In a very interesting op-ed on how China is not buying the world, Martin Wolf includes something I found very thought-provoking from a standpoint of our domestic economy:

Using data from 2006-2009, Prof Nolan concludes that the number of globally dominant businesses in the manufacture of large commercial aircraft and carbonated drinks was two; of mobile telecommunications infrastructure and smart phones, just three; of beer, elevators, heavy-duty trucks and personal computers, four; of digital cameras, six; and of motor vehicles and pharmaceuticals, 10. In these cases, dominant businesses supplied between half and all of the world market.

Similar degrees of concentration have emerged, after consolidation, in many industries. Much the same concentration can be seen among component suppliers.

Look at aircraft. The world has three dominant suppliers of engines, two of brakes, three of tyres, two of seats, one supplier of lavatory systems and one of wiring.

In the motor industries, as well as information technology, beverages and many others, the world has just a few dominant suppliers of the essential components.

If you want an explanation of the worldwide slowdown in economic activity which IMO has produced a worldwide slowdown in job growth, look no farther. Not technology. Not simple employer greed.


The question worth discussing is whether the consolidation that’s been going on is a force of nature or an artifact. I think the latter.

5 comments… add one
  • sam Link

    Antiartifact (read “libertarian”) theory:

    1. Collect underpants
    2. Consolidate all collectors of underpants
    3. Profit!

  • Red Barchetta Link

    I’m not sure what you are getting at, Dave, with “artifact.” Consolidation classically flows slow growth and/or inadequate returns to risk capital.

  • steve Link

    Was swamped yesterday, but this is actually a pretty important observation. I assume by artifact he means policy intervention by governments or crony capitalism, or, is this a natural endpoint for capitalism? I think it is where we end up with international capitalism. As tech matters more, barriers to entry increase. Companies that can consolidate effectively eliminate competition. Do the effects of crony capitalism speed this up? Sure. I think that, very broadly, we are seeing the Marxist critique of capitalism played out here.


  • By “artifact” I mean the result of human action, the result of policy choices as opposed to an inevitable result, the product of natural forces.

  • RB:

    I seriously doubt there are meaningful economies of scale after some relatively small size other than in heavy manufacturing. I have no doubt that $50 billion companies have economies of scale relative to $5 million dollar companies. I doubt that they have economies of scale relative to $1 billion companies.

    What they do have is increased leverage with politicians and a greater predisposition for governments to do business with them. As I’m using the term those are artifacts.

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