Hit Hard, Hit Everyone, And Hit Them All At Once

Supreme Court Justice Louis Brandeis viewed big government and big corporations as symptoms of a “curse of bigness”. Their sheer size places a stranglehold around the democratic neck of economic freedom, or, to put it in simple terms: it takes away choice. Tim Wu, who is a law professor at Columbia University, argues in his most recent book “The Curse of Bigness: Antitrust in the New Gilded Age” to break up modern, large trusts of the digital age to immediately boost free market competition. But, in order to understand how he got to this conclusion, it is necessary to take a closer look at the historical context and how antitrust law and economic policy developed throughout some of the most impactful years for the United States of America. 

tl;dr

This paper is a supplement to the book “The Curse of Bigness: Antitrust in the New Gilded Age.” It covers the years between 1920-1945, with a focus on the New Deal, and represents material left out of the original book.

Make sure to read the full supplement titled The Curse of Bigness: New Deal Supplement between chapters 3 and 4 of the book with the same title by Tim Wu at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3646258

Thurman Arnold speaks with a subcommittee of the Senate Judiciary Committee in March 1938. (Source: WyoHistory.org)

In this supplement, Wu covers how the United States experimented with central planning and policies resulting in a state-managed economy similar to communism in the Soviet Union or state-sponsored socialism in Italy or Germany only to fail catastrophically. He goes on to detail large chain retailers’ quest against the Robinson-Patman Act. The J.C. Penneys, Sears, and Woolworths of the era. Lastly, he takes a look at Alcoa and the question of the benign monopoly. Is it beneficial to allow a single player to dominate a market segment when it offers fair prices without any apparent economic harm? To this, Federal Appellate Court Justice Billings Learned Hand had to state: 

“The Sherman Act has wider purposes. Many people believe that possession of unchallenged economic power deadens initiative, discourages thrift, and depresses energy; that immunity from competition is a narcotic, and rivalry is a stimulant to industrial progress; that the spur of constant stress is necessary to counteract an inevitable disposition to let well enough alone.”

Perhaps what makes this supplement great and worth a read is Wu’s historical account of Thurman Arnold. President Franklin D. Roosevelt appointed little-known Arnold from Wyoming to become the U.S. Attorney General for the Antitrust Division in 1938. Unlike any other antitrust enforcer before or since, Arnold went on to file 1,375 complaints in 213 prosecutions involving 40 industries, while pursuing 185 investigations – all by 1939. Arnold went after the car industry, the film industry, big pharma, big banks, and so many more. His strategy would become known as “shock treatment” whereby a lawsuit would target not just one monopolist, but all its vertically and horizontally integrated co-conspirators. It was as simple as “hit hard, hit everyone, and hit them all at once.”

This supplement is a must-read if you are about or in the process of reading the curse of bigness. If you have ever seen “The Men Who Built America” the historical context of the supplement will serve as valuable knowledge. If you rather watch Tim Wu talk about his book and his learnings, watch this

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