A MTU professor’s take on the growing size of corporations
HOUGHTON — There is a growing problem with competition in the United States, the number of major corporations is shrinking.
“We are getting fewer firms and they are getting to be bigger,” said Michigan Tech economics professor Dr. Paul Nelson in a talk on competition in the United States Thursday. “The number of actual firms listed on the stock markets has really decreased substantially by several thousand,” Nelson said.
For example, Hershey and Mars, the top two candy manufacturers hold the top 60 percent of the entire market. The same is true of footwear, soft drinks, beer and media where 90 percent is owned by 6 companies as opposed to what was once 50.
Nelson sees this as a major problem on multiple levels. When these companies merge layoffs often take place, quality can go down, new discoveries slow and price fixing becomes easier. As Nelson explains it, the issue becomes, “Why innovate if you don’t have to.” Competition no longer becomes a pressing concern.
“The bigger you are the more opportunity you have to be a big bully, also if you’re really really big particularly in a geographic area…you can charge lower wages to workers because there might not be alternative jobs around,” Nelson said, giving the example of General Motors. For a while the CEO saved the company billions by almost destroying the ten thousand auto parts makers, he simply threatened to not buy from them unless the suppliers slashed costs.
However, the issue goes beyond single industries. Some mergers now contain dozens of major brands in different markets under a single corporation.
“What we need is more stringent rules so we don’t get these gigantic groups of hundreds of different products under one decision maker,” Nelson said.
“Over the past 20 years, anti-trust does not seem to have done much… however, when you look at each of the cases, individual situations, the anti-trust people are following the law.” The problem is it’s not helping. “The real answer is competition,” Nelson said, and preventing these major mergers would make that increase as well as new inventions, “pulling the rug out.”
“Antitrust is not anti-business it’s business vs. business,” Nelson said.