Should corporations be prevented from getting too big?

Great Debates
1

Assuming a society is generally operating under a capitalistic framework with some regulations, should that society try to limit the size of corporations? Say, through soft caps like progressive corporate tax rates up to 99%, or manual interventions like regulatory antitrust breakups, or whatever viable approaches there might be?

Today, it’s companies like Google/Alphabet. Yesterday it was Microsoft, last century it was the Bells, and the railroads before them.

Should these companies be broken up now… earlier… later… never?

Should the government only intervene if that company threatens competition, or whenever it reaches a certain size (by what measure? revenue, market cap, # of industries it’s dominant in, # of employees…)?

2

What do you mean by “too big”?

An arbitrary cap is pretty meaningless and dumb. I see people complaining about the concept of a billionaire, and I find that entirely silly - my buddy from high school was a billionaire (in that he bought a few billion Zimbabwe dollars in 2008) so obviously the thing that’s problematic is not having a bank balance with too many zeroes in and of itself.

Antitrust breakups on the other hand are necessary to the functioning of any capitalist market.

They should not be broken up just because they are big and big is bad or whatever.

In areas where these companies exert so much control over a particular industry or product that they are able to use anticompetitive practices to enrich themselves at the cost of the overall market’s efficiency, yes, they should be broken up.

When it threatens competition. Anything else is arbitrary and counterproductive.

A company with a small market share can do anticompetitive things that should be punished even though they are small. And a relatively big company can be relatively well behaved (especially if it’s heavily regulated) though above a certain market share you’re inherently anticompetitive.

3

The short answer is no. The longer answer is who gets to decide what’s too big, and how are you going to enforce such a rule if it ever existed?

4

Yea, when there is a virtual monopoly, something needs to be done. Consider the breakup of the Bell System (AT&T).

But if there’s healthy competition going on, I agree with others that a corporation shouldn’t be prevented from being “too big” simply because they’re too big.

5

yes, this is why we had so many anti trust battles and laws passed.

6

I tend to agree this is where the line should be drawn. A healthy economy needs free market competition. Any company that gets big enough to interfere with the working of a free market should be broken down into competing entities.

But I don’t see a need for a general limit on size.

7

Can anyone give me an example of a massive mega-conglomerate that isn’t engaging in anti-competitive behavior and that doesn’t have an unfair market advantage because of its scope?

I mean, my understanding is that the answer to “how on earth would we ever enforce this?” is that we used to enforce it just fine. There was a popular regulatory precedent in the US that the size of a corporation represented an inherent threat to the common good. This was before the tech cartels took over and achieved full regulatory capture. Now anti-trust laws are being weaponized by the cartels to crush the competition.

Which seems like a pretty strong reason to discourage businesses from getting too big.

8

How do you define corporation? How do you define big? Does Fannie Mae count? Freddie Mac? JP Morgan? Bank of America? The Hongkong and Shanghai Bank? BlackRock? Vanguard?Taiwan Semiconductor?

I mean, until 1684, the colony of Massachussets was a private corporation with around 40,000 people, around 1,000-2,000 shareholders with voting privileges, and an economy that just transitioned from the Puritan model (morality demands a just price) to a merchant-driven free market economy.

~Max

9

Lots of laws in business require a judgement call and/or setting arbitrary lines. What’s “negligence”? What’s an “unfair” contract? Or in criminal cases, what is “reasonable doubt”?

Indeed my job right now involves working out if contractors should be taxed as separate organizations, or as employees, and it’s just based on a long list of indicators. The “definition” of a contractor that should be taxed as an employee would be about 1000 words long.

It’s not a good argument against having antitrust laws.

10

This is sort of the problem with that sort of leftist anti-capitalist ideological thinking. Declaring things as inherently “bad” because they are “too rich” or “too big” without really clarifying what societal problem you are trying to solve.

Anti-trust regulations have been mentioned already.

Large companies often have economies of scale which gives them a market advantage with mass-produced products. It’s why a Ford plant can make cars a lot more cheaply than you can make one in your garage.

