Economic Update: Are Mega-Corporations Ruining Our World?

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In this week's show, Prof. Wolff presents a critique of monopoly and oligopoly; past efforts and success in popular control over mega-corporations - in US and abroad; the fight back by mega-corporations to nullify reforms and regulations. Finally, some real solutions to the social problem and costs of an economy dominated by mega-corporations.


  • 00:00 - 01:11 - Introduction
  • 01:12 - 04:30 - Monopolies
  • 04:31 - 05:08 - Oligopolies
  • 05:09 - 07:15 - Unfair competition
  • 07:16 - 08:54 - Vertical integration
  • 08:55 - 10:01 - 19th 20th century responses to monopoly power
  • 10:02 - 10:22 - Sherman Antitrust Act
  • 10:23 - 11:00 - Clayton Antitrust act
  • 11:01 - 11:27 - Govt breaks up AT&T
  • 11:28 - 13:29 - Small Business Administration formation
  • 13:30 - 13:59 - Regulatory Capture
  • 14:00 - 15:21 - Announcements
  • 15:22 - 18:21 - Utility and Insurance Commissions
  • 18:22 - 20:07 - Small business response in France
  • 20:08 - 21:10 - Germany's response 50% seats on Board by workers
  • 21:11 - 29:46 - Solutions/Alternatives

Transcript has been edited for clarity

Welcome friends, to another edition of “Economic Update,” a weekly program devoted to the economic dimensions of our lives and those of our children. I am your host, Richard Wolff.
Today's program is going to be devoted to large USA corporations, what they are, why they are there, and what their impact is. It is a topic many of you have asked me to address on many occasions. Instead of doing it a little here and a little there, which has been my approach so far, I thought I would take today's show and offer it as an analysis, not only of what mega corporations are and do in our society, but what can be done about it: how can it be challenged, contested, and changed. So let us jump right in.

Mega corporations: I simply mean the one, two, three, large corporations that dominate so many different industries in the United States. They typically use their economic power, strength, and size to buy political and cultural influence and power. They do that by buying mass media (being the great advertisers whose words and ideas you see all the time on the mass media); by donating to political parties and politicians much of the money they need to maintain their activities; hiring and firing and organizing lobbyists to work with the elected officials between elections and thereby to control political power. We know all of that. You do not need me for that. What I am doing is responding to their reality and that reality has recently been brilliantly analyzed, over and over again, by Ralph Nader, Chris Hedges, and many others well known to many of you.

Let us begin with a thumbnail critique of the mega corporations in our culture. Most of them are monopolists, that is, they are the only big fish in their industry. In that position, once they have acquired it, they can jack up the price of whatever it is they sell because they are the monopolist. There is nowhere else to go. The famous example from American history, which I will come back to, is the telephone. At a certain point, one company called AT&T (American Telephone and Telegraph) was ‘the’ phone company. If you made a complaint about what they were charging you or the service they got for you, they would giggle at the other end of the telephone line they owned, by telling you: ‘You could always go to their competition.’ Ha ha ha! There was not any.

Sometimes monopolists have got themselves into trouble by this kind of behavior. Today, we have two examples: Walmart and Amazon. Both of them have destroyed thousands of small mom-and-pop businesses around the country and even some medium-sized bigger than mom-and-pop businesses. They have been a horrific destructive force in countless communities. That has got them a lot of opposition. There have even been communities that have blocked an Amazon warehouse from being located there or blocked a McDonald's hamburger or a Walmart because they do not like what it means. Often monopolists realize they can defend themselves better if they do not become the only one. Instead, when the competition winnows down the number of producers to two or three big corporations, they stop. They do not go to the ultimate one left because that will be a target for criticism. They have a stop sign. We will stay with three or four. By the way, in economics that is called an oligopoly, instead of a monopoly. Monopoly: one. Oligopoly: a few.

The best example is the automobile industry, which started in the 1930s with thirty, forty, or fifty car companies. Then it winnowed itself down to two, three, or four: General Motors, Chrysler, and so on. What is typically done by these big corporations is what we call unfair competition. They are big and they use their bigness, sort of like a bully would, by insisting that suppliers give them a better deal on inputs than the little guys get, or making sure that whoever they sell to, privileges their brand over any competitors. It is important to understand that capitalism has always tended to produce monopolies and oligopolies. It is built into this system. The easiest way to explain it is to tell you and to remind you (because I know most of you know this) that competition -- efforts by little and medium-sized businesses to out produce one another, to offer a better service or a cheaper product, or a better product -- always produces winners and losers: those who do well and their product sells and those who do not.

