covid 19 pandemic
Economics, Non Recipes, Politics

How big corporations and the government use COVID-19 to their advantage

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The Covid-19 pandemic has once again shown that, despite all the tragedy involved with people losing their lives, events like these are shamelessly exploited by big cooperations as well as the government. In the end, a great majority of the population will not only lose financial assets but also personal freedoms and human rights. Yet, huge cooperations will be the big winners of this crisis which allows them to strengthen their market position to attain immense profits in the upcoming decade.

The big players get saved by the government because they are “too big to fail” whereas small companies end up bankrupt. But should corporations really become too big to fail? Isn’t this inherently bad because it creates dependency and bears a high risk? We should’ve learned from the 2008 financial crisis that there is no guarantee for economic growth and that sudden recessions happen even for no reason.

Yet was any of the big players prepared for a huge crisis? No, because as soon as the economy goes down big cooperations drop their strictly capitalist perspective and become socialist. Now, it is suddenly the community that is supposed to save them. But as soon as the company becomes profitable again, there is no giving back to the community. Then the profits will be privatized in a strictly capitalist manner.

In the Western world, we allow companies to work under strictly capitalist rules in times of growth without the risks that are associated with such a system. In a strictly capitalist system, the state doesn’t save your ass if you go bankrupt. But because there are so many jobs associated with these mega cooperations, and there is such an extensive entanglement with other industries, big players are not allowed to fail by the government.

Small business closed due to the covid pandemic
Small businesses are the big losers of the Covid-19 pandemic.

Megacorporations profit from financial crises

The best insurance against any financial crisis nowadays is to get too big to fail. Everyone who is not big enough gets sacrificed by the government. It doesn’t matter if you own a barbershop, coffee, or run a small handicraft business, the government will sacrifice you. Because there are usually not many jobs associated with your business. And also because after the crisis, someone else will fill the market gap left by you.

The government always promises to better regulate megacorporations after financial breakdowns so that there is no such high dependency on them. Yet that doesn’t happen. Instead, these megacorporations profit from the crisis because smaller competitors get wiped out of the market. Instead of many small competitors, many key industries are dominated by a few megacorporations.

For example, take a look at the food and beverage industry which is almost completely dominated by 10 megacorporations that own all the popular brands:

https://s3.amazonaws.com/oxfam-us/www/static/media/files/Behind-the-brands-illusion-of-choice-graphic-2048x1351.jpg
The big players in the food industry and their associated brands. Source: Oxfam.

Another example is the auto industry which is dominated by 14 megacorporations:

These 14 Companies Control the Entire Auto Industry
The auto industry is dominated by 14 key players. Source: Business Insider.

Another example is the Alphabet conglomerate. I’m sure every one of my readers uses at least one of their products or services.

https://upload.wikimedia.org/wikipedia/commons/a/aa/Filiales_d%27Alphabet.png
The Alphabet conglomerate. Source: Wikipedia.

The flaws of unregulated capitalism

The formation of a few megacorporations that dominate the market is a typical syndrome of late capitalism. Smaller players get bought by the big players or they get outcompeted by larger corporations until they go bankrupt. The way to win the game of free capitalism is to obtain a monopoly that gives you the dominance of a market without competition.

Of course, everyone knows that monopolies are harmful. Without competition, there is no innovation and the monopolist has the power to exploit others. That is why there are anti-monopoly laws in place.

However, problems start to appear long before a monopoly is obtained. The bigger a company grows, the more people are involved in it. The more people are involved in it, the more fatal it gets if the company fails. Once a company has reached a certain size, it is too big to fail. That is when the cost of letting the corporation go bankrupt is higher than the cost to save it.

Big corporations offer employment for many people, yet they also hinder new startups from entering the market in the same niche because it is impossible to outcompete the big cooperations in their key business. And even if a start-up is successful it often gets bought by one of the big players over time.

google search engine
Google is the dominant internet search engine. The company’s market dominance goes as far as the term “searching for something on the internet” is synonymous to the term “to google something”.

The older an industry or market gets, the less diverse it usually gets. If a technology is new, many startups might be in competition with each other. However, over time, most of the competitors will go bankrupt while a small minority succeeds. This small minority will then grow into the big corporations that dominate the market.

