Trust-busting: A Response to Business Concentration

Trust-busting:  A Response to Business Concentration

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Most Republicans viewed their election victory in 1900 as an endorsement of the party’s policies toward business. Theodore Roosevelt, who became president in September 1901, did not fully share that view. Rather than simply maintain the status quo, Roosevelt sought a mid-course between Republican laissez faire policies and the socialism advocated by some reform elements.The president found an ally in an increasingly concerned public that had been wary of big government solutions in the past, but was now more receptive. The trusts` continuing growth in numbers and power convinced many that action was needed.Roosevelt took the following steps during his first administration to “keep order” in the American economy:

  • Department of Commerce and Labor. In 1903, Roosevelt persuaded Congress to establish a new cabinet-level department to increase the federal government’s purview over the interstate commerce actions of business and to monitor labor relations. Big business interests lobbied heavily to halt this innovation — the first new executive department since the Civil War — but failed. (Commerce and Labor would be separated into independent department in 1913.)
  • Bureau of Corporations. As an arm of the newly created department, a Bureau of Corporations was established to find violations under the existing antitrust legislation. The Bureau began investigations into the activities of the meatpacking, oil, steel and tobacco industries, among others.
  • Antitrust Law Suits. Roosevelt instructed his attorney general, Philander C. Knox, to launch a series of lawsuits against what were deemed offensive business combinations. Such giants as J.P. Morgan’s Northern Securities Company, John D. Rockefeller’s Standard Oil Trust and James B. Duke’s tobacco trust were targets of the government’s attorneys. In all, forty-four suits were brought during Roosevelt’s administration.

Trust-busting was not a term the president favored. He believed the offending corporations needed to be regulated, not destroyed. Many of his big business critics, however, failed to note the difference.Liberal Catholic bishops produced a document known as the Bishops` Program of Social Reconstruction after World War I. Regarding the concentration of wealth, the bishops` opined that:

For the third evil mentioned above, excessive gains by a small minority of privileged capitalists, the main remedies are prevention of monopolistic control of commodities, adequate government regulation of such public-service monopolies as will remain under private operation, and heavy taxation of incomes, excess profits, and inheritances.

See other Theodore Roosevelt domestic activity.

United States antitrust law

In the United States, antitrust law is a collection of federal and state government laws that regulate the conduct and organization of business corporations and are generally intended to promote competition and prevent monopolies. The main statutes are the Sherman Act of 1890, the Clayton Act of 1914 and the Federal Trade Commission Act of 1914. These Acts serve three major functions. First, Section 1 of the Sherman Act prohibits price-fixing and the operation of cartels, and prohibits other collusive practices that unreasonably restrain trade. Second, Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that may substantially lessen competition or tend to create a monopoly. Third, Section 2 of the Sherman Act prohibits monopolization. [2]

Federal antitrust laws provide for both civil and criminal enforcement of antitrust laws. The Federal Trade Commission, the Antitrust Division of the U.S. Department of Justice, and private parties who are sufficiently affected may all bring civil actions in the courts to enforce the antitrust laws. However, criminal antitrust enforcement is done only by the Justice Department. U.S. states also have antitrust statutes that govern commerce occurring solely within their state borders.

The scope of antitrust laws, and the degree to which they should interfere in an enterprise's freedom to conduct business, or to protect smaller businesses, communities and consumers, are strongly debated. Some economists argue that antitrust laws, in effect, impede competition, [3] and discourage businesses from activities that would be beneficial to society. [4] One view suggests that antitrust laws should focus solely on the benefits to consumers and overall efficiency, while a broad range of legal and economic theory sees the role of antitrust laws as also controlling economic power in the public interest. [5] A survey of 568 members of the American Economic Association (AEA) in 2011 found a near-universal consensus, in that 87 percent of respondents broadly agreed with the statement "Antitrust laws should be enforced vigorously." [6]

Sherman’s Hammer

In response to a large public outcry to check the price-fixing abuses of these monopolies, the Sherman Antitrust Act was passed in 1890. This act banned trusts and monopolistic combinations that placed “unreasonable” restrictions on interstate and international trade. The act acted like a hammer for the government, giving it the power to shatter big companies into smaller pieces to suit their own needs.

Despite this act’s passage in 1890, the next 50 years saw the formation of many domestic monopolies. However, during this same period, the antitrust legislation was used to attack several monopolies, with varying levels of success. The general trend with the use of the act seemed to have been to make a distinction between good monopolies and bad monopolies, as seen by the government.

One example is International Harvester, which produced cheap agricultural equipment for a largely agrarian nation and was thus considered untouchable, lest the voters rebel. American Tobacco, on the other hand, was suspected of charging more than a fair price for cigarettes—then touted as the cure for everything from asthma to menstrual cramps—and consequently became a victim of legislators’ wrath in 1907 and was broken up in 1911.

The Myth of the Roosevelt “Trustbusters”

In the aftermath of the Great Recession, amid growing concerns about income inequality and wage stagnation , politicians and pundits on the left and right have blamed the problems of twenty-first-century America on a familiar populist scapegoat: big business. The solution, they say, can be found in the nation’s past—in particular, the reign of two twentieth-century presidents.

