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When Monopolies and Capitalism Collide
The pitfalls of the system and the unprecedented opportunity to change it
Three weeks ago, Global Justice Now, a UK-based advocacy group campaigning for economic and social justice, published a slim but informative primer on monopolies and how they are affecting our everyday lives, focusing on three key sectors that we come into contact with constantly - food, pharmaceuticals and technology.
If you’re interested in and care about the state of the world today, reading it will be a pretty good way to spend this long weekend. It does what great campaigning literature is supposed to do - it educates you, infuriates you, and it makes you want to do something about it.
There are some eye-popping figures but it’s a pretty short briefing so I urge you all to read it instead of giving a summary here, beyond the three key points below.
Monopoly capitalism doesn’t just raise prices. It moves wealth from the poor to the rich. It also shifts power, making it harder to push for policies to deal with things like climate change.
“The most obvious impact of monopoly power is economic. Monopolies protect businesses from the pressures to either invest in better products, or lower prices for consumers. Instead they can keep prices high to reward shareholders, which entails a transfer of wealth from ordinary people to elites. This can drive cost of living increases, but there are wider problems too. For instance, without strong unions, the market power of monopolies can allow them to pay their workers less, contributing to wage inequality.”
“In everyday language, we tend to think of competition as rivalry between two or three dominant players who might take dramatic action to thwart each other, but this is almost the reverse of what economists mean. In economics a competitive market is one where no single player has enough influence or control for their action to affect the market for others. Rivalry between a handful of big firms is closer to monopoly than competition.”
You could also read this thread from Niall for more info.
What I will give you is an edited version of a wide-ranging - and at times philosophical - chat I had with Niall Glynn and Nick Dearden, the two authors behind the report.
Q - Why should people care about monopolies in general?
NIALL - Because they affect people. We were seeing prices rising even before the Russia-Ukraine war, but a lot of the increases we've seen since then have been of big multinational corporations squeezing as much profits out of the situation as possible. The price of bread and milk have gone up a ridiculous amount and yet (people) are not getting pay raises.
This is affecting people's everyday lives, not just economically but also politically. For example, Big Tech companies like Facebook, Amazon and Google collect so much data on people's everyday lives which they then use to shape how they're advertising to everyone individually. They have such influence and control of how we move about the world.
Q - Do you think COVID-19, Russia’s invasion of Ukraine, and the resulting price rises have increased people’s understanding of issues around competition and monopoly?
NICK - I've never known a time when, say, corporations in the fossil fuel industry have been more unpopular with the general population. You saw something similar during the COVID pandemic with the pharmaceutical corporations.
I think there is almost an instinctive understanding that when an absolutely enormous corporation is hoarding things you need in order to survive and they are able to set prices, that has a really tangible and direct impact on your life.
To be perfectly honest with you, one of the reasons we wanted to focus on monopolies is it makes sense to people in terms of their own lived experiences in a way that a lot of the abstract economic stuff that we work on cannot. So this is almost a little bit populist in some ways.
But what I think is not so well understood and what we've tried to do with the paper was to make the extension from, “Okay, so that means these corporations can profiteer off crises” to how that fuels radical inequality in society and undermines our democracy in fundamental ways - positing monopoly capitalism not simply as something affecting the cost of living crisis, but also so many aspects of society that we care about and even our ability to change them.
Q - You wrote, “The combined income of just the five biggest corporations in the world was more than the income of the poorest 2 billion people put together – one-quarter of the world’s population.” Can you explain how you derived those figures?
NICK - Sure. So the corporate figures were simply taken from Fortune 500 website. We looked at the revenue that's reported there, worked out what that translated to in terms of global incomes using the World Bank's figures, and looked at how many people are living on $1, $2, $3, $4 a day until we got to the amount of the five corporations.
We accept this is this is very approximate because the World Bank doesn't actually collect income at $1, $2, $3, $4. It collects in different parities and then kind of averages that out, but hopefully it give some idea of the scale of wealth that most people can grasp.
Q - I guess that’s always the challenge because sometimes when the zeros adds up, it sort of loses meaning because people can't compute what this mean.
