The bigness of business
For a hundred years big government and big business have watched each other warily in Washington. There was McKinley and later Teddy Roosevelt, known as a "trust buster." As governor of New York, Roosevelt encountered the amoral alliance of private corporations and greedy politicians. "The wealthy criminal class" he called them. Their size and growth shocked him. Edmund Morris in his splendid "The Rise of Theodore Roosevelt" recalls the story: 26 industrial mergers had been announced in the first 25 years since the Civil War; in the next 7 years it had jumped to 156; in the single year 1898 a record of $900 million of capital was incorporated and, in the first two months of Roosevelt's initial period as governor, that 1898 record was already broken. It was a new era -- "the rush toward industrial monopoly" was on.
Those merger figures seem minuscule today. The current corporate grabs for Conoco Inc. by E. I. du Pont de Nemours and by Mobil Corporation have involved $ 7.4 billion and $7.74 billion respectively. Back in innocent 1898 people didn't even use the word "billion" easily; now we are edging toward the word "trillion." Governor Roosevelt denounced "the combination of business with politics and the judiciary which has done so much to enthrone privilege in the economic world." Others fought the "trusts" too -- Bryan, the POpulists, and La Follette. The social problem was to find room for the two giants, big government and big business, in the same national entity.
Congress passed the Sherman Act in 1890. People thought that settled it. It was based on the constitutional power of Congress to regulate interstate commerce. The law outlawed a series of restrictive business practices and slapped a year's jail sentence or a $5,000 fine on the culprits. When Roosevelt left Albany and became President he helped dissolve the Northern Securities Co. under the Sherman Act, and President Taft in 1911 dissolved the Standard Oil Trust and the American Tobacco Co. It was felt that bigness was now under control, giantism was halted.
But mergers kept on.In 1914 Congress passed the Clayton Act under Woodrow Wilson. This was directed at "big" corporations capitalized at $1 million. The Federal Trade Commission was created to help police the giants. Reformers again took breath; had they finally won the struggle? In 1916 Wilson named the first Jew to the Supreme Court, Louis D. Brandeis, whose appointment created some of the interest that we see today in the first woman appointee. The objection to Brandeis was not from anti-Semitism but because of his controversial opposition to business bigness: for example, 52 Boston Brahmins signed a letter to the President opposing confirmation. They could not agree with Brandeis's fear of possible undemocratic concentration of economic power.
Somehow or other an accommodation had to be worked out between the two giants , big business and big government, but it was not an easy matter for the courts. It became more complex even though a good deal of the earlier emotionalism cooled. The nation changed from agricultural to industrial; corporate bigness today is accepted but somewhat reluctantly. The courts have found a way of dealing with the corporations; they are considered as a constitutional "person," with legal rights that in some respects are like those of a private individual. But how private is General Motors which in its 1970 heyday had gross receipts equal to Sweden's, employees and their families equaling the population of New Zealand, and outstanding outlays larger than those of France or West Germany?
Corporate power widen as some companies swallow other companies. The nation's 200 largest industrial concerns increased their share of total US manufacturing from around 46 percent in 1948 to over 60 percent today, according to the latest census.
In an economy half the size of America's Japan has seven auto companies compared to 3 1/2 in the US. Is that the reason Japan's auto production this year will surpass America's?
Federal Reserve Board chairman Paul A. Volcker worries about mega-mergers. Are they tying up scarce capital? The corporate drive to invest surplus funds comes when ordinary credit is scarce, when the shortage of capital is growing, and when interest rates are exorbitant. "I don't know any simple answer to this ," Mr. Volcker complained. Congress may look things over.
Political scientists note that corporations seem to be widening their participation in public affairs. Recent court decisions confirm their right to defend themselves in paid advertisements in policy disputes affecting them. They can also stimulate political action groups which bring them closer into the political arena. As corporations get big they tend to become multinational, some even seem to have their own foreign policy.
The dispute began 90 or 100 years ago. It i s still unsettled and has taken a different form.