Thursday, February 26, 2015

The Shrinking Corporate Sector

Another earnings season is winding down on Wall Street, and revenue numbers seem to be declining broadly among corporations that mainly support the corporate sector. Some of this is just an improvement in efficiency in one way or another — for example, with computers lasting longer, it is harder to sell new computers to corporations — but some of it must be a sign of the corporate sector in retreat. It has always been the case that the established part of the large corporate sector tends to shrink over time, and this has been going faster since the 1980s. Now we are seeing a period in which the up-and-coming large corporations aren’t growing fast enough to cover the decline in the older, established large corporations.

In theory, the “flat” world economy that we talked about so much a decade ago should enable more effective competition from newer and smaller players, and perhaps that is what we are starting to see now.