A Negative Sign for Investment and Job Growth

There’s a good rule of thumb–you get what you reward.

Here’s a summary of current U.S. policy towards big corporations: Invest in the U.S., create jobs, and get sued by the government.

You would think that during a business investment drought, any company that puts big money into the U.S. would be patted on the back. But no…

AT&T is the company which is putting the most money into the U.S….almost $20 billion in capital spending in 2010.  AT&T is also planning to bring back call center jobs from overseas.  AT&T is also getting sued by the Justice Department to block the merger with T-Mobile.

Frankly, this sends a signal to U.S. companies that getting out of  the reach of government regulators by going overseas is the right strategy.

Comments

  1. See, this is where the doctrinaire “free market” folks lose me, which I know you’re not one of but you’ve adopted this dumb position of theirs. They argue for AT&T because they figure it’s a private company so it must always be right and the govt is always wrong (personally, I think they’re both wrong ;) ), so they argue against more govt involvement in the telcos. You, on the other hand, argue for AT&T because you think they’re investing in US jobs and believe that blocking the merger somehow would curtail that. The fact remains that the vast majority of AT&T jobs would stay here regardless, as those employees service their US wired and wireless communications networks, which usually require physical intervention. In fact, the common reason given for mergers like this is to cut jobs and streamline operations, so having two carriers would probably mean more US jobs.

    But I don’t much care about US telco jobs, the real issue is that communications networks are like private roads, information superhighways to our homes. As such, we’re always going to have some public involvement, unless you want your streets to look like this ;) (which btw, would actually be better than what we have now). The telcos were given billions in the ’90s because they promised we’d have fiber everywhere by now, which still hasn’t happened. So we’ve already had giant govt involvement in the telcos to date, which created the oligopoly position they have now, and the govt has royally fucked it up in many, many ways. I wish we could just start over with a model that actually makes sense. But considering how long it will take to get there, I can’t bash the current FCC move to at least prevent the oligopoly from consolidating further in the meantime.

  2. I don’t know, there are always more jobs cut in a merger – that’s the main reason they do them – to cut costs.

    Talking about perverse rewards – why do we give a capital gains tax break for those who invest overseas? I can understand a tax break for investing in the US, but rewarding overseas investment? That does not create any US jobs.

  3. I don’t know what planet you live on but M & A ALWAYS involve job losses. Is the merger going to keep ALL the jobs and net a +5000 with a call center, I do not think so.

  4. The punishment is for attempting to absorb the lower priced competition. AT&T also told some rather unbelievable stories about why they wanted to do it. If government will not protect us, then who will? Votes are also rewards.

  5. Mike – with all due respect – this merger is great for the senior management of ATT and Deutsche Telekom, and pretty much no one else. This is a job-killer and innovation killer. These two companies are both terrible at innovation and customer service; combining them will not make either better or benefit customers in any way that I can see. To your point: better that ATT should just spend their capital in the US on improving their network; and TMobile should become part of Comcast, Liberty, or Time Warner Cable. While I think the customer service would still be pitch poor, at least there would be an outside shot to see some innovative new services. (I still don’t understand why Comcast didn’t by Sprint instead of NBCU, but that’s a whole other discussion).

  6. Wow, this is bad. I started coming here because your posts on productivity from cheap labor vs technology. Interesting stuff. But this is really, really bad. Basically what you get on CNBC or Fox.

    So I guess ATT will show us and only deploy their new cell tech in China. Finally the govt stands up stops just one of the the endless wasteful M&A crap that does nothing but destroy share holder value while generating huge fees for Wall Street along with the required big bribes, er I mean bonuses for making the hard decisions, for the C level managers of both companies.

    And this is your analysis of what happened. Well, I guess I no longer have to waste my time here.

  7. This is a terribly shill-esque or at least naive posting. The real irony is that this merger, if allowed to happen, would likely chill the industry’s growth and evolution that you seem to champion. I’m anxious to see your detailed analysis on how this merger will promote a vibrant marketplace for the industry. And since you are focusing on jobs, you might also include points on how ATT integrated workforces in previous mergers when they bought companies providing the same services to the same customers.

  8. AT&T didn’t invest all that money in this country out of a desire for public service. They performed a cost-benefit analysis, decided it would be profitable and went ahead with it. This, in no way, obligates the government to allow them to make such an anti-competitive move. If they have $39 billion cash to spare, why not invest that in newer networks instead of killing the lower-cost competition? And this will reverse many of their job-creation efforts from earlier. Another commenter put it perfectly; the only ones who will benefit are the suits. Kill the merger.

Trackbacks

  1. […] big corporations have won out over the regulatory worrywarts), Atlantic contributor Michael Mandel had a very different take on the FCC and the Justice Department coming down hard on the merger. In his […]

  2. […] applauded for investing in a domestic business. Instead, it is being sued by the government, which sets a bad precedent, Mr. Mandel says: You would think that during a business investment drought, any company that puts […]

  3. […] Noting this hostility to private investment is hardly a partisan or ideological point. Late this summer one of the finest macroeconomists in the country, Michael Mandel of the Progressive Policy Institute, put matters bluntly: […]

  4. […] of the finest macroeconomists in the country, Michael Mandel of the Progressive Policy Institute, put matters bluntly: President Obama holds a meeting on the economy with his advisors in the Roosevelt Room of the […]

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