Are Private Equity Portfolios and Hedge Funds the New Monopolies? Will They Be the Driver For, or Barrier To, Manufacturing Reshoring to U.S.?

by Dean Prigelmeier, President of Proactive Technologies, Inc.

As with any journey, remembering how you got there is important to knowing how to get back. Since the 1980’s, Americans have been taken on a wild adventure with the restructuring of the world’s economies and trading relationships. Good paying manufacturing jobs in the U.S. were outsourced to lower wage labor markets and replaced with low-paying service jobs. When workers had questions, they were given answers to reassure them that good times and prosperity will come. After an inordinate amount of patience shown and the experiment seeming to have institutionalized worker’s losses for someone else’s gain, Americans have rightfully become restless as if their and their family’s welfare and future are at stake. On top of everything else the social safety net that Americans pay into and rely upon, which has worked since the Great Depression of 1929 – 39,  is now in the process of being dismantled, maybe privatized. This is a good time for business and government leaders to revisit Maslow’s Hierarchy of Needs if they are sincerely having trouble understanding why Americans are distressed.

In college, I attended many economic courses while working on my undergraduate degree. A lot of what I learned was elaborated upon during my pursuit of an MBA, but with a business slant. Many of the economic theories that were espoused then seemed to explain the norms of how the economy worked in the past and was working then, and why certain government interventions, when used sparingly and strategically, were sometimes necessary and later proved appropriate.

Today, it appears that economic norms have been cast aside, and government rules and regulations weakened or not enforced, as the concentration of capital moves entire U.S. and world markets and industries in the direction that benefits the concentrated capital markets. The rest of us seem to be low-level pawns in a life-altering game that we are only allowed to participate in so long as we have money to play. There are brief periods of calm and spotty poor and middle-class well-being, snatched away (along with any gains made) between the roller coaster bottoms, which seem to be cycling increasingly closer. For the vast majority of Americans, economic stability is only a memory and erosion of society, democracy and the capitalist system portend a potential dark future for us all.

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“There are many in the U.S. that realize capitalism cannot exist with just producers and servicers. It needs a robust, thriving and stable consumer class as well.”

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According to an article in The Atlantic entitled “The Secretive Industry Devouring the U.S. Economy,” “The publicly traded company is disappearing. In 1996, about 8,000 firms were listed in the U.S. stock market. Since then, the national economy has grown by nearly $20 trillion. The population has increased by 70 million people. And yet, today, the number of American public companies stands at fewer than 4,000. How can that be?”

Private Equity, Venture Capital, and Hedge Funds that have been acquiring companies control most of the economy, an estimated 75 – 80%. Although each area has its own regulations and regulatory authorities, there is a lot of overlap and cooperation among and between them. Since the 1970’s, capitalists have adopted a tenant of Milton Friedman, a supply-side economist from the Chicago School of Economics that the sole purpose of a firm is to maximize shareholder value, (although even Friedman recognized that there were limits to its application), morphing it into the only purpose of a firm.

The other dog whistle economic theory compromised by the supply-siders was the notion of “Free-Market” capitalism.  The definition became tailored to whatever was useful to put-down those who questioned how its theory was practiced so narrowly to benefit a few. If you questioned supply-side practices you were labeled an “anti-free market socialist, a communist and a supply-side atheist.” Private equity firms and hedge funds have made these their driving mantras and the public good became and obstacle to ignore or remove by their lobbyists efforts on lawmakers. The previous diverse range of economists were replaced by bank economists with a clear conflict of interest, and a media platform beholding to banks for advertising revenue.

The simple truth has been that, while other developed and developing economies and countries were aspiring to maintain a balance of trade with their trading partners, for the last 45 years – 1980 to 2025, the U.S. has maintained a negative (and perilously growing) trade imbalance with the world. The ramifications is that the U.S. relinquished its manufacturing (which was a major contributor to the growth of the U.S. middle class) to produce and sell goods for the world to bring in revenue to run the government and government programs.  The U.S. government chose to transfer manufacturing out of the U.S. in trade in exchange for those benefiting countries putting their revenue in U.S. banks and investments. The U.S. has had to borrow money to fund its government obligations plus its non-budgeted programs, like a 20-year war on terror in the Middle East ($8 trillion dollars), the Crash of 2008 ($22 trillion according to the Government Account Office) – adding to the national debt which, in 2025, reached $36 trillion dollars.

The national debt, recently, has become a political football with the disingenuous excuse to cut legacy U.S. government programs and staff (e.g. Medicare, Medicaid, Social Security – which are self-funding from payroll taxes, – the Veterans Administration, the Food and Drug Administration, the National Oceanic and Atmospheric Administration (weather reporting) and numerous regulation enforcement agencies) for its citizens as if they were the cause of the national debt. Not only do they have a negligible contributory effect on the national debt, one has to keep in mind that as the U.S. is obligated to repay the national debt, that debt is also the basis of the wealth of many of the world’s multi-billionaires. The total market capitalization of the world’s largest stock exchange, the New York Stock Exchange on Wall Street, in September of 2023 was $24.97 trillion.

