

[http://marketrealist.com/2016/02/investment-grade-
corporate-...](http://marketrealist.com/2016/02/investment-grade-corporate-
bond-issuance-gained-traction/)

------
sharemywin
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.

~~~
throwaway729
Gvien the forum we're on, it's worth pointing out that today's white collar
laborers are capturing one or two orders of magnitude less of the value
they're creating than the blue collar workers of 1990's detroit.

360 billion* divided by 1.2 million = 300000 "per employee". Typical salary to
40,000ish-100,00ish range for laborers/engineers. The disparity in those
numbers isn't so bad at all.

Conversely, 1 trillion divided by 137000 = 7,299,270 "per employee". Typical
salary of engineers in those firms is closer to 100,000 to 200,000, and that's
just for the golden child software engineers. And without accounting for
massive cost of living differences between 1990 Detroit and modern day SV.

Which wouldn't be so bad if there were some engineers earning close to or more
than the "per employee" numbers, but I've never heard of anyone making even
close to 7 figures as an engineer at a big firm...

* I think you meant 360 bn, not 36 bn, right?

~~~
jackcosgrove
Not only that, but in US salaried status is routinely used to avoid paying
overtime, when overtime is a tacit requirement of many jobs.

~~~
soulnothing
Even as a contractor with an hourly rate. The assumption is the rate given is
for 40 hours a week. I've had a number of hourly contracts where I was told
either work the over time or find a new contract. The lack of care to
employees is appalling at times.

~~~
devonkim
I've been on contracts that are flat billed based upon 40 hours / week but no
overtime is chargeable. The problems start when more than 40 hours / week is
regularly expected to perform assigned tasks to standards of the contract and
there's little control you have over the client putting barriers in place that
make you less productive making the true hourly rate at least 25% lower.

~~~
soulnothing
I've only had two types of contracts. One is absolutely nothing to do, what
I'm hired to do is not feasible and shelved. The second is so busy, so much
overtime you can't breathe.

So many jobs now, over work and expect over 40 hours. With no additional
compensation. A majority of my contracts are flat rate. I had one role that
paid half of my rate for over time.

------
Spooky23
IMO, this problem is mostly a factor of the consolidation of finance.

The roll up of banking makes it impossible for smaller enterprises to get
traditional capital. We moved away from the old, boom/bust distributed banking
model towards a weird form of command economy with a cartel of mega-banks,
which are really just proxies for the government.

People blame technology for the post-recession economy, but I think the
billions/trillions of capital the flooded the market never made it into the
economy. No wonder little is happening outside of businesses that work with a
venture model.

~~~
IsaacL
Sarbanes-Oxley probably played a role as well. Successful startups now chase
acquisition over IPO, which leads to the creation of huge empires (Apple,
Google, Amazon, Microsoft) and few medium-sized players.

~~~
Animats
No, that's because the overvalued market caps wouldn't fly in an IPO. If Uber
went public, they'd have to disclose real numbers, which probably indicate
they're unprofitable. They're only worth $68 billion when the market doesn't
have to pay out $68 billion.

It's today's very low interest rates that fuel "private equity", which is
usually debt at some level.

~~~
pmoriarty
How much investment is actually done based on such fundamental analysis?

~~~
Animats
Everything Berkshire Hathaway does.

~~~
friendlygrammar
Berkshire Hathaway is successful because they invest in monopolies/duopolies

------
arcanus
* 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.

* 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.

------
uabstraction
This article did a good job of staying relatively neutral for such a
controversial subject. It seems as though an oligopoly of multinational
conglomerates will be the only choice for essential consumer products in a
short 10/20 years. Without competition from smaller open-minded businesses,
only innovation in rent seeking will take place. The companies that end up in
control of the infrastructure and hardware will end up having more power than
most of the world's governments. The cynic in me feels like we're in for some
turbulent times.

~~~
ersii
It's not so strange that we get fewer "smaller open-minded business(es)"
though, considering the increasing regulatory burden. Of course, they are
maintainable - but they do consume a lot of resources to tick them all off.

Most of the regulations doesn't actually directly cost to comply with, but
you'd need more staff or dedicate more time to things that are not your core
business - that's money out of the pocket.

------
ashark
> But better the grind of multilateral negotiation than moves such as the
> European Commission’s recent attempt to impose retrospective taxes on Apple
> in Ireland.

Uh, isn't that "move" _enforcement_ of the results of multilateral negotiation
(the EU and its rules)? What exactly will or should happen when parties of
these multilateral negotiations and agreements the column champions violate
the rules? I'm guessing it'll resemble a "retrospective tax" so closely that
it'd be hard to tell the two apart.

