The corporations and the media give a number of reasons for the recent
frenzy of mergers in the United States and across the world. One or
more of these factors contribute to each merger.
Size - In many industries, especially banking, telecommunications
and oil, there is a belief that the future will be dominated by a
small number of giant transnational corporations. A large corporation
today feels that it needs to merge with another to keep in the top
two or three largest; the theory goes that any smaller companies will
gradually lose market share.
Power - This is related to size, but larger companies have more
political and economic power to effect changes in regulation, trade
policy and prices.
Access to Markets - Companies which operate in different geographic
areas or industries may merge to gain access to the other company's
market. The theory goes that the combined corporation can sell to
both markets with a slimmer structure.
Overcapacity - due to increased efficiency (due to technological
and other factors) and building of new plants in low-wage countries,
many industries have the capacity to produce much more than the world
markets can purchase. The gap in supply and demand is also partly
due to the widespread inequities in wealth; in most countries, poorly-paid
workers simply do not make enough money to buy the goods being produced.
Mergers allow the combined company to cut overlapping jobs and
reduce costs to try to be profitable with less revenue.
Shrinking markets - In other industries, such as the weapons industry,
a slowdown in buying has left companies with an excessive manufacturing
capacity and management structure. By merging, they can eliminate
some of the overhead and combine the income of the two companies.
The American defense industry has seen a dramatic consolidation from
dozens of military contractors down to just a few primary ones.
What's wrong with mergers?
The problem with mergers is that they reduce competition and create
even larger, more powerful transnational companies. Merger news is often
accompanied with corporate-speak explaining how the larger company actually
increases competition by creating a bigger company which can
compete with some other big company, but it is intuitively obvious that
the merger trend is reducing the number of choices for consumers.
The problem with giant transnational companies is that they usurp power
from communities and democratically-elected governments, replacing a
process by which policy can be made by community input, with policy
made by corporate executives. With factories, offices and stores around
the world, corporate heads often make decisions affecting people across
the globe without the least bit of familiarity with, or concern for,
the social impact of the moves. In addition to actual operating policy,
companies use their lobbying power and threats of plant closings to
gain favorable tax, trade and regulatory actions from governments, avoid
enforcement of environmental controls, and win wage and safety concessions
from workers. Corporate decisions are based on maximizing profits, with
minimal concern for social welfare, and as companies get larger, their
investors and executives are even further removed from the effects of
The short term effect of most mergers are a loss of jobs, and reduced
competition in the marketplace. The ironic result of many mergers is
that the combined corporation struggles and often fares more poorly
than the individual companies may have (see "The Synergy Trap: How Companies
Lose the Acquisition Game" by Mark Sirower [Simon and Schuster, 1997]).
The merged company is usually saddled with debt from the merger (acquisition
costs, or costs of closing plants and firing workers), the cost of merging
the administrative and technological operations of the companies, and
ill will from consumers.
What can we do about it?
In real life, it's not so easy to fight corporate mergers
and transnational giants. The normal levers that people have to use
to govern our society are often ineffective against large, ever-growing
corporations. The corporate lobbying power, control of the media, campaign
contributions and backroom bullying tend to overpower the democratic
process. Citizens, consumers and workers have much less influence over
the corporations than their investors and the global financial markets.
With a great deal of organization and outcry, boycotts, strikes and
political pressure can force changes in corporate policy.
However, there are also ways to fight the dominance of
global corporations with your everyday decisions. You can support local
businesses in your own community, keep an eye on corporate welfare and
big money campaign contributions, and watch for treaties and legislation
that supports and encourages larger and larger corporations. There are also
events such as the World Trade Organization
Meeting in Seattle where you can stand up and join the resistance.
For more information, see
Corporate Watch -
an online magazine and resource center designed to provide you--every
day Internet users--activists, journalists, students, teachers and
policy makers--with an array of tools to investigate and analyze corporate
- publishes a magazine and website tracking corporate activity, especially
in the Third World, focusing on the export of hazardous substances,
worker health and safety, labor union issues and the environment.
Project Underground -
an environmental and human rights organization that supporting communities
facing mining, oil and gas activities, primarily by transnational
STARC (STudent Alliance to
Reform Corporations) is a student movement for corporate accountability, including
a campaign to make sure universities invest responsibly.