Restructuring by Design: Government's Complicity in Corporate Restructuring

By Champlin, Dell P.; Knoedler, Janet T. | Journal of Economic Issues, March 1999 | Go to article overview

Restructuring by Design: Government's Complicity in Corporate Restructuring


Champlin, Dell P., Knoedler, Janet T., Journal of Economic Issues


The view that corporate restructuring is not only inevitable, but necessary, has become commonplace in American policy and business circles. Only by imposing job losses and shedding unnecessary costs can American business hope to compete in the "new global economy" and regain the position of dominance it held during the "golden age" of American capitalism after World War II. This narrative of corporate restructuring as necessary and inevitable hinges on the notion that the job losses and other unfortunate consequences of restructuring are simply the result of impersonal market forces over which businesses and governments have no control. The new global economic environment requires "leaner and meaner" as well as larger and more powerful corporations. In the face of global markets dominated by mobile transnational titans, individual governments are viewed as relatively helpless to do little more than "ease the transition" to ensure that American corporations will be among the winners in the global market.

This manifesto of the "new global market" has been repeated so often that it has now become commonplace. But, is it an accurate explanation of the corporate restructuring of the past 20 or 30 years? What if the downsizing, stagnant wages, and loss of job security have not been necessary to ensure a new "golden age," but instead to engineer a redistribution of income to those with market power and influence? The global economic environment is determined by the actions of governments as well as business. The growth of ever-larger corporations through merger and acquisition requires a supportive legal and political atmosphere. In the United States, this atmosphere has been more than supportive as evidenced by the past 30 years of lax antitrust policy. Moreover, federal and state governments have given billions of dollars in subsidies, grants, reduced taxes, and subsidized credit to large corporations, directly and indirectly supporting corporate restructuring. To the extent that corporate restructuring has been aided and abetted by government policy, it should call into question the conventional wisdom that corporate restructuring is the result of impersonal market forces.

In this paper, we explore the extent of government complicity in corporate restructuring. The first two sections examine the role of government in two areas: federal antitrust policy and government "economic development" programs. In the third section, we assess the extent to which government policy has biased the outcome in favor of business at the expense of others. We conclude by suggesting that the persistent belief in the inevitability of restructuring is at odds with the actual record of the past 30 years.

"Adjusting" to the Market I: Antitrust Policy

One area in which the federal government has given an extended green light to corporate restructuring is in antitrust. While the popular view is that Ronald Reagan ushered in the present era of minimal government intervention in our nation's business, the truth is that this process began much earlier. Even the short period of relative activism in the early 1960s under Robert Kennedy's Department of Justice was guided by the philosophy, as stated by Kennedy himself, that the goals of government antitrust policy and of business were the same: both sought "to maintain and nourish the strength of our nation's free economy" [quoted in Williamson 1995, 59]. Under Lyndon Johnson, the tide turned toward an even more conciliatory antitrust policy with the appointment of Donald Turner as head of the Antitrust Division of the Department of Justice. In a speech shortly after his appointment, Turner argued that the government "should not attack a merger simply because the companies are large in the absolute sense" [quoted in Williamson 1995, 64]. Turner was concerned with preventing horizontal mergers that would increase concentration in specific markets, and thus he paid little attention to preventing conglomerate or vertical mergers. …

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