Dominance Of Few social Firms Harmful

Facebook, Google, and Amazon have become one of the huge companies in the U.S. Their dominance is growing day by day as they acquire various businesses that might have put their dominance in jeopardy. They expanded their presence through mergers and acquisitions and continued to dominate the market share. Facebook acquired Instagram, a leading photo sharing platform with growth in its popularity. In addition, its acquisition of WhatsApp was based on eating up the competition its messenger service was presenting. Amazon, the online retailing giant acquired a supermarket chain Whole Foods. Google also acquired YouTube, a video streaming platform that rose to prominence nearly 11 years ago. They have not only marked their presence in various countries across the world but also run business successfully. This control over the market has enabled them to attract investors and advertisers, which consequently resulted in more profits and more money for expansion.

The dominance of top firms does not present good news for the economy of the U.S., according to the research conducted by The Bank of France. The market concentration at the tip of the iceberg works against the growth of economy. Though it is good for companies to gain maximum profitability, it is not favorable for productivity and growth in the long run. The bigger picture shows the dominance increases the profits but reduces the share of labor and domestic income. Moreover, it gives rise to inequality in the economy. It also affects creation of new businesses and new jobs, which consequently affects the growth in the U.S.

According to the research by The Bank of France, the combined market share of the eight largest companies in the U.S. rose in more than 60% of the sectors during the period, 2002–2012. Moreover, the statistics goes above 70% if the 50 largest companies are taken into consideration. The largest market shares and huge profits also resulted in rise in aggregate profits. The share of profits in gross domestic income (GDI) rose from 6% to 10% between 1980 and 2015. The secret behind the sharp rise in aggregate profits is the rise in profit margins of giant companies.

If these companies continue to dominate the market, they would have monopoly and very less to invest in increasing productive capacity. Though there are high rates of return, the dominance may lead to reduction in investments. The net investment rate of non-financial organization in comparison to profits has reduced from 19% on average during 1980–2000 to 12% since 2000. This reduction is the result of dominance of giant companies in the market.

Though these giant companies gained huge profits from dominance over the years, investments and salaries of employees have not been able to keep up the pace. The rise in profits have not filled up pockets of employees of the companies. This will lead to polarization in the economy. On the other hand, reduction in investments would lead to reduction in growth potential of the economy in the long run. The technological progress has led these top companies increase their market share, but this may hinder the growth of economy.