Corporate mergers, stagflation, and globalization are usually studied as separate phenomena, belonging to the fields of finance, economics, and international political economy, respectively. This chapter attempts to tie them together as integral facets of capital accumulation.
Analyzed independently, all three phenomena appear problematic, even mysterious. Take mergers and acquisitions. These are now constantly in the news, and for a good reason. Over the past decade, their value reached unprecedented levels, surpassing for the first time in history that of newly created production capacity. Yet, despite their importance, mergers and acquisitions remain enigmatic. "Most mergers disappoint," writes The Economist, "so why do firms keep merging?" (Anonymous 1998). According to the textbooks, there is no clear answer. Corporate merger remains one of the "ten mysteries of finance," a riddle for which there are many partial explanations but no overall theory (Brealey et al. 1992, ch. 36).
Stagflation, although presently dormant, is equally embarrassing. Most mainstream economists believe that prices should increase when there is excess demand and overheating, but stagflation - a term coined by Samuelson (1974) to denote the combination of stagnation and inflation - shows prices can also rise in the midst of unemployment and recession. 1 A similar difficulty arises with the opposite phenomenon of inflationless growth, such as the one experienced recently in the United States. The standard explanation rests on the disinflationary impact of accelerating productivity, although that scarcely solves the problem. The fact is that even faster efficiency gains have often failed to tame inflation in the past, so why is it that they succeed now? Frustrated, many economists seem to have finally thrown in the towel, suggesting that we now live in a "new economy" where the old rules simply no longer apply.
And globalization, too, remains perplexing to some extent. Although theories here vary a great deal, most seem to assume that in the final analysis globalization
* This article was originally published in the Review of International Political Economy 8(2), 2001 (http://www.tandf.co.uk). A brief epilogue is appended to reflect recent developments.