We Are The 1%

In the winner-take-all world of Big Business, the rich companies are getting richer and the poor poorer

- Peter Coy

Liberals have a blind spot about inequality. They decry disparity between individuals—the fact, for example, that the 10 richest people in America have more money than the bottom 160 million. But they overlook inequality among companies, instead viewing Big Business as a troublesome monolith. During the 2016 presidential campaign, Senator Bernie Sanders of Vermont occasionally tarred business with a broad brush, once saying the chiefs of large multinational companies “ain’t going to like me.”

The surprising truth is there’s as much inequality among large companies as there is among people. As with individuals, a handful of companies make the lion’s share of profits, while struggling companies do so poorly they actually destroy value for their shareholders and debtholders. In the middle is a stressed-out majority: unable to keep up with the best, while pressured by the desperate tactics of the worst.

Inequality in the corporate world isn’t new. Perfect competition—with millions of small, roughly equal businesses battling it out on a level playing field—was never more than a teaching device in intro economics textbooks. What’s new, though, is that the polarization is increasing. The rich businesses are getting richer and the poor poorer.

A 2018 study from McKinsey Global Institute analyzes 5,750 companies around the world that have $1 billion or more in annual revenue and account for roughly two-thirds of all global pretax profits. The institute—the think tank of the global consulting firm McKinsey & Co.—calculates that the best-performing 10th of the companies captured about 80 percent of all the economic profit in 2014 through 2016, up from 75 percent a decade earlier. The top 1 percent of the companies captured 36 percent.