paul phillips wrote:
Would it be wrong to suggest that M&A activity is a symptom of excess capacity, particularly when a merger/acquisition is followed by 'downsizing' -- the laying off of employees. Such activity reduces competition and allows the merged company to 'retire' the most obsolete and most depreciated capital (which, pari passu, usually means the most labour intensive) while giving the companies more ability to maintain or increase prices. What we see now is as markets become more global (i.e. more international competition) there is the merger of former national firms e.g Daimler-Chrysler, Volvo-Ford, etc. and several of the European national air carriers. If this is correct, we should expect to see a continued spate of such mergers until excess capacity is, in effect, 'eliminated' (sterilized) and oligopoly consolidated at the international market level.
Why should it ever be consolidated? MonoCap in the U.S. was a historical anomaly, coming after depression and war, with foreign competition on its back. It couldn't last, and didn't. Why shouldn't there be constant turmoil as long as capitalism careens along in its merry way?
Doug
