A premise of our thinking about prospects for a moral capitalism is restraint on power – restraints suggested by the moral sense, restraints from market preferences and restraints from law. As in most things moral, personal character and good leadership values are indispensable drivers of responsible behaviors. Comfort with restraint is a disposition of character most conducive to moral outcomes.
Accordingly, restraint of market power is a necessary check and balance in the constitutional arrangement of capitalism. In the U.S., thinking more favorably about more rigorous enforcement of antitrust laws is on the rise.
From 1981 to 2017, antitrust cases filed by the U.S. Department of Justice decreased 61%, while mergers and acquisitions, a key means of consolidating private market power, increased by 750%.
I also just read of the drugmaker AbbVie buying its rival Allergan for $63 billion. As a business strategy of growth by merger, AbbVie had bought Pharmacyclics for $21 billion in 2015 and Stemcentrx for $10 billion a year later.
Previously, Bristol-Myers Squibb bought Celgene for $90 billion, Pfizer bought Array BioPharma for $11.4 billion and Eli Lilly bought Loxo Oncology for $8 billion. How is declining competition in drugs good for consumers?
In many industries, a handful of firms now dominate sales.
I have read several academic articles concluding that increased concentration explains recent trends in wage stagnation, rising economic inequality and sluggish productivity.
In step with 1980s economic theory that made a firm primarily responsible for making short-term profits for shareholders, thinking about having too much or too little market power gave priority to making money from consumers. If a merger had advantages for consumers and the market approved of its prospects for enhanced share value, it was held to be a good merger beyond the reach of antitrust laws.
Just as we are now moving on from the theory of the firm as a cooperative enterprise funded to make profits, we are on the cusp of moving away from the theory that bigger firms are better for society.