If you were to start an e-commerce business nowadays that you want to set up to compete with Amazon: forget it. No startup has the resources to compete with one of the world’s most powerful corporations. You cannot beat Amazon in its key business anymore. Amazon has grown too big to face serious competition.

How big companies grow bigger and bigger with every financial crisis

Financial crises like the one during the Covid-19 outbreak are fatal for market diversity. The biggest players get saved by the state while the smaller competitors get wiped out of the market. This results in big gains for the megacorporations as soon as the market recovers.

Yet the next crisis will inevitably follow. We never know exactly when the markets will crash again. All that is sure is that we will never enter a phase of uninterrupted growth. But even though big corporations are well aware of that, they don’t prepare for a financial breakdown. They know that the cost of letting them go bankrupt is higher than the cost to save them.

It’s a vicious circle. Crisis after the crisis, the megacorporations will be saved and come back stronger than before the crisis. That is unless the system collapses at some point if the state runs out of money to save its megacorporations.

Specialization is a fundamental principle of capitalism. Everyone does only what he is most efficient at. Labour is cheap in developing countries which is why most of our textiles are produced there nowadays. Developing countries specialize in manufacturing jobs and manual labor whereas developed countries specialize in research, development, and service offerings.

Office worker
Many jobs in Western countries are not in manufacturing anymore but the service industry.

This obviously has the advantage that we in the Western world can buy cheap consumer articles from East Asia. However, it also poses many risks. We are dependent on long supply chains that are very fragile. If a war or pandemic breaks out then we are fucked.

For example, many pharmaceuticals are nowadays produced in China. During the Covid-19 pandemic, supply chains were suddenly interrupted so that Germany was in fear of running out of antibiotics. The antibiotic industry is nowadays in control of a few megacorporations outside of Europe.

Whoever becomes overly dependent on others bears a high risk

Germany cannot exist as an independent country anymore. All over the world companies rely on others that the supply chains will never be broken. Yet you can never be sure that we will always live in times of peace and economic cooperation.

Some people say that a strong dependency on each other guarantees peace because, in the case of a war, everyone will lose. However, we can never be certain of that. Economic hardship has never prevented a war in world history.

Supply chain
Modern supply chains are long and fragile.

Donald Trump often gets criticized as an isolationist. Yet he is right when he says that manufacturing jobs need to come back to America. He is also right that free markets don’t profit anyone except the large megacorporations. Free trade deals only make it more profitable for big companies to set up their corporations in tax havens like the Caribean islands and outsource production into third-world countries.

Isn’t it better if we produce fewer things of higher quality in our own country? Yes, then the prices for consumer goods might increase sharply. And yes, we might be more limited in the number of goods we can purchase. But overall, do we need new clothes every three months or a new flat-screen TV every year? Do we really need canned tomatoes from China if we can grow and process them in Europe at a slightly higher price?

Our current system relies on consumerism to obtain pleasure and lead a happy life

The Western world has been transformed into a very consumerist society. It is a major hobby of many people nowadays to go shopping. We buy stuff not because we need it but out of pure boredom. But the amount of happiness we get from purchasing a good is short-lived. So we keep buying stuff to satisfy our cravings.

Nowadays, some people claim that they are anti-consumerist and rather spend their money on adventures and memories. With adventures, they often mean traveling or visiting some kind of event like, for example, a concert. But that is consumerism too. While traveling, we are consuming the atmosphere and environment of our travel destination. We pay for the flight tickets, hotel rooms, tour busses, entrance tickets, and food. The impressions and happy memories associated with our travel trip are what we consume.

Traveling people at the airport
Even though many people don’t acknowledge it, traveling is also a consumerist activity.

There is nothing wrong with consumerism per se. I love it to consume things too. However, we should also cherish times in which we act non-consumeristic. The Covid-19 crisis has led to the situation that traveling was suddenly restricted for the German population. Ever since the crisis started, traveling was one of the most discussed topics in Germany.

At first, the government encouraged people to travel around Germany. Then they opened the European borders to allow Germans to travel around Europe. You can often hear people say: “What do I work for if I can’t even go traveling during my vacation?”

People suddenly realized: Working hard and saving money is only worth it if you can use it for consumption. If there is no way to spend your money on pleasure, it becomes worthless. We work harder and harder every year just to be able to increase our consumption levels.

