Not only that, it’s growing faster as these two charts (above and below) from FiveThirtyEight’s Andrew Flowers show:
OK, so what’s the explanation? Flowers takes threes shots at it:
With a slew of mergers and acquisitions — like the Verizon-AOL deal — big businesses might be snapping up or joining with rivals, and that corporate consolidation may have led to a concentration of market power. That’s the skeptical-of-business view.
Alternatively, big U.S. companies might just be riding a streak of legitimate success. Apple had the most profitable corporate quarter in history because people really like the company’s products. The U.S. boasts many of the world’s best-performing companies, so it’s not a stretch to think big business would outpace the economy as a whole. That’s the pro-business view.
And there is a third explanation, which does not point to growing monopoly power nor to pure excellence: globalization. Global trade has exploded in the last two decades. And these giant U.S. businesses might just be leveraging their already large scale to grow further in overseas markets.
I wonder to what extent this supports the market explanation for rising CEO pay, as opposed to managerial power. As economist Steven Kaplan told me awhile back, “Corporate profits as a share of GDP are higher today than at any time in the last 50 years. And profits are measured after executive pay. This does not suggest rents, but, rather improved performance, consistent with technology and scale. … Technology allows top execs and financiers to manage larger organizations and asset pools.” Also, I wonder how the increase in business size is affecting US entrepreneurs, giving them much more powerful competitors and more attractive places to ply their talents.
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