9. The "Virulent Growth of Monopoly Power"

9. The "Virulent Growth of Monopoly Power" In 1937 business had been recovering for four or five years from the Great Depression of 1932 and 1933. Then, suddenly, it plunged. Froin September 1937 to March 1938, the New York Times index of business activity dropped four times as fast as its average 1929 1932 drop. In April 1938, President Roosevelt sent a message to Congress asking it to look into the concentration of American industry. He intimated that it was getting worse and that it might be the cause of the "quickie" depression that had just come on the country. He men tioned a "concentration of private power without equal in history," which, he said, was "seriously impairing the economic effectiveness of private enterprise as a way of providing employment for labor and capital" and he asked for a "thorough study of the concentration of economic power in American industry and the effect of that concentration upon the decline of competition."

In hindsight, it looks as though President Roosevelt both (a) set a fashion in economic "yakety-yak" which persists to this day, and (b) gave serious-minded people, to judge by the evidence, a totally misleading steer on the way things are going in business. Some snide ob servers in N ew York, in fact, claimed at the time that 67 68 THE "GROWTH OF MONOPOLY POWER" the President was trying to divert the blame for the un expected depression (it did not last long however) from the Administration to the business community. This, however, has never been proved. The idea that business is getting more and more con centrated has become politically valuable idiom in Wash ington in recent years. Thus for instance President Truman, in his election campaign of 1948, said "Great corporations have been expanding their power steadily. They have been squeezing small business further and further out of the picture. . . ."

And the President's Council of Economic Advisors, sometimes called the President's "captive economists," said in their third annual report, for 1948, that "Year by year, control of the market is passing more largely into the hands of the large corporations. . .. The process of expansion of large corporations by swallowing smaller firms continues, and the concentration of economic power becomes more intense." And the Federal Trade Commission, in a report to Congress in the summer of 1949, warned that ". . . if nothing is done to check the growth in concentration, either the giant corporations will ultimately take over the country or the government will be impelled to step in.... " At about the same time as this report, the brilliant, likeable, economist-turned politician Senator Paul Douglas from Illinois was quoted in the press as saying, "Small private enterprises are being devoured by these industrial giants at an alarming rate. The area for free competition is being progressively narrowed." And the Chairman of the House Judiciary Committee wrote a letter to the editor of the New York Times (September 2, 1949) saying that "Bigness is getting bigger."

THE "GROWTH OF MONOPOLY POWER" 69 There is nothing in these statements. They are the purest mythology. They do not hold water either for the "long term" or for the "short term." A recent Department of Commerce study of the fortunes of 1,000 American corporations between 1936 and 1946 showed that the 200 largest had not grown as much as the "800 others." A Federal Reserve Board study published in January 1947, of the earnings of 2700 representative firms in the six years 1940-1945 showed that the small and middle sized firms had a "relatively greater increase in sales, profits, and assets" than the larger companies; that little fellows with assets under $250,000 showed not only a larger rate of return but a larger increase in that rate during the period; and that in durable goods, the smallest producers' assets expanded 140 per cent, the medium sized producers', 90 per cent and the biggest firms', 40 per cent.

Department of Commerce figures show that the num ber of separate business firms in the country, though dropping from about 3,300,000 in 1941 to around 2,800, 000 in 1943, then rose to 3,868,000 in 1948, a new high record. A study of the Research and Policy Committee of the CED (Committee for Economic Development) in 1947 came up with the following conclusions: "... (2) the trend of small business activity shows an increase nu merically and in proportion to population compared with 1900. . .. (4) Although the growth of big corpora tions has crowded out some small business concerns, it has created nevv opportunities for others, such as the sales agencies, repair shops, garages, parts manufacturers, and other satellites that have grown up around the automobile industry. "

70 THE "GROWTH OF MONOPOLY POWER" Commerce Department figures on national income and "gross national product" show that the income going to the category of "Business and Professional Income" (which covers unincorporated businesses) has more than held its own in recent years, having shown a propor tionate increase second only to farm income, greater than corporate income, and vastly greater than "Rental Income of Persons," "Net Interest," or "Dividends and Personal Interest Income." This might be called the "short-term" story, covering the last decade or t\vo. The "long-term" story runs even more the opposite of the fashionable Washington folk lore. Thus for instance in oil, the country's largest competitive industry in terms of assets, the Standard Oil Company at the time of its court breakup in 1911 did 85 per cent of the country's refining. Today its nine successor companies do less than 40 per cent. In steel, perhaps the country's most basic. industry, the United States Steel Corporation nearly 50 years ago did nearly two-thirds of the country's whole steel business, but to day, despite its growth, does only around one-third. In automobiles, perhaps the country's most dramatic busi ness, the Ford Motor Company thirty years ago was far and away the biggest producer, but it lost its lead in the late 1920's to General Motors, while Chrysler slipped into an important part of the business.

