The largest ransomware attack in history came in May and shut down more than 300,000 computers around the world, including those used by FedEx, Britain's National Health Service and the Russian Interior Ministry. The so-called WannaCry outbreak hit devices that used old versions of Microsoft Windows, especially the XP edition, highlighting the danger of using systems that lack the latest security updates. It was also a glaring and frightening example of the dangers of monopolies.
Microsoft, which still has more than 80% of the market for operating systems, turned company founder and former chairman Bill Gates into the world's richest man. The company has often used its power to force its customers to upgrade to the newest versions of its software by abandoning old ones, a business model that would have been unviable in a truly competitive environment.
Yet Microsoft's market dominance also allows it to squeeze more profits out of even creaky old software. Windows XP, which was last sold to desktop users in 2008, but is still in use in millions of computers, is vulnerable to cyberattacks. So Microsoft was charging some users $1,000 (all currency in U.S. dollars) a year per device for attack protection and recently has been charging for extra security for its top-end Windows 10 edition.
The pricing power and screw-the-customer attitude of many monopolies and oligopolies is nothing new, but they seem to be getting worse. In May, a computer meltdown at British Airways stranded thousands of travellers. BA's apparent indifference to the chaos was appalling, perhaps because the share price of IAG, BA's parent company, fell only slightly. You may hate BA but you can't avoid it, because it controls more than half of the landing and takeoff slots at Heathrow, Europe's busiest airport.
In the United States, many giants are making a mockery of the formerly fine antitrust system that broke up even behemoths as formidable as Standard Oil and AT&T. In 1938, U.S. president Franklin Delano Roosevelt warned that, "The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism."
We may be at the point of corporate fascism. Many companies are now so powerful that they can set prices, eliminate competitors and make obscene profits on a global scale. They also exert enormous lobbying pressure on even the strongest governments to bend rules in their favour.
Four of the biggest of the big are the FANG tech giants—Facebook, Amazon, Netflix and Google, owned by Alphabet. Google has almost 90% of the market for search advertising. Facebook (including Instagram, Messenger and WhatsApp) controls more than 70% of the media traffic on mobile devices. Amazon has 70% of the e-book market. And don't forget Apple, the world's most valuable company. Its App Store, the gateway to iPhone users, is the Walmart of mobile device software.
Sadly, rather than being regarded as a threat, monopolies and oligopolies are now celebrated by investors and executives, and even many regulators and governments, as marvels that should not be punished for their success. Intense competition is seen as perilous, because it can destroy capital. This perverse view was born in the right-wing Chicago school of economics and championed during the Reagan-Thatcher era. It has fostered industrial concentration not seen since the robber baron era.
In a recent paper, five U.S. and European economists, among them David Autor, an MIT labour specialist, looked at corporate concentration in major U.S. industries as measured by the market share held by the four largest companies in each of them. On average, the top four in manufacturing accounted for 38% in 1982. Thirty years later, their share had climbed to 43%.
It is also little surprise that labour is not sharing in the goodies. The Federal Reserve Bank of St. Louis says the share of U.S. GDP received by workers declined to 60% in 2014 from almost 65% in 2001.
Last fall, Donald Trump vowed to protect the forgotten millions with his thundering "America First" campaign. He said he would stop AT&T's takeover of Time Warner, implying the glorious return of the trustbusters. Will that happen? Probably not. One of Trump's confidantes is Peter Thiel, the billionaire PayPal co-founder who only invests in companies that are potential monopolies. "Monopoly is the condition of every successful business," he once wrote.
At some point, the FANG companies and other monsters will have to be cut down to size. Competition is waning and so is labour's share of income. Once monopolies and oligopolies are even more solidly entrenched, prices will rise. So why wait?