Mon Oct 27th, 2008 at 09:49:52 AM EST
I wrote awhile back about how this crisis was going to make big firms even bigger and reduce competition even more. This is the first time that I can remember where the government actively promoted business consolidation.
Others have started to notice as well, but not enough to change the course of action being undertaken in the "bailout". Just to show that others have understood what is happening (even if the pols don't or pretend they don't) here's a snippet from an overheard internal phone conference at Chase by a NY Times reporter.
"Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase," he began. "What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop."
So When Will Banks Give Loans?
Krugman picked up on the same news story in his column today:
The Widening Gyre
Less obvious is the same trend in retail. A number of chains have already gone out of business and more are about to follow. No one is reporting on the conditions at local, "mom and pop" stores, but I expect to see lots of failures as well. The beneficiary from all this will be dominant players like Walmart. Even without expanding they will get the benefit as shoppers will have fewer options.
The wrong lesson is being learned from the current situation. The conventional wisdom is that things will be fixed by an appropriate amount of regulation, but the real lesson is that government is now a permanent partner of big business and will do all it can to promote it. No one is discussing this change in the economic scene.
Experience has shown that government by corporations doesn't work out well in the long run and turns into some variety of kleptocracy. I hate to use the word "fascism" since it is associated with a police state and the brown shirts, but Mussolini's vision of an integrated business and government system, combined with the active suppression of labor is what we are tending to.
This is not only true in the US, but increasingly in other developed nations as well. JK Galbraith's "balance of forces" model (labor, business, government) has been replaced by his son's "Predator Nation".
So, a few changes to regulatory functions will be used as a distraction while the real forces of monopolization get even stronger. This never ends well.