Trusts, cartels, monopolies, oligopolies. We live in a society where markets are becoming increasingly concentrated. A lot of people have heard of the oligopolies in the telecommunications, airline, and banking industries, but just a few realize how concentrated the chocolate, tobacco, voting machine, and even porn industries are, to name just a few.
The problem of large companies gaining control over entire industries and forming trusts is not new. The United States started facing this issue by the mid-19th century, and by the early 20th century their presence and overreaching influence on the society reached its pinnacle. Here are some of the notable cases of such monopolies from those days: Standard Oil, US Steel, Alcoa, American Tobacco Company. In many cases, these companies accomplished such dominance by threatening, blackmailing and bribing the competition and government officials. Even the establishment of the Federal Trade Commission in 1914 and numerous initiatives by Theodore Roosevelt, Woodrow Wilson and William Taft did not stop the industry tycoons from buying politicians and newspapers. These initiatives were not capable even of banning the tycoons from taking such a key federal position as the United States Secretary of the Treasury. Such appointments were probably illegal even back in 1921 as it probably constituted an obvious conflict of interest. It didn’t seem to bother anyone back then.
Such entities saw no problem in treating unskilled factory labor pretty much like the animals, there’s a lot written on this topic.
It was not until the New Deal that the federal government, led by Franklin D. Roosevelt, introduced some initiatives that curbed big corporations’ unrestrained influence on the average American worker. Some of the legislation proposed and enacted was:
- Social Security Act. It introduced unemployment insurance and government support for retirees. It has proven to have an extremely positive effect on the financial well-being of workers and boosted the economic growth and prosperity of the country.
- Wagner Act. It officially protected the right of workers to form unions and engage in collective bargaining.
- Revenue Acts of 1935 and 1936. These acts increased taxes on wealth and undistributed corporate profits. They had a profound effect on the federal budget and allowed to establish the welfare state initiatives of the New Deal.
These and other changes supported and carried on by the succeeding administrations of Harry Truman, Dwight Eisenhower, Lyndon Johnson, etc. resulted in continuous and steady growth of average wages and salaries. Curiously, they also caused the Great Compression, the decades of a significant reduction in inequality from the 1940s till about the 1970s. It was also a period of steady real wage growth for the average American. However, it cannot be considered a real victory over trusts by Franklin Roosevelt.
No Real Solution Against Trusts
Even after the efforts of Theodore Roosevelt, Wilson, Taft, Franklin Roosevelt, the Supreme Court, the Federal Trade Commission, and so on, Americans still live in a country that is heavily dominated by large monopolies. Even under the administration of Franklin Roosevelt, the trusts and monopolies did not cease to exist, companies such as International Harvester, Alcoa, U.S. Steel, to name a few, did not hesitate to take advantage of the lucrative Second World War deals with the government and the Allies.
The famous cases of breaking monopolies up on multiple competing entities did not solve the problem in the long run. Let’s look at Standard Oil, which was broken into 34 companies in 1911. Today, we have two companies that have a larger total market cap than all the other oil companies in the US combined and multiplied by 2. The same problem happened with the breaking up of the American Tobacco Company, which ultimately led to the formation of the oligopoly of just Philip Morris, Altria Group and Universal Corporation in the game. Again, it is pretty much the same situation with the breakup of AT&T into seven companies in 1984. By 2021, there are only 3 main players on the market: AT&T, Verizon, and Sprint, which are constantly accused of keeping the prices high (Americans and Canadians pay some of the highest telecom fees in the world).
The United States, Canada, and the European Union were taking other measures to prevent significant concentration and influence of businesses on the market and government, but to no avail. Besides breaking companies up, they tried blocking mergers and acquisitions and fining companies abusing anticompetitive law. However, they could not come up with a systematic functioning solution to this day.
Do We Really Need to Destroy Them?
Looking at the high standard of living we enjoy in Europe and North America, we see that heavy domination of the oligopolies does not stop our economies from growing or result in a steep decline in people’s well-being. Perhaps what we should really debate is how we can regulate this business effectively to make it share its wealth with the rest of the country. It is quite a good time for the government to introduce a New “New Deal” for the 21st century.
Some of the possible tools that can be implemented are increased progressive taxation and improved working conditions. Maybe there are new creative solutions, like encouraging new unionization in the white-collar economy to defend workers in the service sectors or knowledge workers.
The United States and Canada are far behind European countries in this regard, with either no minimum paid vacation days required by the U.S. government or just ten days in Canada. Most of the European workers enjoy 20-25 paid vacation days. Another long overdue initiative is the decrease of a workday to 7 or maybe even 6 hours per day. The productivity of the average American worker has improved a lot over the last few decades while the real wage is still lagging behind. There are many possible ways governments can force large corporations to share their profits with the workers. We also have some evidence that such policies had a positive effect on the lives of average American workers up until Ronald Reagan and his successor started to deregulate the industries and decrease the taxes.
That could be another reason for the economic decline of the United States and Canada on top of the massive exodus of manufacturing from North America over the last two decades.
Moreover, we should not only co-exist with the large trusts by regulating them, but should also cooperate and work together as they do bring a lot of advantages. Some large infrastructural and innovation projects are possible only if executed by a large corporation with sufficient resources and top-notch expertise. Monopolies are also known for bringing efficiencies that might result in lower consumer prices. One of the interesting examples of such cooperation is the tax deal reached between the Danish government and Maersk, the country’s largest transportation and oil & gas company. Maersk launched a project to redevelop the Tyra oilfield through which 90% of Denmark’s gas production is processed. It is, surely, in the interest of the government and the country to preserve and improve such strategic resources, and only Maersk is capable of executing such large projects.
Thus, even though the Western democracies did not devise a systematic solution to prevent market concentration, they successfully regulated and redistributed the wealth of such entities to the general public. Perhaps, in a democratic country, it might be impossible to destroy monopolies and trusts. It should be the objective of the authorities to maintain a balance between the interests of the population and big business. The countries that are successful with this task will enjoy a higher standard of living and have happier citizens.
Germany:
DW exclusive: How German companies donate secret money to political parties
Corporate donations to mainstream German political parties fall
Switzeland:
Challenging Nestlé in Switzerland
Canada:
Who backs Canada’s politicians? – interesting database of different corporations (mostly big trusts) donating millions of dollars to the major political parties. I enjoyed seeing some 55555 Inc. donating close to $3 million to the Liberal Party in 2018.
Sweden:
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