ECONOMY OF GIANTS
Nikoloric, L. A.
Economy of Giants MONOPOLY AND FREE ENTERPRISE, by George W. Stocking and Myron W. Watkins, with the Report and Recommendations of the Committee on Cartels and Monopoly. Twentieth Century Fund. 596...
...An individual stockholder —the capitalist—does not direct his destiny...
...Perhaps this passing of individual economic freedom was inevitable...
...This "trustee" is not responsible to the general welfare...
...Other members are A. S. Goss, Marion Hedges, Donald Nelson, Frank M. Surface, Jacob Viner, and J. Raymond Walsh—certainly all well qualified...
...Nor are the old recommendations...
...There is a history of the growth of huge economic entities starting as early as the Revolutionary War...
...This handful of men now run America's "imperfect competition...
...The indiscriminate "pulverization" approach to the problems of monopoly has been discarded...
...The changing judicial interpretation of the antitrust laws is carefully and accurately reviewed...
...He turns his proprietary interest over to a professional manager as trustee...
...Those of the committee add nothing...
...There are too many of them to make policy...
...Both alternatives are, to me, repugnant...
...The study dissects various industries such as glass, tobacco, oil, tin cans, and steel—and describes from source material how the monopolies in these industries operate—their causes and effects...
...Stocking and Watkins find that we live in an economy of "imperfect competition...
...This job is undertaken by a committee headed by James M. Landis, former chairman of the Civil Aeronautics Board and the Securities and Exchange Commission and Dean of the Harvard Law School...
...The corporate giants represent too great a conglomeration of vested wealth to weather change...
...It is now believed that the solution lies in an industry-by-industry examination to discover where concentration serves the public welfare and where it does not...
...and for this reason, irrespective of monopoly abuse, an atrophying conservatism is inevitable...
...It is also true that we now have a degree of concentration never before experienced...
...Yet it is inconceivable that the production and marketing components of each type of steel are identical for all of the large steel companies...
...nor can the professional manager gamble or exercise great initiative...
...Industries have taken the form of oligopoly dominated by a few giants...
...Few of them have the slightest control over their own property...
...In the cigarette industry, for example, when R. J. Reynolds changes prices, the others follow as a matter of course...
...He is not really responsible to the owners as individuals...
...In an industry consisting of only a few large enterprises, it is not necessary to confer or correspond...
...These giants do not conspire or enter into restrictive agreements as these terms are commonly understood to further their control over the market...
...They are simply a restatement of everything we have heard before: repeal the legislated exceptions to the antitrust laws, appropriate more money for the antitrust division and the Federal Trade Commission, increase penalties and improve procedures, revise the patent laws to restrict their application, aid small business particularly by alleviating its tax burden, strengthen Section 7 of the Clayton Act by closing the loophole permitting the acquisition of a competitor's assets as well as his stock...
...It is, however, hard to catch the sophisticated monopolist...
...American ambitions change from those of the individual entrepreneur to those of the security-seeker...
...Perhaps most interesting is the elaborate inspection of present-day monopoly devices...
...It is the third of a series concerned with the problem written for the Twentieth Century Fund by George Stocking and Myron Watkins...
...They have made a masterful analysis of the forces that have created "imperfect competition...
...There are thousands of "owners" of a company like General Electric...
...but it is dangerous...
...New techniques are required to meet new problems...
...Big brother" price leadership is an example...
...It is relatively easy to deal with the more dramatic and traditional manifestations of trade restraint...
...Perhaps Stocking and Watkins will write a fourth book analyzing the effectiveness of the tools of antitrust in the fight for individualism and economic self-expression...
...Monopoly and Free Enterprise is the last word in modern analysis of domestic economic concentration, and reflects the work of perhaps the foremost scholars in the field...
...We have come to accept vast business enterprises, rather reluctantly, as the inevitable and logical result of complicated modern technology and marketing...
...Reviewed by L. A. Nikoloric CONTEMPORARY thought regarding the problems of monopoly is changing rapidly...
...An overwhelming majority of the class was shooting no higher than to land a minor executive position at about $6,000 a year safe in the arms of a large corporation...
...but it is becoming clearer that the old answers are not enough...
...The book covers most of the ground...
...There is no conspiracy in the accepted sense...
...When the conspirators are caught with their heads together or when the restrictive agreements have been reduced to writing and signed, sealed, and delivered, the courts and the public are quick to mete out punishment...
...Just as you and I understand that we are expected to eat soup with a spoon, so the monopolist understands what course of conduct is required of him in any given situation...
...Although the committee finds that the old techniques have, in sum, worked well, I doubt that the conclusion is completely justified...
...When U. S. Steel raises prices, the other companies automatically set identical price schedules within a matter of hours...
...The reason for either move is basically the same...
...There is no need to confer to fix prices...
...Another device is the trade association...
...This "imperfect competition" disturbs Stocking and Watkins...
...II These recommendations, however, are disappointing...
...Bigness often means efficiency and lower prices...
...He has only one primary duty—to show a profit made through conservative and accepted ways...
...A society of economic oligopoly tends to move either far to the right as did Germany in the 1930's, or to throw itself into the hands of government control and ownership when a breakdown occurs...
...It is true that our economy is vigorous and has tremendous productive capacity...
...Stocking and Watkins appear to appreciate these problems...
...Nor do the courts punish or infer conspiracy...
...Recently the senior class at Princeton expressed an attitude remarkable for the "cream" of this aggressive and individualistic country...
...The line between the legitimate exchange of market information and conspiracy is hard to draw...
...I do not mean to suggest that there are easy answers to the problems posed by the new "imperfect competition...
...596 pp...
...Today's industry requires large amounts of concentrated capital...
...The first two were Cartels in Action and Cartels or Competition...
...Complex and expensive research cannot be undertaken by diversified and small establishments...
...I would have preferred to have their own specific recommendations as to the solution...
...Stocking and Watkins, having presented their survey, do not conclude with their own recommendations...
...Present techniques are more sophisticated and as a consequence more difficult to stop...
...There is too much at stake...
Vol. 15 • September 1951 • No. 9
