-Caveat Lector-
One World, One Company?
Date:
Fri, 11 Dec 1998 19:01:01 -0500
From:
Robert Weissman <[EMAIL PROTECTED]>
To:
Multiple recipients of list CORP-FOCUS <[EMAIL PROTECTED]>
How times have changed. Two decades ago, perhaps even a decade ago, Exxon
and Mobil -- the number one and number two U.S. oil producers -- would not
have dared to propose a merger.
If they had so dared, the initial public reaction would have been
uproarious laughter. If the companies had persisted in their marriage
plans over the din of guffaws and snickers, the laughter would have
quickly turned to outrage.
Newspaper editorials would have denounced the merger. Members of Congress
would have thundered about the threat to democracy and called for
intensive and immediate hearings. Most importantly, the public would have
risen in opposition.
There is no chance that the antitrust authorities would have approved such
a merger a mere two decades ago. Now, there is a disturbingly good
possibility the union will be approved.
The reason for the change has less to do with new economic analyses of the
costs and benefits of mergers -- though a conservative, corporate-backed
campaign has managed to overturn many common-sense insights on the costs
of mergers in terms of price increases and the inefficiencies of giant,
bloated corporations -- than with the altered conception of the political
consequences of corporate conglomeration.
When the Teddy Roosevelt-era trustbusters broke up the Standard Oil
monopoly, they were motivated by political as much as economic concerns.
They understood that concentrated economic power translates into
concentrated political power, and that concentrated political power is
incompatible with democracy.
It is time for the U.S. antitrust authorities to recover that perspective
-- and it is increasingly important that antitrust authorities in other
nations do the same.
A recent United Nations report highlights the importance of recognizing
the political implications of mergers and acquisitions. Not only did
mergers reach record levels in the United States in 1997, so did
cross-border deals. In 1997, total cross-border mergers and acquisitions
amounted to $342 billion, according to the United Nations Conference
onTrade and Development's 1998 World Investment Report.
With the Daimler-Benz takeover of Chrysler, BP buying up Amoco and
Deutschebank acquiring Banker's Trust, the 1998 figures seem likely to
exceed those from 1997.
While it is the giant deals between megacorporations in the industrialized
countries that get most of the attention, the hottest trend is
multinationals buying up companies in developing countries. Since 1991,
cross-border acquisitions of companies in developing nations have risen
approximately nine times -- to more than $95 billion in 1997.
(While companies are being bought up in the developing world, not many
developing country companies are doing much buying. Companies based in the
Third World acquired companies in other countries worth under $41 billion
in 1997.)
According to the UN report, two major factors now account for the rise in
the firesale of developing country businesses: privatization, especially
in Latin America and Eastern Europe, with national telephone, electricity
and other enterprises coming under foreign corporate control; and the
Asian economic crisis, which has given multinationals the opportunity to
swoop in and buy Asian companies in financial trouble.
While it may be the case in some instances that foreign corporate
takeovers will lead to more efficient company performance -- for example,
AT&T or other multinational telephone companies may improve customer
service in some countries -- in general foreign takeovers offer none of
the purported benefits of foreign investment. The acquisitions do not
create new jobs, they do not generate new economic activity, they do not
represent new investment -- they only change the company's name.
But these takeovers do present serious problems. Where the takeovers
create private monopolies or oligopolies, developing countries will face
the standard problems of price-gouging and suppression of innovation.
They will also face political problems of immense proportions. The
multinationals are often larger in economic terms than the developing
countries in which they do business, meaning Third World governments are
routinely going to have a very hard time regulating the corporate
goliaths.That the company's headquarters are outside of the country, and
that the corporation has no allegiance to the country in which it is
operating, will make the regulatory challenge that much more difficult.
Although rich countries are more able to control foreign-owned economic
powers operating in their borders, they too are likely to find foreign
ownership to be a growing problem.
U.S. history makes crystal clear the imperative of paying attention to the
political consequences of merger mania. But if the U.S. antitrust agencies
cannot seem to remember and draw lessons from that history, perhaps it
should be no surprise that their counterparts in other countries seem
equally oblivious.
Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime
Reporter. Robert Weissman is editor of the Washington, D.C.-based
Multinational Monitor.
(c) Russell Mokhiber and Robert Weissman
Focus on the Corporation is a weekly column written by Russell Mokhiber
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