Oligopolies Unmasked – The Death of Competition

July 18, 2013

Regular readers have heard this warning on many prior occasions. We are facing an economic menace unparalleled in all of history: the Rise of the Oligopoly. While the majority of readers tune-out the moment they are exposed to this big word, this is one “big word” which people cannot afford to ignore – as the consequences of this word dominate nearly every facet of our existence.

First of all, however, definition of terms. For those not familiar with this concept; an oligopoly is a small handful of large corporations which collectively control/dominate a particular market or sector. It is the kissing-cousin of the monopoly: a single corporation which controls/dominates a particular sector or market.

Everyone is at least vaguely familiar with “monopolies” – and the negative economic connotations associated with them. What is a crucial analytical point is that in terms of behavior and harm, oligopolies are every bit as destructive as monopolies. Indeed (as we shall see later), in the real world it is becoming increasingly difficult to differentiate between a monopoly and an oligopoly.

The source of data for this commentary is some ground-breaking research by a trio of Swiss researchers. The size of this research project alone is impressive, a database of:

 37 million economic actors, both physical persons and firms located in 194 countries…

This is research which is truly “global” in scope. But any awe which readers would experience in perusing this research immediately gives way to trepidation (if not horror) as they present their findings.

As they sifted through their database of 37 million entries, they eventually located the “needles” in this haystack. What they call the “largest connected component” (LCC) effectively encompasses about ¾ of the global economy – presumably all of the most prosperous/affluent segments of the global economy.

Within this LCC, we discover that:

only 737 top holders accumulate 80% of the control…

These 737 “top holders” are primarily all corporate shells, but also include a handful of individual Oligarchs (who are not identified in the research).

Understand that these are by no means “independent” corporations. Rather, this is a heavily “interlocked” network of corporate fronts; characterized by massive “cross-ownership” (i.e. they all own each other).

Thus when the researchers refer to the 737 corporate entities which (effectively) control roughly 80% of the global economy; what they are actually referring to is a handful of clusters within this collection of 737 corporate fronts: the oligopolies.

How small is the handful of oligopolies which has effective control of ¾ of the global economy? The researchers provide us with one horrifying/extreme example, what they refer to as “the core”:

In detail, nearly 4/10 of the control over the economic value of TNC’s  [transnational corporations] in the world is held, via a complicated web of ownership relations, by a group of 147 TNC’s in the core, which has almost full control over itself. The top holders within the core can thus be thought of as an economic “super-entity” in the global network of corporations.   [emphasis mine]

Let me reiterate this stunning conclusion. A single, economic “super-entity” by itself controls roughly 40% of the global economy. When the researchers refer to a “super-entity” which “has almost full control over itself”, what they are discussing is no longer really an oligopoly at all – but rather a monopoly.

One monopoly already effectively controls 40% of the global economy, along with a handful of mega-oligopolies which control another 40% chunk.

This economic nightmare is rapidly getting worse. Our corrupt governments have almost entirely ceased to enforce the “anti-trust” laws which were supposed to prevent any of these oligopolies from ever coming into existence – let alone allowing them to get a choke-hold on 80% of the global economy.

This “disease” (i.e. a global, economic plague) has now been described/defined. At this point we can briefly describe some of the infinite list of “economic symptoms” which inevitably accompany the economic disease known as “oligopoly”.

No competition.

By definition, oligopolies and monopolies don’t compete, they collude. What we have now learned is that roughly 80% of the global economy is a world of nothing but price-fixing and collusion. Where competition ceases to exist, corruption instantly fills the void. More than ¾ of the global economy is rotten with corruption due to the control/influence of this handful of oligopolies.

Endemic poverty.

By definition, all oligopolies and monopolies are entirely parasitic. This is precisely why all the great capitalist theorists warned us centuries earlier why these economic abominations could never be allowed to exist. It’s why all governments create (if not enforce) anti-trust laws.

