Monopoly and Control in Industry

The usual run of economic literature tends to reflect the prevailing business situation. Thus the study of economic changes in the United States issued early in 1929 under the aegis of Mr. Hoover, gave a smug picture in which the “new economic era” of “universal” prosperity seemed destined to continue into eternity. It announced that the business cycle had been eliminated; and because it painted the peak of prosperity in bright colors without analyzing the basic mechanism of American industry and finance, it failed to note those factors which were inevitably leading to the crash that came about six months later.

The depression which followed impelled economists to subject the American economic system to some kind of analysis. Often this analysis - for the most part superficial— reflects the resentment against monopoly which the dispossessed middle classes tend to display under the pressure of an economic crisis. Professor Fetter, for example, addresses his study directly to “a nation of victimized consumers, and . . . to a nation of victimized business men, many of whom are caught in the toils of vicious commercial practices, not of their own making, practices wasteful of public and private wealth, and destructive alike of economic freedom, political justice, and business morals.”

In these words there is an echo of the war-cry “bust the trusts,” with which the indignant middle classes entered the political arena during the rise of monopoly in American industry in the last quarter of the nineteenth century. There has been, since then, a general realization that the trusts cannot be “bust”; on the contrary, the trusts have extended their domination over every phase of finance, industry, commerce, and even agriculture, the last stronghold of “rugged individualism.”

Dr. Laidler gives a factual outline of the extent to which competition has given way to monopoly with its accompanying economic discrimination and extortion. This outline shows that the days of “free markets” and “fair competition” are irrevocably gone. Four decades after the passage of the Sherman Anti-Trust Law, one per cent of the banks in the United States control ninety-nine per cent of banking resources; while two hundred of the largest non-financial corporations control over forty-five per cent of the assets of non-financial corporations, receive over forty per cent of corporate income, control thirty-five per cent of all business wealth and about twenty per cent of all national wealth. All the most important American industries, such as iron, steel, copper, aluminum, communication, automobiles, radio, oil, meat-packing, tobacco, chemicals, rubber, motion pictures, and electric power, are controlled by one, two, or at the most three corporations. In this connection it is worth noting that not only the realm temporal but even the realm spiritual has become trustified. Monopolies dominate the moulding of the American mind. The trusts which control the cinema, the press, and the radio have absorbed or rendered impotent those literati who continue to operate with such handicraft methods of influencing opinion as books or lectures.

Dr. Laidler contents himself with publishing a ledger of American industry and finance. But he makes no attempt to analyze his material or to draw any conclusions from it. Yet the most important fact which emerges from the maze of his astronomical figures is the predominance of finance capital. The evolution of capital has been from merchant capital, to industrial capital, to finance capital. When the small productive unit has been devoured by the trust, the international bank steps in to seize the spoils. The banking firm of J. P. Morgan and its allies alone, Dr. Laidler points out, through interlocking directorates is represented in corporations with net assets totalling seventy-four billion dollars, which constitutes more than one quarter of all American corporate assets. It dominates investment banking operations; it is also the dominant factor in the direct investment of American capital in foreign enterprises, controlling most of the giant corporations which battle in their respective fields with foreign rivals for international supremacy.

This immense power over American industry and international finance is concentrated in the hands of one hundred and sixty-seven persons in the Morgan combination who hold more than 2,450 interlocking directorships in corporations. This is one of the facts which justifies Mr. James W. Gerard’s statement that sixty-four men rule America.

One of the most important aspects of American national economy is its control by a handful of financiers. This means an increase of parasitism on American economic life, a further extension of absentee ownership, and an increasing competition for foreign markets. This in turn leads to the intensification of international economic struggles the final resolution of which is sought in wars.

While Dr. Laidler, assuming the role of an “impartial” reporter, evades conclusions, Professor Fetter is chiefly concerned with finding some remedy for the evils of monopoly. Indeed, to him monopoly as such is an evil. Democracy, he says, cannot endure “if its economic organization is monopolistic for the few and competitive for the masses.” Strenuous efforts must be made to check the movement toward monopoly and “turn it in the other direction toward equal economic justice for all citizens in domestic commerce.” Professor Fetter’s solution is a return to the practice of “fair” competition. “A capitalism without equal freedom of markets and commerce,” he says, “is a system of hypocrisy. Political equality before the law cannot long survive the destruction of its economic counterpart, equal freedom in free markets. The choice lies between oligarchy and democracy.”

