When British farmers protested outside the Houses of Parliament earlier this year, they sent 49 scarecrows, after a survey had found that 49% of UK fruit and vegetable farmers said they expected to go bust within a year. The scarecrows stood in for real farmers, who are mostly too afraid to speak out. One farmer told campaigners they had grown 60 tonnes of salad potatoes for a large UK supermarket, only for the supermarket to suddenly cancel the order, leaving the farmer “financially screwed”. The arbitrary power that supermarkets wield instils fear, which the supermarkets leverage to impose take-it-or-leave-it fees and other unfair conditions on farmers.
The problem is our monopolised food system. Think of it as a vast profit machine shaped like an hourglass, with many food producers at the top, millions of consumers at the bottom, and a few dominant firms – such as giant supermarkets or global food traders – clustered at its narrowing neck, siphoning a cut from the passing traffic. This power ripples through global supply chains. Between 70% and 90% of commercial grain trading, for example, is now controlled by five giants, known as ABCCD: ADM, Bunge, Cofco, Cargill and Louis Dreyfus Company. Together, they handle the bread, cereals, meat and other food that lands on our plates.
Bunge now wants to merge with a rival firm, Viterra, to create a single company, giving farmers even less choice as to who they can sell their produce to, and giving the combined firm more power to pay farmers less. Research from the University of Saskatchewan estimates this merger would cut $770m from annual farm incomes in western Canada alone. These two firms, incorporated in the tax havens of Switzerland and Jersey respectively, each operate in about 40 countries. So the annual damage, including to British farmers, would probably be in the billions.
This monopolistic power hurts consumers too. According to research by the economists Jan Eeckhout and Jan de Loecker, average global markups – the prices companies charge for goods above the cost of producing them – have risen from around 21% above costs in 1980, to 61% today. So a pizza that may have cost you £12 if markets had been as un-concentrated as they were 45 years ago, may now cost £16. Think of the £4 difference as a private monopoly tax that nobody voted for. Here, monopoly power is the connecting thread linking supersize corporate profits with consumer pain, in a phenomenon dubbed “greedflation”.
The sums involved are vast. Forthcoming research by Somo, an NGO that studies multinationals, estimates that the top 1% of listed firms enjoyed total markups of nearly US$7tn last year: 15 times the estimated annual tax losses to tax havens. More than 60 new “food billionaires” were created in the pandemic years of 2020 to 2022, according to Oxfam. Beyond food, the scale of the monopoly problem becomes clear. Mergers and acquisitions now average $3.5tn annually, McKinsey reckons: so the market for mergers is worth three to four times the US defence budget. In market after market, the neck of the hourglass is narrowing.
How did it come to this? The answer is that our regulators became blind to the threat of corporate power. From the 1970s they fell prey to a “consumer welfare” ideology, which argued that bigger companies were more efficient, and that these “efficiencies” would trickle down to consumers in lower prices and better products. As long as consumers were OK, they claimed, we needn’t worry about corporate power. As a result, breaking up companies fell out of fashion. Mergers were in. These pro-monopoly ideas were spread, ironically, by “free market” thinktanks. One result is that the European Commission, which has an undeserved reputation as corporate power’s most fearsome foe, has only blocked 14 of 6,500 notified mergers since 2005.
Yet all the evidence shows that this ideology is nonsense. Monopolists jack up prices, whether it’s our food, smartphones or life-saving drugs, and pocket the difference. What can be done? Historically, trade unions or civil society groups fought corporate power indirectly or from below, by seeking better tax and trade rules, for example, or stronger workers’ rights. These are all essential – but if we don’t also break power directly and from above, we will be like terriers yapping at the heels of giants. To do this, our regulators must block a lot more mergers – and break up firms that are too big.
Many people aren’t – yet – convinced. Won’t breaking up Amazon disrupt my shopping convenience? How would splitting Google or Aldi each into 10 mini companies improve my life? Think of breakups not as a hammer smashing perfectly good firms into pieces, but as a Swiss army knife.
Most dominant firms are sprawling conglomerates, rife with internal conflicts of interest, mischief-making business units and profitable chokepoints. Each can be carefully sliced, removed or unblocked; the resulting pieces can then be treated separately with, say, utility-style regulation, public ownership or more competition. Breakups are political: by curbing corporate power they can open wide space for governments to regulate, tax and police corporate behaviour.
Breakups are also more feasible than many think. The first regulator anywhere to break up a big tech firm was the UK’s feisty Competition and Markets Authority, which in 2021 forced Facebook to sell off the recently acquired online graphics firm Giphy – effective not just in the UK, but globally. There is plenty the UK can do at home too – such as investigate the supermarkets, and break them up if they drive half the farmers out of business.
International collaboration will help. And here the prospects are improving. In the US, where monopoly power has become a cross-partisan issue, regulators are waking up, and the authorities are now actively seeking to break up Amazon, Meta and Google, each in different ways. The EU, meanwhile, is threatening to break up Google. This would have been unthinkable just a few years ago.
Don’t let Bunge and Viterra merge: break them up instead, to release billions in monopoly profits back into our parched economies. The tides are shifting against corporate power, but not fast enough. We must now force the pace. Otherwise, we will fall deeper into the deadening embrace of the most powerful monopolies the world has ever seen.
Nicholas Shaxson is co-founder of the Balanced Economy Project, an anti-monopoly NGO
