Back in 1989, Pepsi technically became the world’s 6th biggest military when it acquired 17 submarines, a cruiser, a frigate and a destroyer from the Soviet Union. Yes, you read that right. I am talking about Pepsi, the soda company.

At the time, the Soviet Union was stifled for cash, seeing as it was on the brink of collapse and would trade anything for cash. However, it was also especially obsessed with drinking Pepsi, so much so that it traded a sizeable naval fleet for 3 Billion worth of Pepsi concentrate.

Pepsi obviously didn’t and couldn’t keep the fleet. It immediately sold it over to a Swedish metal company for scraping and recycling. For a brief amount of time, nonetheless, Pepsi was the 6th largest military in the world in times of naval fleet size.

Pepsi currently has a market cap of US$ 193.08 Billion, making it the 85th most valuable company globally.

Pepsi’s bromance with Russia is a long one that continues to date. Despite the huge amount of economic sanctions placed upon Russia for its invasion of Ukraine, Pepsi continues to do business in Russia. It allegedly raked in profits of over US$ 525 Million, paying US$ 115 Million to the Kremlin. This is money that has been invested into further financing the atrocious war in Ukraine.

Nestle, another company similar if not bigger than Pepsi in terms of global reach is also famous for its sheer size and influence, albeit for all the wrong reasons.

Back in the 1970s, it emerged that Nestle had been working with medical professionals in the US to push the use of their baby formula in place of breast milk to newborn mothers. The company falsely claimed in its marketing advertisements that the baby formula was better than a mother’s breast milk. Despite a huge public outcry, the company redirected these efforts to the developing world, hiring salespeople and paying off medical professionals and researchers to recommend their baby formula over breast milk.

This scandal has never fully died down to date. The company has been facing criticism and backlash for these deceptive baby formula marketing tactics as recently as 2011.

Oh, and we’ve barely even talked about the unending scandals that the company continues to face, which range from allegations of slavery and child labour, and blockage of access to crucial water resources in developing countries to misinformation and destruction of natural resources.

Here’s the point I’m trying to make. Some of these companies have grown too big. And that’s becoming a problem.

Too Big, Too Powerful

Growing up, the soft drink of choice for anyone living in Kenya was known as Softa. The soda was manufactured locally and for two decades it stood up to Coca-Cola, the beverage multinational that had a commanding market share in the Kenyan market for decades.

According to Mr. Peter Kuguru, the founder of Softa Bottling Company, Softa had a market share of 70–80% in areas within a 200km radius of Nairobi.

The moment of chaos after the 2007/08 Post-Election Violence (PEV) disrupted the market. By 2010, Softa’s goose was cooked.

Mr. Kuguru insists that the company was driven out of the market by means of unfair competition and disadvantageous trade practices by its biggest competitor, Coca-Cola.

The government, perhaps under the influence of Coca-Cola became prejudiced against it, ignoring any actions that would have saved the bottling company.

Softa Bottling Company was eventually deregistered and ceased operations in 2020, wallowing in anguish from being disregarded as it went.

That said, local business establishments being run out of operation by big multinational companies is nothing new. It happens all the time.

In a recent turn of events, Alphabet Inc., the multi-national conglomerate that owns Google, was sued in the United States for engaging in unfair market practices that gave it a competitive advantage in the internet advertising business.

The company had also been found guilty of illegally dominating the search engine industry, seeing as it controls over 90% of the online search market.

In the eyes of many economic and legal experts alike, Google is quickly becoming a tech monopoly; leveraging its dominant position in the industry to stifle competition and innovation.

Google is just but a pick of the bunch. Many industries in the United States and at large the global economic system are dominated by a small crop of powerful corporations.

Multinational Companies in Context

One may argue that one of the quirks of capitalism is that it thrives in meritocracy; rewarding companies and corporations for their efforts towards innovation and growth. The more a company innovates, the more it fulfils the demands of the market, hence the more it should be allowed to thrive and grow.

Laissez-faire capitalists would argue that placing limits on growth and labelling entities as monopolies for growing too big works against the basic ideals of capitalism.

However, in an economic system that is as intertwined as ours, allowing corporations to grow without any sort of regulation will work to their advantage, the bigger they grow. Any form of competition from smaller entities would be inconsequential, as the big players can always find ways to wield their influence to maintain their position in the market.

That is why government regulation is important, seeing as it helps level the playing field for all players involved. It is quite counter-intuitive if you think about it, seeing as ‘true’ capitalism is supposed to ‘operate freely and without regulation’. However, as Thomas Hobbes (1588–1679) rightly observed, the anarchic nature of human beings puts them at the mercy of taking advantage of each other if given the opportunity.

John Maynard Keynes (1883–1946), the man behind the famous Keynesian Economic Model, was famous for advocating increased policy regulations within the free market, especially in the wake of the 1929 stock market crash.

The Pacman System

Think of it as a game of Pac-Man. These companies and corporations are the main act of the game. They eat up as many dots as possible within the maze, gearing themselves up for growth into the next level. The ghosts of Blinky, Pinky, Inky and Clyde are the regulatory bodies mostly set up by government institutions, chasing Pac-Man through the maze that is the economic system, even as PacMan munches on the crumbs and the dots that guarantee his growth. As growth becomes more exponential, the game gets harder. Game boosters get harder to find. The ghosts get faster. All to prevent Pac-Man from moving too fast and getting to the next level.

