4 Can powerful firms be good for us?

The governments of market-based economies, in western Europe and north America, used to be suspicious of “big business”. Although firms’ growth into large corporations could be a sign of their success in making product that consumers want, size also gave firms power that could be used against the public interest. Corporations that dominated their market could start to sell inferior, higher-priced products without fearing competition, and those that made large profits could use these to influence the political process. Governments responded by setting up competition regulators (also called anti-trust authorities in the US), with the power to punish corporations for anti-competitive behaviour and even break them up.

But in the past half-century, such ‘trust-busting’ interventions have become a lot less frequent, even though the largest firms appear bigger and more powerful than ever before. Has stronger competition, helped by opening economies to international trade, ensured that even very large firms are now beneficial for the economy?