Market rewards to gargantuan mergers, and the public consecration of them by those who make current opinion in business and economics, suggest that market dogma may be approaching the end of its cycle of intellectual domination–as all things must.
The bruited merger of American Airlines with Delta, and the proposed merger of British Airways with the Netherlands’ KLM, together with the consolidation of mobile telephone operators throughout Europe, coincide with a Washington federal judge’s decision that Microsoft has to be broken into two companies.
The coincidence suggests that we approach the turning point where the assumed imperative of corporate size runs into the practical and political obstacles of the public interest –widely ignored in recent years because the market was held the best public servant of all.
A meeting here recently heard from investment bankers that the rule of survival in business now says that to be No. 1 in your market is the sole acceptable status; to be No. 2 is possibly manageable; to be No. 3 means crisis; and after that–close down or sell out.
This is a frank confirmation of the practical observation that the dynamic of capitalism in its current form tends necessarily toward the creation of monopolies, which alone are able to make serious money.
The market argument has held that monopolies automatically self-destruct, since they inspire new competitors willing to offer better products or lower prices, overthrowing the monopoly. In practice, this often does not occur.
Microsoft is to be broken up because, according to the court’s judgment, its monopoly position allowed it to choke off challengers proposing better products. Government intervention was held necessary to allow competitors the space to establish themselves.
In the pre-deregulation past, regulated monopolies–in telephone and postal services, for example–were tolerated on terms that demanded high levels of service from them and which controlled their prices.
Market ideology required an end to regulated monopoly, even in public services. Britain deregulated and privatized its national rail system with what today are acknowledged as catastrophic results–terrible service and higher prices–and worse yet, virtually no prospect of major improvement. No modern private corporation, attentive to the imperatives of quarterly return and stockholder value, can make the investments necessary to rehabilitate an obsolete and run-down railroad infrastructure.
Another feature of market ideology is what now is described as the “established fact” that managing corporations to the sole purpose of increasing stockholder value is in the best interest of employees, consumers and the community.
Previous formulations of business ethics held that while everyone benefited from corporate success, the labor force and community had interests that did not always coincide with those of stockholders, as the latter perceived them. Management was held to have obligations to all.
In recent years, conventional business and economic wisdom has become disconnected from the realities experienced by ordinary people. It would be very hard, I suspect, to find a representative group of air travelers who believe they have benefited from mega-mergers in the airline industry. It would be even harder to find a rail traveler in Britain who thinks rail privatization did him or her any good.
Defenders of airline deregulation point to over-all declines in fares since deregulation.They do not cite consumer-satisfaction indices, since few can fly at the hours or on the dates when very low fares prevail. Even business corporations now object to what they consider extortionate business-class fares.
Surveys as well as anecdotal evidence indicate widespread consumer hostility to the standards of service, punctuality, amenity and convenience that now prevail in the air-travel industry, just as computer users are widely hostile to Microsoft’s domination of operating systems.
The result, in the United States, is that Congress has required minimum standards of passenger treatment by airlines, and the courts have now dealt with Microsoft. In market theory, however, these problems were supposed to have been regulated by the invisible hand of competition.
Much the same is true in banking and certain other businesses that have experienced intense consolidation in recent years. The better service supposed to be supplied by mega-merged banks or other corporations proves to be more expensive and much worse than before.
Corporate thinking has lost touch with the thinking and values of consumers and citizens as a direct result of business theorists’ rejection of the proposition that the corporation has obligations to a set of interests, not just one.
This has been a phenomenon of the last 25 years. The domination of market ideology will eventually fade because its disutilities, as well as its errors, are increasingly evident. We have all been part of an experiment, yet to end. If we are lucky, it will all finish as case studies in the textbooks.
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E-mail: wpfaff@easynet.fr