What you may not understand is that not only are there winners and losers, but the winners absorb, they literally eat up the loser. The company that goes out of business has to sell its equipment on the used equipment market. You know who buys it? The winner. The people who lose their jobs in the company that is out competed, you know where they look for a job next? In the company that won that competition. What slowly happens is many producers through competition become a few. If it keeps on going, it becomes the oligopoly or the monopoly. That is why the next time you hear some glib politician or some even glibber businessman/woman tell you about the wonders of competition, you are entitled to sneer.

Competition is what causes monopoly and oligopoly. Then there are cases when competition is deliberately removed. Here is an example: You are a big corporation, and you buy your inputs in the market, whatever they are. After a while, you realize you are never quite sure you will be able to get exactly what you want in the market at the quantity you want, and at the price you want. Tired of using the market, you buy the company. You absorb it. It is called vertical integration. You literally go out there, and instead of buying the product from the other company, you buy the company, so that production of that input becomes internal to your enterprise rather than external and has to be bought in the market. Once again, when you hear on the 4th of July, the joys of our market economy, please remember that large corporations almost always are the result of many decisions made by the company CEO and board of directors to get rid of the market, and to remove the market from their situation by bringing the other companies that they used to buy and sell from, to the inside. You know when they bring them inside? How it is all worked out? By economic planning. The very thing that you denounce as socialism is what every large company does inside because it has got rid of the market outside because it wanted to make more profits and have them be more secure. That is the story of the big corporations: how they work and how they got there?

Let us begin to unpack what we can do about it. I have to begin, as I like to do, with some history because we have, as a people in the United States (and there are similar stories for the rest of the world) risen up against big corporations over and over again in our history. I do not have time to go through many of them but the highlights.

At the end of the 19th century and the beginning of the 20th century, there was a mass movement here in the United States against huge corporations. They were called robber barons. That was the name of it. Books and articles were written. Newspaper journalists talked about the horrors of big corporations; the waste that goes on there; the illegality that goes on there; and the destructive social effects of big corporations. In 1890, we had the Sherman Anti-Trust Act. The word trust was often used legally. In the campaigns against them, they were called the big trusts, the robber barons. Notice how different the society was when it called those people robber barons, whereas today they would want to be called (and they pay a lot for the PR) captains of industry. The Clayton Anti-Trust Act: in other words, Congress passed laws reflecting the mass movement from below to constrain them. The Department of Justice in Washington was equipped with an Anti-Trust division (which it still has) whose job it was (like the title says) to be against trust; to watch them; to catch them in their illegality; and to catch them when they violate the rules of an economic system like ours. It was all capitalism, but big corporations came in for a lot of attention. Same thing happened with that telephone company I mentioned before. The Government of the United States, under pressure from below, broke the company up. It broke it up into regional telephone companies that we still have because the monopoly that AT&T wielded was determined to be socially destructive and socially unacceptable.

We created in this country, something called the Small Business Administration, which exists to this day. You know why? Small businesses kept showing that they were being out competed and destroyed by illegal, unfair methods. Simple example: big corporation goes to a local bank and says: “We want a loan, and we want it at this interest rate.” The local bank says: “No, you have to pay more.” “Oh!” says the business. “Really! Then we are going to make sure that nobody banks at your bank. We are going to make sure that we go to another bank. We are going to put you right out of business.” The small business can not play that game because it does not have that many accounts. It is not a fair fight. It is not a level playing field. Big corporations get a bigger, better deal. So, we created the Small Business Administration, which deliberately goes out and offers small businesses lower interest rates and all kinds of other supports to keep them alive because the playing field is in fact tilted. Everyone knows it well that the big corporations did not take all this lying down. Who would expect that they would. As long as you allow them to be there, they will fight back. What did they do? They spent an enormous amount of money developing public relations: endless displays that you can see, and have to see, and have to listen to, about how the big corporation on the corner is really your good friend and is helping you. These days we hear about how it is all excited about the environment and fighting global war. Oh sure! It is even called by a name now: green washing to suggest what it is there for.

Another thing big corporations did is even more important. They began to realize that if the government was going to have an Anti-Trust Division, if state governments and others were going to do something (and I am going to give you some examples later), well, they could solve that problem by becoming the patrons. They could capture the regulators. It is called regulatory capture when the big companies that are supposed to be supervised by the political control of the supervising agency undercut the whole problem.

