What’s the problem?
Ownership of private capital is becoming ever more concentrated, giving fewer and fewer, larger and larger firms, more and more control over what happens in the economy. A small number of enormous firms own outright or have controlling stakes in a huge web of companies that span the globe. Researchers have found that the firms at the heart of the web are overwhelmingly financial giants.
In a second effect, the last 10-20 years have seen firms whose shares are listed on stock exchanges steadily buying back those shares, some of them delisting from stock exchanges and becoming private – often owned by other corporate groups.
These changes come together with the rise of passive investing and the growth of 3 massive asset managers: BlackRock, Vanguard, and State Street. These three have over $11 trillion of assets under management making them, for example, the largest shareholder in 40% of all publicly listed firms in the United States and largest single shareholder in almost 90% of S&P 500 firms (the index of the largest 500 listed firms in the UK).
The result is that the profit motives of this very small group of global firms dominate decisions about what gets built, what not, which services are available, and so on. In short, how the future will be. In the face of our social and ecological crisis, this gives us little power to change how we provide for society’s needs and little power to build a fairer and more sustainable future. For example, a recent report estimates that just 100 companies account for 71% of global greenhouse gas emissions. And, of course, these colossal firms have huge lobbying power to change the rules in their favour. Together with the shift away from public capital, the concentration of private capital makes economic decision making even less democratic.
A report by Battiston et al shows that global corporate ownership and especially control is concentrated in the hands of a small number of firms. 147 firms control a large majority of multinationals. At the core of this group, just 25 firms, mostly banks and financial firms, control around 40% of global multinational firms.
What should we change?
Capitalism has always tended to produce giant firms that try to dominate, and we see this now at a global scale. So this is not a recent glitch in an otherwise well functioning system, this is the normal way the system works. So tackling the problem should not be based on a false nostalgia… for a return to a truly competitive state of the economy that never existed.
Exerting more democratic control over what gets built and what not, over how our future looks, is key. In part, this will be achieved by promoting alternative, collective ways to provide for people’s needs, from state provision to co-operative, mutual and other associative methods. But it will also mean taking steps to rein in the colossal power of the giant firms, especially financial firms that dominate global capitalism. This struggle will have many faces: from forcing them to pay their taxes, to limiting their lobby power, from tougher competition policy to more regulation on actions that harm social justice and the environment. You can find more detailed policy ideas elsewhere on the Finance Watch website and on the Change Finance website.