UN report says growing corporate market power is driving global inequality

7 June 2018: The UN Conference on Trade and Development (UNCTAD) has published a policy brief titled, ‘Corporate rent-seeking, market power and inequality: Time for a multilateral trust buster?’.

It notes that increased market concentration and corporate rentierism is driving global income inequality:

“In 2009–2015, the surplus profits – due largely to rentierist profit strategies rather than productive investment – of the top 1 per cent of publicly listed firms in a new UNCTAD firm-level database for 56 developed, developing and transition economies represented 55 per cent of recorded operating profits”.

UNCTAD believes that the UN’s Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices, and bilateral and multilateral trade and investment agreements, should be reviewed as part of ‘measures to curb abusive business practices’.

Even the International Monetary Fund accepts that the growing power and wealth of corporations in wealthy countries has led to a dangerous concentration of market power. The graph published on this IMF blog illustrates how the ‘average markups’ (a measure of market power) in advanced economies have increased by an average of 43 per cent since the 1980s:

An upcoming IMF working paper also confirms a negative relationship between the labor shares of firms, and the markups of firms. This means that the more market power that firms have, the share of revenue going to profits increases, while the share of revenue going to workers decreases.

This latest evidence of the enormous and increasing market power of global corporations supports our advocacy against giving these corporations greater legal powers to sue governments over domestic laws through including ISDS in trade deals like the TPP-11. The recommendations of the study show that governments need more, not less regulatory powers to address  growing corporate concentration of power and to tackle inequality.