Is bigger better?
That’s a question we’ve been thinking about for years. What originally got us thinking about this was the question the nation faced during the initial part of the recent economic turndown, when there was talk that some major banks were “too big to fail.”
It made a little sense. During those banking crisis days in our country, it appeared that the failure of even one more big banks might bring on a cascading financial disaster. That in turn might trigger a financial panic worldwide. It made you ponder.
But then we recognized that the real problem of the financial and Wall Street arena was its unquenchable greed. These Fat Cats of the financial community made sure the rules were changed, winked-at or bent, so that their wallets became fatter.
And so far, years after investigations and questionable audits which made accounting firms look like they were in bed with the banks, still not a single big-name banker has been sentenced to significant prisons terms. Some may have had their hands slapped, but what they need is to have the fear that they could wind up in a cell for several years.
These days there is talk of another industry seeking to save itself by getting bigger. We refer to the present attempt by American Airlines and U.S. Air to merge, and become the world’s largest airline. Could that be good for us, the average traveler, or travel in general, or for greedy merger-bound managers of those airlines?
Stepping into this now is the Justice Department, questioning whether such a merger will damage the country by providing less competition. It appears that such a reduction in competition would. All you have to consider is airline ticket prices when there is a reduction of airline choice in route competition. Tickets go up!
Instead of merely protesting planned mergers, what’s wrong with the Justice Department seeking an additional role to help the average citizen? Why not take on these heavy-handed industries like Teddy Roosevelt did?
You may remember that Teddy took on no less than John Rockefeller and the Standard Oil interests. His breaking up of Standard Oil because of its monopolistic operations points the way for the government to take a long look at many industries, from airlines to banks to telephone practices to the kaolin industry.
One economic mainstay is for sure: the fewer companies there are in any business, the less choice there is for consumers. When there are only one or two or three firms in any industry, watch out! Though they may not officially be in cahoots, many times they allow virtual carving up of segments of geography, or portions of manufacturing, or concentrating perhaps on certain products…..so that there is a virtual lack of competition.
The consumer suffers.
Ironically, when Teddy Roosevelt clipped the wings of the Standard monopoly, an unexpected aspect happened. The broken-up companies began to make more money. And out of this attempt to curtail Rockefeller, old John made substantial profits as his broken-up firms became bigger.
Our Federal Government need not be so lily-livered in worrying about tackling head-on monopolistic businesses, or the threat of that, such as this airline merger.
It should take the long look. See what’s good for the consumer. And it might even be good for business in the long run, as Mr. Rockefeller found. Bigger is not necessarily better.