Against recent attacks from the political left and right, widely followed US economist Tyler Cowen comes to the defence of big business. His reasons are wide ranging: he argues that they have been a progressive force for social change such as women’s and LGBTQ+ rights; that most people prefer to deal with larger businesses than smaller businesses; and that monopolies are unproblematic because they still price products competitively. Further, he sees markets as being long-term focused, enabling loss making companies like Tesla and Uber to survive. These positive attributes he juxtaposes with regulated industries such as healthcare and education, which he considers problematic. As for income inequality, the biggest gap is between the pay at superstar firms versus the rest. So, he argues that actions should be taken to encourage superstar firms rather than to break them down.
Why does this matter? Cowen provides a useful counter-balancing argument and suggests that breaking up big businesses may impede long-term growth. However, his most powerful examples are in Big Tech – outside of that sector, it’s less clear that big businesses are the paragon of efficiency and innovation. Indeed, part of the success of Big Tech has been the poor produces offered by existing big businesses (think Amazon vs traditional retail).
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)
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