[lbo-talk] Fwd: "new major companies to the fore, more commercial than industrial..."

Ralph Johansen mdriscollrj at charter.net
Mon Jan 21 19:52:36 PST 2019

-------- Forwarded Message -------- Subject: Re: Fwd: Re: "new major companies to the fore, more commercial than industrial..." Date: Mon, 21 Jan 2019 12:56:39 +0000 From: Tony Norfield <tonynorfield at gmail.com> To: Ralph Johansen <mdriscollrj at charter.net>

Hi Ralph,

Since September 2016 I have done an extensive study of these issues and the related companies. See the list of my blog articles at:




On 07/09/2016 18:13, Ralph Johansen wrote:
> Hi Tony,
> I just sent the following to you, I thought, and to the Imperialism
> discussion list names that I had collected, and then realized you were
> the only one not on that list. So apologies and here:
> Ralph
> -------- Forwarded Message --------
> Subject: Re: "new major companies to the fore, more commercial than
> industrial..."
> Date: Wed, 7 Sep 2016 09:06:47 -0700
> From: Ralph Johansen <mdriscollrj at charter.net>
> To:  Tony Norfield
> Tony, at the conclusion of the first vimeo recording of the first
> session 24JulyImperialism1 https://vimeo.com/175982962 you referred to
> what's new in the pipeline that especially interests you:
> "On the financial sort of thing, I would claim to have sorted that
> out; there's more things to talk about, and I think that's important
> as a dimension of the modern world and also in the way in which what
> Marx calls the form of value basically takes the form of financial
> power these days. That's all I've got to say on this. I think it's
> striking that the relatively new major companies that come to the
> fore, and that's in the US, and the ones with the biggest market
> capitalization, are more commercial organizations rather than
> industrial or anything else. I think that's a big feature of what's
> happening now.
> It's quite difficult to pin down without being descriptive. If you
> look at their annual reports, at newspaper reports, etc. etc. So, I'm
> just trying to think of a way to get my head around it which is not,
> you know, 'and another thing that Google did.' I mean, people know
> about this issue who read the papers. So, I'm just trying to think how
> to pose it theoretically. But, basically, it boils down to actual
> power, and it's essentially how huge a mass market domestically you
> can build up. And I'm quite certain about this, you're going to find a
> similar thing in China."
> ------------------------------------------------------------------------
> Since you mention China and the virtual certainty of similar goings-on
> there in the context, I wonder if you've yet had a look at this,
> particularly to the extent it calls attention to Jack Ma and the power
> he obviously has through his enterprise Alibaba Group Holding Limited,
> which I at least had not known of, a Chinese e-commerce company that
> provides consumer-to-consumer, business-to-consumer and
> business-to-business sales services via web portals; whose shares are
> actually sold through a Cayman Islands shell corporation, not in the
> Alibaba group, as China forbids foreign ownership of its companies;
> the world's largest retailer, with 80% of China's online sales; the
> highest IPO in history at $25 billion, and reaching out globally - so
> much so that Jack Ma and his company are jointly featured with host
> China's President Xi Jinping at the just-concluded G-20 meeting held,
> significantly, at Alibaba's headquarter city Hangzhou – "a tech hub
> excelling in information economy and intelligent manufacturing"
> (according to Wikipedia, "electronic information, more than 1,100
> software developers and business processing (BPO) enterprises, with
> major companies such as Motorola, Nokia and Siemens having established
> R&D centers there"):
> https://www.rt.com/op-edge/358326-g20-hangzhou-china-xi/
> http://www.chinadaily.com.cn/business/2016hangzhoug20/2016-09/05/content_26702731_4.htm#Content
> https://en.wikipedia.org/wiki/Alibaba_Group
> ------------------------------------------------------------------------

From Tony Norfield's recent blog entries. Tony's investigations are a valuable resource, an education on trends in today's world economy, building on his long experience in banking and developing insights from his recent book "The City." He notes how giant corporations have massively improved productivity in their areas of investment, while society becomes less able to be better fed, enable better mental and physical health or to find more leisure and time for most of us to enjoy life, while the burden of work for some increases as others are made unemployed, lives are disrupted, labor solidarity is deflected and the benefits of productivity go to a few.

I would add personal observation to this. My wife remarks how places like Kroger and Walmart appear recently to be cutting back on services, replacement of inventory, number of employees and hours of service; we speculate as to how much this may be due to the rapidly growing inroads of Amazon convenience, no driving, parking or in-store shopping hassle, free shipping, reduced overhead consisting mainly of warehousing and cost of free delivery to your door, catalog shopping online (Sears mail order redux) which Walmart-type outlets, with larger overhead, attempt to balance and counter with their own, less effective, efforts at online ordering and convenient parking-lot pickup, and the advantage of selective point-of-purchase personal shopping and try-on, and arguably easier return, refund and exchange without cumbersome re-packaging and re-shipment.

Tony writes:

"These reviews should offer some key points that illustrate the nature of imperial economics today ... insights for those interested in analysing imperialism ... will also be of interest to the more general reader who wants to find out how the world economy works."

