(c) Copyright 1998: Graham Strachan
The ‘rationalism’ in economic rationalism, as has been shown, means ‘profits, without regard to people’. But ‘rational’ has another meaning, also derived from philosophy, and which applies equally well. It explains why economic rationalist academics can continue to claim that their economic faith will lead us all to the promised utopia despite overwhelming evidence to the contrary. In this sense ‘rational’ means ‘theoretical, worked out in the head without regard to evidence in the real world’. It is the opposite of ‘empirical’, which means ‘based on experience, or evidence’.
Reality, to the rationalist, is pretty much anything they imagine it to be. All you have to do is ignore the real world. Because of this, academic economists can delude themselves into believing that ever bigger and bigger conglomerates, leading inevitably to absolute monopoly, can somehow result in ‘increased competition’. The elimination of competition can lead to greater competition. Such contradictions can exist side by side in the mind of the rationalist.
Economic rationalism, as has been shown, is the ideology of oligopoly, a false theory that presents market control by a few huge multinationals as a ‘competitive market’, which is then alleged to be able to provide all the benefits of a truly competitive market. But the unstoppable characteristic of oligopoly, and indeed monopoly capitalism, is to move inexorably towards absolute monopoly, and consistent with this fact we are now observing what are described by the media as ‘mega-mergers’. Nonetheless, academic economists persist with the absurdity that this will somehow lead to increased competition and all the benefits which are supposed to flow from it.
On April 7, 1998, it was announced in the US that financial giants Citicorp and Travelers would merge in a record $70 billion deal, the largest corporate merger ever, creating the world's biggest financial services company operating in 100 countries. The new company, to be called Citigroup, would also be by far the most valuable in the business, with a market capitalization of about $135 billion. Much of Wall Street liked the deal, and Citicorp's stock shot up. The merger was similar to one early last year that joined Morgan Stanley Group Inc., with Dean Witter Discover & Co. And if ‘much of Wall Street’ liked these deals it goes without saying they must be ‘good for everybody’.
Meanwhile BankAmerica is merging with NationsBank, WorldCom with MCICom, Sanduz with Ciba Geigy, Mitsubishi Bank with the Bank of Tokyo, Union Bank Swiss with Swiss Bank Corp, Banc One with First Chicago NBD, and KKR with RJR Nabisco, all forming huge conglomerates on borrowed money, most of which is imaginary due to the fractional reserve banking system. Bigger, bigger, bigger....then what?
As usual, Australia is busting to copy the big boys. The Australian of 15 April 1998 reported that “Investors deposited a further $2.6 billion into the market value of the banking sector yesterday, with shares in each of the Big Four closing at record highs amid fervid takeover speculation. While the Federal Government reaffirmed its ban on big bank mergers, investors were betting this could change after the next election in the wake of dramatic consolidation in the US banking market.” All the way with LBJ, for better or worse, till death do us part.
While academic economists haven’t yet woken up to the fact that the promised consumer benefits from these mega-mergers are illusory, it seems that consumer groups have. While NationsBank and BankAmerica Corp. executives claimed ‘added customer convenience’ could come from their merger deal, NationsBank customers voiced worries that the colossal merger could result in a new round of fees, more bureaucracy and a decline in service. And it will: they can bet on it.
"NationsBank has a history of coming into a market, taking over and imposing their own fee structure --which generally means higher fees, more fees and higher balances required to avoid fees," said Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group, which conducts annual surveys on bank fees. "I don't see them changing their stripes."
Ordinary people are starting to realise what the game is all about. When the aim is ‘market control’, you actually achieve that by controlling markets. Wow! Market control is achieved by mergers and resultant monopolies, and once in control of the market you can do and charge virtually anything you like. This is all a bit much for the academic economist. It’s not supposed to work that way.
One myth which seems to pervade all this is that bigger means ‘more stable’. In fact the opposite is true. The ANZ bank has the biggest presence of Australian banks in Asia, especially the most troubled countries of Indonesia, South Korea and Thailand. The Australian of 17 April 1998 reported that the ANZ Bank has slashed its ‘exposure’ to troubled Asian economies and mothballed plans to acquire banking assets in the region. ANZ chief finance officer Peter Marriott confirmed that any actual losses would be contained within the bank's stated general provisioning.
This raises the obvious question: now that Australian banks are ‘exposing themselves’ in Asia, what would happen if they were to fail as a result of an Asian currency crisis? If the ANZ caught the disease of many Asian banks and showed the liklihood of collapsing, would the government let market forces prevail and allow the bank to fail? The general consensus in the real world is that it could not afford to. It would use taxpayers’ funds to prop up the bank. That’s about as real as this ‘free market’ gets. It’s all a sham behind which the greedy play their little game of monopoly using pretend money and the real world as the board.