In the early 1900s, the narrative goes, Theodore Roosevelt waged war on corporate concentration as a crusading “trustbuster.” A generation later, during the Great Depression, his cousin Franklin D. Roosevelt stood up for small banks against Wall Street’s big bullies. The Roosevelts saved America from plutocracy and created a golden age for the middle class. Thus, many argue, we need a new generation of trustbusters to save us from the robber barons of tech and banking.

It makes for a compelling case. But it’s based on a false history.

Teddy Roosevelt was far from the business-bashing “trustbuster” of popular memory. The Republican president distinguished between “good” and “bad” trusts, telling Congress in 1905, “I am in no sense hostile to corporations. This is an age of combination, and any effort to prevent combination will not only be useless, but in the end, vicious…”

It is true that his administration brought 44 antitrust actions against corporations and business combinations, including the Northern Securities railroad company and the “beef trust” in meatpacking, which were ultimately broken up by the Supreme Court. But Roosevelt had profound doubts about antitrust, observing that “a succession of lawsuits is hopeless from the standpoint of working out a permanently satisfactory solution” to the problems posed by big business. Indeed, he wanted to replace antitrust policy with federal regulation of firms by a powerful Bureau of Corporations, whose decisions would be shielded from judicial review.

His Republican successor in the White House, William Howard Taft, initiated twice as many antitrust lawsuits in four years as Roosevelt had done in his seven and a half years in office. Privately, Roosevelt raged when the Supreme Court ordered the break-up of Standard Oil, in an antitrust lawsuit begun under his administration and completed under Taft: “I do not see what good can come from dissolving the Standard Oil Company into 40 separate companies, all of which will still remain really under the same control. What we should have is a much stricter government supervision of these great companies, but accompanying this supervision should be a recognition of the fact that great combinations have come to stay and we must do them scrupulous justice just as we exact scrupulous justice from them.”

Anger at Taft was one of the factors that motivated Roosevelt to run for president again in 1912 as the candidate of the Progressive Party. The party’s platform reflected his view that big business overall was a positive force, but needed federal regulation: “The corporation is an essential part of modern business. The concentration of modern business, in some degree, is both inevitable and necessary for national and international business efficiency.” The remedy for abuse was not mindlessly breaking up big firms, but preventing specific abuses by means of a strong national regulation of interstate corporations.

Like Roosevelt, FDR is falsely remembered as an enemy of big business. When running for office in 1932, the Democrat mocked the populists who supported antitrust: “The cry was raised against the great corporations. Theodore Roosevelt, the first great Republican Progressive, fought a Presidential campaign on the issue of ‘trust busting’ and talked freely about malefactors of great wealth. If the government had a policy it was rather to turn the clock back, to destroy the large combinations and to return to the time when every man owned his individual small business. This was impossible.” FDR agreed with his cousin that the answer was regulation, not breaking up big corporations: “Nor today should we abandon the principle of strong economic units called corporations, merely because their power is susceptible of easy abuse.”

In his first term, FDR in attempted to restructure the U.S. economy under the National Industrial Recovery Act (NIRA), a system of industry-wide minimum wages and labor codes, which small businesses claimed gave an unfair advantage to big firms. In his second term, after the Supreme Court struck down the NIRA in 1935, Roosevelt briefly fell under the influence of Robert Jackson, Thurman Arnold, and other champions of an aggressive approach to antitrust in the Justice Department. But when World War II broke out, such an approach became an impediment to enlisting major industrial firms for war production, and FDR sidelined the antitrust advocates.

Surely FDR wanted to “break up big banks,” though, given his support of the Glass-Steagall Act of 1933? That’s a myth, too.

FDR and Senator Carter Glass of Virginia shared the goal of separating commercial and investment banking, ending what FDR called “speculation with other people’s money.” But they were also hostile to what American populists loved—the fragmented system of small, unstable local “unit banks” protected from competition with big eastern banks by laws against interstate branch banking. To prop up local banks, Representative Henry B. Steagall of Alabama pushed an old populist idea: federal deposit insurance. Shortly before his election in 1932, FDR explained why he opposed the policy in a letter to the New York Sun: “It would lead to laxity in bank management and carelessness on the part of both banker and depositor. I believe that it would be an impossible drain on the Federal Treasury to make good any such guarantee. For a number of reasons of sound government finance, such a plan would be quite dangerous.”

FDR was so opposed that he threatened to veto the bank reform legislation if it included deposit insurance. In the end, in order to enact other reforms he favored, he reluctantly signed the Glass-Steagall bill. If FDR had prevailed, there would be no Federal Deposit Insurance Corporation (FDIC).

Today, the growth and consolidation of multinational corporations presents American democracy with genuine policy challenges. But the answer need not come from bogus history real history will suffice. Teddy Roosevelt argued that “big trusts” must be “taught that they are under the rule of law,” yet added that “breaking up all big corporations, whether they have behaved well or ill,” is “an extremely insufficient and fragmentary measure.”

And FDR said: “Nor today should we abandon the principle of strong economic units called corporations, merely because their power is susceptible of easy abuse.” The answer to the problems caused by corporate concentration, the Roosevelts agreed, is prudent government oversight and using antitrust laws to police abuses—not to break up every big company simply because it’s big.

Politics and Antitrust: Lessons from the Gilded Age

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Richard B. Baker is Assistant Professor of Economics at The College of New Jersey Carola Frydman is Professor of Finance at the Kellogg School of Management at Northwestern University and Eric Hilt is Professor of Economics at Wellesley College. This post is based on their recent paper.

