Big Business Forged Its Own Chains
Barbarous Relic 
Screenwriting Sanctuary
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Big Business Forged Its Own Chains
Barbarous Relic
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By George
Articles
Demagogue's Survival
Guide
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By George F. Smith Now that Enron is history, Atlanta-based Southern Company has become the "800-pound gorilla" of energy companies. Like other successful corporations, Southern has hired high-powered lobbyists and lavished millions on politicians to get its voice heard in Washington. [1] As we saw with Enron, buying political influence won't guarantee a company's success, but failing to buy enough of it, as Microsoft painfully learned, makes them tempting targets. It's become a matter of survival for business to pay tributes to politicians in return for protection against harmful edicts and legislation. We live with this "mixed-economy monster," in Robert Tracinski's words, by design. [2] One might think it was authored by business-hating socialists, but government regulation got its biggest boost from top business leaders during the Progressive Era of 1896 - 1916. The conventional view of this period depicts the federal government coming to the rescue of a helpless public against the rapacious talons of Big Business. The enemy, we're told, was the free market laissez faire capitalism which allowed predators like Morgan, Rockefeller, and Harriman to exploit the country for their insatiable greed. The facts, however, tell a different story. They show Big Business unhappy with an insufficiently regulated market because it fostered competition. Since competition lowered profits and threatened the very existence of the corporation, the top industrialists and bankers sought to crank up the degree of federal coercion in the market. At the turn of the twentieth century, there was near unanimity in the conviction that Big Business was both inevitable and good. Businesses formed trusts to "obviate ruinous competition," as railroad magnate James J. Hill wrote in 1901. [3] The "march of civilization," wrote Standard Oil's lawyer, demanded industrial cooperation and concentration. Businessmen thought big trusts were the most efficient means of producing and marketing goods. Most observers also believed mergers would lead to monopolies, enabling trusts to prevent competition and dictate prices. This view brought the merger movement to a peak from 1897 - 1901, as investors sought profits and business leaders tried to crush competitors. When mergers instead brought lower profits and greater competition, the movement collapsed. [4] As evidence of the economy's expansion and greater competitiveness, the number of manufacturing firms in the U.S. increased 29.4 percent from 1901 - 1910. U.S. Steel, despite mergers and other efforts to thwart competition, saw its share of the nation's production of ingots and castings go from 62.9 percent in 1901 - 1905, to 52.5 percent in 1911 - 1915. [5] Though Standard Oil epitomized the evil of trusts in the public's perception, "oil prices for consumers declined during the period Standard exercised greatest control of the industry, 1875-1895." [6] From 1899 to 1911, the year of its dissolution, Standard saw its market share drop. It failed to anticipate newer uses of oil and competition from electricity. "In a spiraling market for oil such as existed from the turn of the century on, Standard, conservative and technologically uncreative, was no match for the aggressive new competitors." [7] Similar patterns evolved in other major industries automobile, agricultural machinery, telephone, copper, and meat packing. The dominant firms could not eliminate competition or control prices. That's why they courted the federal government to "stabilize" markets and create a more "elastic" monetary system. "The Progressive Era was essentially put through by the Morgans and their allies in order to cartelize American business and industry," writes economist Murray Rothbard, "to take up more effectively where the cartel and merger movements had left off." [8] Business was in the forefront agitating for intervention, working closely with reformers. Regulation was designed by business, for business. Andrew Carnegie thought that "government control, and that alone," would solve the problem of price competition in the steel industry. Banking "reform" came about through Morgan's people and Senator Nelson Aldrich, a Republican from Rhode Island, who met in secret at Morgan's retreat at Jekyll Island, Georgia to grind out the details of the Federal Reserve Act which enabled the government to go on an inflation spree and finance World War I. Business interests pushed for and obtained the Federal Trade Commission Act, which authorized a five-bureaucrat panel to declare "unfair" methods of competition illegal. Business gave us the beginning of the leviathan state of today. The government they wanted to shake hands with now has them paying A-list lobbyists to stave off their extinction.
References 1. Southern: The New Power in Power, Laura Cohn, Business Week online, http://www.businessweek.com/magazine/toc/02_22/B3785magazine.htm (requires subscription) 2. The mixed-economy monster, Robert W. Tracinski, http://www.jewishworldreview.com/0502/tracinski.html 3. The Triumph of Conservatism: A Re-Interpretation of American History, 1900-1916, Gabriel Kolko, Quadrangle Books, Chicago, 1963, p. 13. 4. Kolko, p. 24 5. Kolko, p. 37 6. Kolko, p. 39 7. Kolko, p. 42. 8. Case Against the Fed, The, Murray N. Rothbard, Ludwig von Mises Institute, Auburn, Alabama, 1994, p. 86. Next in State
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