During these years leading up to the still increasing concentration of wealth, economic theories and government policies that seemed to keep capitalism thriving for most and the society stable and the government operating properly as a moderator seems abandoned. Sure, one could question the relevance of economic “moderators” as changes in the size and make-up of the world economy occurred. One could rationalize that we might require new versions of old economic theories. But what happened to cause the growing gap in wealth between a small group at the top and the entire remaining group citizen consumers was not minor policy tweaks and adjustments. Very few want to mention the economic stability at the micro and macro levels, the instability of economies and societies that were driven to embrace the new economic premises around the world.

What seemed at one time to be a priority to ensure opportunities for the individual citizen consumer to live a comfortable, secure life while consuming and pursuing their dreams, and for small businesses to become big businesses and big businesses to thrive and grow – not so big as to disrupt the world economy, society and democracy – seems to be a memory. That world-view of an all-inclusive capitalism has diminished. The “boring, rational” economists that were around until the U.S. and the world’s developed countries agreed on a different course for capitalism, were marginalized, demonized, displaced and replaced by the bank economists who act more like press officers for corporations and who clearly have a conflict of interest by promulgating economic theories and explanations that skew the facts and enable certain individuals and groups to push, primarily, their agenda. A good example is the lack of warning of the approaching Savings and Loan Crash of the 1980s and 1990s, the Crash of 2008 and the many in between and after.

The result has been the largest transfer of wealth in the history of the world…and not in the direction they encourage us to fear. While preaching to the working class that “we don’t want any program that transfers wealth from the wealthy to the needy” when the few social safety nets are threatened, the wealthy – many without allegiances to the exploited region – have institutionalized the transfer of wealth from the needy to the wealthy corporations and their shareholders as show here.

Economic theory once described our capitalist system as a symbiotic relationship between producers and consumers. A properly functioning economy was described as in a “state of equilibrium.” The government’s role was to monitor that state and make minor adjustments using monetary and fiscal policies to bring it back to equilibrium. Seems programmatic and simple, right?

Then came Neoliberalism, embraced by Republicans, which promoted a more pro-business, anti-regulatory environment and policies. The movement picked up steam when Democrats rolled-out their version of neoliberalism, The Third Way, in the 1980s and gained momentum since. It is a theory of letting the corporations alone and their success will shower us with opportunity and our chance of success. It means to eliminate most regulation of corporations, sparingly enforce the remaining and privatize public services that were meant for the common good, while placating the population with social initiatives that are used like a parent jingling their keys to a toddler to keep them distracted. They promoted each party as “moving to the political center,” which they seemed to do. But the political center has been moving farther abd farther to the right ever since especially after the Citizens United v. Federal Election Commission decision by the U.S. Supreme Court allowing unlimited, unaccountable money in politics, resulting in escalating money influence in our election process which has to have influence on the elected leaders and those seeking office. Billions of dollars were poured into the 2024 presidential election alone.

While initially there was a growth in those climbing out of poverty around the world, they did so because good-paying, benefit-rich, U.S. jobs were offshored to developing countries with much cheaper wages, minimal benefits (if any) and sorely lacking health and safety standards. As corporations moved away, they often left their fixed benefits pension plans to the Pension Benefit Guarantee Corporation (see chart below) and ultimately the taxpayers when the employer-contributed funds dry up. U.S small business suppliers were forced overseas if they could, as well, as corporations continued to force upon them reduced prices for their goods. Any that were led to believe a 401K plan was “more flexible” weren’t also told that the stock market has become more like a casino with worse than Las Vegas odds. High-speed electronic trading, short-selling and market-making movements that bet against the passive investor without their knowledge and consent. Any gains can be wiped out for someone else’s profit in a flash, and if you have anything left you will really find out after the fund manager takes their cut.

Here in the U.S., instead of replacing the good paying jobs with different but good paying jobs, many found themselves driven to multiple service economy jobs with low pay and no benefits. The poor and middle class felt the negative effects first and unfortunately continue to do so. The wealth gap has continued to grow and the vast majority of Americans continue to be left behind and marginalized. There are many in the U.S. that realize capitalism cannot exist with just producers and servicers. It needs a robust, thriving and stable consumer class as well. The more anemic the consumer class becomes, the more unstable the society grows and events can occur that push the country onto an even more perilous track.

