"Bigness in business does not necessarily mean badness," counsels Attorney General William French Smith, the friend of many of the big businessmen who put their money behind Ronald Reagan. But with du Pont and Conoco, the nation's 14th and 15th largest industrial firms, merging and thereby muscling up the line of giantism to become Number 6, Smith would have been more reassuring if he talked bout goodness rather than badness.
What good -- to consumers, workers, communities -- is brought about by these concentrations of corporate power and the increased political power that goes with it?Are new jobs created, or new products? Not much has been heard of that in the du Pont-Conoco deal.
Is there any evidence that what numbers 14 and 15 were doing on their own they will now do more efficiently as Number 6? Will du Pont's products be better made, or cost less in the shopping centers, now that it will take over the nation's second-largest coal company, 14th largest gas producer and 16th largest petroleum refiner?
Few captains of the mighty industries currently caught up in the splurge to merge have adequate answers to these questions. As well they wouldn't. The effects of corporate mergers, like the feeding frenzies of small and medium fish being swallowed by bigger fish, are not especially pretty.
It is left to outsiders to describe the gulping."There is not the slightest reason to believe that after being absorbed by the conglomerate, the small enterprise is more innovative, more efficient or more profitable than before," John Kenneth Galbraith told the House antitrust subcommittee in 1978.
It is important that some of the numbers (as found in recent congressional hearings and federal studies) be grasped. Ninety percent of the net profits are controlled by 2 percent of all U.S. corporations. In 142 industries, the four largest firms control more than half the market. From 1947 to 1972, the share of sales by the nation's 200 largest manufacturers soared from 36 to 52 percent.
Besides the consumer who wonders why so much of what he buys from giant companies is cheaply made, poorly designed and possibly dangerous (as he parks his Pinto in front of the Hyatt Regency to go inside for a lunch of California agribusiness fruit), the small businessman gets hit, beginning with high interest rates.
After that, he is victimized by competitive imbalance. An official of the Small Business Administration reports that 300,000 small businesses (which on record as much more productive, innovative and job-creating than the giants) are squeezed into only a 20 percent share of the economy. With the independent smalls vulnerable to the merging bigs, Milton Stewart of the SBA asked before a House committee last year: "Do we have to wait until we are down to 15 percent, 10 percent, 5 percent, no percent?"
With its warm regard for the virtues of Big Business -- while ever quick with a tirade against the evils of Big Government -- the Reagan administration has done more than merely send forth William French Smith. A few days ago, Rep. Berkley Bedell, the Iowa Democrat who is a wary observer of the damage that can be done by corporate takeovers, told of "listening in amazement" when the administration proposed cuts in the lending policies of the SBA: The cuts "were rationalized on the basis that giving federal loans or loan guarantees to hard-pressed small business would soak up credit that otherwise would go to more deserving enterprises." Bedell noted that the $3 billion being borrowed by du Pont "exceeds the total amount sought for all SBA regular loans and guarantees for the coming year."
Maybe all these figures about the decline of small and the increase of big are just more scare talk. If so why don't the advocates of "bigger is better" counter it with some comfort talk? Could it be, as critics like Galbraith, Stewart and Bedell have been saying, that the more a corporation becomes an empire, the less concerned it is about the effects of its decision on the public good?
It isn't enough for the boosters of Big is Beautiful to claim that mergers aren't necessarily bad. It ought to be the other way around, as by law, it is in Canada: Outside companies merging with Canadian ones must show that their deals would meaningfully benefit the community's economic and social well being.
In other words, bigness is fine, as long as corporate growth that benefits investors doesn't kill off corporate responsibility that benefits the community.