What do we see around us today? Nearly all Western governments are clearly insolvent. Our standard of living has plummeted by more than half in 40 years. Personal savings is at its lowest level in generations. The world’s “richest nations” are on the fast-track to the Third World – and this has all been entirely engineered by the oligopoly-plague.

Massive unemployment.

By definition, oligopolies and monopolies are job-killers. They kill jobs in two ways. First of all, their relentless blood-sucking means that our severely anemic economies can generate much less economic activity – and thus much less employment. Secondly, as we hear about every day, when these mega-corporations “merge” or simply swallow-up smaller competitors they “consolidate”.

Less people; more machines.  It’s “good business.”

In the Western world; there is somewhere in excess of 60 million people who are permanently unemployed. They are not allowed to work, because even if the few million job-openings across the Western world were all filled this instant; there would be 60+ million extra bodies still remaining.

It’s impossible to attach a more precise figure to this unprecedented “structural unemployment”, since our governments have ceased to provide us with realistic measures of this unemployment for decades. Even their so-called “broadest measurements” omit both large numbers of Victims, as well as many facets of endemic unemployment (such as part-time work, “under-employment”, and perpetually declining real wages).

By any possible measure; the plague of the oligopoly is well past the point of “crisis”, and clearly into the realm of catastrophe. These mega-corporations (and the Oligarchs lurking behind them) have already swallowed-up more than ¾ of the global economy, and their malevolent appetites for “consolidation” are only increasing.

They have already (literally) destroyed all prosperity across the Western world. The only pockets of the West not already raped-and-pillaged are those (primarily Scandinavian) nations which have avoided being overrun by this economic Plague.

With respect to the remainder of the West, it’s merely a matter of how much (economic) “rubble” can be salvaged, once these hollowed-out, debt-saturated economies simply collapse.

With respect to the Oligarchs themselves, the individual “actors” vaguely referred to among all these corporate shells, the researchers explain why these ultimate Misers use corporations as their vehicles to plunder all the wealth of the world:

…the top-ranked actors hold a control ten times bigger than what could be expected based on their wealth.

Ten-to-one leverage. Anyone with any level of experience in business or markets understands “juice” like that. The current incarnation of Oligarchs, the most-rapacious wealth-pirates ever seen in history, use these corporate fronts to magnify/accelerate their pillaging by a factor of ten.

But these are only economic consequences. What is not even touched upon by this research is the saturation corruption which must accompany a world saturated by these corrupt, malevolent, economic entities.

Oligopolies buy governments. This is how they are able to blood-suck entire populations/economies. Why did our governments stop enforcing anti-trust laws? They were well-rewarded for doing so. As long as the oligopolies are allowed to exist; our governments will remain thoroughly corrupt servants of these oligopolies (and thus the Oligarchs).

“Smash the oligopolies into little pieces.” On the many previous occasions where readers have been presented with this sentiment, the reasoning behind it was primarily framed in theoretical terms, due to the lack of hard data.

No longer. We now have proof of the size and level of menace of the Oligopoly Plague. We have proof that competition itself has been eliminated in the ¾ of the global economy now saturated with this plague.

There was one more important finding in this research not yet revealed, concerning “the Core” previously discussed; the one oligopoly/monopoly which by itself controls 40% of the global economy:

…A relevant additional fact at this point is that ¾ of the core are financial intermediaries.

This one, gigantic monopoly/oligopoly with a choke-hold on 40% of the global economy is more than ¾ composed of financial holding companies. It is one, big bank.

Such a shocking revelation is certainly worthy of much further discussion. Some of the implications of a global economy dominated by one, big bank will be discussed in the sequel to this piece: The One Bank.

Jeff Nielson

www.bullionbullscanada.com

Jeff NielsonJeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers/investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but soon decided this was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.

In 1934 President Franklin Delano Roosevelt devalued the dollar by raising the price of gold to $35 per ounce.

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