~~~
hencq
> Uh, isn't that "move" enforcement of the results of multilateral negotiation
> (the EU and its rules)?

Well in that case, shouldn't it actually be Ireland that got fined instead of
retroactively taxing Apple?

~~~
jessaustin
Because Apple didn't pay the tax it owed to Ireland, Ireland should pay
something? To whom, Apple? What could justify that?

~~~
DanBC
Ireland set the tax rate that Apple complied with. Ireland is accused of
providing a state funding to Apple by setting that low rate.

(I didn't downvote you).

~~~
_delirium
This isn't specific to Apple or Ireland (or even taxes) fwiw. Ordering the
company to pay back the subsidy is a normal part of the remedy for subsidies
found to violate EU anti-subsidy regulations. The intent is to make it
ineffective for a country to pay out subsidies, because they will in the end
not have the intended effect, as the company won't get to keep the money. If
the remedy were a fine levied on the subsidizing state, but without required
repayment, illegal subsidies would have their intended effect of actually
subsidizing the target firm (they'd just become more expensive, because the
fine would become part of the cost of the subsidy).

For example, when Real Madrid was found to have been unlawfully subsidized by
a local Spanish government earlier this year (they were given €18.4m as
compensation for a land transfer that fell through), they were ordered to
repay the €18.4m [1].

[1] [http://www.bbc.co.uk/news/world-
europe-36706262](http://www.bbc.co.uk/news/world-europe-36706262)

------
BurningFrog
A libertarian explanation is that in the age of the Regulatory State, it's
often more important to be the biggest lobbyist than to make the best product.

"In the Game of Crony Capitalism, you lobby or you die."

~~~
rayiner
The problem with the libertarian explanation is that it contradicts the actual
facts. The "age of the Regulatory" state started in the 1930's. It has been in
decline for decades--with major sectors of the economy being deregulated in
the 1980's and 1990's. In the 1950's and 1960's, regulatory agencies often had
the power to directly exclude potential competition and set prices for goods.
They have a fraction of those power today. Surely, that decrease in regulatory
authority would be linked to a decrease in consolidation. But consolidation
has _increased_ during that time.

Moreover, there is a difference between a plausible theory and showing actual
causation. How is lobbying helping Amazon and Wal-Mart to replace smaller
retailers? Point to something concrete. Because it looks like the real
explanation is the massive efficiency advantages those big firms possess.

Looking at other sectors of the economy: why are Apple and Samsung taking
almost all of the profits in the smartphone industry? Are they better at
lobbying the "Regulatory State" than HTC or Nokia?

~~~
BurningFrog
> _It has been in decline for decades_

I don't have time to put together a great convincing case, so I'll just say
that this is _very_ different from my view. Some high level regulations have
been removed, sure, but meanwhile almost every corner of life now has
regulations and regulators that have to be obeyed and asked for permission.

It would be nice to have some kind of objective measure(s) of the overall
level of state regulation, rather than trade anecdotes/gut feels. Some
economist has probably done that already.

~~~
rayiner
I would guess your view derives from the fact that the parts of the regulatory
state that have grown since the 1970's have more direct effects on individuals
and small businesses: environmental, workplace safety, anti-discrimination,
anti-money laundering. But there isn't much money in gaming those. The big-
money sectors of the economy: telecommunications, transportation,
manufacturing, and finance have been deregulated. And software has become a
big-money sector of the economy and has remained almost completely
unregulated.

I handle appeals in regulatory cases, so I have occasion to research
historical regulatory treatment of different areas. It's really eye-opening to
go read ICC, FCC, or FERC opinions from the 1940s and 1950s and compare them
to ones from today. Agencies back then had vast powers: they could deny entry
of a competitor into a market if they felt it would harm the revenues of
incumbents. If you were an air carrier, you had to publish your prices, and if
the agency did not like them it could impose prices on you. Those agencies are
a shell of their former selves. Agencies used to have to power to structure
industries top-down as they saw fit. Today, they might have thousands of pages
more regulations covering various minutia, but nobody is going to build a
"corporate colossus" lobbying to influence agency treatment of minutia.

~~~
ahh
I am unclear how that's an argument for thousands of pages of regulations
covering minutia.

------
distances
> It means making it easier for consumers to move their data from one company
> to another

I think this would be absolutely brilliant. The ability to readily move data
from one service provider to another would provide a much-needed boost for
competition in the digital space.

I don't know how common it is, but at least in Finland one can move their
mortgage from one bank to another if they get a better deal elsewhere [1]. Or,
one can move their mobile phone subscription and keep the old number. I find
these kinds of service transfer entitlements essential for efficient
competition.

[1] Or technically: one can always pay their Euribor bound mortgage off
without extra cost, and take a new mortgage from another bank.