We have come to the end of the first part of today's show. Please stay with us. We will be right back.

Before we move on, I want to remind everyone that “Economic Update” is produced by Democracy at Work, a small donor-funded, non-profit media organization, celebrating ten years of producing critical system analysis and visions of a more equitable and democratic world through a variety of media like the series, “Ask Prof Wolff,” which is a collection of my responses to questions from Democracy at Work supporters. If you have a question that you would like me to answer, go to Patreon.com/Democracy at Work or our website (democracyatwork.info) and sign up to support the work we do. Submit your question. I try to get to as many as I can, and I thank you for getting involved. You can also learn more about all the work we produce. Sign up for our mailing list, follow us on social media, and join our growing community of supporters who make all this possible, and to whom we are very grateful. Thank you and please stay with us. We will be right back.

Welcome back friends, to the second half of today's “Economic Update.” We are talking about mega corporations, the big monster corporations whose initials we have all had to memorize and learn, and who dominate so much of what goes on politically, economically, and culturally. In the first half, we were talking about the ways in which we, as a nation, have fought back. I want you to get the history, so you know how possible it is, and what its strengths and weaknesses are. We do not have to resign ourselves to being dominated by large corporations. In addition to the problems of the large corporations, we have seen fightbacks. I mentioned some of them: breaking up AT&T and passing the Clayton and Sherman Acts.

Let me give you some more examples. In every one of the 50 states in this country, the states have established commissions. I am going to give you just two examples (there are more): A utility commission and an insurance commission. What does that mean? Very interesting! Both the utilities and the insurers (as they became monopolists or oligopolists, and as they became monsters in their industry) generated pushback. They generated anger from the companies, large and small, that had to pay exorbitant fees for the utilities they depended on, or the customers/individuals who did, or individuals and businesses who had to pay a fortune to big insurance companies who dominated the market. In every one of the 50 states, the pressure arose: ‘control these big companies.’ Here is what the commissions are entitled to do in the 50 states: before the insurance company or the utility company (by utility company I mean the electric company and all of that) can raise a price, they have to go before the commission; demonstrate what they are doing; show their books; and justify the increase they want. If they are already making a profit, and if the commission does not think they need to have a higher price to continue to make a reasonable profit, the commission has the right to say: “No, you cannot increase your price.” In other words, we are controlling and thereby limiting the monopoly power these mega corporations want and like to wield. Have we succeeded in limiting them? Absolutely.

Let me give you some examples from other countries. France is an interesting example. In France, small businesses, enraged about the unlevel playing field in competition with big ones, have organized themselves politically. What does that mean? They go to the two parties that usually are fighting in France: a conservative party (basically the mouthpiece of big business) and the Socialist Party (more likely the mouthpiece of the labor unions and the working class). The little businesses position themselves in between, and they say something very interesting in French politics. They say to the big guys: “You want us to work with you and help your candidates win? You have got to give us guarantees against the nasty competition you will otherwise subject us to, the unfair competition. If you don't give us that, we will make an alliance with the working class and we will screw you by supporting them in getting better deals for workers.” That is why the Socialist Party has succeeded, over and over again, in the last century in French politics, often occupying the presidency, often dominating the national assembly and so on. It is an interesting strategy, but it has worked. If you have ever been to France, you will know that small businesses are the heart of virtually every city. Big business is there, and big business has lots of power in France, but it is limited and constrained by this political way small businesses have blocked its advance.

Here is another example. In Germany, the working class was enraged by the behavior of these large corporations and forced through in elections by winning enough votes, again led by socialists. There has been a law now in Germany for many years: every German corporation, with more than 2000 workers, has to give almost half of the seats on the board of directors to individuals elected by the workers. Imagine that! Very hard for Americans to imagine that, but that is in Germany, the most successful economy in Europe. That is what they do to limit the power. Those big corporations cannot do all kinds of things because just shy of 50 percent of the board of directors will vote against them, and they need those workers to vote for other things they want to do. So, there is a limit and the control that is being exercised.

