Why Is Corporate America Destroying Itself?

Why Is Corporate America Destroying Itself?
A 12-ounce can of Bud Light on a railing at the World Equestrian Center in Ocala, Fla. on May 26, 2023. (T.J. Muscaro/The Epoch Times)
Jeffrey A. Tucker
6/5/2023
Updated:
6/5/2023
0:00
Commentary

For those following the Bud Light fiasco, one would expect a quick and dramatic turnaround to save the brand and the whole company from oblivion. It has faced a consumer backlash for the ages, one that has even driven the company to buy back its own product.

Retailers stuck with surpluses are nearly giving it away for free. And yet, in most places in the country, you can see the stuff stacked high on the shelves plastered with on-sale tags.

But such turnarounds aren’t so easy. In the midst of a real calamity, the beer announced for Pride Month a new partnership and $200,000 grant to “the National LGBT Chamber of Commerce (NGLCC), the exclusive certifying body for LGBT-owned businesses ... to continue supporting economic opportunities and advancements for LGBTQ+ Americans and business owners across the country.”

And then offered a big logo to reinforce this:

What the heck are they thinking? It’s beyond bizarre. It’s not just a lack of cultural fit with their main consumers. It’s worse than that. The whole country is right now in the midst of a real reckoning with the fundamental biological reality of two sexes. And people have also discovered that in recent years, particularly during pandemic lockdown times, a portion of the medical community, in cooperation with major swaths of the public health sector, has assisted and encouraged gender dysphoria in young people and facilitated bodily mutilation.

This cause has absolutely nothing to do with civil rights as we once regarded them. It’s not about equality or equal freedom. It’s about the imposition of myths and lies over basic bourgeois sensibilities and science. For many people, this is where the line is drawn. It deals with core principles that can never be given away lest civilization itself slips into nothingness.

And yet we have major parts of corporate America pretending as if this were nothing but an extension of the emancipationist campaigns of the past. It’s preposterous. So why are they doing this, even in the face of devastating sales losses, consumer boycotts, and mainstream outrage that poses an existential threat to the market share of companies like Anheuser-Busch, Target, Sports Illustrated, Glamour, North Face, and Kohl’s? Maybe they figured that all of this would blow over. But it hasn’t. And it won’t.

There’s a major reckoning taking place. Consumers are in charge and asserting their rights under the system of capitalism to be the ones ultimately in charge of what companies and products live or die.

Let’s consider three major factors to provide a full explanation.

First, during the lockdowns, a major consolidation of large companies took hold of most economic sectors. Small businesses with a close connection to their customer bases were forcibly shuttered and millions never recovered. Meanwhile, large companies were allowed to stay open, allowing them to drain capital and labor from decentralized businesses into centralized ones.

Centralized and consolidated industrial structures are typically more easily controlled by government and better positioned to exercise control of government through regulatory capture. This problem has vexed capitalistic economies for more than 150 years, of course, beginning with railroads and extending to munitions manufacturers and the medical industry by the mid-20th century. But in the 21st century, it has also hit the retail sector and invaded the whole of our lives.

Just consider a company called Authentic Brands. It vastly expanded its holdings in the past four years, beginning with Sports Illustrated in 2019, the magazine that features trans athletes on its covers now. In the same year, BlackRock became the largest shareholder. During the lockdowns, the company started gobbling up far more: Brooks Brothers, Izod, Van Heusen, Arrow, Geoffrey Beene, Reebok, Adidas, Billabong, Roxy, DC Shoes, and Honolua among its 50 brands.
The same is true for food and has been going on for 35 years, a trend made worse during the lockdowns, when small suppliers saw their chains of production disrupted and large players made a killing. A small number of powerful companies control the majority market share of almost 80 percent of dozens of grocery items bought regularly by ordinary Americans.

Four firms or fewer control at least 50 percent of the market for 79 percent of groceries. For almost a third of shopping items, the top firms control at least 75 percent of the market share.

Second, the financing of these companies is hugely influential over their marketing policies. Companies such as BlackRock, State Street, and Vanguard (which together manage $20 trillion in capital) have a major client in state pension holdings and face massive political pressure from lawmakers in blue states to push CEI/DEI/ESG policies. Responding to political pressure, they cobbled together indexes to rank the companies and make investments contingent on meeting political goals. The large companies are heavily leveraged—this began in 2000 with zero-interest-rate policies—and must comply with them or face financial trouble, the consumer be damned.

So a company such as Target or Bud Light might know for sure that their offensive marketing will massively annoy their consumer base, but they take that risk to please their major stockholders of these centralized financial firms, without whom they’re toast. They believe that they’re making a rational trade-off: some small changes in consumer demand in exchange for financial largess from their major benefactors.

This tension is a serious problem, a real tug-of-war between regular people and ruling-class elites.

Third, these companies are just stupid. There’s no other way to put it. They’re refusing to read the writing on the wall.

It happens often in corporate history. I strongly encourage you to watch the 2023 film “Blackberry.” The company that created the modern smartphone held 40 percent of the global market until 2007, when the iPhone was announced. It was clearly a better product but the executives at Blackberry couldn’t see or admit it. They were so attached to their existing product and drunk on money and power that they couldn’t adapt, even in the face of impending disaster.

Much of corporate America today is like Blackberry in 2007, pretending that the consumer revolt will go away and that things will get back to normal. This might be a gigantic error. It’s different this time. Consumers have awakened to the racket.

The strongest evidence is Bud Light, but the revolution is escalating and extending and hitting brands that were once beloved but now are clearly in bed with ruling-class elites. These companies proved useless in defending commercial rights during the lockdowns and now want to shove anti-scientific political symbolism down all our throats. They might not get away with it this time.

The beauty of the film “Blackberry” is that it shows that even the most powerful and well-financed companies can make horrible market decisions. What’s more, any normal person could have told the executives that they were on the wrong path, but money, pride, fame, and a record of success can completely blind companies to their failures and their long-term self-interest.

This appears to be happening across the commercial space, as more and more consumers are realizing their power and are determined to reassert their influence. It’s certainly in their power to do so. The fix for this is authentic capitalism and a dismantling of the corporatist structures that dominate our lives today.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Jeffrey A. Tucker is the founder and president of the Brownstone Institute and the author of many thousands of articles in the scholarly and popular press, as well as 10 books in five languages, most recently “Liberty or Lockdown.” He is also the editor of “The Best of Ludwig von Mises.” He writes a daily column on economics for The Epoch Times and speaks widely on the topics of economics, technology, social philosophy, and culture.
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