We live in a time of big companies. Ever since the privilege of forming a company was first granted, there have been private organizations with the power and backing of nations and they have wielded that power across the globe. Now it seems as if an ever-dwindling roster of companies ‒ in Big Food, Big Tech, Big Pharma ‒ have a say in how our economy works and for whom, and the shadow of that influence reaches deep into our personal lives and stretches out before us into the unfolding path of our shared future.
In 2004, when Google went public on the stock market, it was valued at what seemed at the time to be an impossible $23 billion. Ten years later it was worth $390 billion. In 2018 it was worth $766 billion. Amazon is now worth over $1 trillion. There is no need to assume sinister intentions on the part of company founders, executives, investors, lenders, or any of those that stand to benefit financially from the dazzling ascent of our biggest companies, before questioning whether it is right that such capital, power and influence should be concentrated in the hands of so few individuals. Facebook, for example, is technically a publicly owned company, but it is effectively controlled by one human being – Mark Zuckerberg – who has the deciding vote on all decisions made by one of the biggest and most powerful companies in the world.
Free markets are, in theory, constrained by democratic process. But where is the economic democracy capable of holding the unfathomable power of today’s industry titans to account? The answer is: There is very little that big companies are not able to do, and we have relinquished the tools that were once designed to enclose them.
It turns out that we have been systematically ignoring the power that readily accumulates in so-called ‘free markets’, and this simple oversight is responsible for untold economic grief. We have ended up with rising levels of power held by a few companies in key industries, moulding entire markets in their image. Until we change how these corporations operate, and for whom, our smartphone manufacturers will continue to clear pristine forests in the hunt for precious metals to line consumer gadgets destined for the rubbish heap, and workers will continue to be exploited in the ironically named ‘fulfilment centres’ of online shopping giants. We do alarmingly little to challenge corporate abuse, deterred by entrenched commercial and intellectual forces that continue to advocate regulatory inertia. The ideas, and the power, calcify, creating a cage from which we have failed to break free, because we are unable even to see that it is there.
Competition is the rivalry between suppliers in the market as they strive to get consumers to buy from them.fn1 Competitive markets are exalted for bringing consumers cheap products, and plenty of them. It seems a small leap to assume that a ‘competitive’ market is one with lots of suppliers competing – that must be what politicians mean when they say we should have a competitive economy ‒ right? Possibly. As this book will show, ‘competition’ is often in the eye of the beholder: it can mean many small rivals competing, or it can mean a few companies in fierce contest; it can mean a market with lots of choices, or it can mean one company heralded as the most ‘competitive’ of all (generally this is the competitiveness politicians have in mind). We can all agree that competition is good precisely because we all mean different things by it.
What is vitally important, but often overlooked when we glorify competition, is that it matters what exactly companies are competing for. In a free market, companies are free to pursue power and profits in ways that harm society and the planet. Uber is able to under-provide worker protections for drivers and grow exponentially by trampling over local regulations; meanwhile society pays for the social safety net that Uber does not itself supply. Social media companies build a business model of ‘free’ products commercialized through surveillance and data extraction, but when a democratic election is subverted it affects even those who do not use the platforms – the effects spill out into the wider world. Global banks are able to take risks for which we all must pay the price when the entire financial system is brought to the brink of collapse. Energy companies can conceal the true cost of burning fossil fuels until the problem is so widespread and their activities are so systemically important that we are paralysed into inaction ‒ even when faced with the extinction of our own species. And clothing retailers are allowed to turn a blind eye to the conditions in their supply chains, enabling them to keep costs down with this delinquency.
These social and environmental costs that are not accounted for in the market transactions that generate them are what economists call ‘externalities’, and it is easy to see that a free market will produce many such costs – too many – as, by definition, no one in particular is held accountable for them.
But externalities are not accidents. Creating negative spillovers is what many companies, programmed to maximize returns for shareholders, are implicitly designed to do. The parallel tyranny of consumers and shareholders gives rise to repellent breaches of sound economic or ecosystem organization in favour of corporate interests and the accumulation of corporate power, all in the name of competition.
Competition, and the faith we place in competition to benefit us all and to disperse power throughout the economy, is the critical blind spot that lies unexamined within capitalist doctrine, and it looms large in our economic policy, an elephant that completely crowds out everything else in the room. It is the plot twist in our free market story, laid bare by Rana Plaza ‒ the collapsed building and the pile of bodies. It is a truth sitting buried underneath the neoliberal monolith that has come to circumscribe all that is relevant to public policy.
We have steadfastly ignored the reality of corporate power, especially when it comes to regulating big companies. It even feels like a betrayal of free market ideology to single out big corporations – there is something unsophisticated about failing to appreciate the benefits of bigness when everyone knows that globe-spanning multinationals are more efficient than local businesses, don’t they? But this terra incognita is exactly where we must step if we are to gain purchase on the crises that threaten our society and planet. Nothing should be taken for granted ‒ even, or especially, the role of the most significant and substantial actors in the industries over which they claim their dominion.