NICK - I think that's right and if we're honest, we don't collect statistics in a way that makes it easy for us to do that. You can easily compare the wealth to countries’ combined GDP but what does GDP really mean to an ordinary person? You could compare it to the size of the world economy, but again what does that really mean?
Q - People also think the system has always been rigged and there are numerous essays and think pieces blaming this for the rise of Trump, Bolsonaro, their wave of populism and the ensuing hubris. Do you think that’s true?
NICK - I do think that. I take a lot of my thinking from from Karl Polanyi writing about the rise of fascism and saying if you try to create the perfect market, essentially what you will do is turn everything into a commodity, you'll see this enormous inequality and people will reach out for whatever they can to protect them from the ravages of the market. That could be fascism, communism, or whatever. That’s what happened in the 30s and I think there's quite a bit of evidence to suggest he's right.
NIALL - If you look to the 1930s, people flooded to the far right because they were looking for someone that speak to them and on their behalf. Trump was very good at it. Bolsonaro and Orban are as well. I think the rise of monopolies and the centralising of resources is part of it.
For me, the stronger aspect of that is people want to be spoken to and I feel maybe the left is not as good as doing it as the right (who) say, “We'll give you X, Y, and Z and take down the elite”, but where nine times out of 10 the people saying this are the wealthy elite themselves.
Q - Do we have a better message than these demagogues? How do we ensure that these valid concerns and grievances are not hijacked by people who claim climate change or the need to shift our diets is an elitist ploy?
NICK - I think we also have to posit something of an alternative in how we talk about it, right? The right will always blame people who look different, come from elsewhere, migrants and so on. We know that's not the case. But that doesn't mean we can't support local farmers. One of the things I found working on food is people love the idea of small scale farmers. They have absolutely no idea how our food is actually produced but they like the idea that food is produced by a farmer down the road.
I think even people who don't aren't that bothered about climate change like the idea of the local economy, because it's something personal. I'm from a family of farmers who are definitely not left wing in any way at all. But the point where we can kind of agree is when we begin talking about the monopolistic farm system, and how it needs to be different.
NIALL - Honestly, I think we do have a better message. If you think about the far right and Trump, they use this message, “Look at these people coming and taking your stuff. These migrants coming in affecting your life.” Whereas a properly progressive message should be all about a collective, everyone working together. But also part of that is we need to not just speak about what the message is but also who's the messenger.
Q - I’m fascinated by the history of early monopolistic companies. You wrote about the Dutch East India Company. Did you also look into the British East India Company? I ask this because I’m Burmese!
NIALL - Not for this report, but I'm big on economic history, so I know quite a bit about the British East India Company. There are definitely a lot of parallels with the Dutch East India Company and also with large multinational corporations of today. The first one is the connection they have with the state.
These larger organisations don't become the size without the huge backing and interpersonal relations with the state. The British East India Company was very active in lobbying the parliament and the politicians to make the rules of the game in their favour and it ended up with huge swathes of lands and estates that are still passed down generations today.
You see the same thing today with Google, Apple, Uber, Pfizer - the governments around the world do favourable trade deals, tax breaks, lower workers rights, and some climate denialism as well for them. You also see a huge parallel with the exploitative nature of the British and Dutch East India companies and today. They went around the world, extracting spices and stuff they didn’t have, and profiting off people who they saw as lesser than themselves.
Take Amazon for example. During the pandemic, their profits skyrocketed to ridiculous amounts. Jeff Bezos’ net worth went up by 67%. That was not because he was working like 67% harder. It was off the back of low paid, precarious Amazon workers. The exploitative nature of these monopolies is a very fundamental characteristic which you see over history.
Q - Can we learn anything from the rise and fall of Dutch and Brit transatlantic companies and the robber barons to what’s happening today? If so, what?
NIALL - One of the biggest thing is these big multi national corporations aren’t run by the most competent people.
The East India companies were badly run, had financial issues, and the parliament had to step in and put new laws. It's very similar to today as well. Obviously, we've not seen these huge monopolies collapse but I think we're starting to see shifts that they are getting a little bit too out of hand and the understanding that the state is going to need to step in before it’s too late.