Shouldn’t Pac-Man be allowed to move as fast as he wants? Should he be at liberty to eat up as much as he wants, and to get to the highest level possible?

Here in lies the problem.

In the original arcade version of Pac-Man, playing the game at level 256 would cause it to load improperly resulting in a kill screen. The game just wasn’t designed to be played that far due to the software limitations of the time.

So too is the economic system we operate in. Capitalism is designed to encourage economic growth. However, it is not tailored to accommodate unregulated growth. If left unchecked, capitalism collapses upon its weight.

The United States government had passed several federal legislative acts such as the Sherman Act (1890) and the Clayton Act (1914) to curb market-intrusive, trade-restrictive and monopolistic activities within its manufacturing-dominated industry. Standard Oil became the most prominent casualty of this legal undertaking as it was forced to break up given its complete domination over the oil industry. An attempt to lodge an anti-trust lawsuit against US Steel, another industrial behemoth was not as successful.

However, the issue with the current economic model is that it operates contrary to how it should. The ‘ghosts’ of regulation seem to get slower in chasing Pac-Man even as the levels get faster. They are however faster than they should be in chasing Pac-Man when he is still at the beginner level.

Regulation seems to stifle the entities that it should be protecting most. Regulation is good at keeping an eye on the activities of smaller companies while remaining aloof to economic atrocities committed by some of the big conglomerates. If anything, the ‘ghosts’ run out of breath whenever they have to chase Pac-Man past a certain level.

The problem with Multi-national Conglomerates

That brings me to the first headache with the existence of big, multi-national conglomerates. They are tough to regulate.

You would expect that countries in the developed world that have more mature democracies would find ways to regulate the influence of these corporations. However, many of these multinational corporations have found vulnerabilities within the economic systems of these countries that have allowed them to grow roots and establish their influence globally.

Despite possessing harsh anti-trust laws, the United States government has had it tough in trying to regulate the activities of these multinational corporations. These corporations have found ways to skirt anti-trust laws even as they engage in mergers and acquisitions, causing them to grow bigger than ever.

Only one of the 10 largest companies listed on the Fortune Global 500 Index is not American-based.

Nonetheless, Europe may have found some success in limiting the size of its corporations. However, it too has had an uphill task in regulating the activities of big players particularly in the finance and financial services sector.

The problem is tremendously worse in developing countries.

Many of these conglomerates, especially those in the manufacturing and agricultural sectors have also moved operations to the developing world. Resources there are abundant and labour is cheap, which lowers the cost of production.

These companies bring their monopolistic tendencies along with them, stifling local manufacturing operations and running them out of business.

Many local businesses find it hard to compete with these conglomerates for two reasons;

• These conglomerates have access to cheap credit facilities and huge financial resources from global markets. It means that they are willing to splash the cash and manipulate prices, sacrificing profits in the short term to run local competitors out of business. Once the competition has been done away with, they can raise the prices back up and recoup lost profits, if they so please.

Here’s an example. Uber, the ride-hailing service has been accused of smothering local taxi and public transport services in many of the countries that it operates in. It does so by offering free rides, discounts, and cashback to attract as many new users as possible and build a monopoly on the user base. Once the competition has been squashed, it can jack up the prices and pay the riders rates out of its own volition, as it possesses the ultimate competitive advantage over the market.

• Secondly, these conglomerates exploit administrative loopholes to gain preferential treatment in the countries where they operate. In developed countries, this may occur in the form of lobbying where they collaborate with legislatures and administrators in the public domain of governance. They may, for example, sponsor a politician to introduce a legal bill that favours their operations or work with an administrator to do away with a legal impediment that hinders their ability to do business.

In the developing world where the actions of public service are shadier, corruption becomes the more sensible route to follow. It may start with acts as simple as gaining favour with powerful politicians in these countries, which comes by offering them financial incentives to side with the business. These politicians often wield much more power and influence, hence granting these conglomerates an easy pass compared with local companies that have to wade through stringent and unfounded legal regulations.

This has a name, by the way. It is called corporate capitalism. If left unchecked, the corporation can do a ‘full takeover of government’, retaining direct influence over the laws and regulations that are passed in government. Then, ladies and gentlemen, you have yourself a Corporatocracy.

It gets even worse.

When these conglomerates are in cahoots with the political class in the country, they also get special privileges that allow them to skirt responsibilities arising from the impact of their activities in these countries. They may, for example, get tax breaks, relief from labour laws and regulations and exoneration from environmentally destructive activities. All while local businesses are forced to adhere to the most stringent of these regulations.

The activities of the monopolies can even directly help in keeping an oppressive, authoritarian regime in power. Remember the bromance between Russia and Pepsi that I mentioned at the beginning of this article?

All in all, the monopolies can do whatever they want, whenever they want for as long as they can smooth the right palms and quiet the competition. And at the end of it all, they may not even have to take responsibility for their actions.

Monopolies may be the product of the capitalist system, but it stands against the very fabric of capitalism which is freedom of the markets. The overarching influence of these entities kills local innovation and industry, which are some of the key constituents of global economic growth.

This article is an updated and edited version initially published on my Medium page on December 11, 2024.