Both U.S. political parties’ government policies have significantly weakened the consumer poor and middle class, and have undermined the democracy and society. For example,

• half of the adults in the US read at 6^th grade level or less.
  • Four in five U.S. adults (79 percent) have English literacy skills sufficient to complete tasks that require comparing and contrasting information, paraphrasing, or making low-level inferences—literacy skills at level 2 or above in PIAAC (OECD 2013). In contrast, one in five U.S. adults (21 percent) has difficulty completing these tasks
• 8.4 percent (11.2 million) of U.S. households had low food security in 2023.
  • 5.1 percent (6.8 million) of U.S. households had very low food security at some time during 2023.
  • According to the latest estimates, as many as nearly 14 million  children in the United States live in “food insecure” homes.  Lack of proper nutrition limits the child’s brain to learn.
• Eviction filings are 50% higher than they were pre-pandemic in some cities as rents rise
• Credit card defaults are on the rise for Americans, reaching the highest level in 14 years. U.S. credit card defaults jumped to a record $46 billion from January through September 2024. Americans found them forced to use credit cards for living expenses as wages didn’t keep up with inflation and “real economy” inflation continues to climb
• Car repossessions are up 23% 
• The U.S. housing market experienced a rise in foreclosure activity in February 2025
• In 2024, healthcare bills were a cause of distress for an increasing number of Americans:
  • One in every 10 Americans has outstanding medical debt. (Health System Tracker)
  • Every year, 530,000 American families file for bankruptcy due to medical bills. (Nasdaq)
  • US medical bills are a major reason behind filing for bankruptcy for 59% of Americans. (Investopedia)On average, Americans spend about $10,000 a year on healthcare costs. (Debt)
  • 72% of all medical debt in the US comes from one-time medical issues. (Kaiser Family Foundation)
  • Most US citizens with medical debt owe between $1,000 and $2,500. (Kaiser Family Foundation)
• Business bankruptcies in the United States have been on a steady increase since Q1 2022. “They increased to 23,107 Companies in the fourth quarter of 2024 from 22,762 Companies in the third quarter of 2024.” In Q2 of 2022 there were 12,700 bankruptcies.
• US suicide rate reaches highest point in more than 80 years:
  • An estimated 49,449 people died by suicide in 2022, the CDC said. That’s an increase of 2.6% over the 48,183 suicide deaths in 2021.
  • After the highs of 20.5 suicides per 100,000 after WWI, and 21.9 per 100,000 during the Great Depression, the rate of suicide has continued to climb from 11.8 per 100,000 during the Crash of 2008 to 14.3 in in 2022.
  • In 2022, there were 6,407 suicides among Veterans and 41,484 among non-Veteran U.S. adults.
    • Among all U.S. adults in 2022, there were, on average, 131.2 suicides per day, with 17.6 Veteran suicides per day.
    • On average, seven suicides per day were among Veterans who received Veterans Health Administration (VHA) care in 2021 or 2022, and 10.6 were among other Veterans.

None of these numbers back the notion of “American exceptionalism” often touted by those doing very well and do not want things to change. The growing realization is that the path we are on has upset the entire developed and developing world and the longer we go without bold, systemic changes the more vulnerable are individual economies and potential for conflict between them.

Now, the minor adjustments needed that the government used to make to keep our economy in equilibrium amount to nothing more than illusionary efforts, too little too late, to create an illusion of control of an out-of-control situation. Lobbyists make sure solutions miss their mark and protect the interests of those who pay them. The media likes to describe the state of today’s economy in the terms used in the past as if that is the economy we have today. “A .05 % reduction in the interest rate by the fed will bring down credit card interest rates;” since when? “A reduction in the reported Consumer Price Index means prices on everything are coming down:” not likely. “Building more affordable homes will allow more people to buy them;” not if hedge funds, Air B&B and private equity buy them first.” Today, we have two parallel economies, with one near finishing a “hostile takeover” of the other.

In college, I remember spending entire semesters going over anti-trust law, monopoly  oligopoly and anti-competitive behavior and the reasoning behind government intervention. We talked about the break-up of the AT & T communications monopoly which achieved a dominate market share position that made it difficult for other firms to enter the market. It was explained to me that it was not good for the economy, for society, and for capitalism to allow the concentration of market power that would inevitably push prices up and customer service down with consumers nowhere to go as competition disappeared. Horizontal monopolies (buying up the competition), vertical monopolies (buying up the suppliers to, among other things, prevent access to them by competitors and set favorable wholesale costs for the monopolist) and oligopolies (colluding with competitors to fix prices favorable to each colluder) were all ways to limit competition at the expense of the consumer. All most certainly affect consumer prices, consumer support and satisfaction, and product/service diversity as the market concentrates around one corporation or a few major corporations.

Private equity and hedge funds have learned how to accomplish anti-competitive practices while the previous laws regarding the concentration of market share around one firm. Laws were not revised to funds that buy, sell, merge, break-up and shut-down the firms in a market to maximize short-term shareholder value, irreparably harming the function of the market in its wake, upending labor forces and disrupting communities and regional economies.