Recent years have witnessed a resurgence of interest in antitrust. In response to the perception that antitrust enforcement has become ineffectual, some commentators have argued that existing statutes may no longer offer regulators adequate tools for policing anticompetitive behavior. Yet the Department of Justice and Federal Trade Commission hold considerable discretion over how they choose to enforce the law. If modern antitrust is too weak, its weakness may originate in the content of our laws, or alternatively in the approach taken to enforcing those laws. It is not clear whether different leadership at America’s antitrust authorities would have produced different outcomes.

In a recent paper, we study an extraordinary episode from the Gilded Age in which the enforcement of antitrust statutes was suddenly strengthened, and show that political discretion over antitrust enforcement can have meaningful consequences for the economy. No period in American history witnessed a more significant consolidation of economic activity into large firms than the Great Merger wave of 1895-1904. William McKinley, who was elected president in 1896, was generally friendly towards business interests, and did not attempt to use the Sherman Act to challenge any of those mergers. His assassination by an anarchist in September 1901 presents an opportunity to study the effects of a change in the president’s attitude towards enforcement of antitrust laws at a time when all other institutions remained unchanged. In contrast to McKinley, his vice president Theodore Roosevelt, who succeeded him as president, had been openly critical of big business. The sudden accession of a well-known Progressive reformer to the presidency likely shifted expectations regarding the aggressiveness with which antitrust laws would be enforced.

We use the stock market’s reaction to the McKinley assassination to measure the expected impact of this change in the president’s preferences over antitrust enforcement. In response to the shooting of McKinley, the value of NYSE-traded firms fell by an average of 6.2 percent. To put this magnitude in perspective, the stock market declined by only 1.6 percent on average over the six other presidential assassinations and nearly successful assassination attempts we have identified. As the president and vice president are chosen together, the assassination of the president typically does not lead to a significant change in expected policy. The transition from McKinley to Roosevelt was clearly anything but typical.

We analyze the importance of antitrust in the stock market’s reaction by comparing the stock returns of firms that were likely to have been differentially vulnerable to more aggressive antitrust enforcement, to those that were not. Many of the firms that were listed on the NYSE at the time were the product of recent horizontal mergers, and we argue that these firms were much more likely to be subject to greater antitrust scrutiny under a more aggressive enforcement regime. We find that following McKinley’s shooting, firms involved in recent mergers saw declines in their abnormal returns that were 1.5 to 2 percentage points greater than those of other firms.

A possible source of concern regarding these estimates is that the effects of the change from McKinley to Roosevelt may have been confounded with the effects of a presidential assassination. The fact that an anarchist shot the president, for example, may have been perceived as a sign of rising political instability. Yet the experience with McKinley offers a unique opportunity to address this concern. President McKinley initially survived the shooting, and three days later his doctors announced that they expected him to make a “full recovery.” When that prognosis was announced, the losses experienced following his shooting were largely reversed, and firms involved in recent mergers saw differentially large gains. Then, seven days following the shooting, it was suddenly announced that McKinley was in fact near death. Upon receiving this news, the market reversed again, with an overall fall in share prices of similar magnitude. Since the effects from political unrest should have been reflected in prices on the day of the shooting, this latter decline in stock prices suggests that investors instead reacted to expected policy changes that would result from Roosevelt becoming president. Finally, Roosevelt’s statements when he ultimately took the oath of office defied expectations and signaled that he would follow McKinley’s policy agenda these resulted in differential gains for firms that had been involved in recent mergers.

Once in office, Roosevelt violated his pledge to follow McKinley’s agenda and began to enforce the Sherman Act more aggressively. We also use an event study methodology to analyze the stock market’s response to the announcement of his first antitrust suit. On February 19, 1902, Roosevelt’s attorney general announced that he was going to file suit against the Northern Securities Company, an enormous holding company formed by J.P. Morgan in 1901 that controlled several major competing railroads. Plans for this suit were kept secret, which enables us to observe the market’s assessment of the expected change in antitrust doctrine that would result from the suit. Our analysis indicates the firms whose shares performed worse in response to bad news regarding McKinley’s health also suffered differentially low abnormal returns following the announcement of the suit. The stock market’s response to the assassination was consistent with its response to Roosevelt’s trust-busting.

The structure of antitrust enforcement is much more institutionalized today than it was in 1901 and recent presidential administrations have exhibited a high degree of continuity in their approaches to the issue. Nonetheless, scholars interested in designing strategies to address the growth of economic concentration should not neglect the role of enforcement efforts. One of the most significant changes in antitrust enforcement of the Gilded Age resulted not from new legislation, but from a change in the approach taken to the enforcement of existing law when Roosevelt became president. Antitrust is fundamentally political, and it is at least possible that different political leadership could produce meaningfully different antitrust enforcement.

Beer Hall Putsch 

On the evening of November 8, 1923, members of the SA and others forced their way into a large beer hall where another right-wing leader was addressing the crowd. Wielding a revolver, Hitler proclaimed the beginning of a national revolution and led marchers to the center of Munich, where they got into a gun battle with police.

Hitler fled quickly, but he and other rebel leaders were later arrested. Even though it failed spectacularly, the Beer Hall Putsch established Hitler as a national figure, and (in the eyes of many) a hero of right-wing nationalism.