Professor Fetter is not a bit discouraged by the complete failure of all gestures in the form of laws, commissions, and investigations which have been made to allay the demand of the middle classes for the regulation or abolition of monopoly. He explains these failures by the inability of the judiciary to understand the economic theory of prices, markets, and competition. He believes that if the courts correctly understood the nature of the basing-point method of price fixing and would properly enforce existing statutes, the “masquerade of monopoly” would terminate.

Such a conclusion is possible only if one completely disregards the irresistible tendency of capitalism toward monopoly and the concentration of wealth, so eloquently attested by the facts cited both by Professor Fetter and Dr. Laidler. In order to have such naive faith in the judiciary, it is also necessary to disregard the economic nature of political institutions. Perhaps if Professor Fetter had analyzed the economic basis of the courts and the relations between judges and the monopolies which they are supposed to regulate, he would not place such faith in the miraculous power of abolishing the basing-point system. It is important to bear in mind that in any country dominated by trusts, all political institutions, the “impartial” judiciary included, are participants in the “masquerade of monopoly.” History does not repeat itself; one might as well wish for the return of the cross-bow to replace the machine-gun as for the return of “free markets” and “fair competition” to replace monopoly.

The chief defect of both studies here under review is that they consider monopoly in the abstract. They fail to point out that the evils of monopoly are inherent in the profit-system which inevitably leads to monopoly. If, as the facts cited by both authors indicate, monopoly is a higher form of racketeering based on force and fraud, it is because the entire system which reaches its climax in monopoly is based on force and fraud.

As a socialist, Dr. Laidler does not share Professor Fetter’s simple belief that a proper application of present laws can restore “free markets” and “fair competition.” He does not believe in “public” regulation; he is convinced it would not solve the problem of “unjust inequality of wealth and income and of the dangerous unequal distribution of power found in modern industry.” Furthermore, as a socialist, he believes that “the trust and combine movement is preparing the way for socialization.” Indeed, the socialists look on monopoly as an advantage since the negotiations which would be conducted with the capitalists for establishing socialism could then be carried on with a few instead of a multitude of corporate groups. They think it possible that when some future socialist government undertakes to purchase industries, the investment trust and holding company system established by capitalism would provide a means for the socialist government to secure control of a number of industries without the immediate outlay of too great a sum of money. If Professor Fetter looks naively to the past, the socialists, of whom Dr. Laidler is one, look even more naively toward the future. Under capitalism everything may have its price, but it is ridiculous to assume that it is possible to purchase the reorganization of society. It is an historic fact that the capitalist system has bought out socialist governments in post-war Europe; but that is no reason for supposing that a socialist government could ever buy out the capitalist system.

The world-wide depression of the past two years dramatically illustrates the fact that monopoly capitalism leads to crises. Various solutions have been offered to avoid such crises in the future. Leading industrialists and financiers do not share Professor Fetter’s faith in public regulation or Dr. Laidler’s in public ownership. Some of them have suggested the introduction of planning on a national scale into capitalist economy. In so far as such suggestions are not mere smoke-screens to allay popular discontent with the present crisis or to establish the overt and centralized dictatorship of capital, they are as naive as the faith in well-informed courts or in the power of socialist governments to purchase industries. Both of the studies under review correctly point out that monopoly capitalism does not abolish competition among trusts and international cartels. Hence it ought to be clear that a national economic council composed of representatives of competing monopolies could not possibly plan for the welfare of the nation as a whole. There is no way to coordinate the competing elements of such a council, since, as every student of history knows, governments serve rather than dominate capital. The only possible consequence of such a national economic council would be that its more powerful members would use the council to expand their own monopolies.

In reality history is deciding between two tendencies in economic control which are already operating in various countries and neither of which Professor Fetter and Dr. Laidler have taken the trouble to discuss. One is the overt dictatorship of capital which dispenses with the “masquerade” of monopoly and rules through armed force; the other is the reorganization of national economy along the lines followed by the Soviet Union.