CARTELS AND FREE ENTERPRISE TREND TOWARD MONOPOLY IMPERILS POLITICAL AND ECONOMIC DEMOCRACY
Berge, Wendell
Cartels and Free Enterprise Trend Toward Monopoly Imperils Political andEconomicDemocracy By Wendell Berge IN terms of our own history ami in relation to our economic future, cartels constitute...
...The Trend Toward Monopoly In the defense program of 1940 and 1941 and in the period following Pearl Harbor the grave effects of cartelization upon American industry were clearly and unmistakably revealed...
...If they were actually efficient, there would be no need for cartels to fear competition as they do...
...The path of their ' arrival Must lie pVepartd...
...Cartels and Free Enterprise Trend Toward Monopoly Imperils Political andEconomicDemocracy By Wendell Berge IN terms of our own history ami in relation to our economic future, cartels constitute one of the most serious problems with which democratic government must contend, The briefest survey of what cartels actually atand for, of what they have done and must do in order to retain their power, should i»e sufficient to convince the most skeptical observes that between the philosophy of economic privilege on which cartels are based and the fundamental economic principles of democratic law and progress, there is a gulf that no sophistry can bridge...
...It is at this point that the threat of cartels is most potent...
...This struggle against monopoly began with the American revolution, which in its economic aspects was a revolt against monopoly, and continued intermittently during the 19th century...
...Wishing will not create these new branches of' production, nor will they spring fully-1 developed from the brain of business or government or labor...
...The argument m' frequently advanced that because other countries may have cartels now, or may permit them in the future, this nation ntuit' alio tolerate the adherence of American concerns to cartel agreements...
...The consequences for (he first phsae of our war effort were severe...
...Where eartele exist, they sooner or later must seek political influence—and cartel Influence in world affairs can haVe disastrous consequences...
...Throughout more than a century and a half the concentration of monopoly power in economic life has represented f major and persistent problem in our economic development...
...Both in the United States and throughout the world cartels were able to entrench the nisei ves liecausa...
...This means that industry, must by its initiative create new fields of production, new goods and services, new jobs and .occupations...
...In concrete terms, it is essential that industry assume a venturesome lead...
...had dene aovfarl M restrict...
...Monopoly had become international in sonpe...
...Moreover, under Our reciprocal trade program any country Which discriminates against the commerce of the United States, or permits discrimination by reason of cartel activity, face* the possible > ''fCMtsaae* ea Page Kasn-teeo) i loss of the American market for its own products...
...Our labor force will be, iii consequence of its , training, in,armed services and industry alike, the most highly-skilled which wa have ever had...
...To monopoly-minded business men in the United Ststes and Great Britain cartel agreements made with German industries were devices for achieving economic stability, eliminating competition, and safeguarding an entrenched position...
...It^ttsfJsMuv: industry cartel , 4gt|ama^\wye alhetaod bjf which the fd&sj$pwet[tM world could be divided and.bK|a1dcb^*he German nation could hope for a daeUiv* superiority in,the .The philosophy of privilege and' the practices of restriction^ tpnetitute to-yether the greatest menace /<> the economic development of tfypoeixca, world...
...The fact remains that a cartelized economy cannot provide the conditions of economic progress...
...Our trade,, whether of exports or imports, cannot grow if cartels determine who may enter foreign markets, who may sell or buy in the American market, and what industries can or cannot exist here or abroad...
...Nevertheless, the trend to concentration in indue try and the in-create of economic power in the hande of privileged troupe continued deepite the effort* of government and the oppo...
...Fortunately for us, such private market domination is illegal under the Sherman Act as well as contrary to the conditions of a free market upon which our economy depends for its advancement...
...If we consider the controls which cartels exercised over the fields of electronics and electrical equipment, or light metals such as aluminum, magnesium, and beryllium, or almost the whole domain of chemistry, it is apparent that the policies of quotas, fixed prices, limited capacity, and captive research effectively retarded their advancement...
...If the chance is not taken, the unfavorable factors might easily become dominant, and we would have mass unemployment and stagnation...
...Such economic power over the Aow ef world trade is also political in its effects...
...Any stability thus achieved is transitory and is gained at the price of genuine economic advancement...
...It is manifest that the organisation of new industries is crucial...
...In these actions, they have been spurred by the realisation that in the long run political freedom cannot survive without economic freedom...
...The branches of production and the fields of research and Invention which have been showa during the war to offer the greatest number of possibilities for new industry have also been in the peat most completely dominated by cartels...
...For the purpose of Stimulating the most rapid growth of industry and of raising the standard of living of our citizens, men with enterprise and' initiative, were encouraged to enter the) market and compete...
...Aside from the hidden taxes which cartels'impose upon consumers, aside from the dangerous influence which carte's have exercised upon national policies, eartclization spells the end of economic opportunity for fee enterprise, the necessary framework for political democracy...
...Economic Libcralhm Menaced T*HIS problem of maintaining a virile competitive economy is among the most vital concerns confronting business, labor and government in the postwar period...
...equal to a momentous task...
...For a cartel pattern to operate efficiently in the international realm, it must be based upon a system of national monopolies or monopoly groups in industry...
...At the aame time/ It proved ha-possibfe to revive world trade which cartel pwtkf...
...America, a land of giant corpora-lions before the wsr, will emerge from this wsr with a larger share of its vastly expended economy controlled by a smaller number of firms...
...Size became a symbol of efficiency in inT dustry...
...he obstacle* to their development must be cleared away...
...Long before 1939, by ruthless and hidden measures of economic warfare, by secret agreements which restricted the production of vital materials, Germany's cartel system had achieved economic conquests which were stepping stones in the direction of ultimate military domination...
