Big corporate mergers are the rage these days. FedEx is merging with the Dutch delivery company, TNT. AT&T is merging with DirecTV, and Royal Dutch Shell wants to acquire the British natural gas company, BG Group. At first glance, these mergers, and others like them, look like great profit generating moves for shareholders, but on closer review all that glitters financially may not be best for consumers and capitalism.
Mergers give companies the ability to join forces with the competition. Corporations reduce costs, and may even acquire a hot product in the deal. Corporations also merge to gain access to new geographic markets, or they just want to be bigger and better. But, all those positives may not produce much for consumers and investors according to some economists like Christian Broda.
Christian Broda is the Managing Director of Duquesne Capital Management, and he knows what big corporate mergers do for the economy. The economy might suffer in the long-run thanks to these mergers. When one company dominates a specific market, consumers pay the price in several ways. Products begin to disappear, and prices increase. The workforce in that market shrinks and communities suffer the consequences of high unemployment and social unrest. The environmental factors that these corporate power moves change impact the socio-psychological attitude of the people. The social balance could become so disturbed that capitalism itself will function differently.
The idea that vanishing investment opportunities are associated with big business mergers is not something everyone understands. But these large-scale business mergers represent a petrified, modern day form of capitalism that produces restrictive practices, exclusive attention to conserving capital and price rigidity. Not only are investment opportunities erased by these mergers, capitalism is changed by them, and so is the global social structure.
The excessive reserves held by these big corporations, the gluts in the money market created by them, the stagnation of investment opportunities, and the eventual disappearance of investment opportunities pose several challenges for future generations.