Too Big (Part One)

Criticism of the growing power and influence arising from corporate consolidation is heard from across the political spectrum. The trend is evident in industries as varied as communication media, airlines, healthcare and waste disposal. A 2016 in-depth analysis of U.S. businesses  documented that market concentration has systematically increased in over 75% of U.S. industries over the last 20 years. Given the flood of merger and acquisition activity, it is not surprising that over the same period, U.S. public markets lost almost 50% of their publicly traded firms.

The concentration of power has reminded elected officials, journalists and economists of the economic situation in the so-called Gilded Age around the turn of the twentieth century. Industrialists John D. Rockefeller, J.P. Morgan and Andrew Carnegie were accumulating monopoly power over major industries. Although Congress had passed the Sherman Antitrust Act in 1890, enforcement was minimal until Theodore Roosevelt ascended to the presidency following the 1901 assassination of William McKinley.

The Sherman Act prohibits anticompetitive activity that enables a business or group of like businesses to monopolize the market for their product or service. A narrow interpretation of the act examined only the economic consequences of anticompetitive action: Does the action drive competitors out of business and/or cause costs to consumers to rise? As president, Theodore Roosevelt broadened the sphere of government intervention with respect to relations between corporations and individuals. (See “Early Twentieth Century Progressivism.”) He wrote in his autobiography that he fought “for the abolition of privilege,” and argued for equal treatment:

a simple and poor society can exist as a democracy on a basis of sheer individualism. But a rich and complex industrial society cannot so exist; for some individuals, and especially those artificial individuals called corporations, become so very big that the ordinary individual is utterly dwarfed beside them, and cannot deal with them on terms of equality. It therefore becomes necessary for these ordinary individuals to combine in their turn, first in order to act in their collective capacity through that biggest of all combinations called the Government.

Louis Brandeis, who was appointed to the Supreme Court in 1916 by President Woodrow Wilson, concurred with Roosevelt’s position on government’s role vis-à-vis concentrated power. Brandeis cited “the curse of bigness” as a threat to democracy in his book titled Other People’s Money, and How the Bankers Use It. He wrote, “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” Thus, antitrust came to address political power as well as economic power.