Corporate Rent-Seeking, Market Power and Inequality: Time for a multilateral trust buster?

Policy Brief No. 66

Income inequality has been rising globally in recent decades, posing a serious challenge to economic growth and stability. Discussion initially focused on widening income and wealth gaps across households and population cohorts but has recently shifted to the long-term fall in the labour share of income, including in many developing and emerging economies since the 1990s.

Explanations of this trend have to date been dominated by a “textbook story of globalization and technology”, a narrative that ignores the role played by market power and corporate rent-seeking in widening income inequality.

Growing public concern over the significant rise of large technology companies, the continued excesses of financial rentierism and the proliferation of abusive tax-related practices by large corporations has led to a renewed interest in how private corporate interests prevail over public interests of inclusiveness, higher income equality and sustainability.

Based on a new firm-level database on developed and developing countries, this policy brief discusses recent trends in the evolution of non-financial corporate rents and their core policy implications.

Key points:

  • Rising market concentration and corporate rentierism in core sectors of the global economy are a major driver of growing global income inequality.

  • In 2009–2015, the surplus profits – due largely to rentierist profit strategies rather than productive investment – of the top 1 per cent of publicly listed firms in a new UNCTAD firm-level database for 56 developed, developing and transition economies represented 55 per cent of recorded operating profits.

  • Measures to curb abusive business practices should include a review of the United Nations Set of Multilaterally Agreed Equitable Principles and Rules for the Control of Restrictive Business Practices and of bilateral and megaregional trade and investment agreements

16 May 2018