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Graphics from 4 empirical muckrakers – 1. Nitzan and Bichler’s Buy-to-Build Indicator
from Blair Fix
During the 1990s, corporate mergers became part of the public zeitgeist. But what is the deep history of mergers and acquisitions?
Jonathan Nitzan and Shimshon Bichler piece together the puzzle with their ‘buy-to-build’ indicator. This indicator measures the dollar value of mergers and acquisitions expressed as a percentage of gross fixed investments. It tells us how much corporations are spending on buying other companies, relative to how much they are spending on actually building things. Nitzan and Bichler muckrake to put together a century of US data:
More recently, Joe Francis compiled an open source update of the buy-to-build indicator. This is great empirical muckraking.
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—— Ugarteche, Puyana and Madi ——
Gerson Lima / Maria Alejandra Madi
Edward Fullbrook and Jamie Morgan
————— Michael Hudson ————–
Maria Alejandra Madi / Jack Reardon
————- Edward Fullbrook ————-
—————— Steve Keen —————–
————— Richard Smith —————
————– Gustavo Marques————
– Victor Beker and Beniamino Moro –
————– Lars Pålsson Syll ————-
—————– Stuart Birks —————-
Edward Fullbrook and Jamie Morgan
———— Armando Ochangco ———-
Shimshon Bichler / Jonathan Nitzan
————— Mauro Gallegati ————–
————— Herman Daly —————-
————— Asad Zaman —————
—————– C. T. Kurien —————
————— Robert Locke —————-
Real-World Economics Review Blog 
Does this represent an acceleration of “musical chairs” acquisitions or does it represent an ever greater concentration of monopoly ownership in large conglomerates and transnational corporations? The data from Monthly Review Marxists and their publications indicate the latter. It’s mostly about the monopoly concentration of capital.
It seems to me that CasP (Capital as Power) research and modern Marxist research of the Monthly Review “School” dovetail. CasP and MR are looking at the same phenomena through somewhat different lenses or instruments. In each case they are committed to data-collection and analysis at this level, not to ideological analysis. In MR ideological analysis still does occur at another level but initial empirical analysis of capital patterns is undertaken.
The process of imaging with different instruments is common to science. Take the example of brain imaging where all of the following are employed: fMRI, CT, PET, EEG, MEG and NERS. I leave it to the reader to search these terms. The point I am making is that a complex system can be, indeed must be, investigated in many ways with many instruments. The issue is to make sure that;
(a) empirical data is collected and analyzed for each “picture”;
(b) artifacts are identified and adjusted or rejected as appropriate;
(c) it is understood what each picture can and cannot image; and finally
(d) the different pictures are validly amalgamated or concatenated to give a better overall picture (model) of the complex system.
In summary, what I am saying is that closer interchange of ideas between CasP and MR (as the two most intellectually impressive and empirically based schools in Political Economy today) would be fruitful, I believe.
The
Academy of Management Executive, 19:2 (May), 2019 pp. 50-58, writes about a German
multinational corporation’s efforts to introduce lean production concept in two of its
factories, one in Germany, the other in the US.
Although new organizational charts were drawn up on their facility in the
United States, the actual way work was done did not changed. Hence the
German multinational lean production program failed to alter production or
research and development times at the US facility. In stark contrast, the
manner of work at the German plant facility altered dramatically.
The author concluded about lean production reforms that
at least part of the success of any lean production program depends on the
institutional environment within which a firm is operating. Lean production
functions best when a training system provides workers with a high level of
broad-based analytical skills [as in Germany] and labor laws that engender
the retention of employees and facilitate their integration into the decision making process [as in Germany] (p. 50)”
If you want to consider buy and build indicators, you need to consider the specificies of firm governance, or you won’t get anywhere.
There is an interesting relationship in the charts. Booms in mergers and acquisitions were observed in the stock market boom of the 1920s and the one that began n the 1990s. Now that sits oddly with the Tobin Q theory of investment. Q measures the value of assets on the stock market compared with the cost of constructing them anew, the so-called valuation ratio. According to the theory people should construct assets when it is cheap to do so relative to buying them ready made.by M&A. It may be that investment is positively associated with stock market booms but it still declines as a proportion of M&A spending.. This seems to imply a more Minsky-esque mechanism at work whereby higher prices bring out buyers as speculative enthusiasm builds. It also reflects academic findings that a firm making a large takeover is rarely a good investment for shareholders.
I don’t think it is always the case but the recent boom in M&A has certainly been associated with a rise in concentration and monopoly.
On the Tobin’s Q “Puzzle” and its resolution with our Buy-to-Build Indicator, see our book “Capital as Power”, Ch. 15, and particularly Figure 15.3 (http://bnarchives.yorku.ca/259/2/20090522_nb_casp_full_indexed.pdf).