By Ignacio Ramonet
Le Monde Diplomatique
June 1998
The pace of corporate change is impressive. Hardly a week goes by without the media announcing some new marriage between major companies, the creation of some new colossus, a mega-merger designed to create the super-giants of the future.
Among the most spectacular, we have recently had the acquisition of the Chrysler auto company by Daimler-Benz (for a sum of $43 billion); the Citicorp bank by Travelers ($82.9 billion); the Ameritech telephone company by SBC Communications ($60 billion); the pharmaceuticals giant Ciba by Sandoz ($36.3 billion, creating Novartis); MCI Communications by WorldCom ($30 billion); the Bank of Tokyo by Mitsubishi Bank ($33.8 billion); the Société de Banque Suisse by the Union des Banques Suisses ($24.3 billion); and the recent merger decision between the two historical giants of the German steel industry, Thyssen and Krupp, which, according to their managements, will generate a combined turnover of $63 billion.
In 1997 the total for mergers and acquisitions was running at upwards of $1,600 billion. The sectors most susceptible to this monolith-mania have been banking, pharmaceuticals, media, telecommunications, food and agro-industry and the auto industry.
What explains this ferment of activity? Operating within a context of increasing globalisation, the major companies of the Triad (North America, the European Union and Japan) are making the most of economic deregulation in order to establish truly global presences for themselves. They are looking to become major players in the world's leading countries and aiming to take significant shares in those countries' markets. A combination of factors such as the fall in interest rates (which prompts a shift from bonds into shares), a large quantity of capital seeking a way out of the Asian stock markets, the massive financial capabilities of the large pension funds, and the improved profitability of companies in Europe and the United States, has created a certain headiness in the stock exchanges of the West, and this is what lies behind the merger frenzy.
The mergers are happening in areas that would once have been considered taboo. For instance, at one time most governments would have seen the auto industry, along with steel and telecommunications, as a sector of prime strategic importance. However, this has not been the case in Britain for the past twenty years and, since the purchase of Chrysler by Germany's Daimler-Benz, it is no longer the case in the United States either.
In the view of an expert from the Boston Consulting Group, the world's bosses have lost their inhibitions. The safety mechanisms of traditional capitalism have blown out. Non-aggression pacts no longer apply. It is no longer considered bad manners to go banging on a company's door even when their management have rejected your offer (1). There was an eloquent example of this in France in March 1998, when Jean-Marie Messier's Compagnie Générale des Eaux merged with Havas, to create the Vivendi group.
From the predators' point of view, such mergers offer several advantages. Competition from other companies can be eliminated by buying them up because in most cases these mergers arise not out of a desire to diversify, but as an attempt by competitor companies to achieve quasi-monopoly positions in their respective sectors (2); they also provide an opportunity to catch up in R&D terms, by taking over firms that are technologically more advanced; and finally they open the way to mass sackings under the pretext of cutting costs (for example, in its first year the merger between UK firms Glaxo and Wellcome resulted in the elimination of 7,500 jobs - one tenth of the total workforce).
As a result of successive consolidations, some firms have now achieved gargantuan proportions. Their turnovers are sometimes higher than the GNP of some industrialised countries. For instance, General Motors' turnover is higher that the GNP of Denmark; Exxon's is bigger than that of Norway, and Toyota's is bigger than that of Portugal (3). The financial resources available to these companies often exceed the financial incomes of whole countries, including major industrialised countries. They are also greater than the foreign exchange reserves held by most major countries' central banks (4).
In a kind of push-pull effect, as the mergers lead to the creation of ever larger corporations, the advance of privatisation means that the state is reduced to the stature of a dwarf.
Ever since Margaret Thatcher launched the first privatisations in the early 1980s, more or less everything has been up for sale. Most governments, from North to South, from right to left, have embarked on massive pruning operations in their state apparatuses. Between 1990 and 1997, at world level, governments have off-loaded onto a grateful private sector sections of their national heritage to the tune of $513 billion ($215 billion in the European Union alone). Privatised concerns are particularly valued by investors since they may have benefited from restructuring financed by the state and are also likely to have had their debts wiped out. They are very attractive propositions. Particularly the public amenities (such as electricity, gas, water, transportation, telecommunications and health), which promise a highly profitable, regular income which is free of risk and where prior investment made by governments is good for decades to come.
In the run-up to the millennium, we are witnessing a strange spectacle: the growing power of planetary business giants, against which the traditional countervailing powers (governments, parties, trade unions etc.) seem increasingly impotent. The main phenomenon of our age, globalisation, is in no sense under the control of governments. Faced with these giant corporations, the state is losing more and more of its prerogatives. The question is, can we, as citizens, really turn a blind eye to this new-style global coup d'état?
(1) Libération, 15 October 1997.
(2) In the interests of not appearing to favour the re-establishment of "natural monopolies", the US government has taken legal action against Bill Gates's Microsoft for allegedly violating anti-trust legislation.
(3) François Chesnais, La Mondialisation du capital, Syros, Paris, 1997.
(4) Ibid.
Translated by Ed Emery
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