Mergers harm democracy

AT&T announced its intentions to buy T-Mobile, whose parent company is German government-owned Deutsche Telekom, for $39 billion. It will pay $25 billion in cash, and the rest in shares, leaving DT an 8 percent stake in the new entity.

It’s hard for us mere Main Street mortals to imagine paying $25 billion in cash!

AT&T wireless has a unionized workforce of some 42,000 workers. The U.S. labor movement said this merger could be a good development for workers and consumers.

T-Mobile is notoriously anti-union in the United States and fights any attempt by T-Mobile workers to organize and bargain collectively. But Deutsche Telekom is unionized in Germany. Communication Workers of America and a German union, ver.di, have partnered to support U.S. T-Mobile workers to exercise their right to organize. 

It makes sense for labor, especially CWA, to issue positive statement given these dynamics. 

Yet, there are other economic and political forces at work in this merger than union vs. nonunion.

Merger-mania is a hallmark of capitalism. Its track record is littered with mass layoffs, price hikes, union-busting, monopolization and attacks on democratic rights, all dangerous trends for society. (One only has to mention the phrase, “too big to fail,” as an example of the 2008 financial disaster.)

Mergers usually come with the promise of “efficiency” and therefore a better deal for consumers. With that “efficiency” prices go down, profits up and the economy grows, which is supposed to be good for all.

But at closer look, “efficiency” reveals something else entirely. In an article about the announced deal, The New York Times says the deal would provide a “significant cost savings, roughly $3 billion a year,” meaning higher profits for stock holders, not lower prices for consumers or more wages for company workers.

And how would $3 billion a year be realized?

Again, The Times says, “The combined company is expected to close hundreds of retail outlets in areas where they overlap, as well as eliminate overlapping back office, technical and call center staff.” 

That means layoffs at a time when unemployment stubbornly hovers between 9 and 10 percent.

For consumers, it is unclear how the merger will affect prices. The hypothesis is a company becomes more efficient and passes off the cost-savings to the customer.

For all the breakthroughs in technology and global production – all good for efficiency – why aren’t prices decreasing? In fact, in many basic spheres of life: energy, food, health care and communication, prices have gone up and take a bigger bite out of family income.

Mergers tend to create higher prices because less and less companies compete, and the few that remain can – and have, although it’s supposed to be illegal – conspire to keep prices artificially high. (Lest we forget the landmark antitrust lawsuit against AT&T that resulted in the 1982 break-up of the monopoly into the eight “Baby Bells.”)

T-Mobile customers usually pay less than AT&T’s. Don’t count on that after this merger.

It is hoped by some that this merger will facilitate building broadband high-speed wireless networks in all communities – urban, suburban, rural – an important goal, indeed.

However, it’s not clear if the merger will guarantee that.

Capital investment flows to where it can make the greatest rate of profit. Not just any profit – but maximum profit.

Who is to say that building high-speed networks for Hibbing, Minn., Missoula, Mont., or Chattanooga, Tenn., would mean maximum profit for the mega-corporation?

There has been a longstanding struggle to limit this tendency in capitalism toward monopolization.

Perhaps most notably were President Theordore Roosevelt’s battles with “the trusts.”

With the Reagan Revolution, antimonopoly regulations and enforcement were among the casualties of “no government except to help the super-rich and corporations” ideology.

By the time George W. Bush took office the Department of Justice – which is tasked with anti-monopoly law enforcement – became a handmaiden for corporate mergers, helping mega-corps get around any of the remaining laws and regulations.

Now we have the U.S. Supreme Court Citizens United ruling that has increased megacorporations’ influence in elections and the legislative arena.

Mega-corporations put billions of dollars into anti-Democratic attack ads and campaigns during the 2010 midterm elections.  They are now getting their payback with anti-worker and anti-civil rights bills and actions sweeping GOP-ruled states: Wisconsin, Indiana, Ohio, Missouri, Michigan, New Jersey, Maine  to name a few.

We won’t even get into the tea party House of Representatives and their attacks on democracy and freedom.

These mega-corps and their mega-bucks have a negative impact on the country’s democracy that leads to more and more extreme attacks on rights and freedoms.

As advocates of socialism, the corporations that command the economic heights need to be democratized and run fully in the public’s interest. Capitalism cannot guarantee such democracy and as such, if this editorial board was running the show, we’d say no to the merger.

But, the Department of Justice and the Federal Communications Commission, along with committees in Congress, are the ones that have the oversight capabilities. They should use it to the fullest extent to guarantee that workers and consumers interests are put ahead of private profits.

Photo: Mark Klein is a former AT&T technician who blew the whistle on the telecom giant for their cooperation with the Bush administrations illegal warrantless wiretapping program. Klein came forward with hundreds of pages of documents showing how AT&T broke the law and gave the NSA unfettered access to their customer’s records and calling data. (Quinn Norton/CC)


PW Editorial Board
PW Editorial Board

People’s World editorial board: Editor-in-Chief John Wojcik,  Managing Editor C.J. Atkins, Copy Editor Eric A. Gordon, Washington D.C. Bureau Chief Mark Gruenberg, Social Media Editor Chauncey K. Robinson, Senior Editor Roberta Wood, Senior Editor Joe Sims