The positive side of the AT&T-T-Mobile merger
Jeremy Hobson: You know that $39 billion AT&T takeover of T-Mobile? The one that would reduce competition in the world of cell phone service? Well for some reason, it's got our economics correspondent Chris Farrell very excited. He joins us now. Hi Chris.
Chris Farrell: Hey Jeremy.
Hobson: So why are you so excited about this big AT&T-T-Mobile deal that we found out about this week? I mean, everyone says it's going to be terrible for consumers.
Farrell: But it's good news for the economy. Think about it this way, Jeremy: CEOs for the past couple of years have been scared. They've been in a survival mode. Well, they're now leaving the bunker. They're willing to take a risk; they're going to buy a business, they're going to expand. And so, the famous phrase of John Maynard Keynes: Animal spirits of capitalism, at least in the executive suite, are being unleashed.
Hobson: Why are they being unleashed right now? We've still got a lot of uncertainty in places like Libya and Japan. Why are CEOs so ready to jump into the marketplace again?
Farrell: The signs have been growing that this economy is doing better. So I think it is a time to consolidate your business, to expand your business, if that's what you want to do. And if the economy's getting better, the safe forecasts will say: interest rates are going to go up and therefore, an acquisition would be more expensive down the road.
Hobson: And what do these mergers and acquisitions, if we're about to get into a big M&A boom, what does this mean for the rest of us?
Farrell: Well we have a lot of experience with this, and what we know is that it means in companies where you have the mergers, there's going to be a lot of job losses because you're going to get rid of redundant positions, right? That's just what happens. And you have to justify the costs and all the efficiencies. And then in certain industries where you're having a lot of consolidation, you start eliminating the competition -- again, a lot of job losses. If you take a look from the perspective of the overall economy, however, it's that famous phrase by Joseph Schumpeter: creative destruction. I think we're seeing more growth, I think we're seeing more opportunity. So overall, job creation. But if you're in the wrong place at the wrong time, job losses.
Hobson: Marketplace's economics correspondent Chris Farrell. Thanks Chris.
Farrell: Thanks a lot.