I think the other side is that how the economy should be run isn’t set in stone and we need to be creating alternative systems, organisations, laws, ideas, movements, to fill the spaces. That gives me hope.
NICK - Hope is the best thing. I think the hope is it can be done and you don't need a revolutionary government to do it. Today you've got Biden who is not from even the left of the Democrat party, but who I think recognises it's kind of gone too far. Even if interest is in preserving the capitalist system, you've got to do something quite big and transformational.
For me, that's the opportunity in front of us. It presents something we've not seen for 40 years or more and we want to make sure that transformation is as radical as we can make it because we believe that's necessary to preserve life on the planet.
Q - I want to zoom in on the agribusiness part. People knew about Big Oil and Big Pharma, and now Big Tech. Do they know about Big Ag?
NIALL - Definitely not. It’s becoming a little bit more obvious because during the pandemic, some people saw empty shelves in the supermarkets and such and a few documentaries about factory farming and industrial fishing over the past decade. But in terms of monopolies, Big Ag is less well known because the idyllic view we have of where food comes from.
One of the things people definitely don't know about, and honestly I didn't either and I’m a big nerd, is the role of these commodity trading houses. They play such an influential role in society, these middlemen trading on metals and grains.
Cargill, one of the biggest agricultural traders, saw a 64% hump in profits, which is wild, and when you think these traders control between like 70% and 90% of international grain trade… these are such influential parts of the economy which I don’t think the general public know enough.
Q - What tools are at our disposal to fight this? And are they sufficient?
NIALL - For me, there are two broad strands. There's the competition policy, to make markets more competitive, regulate, and breakup the big monopolies. Most of the focus has been on tech lately. There’s also the ownership policy and trying to fundamentally change who owns the resources in the economy. For me, that should be the people who run the workplaces and local communities.
I’m sure the anti-trust people will disagree but the competition policy is probably not the best route. To me, there's no point in breaking up, for example, Google or these commodity trading houses to make them more competitive if we do nothing to change the structures that led to them in the first place.
If we don't change those structural issues, these monopolistic firms probably rise again and probably be more exploitative in the future. It might not be the exact same people but it's gonna be very rich individuals who will sort of hoover up all those resources.
It’s like having a burst pipe and sticking a plaster on it. It might stop the leak for a short while but there’s still a risk it’ll flood everything. You need to change who runs their workplaces, who owns their communities, and then get them to decide what they can do with it as well.
Q - The briefing talked about rewriting rules - “Unless these global rules are rewritten, and economic structures reshaped, more monopoly capitalism will only fuel global inequalities rather than redress them”. Can you elaborate?
NIALL - So the competition policy aspect is you are tackling the symptoms or the tackling the cold and the sniffles whereas we need to go a bit deeper. Tackle the ownership and give people more of a say. People talk about more democracy and more engagement in politics what’s missing for me is that unless people have economic democracy and the ability to control their own lives, you won't get to that aspect.
Q - Where is the line between being against monopolistic, exploitative capitalism and being unrealistic or naive?
NIALL - These big multinational corporations has such a huge influence and but how the economy should work isn’t set in stone. It's interesting that people think things can't change. Perhaps that comes comes after years of being beaten down and maybe only seeing a small amount of improvement in their living situations.
For me, there are the sort of alternatives already being created. Something that gives me strength is communities taking their lives into their hands and realise that they're not waiting for anyone. Like small farmers coming together and trying to fight against big multinational corporations, like La Via Campesina. We saw that with The People’s Vaccine Movement and the Make Amazon Pay campaign.
Q - You’re agitating for a new movement. Tell me about it. Is it something organised or more organic?
NIALL - Maybe it's both. People coming together to sort of fight against this which is already happening. It won’t be an easy but I think it could be done. The big thing is also just to get people discussing this stuff.
Q - After working on this briefing and the discussions you’ve had, do you feel optimistic or pessimistic that things can change?
NIALL - I’m definitely optimistic. I get my optimism from seeing grassroots people in communities taking that fight themselves. It's the people on the ground that gave me that hope rather than governments, NGOs, universities and think tanks".
The Q&A is long enough I’m skipping the Three Good Reads this week.