An article in the Christian Science Monitor of April 16, 1949, headed, "What Will Insurance Firms' Probe De velop?" said "There are seven times the number of legal reserve (life insurance) companies in business now as in 1900 and 121 more than listed at the end of World War II, and the total rose by 35 during 1948. Moreover the larger cOlnpanies have not grown at as rapid a rate as the smaller ones. The largest 12 companies . . . have THE "GROWTH OF MONOPOLY POWER" 71 expanded since 1906 at a rate only two-thirds that of the others, while the assets of the largest four New York companies . . . increased in the same period at a rate only half that of the rest of the business. . . ." A favorite citation of the Washington alarmists is a recent report of the Federal Trade Commission on "The Concentration of Productive Facilities, 1947, in 26.Se lected Industries." The FTC's report is purely a "still."

It is a snapshot, not a .moving picture. It does not show or consider whether the "selected" industries are more concentrated now than ten, twenty, or thirty years ago. Most are less so. American industry is less "concen trated" than ever before. Perhaps a good summary of the trend may be found in an article in Harper's Magazine.! It said, and this quotation does not do it justice, "All new industries start out with a multitude of small companies: television today, the radio-set industry 25 years ago, the automobile in dustry in 1905. After ten or fifteen years, the field has sharply narrowed ... one of the leaders is usually out front at this stage. . .. Another fifteen years later . . . the earlier leader has lost ground appreciably. . . . From then on industry leadership tends to become more and more widely dispersed. . . ." 1\1any tricks are played with statistics in this Wash ington offensive against the "Bigs," who are supposed to be getting bigger, while the "Smalls," get smaller. A neat one was turned, for instance, by Senator Joseph C.

O'Mahoney, in the Readers'Digest of April 1949. He said "The most exclusive club in the world is . . . the "Billion-Dollar Club" ... corporations with assets of more than one billion dollars. In 1929 this "club" had 20 members; in 1939, 28; in 1945, 40. Today it has 48 members. . .. As such corporations increase in num72 THE "GROWTH OF MONOPOLY POWER" hers and in assets,the people, through their city and state governments, become less competent to cope with them and so turn to the federal government. . . ." People who live near tideland can see the catch in such figures. At five o'clock there may he 20 islands show ing; at 5: OS, when the tide has dropped an inch, there may he 28 showing, and 20 minutes later there may he 48 rocks in view. Between 1929 and 1949 the national income tripled. If there were not many more corpora tions now with assets of over a billion dollars than in 1929, it would he a wonder. The Senator could have made a much more astonishing statement if he had chosen to use gross sales as his measure. In 1929 there were only two corporations with gross sales of over a billion dollars; 2 by 1949 this figure had jumped to 17.

This doesn't prove anything more than his figures, how ever. Big-company figures are getting bigger. So is everything else. As the farmer in the story said, "Every thing seems to get more so." One reason why the big companies don't keep on getting so much bigger that they crowd out everybody else (as the elephants would, by a version of Darwinian theory, in a few generations), is that many of them fail. Thus "Of the 100 largest industrial corporations in 1909, over 60 were, no longer in the giant class in 1935, and at least 26 were outright failures.... " 3 But the main reason for disregarding the Washington cries about the "growing concentration of industry" is that they are chiefly "puff." Scrutinized by the same careful standards that the Federal Trade Commission ap plies to cigarette advertising, they would be ruled out of bounds in no time. They are somewhat like the assertions the government lawyers made in the A&P case, to be discussedlater. The THE "GROWTH OF MONOPOLY POWER" 73 Antitrust Division lawyers described the A&P picture as one of an "ever-broadening . . . spiral of monopoly and trade restraint in the hands of A&P." But meantime A&P's share of the retail grocery business was dropping from around 11 per cent to around 7 per cent.

Another statistical trick sometimesused-and a good il lustration of what statistics can be made to do in the hands of those who want to make something out of them-is a very simple one. Take the present biggest companies in an industry. Add up their share of the industry'S business. Then compare it with what they did· thirty years ago. It will always show that they do a larger share now than then-no matter what industry is taken or how long a period is used. Why? Because today's biggest companies are the ones that have grown the most. Some of them were unheard of 30 years ago. On the other hand some of the greatest among corporations of 30 years ago are now gone.