Capitalism, economy & financial well-being in America, Government & Law

Bigger is Not Better

December 11, 2017

We live in an era where mergers are common.  The examples are numerous – big banks and financial institutions, airlines, cable companies, newspapers and radio/TV.  The common logic is that bigger leads to greater efficiency, which in turn has the potential for lower prices and possibly higher quality.  While this is the potential, experience has shown that that is not always the outcome.

Mergers are approved with the rational that at the national level there is competition.  In fact, in many cases when looking at geographic regions, one finds market dominance by a single business entity.  The airlines are a case in point.  Mergers have created a situation where many markets are dominated by a single airline.  That airline is then free to set prices higher than it might otherwise if there was strong competition.

Big media is another example.  Media companies control multiple news outlets – newspapers, radio, TV, cable.  When they dominate a geographic area they unduly influence and potentially bias, the information available to the community.  They do, however, improve the efficiency of collection and delivery.  From an individual citizen point of view, I doubt that this offsets the potential for biased information.

Large enterprises, in general, amass large wealth and the associated potential to influence the democratic process to suit there own needs.  Large organizations, in general, behave in a manner to support and foster their own needs, growth and profit, and not the best interests of the general population.  Large generally means less competitive pressure and therefore less tendency to innovate (although they generally claim otherwise).  Innovation drives the creation of better jobs in the future.

So, as in many situations, we are confronted with a tradeoff.  We want the efficiencies and potential lower prices and breadth of options.  We do not want excessive corporate self interest and the potential for corruption of the political process.  The critical question is ‘How big is too big?’  The answer clearly varies with industry and specific circumstances.  The answer has to be in part that adequate independent societal advocacy is a part of the decision process.  Something that does not exist today.

Photo by @jbtaylor

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