June 23, 2021

The IMF warns of the rise in market power of multinationals


The power of large corporations has not stopped growing in recent years and will increase in the future as a result of the wave of bankruptcies that will foreseeably affect SMEs due to the pandemic, according to the International Monetary Fund (IMF), which asks authorities intervene to prevent further market concentration from threatening to slow the recovery.

The IMF supports the government's tax increase but asks that some figures be delayed in the recovery

The IMF supports the government’s tax increase but asks that some figures be delayed in the recovery

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In its analysis, the IMF also warns that this increase in the market power of large corporations, while making economies more stable, “has also made monetary and fiscal policies less effective.”

The institution led by Kristalina Georgieva points out that, although it has a broad base in all countries and industries, this increase in the market power of multinationals has been particularly pronounced in sectors such as technology and pharmaceuticals, while on the contrary In the banking sector, there has not been a clear increase in market power.

This increase is concentrated in a small group of companies whose market power is increasingly entrenched and has been accompanied by a general decline in business dynamism, including a declining share of the economic activity of young companies, notes the Fund.

In this sense, it points out that, despite not being the main driver, mergers and acquisitions led by the dominant companies have contributed to increasing their market power and decreasing business dynamism, since competitors in general are affected so much in its growth as well as in spending on research and development, which is particularly worrying in a world of low productivity growth.

“These are missed opportunities in terms of growth, job creation and increased incomes,” said IMF Managing Director Kristalina Georgieva, for whom the good news is that active reviews of the frameworks are already underway. competition policies in major economies, including the European Union and the United States.

“These reviews offer an opportunity not to be missed. Policy makers should act now to avoid a sharp increase in market power that could slow down the recovery,” said the Bulgarian economist.

In this regard, the IMF advocates that the competition authorities pay greater attention to compliance with the control rules in merger processes, as well as more actively implement the prohibitions related to the abuse of dominant positions and make greater use of market research to discover harmful behavior without waiting to hear of violations.

Likewise, the institution considers that greater efforts are needed to guarantee competition in input markets, including labor markets, and defends the importance of providing the authorities with the necessary resources to address the changes accelerated by the digital economy, where the The rise of ‘big data’ and artificial intelligence are multiplying the advantage of established companies.

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