The rise of the global mega-firms - why the IMF is worried

It is a warning buried at the end of the International Monetary Fund's report on the American economy.

And it comes not from a protest group or a campaigning organisation, but a body built to foster the globalised, market economy.

The IMF is not renowned for being rammed full of anti-capitalist agitators.

So the question it raises might surprise a few people.

Are some businesses just too dominant, too big, for the overall good of the economy?

And has their growth exacerbated the decade long trend where the return on assets (in this case shares) has outstripped the return on labour (the income we receive for working).

"The market power of corporations is becoming more pronounced across a range of industries, with important macro-economic effects," the IMF "Article IV" report on the USA says.

"Margins between prices and variable costs - mark-ups - have been rising steadily since the 1980s, and at an accelerated pace since 2010.

"Measures of industry concentration and profitability mirror this increase in market power.

"Corporate level data suggest that these trends have been driven by an increase in rents that are accruing to a relatively small, but growing, number of 'superstar' firms."

Put simply, mega-firms with mega-profits have such huge amounts of power they are able to charge more for their products and services than would be possible if markets were functioning differently - what is called the economic rent.

The IMF - a membership organisation of 189 nations - is careful not to name names.

And firms which some might think the target - like Apple or Facebook or Google - regularly point out that their success comes from providing products and services that consumers want.

They also invest heavily to improve those products and services at a faster rate than their competitors.

Markets reward success.

The debate about the growth of the "mega-corp" is one of the most vital of our times.

Large, hyper-successful companies can be very good for their shareholders (including our pension funds), a lot of the people that work for them, governments through the taxes they pay and the people who use what they produce.

But, in aggregate, are they skewing the economy in ways that are not all positive?

And are they leading to a disillusionment with markets that has its reflection in the rise of anti-establishment politics across much of the western world?

"The evidence suggests that these developments are having important effects on outcomes, including potentially depressing future investment and R&D [research and development] spending, as well as weighing on the labour share of income," the IMF says.

"Network and information externalities or increasing returns to scale may justify an oligopolistic structure. However, super-normal profits or rents from such market power should be taxed fairly."

The IMF suggests "cash flow" taxes for some digital firms - a tax on activity such as advertising revenue rather than a tax on profits which can be moved relatively easily between countries.

It is an idea the UK and European Commission are both considering, as I wrote earlier in the year.

The IMF admits that care must be taken not to place unfair burdens on companies that genuinely invest to create economic value.

But it also points out that markets should remain "contestable" - one dominant player is not always the best result for consumers.

However much we might like what they produce.