“We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.”
-Supreme Court Justice Louis Brandeis
Ledger of Harms
Over the last 40 years, concentrated economic power in the United States has reached extreme proportions.
Across a wide range of markets—not just tech, banks, media, health care, and airlines, but everything from eyeglasses to baby formula and mattresses to meat processing—a few corporations dominate sector after sector of our economy. Often deeply integrated with Wall Street interests, these corporations wield tremendous power over our economy and democracy.
This means that the underlying structure of most markets are pre-programmed for driving inequality and producing unjust outcomes. Corporate monopolies extract more and more wealth and power from working people, independent businesses, entrepreneurs, ordinary investors, consumers, and entire communities. And they are often the vehicles through which a handful of individuals have amassed unprecedented fortunes.
Dominant corporations also wield tremendous power over our democracy to shape public discourse, influence government policy, and avoid accountability. Their political power entrenches and exacerbates economic and political marginalization among historically excluded communities. It also contributes to deep injustices in the application of the law; for the most powerful corporations, laws are often mere suggestions, in stark contrast to the abusive ways our legal system treats the poor and communities of color.
Below, we catalogue some of the ways that concentrated economic power causes or contributes to a broad range of social problems and injustices, drawing on a growing body of research and analysis.
In many markets, corporate concentration is correlated with higher prices because powerful corporations can charge consumers more for goods and services.
- Combined with lower wages, corporate consolidation costs the average American household $5,000 a year in lost purchasing power (Philippon, 2019).
- Mergers between companies in concentrated markets result in an average price increase of 7 percent (Northeastern University, 2017).
- Since 1980, markups—how much companies charge for products beyond their production costs—have tripled from 21 percent to 61 percent due to growing consolidation (Quarterly Journal of Economics, 2019).
Without decades of corporate concentration, wages would likely be substantially higher today than they are now.
- Median annual compensation—now only $33,000—would be more than $10,000 higher if employers were less concentrated (Harvard Law Review, 2018).
- Workers are getting an even smaller percentage of profits today than they were 30 years ago, even though corporations are making about $14,000 more in profit per worker. This is almost entirely due to increased corporate concentration (University of Chicago, 2016).
- The more concentrated the industry, the smaller share of the profits workers receive (Journal of Finance, 2020; Quarterly Journal of Economics, 2019). The same is true of labor markets: highly concentrated markets are associated with significantly lower wages (Journal of Human Resources, 2020).
Employer concentration limits job growth and lowers job quality.
- Employment falls as employers’ power over the labor market increases and is roughly 13 percent less today because of concentration (Harvard Law Review, 2018).
- Dominant corporations hire fewer workers, produce less output, and earn higher profits than would otherwise be the case (Brookings Institution, 2018).
- Dominant corporations shed more workers than they hire most years (Economic Innovation Group, 2017).
- The economy would have produced nearly a million additional jobs in new companies in 2014 alone had the startup rate been as high as it was in 2006 (Economic Innovation Group, 2017).
Corporate concentration enables big corporations to exert enormous power over working people. One pernicious manifestation is the explosion of noncompete agreements that limit worker mobility, preventing them from seeking a safer or better-paying job, starting their own businesses, or otherwise competing in the labor market.
- A quarter of American workers are bound by a noncompete restriction on their current job or from a previous job, including roughly one in five minimum-wage workers (Princeton, 2018).
- Noncompetes restrict wages and dampen entrepreneurship, reducing new-firm entry by as much as 18 percent (Economic Innovation Group, 2019; Journal of Human Resources, 2017; Management Science, 2017).
- Workers in states and industries with more noncompetes suffer from lower wages, less job mobility, and lower levels of job satisfaction, even when they themselves aren’t bound by such agreements (Organization Science, 2017).
Large corporations increasingly dominate local economies, pitting states and cities against each other and undermining small businesses and community well-being.
- During the 2010 to 2014 recovery, the creation of net new businesses in just five metro areas was equal to that in the rest of America combined. This concentration of new investment is likely a function of concentrations of economic power (Economic Innovation Group, 2017).
- Counties where small, locally-owned businesses account for a larger shareof the economy have higher income and job growth and lower poverty rates (Federal Reserve Bank of Atlanta, 2013; Economic Development Quarterly, 2011).
- Local businesses return a far higher share of their revenue to the local economy—in profits paid to local owners, wages to local workers, procurement from local suppliers—than national chains do (Maine Center for Economic Policy, 2011).
- Surveys show that independent businesses are declining in most industries due to market concentration and unfair competition from large competitors (Institute for Local Self-Reliance, 2019).
Corporate concentration stifles entrepreneurship as dominant corporations make it harder for smaller or newer competitors to enter the marketplace.
- America’s start-up rate has collapsed, falling by half since the 1970s (Economic Innovation Group, 2017; Brookings Institution, 2014). Increased concentration has gone hand in hand with its decline (Economic Innovation Group, 2017).
- Existing corporations open fully 40 percentof new businesses, while the number of “high growth” firms—young companies that play an especially important role in employment, productivity, and wage growth—has declined (Brookings Institution, 2018; Brookings Institution 2014).
- There are fewer startups in states where a smaller number of companies dominate (Brookings Institution, 2014).
- It’s twice as expensive for small or medium sized businesses to borrow money than it is for large corporations. (IMF, 2020)
Dominant corporations invest less in basic research, spending instead on technology acquisitions or stock buybacks to raise their share price.