...This is true of both older raw materials and more recently developed resources...
...The degree to which monopoly practices had weakened the democratic nations could not be concealed any more than could the advantage which Germany had taken of cartel practices to infiltrate and to undermine America's industrial strength...
...New industries which threatened existing investment were thrdttfed and vital sectors of economic development were not permitted • JjjKt«M...
...During this period the cartelisation of world industry reached a peak...
...How can new firms enter a market if it is in the jurisdiction of a cartel group to stifle competition ? The answer is that as long as csrtels sre able illegally to rule over dynamic sectors of research and production, new ideas, new investment and new products cannot enter the market...
...Jf old cartel agreements art revived or ^J^.^Ul, art^mtieX^fre is little , prefifrcte of success"% ^$ieving full pi-odiirtton and full employment at heme or cooperation with friendly nut tone abroad...
...To them has gone the great bulk ef new plants built at Government expense, over $14,000,000,000...
...Monopolists who desired to eliminate all competition in domestic markets were susceptible to offers of a protected market at home even though it meant giving up all or part of their shares in . wiajW trade, Aa a consequence whole continents w«re'landed oyer to German industry to be exploited economically I and infiltrated politically...
...It is an attempt to gloss the facts of monopoly with an appearance of economic security and an aura of efficiency...
...Governments may endeavor to improve relations, to increase understanding, and to stimulate reciprocal trade but if cartela make the economic decisions the desires of governments cannot be carried eat...
...eition of the majority ef the people...
...Consumers will take what the cartels allow them to have in the way of new goods and services...
...Qur potential productivity ha* been demonstrated...
...When the geographic frontier closed it became evident that the continued concentration of economic power threatened to eclipse free enterprise...
...For the sake of our military security and our econpflaie welfare we?cannot per- , •;\wtt4Aric»i"irm« to enter into agreements which "divide the world market, which exclude opportunity for new enterprise, which expose the independent businessman to the threat of extermination am} which lead ultimately to ,mass unemployment and depression...
...Just as our representative form of government depends upon s system of checks and balances to- maintain political freedom, so at the outset it placed reliance upon competition to keep opportunity and freedom of enterprise alive...
...Those who believe in free enterprise understand that to meet...
...How can independent inventors or independent business men create new enterprise if it is in the power of cartels to deny acces* to large areas of technology...
...in promoting i peacetime economic activity...
...Consequently during the last years of the 19th century there arose a mighty tight against the trusts which resulted in the passage of the Sherman Act...
...It must be recognized that the concentration of economic power which developed prior to the war hae once more been accelerated and extended under the pressure of war needs, Recently a subcommittee of the Senate Committee on Education and Labor reported that: Throughout the Brat two and one-half years of our effort, 100 of America's largest corporations have received 75 percent of all wsr contracts by dollar volume...
...Another major depression in this country, with attendant widespread insecurity, loss of world trade, and the lurking, threat of international friction and war, will toll all the bells for the pasting, of the system of economic liberalism forever...
...No major ' international cartel can exist if American concerns in the industry actively compete...
...If we attempt to estimate the balance between the elements which favor the development of new industries and the obstacles to their appearance, it is clear that there is a good plus-margin, a bet-ter-than-flghting chance for our economic system to show that it can equate its achievements in peace with its performance in war...
...this test .effectively the role «f business must be clearly and accurately assessed...
...If there is a resurgence-of cartel power in these industries there Will be no opportunities for investment, enterprise, or labor to build, to explore, or to work...
...Business men, in particular, must realize that If the system ef free private enterprise is to survive, it must prove...
...Cartel rule of externsl trade, whether it is sanctioned or subsidized or not, inevitably extends to internal trade...
...In th« return to normalcy efforts to(Hfl|r"i*t I monopoly power was* further reurxed, and in the boom era of the 1920s there was little concern with the monopoly problem...
...We know.that the' capacity to achieve these goals exists...
...The stability which cartel advocates vaunt as the outcome of their proposals is an illusion, and a costly one...
...All of us are familiar with the shortage* and lack of capacity which resulted in this instance, and with the cartel methods involved...
...Both natural and synthetic rubber, for example, we're under cartel control prior to the war...
...It cannot offer access to the market and access to technology on a competitive basis...
...The formation of mergers and combines, the development of pnhjmt pools, and the elimination of small scale enterprise were) accepted alauet ika ? part of the nature of thing...
...Our industrial managers and our progressive group of business men have glimpsed new possibilities of markets, methods, and products during the war years...
...there was little understanding of their effects...
...During the years from 1914 to 1918 the process of monopolisation of economic life was abetted by the conditions and demands of s war economy...
...To keep the market open, both government and public opinion have waged campaigns throughout Our history against the emergence of monopoly power in industry...
...Our economy can be neither free nor expanding if cartels are able to fenre in and'govern the vast veie frontier of science* * * » C.4KTEI.S by their nature are inimical to greater'freedom of international trade...
...The Sherman Act is the expression of s fundamental opposition to the domination of Industry by monopoly group* and to the control of opportunity by economic privilege...
...In large part the great depression was the result of cartels being able to Impose a policy of restricted output and high er^ea, *o great did tfce.reji-nentatkm of tadfctry %g U^ajrftiane economic in iiaataaii ttftuiit thai every effort o« the pX s*4'«4bWMb-thorlty to stimulate ptedaetion and to Increase employment was largely nulli-Aed...
...The enforcement of the Sherman Act was more nominal than real...
Vol. 29 • March 1946 • No. 10
