| [..]I think tech companies may have something to do with it too.
These companies basically create massive book assets (and income streams) without requiring much capital, or being capital constrained. John Van Reenen talks about this in this paper [1]. He has been looking into how and why the giant companies have been concentrating all power in their market : Amazon, Google,... His hypothesis is that to become a giant company you used to need capital to buy the best factory and the best machines but that nowadays to become big you need to have the best version of intangible capital : proprietary software, users' data,... Markets become winner takes all and this creates the rise of "superstar companies". To become a giant company you can't just dump money at the problem anymore to build, say, a new factory. The only way to dominate search is to have Google's tech along with users and the data they generate. To become a retail giant you invest heavily in logistics and inventory control management. This has several consequences : - You don't need to borrow mass amount of money to become big. - Changing the interest rate doesn't have as big as an impact as before (if you don't need large amount of capital to grow big, making money more expensive won't prevent companies to grow big). - wages inequality rise (the few workers that produce the intangible capital in the have high wage while wage become stagnant for the rest) [1] Increasing Differences between firms:
Market Power and the Macro-Economy http://mitsloan.mit.edu/shared/ods/documents/?DocumentID=504... |