- Dominant corporations invest less in basic research (NBER, 2015).
- Business investment has fallen by half since the 1970s (Brookings Institution, 2018). In 2018, corporations spent just $404 billion on research and development compared to more than $1 trillion in stock buybacks (Congressional Research Service, 2020; CNBC, 2018).
- Instead of innovating, dominant firms acquire. Yet technology acquisition results in significantly lower returns on R&D investment at both dominant and acquired firms (Harvard Business Review, 2018).
Corporate concentration extracts wealth and opportunity out of Black and brown communities, even as corporations shape our laws in ways that exacerbate and perpetuate racial injustice.
- The effects of corporate concentration disproportionately impacts communities of color in a range of ways, exacerbating existing inequalities caused by racial exclusion and structural discrimination (Hamilton and Nighty, 2019).
- Dominant corporations have rolled-up black-owned businesses or made it more difficult for them to prosper. Tens of thousands of black-owned businesses have disappeared since the 1980s and the per-capita number of black employers declined by 12 percent between 1997 and 2014 alone (Feldman, 2017).
- The privatization of public resources further concentrates corporate wealth and power while disproportionately harming black communities (NAACP LDF, 2019; Food and Water Watch, 2015).
- Corporate concentration has contributed to the decline of black media: black-owned newspapers have lost advertising revenue to Google and Facebook, white-owned media companies have rolled-up black outlets, and the number of black journalists working at daily newspapers declined by 40 percent between 1997 and 2014 (Democracy Fund, 2019; Atlanta Black Start, 2015; Pew Research, 2014).
- Media monopolies like Comcast discriminate against black content-creators, placing the means to shape commercial imagery almost exclusively in the hands of white corporate executives (Stoller, 2020).
Dominant corporations use their outsized power over workers and consumers to prioritize profits over safety with relative impunity.
- Concentrated hospital markets—which face less competition on quality and innovation—have been associated with significantly higher mortality rates and substantially worse patient outcomes (House Energy and Commerce Committee, 2018; Health Affairs, 2017).
- Concentration in the dialysis industry has resulted in reduced quality of care, evidenced by higher hospitalization rates and lower survival rates. (National Bureau of Economic Research, 2020).
- Amazon pushed for ever-faster delivery times even when warned it would almost certainly cost lives, with dozens of injuries and at least 10 deaths from delivery-related accidents occurring since 2015, with the actual numbers likely far higher (The New York Times, 2019).
- Corporations that dominate the extremely concentrated U.S. food system are notoriously abusive towards workers and suppliers. Since the start of the COVID-19 outbreak, at least 57,000 people in meatpacking, food processing, and farm work have gotten sick or died (FERN, 2020).
- Lax antitrust enforcement allowed a “killer acquisition” in the ventilator market to shut down production of low-cost ventilators meant to be used in case of a pandemic like COVID-19 (New York Times, 2020).
- One of only two global passenger airplane manufacturers, Boeing’s reckless pursuit of shareholder profits cost 346 lives lost in crashes of the corporation’s 737 Max (Economic Liberties, 2020).
Dominant corporations expose American consumers to significant risks of disruption from concentrated supply chains, including shortages of essential drugs and medical equipment.
- Large corporations have sacrificed resiliency to maximize profits, embracing just-in-time delivery, eliminating built-in redundancies, concentrating production in vulnerable locations, and relying on subcontractors across their supply chains (Advisen Insurance Intelligence, 2013).
- In the pharmaceutical market, consolidation among drug manufacturers caused a steep increase in essential drug shortages long before the coronavirus pandemic (Duke University, 2018).
- Manufacturing parts suppliershave also consolidated in recent decades, exposing supply chains to greater risk of product shortages when disaster strikes (National Academy of Engineering, 2014).
Dominant corporations use their power to shape public discourse, influence government policy, undermine democratic institutions, and avoid accountability.
- Corporations are spending unprecedented amounts to influence policy outcomes. Lobbying expenditures reached an eight-year high of $3.4 billion in 2018, not including the hundreds of millions of dollars businesses spend on unregulated influence campaigns every year (Open Secrets, 2019; The Intercept 2019).
- Industry groups controlled by monopolies have used the courts to reshape our labor laws, gutting fundamental worker protections like the right to organize and sue to remedy harms. The Supreme Court is the most business-friendly it has been in a century (Minnesota Law Review, 2013).
- Google and Facebook have monopolized digital advertising, harvesting nearly 60 percent of U.S. advertising revenue, decimating newspapers, magazines, and other outlets even before the coronavirus pandemic (PwC, 2019). Roughly 1,800 local newspapers disappeared in America between 2004 and 2018 (UNC, 2018).
Securing economic liberty for everyone in America means empowering consumers, workers, and communities and freeing them from discrimination, extortion, and abuse from unchecked monopolies and predatory finance. It means ensuring entrepreneurs and businesses are able to succeed on the merits of their ideas and hard work. And it means broadly distributing wealth and market power to promote equitable political power and safeguard American democracy.
There’s no one-size-fits-all solution or single bill to pass to guarantee economic liberty for all. Instead, our democratic institutions must aggressively and vigilantly wield a suite of powerful policy tools — like aggressive corporate oversight, antitrust enforcement, anti-corruption measures, financial regulation, international trade arrangements, and a reinvigorated administrative state — to challenge monopolies’ dominance over our economy and democracy. It is up to us — as consumers, workers, business people, and citizens — to make sure that they do.