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Starting at the end of the 19th century, many Americans viewed the emergence of large, industrial corporations as a threat to the republic, and these concerns were translated into the Sherman and Clayton antitrust acts.
Today, a similar panic is in full force, this time led mainly by congressional Democrats, who have introduced sweeping legislation ostensibly targeting the 21st century corporate titans they and others derisively call “Big Tech,” but ultimately aimed at reining in big business generally. Indeed, this new anti-big ideology has taken root in a 21st century Democratic Party coalition comprised of both hipster elites in academia, for whom antitrust is an intellectual cause, and grassroots activists and political strategists desperate to demonstrate solidarity with their working class constituency before populist conservatives can make inroads.
However, just as the initial panic over bigness in the early 20th century gave way to a more measured acceptance of the reality, and indeed the benefits, of giant industrial corporations, so too today one can hope that the current antitrust panic over “Big Tech” and Internet platforms more will give way to a more measured acceptance of the need for and benefits of big tech platforms. Until that time, it is important to ensure that the legislative and administrative damage is not too great.
It is hard to overstate the change in America that the rise of the industrial corporation brought. As Harvard historian Alfred Chandler wrote in 1977 in his magisterial book The Visible Hand: The Managerial Revolution in American Business,
As modern business enterprise acquired functions hitherto carried out by the market, it became the most powerful institution in the American economy and its managers the most influential group of economic decision makers. The rise of modern business enterprise in the United States, therefore, brought with it managerial capitalism.
Chandler went on to note that these firms initially had little political support:
At least until the 1940s, modern business enterprise grew in spite of public and government opposition. Many Americans-probably a majority-looked on large-scale enterprise with suspicion. The concentrated economic power such enterprises wielded violated basic democratic values. Their existence dampened entrepreneurial opportunity in many sectors of the economy. Their managers were not required to explain or be accountable for their uses of power.
Finally, Chandler noted:
In the first decade of the twentieth century, the control of the large corporation was, in fact, the paramount political question of the day. The protest against the new type of business enterprise was led by merchants, small manufacturers, and other businessmen, including commercial farmers, who felt their economic interests threatened by the new institution. By basing their arguments on traditional ideology and traditional economic beliefs, they won widespread support for their views. Yet in the end, the protests, the political campaigns, and the resulting legislation did little to retard the continuing growth of the new institution and the new class that managed it.
If there was one person who did more to place himself in intellectual opposition to the tide of bigness, it was Progressive-era Supreme Court Justice Louis Brandeis, who famously warned about “the curse of bigness.” Brandeis started his legal career in the 1890s defending small firms against large firms, and he developed a distinct animus toward large corporations and a preference for the prior “producer republican” ethos of small farmers, merchants, and craftsman. For him, the only reason firms sought bigness was to exploit monopoly power, and the only way they attained bigness was by cheating. As economic historian Thomas K. McGraw wrote: “By his frequent references to the ‘curse of bigness,’ he meant that bigness itself was the mark of Cain, a sign of prior sinning.”
In 1934, Adolfe Berle summarized the Brandeisian view when he warned President Roosevelt that Brandeis and his allies were turning against the New Deal, which they saw as too favorable to big business:
His idea was that we were steadily creating organisms of big business which were growing in power, wiping out the middle class, eliminating small business and putting themselves in a place where they rather than the government were controlling the nation’s destinies.
Knowing that the Achilles heel in his campaign to hold back the onslaught of industrial progress was the enormous efficiency and prosperity industrial corporations brought, Brandeis went to great pains to try to paint small firms as being as efficient as large ones, writing in 1911, that “a corporation may well be too large to be the most efficient instrument of production and of distribution.”
Yet, this claim soon was belied by a growing abundance of low-cost consumer goods, starting in the 1920s and exploding by the 1950s, such that it lost all force. Because the benefits of bigness—for consumers, workers, and the nation, which was taking its place on the world stage as a great power—these ultimately anachronistic concerns lost out to more pragmatic voices.
