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The Economist Magazine 11th June 2021. The Economist was established in 1843 by James Wilson, a hatmaker from the small Scottish town of Hawick, to campaign against the protectionist Corn Laws. The tariffs were repealed in 1846 but the newspaper lived on as “a political, literary, and general newspaper”, never abandoning its belief in free trade, internationalism and minimum interference by government, especially in the affairs of the market. (It did, however, abandon the Oxford comma.) The Corn Laws, which by taxing and restricting imports of grain made bread expensive and starvation common, were bad for Britain. Free trade, in Wilson’s view, was good for everyone. Wilson believed “that reason is given to us to sit in judgment over the dictates of our feelings.” Reason convinced him in particular that Adam Smith was right, and that through its invisible hand the market benefited profit-seeking individuals and society alike. The Economist Magazine 11th June 2021

Twenty years ago this week the share price of a startup run by an obsessive called Jeff Bezos had slumped by 71% over 12 months. Amazon’s near death experience was part of the dotcom crash that exposed Silicon Valley’s hubris and, along with the $ 14bn fraud at Enron, shattered confidence in American  business. China, me awhile, was struggling to privatize its creaking state owned firms , and there w as little sign that it could create a culture of entrepreneurship . Instead the bright hope was in Europe, where a new single currency promised to catalyze giant business friendly integrated market. Creative destruction often makes predictions look silly , but even by these standards the post pandemic business world is dramatically different from what you might have expected two decades ago. Tech firms comprise a quarter of the global stock market and the geographic mix has become strikingly lopsided. America and, increasingly, China are ascendant, accounting for 76 of the world’ s 100 most valuable firms . Europe’s tally has fallen from 41 in 2000 to 15 today.

This imbalance in large part reflects American and Chinese skill, and complacency in Europe and elsewhere . It raises two giant questions: why has it come about? And can it last? In themselves, big companies are no better than small ones. Japan Inc’s status soared in the 1980s only to collapse. Big firms can be a sign of success but also of sloth. Saudi Aramco, the world’ s second most valuable firm, is not so much a $2trn symbol of vigor as of a desert kingdom’ s dangerous dependency on fossil fuels . Even so , the right sort of giant company is a sign of a healthy business ecology in which big, efficient firms are created and constantly swept away by competition. It is the secret to raising long run living standards.


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