Getting back to neoliberalism and The Third Way policies of the government since 1990, most regulations that limited the concentration of market share to a few “common good” utilities-types have been removed, significantly weakened and/or loosely enforced. It was thought that as the world opened up their markets to the U.S., the old notions regarding ant-competitive practices no longer applied. The prevailing economic theories favored self-regulation as a means to increase household wealth and shared good fortune of the growing multinational businesses. Standing in the way of that egalitarian notion was the capitalist’s credo that the primary role of the firm is to maximize shareholder wealth.

It was thought, as well, that incomes would increase in the U.S. as prices of goods, now manufactured off-shore with cheap labor, would usher in a utopian era for the American people. What resulted instead was goods priced as if they were produced in the U.S. but often with less quality (more profit, less cost to produce), American workers displaced and forced to work 2 or 3 jobs to make near what they used to, the price of life-sustaining goods and services such as mortgage rates, rent, healthcare, insurance, autos, utilities, food, fuel, as well as government taxes on property, park access, tolls, etc. continually increasing while wages on average remained stagnant for the last 40 years. This due, in large part, to the concentration of wealth among a few who, in turn, used that wealth to build more wealth and concentrate it further.

Today, consumers are hurting. Too many are being bled dry by the rabid need for more profits. Inflation, shrinkflation and profiteering. It has nothing to do with the interest rate as we are led to believe; that is just an effort to get us to “look over there.” But the current state of our democracy should warn us that solutions should be well-thought and show immediate potential and/or results. These are serious problems; complex and intertwined. They require precise solutions that unwind the damaging, lingering effects of misguided policies.

Private equity involvement in everything from housing, insurance, healthcare, mobile home parks, funeral homes, cemeteries – affecting nearly all aspects of a consumer’s well-being – have whittled away at the existence of the worker, the family and communities. For example, where maximum profit for shareholders directly conflicts with a patient’s health and post-treatment financial health, private equity’s involvement in assisted living centers, hospital systems, physician contracts, emergency room management, ambulance services, flight-for-life transport, hospices, funeral homes and cemetaries and crematoriums have eroded the public’s faith and trust in capitalism, the government that permitted this and their belief that a person’s health is a right, not just a privilege for the well-heeled few.

Other than a few legacy monopolies such as Google, Amazon, Microsoft who worked hard to concentrate their market share since inception, and who have recently been in litigation with the justice department for critical examination against federal anti-trust regulations, we really didn’t hear much discussion about monopolies until recently. Other distracting explanations of why prices on almost everything is so high post-Covid-19 such as the standard “supply-chain issues” lost its credibility. But if we aren’t talking about monopolies and oligopolies across industry sectors, what drove prices so high (along with record profits – something you don’t see when prices rise to offset increased costs) and kept them there. Some call it “simple corporate greed,” but distractions keep more precise reasons and the source camouflaged.

Today, Americans are witnessing the government run extensively by billionaires in the White House and cabinet positions. It is not hard to understand their motivation, their self-serving interests and allegiances. But will their interests be allowed to usurp those of the 95% of Americans? That is to be seen.

The current administration is rolling out their plan to bring manufacturing back. An encouraging goal. But while we are told the current effort to bring back manufacturing through blanket tariffs is the answer,  many economists who support the effort in theory express concern that tariffs will not help grow the domestic manufacturing base until the capacity of the decimated manufacturing base is grown back enough to offer products to compete with the tariffed product. We should all watch how this turns out very closely to make sure the only thing the consumer sees is higher prices.

Reshoring, not nearshoring, of good paying manufacturing jobs will raise standards of livings for workers, offer a brighter future for their children, regenerate dormant local economies by building back small businesses as discretionary money from worker’s wages circulates in the local economy instead of being exported to a multinational company’s home bank account. Bringing manufacturing from China, Viet Nam and India to Mexico and Canada only adds insult to injury, helping those countries economies and leaving the American problem to remain American.

We are at a point in history where the pendulum must start swinging back to head off a global crisis. Monopolies and oligopolies made up of private equity firms and hedge funds (and government, for that matter) can be the force for good that venture capital and public markets once were and achieve redemption. Or, they can drive our country and other developed/developing countries to final ruin. After all, no one will deny they had a good run. Making  good profits on long-term investments for a good cause instead of massive wealth gains on short-term gyrations will only ask them to build their wealth slower and share some of it along the way. After all, what happens in a capitalist democracy when there are no more consumers?

 

If you recognize the challenges of a chaotic market, its effect on your workforce and the changing labor market, and have shed your fear of even looking for other solutions, check out Proactive Technologies’ structured on-the-job training system approach to see how it might work at your firm, your family of facilities or your region. Contact a Proactive Technologies representative today to schedule a GoToMeeting videoconference briefing to your computer. This can be followed up with an onsite presentation for you and your colleagues.