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Richard Wolff on Why Mergers Don’t Benefit Consumers

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My second update has to do with mergers
that are in the news. One is between T-mobile and Sprint (major telephone
companies) and the other one is a merger between Renault, the French car company,
and the Fiat Chrysler corporation. And in both of these mergers, which are
underway, there’s a lot of talk in the financial press that upset me. It was
talking about the benefits to the consumer that will likely result from
these mergers and my economics hat pumped up and said to me “explain why
that’s not true.” Well, here’s what it’s about. These mergers are always, in part,
designed to save on costs, to cut costs, to become leaner and meaner or whatever
metaphors you like. That’s the point, indeed, is to save on costs. And of course
one of those costs: labor costs. To do away with “excess workers” that you don’t
need anymore if two companies with two headquarters and two systems and two
warehousing operations merge into one. So it’ll produce a lot of unemployment.
That’s the first thing to keep in mind. The second thing is the statement that
“saving costs these companies will pass on the reduced costs in lower prices.” In
your dreams they will. The whole point of the merger is to cut the costs without
dropping the prices because that will maximize the profits which is what
they’re in business to be doing. So you can be just as sure that the merger will
cut costs as you can be sure that the merged company will do its damnedest not
to cut prices very far because that’s how they maximize the profits that you
can get out of merging. And here’s the irony of course, this is always going on.
Capitalism is a system it puts companies in competition to one another and
typically there’s a winner and a loser. One company wins the competition, the
other one loses it. And here’s what happens after the winning and the losing
is done: the winner eats the loser. That’s right. The company
that lost has to sell off its equipment. Who do you think buys used
equipment? The company that won. Where will the workers go who lose their
jobs from the company that goes out of business? Those lucky enough to get
another job will probably try to get one with the company that won, which will
have jobs because it’s buying the used equipment from the one that lost. And
when that process is finished many companies become fewer companies until
they’re just big enough and few enough to be able to get together at the golf
course, play a few rounds and cut a few deals in
order not to have to drop the prices, even after they’ve cut the costs. That’s
what typically happens and that’s what mergers are all about. The statement the
statement that they’re going to help consumers, here’s why that’s made, that
statement, not just general PR public relations but because these mergers need
approval by the authorities (the antitrust authorities in most countries),
they need to get the politicians on board to look the other way. And the way
you do that is tell a lot of stories about the consumer benefits so they’ll
pass it through. Don’t be fooled.

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20 thoughts on “Richard Wolff on Why Mergers Don’t Benefit Consumers”

  1. sharadowasdr says:

    Sir, could you give your comments on the big Indian bank mergers ?

  2. Dennis Miller says:

    With Citreon and Fiat we are talking 2 countries so where would manufacturing occur?

  3. J Rhoads says:

    The contradictions of mergers: Capitalists extolling the virtues of mergers being a "win, win" scenario AND carrying on endlessly about how this behavior causes anti-competitive monopolies and is not the "true" capitalism. In other words, they don't know sh#t from shinola. These are two sides of the same coin, so lets just get rid of the coin.

  4. MyessYallyah Americus says:

    You are a dead man you fucking fagget. Death is all you have to look forward to

  5. madeline cruz says:

    Professor Wolf forgot to mentioned that the way the politicians allowed these mergers to happened is mostly because they get paid on the said to allowed these mergers to take place. Yes, they get told the story about how it’s going to lower prices for the consumer, which they also know it’s BS but the bottom line they get paid.

  6. whytepirate says:

    When I was a child I wondered why we let people starve in the Land of plenty now that I'm a man I know why.

  7. Fook Oh Wong says:

    The truth is told.

  8. ToldYouSo says:

    This guy has a economics hat. You can't see it? That's the point…. For example increasing profits doesn't have to be done by increasing prices as this academic schmuck would have you believe. It can be done by LOWERING PRICES (while still maintaining a reasonable profit margin per unit) WHICH INCREASES SALES. Neither Renault nor Fiat/Chrysler are doing great in terms of sales and they have much more to gain if they increase their market share than their profit per unit sold.

  9. HURRICANE RAVI says:

    Professor Richard Wolff is like few other Professors…..He teaches the Truth unlike The Idiots like Jordan B Peterson and Gad Saad who tell countless lies in order to Fill their own pockets.πŸ€”πŸ”₯πŸ”₯πŸ”₯πŸ”₯πŸ”₯πŸ€”πŸ˜

  10. Philip Yuan says:

    Dr. Wolff: we support your Democracy at work idea. Any information on how worker co-op handles automation and improvements that may be objectionable to members for the consequence of reduction of jobs.🎈

  11. Thomas Meadows says:

    a monopoly

  12. Anarchist Tech Support says:

    The Sprint/T-mobile merger is being presented in technology "news" as a battle over license for contiguous radio spectrum. The more they can have awarded to a single service, the more spectrum they can use to achieve actual 5G wireless.

    In the end, theyre arguing for nationalized services.

  13. Matt Erbst says:

    Are transcripts available for these videos?
    Or would [email protected] like me to volunteer to write a software solution to automate their creation?

  14. soundcloud.com/SpontaneousMixx says:

    I disagree on the point of the Sprint/TMobile merger. A sad truth in this particular instance is that Sprint will likely not remain viable standing on their own. That will likely result in job loss and reduced competition anyway. Add to that the fact that if they simply shuttered after failure, that would afford much larger AT& T or Verizon the opportunity to buy up their assets, which could potentially put a squeeze on T-Mobile, potentially competing them out of the market as well. I can't speak for long term effects, but in the intermediate, the merger is likely good for the consumer, (as John Legere wants to win and will continue to complete ferociously,) and also be there lesser of two evils for the employees.

    But I'm no economist, just my opinion.

  15. Debbie Becker says:

    That s easy. Mergers are monopolies. Monopolies own the market in whatever they are in. No competition means no care of pricing. Tommy Becker's comment

  16. cshubs says:

    I've been saying for years that someday, there will only be: The Company
    It would not need a name because it'll be the only business left on earth.

  17. PoliceState says:

    Lower number of total jobs, but the same number of people wanting to work means the company will probably lower the pay for new workers.

  18. fourdotsYT says:

    Acquire enough monopoly… make enough money to pay the antitrust fines. $$profit.

  19. Duggy Dugg says:

    finally.. something on which I can agree with proff..mergers decrease competition…where are the anti trust laws when you need them ?

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