When people invest their money, it is only fair that they get interest on that money. If I worked 1000h at 15$/h, save 1$ each hour, and buy a 1000$ vending machine, then it's not "evil" of me to set the prices to a level where I make 20$ in profits per year. This kind of return on investment is completely justfified, I'm giving people something they like (chocolate bars) and in return they give me slightly more cash than it would cost to buy the same product in a supermarket.
But what if I was really economically powerful? Let's say my rich uncle passed away and left me a billion dollars. Mind you, I don't have a monopoly on anything, only lots of capital to play around with. Now I go to a middle-class farmer and tell him I want to buy all his sugar cane, 2 tons, but at a price that's 1% lower than the market average. Because the offer is so huge, he has little other choice than to accept, because otherwise I could just go to another farmer with a better price and he might end up not selling all of his crops this year.
Now with my 2 tons of sugar cane I go to a sugar refinery, and ask them to refine my sugar cane to sugar, at full capacity of their machines. While normal customers pay 1000$ per ton refined, I only pay 990$ because my offer is so huge which gives them the advantage that they can run their machines at full capacity.
Going through another few steps, getting slightly better deals each time because of my enormous economic power, at the end of it I get maybe 5% interest where others with less investments only got 2%. What would have happened though if my uncle's 1 billion dollars had been split up into many different companies, each competing for market shares? Perhaps at the refinery, these companies would have had to pay a higher price, but that also would have freed up the refinery to offer lower prices to other customers, since now all competitors are on an equal playing field, perhaps now the price for all customers would have been 998$ instead of 1000$. The refinery can always run the machines near full capacity because with more smaller demanders, demand is more constant.
Concentration of wealth doesn't only distort market forces when a corporation literally has a monopoly. It also distorts the market when the person is only tremendously more economically powerful than his individual competitors, even if his share of the market isn't even near 50%. When you need to buy 5'000 pounds of meat and 100 small businesses offer to sell 50 pounds of meat at 3$/pound + 1$ for shipping, or one billionaire offers to sell you 50'000 pounds at 3$/pound +1$ for shipping, then you're going to take the giant offer by the billionaire because the centralization saves you money (1001$-11$=99$). This is called "Economy of Scale": If you produce or buy a lot, you will save money. That means next year perhaps the billionaire has a few dozen million dollars more on his bank account, meaning the year after that he will get even better deals
Don't get me wrong, I don't want to split up the economy into millions of 5-employee mom-and-pop shops, specifically because more economic centralization does mean less waste in the economy overall. I just want to make sure that 1. There's an equal playing field between small businesses and big business and 2. There's an equal playing field between small investors and big investors. In general, every investor should get approximately the same return on his investments, when the already uber-wealthy get 5% while every-day people get below 2%, that's just creating runaway wealth inequality, and that even though nobody can argue the person who just gets a higher interest is becoming richer because he's "working harder". No, it's because he's already uch more wealthy than his competitors.
Here are some policies that I think would help with this. Just for the record I don't necessarily support all of these, but I could well imagine that most of them would work:
Ban stock buybacks. Before the 1980s this was already illegal, and in most of the world it still is. When you think about it, buybacks are basically a way for CEOs to artificially inflate stock prices (many CEOs get bonuses based on stock prices) because of the lowered demand, and also indirectly give money to their shareholders through the increased share prices without paying the dividend tax.
An increased estate tax for wealth over 1 million dollars (~50%), even higher one for wealth over 10 million(~60%), 100 million(~70%), 1 billion (~90%) etc. This makes sure the wealth disadvantage that most of society has as opposed to the powerful elites at least doesn't grow exponentially throughout the generations. But it doesn't address what's happening within one generation.
A progressive tax on corporations. Meaning just like with the progressive income tax, corporate profits over for example 100 million are taxed more than profits under that, and profits over 1 billion are taxed even higher, etc. This does NOT raise taxes on small businesses, that's the entire point.
A wealth tax, taxing 2% on existing wealth a person has over 10 million, and 3% on wealth a person has over 1 billion. This would tax wealth of rich Americans wherever it is located, meaning off-shore tax havens won't work.
Encouraging worker-owned cooperatives over corporations. A cooperative is basically a corporation, only instead of shareholders making decisions and owning the company, workers do, democratically. While this doesn't change the power dynamics between companies (cooperatives/corporations), it does at least distribute wealth to all workers involved. One way for this to happen could maybe be the government giving cheap loans to workers who seek to buy the corporation they work for, whether in full or stocks.
Allowing workers in major corporations to elect half their corporate board. Only applies to corporations with over ~ 1 billion $ in profits. This is already being done in Germany and a majority of the European Union.
Mandate that a certain percentage of corporate profits go to their workers as a bonus, each receiving the same amount, at the end of each quarter. Since this cuts directly into corporate profits, for corporations this would have a similar effect as taxes have, so we should not go too high with this. Maybe 5% for profits over 1 million per year (250k/quarter).
What do you think about my analysis of this problem and the solutions? Do you maybe have better solutions? Let me know in the comments below