Yet consumption alone doesn’t produce happiness in the long term. We don’t need to increase our consumption every year. But that is what the system is built on. We work harder every year because we draw pleasure from consuming things. But just like a drug, the more we consume, the less pleasure we derive from it. That is why we need to consume more and more things over time to make up for the drop in pleasure.

With consumerism, less is more. I don’t want to live a life without any consumerism. That would be very restrictive. However, I don’t fall into a deep mental crisis just because there is nothing to consume at a given time. If we can’t travel for one or two years because of Covid19 – so what? Then our next trip will probably be one of the most pleasurable events.

The law of diminishing returns is a very real thing. The more we have of something, the less we are able to derive pleasure from it.

Consumers at a shopping mall.
Pure consumerism doesn’t provide happiness in the long term.

Governments take advantage of the corona crisis

Besides the economic impact, Covid-19 also impacts our privacy and personal freedom. Whenever there is a crisis, governments all over the world use it to justify measures that would otherwise not be accepted by the population.

After the terrorist attacks on the Christmas market in Berlin in 2016, the German government decided to ban the sale of anonymous sim cards in Germany. Whoever wants to buy a sim card in Germany now has to show his personal id card and get verified. The government propaganda wants you to believe that this is a measure to prevent future terrorist attacks. But it is not. It was just a convenient way for the German secret service and police to extend their monitoring possibilities.

After riots in Stuttgart in the summer of 2020, the city now starts video surveillance by the police in public places. Without the riots, this would not have been accepted by the general population. However, now it is hard to argue against it for critics.

video surveillance camera
Governments take advantage of terrorist attacks and riots to increase video surveillance.

The American government used 9/11 to start a senseless war in Iraq. Recep Tayyip Erdoğan used the 2016 Turkish coup d’état attempt to change Turkey’s parliamentary system of government into an executive presidency.

And the Covid-19 crisis now makes it easier for governments all over the world to establish more government control and surveillance. All the Covid-19 tracking apps weren’t just created because governments are worried about their citizens’ health. Even though they might be harmless in their current state, their usage can easily be extended. I can promise you that they won’t disappear once the Covid-19 pandemic has passed by. Years from now we might then be forced to install tracking apps on our phone under the premise of “national security”.

Covid-19 is another step towards a cashless society

The Covid-19 crisis also comes in very handy for banks and the big tech companies who offer cashless payments. The German government and retail industry have urged customers here to pay cashless because it is more “hygienic”. How cashless payment is more hygienic than every customer touching the payment terminal is still a mystery to me.

The percentage of people in Europe that prefer cash payments over cashless payments has steeply declined from 43 to 36 percent since the beginning of the corona crisis. One of the long-term goals of many European countries and the finance industries is to severely limit or even abolish paper money. A common argument against paper money is that it can be used for criminal purposes.

Payment with card
Cashless payments are on the rise worldwide.

However, a cashless society also severely restricts the privacy of the population. All our monetary transactions can be tracked that way. And not just that. Banks and financial institutions will massively gain power in a cashless society. If you don’t have some kind of bank or governmental deposit account, you would not able to process payments. And if your virtual money gets frozen, you suddenly have no more access to money.

Nowadays, you have the freedom to keep cash at home. It will always be accepted. Cash cannot be frozen like virtual money.

While populations worldwide suffer from the consequences of the Covid-19 pandemic, we shouldn’t forget that, in the aftermath, the ones profiting from this crisis will be the megacorporations as well as governments which are looking for ways to extend their control of the population.

Resources:

Drohen Medikamenten-Engpässe?

Die Krise als Hebel für Überwachung und Kontrolle

Corona beschleunigt Abkehr vom Bargeld

Thiele: Forderung nach kompletter Bargeldabschaffung ist unangemessen

2 Comments

  1. Michael O'Keefe

    Tim,

    As an avid sci-fi reader (and now into historical novels too), more now than ever, it seems we have stepped into the pages of some science fiction novel. One of the dark, dystopian futures, like Zamyatin’s We, Philip K. Dick’s Blade Runner (Electric Sheep) or Minority Report. Sadly not some interesting world like Narnia or Middle-Earth.

    The mega-corps, with government backing, are like the carpetbaggers after the U.S. Civil War, exploiting the crisis, destroying small businesses while benefiting giants like Amazon. The U.S. especially seems to have turned into some quasi-socialist state, as Chamath Palihapitiya recently said.

