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From: Sid Shniad
To: [EMAIL PROTECTED]
Subject: Democracy and Megacorporations Don't Mix -- Robert Reich
Date: Thursday, June 04, 1998 5:05PM
The Los Angeles Times Wednesday, May 13, 1998
Democracy and Megacorporations May Be Mutually Exclusive
A century ago, the trustbusters battled big business as an
economic problem. Today, the real danger is political.
By Robert B. Reich
The era of big government may be over, as the president says, but the
era
of corporate giantism seems only to have just begun.
The proposed Daimler-Benz deal with Chrysler will be the biggest
industrial
merger in history. America's banks are joining up at a record pace, as
are
defense contractors and telecommunications behemoths. SBC just
announced its decision to acquire Ameritech. Compaq's merger with
Digital
will be the largest in the history of the computer industry.
The nation is in the midst of an economic consolidation even more
dramatic than that which occurred more than a century ago when vast
empires were created in railroads, steel, iron and oil--and when the
antitrust
laws were first put into place to stop corporate giantism.
Our forebears cared then. Should we be concerned now?
There have been two strands to America's historic concern about
corporate
bigness. The first was political. It was the fear that large
concentrations of
economic power might undermine democracy. The second has been
economic. It's that business leviathans might get so large that they
squeeze
out competitors, after which they raise prices and stifle innovation.
The first strand animated the antitrust movement of the late 19th
century.
For Republican Sen. John Sherman of Ohio, chief sponsor of the Sherman
Antitrust Act of 1890, the power of trusts amounted to "a kingly
prerogative, inconsistent with our form of government." Sherman reasoned
that "if we will not endure a king as a political power, we should not
endure
a king over the production, transportation and sale of any of the
necessaries
of life."
Only the second strand remains today. Modern trustbusters worry solely
about maintaining competition. That's why the Justice Department is
battling Microsoft, whose Windows operating system dominates 90% of the
market, and why it's trying to stop Lockheed from merging with Northrop.
And that's why today's trustbusters probably won't stop Citicorp's
merger
with Travelers into a $700-billion financial colossus or NationsBank's
giant
merger with BankAmerica. Nor do I expect the government to derail the
combination of Daimler-Benz and Chrysler or Digital's merger with
Compaq or most of the other megamergers.
These combinations won't threaten competition. Other big companies are
in
the same market, so the new giants will have ample incentive to keep
their
prices low. Besides, most of these markets are global or about to become
so. If the newly formed giants did try to raise prices, competitors from
other nations would move in. If not GM or Ford, then Volkswagen or
Toyota would grab the market away from a Daimler-Chrysler that raised
its
prices too high.
In addition, technologies are evolving so quickly in these industries
that a
dominant player can be overtaken if it gets smug. Telecommunications,
finance, entertainment and computers all are shifting ground,
trespassing
into one another's terrains, morphing into a mind-boggling variety of
integrated products and services. Unless one player has a lock on a key
standard (as, arguably, Microsoft has with Windows), dominance is likely
to be fleeting.
In fact, many of these mergers will create new efficiencies, which can
reduce prices further. Huge national banks will be less susceptible to
regional downturns than will smaller banks, for example, and they can
spread the costs of new technologies (like fancy automated teller
machines)
over many more transactions. Chrysler will gain sales outlets abroad and
Daimler-Benz will gain a wider range of downscale cars. Compaq will
obtain a much-needed system for direct sales and service and Digital
will
get some leading-edge products.
Some employees will lose their jobs, of course. But that's less of a
problem
now, when fewer than 5% of workers across the nation are actively
looking
for jobs. Digital is expected to cut some 15,000 jobs, or 28% of its
present
work force, after merging with Compaq. Yet most of those jobs are in
Massachusetts, where unemployment is down to 3.7% and other high-tech
companies are recruiting like mad.
The real danger of the new corporate giantism is political rather than
economic. It has to do with the earlier, now abandoned, strand of
antitrust.
Even if they don't have power to raise prices, the new giants will have
more power to raise political money. At a time when campaigns for
elective
office in America are fast degenerating into pure television advertising
and
when "soft money" for such ads is already out of control, we should at
least consider the possibility that corporate giantism will poison
elections for
good.
Most of the half-billion dollars spent during the last presidential
election
came from American corporations and Wall Street. (Even in their support
for Democratic candidates, they outspent organized labor.) And as these
giants become global, the campaign money will, in effect, come from
everywhere around the globe. Concerned about the "Chinese connection"
in 1996? Ponder the "German connection" when Daimler-Chrysler begins
underwriting future candidates or when publishing giant Bertelsmann,
which just bought Random House, begins flexing its own political muscle
in
America.
Consider also their power to mount effective lobbying campaigns in
Washington or our state capitals, seeking favorable outcomes in contests
over environmental or health and safety regulations. I still have scars
to
show how effective corporate lobbying was in the first Clinton
administration. The new giants will have even deeper pockets.
Remember Harry and Louise, the fictional couple in commercials that
helped sink the Clinton administration's national health initiative?
Such
well-financed corporate public relations campaigns have effectively
swayed
public opinion. The new giants could do so even more.
Ponder the generous flow of corporate money that already compromises
universities and think tanks in pursuit of analyses favorable to
corporate
positions. The new giants will have more resources for this sort of
thing.
They'll be able to afford platoons of lawyers to fight anyone audacious
enough to take them to court and to litigate forever against any
government
agency trying to enforce the law. Are Justice Department lawyers a fair
match for Microsoft's army of private attorneys from America's most
prestigious law firms?
If none of this concerns you, consider: The new giants will be
employing--directly and through vast webs of suppliers and
subcontractors--large numbers of Americans. Decisions about where to
open a new facility or where to close an old one will affect thousands
of
livelihoods. So you can bet that mayors, governors and even heads of
state
will give the giants whatever they ask for. "Corporate welfare" in the
form
of tax breaks, subsidies and other government largess already flows
disproportionately to big companies. More of it will flow even more
freely
to the new giants.
Moreover, a democracy requires that its representatives speak out
against
irresponsible conduct. Will government officials whose constituents'
jobs
(and whose own campaign coffers) are dependent on the new giants be
willing to criticize when they deserve criticism?
A democracy needs a free press that informs citizens of major dangers or
unfairness or corruption. Will media that are dependent on the new
giants
for an ever-larger share of advertising revenues be willing to blow the
whistle on them when a whistle should be blown?
A democracy requires free citizens who are willing to say publicly
unpopular things to provoke critical debate. Will individuals who depend
for
their livelihoods on a few corporate giants--or whose relatives depend
on
them--be willing to sound the alarm when alarms should be sounded?
As we ponder the current surge toward corporate giantism, these are the
sorts of questions we ought to be asking, not just whether the results
are
economically justified. It's the discussion we had more than a century
ago,
but haven't had much since. As historian Richard Hofstadter observed,
"The political impulse behind the Sherman Act was clearer and more
articulate than the economic theory. Men who used the vaguest language
when they talked about 'the trusts' and monopolies . . . were reasonably
clear about what it was that they were trying to avoid: They wanted to
keep
concentrated private power from destroying democratic government."
The greatest threat to democracy is the deepening cynicism among so many
people who are convinced that the political game is rigged in favor of
the
big guys. The problem is, they're often right. The trend toward
corporate
giantism may mean they're right even more of the time.
Robert B. Reich, the former secretary of Labor, is professor of economic
and social policy at Brandeis University
