Competition Policy

Monopoly capitalism?

Good Morning from New Economy Brief

From Hayek to Marx, economic thinkers from across the political spectrum have long criticised the power of monopolies. But despite this consensus, are we at risk of sleep-walking into a new age of monopoly capitalism?

This week’s Digest looks at the evidence about market concentration, its impacts, the emerging literature about the interaction between monopolies and inflation, and possible policy options to counter these effects.

Monopoly money. “We’re now 40 years into the experiment of letting giant corporations accumulate more and more power...I believe that experiment failed.” These were the words of President Biden in 2021 announcing a new executive order on anti-trust (competition policy). It isn’t hard to see why he felt the need to sound the alarm. Researchers in the US have found that the top 0.1% of companies in America are responsible for a staggering 88% of corporate assets and 66% of sales. Campaigners Global Justice Now (GJN) argue in a new paper that this is part of a wider trend, where giant corporations have “captured the economy” through a series of mergers and acquisitions and are now exerting their power to warp global markets.

  • Why does this matter? The concentration of corporate power has many warping effects. For example, concentration in the agrifood industry has led to a loss of biodiversity as giant businesses standardise crops across different regions. GJN also argue that lack of competition also creates other negative climate outcomes, for example by encouraging practices like built-in obsolescence. More profoundly, as the Balanced Economy Project put it: “Monopoly power corrupts politics, increases inequality, worsens political polarisation, stifles innovation, reduces economic growth, undermines truth and the media, benefits authoritarian rulers, and generally blocks the possibility of change.”
  • Food for thought? Which markets are we talking about? Well, quite a lot of them. GJN point to Google’s 85% share of the global search engine market (93% in the UK) as an example, but draws the net more broadly, with Big Tech and Big Pharma in the spotlight. Perhaps most relevant given current economic concerns though is the global food market which has seen dramatic consolidation in recent years. The latest report from the ETC group on ‘food barons’ finds that many crucial agrifood sectors are controlled by just four to six dominant firms which “wield enormous power” over global food markets.
  • Isn’t this regulated?  Not very well according to campaigners. New anti-monopoly outfit the Balanced Economy Project argue that neoliberal thought has evolved to prize ‘competitiveness’ over ‘competition’ and this has muddied the regulatory waters. For example, the government’s controversial Edinburgh Reforms embed the principle of ‘competitiveness’ in the mandate of financial regulators, which finance campaigners like the Finance Innovation Lab claim confuses the role of the regulator. In their paper, GJN also argue that regulators like the UK’s Competition and Markets Authority (CMA) have been too reluctant to block mergers and acquisitions - for example Google has acquired over 200 companies since 2001. Just last week, the CMA performed a surprise u-turn to remove barriers to the acquisition of video games company Activision Blizzard by Microsoft, further consolidating the rapidly growing video games sector.

Competition and inflation. That’s a pretty long charge-sheet against monopolies, but of particular interest in the current economic climate in the interaction between monopoly capitalism and inflation. A common argument in the ‘wage-price spiral’ debate is that this bout of global inflation is unlike previous price surges because the power of organised labour has been much diminished since the 1970s, meaning that collective bargaining is unlikely to drive inflation in the same way. Another aspect that has changed in recent decades is the concentration of various vital global markets, which has consolidated price-setting power into the hands of a small number of mega-corporations. Shouldn’t we also expect this to have some interaction with inflation? 

  • Systemically Significant Prices. That’s what the University of Massachusetts' Isabella Weber thinks. Weber and her colleagues have argued that the current inflation phenomenon cannot be explained simply as a macroeconomic phenomenon (too much money chasing too few goods) and instead is about how changes to ‘systemically significant prices’ (like energy) can ripple through an economy. In this model, changes to these prices (often resulting from external shocks) spark responses from other businesses who have to raise prices to account for the increasing input costs, and eventually trigger a response from workers who demand higher wages. By focusing mainly on the wage-bargaining aspect, policy-makers are neglecting to tackle the root cause of the inflation.
  • What has this got to do with monopolies? The interaction with market concentration is critical to understanding this kind of inflation. When small groups of firms have incredibly high price-setting power, it allows them to exploit external shocks either to raise prices further than they need to, or to keep them high long after an economic shock has abated. When these are in systemically significant sectors, like oil or food, this then has a material impact on inflation throughout the economy. The evidence of massive recent profits for commodity traders, alongside research from IPPR/Commonwealth and Unite the Union on recent profiteering suggest that some firms have been able to leverage their power in this way to make vast sums and fuel the cost of living crisis.