    This has been a many years / ongoing change, not overnight, where your options for buying products, especially household products, were like the bad-old-days of beer in the U.S.: Budweiser or Busch. I remember an epiphany when I realized that this lousy tasting, watered-down beer, was perhaps a product of another heavy-handed government insanity (prohibition) and also no doubt due to the horrible (in my opinion) main ingredient: corn! This reminded me of stories about Soviet Russia: we have three glasses, small, medium, and large. Lots of choices! Or the absolute stagnation / lack of innovation with respect to cars, take the Trabant. (Amazing car in 1950, not so amazing nearly unchanged 50-60 years later!)

    Hopefully the small breweries, one of the success stories of recent years, will hang in there (though even now, they have been bought up by bigger conglomerates, for example Samuel Adams beer. I would imagine the beer map would look much like the car map in your post.

    Under communism, with central planning, Hungary was the country that made the buses (rather good buses, Ikarus I think) sort of like today’s time, where an entire city in China might be the sole place where clothes hangers are build. So to your point about tomatoes, it is simply astonishing to find _garlic_ from _China_ of all places! And then you go to the farmer’s market, where we are fortunate enough to find a farmer who grows all sorts of amazing varieties of wonderful garlic. Italian garlic, Romanian, German, and so on. (At least, I hope he is still at the market, haven’t seen him yet. Happens to be a chap of German descent, come to think of it.)

    Since when did we outsource production of garlic to CHINA!? Astonishing. To me, one of the best things Trump did was not sign the TPP, which would probably work out as well for the average U.S. citizen as well as NAFTA worked out for the Mexicans, i.e. benefiting a few elite bankers, but destroyed the Mexican farmers, and with it the wonderful varieties of corn. (I’m not all against corn, it just should not be in beer.)

    Since this is a „Food for thought“ blog, one aspect that is interesting, and frightening, is the possibility of food shortages. Australia seems to be a focal point. How on earth, with all our advanced technology, can an entire country actually run out of rice? Then surely the Big Ag centralized farming system is broken (Stalin proved it) and we should all go back to small plots of land.

    This may appear to be a coldly calculated, well-planned, well-researched War Gamed effort, but it also strikes me, every time I see these heavy-handed (surveillance) tactics, the last gasp of a dying empire. What is China so afraid of the Uighurs for? Is it so easy that this small minority could topple their empire? They seem to be flailing at real and imaginary enemies, like a mighty Rome surrounded by the Visigoths, the Celts, Huns and so on. The U.S. giving way to China? Or are they both on their last legs? Weren’t they prophesying the future was the BRICS, Brazil, Russia, India, China?

    No idea what will happen, but one idea I always keep in mind. When Columbus first visited the Americas, the native Indians treated him like a god, because there was a prophecy that a god would come from the east. But the American Indians were told to remember their old ways, because some day, this god would be gone, and with it all the changes, and they would have to go back to their old proven ways.

    I guess we all follow that in some way. My wife makes plum jam, just like her mother used to make it. (Her apricot jam was heavenly.) And I suppose, going back, just like her mom used to make it. And so on.

    Food for thought,

    Best,

    Mike

    • Thanks for your comment, Mike!

      Surely there are a lot of open questions for the future that are impossible to answer. I always hope that some smaller and more sustainable food businesses, that process locally grown ingredients, will begin to thrive and offer an alternative to the mass produced products of the big corporations that dominate the market. At first, it seems like we have a lot of choice in a supermarket. But once you look beyond the different brand names, it becomes quite obvious that only few corporations and people decide what we get to eat.

      We are nowadays at high risk for local food shortages not just because of the changing climate in various regions of the world, but also because our food is getting processed in fewer and much larger processing plants. If there is a harmful contamination with pathogenic bacteria, there is no alternative supplier for a certain product. It’s in my eyes also very risky to have all the livestock crammed up in mega-farms. If the animals catch a harmful virus, you often have no other choice than to kill all of them immediately. And if a threat remains undetected, consumers all over the globe can be harmed because the product is mass distributed all over the continent.

      I agree with you that the old ways are sometimes the best. With all the rapid change happening we shouldn’t forget or omit our roots and traditions. – Tim

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