wkmac
Well-Known Member
In Restraint of Trade, The Business Campaign Against Competition 1918-1938
And it only gets better from there!
Paralleling this view of history, however, is a recognition that government
regulation has generally served to further the very economic interests
being regulated. The economist-and later United States senator-Paul
Douglas was not the first to become aware of this fact when, in 1935, he
observed with some bewilderment, "Public regulation has proved most ineffective.
Instead of the regulatory commissions controlling the private utilities,
the utilities have largely controlled the regulatory commissions. Nor
was he the last to perceive the truth of that proposition. Indeed, in the intervening
years, research has revealed the dominant influence of commercial
and industrial interests in shaping and directing government regulatory policies
in order to advance such business interest. While there is a debate as to
whether businessmen had advocated the establishment of political agencies
in order to structure the marketplace for their benefit or had only captured
such agencies after they had been created, few would question the idea that
the regulatory processes of government have been actively and purposefully
employed by business interests in order to gain advantages denied them in
the marketplace. page 14
Or, as an earlier scholar, Myron Watkins, noted: "From the time of President
Theodore Roosevelt's second administration there had been an insistent movement
among certain industrial leaders for either a legislative or administrative
definition of an exact standard of competitive conduct." page 15
The attraction of so many business leaders to systems of government enforced
trade practice standards reflected a continuing institutionalization
of economic life. The system wide benefits of maintaining openness in competition-
with no legal restrictions on freedom of entry into the marketplace
or on the terms and conditions for which parties could contract with one
another-were being rejected by business organizations more concerned with
the survival of individual firms and industries. As a consequence, business
leaders expressed an increasing desire for the maintenance of conditions of
equilibrium that would help preserve the positions of existing firms. Free
and unrestrained competition demanded a continuing resiliency in responding
to market changes. The innovation in products, services, and business
methods that made economic life creative and vibrant came to be seen as a
threat to the survival of firms unable or unwilling to respond. Concerns for
security and stability began to take priority over autonomy and spontaneity
in the thinking of most business leaders. page 16
In order to put business responses to competitive practices during the postwar
years in proper perspective, one must begin with the WIB. The war itself
served as a catalyst for the emergence of corporate institutionalism. As the
historian William Leuchtenburg has stated:
"The war confirmed the triumph of large-scale industrial organization. . . . [It]
speeded both popular acceptance and acceptance in the business world of the
virtues of large-scale, amalgamated, oligopolistic industries. . . . In 1916 America
still thought to a great degree in terms of nineteenth-century values of decentralization,
competition, equality, agrarian supremacy, and the primacy of the
small town. By 1920 the triumph of the twentieth century-centralized, industrialized,
secularized, urbanized-while by no means complete, could clearly
be foreseen."
The historian Robert Wiebe has observed that "the mobilization of 1917
and 1918 illuminated the degree to which an emerging bureaucratic system
had actually ordered American society." page 21
In furtherance of the war effort, the WIB centralized the economic life of
America into a highly structured bureaucracy under the effective direction
and control of leading business interests. Matters relating to the production,
pricing, and allocation of strategic goods and services were handled not by
the impersonal forces of the marketplace, but by the quite personal direction
of businessmen armed with governmental authority. American industry had,
in short, become "mobilized" in the most literal, military sense of the word.
Depending upon how one viewed the practice, American businesses found
themselves subject to political "coordination" or "regimentation" in furtherance
of collective goals. The historian Arthur Schlesinger Jr. has provided
an accurate summary:
"For a moment Washington became the unchallenged economic capital of the
nation. Through the War Industries Board, the government mobilized industrial
production. Through the War Food Administration, it sought to control
the production and consumption of food. Through the Capital Issues Committee,
it tried to regulate private investment. Through the War Finance Corporation,
it directed and financed industrial expansion. It took over the railroads
and the telephone and telegraph system. It set up independent public corporations
in diverse fields from the United States Housing Corporation to the Shipping
Board Emergency Fleet Corporation, from the Sugar Equalization Board
to the Spruce Production Corporation."
Another historian, Frederick Lewis Allen, more succinctly characterized the
WIB as an agency with "almost dictatorial power to decide to what uses the
industrial machinery of the country might be applied. "s
With the backing of the United States Chamber of Commerce, the Council
of National Defense created the WIB in July 1917. page 22
For purposes of this book, the significance of the WIB experiment lies in
the exposure of the business community to a system of political coordination,
under business direction, of those economic functions that are ordinarily
thought of as being best left to the disciplines and pressures of the
marketplace. The economic order and allocation of resources that are the
of the impersonal and informal market pricing mechanism were
abandoned in favor of formal, political means of ordering economic activity.
More importantly, the business community discovered in the WIB the basic
machinery for a more permanent system for an effective business direction
of economic life.
The WIB was viewed by certain businessmen as not only essential to the
war effort but as having the potential for helping to regularize competitive
conditions once the war ended. Prior to becoming president of AT&T, Walter
S. Gifford told a meeting of the United States Chamber of Commerce in
September 1917:
"We have never needed such organized industry as much as we need it now
when we are engaged in this great war and we never have needed it as much as
we shall need it after this war is over, when we shall be in the midst of a world
competition of unknown proportions." page 25
And it only gets better from there!