What’s in a Name? Riot vs. Massacre

In recent years there has been ongoing discussion about what to call the event that happened in 1921. Historically, it has been called the Tulsa Race Riot. Some say it was given that name at the time for insurance purposes. Designating it a riot prevented insurance companies from having to pay benefits to the people of Greenwood whose homes and businesses were destroyed. It also was common at the time for any large-scale clash between different racial or ethnic groups to be categorized a race riot.

Definition of RIOT: a tumultuous disturbance of the public peace by three or more persons assembled together and acting with common intent. Definition of MASSACRE: the act or an instance of killing a number of usually helpless or unresisting human beings under circumstances of atrocity or cruelty.

Twelve Scholars Critique the 1619 Project and the New York Times Magazine Editor Responds

Editor's note: Twelve Civil War historians and political scientists who research the Civil War composed a letter to The New York Times Magazine concerning 'The 1619 Project.' The NYTM editor, Jake Silverstein, responded but the NYTM declined to publish the letter and his response. The scholars created a reply and Silverstein had no objection to publishing the exchange in another venue. It is published below.

To the Editor of The New York Times Magazine 12/30/2019

We are writing to you today, in tandem with numerous others, to express our deep concern about the New York Times&rsquo promotion of The 1619 Project, which first appeared in the pages of the New York Times Magazine on August 14th in the form of ten essays, poems and fiction by a variety of authors. The Project&rsquos avowed purpose is to restore the history of slavery to a central place in American memory and history, and in conjunction with the New York Times, the Project now plans to create and distribute school curriculums which will feature this re-centering of the American experience.

It is not our purpose to question the significance of slavery in the American past. None of us have any disagreement with the need for Americans, as they consider their history, to understand that the past is populated by sinners as well as saints, by horrors as well as honors, and that is particularly true of the scarred legacy of slavery.

As historians and students of the Founding and the Civil War era, our concern is that The 1619 Project offers a historically-limited view of slavery, especially since slavery was not just (or even exclusively) an American malady, and grew up in a larger context of forced labor and race. Moreover, the breadth of 400 years and 300 million people cannot be compressed into single-size interpretations yet, The 1619 Project asserts that every aspect of American life has only one lens for viewing, that of slavery and its fall-out. &ldquoAmerica Wasn&rsquot a Democracy Until Black Americans Made It One,&rdquo insists the lead essay by Nikole Hannah-Jones &ldquoAmerican Capitalism Is Brutal. You Can Trace That to the Plantation,&rdquo asserts another by Matthew Desmond. In some cases, history is reduced to metaphor: &ldquoHow Segregation Caused Your Traffic Jam.&rdquo

We are also dismayed by the problematic treatment of major issues and personalities of the Founding and Civil War eras. For instance: The 1619 Project construes slavery as a capitalist venture, yet it fails to note how Southern slaveholders scorned capitalism as &ldquoa conglomeration of greasy mechanics, petty operators, small-fisted farmers, and moon-struck theorists.&rdquo[1] Although the Project asserts that &ldquoNew Orleans boasted a denser concentration of banking capital than New York City,&rdquo the phrase &ldquobanking capital&rdquo elides the reality that on the eve of the Civil War, New York possessed more banks (294) than the entire future Confederacy (208), and that Southern &ldquobanking capital&rdquo in 1858 amounted to less than 80% of that held by New York banks alone.[2]

Again: we are presented with an image of Abraham Lincoln in 1862, informing a delegation of &ldquofive esteemed free black men&rdquo at the White House that, because black Americans were a &ldquotroublesome presence,&rdquo his solution was colonization -- &ldquoto ship black people, once freed, to another country.&rdquo No mention, however, is made that the &ldquotroublesome presence&rdquo comment is Lincoln&rsquos description in 1852 of the views of Henry Clay,[3] or that colonization would be &ldquosloughed off&rdquo by him (in John Hay&rsquos diary) as a &ldquobarbarous humbug,&rdquo[4] or that Lincoln would eventually be murdered by a white supremacist in 1865 after calling for black voting rights, or that this was the man whom Frederick Douglass described as &ldquoemphatically the black man&rsquos president.&rdquo[5]

We do not believe that the authors of The 1619 Project have considered these larger contexts with sufficient seriousness, or invited a candid review of its assertions by the larger community of historians. We are also troubled that these materials are now to become the basis of school curriculums, with the imprimatur of the New York Times. The remedy for past historical oversights is not their replacement by modern oversights. We therefore respectfully ask the New York Times to withhold any steps to publish and distribute The 1619 Project until these concerns can be addressed in a thorough and open fashion.

William B. Allen, Emeritus Dean and Professor, Michigan State University

Michael A. Burlingame, Naomi B. Lynn Distinguished Chair in Lincoln Studies, University of Illinois, Springfield

Joseph R. Fornieri, Professor of Political Science, Rochester Institute of Technology

Allen C. Guelzo, Senior Research Scholar, Princeton University

Peter Kolchin, Henry Clay Reed Professor Emeritus of History, University of Delaware

Glenn W. LaFantasie, Frockt Family Professor of Civil War History and Director of the Institute for Civil War Studies, Western Kentucky University

Lucas E. Morel, Professor of Politics, Washington & Lee University

George C. Rable, Professor Emeritus, University of Alabama

Diana J. Schaub, Professor of Political Science, Loyola University

Colleen A. Sheehan, Professor of Political Science and Director, The Matthew J. Ryan Center, Villanova University

Steven B. Smith, Alfred Cowles Professor of Political Science, Yale University.

