Daily chartCorporate concentration
The creep of consolidation across America's corporate landscape
PROFITS are an essential part of capitalism. They give investors a return, encourage innovation and signal where resources should be invested. Their accumulation allows investment in bold new ventures. But high profits across a whole economy can be a sign of sickness. In America, corporate profits are at near-record highs relative to GDP. As our briefing this week explains, there are a number of reasons for this. One factor is the creeping consolidation of industries in recent years.
Using America’s five-yearly economic census, The Economist has divided up the American corporate landscape into 893 individual industries: from coffins to credit cards. Between 1997 and 2012 the weighted-average share of the top four firms’ revenues has risen from 26% to 32% of the total.
Concentrated industries, in which the top four firms control between a third and two-thirds of the market, have seen their share of revenues rise from 24% to 33% between 1997 and 2012. And just under a tenth of the activity takes place in industries in which the top four firms control two-thirds or more of sales. While concentration does not of itself indicate collusion—America’s regulatory environment acts as a barrier, too—it does suggest that America needs a heavy dose of competition.
