June 21, 2013
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Bigger isn’t always better. From the Tower of Babel to Teddy Roosevelt’s trust-busting, that principle’s been enshrined in law and legend since the dawn of history. Have we forgotten the lesson?
Corporations, databases, storehouses of personal and institutional wealth all are expanding at ever-increasing speed, threatening to engulf our economy and our lives as they do. That’s the problem with Big Things: Once they reached a certain size, they keep on getting bigger.
Here are seven ways the runaway power of Bigger in finance and in data is threatening to overwhelm us all.
1. Bigger Corporations
Americans have known about the danger of overly large corporations since the founding of the Republic. “I hope that we shall crush in its birth the aristocracy of our monied corporations,” said Thomas Jefferson, “which dare already to challenge our government to a trial of strength, and bid defiance to the laws of our country.”
“The money powers prey upon the nation in times of peace and conspire against it in times of adversity,” Abraham Lincoln observed. “The banking powers are more despotic than a monarchy, more insolent than autocracy, more selfish than bureaucracy.”
Even an unlikely populist, Grover Cleveland, said this: “As we view the achievements of aggregated capital, we discover the existence of trusts, combinations, and monopolies, while the citizen is struggling far in the rear, or is trampled beneath an iron heel. Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people’s masters.”
Oversized corporate power is why Congress passed the Sherman Antitrust Act of 1890. It’s why Theodore Roosevelt broke up the railroad. When businesses become so large that competition’s squeezed out, everybody suffers.
And yet today we’re confronted with the largest corporations in history, with predictable, even inevitable, results. In real dollar terms, the minimum wage is less than half what it was in 1968. One of the main reasons for that is that most minimum-wage employees work for large corporations who dominate both their labor markets and the political process.
The Census Bureau reported in 2008 that 33 million Americans–more than 25 percent of the total workforce–worked for corporations with 10,000 employees or more. The largest employer is Walmart, with an astonishing 1,400,000 employees, followed by the company that owns Taco Bell, Pizza Hut and KFC, and then McDonald’s.
With that kind of clout it’s easy to keep wages low while doling out record payouts to executives and shareholders. Walmart, for example, paid $11.3 billion in dividends and share buybacks last year. That comes to more than $8,000 per worker. McDonald’s shareholder payouts came to nearly $7,000 per worker.
What’s more, despite their PR campaigns, there’s no evidence that shoppers benefit by paying less for their goods. Walmart aggressively forces prices downward for its suppliers, sometimes below the cost of production. But the suppliers have to make up the difference somewhere, either by over-charging other stores or underpaying their own employees and suppliers.
Either way, it comes out of the public’s pocket in the end.
Companies like Walmart don’t create jobs, either. They take them from elsewhere, and frequently pay less in wages. A Pennsylvania study found a correlation between the presence of Walmart and increases in county-wide poverty, which the authors speculated might have been because “Walmart stores destroy civic capacity in the communities in which they locate by driving out local entrepreneurs and community leaders.”
They can kill leadership at the national level, too.
2. Bigger Banks
The statistics on too-big-to-fail banks and financial institutions are staggering: The largest 0.2 percent of US banks–12 of them, altogether–control 69 percent of the industry’s total assets, while 98.6 percent of all banks held only 12 percent of assets.
This article originally appeared on: AlterNet