Michael P. Zuckert, N. Reeves Dreux Professor of Political Science, University of Notre Dame

From Jake Silverstein, Editor, The New York Times Magazine 1/10/2020

Thank you again for your letter regarding The 1619 Project. We welcome feedback of all kinds, and we take seriously the job of reviewing objections to anything we publish. As you know, the project has been the topic of considerable discussion in recent weeks. I&rsquom sure you saw the letter from Sean Wilentz and others, along with my response, both of which were published in our Dec 29 issue. I believe that this earlier letter, together with my response, addresses many of the same objections raised in your letter.

I asked our research desk, which reviews all requests for corrections, to read this letter and examine the questions it raises. They did so, and concluded that no corrections are warranted. Your letter raises many interesting points, which is no surprise considering the distinguished group of signatories, but they are not points that prompt correction. For instance, you write that &ldquoThe 1619 Project offers a historically-limited view of slavery, especially since slavery was not just (or even exclusively) an American malady.&rdquo This is a critique of the project, not a request for correction. I believe you made a similar point in your essay for City Journal. Similarly, your letter notes critically that &ldquoThe 1619 Project asserts that every aspect of American life has only one lens for viewing, that of slavery and its fallout.&rdquo Those are your words, not ours, but again, the complaint goes to a difference of interpretation and intention, not fact.

I do allow that some of the queries in your letter are of a more factual nature. Below is our research desk&rsquos responses to those matters.

Jake Silverstein
Notes from our research desk:

1. The letter states that the 1619 Project construes slavery as a capitalist venture and fails to note how Southern slaveholders scorned capitalism as &lsquoa conglomeration of greasy mechanics, petty operators, small-fisted farmers, and moon-struck theorists.&rsquo

This quote appears in James L. Huston's The British Gentry, the Southern Planter, and the Northern Family Farmer: Agriculture and Sectional Antagonism in North America (2016). In full it reads, "Free Society, we sicken at the name, what is it but a conglomeration of greasy mechanics, petty operators, small-fisted farmers, and moon-struck theorists.&rsquo All the Northern, and especially the New England states, are devoid of society fitted for a gentleman." Huston attributes this quote to "a Georgia editor in a foul humor." It does not have to do with capitalism but with aristocratic plantation owners scoffing at small-scale family farms of the north. In Hurston&rsquos words, this is about the &ldquoaristocratic distain&rdquo of the slavers.

2. The letter states that although the 1619 Project asserts that &ldquoNew Orleans boasted a denser concentration of banking capital than New York City,&rdquo the phrase &ldquobanking capital&rdquo elides the reality that on the eve of the Civil War, New York possessed more banks (294) than the entire future Confederacy (208), and that Southern &ldquobanking capital&rdquo in 1858 amounted to less than 80% of that held by New York banks alone.

The sentence in Matthew Desmond&rsquos essay has to do with New Orleans and New York City. The citation has to do with entire states&mdashand not with the concentration of banking capital but with banks. Several works&mdashSven Beckert and Seth Rockman, eds., Slavery&rsquos Capitalism (2016) Seth Rockman, &ldquoThe Unfree Origins of American Capitalism&rdquo in The Economy of Early America (2006) Calvin Schermerhorn, The Business of Slavery and the Rise of American Capitalism, 1815-1860&mdashdeal with the importance of finance and banking in the American South&mdashin particular, with the rise of state chartered banks.

3. The letter asserts that Nikole Hannah-Jones does not provide enough context in her essay for Lincoln&rsquos "troublesome presence" quote and that this was only Lincoln's description of the views of Henry Clay.

Hannah-Jones does not state, as the letter implies, that Lincoln recited these words to the visiting delegation of free black men. Second, while the occasion for Lincoln&rsquos words was indeed a eulogy for Clay, the full context makes it clear that Lincoln was endorsing Clay&rsquos position: &ldquoHe considered it no demerit in the society, that it tended to relieve slave-holders from the troublesome presence of the free negroes but this was far from being its whole merit in his estimation. [Clay&rsquos] suggestion of the possible ultimate redemption of the African race and African continent, was made twenty-five years ago. Every succeeding year has added strength to the hope of its realization. May it indeed be realized!&rdquo Hay&rsquos diary entries about Lincoln&rsquos eventual abandonment of the colonization scheme, two years after he met with the delegation, do not alter the fact that we correctly describe Lincoln&rsquos views at the time of the meeting in 1862. The letter&rsquos other concerns about how Hannah-Jones&rsquos essay characterizes Lincoln are fundamentally requests for the inclusion of additional information--about Frederick Douglass&rsquos estimation of Lincoln, or the conditions under which Lincoln was assassinated--rather than errors in need of correction.

From Allen C. Guelzo, Princeton University 1/11/2020

Thank you for your reply. That our letter addresses both matters of overall interpretation and specific fact was, we thought, self-evident. That the disagreement concerning overall interpretation, and on a subject of such consequence, can be simply dismissed out-of-hand is dismaying, but so are the dismissals by your "reference desk" of the specific examples we offered.

