Newsletter No 13

Date: 30 June 2025

 

The problem of regulatory arbitrage

This month Jayati Ghosh, the eminent economist and co-chair of ICRICT, gave a fascinating interview to Critical Takes in which she argued that the profits of multinationals increasingly relate to “economies of arbitrage”.

By this she means the ability of multinationals to fragment their activities around the world so as to exploit differences between national regulations. A well-known example is corporations assigning key assets or functions to tax havens.

Governments have frequently made this practice easier by creating special zones for private investment which typically offer low taxes and weak regulation. Special economic zones contributed to the spectacular growth of China's economy in the last few decades. However, the model doesn't transfer well to countries which lack China's advantages and its only real beneficiary will be private capital.

Her conclusion is that “drastic changes” are needed in regulation. We talked about two of these changes: tax reform at the UN and loosening ownership rules for intellectual property so that corporations can’t monopolise what should be public knowledge.

 

How the “cloud giants” monopolise knowledge

Cecila Rikap of University College London contributed a brilliant take on the ways that Big Tech firms exploit the “Cloud” to create “intellectual monopolies”.

By providing the digital infrastructure used by other businesses, the biggest tech firms are able to amass and exploit information about what those firms are up to.

I remarked to Cecilia that there seems to be a hierarchy of corporate power here: the “cloud giants” (Microsoft, Amazon and Google) use the knowledge they amass from the closed systems of their “clouds” not only to dominate their own industry but also to compete with their own multinational clients. And these clients rent cloud technologies from the giants and use them to dominate smaller firms in their own industries.

She replied: “Exactly! And also leading corporations from other sectors try to counterbalance the power of the cloud giants, for instance, by developing intermediate layers of software to better interoperate between different clouds, sometimes even trying to build their own private cloud (like Bank of America is trying to do). But the latter is a very tiny minority, most simply accept the relative subordination that enables value extraction from those further below.”

In other words, this looks less like a value chain and more like a food chain.

Anyway, it’s a fantastic short essay and very much worth reading. So what should be done? Cecilia and her colleagues have a detailed answer here.

 

Interesting takes in other places

Plastic! We know that microscopic particles of the stuff are getting into our bloodstreams, yet much of what we buy from the shops still contains it or comes wrapped in it.

A report from GAIA about progress towards a global plastics treaty includes some useful analysis about how treaty negotiations work and the best way to secure a strong agreement.

And here’s a short, informative academic paper on the “petrochemical historical bloc”, a loose alliance of countries and companies which produce fossil fuels, petrochemicals and plastics and whose aim is to limit the ambition of a treaty – most likely by pushing it towards voluntarism and “waste management” and away from an obligation to produce less plastic.

The authors conclude: “Achieving even modest ambition is going to require a concerted, determined, and noisy effort to challenge the obstructionist tactics, false claims, and deeply-rooted power of the petrochemical historical bloc."

 

Coming up soon on Critical Takes

In July Critical Takes will publish a short briefing called So, what should we do about corporate power? which sums up all the ideas published on this platform in the last year, plus ideas from other places in civil society.

The briefing argues that all these ideas should be considered as part of a single, long-term agenda for transforming corporate power. Whatever aspect of the power of multinationals you work on, I hope you'll find it useful.

Also coming soon: what Big Tech is up to in India.

Until next time, good luck with your work!

Diarmid