Big tech monopolies Microsoft, Apple, Alphabet, Amazon and Facebook now make up more than a fifth of the entire value of the S&P 500 stock market index.
Part of the reason these companies’ stocks are doing so well is that their business models, to varying extents, render them immune from the impact of the coronavirus-induced lockdown. Given that these companies provide many of their services and sell many of their products online, most have not seen a fall in sales.
In fact, some of these firms have seen a spike in demand as housebound consumers flock online to work, consume and entertain themselves. Amazon has announced it will be hiring 75,000 new workers to cope with the coronavirus-induced spike in demand, on top of the 100,000 extra staff it has taken on since the pandemic began.
But many of these stocks were outperforming the rest of the stock market even before the crisis. While many equities were considered to be overvalued (meaning their current share price was much higher than the returns that the company could be expected to generate over the long-term) before the pandemic began, the stocks of the big tech companies were subject to particularly strong valuations.
Some argued that we were seeing another bubble in big tech. Others argued that the strength of the tech companies’ business models meant that the high current valuations were justified.
The current strength of these firms’ stocks suggest that the latter camp were correct – if big tech had been subject to a bubble then investors would have fled these stocks at the first sign of uncertainty.
There is a third explanation. It is not the strength of these companies’ business models per se that explains their high stock prices and apparent invulnerability to crisis, but their market power. Investors were behaving rationally when they piled money into companies like Amazon, but only because they could see that the company was rapidly becoming one of the most powerful monopolies in human history.
A concentration of power.
The coronavirus crisis is, in this sense, simply accelerating a pre-existing trend towards market concentration. The process of creative destruction deepens during moments of crisis – the weak, with low margins, high debts and little access to information or patronage, tend to suffer most.
When these businesses fail, they are bought up by their larger rivals, which tend to have the cash necessary to allow them to outlast the crisis, as well as strong links with the finance sector and big government, which allow them to access support unavailable to their smaller rivals. As Karl Marx writes, “Capital grows in one place to a huge mass in a single hand, because it has in another place been lost by many”.
It is not hard to see why big tech companies may benefit from excess monopoly rents (the excess profits generated from dominance of a particular market). Many are platforms that benefit from network effects, which create significant economies of scale. In simple terms, the more buyers and sellers that sign up to a platform like Amazon, the more successful it becomes.
The business models of these companies are built on their ability to monopolise, and then sell on, the data generated from the transactions on their sites. The more people who sign up, the more data that is generated; and the more data generated, the more useful this data is for those analysing it. You couldn’t learn much from the last day of one individual’s browsing history, but you could learn a huge amount from the clicks of millions of people over the last year.
The big tech companies have also engaged in other practices designed to consolidate their monopoly power. Some use anti-competitive practices designed to penalise their rivals – think of how Google was taken to court by the European Union for privileging certain search results over others.
Most of them use various accounting mechanisms to avoid taxation in order to boost their profits. And almost all of them have extremely cosy relationships with local and national governments, which often allow them to access preferential treatment denied to their competitors.
But while the tendency towards market concentration evident both before and after the coronavirus pandemic has been particularly evident in big tech, it also applies across a range of other markets – from pharmaceuticals, to consumer goods, to oil and gas.
Low interest rates have facilitated a wave of mergers and acquisitions activity across many sectors. Intellectual property rules and anti-competitive trade rules have privileged certain companies – particularly those in the global north – over others. Successive crises have swallowed up smaller firms, which have been bought up by their larger rivals.
Organising against monopolies.
The coronavirus crisis is, as I have argued before, accelerating the trend towards monopolisation inherent within capitalism. While it is unclear where this trend will lead, we should remember Marx’s warning that the centralization of capitalism, one of the “immanent laws of capitalist production itself”, can generate even greater levels of “misery, oppression, slavery, degradation and exploitation”. It can also, however, become “a fetter on the mode of production that has flourished alongside it”.
Given the amount of power that will be concentrated in the hands of a few tech billionaires when this crisis is over, it is critical that these companies be subject to democratic popular control. In part, this requires socialists to engage in organising electorally to gain control of the apparatus of the state – the only institution with the power to exert any influence over these companies.
But it also requires organising within them. Hyper-exploited workers in Amazon warehouses should be the locus for the organising efforts of major unions. Over the longer term, we must push for the acceleration of a process some have argued is impossible – the vertical organisation of workers throughout the supply chains of particular corporations.
This requires not simply cross-sectoral, but international solidarity between workers. Clearly, we are a long way from such a goal – but it is still our best hope for curbing the monopoly power of the corporations that exercise so much control over all of our lives.
Grace Blakeley is an economics commentator and author of Stolen: How to save the world from financialisation.