Indeed, notwithstanding the anticorporate muckraking and the success in passing key legislation in the early 20th century, the result was barely a bump in the road to the growth of America’s corporate economy and the prosperity and power it afforded. In part this was because successive administrations and federal judges exercised restraint in their “trustbusting.” Even Theodore Roosevelt, who is often remembered only as a “trust buster,” distinguished between “good” and “bad” trusts and preferred federal licensing and regulation of corporations to breaking up big companies. In his 1905 annual message to Congress, Roosevelt declared:
I am in no sense hostile to corporations. This is an age of combination, and any effort to prevent combination will not be useless, but in the end vicious, because of the contempt for law which the failure to enforce law inevitably produces. We should, moreover, recognize in cordial and ample fashion the immense good effected by corporate agencies in a country such as ours, and the wealth of intellect, energy, and fidelity devoted to their service, and therefore normally to the service of the public, by their officers and directors. The corporation has come to stay, just as the trade union has come to stay.
Indeed, conservatives, socialists, unionists, and nationalists like TR and progressive intellectual Herbert Croly welcomed large industrial firms. In his 1937 book The Folklore of Capitalism, FDR official Thurman Arnold mocked trust-busting campaigns as being “entirely futile but enormously picturesque.” According to Arnold, as quoted in Alan Brinkley’s The End of Reform: “There can be no greater nonsense than the idea that a mechanized age can get along without big business.”
So, while Brandeis and his small business allies won the battle, they lost the war, for two reasons. Large corporations did not emerge because of “sinning,” they emerged because the underlying technology systems (electricity, steel, machine tools, etc.) enabled the development of massively productive enterprises—but only if they were big enough to take advantage of the technologies. Ford’s River Rouge auto plant, the largest and most efficient factory in the world at the time, had to be enormous. As Chandler writes:
Modern business enterprise was thus the institutional response to the rapid pace of technological innovation and increasing consumer demand in the United States during the second half of the nineteenth century.
Meanwhile, these mega-corporations didn’t just create great wealth for storied industrialists such as Carnegie, Rockefeller, and Dupont—they also drove broad-based economic prosperity for American society. This is why Berle told FDR, “as long as people want Ford cars they are likely to have Ford factories and finance to match.” Brandeis and his intellectual allies were fighting an ultimately backward looking, losing battle.
Brandeisians also lost because most of the political support for the anticorporate movement came from special interests, which saw their very existence as threatened by these new corporate giants. In his biography of Brandeis, McCraw concluded:
In the last analysis, Brandeis’s emphasis on bigness as the essence of the problem doomed to superficiality both his diagnosis and his prescription… It meant, finally, that he must become in significant measure not the “People’s Lawyer” but the mouthpiece for retail druggists, small shoe manufacturers, and other members of the petite bourgeoisie. These groups, like so many others in American history, were seeking to use the power of government to redress or reverse economic forces that were threatening to render them obsolete. And in Brandeis they found a great advocate.
That brings us to today. We are once again in the early stages of a revolution in enterprise organization and technology, which is giving rise to a very different kind of corporation—the IT-enabled platform firm that, because of economies of scale and scope and network effects, can become very large, very fast and generate massive benefits in the process. As IT expert David Moschella has written, tech platforms combine customization, quality, and often low costs (indeed, sometimes free services for consumers) into one firm, something what was not possible in the past. We only have to look at Google and its parent company Alphabet, Amazon, Apple, Microsoft, and Facebook and its parent Meta to see this play out—but we also see it in a host of other platforms in other sectors, such as AirBnB in lodging, Uber and Lyft in transportation, and a score of companies in fintech. The reality is that IT-enabled platforms are the future in many industries, and their emergence is just like the transformation that occurred in the early 20th century: It will disrupt many incumbent firms while significantly increasing prosperity and productivity, as long as policymakers don’t “smash the machine.”
