The fact that the devil commonly shits on the biggest pile is just as much an old adage as it is true: This year, US Forbes magazine counted more than 2,000 billionaires worldwide for the first time. Her fortune grew 18 percent last year to $ 7.67 trillion, a record. Particularly generous Microsoft founder Bill Gates was considered, his wealth is estimated at 85.3 billion dollars. Second place belongs to Amazon inventor Jeff Bezos with 83.5 billion dollars. He is followed by Spaniard Amancio Ortega, whose textile chain Inditex (including Zara) ran so well that he owns 81.6 billion dollars.
All three owe their immense wealth to the overwhelming success of the companies that built them. Just as Gates used the Microsoft Windows operating system to change the world of computers, Bezos revolutionized shopping. Only his company Amazon became the largest seller of books, now you can find everything on Amazon, even mangoes, pants and coffee machines. Ortega, on the other hand, made a splash with clothes alone.
These big corporations fascinate some of the best economists. For example, several studies have been published in recent months that show that market concentration has increased sharply in all sectors. The power of corporations is growing. The scientists see this as an important cause for the growing inequality in many industrialized countries. Because the super-companies, thanks to excellent products or thanks to their dominant position – or both – high profits and allow their owners unprecedented asset growth.
“We wanted to know why the distribution of economic income has shifted significantly in favor of capital owners like Gates and Bezos and at the expense of workers,” says David Dorn, Professor of International Trade and Labor Markets at the University of Zurich. The fact that the wage share has been declining for a long time in the US, most European countries and even China has surprised economists. So Dorn investigated the phenomenon together with a prominent research team from the USA. For their empirical study (“The Fall of the Labor Share and the Rise of Superstar Firms”), they were able to access a vast body of data from the US Census Bureau, which breaks down the economic development into the branches of the companies.
For example, the researchers discovered that market concentration in all major sectors of the United States has increased significantly. This means that the largest companies in the industry will increase their market share in terms of the industry’s sales. It showed that large companies grow faster. And because large companies usually have small pay ratios, it’s clear that the share of employees in national income declines over the decades, while companies’ share of profits increases. “From the strengthening of the super-companies benefit first and foremost the shareholders and not the employees,” says Dorn.
He is not alone in his assessment. A new consensus is emerging among economists that applies to all industrialized countries: concentration has now progressed so far that it is weakening competition, harming the economy and putting society in serious trouble. When the pressure of competition fades, dominant companies need not be as innovative as they used to be. They can hoard profits instead of reinvesting them right away, and therefore create fewer jobs than they can. “Monopolistic power could become for economists what taxes and unions were in the 1970s – an enemy to fight,” economist and blogger Noah Smith believes.
The phenomenon of super companies extends far beyond the American technology sector. It is found in many sectors of the US industry, retail, wholesale, services and finance, utilities and transport companies. Everywhere today, the four largest companies in a sector have a significantly larger market share than they did 30 years ago. For example, in the US retail sector, the market share of the largest four providers has doubled in the past three decades from 15 to 30 percent, Dorn and colleagues show. In industry, energy, transportation and finance companies, the largest companies are even more involved in market share. A similar development exists in many European countries, including Germany.