~~~
jsprogrammer
What type of data are you wanting to move? Would you just want a huge movable
block of space that you could mount somewhere?

~~~
distances
All data associated with my user account, perhaps with some kind of a schema
if applicable. Other services could then implement data import features for
this, or for just the part of the data that concerns the service they are
providing.

Basically, it should be clear that all data connected to a person is
irrevocably theirs. Any provider can build services for taking advantage of
the data -- but it'd be the user's right to migrate it at their pleasure.

~~~
sqeaky
Standards happen so slowly. By the time people agreed on what should be in
this, that agreement would be antiquated.

We need something like what happened with OpenID and Oauth. OpenID may be
gone, but one company made a few bucks on it and OAuth is largely inspired by
it. Someone needs to find a way to make a buck moving profile data around in a
meaningful way then that becomes a de-facto standard that gets copied and used
all over.

Then the government can regulate something that already exists rather than
regulate something shitty into existence.

~~~
distances
What standards? For sure there can't be any standard that would lend itself to
all of the various ways your data is used and stored.

------
rayiner
> None of this helps the image of big business. Paying tax seems to be
> unavoidable for individuals but optional for firms

This kind of grinds me. There are tons of tax breaks for individuals: mortgage
interest deduction, tax-free health care, etc. In fact, the exclusion of
health care benefits from taxation costs the government _more_ than all
corporate tax avoidance schemes put together.

~~~
nvarsj
There are a few tax breaks for individuals, but many more for companies.
They're called "business expenses" :). I wish I could deduct everything I
required as an individual (notably, there is no rent deduction for
individuals).

~~~
tptacek
There are enormous tax breaks for individuals. The mortgage interest deduction
(which is an abomination), for instance, costs $70bn.

~~~
ersii
I'd flip that around and say that's $70bn saved for people. It's not called a
tax break for nothing.

Why do you consider the mortgage interest deduction an abomination?

~~~
tptacek
Because it's hugely regressive.

~~~
tormeh
Also, high home ownership causes NIMBYism and high leverage causes bubbles.
It's hard to come up with a worse idea than mortgage interest deduction.

------
JadeNB
Maybe it doesn't confuse others, but the removal of the word 'the' before
"corporate colossus" (as it appears in the subtitle of the linked article)
makes this title hard for me to parse.

EDIT: It's since been restored; thanks!

------
ilaksh
See urban dictionary entry for technopoly.

Centralization is a big problem whether you have a mainly cooperative system
like communism or a competitive one as in capitalism.

Decentralizing technologies can help us get systems that are distributed,
diverse, and free to evolve but also capable of holistic measurement and
operation.

Such as bitcoin, ethereum, NDN, swarm, Namecoin, 3d printing, etc.

------
forrestthewoods
Growth is globalized. Global companies get a disproportionate share of growth.
Therefore giants will become increasingly large relative to non-global
entities.

I'm not sure what the specific problems are. Which makes prescribing a fix
impossible.

~~~
sseagull
In my (uneducated) opinion, the specific problem is that the people, through
their governments, lose control over these large, global entities that affect
their daily lives. When they get this big, there's no way to tax them and no
way to punish them for wrongdoing - they could just move to a friendlier
country, use loopholes, etc. Of course, thanks to various trade agreements,
they will still have access to our markets...

And the consumer can't always go elsewhere - there may be no viable
competition, or that competition gets bought by the larger company for what is
essentially pocket change.

Too big to fail = too big to control

~~~
ersii
I know it's not an too popular opinion here on HackerNews and I'd say you're
sort of right, but you got it in reverse. The problem is not that it's hard to
control or tax companies, the problem is that it's not as easy for you or me
to do the same.

You have to have significant resources to break free from local restraints,
which is really unfortunate. It's also a lot of resources that gets spent,
just so people or companies can do whatever they want with their own
resources. In other words, it's possibly a loss of production - those
resources could have gone elsewhere.

Please be gentle, I'm open for discussing these things.

~~~
radicsge
It's not that you cant get there,

but indeed that they are out of control: they can remove money from an
arbitrary economy and not necessarily put it back (see apple that sitting in
an incredible amount of cache) => (they dont need to hire people locally.. at
least not as much) => they -at the moment are- making poor countries/people
even poorer, rich ones even richer => they have more and more power in less
and less hands

