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The rise of the corporate colossus is a giant problem
- arcanus 10y ago* The share of GDP generated by America’s 100 biggest companies rose from about 33% in 1994 to 46% in 2013. * The five largest banks account for 45% of banking assets, up from 25% in 2000. * About 30% of global foreign direct investment (FDI) flows through tax havens; big companies routinely use “transfer pricing” to pretend that profits generated in one part of the world are in fact made in another.
- JadeNB 10y agoMaybe it doesn't confuse others, but the removal of the word 'the' before "corporate colossus" (as it appears in the subtitle of the linked article) makes this title hard for me to parse. EDIT: It's since been restored; thanks!
- ashark 10y ago> But better the grind of multilateral negotiation than moves such as the European Commission’s recent attempt to impose retrospective taxes on Apple in Ireland. Uh, isn't that "move" enforcement of the results of multilateral negotiation (the EU and its rules)? What exactly will or should happen when parties of these multilateral negotiations and agreements the column champions violate the rules? I'm guessing it'll resemble a "retrospective tax" so closely that it'd be hard to tell the two apart.
- aetherson 10y agoThe EU isn't multilateral. Multilateral would be the EU + the US + Japan + China + other smaller economies, or at least the majority of those players.
- klank 10y agoIn this context the EU is most certainly multilateral. The laws being evaluated were agreed upon by 28 member states.
- deleted 10y ago[deleted]
- aetherson 10y agoNope, sorry. You're wrong. In this context, multilateral means engaging at least a majority of the biggest economies on the planet. The EU solo-ing it is unilateral, just like the US solo-ing it would be unilateral, even if we described US law as agreed upon by 50 member states.
- hencq 10y ago> Uh, isn't that "move" enforcement of the results of multilateral negotiation (the EU and its rules)? Well in that case, shouldn't it actually be Ireland that got fined instead of retroactively taxing Apple?
- jessaustin 10y agoBecause Apple didn't pay the tax it owed to Ireland, Ireland should pay something? To whom, Apple? What could justify that?
- detaro 10y agoIreland is the one (accused to be) violating treaties it signed, with the goal of getting an advantage over other signatories, so it is not unlogical that it could be fined in some way for doing so.
- DanBC 10y agoIreland set the tax rate that Apple complied with. Ireland is accused of providing a state funding to Apple by setting that low rate. (I didn't downvote you).
- _delirium 10y agoThis isn't specific to Apple or Ireland (or even taxes) fwiw. Ordering the company to pay back the subsidy is a normal part of the remedy for subsidies found to violate EU anti-subsidy regulations. The intent is to make it ineffective for a country to pay out subsidies, because they will in the end not have the intended effect, as the company won't get to keep the money. If the remedy were a fine levied on the subsidizing state, but without required repayment, illegal subsidies would have their intended effect of actually subsidizing the target firm (they'd just become more expensive, because the fine would become part of the cost of the subsidy). For example, when Real Madrid was found to have been unlawfully subsidized by a local Spanish government earlier this year (they were given €18.4m as compensation for a land transfer that fell through), they were ordered to repay the €18.4m [1]. [1] http://www.bbc.co.uk/news/world-europe-36706262 http://www.bbc.co.uk/news/world-europe-36706262
- th0waway 10y agoThe issue is that the corporations are allowed to spread virtually unchecked out of the borders of their 'home' country. This allows them to grow virtually unchecked, and use the information friction between country's governments to obfuscate what's happening.
- abirkill 10y agoF4 cc yourffrrcc4f rf
- forrestthewoods 10y agoGrowth is globalized. Global companies get a disproportionate share of growth. Therefore giants will become increasingly large relative to non-global entities. I'm not sure what the specific problems are. Which makes prescribing a fix impossible.
- sseagull 10y agoIn my (uneducated) opinion, the specific problem is that the people, through their governments, lose control over these large, global entities that affect their daily lives. When they get this big, there's no way to tax them and no way to punish them for wrongdoing - they could just move to a friendlier country, use loopholes, etc. Of course, thanks to various trade agreements, they will still have access to our markets... And the consumer can't always go elsewhere - there may be no viable competition, or that competition gets bought by the larger company for what is essentially pocket change. Too big to fail = too big to control
- ersii 10y agoI know it's not an too popular opinion here on HackerNews and I'd say you're sort of right, but you got it in reverse. The problem is not that it's hard to control or tax companies, the problem is that it's not as easy for you or me to do the same. You have to have significant resources to break free from local restraints, which is really unfortunate. It's also a lot of resources that gets spent, just so people or companies can do whatever they want with their own resources. In other words, it's possibly a loss of production - those resources could have gone elsewhere. Please be gentle, I'm open for discussing these things.
