Merger Policy and Industrial Policy

Cowling, Keith | January 1, 1989

The article by Adams and Brock is a welcome and important antidote to current government thinking about merger policy, both in the United States and in Europe. In both regions, the government approach presumes the efficiency-creating properties of mergers and, therefore, adopts an extremely permissive stance. The declared imperative of international competitiveness echoes the view towards mergers which prevailed in Europe during the 1960s. However, while the analysis of Adams and Brock is both important and correct, I believe it is also incomplete. If bigness is a problem created largely by the laxity of past merger policy, then it is certainly correct to argue for stricter merger policy now and in the future; yet such an approach is unlikely to suffice. Not only is a policy required to control the further growth in the dominance of the giant corporations, but the problems posed by that very dominance must be addressed. I believe those problems should not only be addressed as issues of regulation, but also as issues of development. As democratic communities, we must react to the accumulated power of the major actors on the economic scene by regulating their behavior or by divesting them of at least some of their power. We must also act strategically to counterpose our own vision of the future to that of the dominant corporations. Thus, the regulatory and developmental roles of government are complementary in the search for a dynamic and efficient economy, and these roles require the development of some sort of industrial policy.