Barry Lynn on oligopolies
In the staid pages of the Financial Times, it is striking to see corporate critic Barry Lynn given free rein. In an article entitled "Wake up to the old-fashioned power of the new oligopolies" (2/14/06), Lynn lays out his worries about the new oligopoly and its effects on the economy and on life in general.
For those without direct access to the Financial Times, here are his main points.
- Policy makers have ignored the possible consequences of growing oligopoly control, even when it leads to debacles like last year's vaccine shortage. He lists a variety of oligopolies in iron ore, in technology, in energy, in food and personal care products, and wonders why there is no official concern.
- All this is leading to "corporate endgame", where fewer and fewer companies gain control over key pieces of the global economy as companies with "extraordinary scale and scope" manage to earn "disproportionately high profits."
- This leads to the abuses of oligopolies, including the control of political power, pricing distortions, control over is allowed into the market and when, and extreme profiteering.
- The growth of oligopolies was started by a"radical relaxation" of antitrust rules, starting with the Reagan administration.
- The suppression of innovation in some fields as control of markets makes certain kinds of innovation a threat, or at least an unneeded luxury. This stems form the ability of large companies to dominate whole sectors of the economy.
- Competition is directed downward to the smallest suppliers and the individual worker, so that larger companies can be spared real competition.
These are all points we have made in the past, but well expressed and nicely combined. The most interesting insight is into the way in which we feel that our world is far more competitive than it was 30 years ago, even though oligopoly is designed to damp down competition, at least for the firms that survive. As Lynn puts it:
It is here we find at least a partial explanation for one of the more confusing paradoxes of today's global system - the simultaneous rise in consolidation and competition. So far, especially in America, the tendency has been to blame extreme competition on "globalisation", not least because faulting foreigners for domestic ills can be a good way to sell books and win votes. The real explanation, however, is not only globalisation, or even mainly globalisation, as much as radical changes in the structure of industry. In other words, it is not the Chinese who destroy US and European jobs, but roll up by the world's largest traders and retailers of the power to pit producer against producer, and to capture most or all of the gain from the arbitrage.
6:08:35 PM 
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