One blind spot – so how hard can it be to see clearly past it? Extremely hard.
As I found out when I opened Pandora’s box, behind that one blind spot sit six free market myths that urge us to reconsider any attempt to recalibrate free market competition. One or more of these myths is at play whenever free market logic is called into question, and the myth usually wins.
So here they are, six commonly accepted myths which, as we shall see, have roots in eighteenth-century economic thinking, laid out and ready for a fresh evaluation in the cold, hard light of the twenty-first century.
Remarkably, these myths ‒ mere stories about how the economy might theoretically work ‒ have been enshrined in the law and in business practice. And the flipside of these arguments – that government and society are inefficient, wasteful, bureaucratic and not innovative – becomes the justification for non-intervention in the market.
In this book we will take each of these myths in turn to reveal the reality that is currently being obscured. Free market competition does not disperse power, it creates power. In fact ‘competition’ has come to be synonymous with market domination. Companies compete for power, for the benefit of their shareholders, in ways that harm society. There are many types of corporate power that allow the powerful to choose how to shape the economy and society in their interests. Modern antitrust does little to constrain corporate power and, instead, condones it. Corporate directors need not maximize shareholder returns ‒ the law is being wilfully misinterpreted to our collective detriment. This is doubly damaging because most shareholders are already wealthy.
There have been many attempts to debunk the principles of ‘neoliberalism’ – the overarching ideology that these myths serve to reinforce. The challenge is to do something with the insight that things do not need to be ‒ and should not be ‒ this way. We need to act on the knowledge that we are being governed by a defunct system of beliefs that is driving us off a cliff. In this book I will engage with ideas about how to change the regulation of corporate power – how to acknowledge power in all its guises, to restrain excessive corporate power and to redistribute the remaining power more equally across society.
What has become clear is that the unwavering focus on shareholder returns and profit is endangering lives, threatening society and compromising the habitability of our planet. Governments struggle to keep up with an economic system designed to devour the world and every resource within it, and it has taken us longer than it should have to face up to the fact that we are living precariously on a finite, crowded and divided planet that is steadily getting warmer.
The costs of free markets and the true power of companies have been completely removed from our analysis exactly where this would be most relevant – in the discipline of antitrust, which is meant to deliver the vaunted benefits of competition to the masses. Antitrust law is supposed to protect competition, promote market fairness and prevent power from accumulating. But power and externalities have been slowly displaced in antitrust thinking, replaced instead by a single-minded focus on low prices for consumers. Economic democracy is equated with the opportunity to spend, and to buy more and more, even whilst the tragic collapse of our ecosystem is unfolding.
Once we are released from the hypnotic hold of these free market myths, we will be free to reconfigure capitalism in fundamental ways, safe in the knowledge that the alarmist warnings of doom that greet anyone attempting to step beyond neoliberalism are there to serve the interests of the few, not the many.
These free market myths were inserted into antitrust thinking as the discipline came to be dominated by economics. The result is that competition law, like many other areas of law, has become an increasingly technocratic field. It is now a niche discipline that most people find impenetrable if they have not dedicated their lives to it. And it turns out that this veil of ignorance, which the antitrust community tends to reinforce rather than remove, has done us a collective disservice. Without full public understanding and oversight, antitrust has supervised the grand reshaping of our economic world into what it is today.
Within antitrust, there has been a wholesale shift over the last century from a discussion of power, democracy and the best way to organize a just society, towards a narrow assessment of the economic welfare of prototypical consumers. There is so much that this version of economics leaves out, assumes away, ignores or minimizes, and many of our fears, concerns and vulnerabilities fall between those cracks. We no longer challenge corporate power at its heart by dissolving companies whose corporate abuses subvert the public interest. We have moved from the language of politics and social justice, comprehensible to the lay person, to the vocabulary and formulae of economics, unintelligible even to many of the officials responsible for administering the competition regime.
In the meantime, antitrust practitioners have managed to diligently develop a complicated regulatory framework for market power that somehow allows markets to consolidate anyway. Even more egregiously, we – as a society ‒ have misconstrued the true nature of corporate power itself. We cannot see what is right in front of us. Antitrust’s fixation with price, although amenable to economic quantification, will not help us contain power beyond the economist’s narrowly construed definition of market power. If we only look at whether prices will go up or down, we cannot capture the many broader, more subtle, surreptitious and insidious ways in which companies can bend the economy and society to their will.
