The massive mergers taking place are a disaster for democracy
By George Monbiot. Published in the Guardian 20th January 2000
It surely cannot be long before the world’s big companies recognise the inexorable logic of “synergistic rationalisation” and fuse together to form a single corporation. They may be at it already. In 1998, the value of mergers and acquisitions in Europe broke all records. In 1999, it doubled again. Now corporate chief executives appear determined to beat that admirable score by the end of January.
Last week AOL and TimeWarner concluded the biggest corporate deal in history, a merger worth some £200 billion. This week, Tesco appears to be stalking Marks and Spencer, Citigroup has swallowed another merchant bank, Mannesman is trying to fight off a bid by Vodafone, and the pharmaceutical companies Glaxo-Wellcome and SmithKline Beecham have meshed to create the United Kingdom’s biggest corporation. The great blob has begun to coalesce. As the ecstasies of the executives celebrating these deals suggest, this consolidation is great news for them. It is a disaster for everyone else.
To discover why businesses are expanding, we need only examine another of this week’s big stories. An American company called Myriad Genetics is threatening the work of British laboratories testing patients for the presence of genes associated with breast cancer. Myriad has patented these genes in the United States, and now claims to own them in Europe as well. It can make this claim only because, in 1997, the British Government helped the European Commission to approve a new directive, harmonising European patent laws with those in the United States. Life, the directive suggests, is now patentable in the European Union.
The debate over patenting rules attracted the biggest corporate lobbying effort ever conducted in Europe. The company which spent most was SmithKline Beecham. “Genes,” its research director had decided, “are the currency of the future”. It was determined to acquire a licence to print money.
The “harmonisation” of laws in Europe and the United States has allowed SmithKline Beecham to expand the scale of its operations: it can now develop the same products under the same conditions in both trading blocs. It is able, as a result, to reap economies of scale which are unavailable to smaller companies, trading nationally.
As laws in different parts of the world are aligned, small firms wither, while big business prospers. The mega-mergers of the past three years spring from the implementation of the last world trade agreement, the consolidation of European law, the launching of the European currency, and the first attempts to turn Europe and North America into a single trading bloc. As big companies become bigger still, they seek to pull the rug from under their smaller competitors by demanding ever swifter harmonisation. The Glaxo-SmithKline merger is the inevitable outcome of the processes SmithKline Beecham set in motion.
That mergers like this are bad for the workforce can scarcely be disputed: the latest pharmaceutical alliance will lead to the demise of 15,000 jobs. But some of the boardroom beneficiaries of these deals have sought to suggest that they will be good for everyone else. They’re wrong.
Big companies may reap economies of scale, but when competition is limited they’re unlikely to pass them onto consumers. As producers expand, consumers shrink: we become ever less capable of fine-tuning our demand. When markets are dominated by big companies, there is less opportunity for small ones to emerge. If you are baking a few pounds of biscuits in your kitchen, for example, you might be able to supply your local corner shop or market stall, but there’s not much point in talking to Tesco.
Most importantly, however, big business means big politics. Major companies, as SmithKline Beecham found, get what they want. The bigger they become, the more power they accumulate. Working with governments all over the world, they can extract politics from the national domain, where ordinary people can affect it, and transfer it to the remote and inaccessible heights of international negotiations. As they grow, their concerns become ever further removed from those of the citizens they dwarf, until the world is run not for the benefit of its six billion poor or merely comfortable inhabitants, but for that of a handful of perverse billionaires.
The mergers of the past two weeks are particularly dangerous. The TimeWarner-AOL consolidation could mark the beginning of the end not only of the residual freedoms of a consolidating press, but also of the brief but glorious flowering of internet democracy. Glaxo-Wellcome has already tried to bully the NHS into buying its anti-flu drug; the bigger company to which it now belongs could start to shape national health policies to suit itself. When businesses dine on each other, the rest of us get swallowed.