20 years ago there were approximately seven or eight thousand corporations,
public companies, in the United States. Today there's half that number. Why?
Because they have concentrated. Many have become fewer. The typical corporation is
therefore much larger. The Board of Directors hasn't changed, that's still 15
to 20 people, and the major shareholders haven't changed much in number either.
What has changed is the size of the employees; more and more of them relative
to the Board of Directors that runs the business. Let me drive home what this
means in economic language. Companies merge. Many become fewer. Bigger companies
buy smaller ones. They get together. They do that in two ways. Sometimes a company
buys other companies like itself, so many cigarette companies become three or four,
many car companies become three or four. That's called "horizontal integration." The
same company doing the same kind of thing, instead of competing with one
another they become parts of one another. The other kind of concentration is
called "vertical integration." That's when a
company doesn't buy another one like itself, instead it buys either a company
from whom it used to buy inputs. For example, a car company buys a steel
company. That's a company buying something that is different from itself,
something that provides an input to itself. Sometimes companies buy the thing
they sell to. For example, car companies selling
to an independent dealer can decide instead to buy that dealer. Then they own
both the producer of the car and the seller of the car. We've had both
horizontal and vertical integration. Let me give you an idea of what that has
meant in terms of size. Back in 1975 the 109 biggest
corporations out of the seven, eight thousand there
were got half of the profits. 109 out of thousands accounted for
half the profits. In 2016 this had been reduced to the following stunning number:
the 30 largest corporations together in this country out of 3.5 thousand
have half the profits. That's called a highly concentrated
system. Very few corporations have enormous wealth and enormous power that
derives from that wealth at their disposal. And we all know how they use it,
which makes sense once you understand this structure. If you're super
concentrated and super rich there's always a danger that the mass of your
employees and even the mass of other smaller companies will resent your power
and your wealth, will feel abused by it, we'll know that in any dealings with you
you have the upper hand because you've got the enormous wealth. And so there is
danger that your situation will be attacked. One of the things these big
corporations can do and do do is try to control all that. They set up
associations with other companies so that they have an ongoing relationship
and can stave off criticism and attack. They spend a lot of money on public
relations so if I gave you the names of these companies you're already familiar
with them. You know those names because you've dealt with them in your life and
there's a lot of advertising out there to make sure you never forget them. And
they also buy the politicians. They provided experts that give the
politicians their information. They buy the lobbyists who spend time taking the
politicians out to fancy dinners and to explain what is wanted of them. They give
the big bucks donations to the political campaigns to keep those politicians in
office. And they have all the wealth and all the connections needed to do that.
They will pay for publicity makes the politician look good or, if the
politician doesn't cooperate, they'll pay for the publicity that makes him or her
look bad. You get the picture. The power of these corporations cannot be
exaggerated. When I looked into my own understanding of the world to give you a
metaphor, a parallel, the largest corporations in America (the top two
three hundred is really all we need to talk about) are like the kings of old and
the court: a handful of people, very small, gather around the big one at the top,
together make all the decisions formally and informally (on the golf course, at the
restaurant, at the resort or in the boardroom, it doesn't really matter).
They run the economic system because they have the dominant wealth and power to do so.