The corporate landscape is evolving. United Airlines and Continental Airlines have moved their tails together to form one of the largest transportation providers in the world. My wife and I were flying to Honduras when this was happening. I stood in the back of the plane discussing this merger with the flight attendants of Continental and they were not too happy. The dominant partner was United and the flight attendants for United were getting all of the prime routes while the Continental Flight attendants were getting the less attractive flights, which led to their unhappiness.
Another example of how the corporate landscape has changed happened yesterday with the purchasing of Medco Health Solutions by Express Scripts. The purchase prices was $29.1 Billion. Express Sripts is a much smaller company, but due to the undervaluing of Medco related to its stock price they were vulnerable. It also appears that there is a huge change within the pharmacy-benefit business resulting in several giant competitors.
Mergers and Acquisitions are nothing new. Boeing and McDonald Douglas merged in 1998, and during the recession many banks merged to survive the catastrophe that had just occurred. Are these large corporate entities healthy for the market, or can they be viewed as problematic for the long term economic health of the US and the world? What is very interesting is the Karl Marx actually addressed this phenomenon.
Marx discussed capital accumulation in volume one of “Das Capital.” He informed the reader that as capitalism evolved the means of production would be concentrated into the hands fewer and fewer individuals. Obviously this would lead to the survival of the fittest, with the weak not surviving. The losers would disappear, and the winners would grow larger resulting in Oligopolies and Monopolies.
Marx also stated that with these larger corporations in place exploitation of the worker would escalate. The craftsperson would disappear and be replaced with the human robot. In Marx’s time it was the factory, and in our day it is the technology that allows the worker to work faster. With higher levels of productivity due to the new technology less people are required which creates a dependent workforce, because they don’t want to get laid off, that is willing to work for subsistent wages. Marx continued to pontificate that this conflict would lead to a polarization of classes. According to Marx in a capitalist system, the aristocracy of Feudalism is replaced by the owners of production which he named the Bourgeois. This class would then struggle against the Proletariat. During this dialectic the workers throughout the world will rise up and take over the means of production and ultimately the political systems of the world leading to a worldwide Communist state.
In 1989 the Berlin wall fell. Ronald Reagan’s famous statement, “Mr. Gorbachev tear down that wall,” is taken as the victory cry of Capitalism over Communism. However, before we strut our stuff like peacocks we need to rethink our arrogance. The political system that Marx spoke of in the Communist Manifesto may have failed, but his economic thoughts are still relevant. His concept of the concentration of the means of production into the hands of a few is happening as we speak. The exploitation of workers is still happening all over the world, even in the good old US of A. Alienation of the Worker from the fruit of his/her labor is just as true today as it was in 1848, so you Bourgeois don’t tell me you won, because the game is not over yet.
The Communist Manifesto starts with a statement that is quite spooky. “A specter is haunting Europe the specter of communism.” If you are a smart manager, you will pay attention to Marx. His economic concepts are appropriate for today’s situation. We are running at a 9.2% unemployment rate. Corporations have money, but are not hiring people? Anger is running high in society. Riots are occurring all over the world. People want change. You know what, maybe we declared victory too soon. Maybe we forgot how important respect and love are in everything we do, and commoditized humanity to make more money. In the process of accomplishing this we sold our soul to the devil.
And that is my thought for the day!