How Capitalism Saved America by DiLorenzo Thomas J

Author:DiLorenzo, Thomas J. [DiLorenzo, Thomas J.]
Language: eng
Format: mobi, epub
Tags: Nonfiction
ISBN: 9781400081172
Publisher: Random House Inc.
Published: 2004-08-09T16:00:00+00:00

ANTITRUST BEFORE SHERMAN

Even before Congress passed the Sherman Act, the enactment of state antitrust laws made clear that special interests could push government to thwart competition. The agitation for antitrust laws seems to have started in the Midwest among farm groups, not industrialists. In response to the formation of large corporate farms that were taking advantage of economies of scale to reduce their prices, Missouri farmers began to organize politically. An 1889 Farmers’ Alliance meeting in St. Louis called for legislation “to suppress . . . all unhealthy rivalry.”13 This of course is a telling statement: despite the common folklore about antitrust, state antitrust regulation had its origins in a movement to suppress competition.

The farmers at the forefront of the antitrust movement claimed to be victims of “monopolies,” but in reality they were merely bitter about the success of their more efficient competitors. The hallmarks of monopoly according to standard economic theory—restrictions in output and increased prices—were nowhere to be found in the farm belts during this period. Indeed, falling prices were prompting the calls for antitrust legislation. In the South, for example, farmers pushed for antitrust laws to halt the decline in cotton prices. The Missouri farmers who formed the Farmers’ Alliance in 1889 were responding to the declining prices of their staples—cattle, hogs, and wheat. Consumers, of course, were benefiting immensely: beef prices were 38 percent lower than they had been in 1884; the price of hogs had fallen 19 percent since 1883; and the price of wheat was about 35 percent lower than it had been a decade earlier.14 But that is precisely why these agricultural political entrepreneurs began clamoring for an antitrust law—so they could, in effect, legally pick consumers’ pockets. It didn’t seem to matter that the farmers themselves were benefiting from reduced costs during this period. Rail rates and interest rates had declined—farm mortgage rates fell from 11.41 percent in 1880 to 7.84 percent in 1889, a 31 percent reduction—and farm machinery was becoming less and less expensive as well.

At the state level, a major impetus for antitrust legislation came from the meatpacking industry, of all places. The “Big Four” meatpackers—Swift, Armour, Morris, and Hammond—had all created marvelously efficient operations that were vertically integrated into wholesaling and retailing and were shipping inexpensive, dressed beef by train all across the country from their centralized facilities in Chicago. Consequently, the price of beef fell throughout the 1880s. Suddenly there was ominous talk of a “beef trust.” Cattlemen combined with local butchers to begin an organized political campaign against declining beef prices. They succeeded in persuading Senator George Vest of Missouri to convene a commission to investigate the cause of lower beef prices. The Vest Commission concluded that “the principal cause of the depression in the prices paid to the cattle raiser and of the remarkable fact that the cost of beef has not fallen in proportion, comes from the artificial and abnormal centralization of markets, and the absolute control by a few operators thereby made possible [emphasis added].

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.