How will the recent wave of mergers affect the nation?
June 2, 1998
in this forum:
What is the correlation between mergers and the strength of the economy overall? How will the recent wave of mergers affect the consumer? Does the recent wave of mergers mean fewer rights for labor? In this emerging global economy, how do mergers affect third world countries? Is bigger better? John H. Abakah of Silver Spring, MD, asks: [In this emerging global economy], how do mergers affect third world countries?
Professor Weston responds:
Mergers have been very good for third world countries. Mergers are one of the vehicles for responding to economic change and making resource adjustments over time. One of the forces producing freer economic trade and more jobs has been the movement toward freer trade through agreements such as GATT and NAFTA. Freer trade has increased international competition and has increased opportunities for all countries from realizing their comparative advantages.
More specifically, mergers and joint ventures have taken place between companies in developed countries and companies in developing countries. Companies in developing countries that have good products now have greater opportunities to sell these products in world markets. Often in alliance with companies in developed countries, companies in third world countries can grow faster, become larger, stronger, and increase employment in their countries.
Professor Adams responds:
I apologize for not being able to answer this question which is profoundly important these days -- as markets are becoming global and corporations are becoming multinational.
Unfortunately, I have not so far done research in this field. Therefore, I hesitate to offer off-the-cuff opinions which would be of dubious value.