Apple's US$1 trillion milestone reflects rise of superstar firms

Apple produces some of the world's most popular consumer products, such as the iMaca, iPod and iPhone, reshaping swaths of everyday life.
Apple produces some of the world's most popular consumer products, such as the iMaca, iPod and iPhone, reshaping swaths of everyday life.PHOTO: REUTERS

US Steel. General Motors. AT&T. Exxon Mobil.

Small potatoes.

Apple on Thursday reached a milestone that these icons of capitalism never dreamed of: a market value of more than US$1 trillion (S$1.37 trillion).

That landmark is the result of an extraordinary corporate success story.

In a span of just 21 years, a near-bankrupt computer-maker has evolved into the most valuable publicly traded company in the United States, pushing the tech industry away from big, bulky machines and producing some of the world's most popular consumer products, like the iMac, iPod and iPhone. Apple's products have reshaped swaths of everyday life.

But Apple's new 13-figure valuation also highlights how a group of enormous companies has come to dominate the US economy. Today, a smaller cluster of American companies commands a larger share of total corporate profits than since at least the 1970s.

The effect of this phenomenon has been clear in the stock markets, where a band of household-name companies - led by Apple, Amazon, Facebook and Google - has fuelled the nine-year bull market, the second-longest behind the rally that ended in 2000.


Their successes are also propelling the broader economy, which is on track for its fastest growth rate in a decade.

But the effects of the consolidation of corporate profits extend far beyond the stock markets - and they are not entirely benign.

Economists, for example, are starting to look into whether the rise of so-called superstar firms is contributing to the lacklustre wage growth, shrinking middle class and rising income inequality in the US.

"It's one of the most important trends that we are experiencing," said University of Geneva economist Roni Michaely. "It's really about economic growth, economic inequality and consumer welfare."

A consensus has formed among economists that the trend towards corporate concentration - in terms of the size of companies and their grasp on profits - is real and may be long-lasting.

The consolidation is especially pronounced in the technology sector, where a group of large, efficient companies now lords over the fastest-growing and most dynamic parts of the US economy.

Apple and Google combined now provide the software for 99 per cent of all smartphones. Facebook and Google take 59 cents of every dollar spent on online advertising in the US. Amazon exerts utter dominance over online shopping and is getting bigger, fast, in areas like streaming of music and videos.

But the trend is not confined to technology. Today, almost half of all the assets in the US financial system are controlled by five banks. In the late 1990s, the top five banks controlled a little more than one-fifth of the market.

Although companies tend to gain power as they grow, that does not make them invincible. They can simultaneously become more susceptible to crippling assaults from politicians and regulators. The same tech companies that are vacuuming up a greater share of corporate profits are also in the cross-hairs of governments around the world.


A version of this article appeared in the print edition of The Straits Times on August 04, 2018, with the headline 'Apple's US$1 trillion milestone reflects rise of superstar firms'. Subscribe