Amalgamation in Economics

Amalgamation in Economics

 

the merger of capitalist enterprises (industrial or banking), representing the absorption of small enterprises by large ones or the joining of large firms into giant ones.

Amalgamation is one of the forms of the centralization of capital occuring during competitive struggle, with decisive advantages for the large capitalist enterprises over the small and medium-sized ones. Amalgamation has become most widespread under imperialism. It is mainly used by monopolies to strengthen their own economic positions and to drive out nonmonopolized enterprises. In American industry, the number of amalgamations during 1921–40 was 8,462 compared to 10,512 during 1948–65. In the 1950’s and the early 1960’s, the few largest industrial and commercial corporations in the USA absorbed more than 3,700 other companies by amalgamation. Chiefly as a result of amalgamation, there has been a sharp drop in the number of banks in

England, particularly in the 20th century. There was a total of 552 English bank amalgamations from 1826 through 1924, including 248 during the 1890–1924 period. The number of joint-stock banks in England declined from 104 in 1890 to 13 in 1962.

In the USA there were close to 2,000 bank amalgamations during 1953–64. Since World War II, many amalgamations have occurred between large monopolistic banks. Thus, in 1955 the Chase National Bank and the Bank of Manhattan merged into the single Chase Manhattan Bank (with assets of $7.5 billion), while the First National Bank of the City of New York and the National City Bank of New York merged into the united bank of the First National City Bank of New York (with assets of $6.9 billion). In 1959 the banking house of John P. Morgan merged with the Guaranty Trust Company, forming one of the largest banks, the Morgan Guaranty Trust Company (with assets of $4 billion). In 1961 Manufacturers Hanover Trust Company, the fourth largest bank in the USA, was created as a result of the amalgamation of two large banks.

In England, where the number of banks is comparatively small, a new series of amalgamations has been noted. At the beginning of 1968, merger plans were announced by the National Provincial Bank and the Westminster Bank, as well as by the Lloyd’s Bank and Barclays Bank.

It is essential to distinguish the so-called quasi-merger from amalgamation in the true sense of the word. In amalgamation each of the merging companies loses its former independence and becomes a part of the new company. With a quasi-merger, two or more companies exchange shares without the formal loss of independence.

E. IA. BREGEL