Chris Milton
Let’s face it, business growth is all about one thing: getting more money out of consumers’ pockets and into company coffers. Why do it, otherwise?
And often growth goes hand in hand with competition as companies scrabble to increase their share of a finite market.
Trouble is, anti-trust legislation introduces a certain ceiling beyond which a business may not grow within a sector.
So to keep on taking money from consumers, a business has to start expanding in a different sector. Most of the time this means buying an existing company, which also happens to eliminate future competition.
Businesses often justify this by saying greater consumer value can be achieved through merging backroom processes and increasing purchasing power. Good for the consumer you may think .. or is it?
The Real Consequences Of Business Growth
Three things happen when backroom efficiencies are introduced:
- people lose their jobs, reducing the money in circulation, lowering living standards and reducing peoples’ ability to buy lasting quality;
- products are made from cheaper products, forcing consumers to buy several low quality items instead of one good quality one;
- innovation, competition and variety take second place as large companies concentrate on which common denominators they can sell for the greatest profit, eradicating consumer choice.
Are any of these consequences really in the public’s interests?
Destructive Competition Across Sectors
Take the growth of large supermarkets as an example. Not content with decimating the retail environment for food, electricals, health and clothing they’re now (in the UK) moving into restaurants, financial services and publishing.
Rather than bringing value to consumers, today’s practice simply eliminates competition, value and employment. Worse of all, it makes several industries reliant on a handful of companies, undermining the overall stability of an entire economy.
Government, bullied by big business, has allowed this to happen. Too many times during the financial crisis have we heard “this institution is too big to allow it to fail”. This means only one thing: businesses have grown too large.
A new framework is required which emphasises the need for a mutually supporting network throughout the economy alongside to support value driven competition within each sector.
Making Growth and Competition Good For All
As a first step, sectors need to be redefined or segmented, and businesses restricted to owning a certain percentage of spend in any one of these smaller packages. No company should be allowed to compete in more than, say, three of these new sector packages.
This will ensure an individual organisation cannot corner consumer spend in the way supermarkets or banks have. The same goes for service industries and B2B supply chain considerations.
The economic madness of biggest is best-est has to stop. The past of giant leviathans which can bring an entire country to their knees the moment they stumbles should be left behind. The future of small and agile , collaborative and competitive has arrived.
[social_buttons]What do you think? Is this the way for the economy to move forward, or should we count upon greater centralisation and consolidation across sectors to provide stability for the years to come?
Leave a comment below. We’ve had some great opinions throughout this series and I look forward to reading some more!
Picture Credit: “Working Together Teamwork Puzzle Concept” by lumaxart from Flickr under Creative Commons Attribution Share Alike License.
What is needed is for politicians to stop manipulating things to their desired ends, thus allowing markets to be decided by consumers and producers. Read Murray Rothbard at http://mises.org/literature.aspx?action=author&Id=299
I’ve been looking at Murray Rothbard’s work over the past few days, which is why it’s taken me a little time to reply.
I have a lot of sympathy with free marketeers but the question is always regulation. Markets have to be regulated one way or another: a complete absence of regulation is defined as anarchy 😉
Similarly, politicians will never be able to leave markets alone, any more than they can leave defence or the legal profession alone.
Why? Because these are all aspects of the society which they have been democratically elected to govern on behalf of the people.
Now, the system is by no means prefect, granted! However, I cannot see how placing markets outside the control of government will help.
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I’m not doubting what you say is true – but how can it be proven?
Your argument seems to be based on a false premise. Consumers GIVE money to companies. Governments TAKE money from people. Also you seem to base your argument on the fact that everything is a win lose (0 sum) situation. markets are not finite. If that were the case we would all be living at caveman standards. Free enterprise has shown that markets are not finite, they have been expanding and raising living standards since the idea of a free market came into being.
Companies grow large because they provide value to consumers. If they didn’t provide value no one would give them any money. and If they stop providing value people stop giving them money and they change or go out of business. Its not until you throw regulation in to the system that this process stops working. regulation makes it much harder for new competition to sprout up to take market share from the larger company that is no longer working as well as it could.
And governments arent bullied by anybody. When you have that many guns no one can mess with you. And too big to fail is politician speak for I have a ton of vested interest in this company, so I’m going to give other peoples money to them so I don’t lose any thing.
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