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Mergers Provide Illusion of Growth

08/07/1998

Once again, Wall Street is in the grips of merger mania. The financial pages are replete with reports of new billion-dollar mega-mergers. Last year, some 6,800 mergers were consummated, with a price tag of $550 billion (that is, one-half trillion dollars). The spin doctors on Madison Avenue assure us these corporate marriages are good for the country. Corporate giantism, they tell us, enhances production efficiency, promotes technological progress and promotes America's competitiveness in world markets. But James Brock, an economist in Miami University’s business school, isn’t convinced. To him, the secret behind this unchecked corporate optimism is synergy -- the principle that "two plus two equals five." Moreover, he sees an ultimate irony in Wall Street's addiction to mergers and acquisitions. While America urges the former communist nations of Eastern Europe to dismantle their central planning mechanisms and monopolistic superstructures, we seem to tolerate the frenzied building of industrial empires here at home, Brock says. He has testified on several economic issues before Senate and House congressional committees at both federal and state levels. A prolific author, his books include Antitrust Economics on Trial: A Dialogue on the New Laissez-Faire, Dangerous Pursuits: Mergers and Acquisitions in the Age of Wall Street and The Bigness Complex, one of Business Week's top 10 best business books of 1987. Brock is delightfully articulate and capable of making complex subjects understandable. You can reach Brock at his office at (513) 529-2846 or at home at (513) 523-3241. Or leave a message with the economics department, (513) 529-2836.

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