The New Corporatism That’s Killing Capitalism
15th July 2023
Over the years since the financial crisis, economic power and wealth has become ever more concentrated in fewer hands. This is something leaders have acknowledged, and policymakers have tried to do something about. And yet, despite brave talk of breaking up mega-giant companies, anti-trust efforts have been anemic, as most recently demonstrated by the failure to stop Microsoft from swallowing game maker Activision.
The future looked a little brighter in the immediate aftermath of the pandemic. There were signs of a grassroots resurgence, with a strong uptick in new business formations in the United States. But since then, as interest rates have risen and regulatory pressures have increased, there has been a slackening off of new firms. Outside of high-growth areas like artificial intelligence, where most small companies are usually allied with the mega-giants, bigger is better in today’s economy.
Consolidation has been especially dramatic in the financial sector. Since the 2008 financial crisis the power of the largest investment banks has greatly expanded and they now account for almost half of the sector. The rapid concentration of US banking assets accelerated with the collapse of several regional banks and could be further accelerated by bad commercial loans. The steady loss of smaller banks — their numbers down by half over the past twenty years — removes the predominant source of credit for smaller businesses. Between 1983 and 2018, the number of banks fell from 11,000 to barely 4,000. By itself JP Morgan accounts for 13 percent of the nation’s deposits and over 20 percent of all credit cards. Profits for these large financial instutions have soared amidst a stagnant economy due to rising intersst rates.