Institutional economic domination

Undue institutional concentration of investment power
Inequitable consolidation of financial power
Corpocracy

Nature

An excessively concentrated degree of investment power is in the hands of very few, very large institutions. By virtue of their size and by virtue of the pressure that they are under to provide performance over a very short time period these institution have adopted stock exchange trading policies which can disrupt markets, because they are not counterbalanced by other types of investors who may be operating under different performance criteria or have different perceptions of value. The traditional balance between large institutions and individual investors, between short-term speculators and long-term investors, between occasional investors and regulars, which has always produced a degree of market equilibrium, is gone.

The complexity of modern stock markets and the speed at which they interact are beginning to alienate the individual investor, who feels he is incapable of coping with that complexity on his own. He is thus at a considerable disadvantage to the professional investor who has all these tools at his disposal. The alienation of the individual investor from the market tends to be followed by a certain alienation. If the individual feels he no longer has a direct stake in the economy and is forced to delegate his ownership and decision-making power to a large faceless, unaccountable institution, that leads to disillusionment with the entire system.

Background

The global significance of institutional economic domination emerged prominently during the post-colonial era, as newly independent nations observed persistent disparities in economic power rooted in international financial institutions and multinational corporations. Scholarly attention intensified in the 1970s with analyses of dependency theory and critiques of structural adjustment policies, highlighting how entrenched institutional frameworks perpetuated unequal economic relationships. Subsequent decades saw increased scrutiny of global governance structures, revealing the enduring influence of dominant economies over international economic decision-making.

Incidence

According to a 2001 study by the Institute for Policy Studies, 51 of the largest 100 economies in the world are corporations, not countries. This conclusion is based on a comparison of corporate sales and gross domestic product. Put in economic terms, this means that General Motors Corp. is bigger than Denmark, IBM is bigger than Singapore and Sony is bigger than Pakistan.

"Free trade" goes hand in hand with the dominance of Trans-National Corporations (TNCs) in trade. It is reported that with emerging globalization, TNCs have quadrupled in number from around 7,000 to 44,000, including also the emergence of the superconglomerates which have increased concentration of economic power in industrial and economic sectors. TNCs control a full two-thirds of world trade with one third of trade actually intra-TNC transactions.

Claim

Hence, as the Pope remarked so discerningly, "economic domination has taken the place of the open market. Unbridled ambition for domination has succeeded the desire for gain; the whole economic regime has become hard, cruel and relentless in frightful measure." As a consequence, even the public authority was becoming the tool of plutocracy, which was thus gaining a stranglehold on the entire world. (Papal Encyclical, Pacem in Terris, 1963)

The most dangerous G7 move is to transfer the Multilateral Agreement on Investment (MAI) to the WTO, as it would give unprecedented powers to foreign investors to enter any country at will and prevent states from protecting their national interest. The WTO will acquire even more power once the TNCs and G7 countries succeed in injecting new issues on investments, competition, government procurement, environment and labor into the WTO.

Counter-claim

The notion that "institutional economic domination" is a pressing problem is vastly overstated. Institutions exist to provide structure, stability, and efficiency in markets—not to oppress or dominate. Claims of widespread economic domination distract from real issues like innovation, productivity, and opportunity. Focusing on this so-called problem only fuels unnecessary suspicion and undermines the very systems that have enabled unprecedented prosperity and progress. It is simply not a significant concern.