The concept that big is beautiful is not one honoured in words but it certainly is honoured in observance. Every day in almost every part of our lives we must deal with a big organisation that has many millions of customers. These big organisations, like wealthy people and the aristocracy, seek comfort in organisations like them so we find that their auditors are massive corporations, their lawyers are massive businesses and their friends are people like them.
No one, of course, ever got fired for buying IBM computers in the old days; if someone has to ask “who are these people” it usually means that these people are too small and therefore not sufficiently knowledgeable and talented, to do the job.
The irony is that these very large corporations depend on their income on the very small customers. An energy company will have millions of customers who pay them money every month or every three months; a coffee shop chain will have millions of people who part with a few pounds a day to enjoy their products. Of course the corporations wax lyrical about their customers, but when it comes to choosing their contractors they seek comfort in what they know; other large corporations that are people like them.
There are four major accountancy firms. Between them they audit all the major United Kingdom corporations. They are people like their customers. They constitute an oligopoly in the audit market for large listed companies. The Audit Investigation Group of the Competition Commission has criticised the oligopoly for having too cosy a relationship with those they audit.
It has long been a puzzle to me as to why, when the banks collapsed in 2009, rapidly becoming insolvent, so it would seem, that the auditors did not come in for more criticism. After all, the cause of the banks’ insolvency was well known; they gambled in derivatives and other so called financial products which proved to be very risky. The auditors did not understand the risks and did not qualify the accounts of the banks. That meant that those who invested in banks shares (including those who might not know that they have invested in banks’ shares such as people who bought insurance policies or gave their savings to financial managers or a pension company,) could not rely on the auditors properly identifying the risks that the banks were taking.
That means that the shares were grossly overvalued and when the financial crash came it was not really a crash (none of these crashes are really a crash) but a market correction that brough the value of the banks’ shares more in line with reality.
So using as auditors “people like us” meant that one set of oligarchs were auditing another set of oligarchs.
When businesses reach the situation of being part of an oligarchy they have almost fulfilled their ambition. The ambition, of course is to become a monopoly, but monopolies are deemed to be against the public interest, so big business can seek comfort in knowing that oligopoly is tolerated and often encouraged by government, who never remember that small is beautiful to people like us.