Examples of a few of the observations, that I found instructive, mainly about the power of marketing and finance more and more overwhelming revenue from production - some well-known but placed in relevant context [he refers to these, especially in the case of Apple and its types as symptoms of "moribund capitalism," even as income, market share and corresponding power grow... in a context of capitalism’s propensity for wars and destruction, the monopolisation of many of the world’s resources by a few powerful companies and governments, and the oppression of hundreds of millions of people for whom being part of the capitalist world economy more often means a ticket for the treadmill rather than a path to progress.]:

"In the digital advertising world, Google and Facebook are the dominant forces, together having more than half the digital advertising revenues. Google has a much bigger share than Facebook, and also has a stock market capitalisation of around $650bn compared to Facebook’s at just below $500bn, helped by the fact that its system accounts for 90% of all Internet searches. But Facebook is a sizeable member of this giant duopoly ... Facebook has two big advantages over offline media. It can just provide a platform, and rely upon other people to produce the content that is shared on its system, rather than having to produce that content itself. It also has a more detailed view of the profile, likes and inclinations of its users than is possible for television companies or newspapers. This is the core value it offers to potential advertisers: not just a big and growing audience, but one differentiated by age, gender, location and likes ... Facebook had less than 500m monthly active users of its system in 2010; by mid-2017 it had hit two billion users. Even if one allows for duplicate/fake profiles and for company accounts, that is almost a quarter of the world’s population and the number is still growing rapidly. Those figures do not include many users of other Facebook-purchased companies, WhatsApp and Instagram, although there will be some overlap ... Facebook's growth has absorbed some of the advertising revenues of other businesses and helped undermine them. But it is a better example of capitalism’s conflict between the forces and relations of production. The forces – the development of an easy global transmission for all kinds of data, ideas and information – are channelled by a system that accumulates the personal and social information of billions of people for private profit. Facebook is basically an advertising platform, and advertising is intimately related to the rise of mass production and the generation of monopolies, even in areas of new technology."

"People like [Amazon] for its low costs and the efficient delivery of consumer goods; people hate it for its ruthless cost cutting, with the impact on warehouse workers, delivery drivers and any business that competes with it, from bookshops to electrical goods stores and many others. But the key thing about its business is not that Amazon aims to move into all markets for goods and services. Amazon’s business is to /be the market/. Looking for something? Check the price on Amazon! ... it hardly makes any profit. In the five years from 2012 to 2016, it made a loss in two of those years; in 2015 its net income was a mere $596m, although in 2016 that rose to $2.4bn. While these are big numbers to have in your personal bank account, they are peanuts for a major corporation. The 2016 net income was only around $5 per share, when the average price of a share in that year was $700, giving a return of less than 1%. Even this /potential/ return was negated by the fact that Amazon has /never/ paid any cash dividends on its common stock. But don’t shed any tears for Amazon’s capitalist investors. Despite the lack of dividend payments, they will have found the price of the shares they held rising rapidly. So they could turn a blind eye to the lack of regular income from the shares and instead marvel at the fact that Amazon’s share price has risen from less than $100 ten years ago, and less than $240 five years ago to over $1000 now. The capital gains from these moves have been dramatic, increasing the wealth of shareholders, if not directly their incomes. What has made Amazon attractive in stock markets is that its business has also been growing rapidly, recently at some 20-25% per year, with net sales of $136bn in 2016 ... Amazon’s business operations highlight many of the paradoxes of modern imperialism. It provides an efficient delivery of a wide range of goods and services to satisfied customers, but the workers involved in the process are stretched to the limit, and businesses competing with them are liable to come off badly, or may have to do a deal that undermines their viability. It exemplifies how economies of scale and good technology can provide low cost products to the mass of consumers, and how this also undermines previous areas of market privilege (books, music, specialist products, etc) from which sections of the population had formerly benefited. This is the ‘market disruption’ lauded by proponents of capitalism, but is one that inevitably leads to monopolistic power. For now, Amazon is valued by the stock market as a company that is able to use its huge scale and scope of business to eventually produce the required profits. Amazon does not necessarily want to destroy the competition, but to absorb other companies into the market system it has built."

"... the huge US market cannot be over-estimated as a key advantage for Amazon. Home to numerous millionaires and billionaires with spare cash to invest, a pool of skilled technicians and a large supply of pliable cheap labour, a relatively uniform system of commercial laws and secure property rights, and a population of over 320 million people with one of the highest per capita incomes in the world, it is no wonder that the US is home to most of the commercial behemoths today. Competition may be fierce, but success in this market can be a springboard for gaining commercial power worldwide."

"Monopolisation of commercial relationships has been a fundamental feature of global corporations, so much so that most of the leading companies by stock market capitalisation these days are ones that have a strong commercial power, rather than being powerful producers. For example, Amazon is now worth more on the stock market than ExxonMobil, and so is Alibaba. Apple Inc, the world’s largest company in these terms, has the largest capitalisation of a private company, but does very little production itself and relies on its domination of supply chains for assembly and its consumer market power – one should also note its use of the financial system. Alibaba’s business model fits with these important trends and it could well develop into another of these powerful /global/ companies, supported from its strong domestic base in China."

"Apple’s business is not only one of trying to secure its position in a segment of the consumer technology market. More and more it has become a major financial player, and one that has run out of ideas to develop its formerly core business. Instead it keeps its investors happy with share buybacks and a ‘capital return programme’. It remains the biggest capitalist corporation by market value, although as a monopolistic player it has a lack of incentive to expand production. These features illustrate the moribund nature of contemporary capitalism ... Higher international losses are mainly due to higher operating expenses as Amazon expands its ‘fulfilment centres’, technology infrastructure and marketing in these countries. But that still means Amazon has faced prolonged losses on its international business, financed by its North American (mainly US) operations."

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