Government supervision has not proven to prevent big corporations, nor even to prevent their domination. It has limited it, it has constrained it, it has justified the efforts of people to make those kinds of reforms, but it has not solved the problem. The problem cannot be solved unless we deal with what big corporations are. We would like to believe we aspire to a democratic society, and those of us who are not so critical, imagine we have already gotten there. If you are serious about democracy, then one of the things a democracy ought to decide and put up to a vote is what size enterprise we want. Suppose we do not want mega corporations to have the kind of power that they do in our culture. They have captured most of the regulatory commissions and have dominated the two major parties. That is obvious. They shape the culture through their control of the media who are themselves monopolists and oligopolists. Therefore, there are hardly any voices of criticism. If we want to deal with that, then let us democratize the enterprise in the following sense: we should decide, “Do we want any mega corporations? Do we want none? Do we want something in between?” Let us not be fooled by people who say: “Well, if you want modern economic wealth, you have to have big corporations.” One of my teachers, many years ago, John Kenneth Galbraith made that argument that ‘we have to accept big corporations because otherwise we would not have the wealth we do.’ I have two answers to that. Number one: that is a proposition that has never been proved. Big companies always were small companies. If you ever talk to someone from a big company, honestly, maybe after two or three Martinis (they are used to that), you get the following story: “We were much more creative in this company when we were much smaller. Now we are a big unwieldy bureaucracy. Everything takes very long. We do not grow very fast.” Interesting! Let us see how far that goes.

Maybe we would be all better off with an economy that had fewer big monsters. Maybe we could decide as a society that little companies do not get the kind of supervision that big companies do. We can take the idea of the commission for utilities and insurance and take it more generally. Let us supervise everything that gets beyond a certain size. If you want to go beyond a certain size, you are now subject to constraints and rules and regulations that we do not impose on medium and small companies to prevent the big ones from abusing the gains that they get by being large and nothing more than that.

Let us make more smaller firms. Let us encourage smaller firms. Let us break up big firms into smaller firms, especially, if we believe in the market competition idea. Let us really have it. Maybe, let us be even bolder and imagine that not only do we organize enterprises in our society, which don't get to an overwhelming size (the way we have today), but let us make corporations into worker co-ops. You know we advocate for that. One of the reasons we do that is that they are not governed by profit. They are not governed by a competition that has to make them bigger all the time. If they grow, we can have more companies to serve a growing demand. We do not have to have one company that becomes a behemoth, an enormity that overwhelms us in ways we do not want. We can shape the economy we live in to respond to our democratic needs. What it is doing now is responding to a small number of capitalists who sit at the top of big corporations. They love the enormous power they wield. They love their ability to give themselves the kind of wealth that the pharaohs had in ancient Egypt: you know, the Elon Musk phenomenon and all that goes with it. Yeah! They like it. They promote the PR that is supposed to convince all of us to go along and imagine it should be this way, or it has to be this way, or it is efficient. It is not any of those things. It has been a big burden on the United States, at least, as much as anything else. It has led citizens, like us, in the past to fight back with anti-trust, commissions, and much more. It is time now, as we see the enormous inequality generated by these companies and the super rich. They are the ones who sit at the top. That is why you know names like Jeff Bezos or Elon Musk or Bill Gates or the others. It is because they sit at the top of these enormous wealth powerhouses. They are not wealthy because they are smart, well-known, and clever. We think they are smart, well-known, and clever because they sit on the wealth. We allowed that wealth to get to that enormous size.

Even if it were true that we might not generate as much wealth if we had smaller industries, maybe there is a good argument for sacrificing some of the wealth we produce to have a different way of relating to one another in our daily lives because we are not under the pressure of a few big corporations. The advertising coming at you from every corner: the fact that you have to look at the Coca-Cola ads, young people cavorting on the beach eight million times in your life is not a choice you made. That is their decision of how to get you to buy more Coca-Cola. That is because they profit from that. Is that really the way we want our society to be shaped in the present and the future by those who sit at the top of these monstrosities? I do not think so. I think, in fact, we could learn from the surges of pressure from citizens against those kinds of industries in the past, from the efforts they made, noble that they were, and the struggle that they took. They were outrun by these big corporations who used their money to blunt the effectiveness of the movements against them, to capture the very regulators that the reformists set up. Let us learn from that. Laws and regulations are not enough. The very core of the problem is how we allow private capitalists to compete themselves into monopolies and oligopolies. That is the root of the problem. That is what has to be changed if we are going to solve the problem. It is not a complex idea. It is only perhaps new and that is partly because those very forces make it very hard to get these ideas out there and across to the people who need to hear them, see them, and act on them.

Thank you very much for your attention. As always, I look forward to speaking with you again next week.

Transcript by Asma Siddiqi

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Showing 4 comments

  • Edward Dodson
    commented 2023-03-01 20:37:30 -0500
    One part of the solution to the enormous power of corporations is participatory democracy in replacement of delegated or representative democracy. Rather than holding elections of our legislators (at all levels of government), we should move to selection of legislators by lottery.