It is evasive to claim that the Georgia quotation is only about aristocracy and therefore not germane the whole point, not only of Huston&rsquos book but our letter, is that the Southern slave economy was aristocratic, not capitalistic, in spirit and practice. Citations to works of contemporaneous authors, North and South, foreign and domestic, to the same effect could be easily multiplied, the most notorious being the words of the pro-slavery apologist George Fitzhugh.

It is similarly evasive to claim that the statement about banks and banking capital only applies to two cities the point of our objection was that the slaveholding South possessed minuscule amounts of such capital when compared to the North, and merely vaguely invoking the work of Beckert, Rockman and Schermerhorn (and without a specific citation) fails to speak to the hard data of 1859. And had your &ldquoreference desk&rdquo paid attention to the material cited in our letter, it would have seen that New York alone outdistanced the entire future Confederacy in terms of both banks and banking capital as well.

Finally, your response does nothing to correct the mistaken attribution to Lincoln of views which Lincoln specifically attributed to Clay. Lincoln was, at best, ambivalent about colonization &ndash something evidenced by his comments on the subject in 1854 &ndash and it is unhelpful to attempt to distance Lincoln&rsquos August 1862 meeting with the black delegation from Hay&rsquos 1864 diary entry, where it is clear that Hay is articulating Lincoln&rsquos views. Your response also takes no notice of the fact that Lincoln&rsquos appeal in 1862 was for voluntary emigration that he called off the only temporary experiment in such emigration which the federal government sponsored in 1863 and that Lincoln was at the same time advocating the recruitment of black soldiers whom, in 1864, he has already begun declaring must be granted equal voting rights. That The 1619 Project failed to speak to these matters is an error of omission, but a colossal omission, and still an error.

It is my assumption, given your response, that the New York Times Magazine has no intention of publishing our letter. I hope, in that case, that you will have no objection to our publishing it in an alternative venue.

Senior Research Scholar, The Council of the Humanities

Director, Initiative in Politics and Statesmanship, James Madison Program in American Ideals and Institutions

[1]James L. Huston, The British Gentry, the Southern Planter and the Northern Family Farmer: Agriculture and Sectional Antagonism in North America(Baton Rouge: Louisiana State University Press, 2015), 168-169.

[2]The American Almanac and Repository of Useful Knowledge for the Year 1859(Boston: Crosby, Nichols, and Co., 1859), 218.

[3]&ldquoEulogy on Henry Clay&rdquo (July 6, 1852), in Collected Works of Abraham Lincoln, ed. R.P. Basler et al(New Brunswick, NJ: Rutgers University Press, 1953), 2:132.

[4]John Hay, diary entry for July 1, 1864, in Inside Lincoln&rsquos White House: The Complete Civil War Diary of John Hay, eds. M. Burlingame & J.R.T. Ettlinger (Carbondale: Southern Illinois University Press, 1997), 217.

[5]&ldquoOration of Fred. Douglass,&rdquo New York Daily Herald(June 2, 1865).

Big Retail Tightens Its Grip

In an era of bigness, it’s time for regulators and consumers to think small again.

A month ago I went into a local small business in my Los Angeles suburb to buy a “big girl” bike for my daughter. The couple blocks of shops are apparently so good at aping the main streets of middle American small towns that camera crews film there at least once a month. Once I got to the store to buy my daughter her bike, though, I was disillusioned by what the stickers on the bikes said: Made in China.

I looked up the company on my phone and discovered it was a U.S.-based multinational corporation. If I bought my daughter her bike there, I realized, I would be supporting “small business” only partially. Small retail, apparently, doesn’t mean small-scale industrial production. If I bought a bike at this store would I still fulfill my self-professed goal, in an age of renewed economic nationalism, to be an economic patriot and support America’s strategic decoupling from China?

Maybe, I thought, I’ll ask the bike store owner why he doesn’t buy from an American producer. But I already knew the answer: “Because then I wouldn’t be able to compete.”

I ended up buying the bike for many of the same reasons I shopped at Walmart and Amazon during the height of the pandemic—a combination of price and convenience. Could I have scoured Los Angeles for an independent bike manufacturer? The answer is almost certainly yes, given the requisite amounts of gumption and time. If I found one, but it relied on fabricated metals from China, would my purchase still count towards supporting small businesses? Perhaps. Perhaps not.

Bernie Sanders’ runs for president in 2016 and 2020 were made famous for catchall slogans: “oligarchy,” “the 1 percent,” and the notion that we live in a “rigged economy.” As it turns out, he was right. The economy is rigged, in more ways than one, and things like raising taxes and strengthening private sector unions are only a part—albeit an important one—of a necessary response to the great story of business consolidation over the last 30 to 40 years. It was hard for me to find a small bicycle manufacturer to complement my “small business” bicycle purchase because of an economic path consciously chosen over the years by regulators at the FTC and DOJ Antitrust Division, who were in turn influenced by prominent economists and jurists.

An incisive and eminently comprehensible (by the standard of layman readability) article in the Yale Law Journal by President Biden’s nominee for FTC Commissioner, Lina M. Khan, paints a detailed picture of how we got here—here being the economic quagmire of big box retail and Big Tech dominating an ever-larger share of our nation’s economic activity. Their market dominance increasingly draws the ire of both left and right in this moment of indisputably populist politics. Yet many of us don’t necessarily understand how Walmart, Google, Amazon, Facebook, and Apple, among others, came to be the behemoths that they are now.