Regulators – antitrust authorities included – have their work cut out for them as the impacts of corporate conduct refuse to limit themselves to national jurisdictional boundaries. With the majority of the world’s biggest companies headquartered in America, and with the American regulatory approach historically influential across the world, we must all look to the United States to understand how we arrived at our world of big, unaccountable companies and how we might move forward.
The global community of antitrust lawyers, economists, officials, scholars and practitioners must face up to what has been a profound dereliction of duty. Charged with safeguarding the progress of industrial development, we adopted such a narrow interpretation of our task that we managed to supervise the mass consolidation of industry on the blanket, untested and rather naive assumption that, with the potential for low prices always dangled before our eyes, no harm could come from the rise of colossal companies. It happened on our watch.
Thankfully, times are changing. In 2019, the influential Business Roundtable group of 180 CEOs of America’s most powerful companies declared that shareholder value would no longer rule supreme in the boardrooms of their companies – although it remains to be seen whether they really mean it. The Scottish Government, the Welsh Assembly and the UK Parliament each declared a climate emergency. In the US, antitrust authorities have opened investigations into the power of the tech titans, dozens of attorneys general across the United States are bringing cases against Facebook and Google, and presidential candidates Elizabeth Warren and Bernie Sanders have placed antitrust at the top of the agenda, alongside an attempt to create real corporate responsibility for the biggest companies.
But there are two separate conversations happening: about corporate power and monopoly on the one hand, and shareholder value and corporate responsibility on the other. Until we realize that these are actually the same conversation – that corporate power can undermine corporate responsibility and that corporate responsibility is meaningless if companies are slavishly pursuing power – then we will not be able to start the hard work of re-engineering global capitalism for a sustainable, or even survivable, future.
How should we react when Amazon makes a move to become the sole platform through which the US government conducts all its tenders for anything from paperclips to power plants? What are the implications when Facebook announces it is creating its own currency? What does it mean when the UK government seeks to introduce more competition into healthcare? Will oil companies be the ones to save us from climate change?
To answer these questions, we must leave eighteenth-, nineteenth- and twentieth-century thinking behind and step bravely and purposefully into the next decades, recalibrating our models for the twenty-first century. After dismantling the six free market myths that perpetuate the major blind spot in our models of free market competition – the failure to perceive the power of corporations and how they can use that power to foist harm on to an unsuspecting and subservient society – we can make space for a new economic logic, enabling us to reclaim corporate power and reinstate public service for big and powerful companies.
This book offers a new vision for corporate power in the economy – directed not by lax antitrust regulation of shareholder value companies but by ‘stakeholder antitrust’. At the heart of this vision is a rejection of the idea that free markets naturally respond to the interests of the public. Stakeholders – not just shareholders but workers, communities, governments and the environment – should instead be given an active role in shaping their economic reality.
Stakeholder antitrust consists of two elements.
Together, these two elements will help to ensure that economic democracy can prevail within market capitalism.
As the devastating risk of climate and societal breakdown looms on the near horizon, the urgency of establishing stakeholder influence over the corporate activities of the largest and most influential companies grows ever stronger. This can be achieved by truly democratizing companies, sharing power within the corporate hierarchy with stakeholders, and creating a platform for stakeholders, not just shareholders, to guide companies in line with the public interest. The tendency of corporate power to accumulate can be challenged through antitrust regulation, but companies should also be forced to use their power in ways that genuinely support the public interest, and there should be ultimate limits placed on the power of companies. At the same time, stakeholders should be given more power to direct corporate activities.
With stakeholder antitrust, we would start this overhaul of the corporate sector in areas where the power is most concentrated and the costs most prolific. Antitrust is therefore key to both identifying power and limiting the possibility that any other regulatory interventions will be undermined. Antitrust should not just be the sleepwalking referee for free market competition, it should be our relentless guard against unwarranted and unchecked corporate power, and we need that now more than ever.
Happily, we have at our disposal a powerful, mobile and flexible tool with which to plug the gaps, a robust social, legal and institutional structure that can corral people and vast resources and direct them towards any chosen end: the corporation. We can regulate the company as a channel through which governments and communities, not just unforgiving global capital, can act for the public good, and we can activate this redesign in the biggest and most powerful companies through antitrust – never once forgetting that the corporation is capable also of devastation and destruction. We are the ones with the responsibility to maintain a firm grip and a wary eye.
Antitrust and corporate law ‒ two arcane spheres of regulation ‒ have failed to contain corporate power over the last century, hamstrung by economic theories that enfeebled them from the inside out. And yet, lying dormant within them, they may uniquely contain the tools for our potential salvation. Antitrust and corporate law can allow us to curb corporate abuse right at the source – within the corporation itself.
We are recognizing the failures of corporate capitalism not a moment too soon, and hopefully not too late. We need big companies to share their power and we, the people of the world, need to reclaim it. And we need to start now.