In that game the goal is to get more and more property, so you can command the highest prices possible and eventually force everyone else to go bankrupt. It has a 1930s Depression feel about it.
So, I’m looking at a similar goal this week, watching one of the largest three oil drilling equipment companies buy out another of the top three.
Negotiations have apparently been going on for a while, but news leaked last Thursday about the possible buyout of Baker-Hughes by Halliburton. Halliburton was already very big at number 2 worldwide. Baker-Hughes was probably third largest, but combined with Halliburton, they eclipse the size of number 1 Schlumberger (a French company, pronounced here in Texas something like Shlum-ber-zhay).
This morning the news came out that the deal was going through. Halliburton is paying around $34.6 billion for their fellow American company, along with some stock payments for employees. Last Friday stock prices were up a bit for both companies. Today, Halliburton is down 10 points and Baker-Hughes is up 10 points. I don’t know what that means, other than stock watchers think the price was good for Baker-Hughes and probably higher than Halliburton had wanted to pay. As far as I can tell, nothing illegal has taken place. Anti-trust examinations are still to come.
So that’s the free market at work, right? Only partly. Free enterprise is not actually a game of monopoly, in which the players have a goal or getting all the market share and putting all their competitors out of business. After all, competition keeps prices down for consumers and encourages innovation.
But competitors are kind of pesky for big businesses. And that’s why there have always been efforts to get governments to regulate in ways that give an advantage to the bigger, more established businesses, making market entry more difficult—thus limiting competition.
It was just a few days ago that I quoted economist Milton Friedman saying:
[Businesses] aren’t promoting free enterprise when they ask for handouts and regulations and controls to avoid competition.
The two greatest enemies of free society are intellectuals and businessmen—for opposite reasons. Intellectuals want freedom for themselves but no one else. Businessmen want free enterprise for everyone else, but special consideration for themselves.
I don’t have any data showing particular favors either Halliburton or Baker-Hughes has been involved in. I’m not a hater of either company just because of size. But I am puzzled—as a lover of free enterprise and civilization—with the monopoly game playing of big business in general. Why would it be a goal to grow endlessly? Why isn’t there a perfect size for any particular organization? Is bigger necessarily better?
The companies seem to see benefits from the merger. But there are concerns. One of the things that tend to happen following mergers is that shifting and settling occurs. Where there are redundancies, the acquired company employers are the ones likely to be let go. So it’s hard for regular people to understand what the CEO means when he announces that they always put the employer and shareholder interests first.
Baker-Hughes had been having a good year. Halliburton has as well. Both were facing an industry with lower oil prices right now, because OPEC saw the need to flood the market, in the face of growing supply out of North Dakota and Texas, to discourage further drilling. But OPEC can only drop prices for so long without harming themselves. As long as drilling is happening anywhere in the world, both of these big companies were there making money. So, it wasn’t any great need on the part of Baker-Hughes that led them to enter into the negotiations in the first place.
In general, in a free market, businesses ought to be free to hire and let go employees as they see fit. But, because success of free market is intertwined with living the laws of civilization, there should be some concern for the individual employees as well. If that perspective is lost because a company gets too big, loses sight of people and culture, and focuses only on bottom line growth, then that company might be too big.
Should government have a role in making things safer/better for employees in such a merger? It’s tempting to say yes. The employees have been hard working and loyal, and the company is failing to be loyal in return. Shouldn’t we, the people, see to it that employees aren’t taken care of as we think would be fair?
Yes and no. This situation isn’t very different from people who think we, the people, ought to force companies to pay a minimum wage. The outcome of forcing a particular contract between employer and employee is the failure to enter into a contract that doesn’t benefit both parties. So what happens is that unemployment goes up, and those who could be getting experience while earning low hourly wages are left unemployed. Our interference harms rather than helps, despite our good intentions.
So, what would be nice is that these big corporations, when they face redundancies, they think less about numbers and more about people. They could consider a longer severance package, for example.
The experienced cynics among us might ask, What if we know those companies just won’t do it; shouldn’t they be forced to give a longer severance package? Wouldn’t that at least make them think differently about the balance between keeping and laying off any particular employee?
I don’t know. It looks good, to voice the intentions this way. But what we need is a world in which the company leaders actually think about culture, loyalty, and human factors as a higher priority to short-term numbers. We need them to be more civilized. Without the heartfelt movement toward civilization, there will always be unintended consequences, probably opposite of what we want to have happen.
Freedom, prosperity, and civilization are tied together. You don’t get actual long-term prosperity without laws that allow as much freedom as possible, and without people who choose to live civilized lives. So the best outcome to pray for, after a big upheaval for thousands of people, such as this merger is about to cause—is for the hearts of more and more people, preferably those in leadership positions where policy decisions are made, to be turned toward accomplishing human good, and trusting that will lead to greater prosperity.