Similarly, some industries are by their nature capital-intensive. It’s why you don’t see too many competitors for Boeing and Airbus forming in people’s garages

11

Yes. Corporations act in the private interest and we have a public interest in not letting that happen.

12

Won’t somebody please think of the billionaire corporations?
They have to lobby furiously to keep their keep their tax breaks and prevent basic worker and environmental protections from creeping in.

13

The older I get, the more convinced I am that wealth disparity, either with individuals or corporations, is itself a root problem.

Consider a small community of 100 people all relatively equal in wealth/income; everyone’s got a job, and 10% of the community does residential construction. Anyone needs a house built, and these 10 people are able to build a reasonable sized one in 3-6 months for a reasonable price.

Let’s say that 3 of the people in this community get together and build a better mousetrap. The community is happy, they all start buying those mousetraps, and the 3 people are able to amass a bit of wealth. They choose to spend their wealth on big houses; each house takes 4 times as long to build but it’s 4 times as fancy. Problem is there’s only 10 people in residential construction, and they’re going to go where the money is, so they become experts in big houses. Now the people who want reasonable houses have to compete with the 3 wealthy people. Housing prices go up, more people get into construction to try and compensate, meaning other work doesn’t get done.

Is this good for anyone besides the 13 people who are either getting a big house, or getting paid better for building bigger houses? The answer is no, IMHO – the mere act of having that wealth means that those 3 people are able to adjust the societies priority in a way that benefits them but not society. If the people decide that the need a water filtration plant built, it’s going to be even more expensive because there’s a shortage of construction workers.

If we limit how much those 3 people (who maybe have formed a corporation) can amass in the first place, then maybe their houses are only 10% better instead of 400% better. The society’s ability to allocate labor is better aligned with the society’s needs as a whole.

All that to say, I don’t think there’s any benefit to letting any corporation amass society-altering wealth. Pin it to profits, pin it to assets, pin it to market share, whatever, but limiting the impact of corporations is a positive in its own right without worrying about specific anti-trust practices.

ETA: Or, what @Sitnam said in 1 sentence.

14

To be fair, the title of the thread is a bit provocative and invites obvious retorts about how big is “too big”.
But I think for many of us, it is not about setting some arbitrary line. It is more that there are such things as anticompetitive practices, and regulations that favor corporations very much to the detriment of society. I don’t believe that the divine hand of the market is either perfect nor immediate.

And while there is no maximum size for a corporation, the bigger the big fish get, the more we can suspect we have set the level of taxation, regulation and antitrust incorrectly.

15

What if those three people invented a way to build giant houses for the cost of a regular house?

16

There is also the concept of a company becoming “too big to fail”. The term gained popularity with banks during the financial crisis as it was determined we couldn’t let the market simply allow them to go the way of Lehman Brothers and Bear Stears because they employed too many people and were so intertwined with so many other entities that their failure would have massive repercussions across the economy.

But other than anti-trust legislation and laws to protect workers and the environment and whatnot, I don’t know that an arbitrary cap on market cap is the solution.

17

Why would you think mousetrap builders know how to build houses more efficiently?

18

I think there’s an easier way to frame it. What’s better for society, one billionaire, or 1,000 millionaires? The billionaire isn’t going to buy 1,000x as much house, cars, iPhones, TVs, food, or anything else. So that extra money just goes into the hoard. So I actually tend to agree that we shouldn’t have any billionaires, not only because it concentrates too much money in too few hands, but it also concentrates too much power in those few hands.

And if it’s too big to fail then it’s too big to exist, at least in its current form. The recession bailouts should’ve included state ownership of a percentage of those companies in proportion to how much money they were being loaned. After some time period the company could buy back those shares I suppose, but the deal would need to be structured extremely carefully to prevent that from becoming a big loophole. Otherwise those companies should’ve been broken up into smaller entities that were no longer too big to fail.

19

I don’t know. Maybe they just make their mousetraps much bigger and not escape-proof? Maybe the people in this scenario are tiny.

20

Thomas Jefferson, is that you?

Seriously, as mentioned above, who decides what’s too big?

I’ll say this, though, as much as I dislike Jeff, I do like my shit cheap, delivered the next day and shipped free.