What can we do about it? As the old joke goes, I wouldn’t start from here. Unwinding market concentration is significantly more difficult than preventing it from emerging in the first place through effective competition policy (anti-trust for American readers). As previewed in the opening to this newsletter, the Biden administration has toughened its stance towards the enforcement of anti-trust laws, appointing serious regulators and signalling a change of approach from recent decades. But effective enforcement of existing laws is unlikely to make a dent in the current situation. GJN highlight a suite of bolder policy options, such as the enforced break-up of monopolistic companies, and constraining the role of the financial giants and investment funds which lie behind so much of this concentration.

  • Natural monopolies? In some cases it is almost impossible to generate real competition, which begs the question over whether these natural monopolies should be run in the private sector at all. The recent fiascos with the UK’s railway franchising model are an example of just such a problem, and famously the most profitable sector of the UK economy are the privatised power networks which have a complete monopoly over their areas and are largely owned by overseas investment funds.
  • A new stabilisation paradigm? In respect of inflation, Weber argues that a new policy suite is needed to respond to this kind of price rise, rather than reliance on the blunt macroeconomic tools of interest rates. Central to this is the use of strategic price controls, which she argues “have tended to work in highly concentrated markets”. Citing UK and European energy price controls as examples, Weber argues that this kind of tool - once regarded as economic heresy - should be more widely deployed, especially as climate change is likely to spark waves of inflation that are similar to the one we are currently experiencing.
Weekly Updates


Banking crisis. The latest banking “chaos” is evidence of the need both for a public banking system and to treat money as a public good, argues Positive Money’s Simon Youel. A public banking system would require two complementary parts, argues Youel: “First, a genuine public banking option that allows people to store money and make payments without being exposed to the risk taking of profit-maximising private banks. Secondly, regulation of banks that better reflects the fact they are utility companies for which the provision of key public goods are franchised out to by the state.”


A ‘new deal’ for business. Despite underlying strengths, the UK economy faces stagnant, unequal and unsustainable economic growth, according to research by George Dibb and Harry Quilter-Pinner of the Institute for Public Policy Research (IPPR) think tank. To address these challenges, they argue, government must create a ‘new deal’ for business in which government and business can work together towards “faster, fairer and greener growth”.  

Corporate governance. “Weak participation rights and a shareholder-focused model of corporate governance are associated with poor economic performance” in the UK, according to new analysis by Common Wealth. The think tank has found that the UK is an “outlier” in corporate governance and “is more unequal, has weaker productivity growth, and invests less in research and development than stakeholder-oriented economies”.  


Rishi Sunak’s tax rate. Last week, the Prime Minister revealed how much tax he pays. Quick analysis from Tax Justice UK found that the multi-millionaire pays the same effective rate of tax as the average nurse (around 22%). Tax Justice UK argues that this “shows precisely what’s wrong with our tax system: the super rich take most of their income from wealth, not work. And taxes on income from wealth are much lower than taxes on work”.

Social security

The ‘sanctions surge’. A briefing paper by the IPPR explains how the rate of universal credit claimants experiencing sanctions has risen rapidly since the start of the Covid-19 pandemic. The research finds that young men are sanctioned at the highest rate and that the largest rise in sanction rates has been among the over 60s. 


Child poverty. 4.2 million children and young people are growing up in poverty in the UK, a rise of 300,000 children in the space of one year, according to new government data analysed by Magic Breakfast. The data also shows that 1.7 million children and young people in the UK live in food insecure households, the same figure as before the pandemic.