Big Companies Thrive as Small Businesses Scrape By

October 8, 2020

According to the Brookings Institution, more than 400,000 small businesses have closed during the pandemic while hundreds of thousands more remain at high risk of ceasing operations. But while many small companies have struggled, large corporations in the tech and telecommunications industries have never been better. In fact, experts fear that big companies like Amazon and AT&T could consolidate on an enormous scale over the next six months as they buy bankrupt businesses at fire sale prices.

Although corporations have long held certain advantages over smaller competitors, the pandemic has decidedly tipped the scales in the favor of big business. When widespread lockdowns tanked sales at many restaurants and retailers, most companies did not have cash reserves to stay afloat during the down times. Meanwhile, data from the Federal Reserve shows that large nonfinancial businesses have a whopping $4.1 trillion in cash on hand, the biggest cash reserve in world history. What’s more, the Coronavirus Aid, Relief and Economic Security Act (CARES) included provisions that allowed the Fed to provide large companies with up to $5 trillion in subsidized loans.

Corporations are also surging in value thanks to a stock market that has managed to reach its pre-March 2020 highs. Given these enormous resources and advantages, it’s possible that big companies could soon start to gobble up small operations at a rate not seen before. Many corporations already pursue a business strategy of “killer acquisitions” in which they acquire innovative startups before they become potential competitors. It’s possible that big companies could face opposition from the federal government over antitrust laws, but some economists wonder if regulators will be able to stop the oncoming wave of corporate consolidation. 

Questions:

  1. Why have large corporations thrived during the pandemic while small businesses have struggled?
  2. Do you think large corporations should be broken up by antitrust laws if they acquire too many direct competitors? Why or why not?

Source: Austan Goolsbee, “Big Companies Are Starting to Swallow the World,” The New York Times, September 30, 2020.

One Response to Big Companies Thrive as Small Businesses Scrape By

  • I think large corporations thrived because things like amazon can be really good in a time like this while a small restaurant could be closed for a while.

    2. I do not think big corporations should be broken up because it could end up ruining the business.

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