Yet, just as we saw a backlash grounded in fear and appeals to special interests a century ago, we see a Neo-Brandeisian backlash today. The movement’s champions frame their campaign to prevent the transformation of the U.S. economy in appeals to patriotic values and the public interest. For instance, Biden-appointed FTC Chair Lina Khan says her quest to break up “big tech,” and thereby protect small businesses from more effective competitors, is an effort to “protect our economy and our democracy from unchecked monopoly power.” This is a much more powerful argument than acknowledging that protecting small businesses against more effective competitors will come at a steep economic cost.
In unguarded moments, leading Neo-Brandeisians will concede that point, but they argue that it is less important than their social and political goals. In that respect, they are more intellectually honest than Brandeis himself, who tried to persuade people that if government took an ax to big companies, then productivity would not drop and prices would not rise. Perhaps because so few progressives today value productivity (they see it as harmful to workers) and so many look down on consumerism (it’s vulgar and bad for the planet), some actually acknowledge the costs their campaign would impose. Outspoken Neo-Brandeisian Matt Stoller, author of the anticorporate screed Goliath, admits that a world of yeoman producers might mean higher prices (i.e., lower living standards), but he argues it would be a small price to pay for democracy and dignity. He complains that over the last half-century, “the rights of producers, of small business, or small banks and credit unions, did not matter next to the need to hold down prices for consumers.” Likewise, Brandeis admirers Barry Lynn and Phil Longman admit, “breaking up monopoly has little to do with promoting efficiency or better deals for consumers, and everything to do with protecting political equality, self-government, and democratic institutions.” For the progressive Roosevelt Institute, the goal is to “curb corporate power,” even if consumers get hurt. Roosevelt Institute scholar K. Sabeel Rahman gave away the game when he admitted, “If consumer prices are our only concern, it is hard to see how Amazon, Comcast, and companies such as Uber need regulation.” Indeed. The issue is not that big tech companies are hurting consumers, it’s that they are big and powerful and represent a transformation to a new era.
It took at almost half a century for most Americans to come to terms with the fact that the U.S. economy had permanently transformed, for the better, into a corporate industrial economy. What ended up clinching the deal for all but the most committed anti-business progressives (in contrast to progressives, Marxists actually favored “monopoly capitalism”; they just wanted it unionized) was the previously unimaginable high standard of living large corporations enabled. Industrial corporations had made the American Dream a reality.
Hopefully, we will not have to wait 25 more years (Google, for example, was founded in 1998) for most policymakers to come to a similar realization that: 1) large, internet-based platforms in a wide range of industries represent the new form of industrial organization made possible by the underlying digital technology system, and that 2) these platforms provide massive societal benefits, especially choice, lower prices, and higher productivity. In the meantime, we can only hope that not too many legislators and administration officials don’t get swept up in the anticorporate, Neo-Brandeisian wave and enact the kind of laws and regulations that would slow this needed transition.
It is hard to underestimate how important it is for policymakers to get this right. The last time the global economy underwent such a change, it was America that led the way. And even though there was ideological and special-interest opposition to this transformation from Brandeis and his followers, along with small firms and their allies, that opposition was in fact much less intense than in the rest of the world, and the U.S political system was less susceptible to being affected by it. That is a principal reason why America was able to dominate the 20th century economy. As Chandler noted, there was “even stronger ideological and political opposition, in western Europe and Japan,” which is why it took them an additional three to four decades to fully make the transition to big-firm industrialization.
American GIs in WWII could be grateful for that difference, for as Stefan Link writes in Forging Global Fordism, it was U.S. leadership in mass production, pioneered and led by U.S. corporate giants, that played a key role in America prevailing over the Axis powers. Today, while Chinese leaders may fire the occasional shot across the bow at its tech leaders like Jack Ma to make sure they know who’s really calling the shots, the last thing the CCP wants to do is risk hobbling their big tech champions through some kind of ideological, big-is-bad campaign. In fact, the Chinese government does everything it can to foster large, globally dominant corporations, going so far as forcing mergers to achieve scale.
If America is to have any chance to staying ahead of the rising Chinese technology behemoth, it must not hobble its tech firms with backward-looking antitrust laws and undue enforcement. To paraphrase Thurman Arnold, there can be no greater nonsense than the idea we can get by in a digitized age without big tech.