In Khan’s telling, American legislation from the Clayton Act (1890) to the Sherman Act (1914) and the Robinson-Patman Act (1936) set our country on a course towards preserving a capitalist system of genuinely free markets. In place of a market dominated by monopolies that could fix prices and collude with fellow large corporations, American legislation and legislators rose to the task of preserving competition and thus innovation and entrepreneurship. Irrespective of costs and benefits to consumers or convenience gained by economies of scale, markets had to be structurally sound to protect against anticompetitive behavior that might suppress competition by creating ever-larger barriers of entry to potential rivals.

A school of thought called “economic structuralism” reinforced these laws. Economic structuralists had a “structure-based view of competition,” meaning that markets were only healthy if they were diversified horizontally and vertically. (Horizontal market diversity meaning a diversity of producers vertical diversity meaning diversity in the supply-chain of any particular industry.)

Then, in the 1970s, “price theory” rode the wave of free-market enthusiasm straight into the Reagan years, all the way through to George W. Bush and, arguably, the Obama administration. As long as prices remained low, said the so-called “Chicago School of Economists,” as well as jurists like Robert Bork in his influential book The Antitrust Paradox , concerns over monopolies were generally unfounded.

According to Khan: “Foundational to this view is a faith in the efficiency of markets, propelled by profit-maximizing actors.” The result of this new wave of thinking in the Washington bubble of elite opinion was a generation of comparatively timid regulators and poor courtroom decisions in favor of monopolists. In hindsight, according to Khan and a growing bipartisan consensus, price theory was given undue deference and allowed a small handful of companies to amass unchecked power.

As if to prompt a pang of latent guilty conscience determined to resurface after my moral semi-failing at the bike store, a story appeared a few weeks later in the Wall Street Journal titled “ Amazon is the Target of Small-business Antitrust Campaign .” On NPR was another nudge: an interview with Alec MacGillis discussing his new book about the company, in which he states that many of us don’t like to ponder Amazon’s explosive growth during the pandemic because “we’re all complicit.” We all ordered products “the safe way,” to our door, and used quarantine guidelines as our rationale while Amazon hired 400,000 more people and grew its warehouse space by over 50 percent.

By some measures Amazon is now tied to two-thirds of all internet commerce, and studies have shown that many online shoppers—particularly once they’ve purchased a Prime membership—eschew even a web search in their online shopping, going straight to the Amazon website instead. These Prime memberships are subsidized by Amazon at a loss in order to gain market share.

This raises the sort of problems Khan and others mean when they speak of “structuralist” economic concerns. Once Amazon has squeezed out all its remaining competitors, what’s to stop it from raising prices? How will new rivals even be able to compete with the company’s outsized market power and its ability to both sell and control the selling infrastructure? Amazon simultaneously operates sales platforms that third parties use and launches competing products on those platforms with data gleaned from their rivals.

Stacy Mitchell looks in our current moment of Big Tech and big box dominance like something of a prophet—a Jonah who has just completed a fifteen-year slog through a Nineveh enthralled by “free market” theorists. Mitchell is co-director at the Institute For Local Self-Reliance and a key organizer of the Small Business Rising Coalition profiled in the front-page Wall Street Journal article mentioned above. As early as 2006, Mitchell wrote a book titled Big Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses .

What Mitchell helped me to understand, in addition to the aforementioned concerns about structurally unsound markets over-reliant on hyper-consolidated producers and supply chains which suppress competition, is how Big Box stores and Big Tech relate to the other stirrings of populist disquiet in our electorate, like outsourcing and income inequality.

“A substantial driver of income inequality,” Mitchell explained to me in an interview, “is consolidation in the market…When you have too few companies in the market, there is less competition for your labor, which holds down wages. And you have less negotiating power as a worker because it’s harder for you to leave and find another employer.”

When I ask Mitchell if there is a connection between outsourcing and big box consolidation her response is instantaneous. “Absolutely,” she says, “consolidation in retail drove manufacturing overseas. Demands for ever lower prices from big box retailers meant lower labor costs and lower quality to get to that lower price point.” The answer, we all know now, much to the devastation of our economy and the social fabric of America’s rust belt, was to send factories overseas.

According to Mitchell, American politicians on both sides of the political divide are waking up to the concerns of the economic structuralists that have gone unheard for the last 30 to 40 years. Both the House Antitrust Report on Big Tech , written by Democrats, and the minority Republican response to it, Congressman Ken Buck’s Third Way Report , “echo one another fundamentally” in their findings that serious structural problems exist in the American economy as it is currently configured. A caveat to that consensus is that Democrats seem more open to the idea of additional regulatory agencies—much like the Consumer Financial Protection Bureau that emerged from the crucible of the Great Recession—while Republicans like Buck would first like to see greater antitrust enforcement by the FTC and the DOJ Antitrust Division.

Buck points out that the FTC and DOJ have a combined budget of only $510 million per year to enforce antitrust law, while the Big Tech sector (Amazon, Google, Apple, Facebook) represent $2 trillion in economic activity per year and over 10 percent of America’s GDP. Continued pressure from Congress through further committee investigations—such as the one recently conducted on Big Tech, along with the allocation of more funding and resources to the FTC and DOJ—would be important steps, in lieu of immediate legislation, in the inauguration of a new era of trust-busting under President Biden’s watch.

