Forget the Invisible Hand. Big Tech Is Building Empires.

Mainstream economics says capitalism is built on competition. But today, competition has given way to empire building - and the rest of us are paying the price.

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If you take Econ 101, you’ll be taught a model of the economy that hinges on free market competition. According to its proponents, competition is what makes capitalism the most efficient and productive economic system imaginable. It drives innovation, holds down prices, and ensures that scarce resources are put to their most productive use.

Capitalism’s defenders have always placed competition at the heart of their analysis. Adam Smith used the metaphor of the ‘invisible hand’ to describe the regulating effects of competition in a free market economy. David Ricardo built on Smith’s framework to analyse how competition equalised the rate of profit between different sectors and places – ultimately bringing the world economy into balance. Joseph Schumpeter argued that the “perennial gale of creative destruction” was what ensured that capitalist economies remained dynamic and innovative over the long run.

But in the absence of competition, none of these arguments for capitalism hold. Without competitive pressure, the invisible hand cannot balance supply and demand; profit cannot flow to more dynamic sectors or regions; and less innovative companies cannot be felled by the winds of creative destruction.

If firms aren’t scared of losing market share to their competitors, they won’t feel the need to innovate, or keep prices low, or keep costs down. The firm can keep trundling along because its customers have nowhere else to go. As a result, innovation slows, prices rise, and inefficiencies accumulate.

In short, without competition, capitalism’s proponents can no longer claim that it is a uniquely efficient, productive, or innovative social system. The arguments for its existence evaporate.

Capitalist planning

Marxist theorists have always seen through the argument that competition is the lifeblood of capitalism. Marx himself observed a tendency within capitalist economies towards centralisation, whereby a few powerful firms come to dominate critical industries.

These monopolies consolidate their power by building close relationships with both financial institutions and the state. They are then able to project this power abroad, allowing them to extract resources and labour from poorer parts of the world. In other words, monopoly goes hand in hand with financialisation, state capture, and imperialism.

The end result is a world system dominated by a few huge monopolies headquartered in the rich world, supported by imperialist states and powerful financial institutions. As I argue in Vulture Capitalism, cooperation between these powerful actors facilitates a kind of oligarchic capitalist planning – the polar opposite of free market competition.

Competition doesn’t disappear under capitalist planning. Workers and smaller firms, are still subjected to ruthless competitive pressure. But the most powerful actors are able to insulate themselves from this competitive pressure – and focus instead on building corporate empires.

At the commanding heights of a capitalist economy – in the sectors upon which all other production depends – competition gives way to empire building. Large firms will work with each other, with states, and with financial institutions to protect themselves and their super-profits. And everyone else suffers as a result.

Just take Amazon. It didn’t turn a profit for the first decade of its existence – instead focusing on ploughing its revenue back into expansion. In other words, empire building. Eventually, it carved out such a dominant position in the market that it became one of the most powerful monopolies in the world.

As Amazon’s power grew, it became easier for the company to insulate itself from competition. At the same time, competition increased dramatically for less powerful actors dependent upon the company. Just think of the Amazon drivers forced to pee in bottles to make sure they didn’t miss their delivery targets; or the small businesses forced under by Amazon’s predatory pricing tactics.

Tech Empires

We’re seeing these dynamics very clearly in big tech today. Just check out this piece in the Financial Times, which looks at the earnings reports of the big tech companies.

Investors scrutinise these reports – which provide information on figures like profits, investment spending, and debt – to determine where to put their money. In a competitive market, they’d be trying to assess which companies were using their resources most efficiently, assuming that the bloated big spenders would be taken down by competitive pressure.

But today, investors don’t seem to be worried about how much these companies are spending, how much debt they have, or even how much profit they’re making. In fact, they’re willing to let the men running these companies plough unimaginable sums of money into purely speculative technologies, in the vague hope that one of them will strike gold.

As the FT puts it,

“The more AI matters to these companies, the less today’s financial results do… Meta’s Mark Zuckerberg and Alphabet’s Sundar Pichai are both chasing AI with superhuman intellect. Microsoft runs the cloud on which much of it will sit. Amazon is launching satellites into orbit.”

These are – sometimes literally – moonshots. Many will not pay off. Investors may find that companies have wasted billions pursuing innovations that either don’t work or aren’t as profitable as they were expecting. Investors know this, but they’re still throwing money at big tech. Why?

The state-like corporation

The simple answer is that the big tech companies aren’t normal corporations – they’re corporate empires. These companies don’t need to demonstrate that they’re using their resources efficiently to maximise their profits over the short-term. They just need to show that their territory is growing – and the boundaries of their empire are protected.

For big tech, this means controlling the technologies that will be indispensable to future production. The more they can push adoption of their AI tools among households, businesses, and governments, the stronger their empires become. It doesn’t matter if they’re burning through cash to achieve this growth in the short-term – all that matters is that, in the long-term, we all become dependent upon them.

This pursuit of imperial power is precisely why companies like OpenAI and Palantir are pushing so hard for government contracts – despite the allegedly libertarian leanings of their leaders. If they can force their technologies into the architecture of the capitalist state, they won’t just become monopolies, they’ll become an extension of the state itself – with all the political power that entails.

Eventually, the goal is precisely to become state-like entities, providing services the rest of the world cannot live without in exchange for levies on income. This vision could not be farther from the competitive, free market utopia outlined by capitalism’s cheerleaders. Because the real driving force of capital accumulation isn’t competition – it’s domination.