- radicsge 10y agoIt's not that you cant get there, but indeed that they are out of control: they can remove money from an arbitrary economy and not necessarily put it back (see apple that sitting in an incredible amount of cache) => (they dont need to hire people locally.. at least not as much) => they -at the moment are- making poor countries/people even poorer, rich ones even richer => they have more and more power in less and less hands
- sharemywin 10y agoIn 1990 the top three carmakers in Detroit had a market capitalisation of $36 billion and 1.2m employees. In 2014 the top three firms in Silicon Valley, with a market capitalisation of over $1 trillion, had only 137,000 employees.
- throwaway729 10y agoGvien the forum we're on, it's worth pointing out that today's white collar laborers are capturing one or two orders of magnitude less of the value they're creating than the blue collar workers of 1990's detroit. 360 billion* divided by 1.2 million = 300000 "per employee". Typical salary to 40,000ish-100,00ish range for laborers/engineers. The disparity in those numbers isn't so bad at all. Conversely, 1 trillion divided by 137000 = 7,299,270 "per employee". Typical salary of engineers in those firms is closer to 100,000 to 200,000, and that's just for the golden child software engineers. And without accounting for massive cost of living differences between 1990 Detroit and modern day SV. Which wouldn't be so bad if there were some engineers earning close to or more than the "per employee" numbers, but I've never heard of anyone making even close to 7 figures as an engineer at a big firm... * I think you meant 360 bn, not 36 bn, right?
- mbillie1 10y agoDon't think you needed a throwaway for that, that's a cogent point.
- ersii 10y agoWhen it comes to opinions or facts in sensitive subjects (such as anything related to taxation) - to be able to discuss freely you actually need a throwaway account. A lot of people only down vote when they disagree to some content or questions and leave the questions and discussions somewhere else.
- deleted 10y ago[deleted]
- nonameface 10y ago
- Spooky23 10y agoIMO, this problem is mostly a factor of the consolidation of finance. The roll up of banking makes it impossible for smaller enterprises to get traditional capital. We moved away from the old, boom/bust distributed banking model towards a weird form of command economy with a cartel of mega-banks, which are really just proxies for the government. People blame technology for the post-recession economy, but I think the billions/trillions of capital the flooded the market never made it into the economy. No wonder little is happening outside of businesses that work with a venture model.
- IsaacL 10y agoSarbanes-Oxley probably played a role as well. Successful startups now chase acquisition over IPO, which leads to the creation of huge empires (Apple, Google, Amazon, Microsoft) and few medium-sized players.
- vkou 10y agoMost business in the United States is not driven by Silicon Valley startups.
- Animats 10y agoNo, that's because the overvalued market caps wouldn't fly in an IPO. If Uber went public, they'd have to disclose real numbers, which probably indicate they're unprofitable. They're only worth $68 billion when the market doesn't have to pay out $68 billion. It's today's very low interest rates that fuel "private equity", which is usually debt at some level.
- distances 10y ago> It means making it easier for consumers to move their data from one company to another I think this would be absolutely brilliant. The ability to readily move data from one service provider to another would provide a much-needed boost for competition in the digital space. I don't know how common it is, but at least in Finland one can move their mortgage from one bank to another if they get a better deal elsewhere [1]. Or, one can move their mobile phone subscription and keep the old number. I find these kinds of service transfer entitlements essential for efficient competition. [1] Or technically: one can always pay their Euribor bound mortgage off without extra cost, and take a new mortgage from another bank.
- jsprogrammer 10y agoWhat type of data are you wanting to move? Would you just want a huge movable block of space that you could mount somewhere?
- distances 10y agoAll data associated with my user account, perhaps with some kind of a schema if applicable. Other services could then implement data import features for this, or for just the part of the data that concerns the service they are providing. Basically, it should be clear that all data connected to a person is irrevocably theirs. Any provider can build services for taking advantage of the data -- but it'd be the user's right to migrate it at their pleasure.
- sqeaky 10y agoStandards happen so slowly. By the time people agreed on what should be in this, that agreement would be antiquated. We need something like what happened with OpenID and Oauth. OpenID may be gone, but one company made a few bucks on it and OAuth is largely inspired by it. Someone needs to find a way to make a buck moving profile data around in a meaningful way then that becomes a de-facto standard that gets copied and used all over. Then the government can regulate something that already exists rather than regulate something shitty into existence.
- BurningFrog 10y agoA libertarian explanation is that in the age of the Regulatory State, it's often more important to be the biggest lobbyist than to make the best product. "In the Game of Crony Capitalism, you lobby or you die."