Mitchell pointed out to me that opinion polls suggest broad bipartisan support for such actions. In an answer to critics who say consumers like the Amazon experience, Mitchell argues that just because you “love e-commerce, doesn’t mean you love Amazon” per se. What is more, Mitchell explains to me the fundamental threat to entrepreneurship and innovation presented by the Big Tech and big box store economy:

“The key to introducing new products to the market is independent retailers,” Mitchell tells me. “Amazon is good for search but bad for discovery.” Small retailers are where new companies are most likely to place their products initially, and it is the climate of the small retail experience that introduces customers to new products. Mitchell cites studies and anecdotes of toy sellers and books shops which demonstrate that consumers are more likely to encounter a new toy or a new author through small sellers, which is precisely why polling also demonstrates a consistent consumer preference for the non-chain retail experience.

Before we ended our interview, Mitchell pointed me to Chris Jones of the National Grocers Association (NGA) and the comparative lack of media coverage of predatory tactics designed to eliminate competition from small grocers. The grocery business has undergone an alarming transformation, and not for the better. As with e-commerce, the trend has only been accelerated by the pandemic. A quarter of all grocery sales nationally—the percentage is higher in some states—are made through Walmart.

A recent white paper by the NGA, “ Buyer Power and Economic Discrimination in the Grocery Aisle,” provides a shocking revelation of Walmart’s morally execrable and legally dubious practices to squeeze out competitors amid the pandemic:

In 2017, Walmart announced a new requirement that suppliers for Walmart stores and Walmart’s e-commerce business must provide on time and in full deliveries 75 percent of the time. Since then, Walmart has repeatedly tightened this requirement, raising the bar for on time, in full deliveries from 75 percent to 85 percent and then to 87 percent in 2019. In September 2020, while manufacturers and suppliers throughout supply chains were struggling to safely meet demand during the COVID-19 pandemic, Walmart raised the bar again, demanding 98 percent on time, in full deliveries. Walmart punishes suppliers that fail to meet its demands by charging a penalty of 3 percent of the cost of goods sold—a devastating penalty in an industry already operating with razor-thin margins.

The result, of course, was that in times of crisis-induced scarcity—and due to no fault of their own on the side of smaller grocers—supplier product was diverted from smaller stores to Walmart in order to avoid “a devastating penalty.” Prior to the pandemic, these same stores were often charged more by their suppliers for the same goods. Walmart’s P.R. arm would argue that this is simply a function of healthy markets economies of scale allow Walmart to purchase larger quantities, thus securing lower prices.

Advocates like Chris Jones would argue that this is in fact an example of predatory pricing which further squeezes out independent grocers as well as the smaller-scale farmers who can’t compete with big agribusiness. As Jones pointed out to me in an email exchange:

The FTC traditionally oversees competition in the grocery sector. We have not seen a price discrimination or an exclusionary conduct case in the grocery sector brought by the FTC in over 20 years despite overwhelming evidence that grocery power buyers are influencing supplier terms in their favor at the expense of independents.

Like Khan and Mitchell, Jones cites misguided economic theory along with lacunas in antitrust law as deserving of blame:

We suspect it’s a combination of the engrained Chicago School mindset that wrongly regards the exercising of buyer power as a market efficiency that benefits consumers. We rebut this notion in the White Paper. The lax enforcement approach is also attributable to the difficulty of bringing a case in the courts due to the nearly impossible burden of proof requiring a plaintiff to show market wide harm to competition in the case of the Robinson Patman Act.

Perhaps it’s worth reminding readers here that Amazon also has a grocery arm, as well as burgeoning roles in health services and pharmaceuticals and even the financial sector. As Mitchell states to me with eminently quotable precision and pithiness: “There are vanishingly few parts of the economy where Amazon doesn’t have its tentacles.”

Her observation reminded me of an op-ed, written early on in the pandemic by William Galston , about the inherent tradeoffs between “efficient” and “resilient” economic systems. Hasn’t COVID made it abundantly clear that our economy has sacrificed far too much at the altar of efficiency, gutting small- to medium-sized businesses, manufacturers, and other producers in the process? Whether the pandemic has cemented our conviction that supply chain and producer diversity are needed now more than ever, or simply forged a deeper dependence on consolidated big businesses like Amazon and Walmart, will depend in large part on whether Congress demonstrates the resolve to put its money where its mouth is.

As I have pondered my small business-bought but Chinese-made bike, alongside the illuminating conversations with Mitchell and Jones, Khan’s Yale Law paper, the House committee reports, and the National Grocers Association’s white paper, I’ve arrived at a few realizations: One, the American economy needs deep structural reform two, there is a bipartisan consensus to launch a new era of trust busting, even if the devil is in the details and three, in an era of Biden’s multi-trillion dollar “new New Deal,” legislators on both sides of the aisle must ensure that this spending blowout does not further entrench the structural flaws of the mega-business agenda that, by all appearances, has a powerful lobbying arm in Washington dedicated to making sure the opposite comes to fruition.

Kurt Hofer is a native Californian with a Ph.D. in Spanish Literature. He teaches high school history in a Los Angeles area independent school.

This article was supported by the Ewing Marion Kauffman Foundation. The contents of this publication are solely the responsibility of the authors.

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