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By Root 531 0

critic sees himself or herself as David slinging stones at vast, corrupt and dehumanising Goliath-like corporations that punish, pollute and profiteer with impunity. To my knowledge, no large company has yet featured in a Hollywood movie without its boss embarking on a sinister plot to kill people (in the latest one I watched, Tilda Swinton somewhat predictably tried to kill George Clooney for exposing her company’s poisoning of people with pesticides). I hold no brief for large corporations, whose inefficiencies, complacencies and anti-competitive tendencies often drive me as crazy as the next man. Like Milton Friedman, I notice that ‘business corporations in general are not defenders of free enterprise. On the contrary, they are one of the chief sources of danger.’ They are addicted to corporate welfare, they love regulations that erect barriers to entry to their small competitors, they yearn for monopoly and they grow flabby and inefficient with age.

But I detect that the criticism is increasingly out of date, and that large corporations are ever more vulnerable to their nimbler competitors in the modern world – or would be if they were not granted special privileges by the state. Most big firms are actually becoming frail, fragile and frightened – of the press, of pressure groups, of government, of their customers. So they should be. Given how frequently they vanish – by take-over or bankruptcy – this is hardly surprising. Coca-Cola may wish its customers were ‘serfs under feudal brandlords’, in the words of one critic, but look what happened to New Coke. Shell may have tried to dump an oil-storage device in the deep sea in 1995, but a whiff of consumer boycott and it changed its mind. Exxon may have famously stood out from the consensus by funding scepticism of climate change (while Enron funded climate alarmism) – but by 2008 it had been bullied into recanting.

Companies have a far shorter half-life than government agencies. Half of the biggest American companies of 1980 have now disappeared by take-over or bankruptcy; half of today’s biggest companies did not even exist in 1980. The same is not true of government monopolies: the Internal Revenue Service and the National Health Service will not die, however much incompetence they might display. Yet most anti-corporate activists have faith in the good will of the leviathans that can force you to do business with them, but are suspicious of the behemoths that have to beg for your business. I find that odd.

Moreover, for all their eventual sins, entrepreneurial corporations can do enormous good while they are young and growing. Consider the case of discount retailing. The burst of increasing productivity that countries like America and Britain rather unexpectedly experienced in the 1990s at first puzzled many economists. They wanted to credit computers, but as the economist Robert Solow had quipped in 1987, ‘you can see the computer everywhere but in the productivity statistics’, and those of us who experienced how easy it was to waste time using a computer in those days agreed. A study by McKinsey concluded that the 1990s surge in the United States was caused by (drum roll of excitement) logistical changes in business (groan of disappointment), especially in the retail business and especially in just one firm – Wal-Mart. Efficient ordering, ruthless negotiating, hyper-punctual time keeping (suppliers must sometimes hit a thirty-second window for deliveries), merciless cost control and ingenious responses to customers’ preferences had given Wal-Mart a 40 per cent efficiency advantage over its competitors by the early 1990s. Wal-Mart’s competitors rapidly followed suit, raising their own productivity by 28 per cent in the later 1990s, but Wal-Mart had not stood still, gaining another 22 per cent in the same time, even as it opened an average of seven new three-acre supercentres a month for a decade. According to Eric Beinhocker of McKinsey, these ‘social-technology’ innovations in the retail sector alone accounted for fully a quarter of all United States productivity