- jcfrei 10y agoA much more probable explanation might be the increasing importance of economies of scale (software is a prime example).
- jhayward 10y agoIt would be helpful if you would supply the Libertarian explanation for the Facebook, Google, Microsoft, and Amazon monopolies as products of the regulatory state and crony capitalism.
- pessimizer 10y agoI actively dislike libertarians, and even I think that they would have no trouble explaining those particular examples.
- rayiner 10y agoThe problem with the libertarian explanation is that it contradicts the actual facts. The "age of the Regulatory" state started in the 1930's. It has been in decline for decades--with major sectors of the economy being deregulated in the 1980's and 1990's. In the 1950's and 1960's, regulatory agencies often had the power to directly exclude potential competition and set prices for goods. They have a fraction of those power today. Surely, that decrease in regulatory authority would be linked to a decrease in consolidation. But consolidation has increased during that time. Moreover, there is a difference between a plausible theory and showing actual causation. How is lobbying helping Amazon and Wal-Mart to replace smaller retailers? Point to something concrete. Because it looks like the real explanation is the massive efficiency advantages those big firms possess. Looking at other sectors of the economy: why are Apple and Samsung taking almost all of the profits in the smartphone industry? Are they better at lobbying the "Regulatory State" than HTC or Nokia?
- pipio21 10y agoBlame "too big to fail" and negative interest rates. When big banks had problems, the solution was to make even bigger banks and giving them free money in order to look good. They take savers money with negative interest rates and give it free to big banks and companies like Google, Microsoft or Deutsche Bank. Given that if you(as a person or small company) ask a bank for money you will have to pay 20% interest rates or so, this is a tremendous advantage for them. Big companies have free money because they can ask for a loan and give back later less that what they took after inflation!!! This means big companies could buy the competition instead of competing with them , like facebook with wassapp, with stock, being cheaper than having their overvalued stock go down with competition. It also means big companies could buy their own stock in the market and pump up their value, making the stock acquisition cheaper and increasing board bonus(from stock owners) look reasonable. Central banks and politicians are obliterating middle class and business owners. This is a terrible thing because History teach us this always happens before a (violent)revolution.
- guelo 10y agoThis argument doesn't make any sense to me. Neither Google or Facebook or Apple have been using cheap loans to fuel growth. They have more cash flow from operations than they know what to do with, they don't need loans.
- greeneggs 10y agoThey also can't borrow at negative real interest rates. Only some governments can. And you can't blame the governments for low interest rates. At least in the medium term, interest rates are mostly set by the market, supply and demand for loans. There's not a lot of demand.
- GenWintergreen 10y agoSure they can. AAPL issued bonds in 2015.
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- uabstraction 10y agoThis article did a good job of staying relatively neutral for such a controversial subject. It seems as though an oligopoly of multinational conglomerates will be the only choice for essential consumer products in a short 10/20 years. Without competition from smaller open-minded businesses, only innovation in rent seeking will take place. The companies that end up in control of the infrastructure and hardware will end up having more power than most of the world's governments. The cynic in me feels like we're in for some turbulent times.
- ersii 10y agoIt's not so strange that we get fewer "smaller open-minded business(es)" though, considering the increasing regulatory burden. Of course, they are maintainable - but they do consume a lot of resources to tick them all off. Most of the regulations doesn't actually directly cost to comply with, but you'd need more staff or dedicate more time to things that are not your core business - that's money out of the pocket.
- rayiner 10y ago> None of this helps the image of big business. Paying tax seems to be unavoidable for individuals but optional for firms This kind of grinds me. There are tons of tax breaks for individuals: mortgage interest deduction, tax-free health care, etc. In fact, the exclusion of health care benefits from taxation costs the government more than all corporate tax avoidance schemes put together.
- x3n0ph3n3 10y agoIf business can deduct all the costs needed to maintain existence, then why shouldn't individuals? Health costs are required for existence, as is housing. Frankly, I think food and rent should also be deductible as an individual if a business can deduct the cost of catering and office rent.
- nvarsj 10y agoThere are a few tax breaks for individuals, but many more for companies. They're called "business expenses" :). I wish I could deduct everything I required as an individual (notably, there is no rent deduction for individuals).
- tptacek 10y agoThere are enormous tax breaks for individuals. The mortgage interest deduction (which is an abomination), for instance, costs $70bn.
- ilaksh 10y agoSee urban dictionary entry for technopoly. Centralization is a big problem whether you have a mainly cooperative system like communism or a competitive one as in capitalism. Decentralizing technologies can help us get systems that are distributed, diverse, and free to evolve but also capable of holistic measurement and operation. Such as bitcoin, ethereum, NDN, swarm, Namecoin, 3d printing, etc.