[ Question ]

Why don't countries, like companies, more often merge?

by Vishrut Arya1 min read22nd Aug 202020 comments


GovernmentPoliticsWorld Modeling

Whereas companies often undergo a friendly merger or acquisition, why don't countries more often do this? Set aside colonialism because I'd like to focus on the case where the threat of violence is not paramount.

I suppose the right incentives aren't in place but is this an intrinsic fact of international relations or democratic politics?

For example, a merger between the US and Mexico seems, naively, like it could be in both nations' interest. The US gets more land and lower-cost labor and Mexico gets access to better governance and knowledge spillover.

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You get everything, good and bad, when merging countries. You don't get the privilege of firing difficult citizens, especially when it comes to taking two bureaucracies and turning them into one. Equalising standards can be incredibly expensive and onerous.

The US already gets everything it wants from Mexico so there's no reason to take on all the things it doesn't want for literally zero gain. If Mexico became a state then America loses a big chunk of its slave trade and gains a bunch of third world problems (including the cartels).

Mexico gets access to better governance

Assuming the Mexican people wanted this and that they thought the US could give it to them, how would they get it?

In this scenario, the government isn't responsive to the people so how would they get this non-responsive government to give up its power and merge with the US?

Malaysia is a merged country. I don't know of any other. Do you?

Germany is a merged country in both its original and post-Cold War forms.

The constituent countries within the UK used to be independent of each other.

Wales was conquered by England, but Scotland entered into a union voluntarily-ish (I don't know the full story of the reasons for it; seem to recall something about Scotland being heavily in debt). And the ins/outs of Ireland / Northern Ireland are a whole thing unto themselves.

Also not uncommon for modern countries to have previously been a patchwork of rival kingdoms that later unified - although it'll vary whether that was by choice or by conquest (with the latter seeming less like a "merger")

Modern India could be considered one. The princely states had a choice to be independent when the Brits, but many of them chose to merge into India. Though the ones that chose not to were met with violence (Kashmir, Hyderabad), but many states joined out of socio-economic consideration (large parts of Rajputana), or because of demand from the populace (Travancore).

Though India's immediate post-colonial situation was pretty unique, and isn't quite parallel with modern independent nation states.

3Teerth Aloke5moYou misunderstand the problem in Kashmir. Kingdom of Jammu and Kashmir was invaded by tribals from Pakistan, and India intervened militarily to rescue the Kingdom, under the condition that Jammu and Kashmir joins India. For 2 years around the 1971 war, my grandfather worked in Jammu. Another connection : my grandfather was a member of the organization RSS's youth wing that had a role in the start of the religious conflict in Kashmir, in October 1947, which led to the invasion by the coreligionists of Muslims under attack there.

Companies by definition exist to make profit, while countries by definition do not exist for profit. It makes sense that CEO #A is willing to give up his role as a CEO for personal profit, while president/prime minister of a nation state will loose power getting nothing in return. Add to the mix all those nationalistic/patriotic/other reasons and you are in eternal status quo. I could actually add very good case study for countries not merging. Cyprus and North Cyprus, divided since 70ties, they tried to merge back together for 2 decades now. With huge economical gain for North and political for South, but Turkey does not approve the move hence, despite majority of population supporting idea it's getting nowhere. Another good case is union of Belarus and Russian Federation, despite being knitted together (economically and culturally at this stage), president of Belarus is nowhere near to accept to be another federated state of Russia (and basically being appointed by President of Russia). I would say ambition, grudges and corruption are 3 main factors while states are not willing to merge together. That being said, there are economists that claim that merges between corporations are most of the time pointless and only a device to bump short term stock valuation.

This. is. so. true...

Also addendum: Companies need to get buy-in for a merger from a small number of stakeholders (board members/president/whatever) but assuming a democratic country the number of stakeholders that you need to get buy-in is so much more (probably 50% + 1 population).

Autonomy and culture are big points. Mexicans would be losing a lot of autonomy over to the United States, and their culture would to a large degree be overwritten by the more dominant countries culture.

The only situation where I see this working is where no one country can have total power over the others. Something like the EU, if they move towards federation. But even with the relatively loose coupling the EU has, there is plenty of euroskepticism - both founded and unfounded.

In general, the advantages of mergers are not so obvious, while the costs are enormous. You can get many of the benefits of having one country through mechanisms like free trade agreements, open borders, shared currency zones etc.

You can get many of the benefits of having one country through mechanisms like free trade agreements, open borders, shared currency zones etc.

This is key in my opinion.

When two companies merge, there is an outside institution, the government, which everybody trusts to enforce the terms of the merger and to protect the rights of the employees. When two countries merge, why would the lesser country trust the greater one to honor the terms of the merger agreement and protect its citizens' rights? There is no outside institution to enforce it. If Mexico agreed to merge with the US, and the new national government still dominated by former Americans decided to renege on some part of the deal, who would the former Mexicans go to to seek redress? There is no one, and they know that there is no one, and so it doesn't make sense for them to agree to a merger.

Because you can generally get what you want from some arrangement that falls short of complete merger. If you want economic strength without military union, you can join NAFTA, if you want military union without economic union you can join NATO. Even "mergers" usually leave their constituents as federated States with some control over their own affairs.

I haven't studied this extensively, but I'd add to drachenfels' answer that not only do leaders lack the desire to merge countries, but so do their citizens. Fundamentally, it seems that people are averse to giving up sovereignty/autonomy over the policies that govern them, and merging reduces that sovereignty.

It would be interesting to consider how the United States and EU came to be in spite of this.

Scale and Complexity? — Thinking in terms of variables and states works fine to some extent, but I think that it is always in the interactions between those variables that the states get screwed up(to a point of complete unrecognizability). And when you scale the number of variables, the interactions become too non-linear for effective management/monitoring of states. Cliched, but I feel disintegration of large is a more plausible event than coalescence of small, for with scale comes uncertainty and complexity.

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Why don't countries divide more often?

Clearly if one can join others for benefit, then the inverse must also be true. Why don't countries divest themselves of problems (of all stripes)?

If we look at the States it is clear that certain areas have major animus, fundamental political disagreements, etc. In the case of the States it is even more a question for me because it is a union - the states have significant autonomy under the banner of the federal government. You can go your own way in part, in a reversible way, alongside others doing the same.

England and Scotland merged several hundred years ago. This involved the English bribing politicians, and trade blocades, but not outright war. The European Union could also be considered as a kind of merger.

Debatably the US is a merged country (originally a confederacy of independent states, decided to bind themselves together). Similarly, you could say that the EU is. The USSR's control over a number of smaller states (eg. Poland, East Germany) could count as well.

Generally though, I'd say that the incentives are against it on multiple levels. The politicians are against it because they'd lose some level of power, unless it's a complete takeover, in which case the other side is losing significant power. The bureaucrats are against it because combining country-wide systems would be very difficult. And the people are against it because of nationalism and the intersection of nationalism and ethnic groups. Many Americans wouldn't want to merge with Mexico because they want to be separate from the Mexicans. Most Serbians want to have their own country separate from the Croatians' country. People like self-determination.

USSR itself formed by the merger of the Ukrainian Soviet Socialist Republic, Transcaucasian Soviet Socialist Republic, Beylorussian Soviet Socialist Republic and Russian Soviet Socialist Republic in December 1922. It is believed that Joseph Stalin preferred the other states to be annexed into Russia, while Lenin, the then Prime Minister of Russian Soviet Republic, favored a federation.