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.
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