The effect of GEMs on business: a decline in big institutions

It was a surreal morning, even for hardened financial journalists. On Easter Monday 1998, Wall Street opinion formers were invited to the opulent Hilton banquet room at Manhattan’s Waldorf-Astoria to be told that Nations Bank was merging with BankAmerica to form the largest bank in the US. ‘Bigger is indeed better’ a beaming head of Nations Bank told the press conference.1 Two hours later the financial commentators trooped back to the same building’s Empire banquet hall to learn that First Chicago and Banc One had followed suit, creating the continent’s fifth largest bank. Both mergers were explained in terms of advantages of size in a globalizing economy and economies of scale: BankAmerica and Nations Bank announced plans to shed between 5000 and 8000 jobs within two years of fusing. The creation of megabanks represents one part of a long historical trend in business: the need to be big. Factories and centralized distribution facilities in the Industrial Revolution spawned big business. Craft-based worker alliances then metamorphosed into big union power as an essential counterweight. When the weaknesses of those antagonistic forces were painfully revealed in the depression years, big government emerged to provide a safety net.