ECONOMY

Monopoly capitalism or European integration?

The serious slowing down of the international economy and the pressing need for restructuring in Greece have recently given rise to an interesting debate in Athens. Following the controversy on the expediency of the application of a Keynesian model to boost demand, another important question has surfaced in the last two weeks: Do big business mergers lead to a sharpening of competitiveness in the context of European integration, or do they contribute, partly due to the small size of the Greek market, to the creation of a new type of public-private corporate monopolies? The debate has been fueled by the announcement of the supermerger between the country’s two largest banks, National and Alpha – which belong to the public and private sector respectively – and the lively speculation about the spawning of numerous other such large deals, from telecommunications to the mass media. The pundits say the answer is not straightforward. If, for instance, a merger leads to desirable economies of scale, bolstering the competitiveness of the new corporate giant in terms of price and quality vis-a-vis rivals elsewhere in Europe, then the answer is surely in its favor. Such an outcome would benefit consumers (individuals as well as firms) and the Greek economy as a whole in the new competitive environment ushered in by the adoption of the euro on January 1. However, failure to attain such economies of scale – which would bring about large cost reductions – will result in the economy and consumers suffering for a long time from Greek giant conglomerates dominating one sector or another. The result would be one well-known from the past ills of state monopolies: high prices, bad quality and low productivity. This is no longer the most likely outcome, the proponents of big is efficient will argue. It may be that the monopolistic or oligopolistic structure of markets has always caused phenomena of dysfunction and asphyxia throughout the economic system, but it is not so now. Even a gigantic – by Greek standards – firm would have to operate under conditions of intense competition, in view of the huge European single market, which no longer coincides with national borders. This is largely true. But at the same time, those arguing that the Greek economy is a very small part of the eurozone, with a low degree of exposure to the global economy and therefore not particularly targeted by European conglomerates, have a point. The dominant new players would seem to have a lot to gain, at least in the medium term. The truth is, however, that big companies do not operate in a time frame of just two or three years, but rather of five or even 10 years. In such a time frame, the Greek economy can only be seen as an inseparable part of the larger European entity, and therefore mergers should be seen as desirable and worth backing by policy, business leaders will argue. This would not, of course, mean that they would necessarily favor the creation of powerful monopolies. Besides, they argue, monopolies are not to be found in any member state of the European Union.