    Anyone willing to serve the public in a legislative capacity would take and pass what amounts to a civil service examination that evaluates a person’s competency to serve. The potential for qualified citizens to step forward would be dramatically increased IF all young persons were required to take a thorough program of civics education and government operation over a period of years (covering grades 7 thru 12).

    Those who are willing to serve first take and pass this civil service examination, then their name is entered into the lottery from which legislators are selected to serve one term in office after which they return to their private life.

    Gone would be the dominating importance of political parties. Gone would be political campaigns that drag on for a year or longer. Gone would be the influence of those with the financial means to fund political campaigns. Here for the first time in our history would be something approaching participatory democracy.
  • Sonny Wiehe
    commented 2023-03-01 20:34:55 -0500
    @Philip Wood

    It’s not that corporations are no longer accountable to its citizenry. They have NEVER been accountable. Nor should they be. They are accountable to their share holders and their customers. That’s it…and the way it is supposed to be. Only government should be accountable to its citizenry. I do agree that is no longer (if ever) the case. The citizenry in the U.S. has always been either too ignorant, too lazy, and too apathetic (or any combination of the three) to demand it.
  • Philip Wood
    commented 2023-03-01 13:20:57 -0500
    You are correct in that mega corporations and govenment have grown too large and are no longer accountable to our citizenry. Corporations are the most democratic enities. They are governed by a board of directors elected by the owners (stockholders). All stockholders have an equal vote per share as to how the company is run. If you own one share you have one vote and if you have a thousand shares you have a thousand votes. The unique thing about US corporations is that your liability is limited to your investment making it attractive to invest your money. Anyone can buy stock or sell stock no matter who your are. If you have a 401 type of retirement account or you just have a regular investment account, you participate in our economy. It does not mattter if you make $30k or $1,000,000 a year, you are treated exactly the same. No so with our government. Our free enterprise (capitalist) system has taken more people out of poverty than any known system in spite of its obvious flaws. You may want to live in a nanny state but I do not. In a nanny state you have to get permission (by a government employee) to do anything. New technology or more effective ways of doing things are slowed down to a crawl. Yes, you can “save” jobs but these jobs generally go away anyway. If you try to stop progress, you get left in the dust. Just like the old style manufacturing did in the US. Too much taxation and lack of modernizing equals moving to a better business environment-ie: moving to Mexico or elsewhere. In spite what companies say, it is usually not wages that casue a company to move.
  • Sonny Wiehe
    commented 2023-02-28 22:40:11 -0500
    No solutions were offered in this most basic of business lectures. The biggest “behemoth” out there that is we are in DIRE need of reigning in is government—on all levels. The corporations have captured the interests of government officials (by buying elected offiicals off and controlling the election process to get them (or appointed successors re-elected) and have expanded to dangerous degree. All that talk of the success of commissions and regulatory agencies is bullshit and have become a moot point. it never worked. In fact, Government is now handing out “special exceptions” to Big Corp. on virtually any zoning or environmental issue out there. But one recent example is the proliferation of “data” centers being built in the Washington D.C. area with massive diesel power back up systems that fail to meet EPA standards if operated. But they’ve been built, and installed anyhow. Under a special exception basis. In my opinion, not only are these “data centers” (which I suspect are bit coin mining operations) energy intensive and straining existing power grids for virtually no public benefit whatsoever, they represent an environmental disaster in the making.

    The professor also talks of reigning in Big Corp. Right. There is no way folks will demand anything of a private corporation. These corporations do not have to listen to anybody but board members. The irony of his “lesson” is that these mega corporations are so inherently unprofitable at this point that they have had to buy government influence in order to get bail out funding on a regular basis in order to continue to operate. To these corporations, these continuous bailouts are pulled from the backs of future earnings of U.S. workers (and thus, taxes) and represent the core of their guaranteed profits.This guaranteed income stream comes in the form of “quantitative easing”, “Inflation Reduction Acts”, Economic Recovery Acts", etc. The bottom line is the fiat currency (AKA economic crack supply) pipeline has to end. The $31.6T federal net operation debt is costing the U.S. tax payer over a billion dollars a day to finance. That is way more than any single corporation is costing the U.S. citizen. The answer to this insanity is a demand for the passage of a federal balanced budget amendment. Now. I believe Big Corp would then quickly die on the grapevine.

    Why the professor continues to ignore this bigger picture with his grade school economic lessons is a mystery to me. Or is it?

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