20 years ago there were approximately
seven or eight thousand corporations, public companies, in the United States.
Today there’s half that number. Why? Because they have concentrated. Many have
become fewer. The typical corporation is therefore much larger. The Board of
Directors hasn’t changed, that’s still 15 to 20 people, and the major shareholders
haven’t changed much in number either. What has changed is the size of the
employees; more and more of them relative to the Board of Directors that runs the
business. Let me drive home what this means in economic language. Companies
merge. Many become fewer. Bigger companies buy smaller ones. They get together. They
do that in two ways. Sometimes a company buys other companies like itself, so many
cigarette companies become three or four, many car companies become three or four.
That’s called “horizontal integration.” The same company doing the same kind of
thing, instead of competing with one another they become parts of one another.
The other kind of concentration is called
“vertical integration.” That’s when a company doesn’t buy another one like
itself, instead it buys either a company from whom it used to buy inputs. For
example, a car company buys a steel company. That’s a company buying
something that is different from itself, something that provides an input to
itself. Sometimes companies buy the thing they sell to.
For example, car companies selling to an independent dealer can decide
instead to buy that dealer. Then they own both the producer of the car and the
seller of the car. We’ve had both horizontal and vertical integration. Let
me give you an idea of what that has meant in terms of size. Back in 1975
the 109 biggest corporations
out of the seven, eight thousand there were got half of the profits.
109 out of thousands accounted for half the profits. In 2016 this had been
reduced to the following stunning number: the 30 largest corporations together
in this country out of 3.5 thousand have half the profits.
That’s called a highly concentrated system. Very few corporations have
enormous wealth and enormous power that derives from that wealth at their
disposal. And we all know how they use it, which makes sense once you understand
this structure. If you’re super concentrated and super rich there’s
always a danger that the mass of your employees and even the mass of other
smaller companies will resent your power and your wealth, will feel abused by it,
we’ll know that in any dealings with you you have the upper hand because you’ve
got the enormous wealth. And so there is danger that your situation will be
attacked. One of the things these big corporations can do and do do is try to
control all that. They set up associations with other companies so
that they have an ongoing relationship and can stave off criticism and attack.
They spend a lot of money on public relations so if I gave you the names of
these companies you’re already familiar with them. You know those names because
you’ve dealt with them in your life and there’s a lot of advertising out there
to make sure you never forget them. And they also buy the politicians. They
provided experts that give the politicians their information. They buy
the lobbyists who spend time taking the politicians out to fancy dinners and to
explain what is wanted of them. They give the big bucks donations to the political
campaigns to keep those politicians in office. And they have all the wealth and
all the connections needed to do that. They will pay for publicity
makes the politician look good or, if the politician doesn’t cooperate, they’ll pay
for the publicity that makes him or her look bad. You get the picture. The power
of these corporations cannot be exaggerated. When I looked into my own
understanding of the world to give you a metaphor, a parallel, the largest
corporations in America (the top two three hundred is really all we need to
talk about) are like the kings of old and the court: a handful of people, very small,
gather around the big one at the top, together make all the decisions formally
and informally (on the golf course, at the restaurant, at the resort or in the
boardroom, it doesn’t really matter). They run the economic system because
they have the dominant wealth and power to do so.