I sent this letter today to the Wall Street Journal:
Donald Libert speculates
that Sen. John Sherman sponsored the 1890 antitrust act that bears his
name out of "a desire to ‘pay back’ the New York
industrialist-dominated delegation who he blamed for denying him the
Republican nomination for president at the 1888 convention" (Letters,
July 19). Revenge might well have been part of the Senator’s agenda.
But another part of that agenda likely was his desire for political
cover.
Sherman, a staunch protectionist, was a senate champion
of the McKinley Tariff. This tariff, enacted a mere three months after
passage of the antitrust act, set import duties at (what at the time
were) record high levels. (So much for Sen. Sherman’s credentials as
friend of consumers!) Free-trade Democrats rightly accused
protectionists as being architects of monopoly power – an accusation
that Sen. Sherman no doubt sought to conveniently deflect by putting
his name on an antitrust statute.
Sincerely,
Donald J. Boudreaux
Once again, the relevant research here was done by Tom DiLorenzo. See: Thomas J. DiLorenzo, "The Origins of Antitrust: An Interest-Group Perspective," International Review of Law and Economics (June 1985).
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{ 12 comments }
Don,
Some may take DiLorenzo seriously as an economist, but he's an embarassment as a historian. Ditto for Libert's speculations about Sherman. Innuendo is not the same as proof. Considering that the act passed both houses of Congress with overwhelming support, it becomes very hard to see it as a vehicle for one man's political revenge upon another. Regarding your imputation to Sherman of using the bill for "political cover", what evidence exists to support your speculation? Sherman had a successful political career which spanned decades. Why would he want or even need political cover given his secure position?
This New York Times (circa 1980) article says pretty much the same thing.
http://query.nytimes.com/mem/archive-free/pdf?_r=2&res=9B06E4D7103BE533A25752C0A9669D94619ED7CF&oref=slogin&oref=slogin
“That so-called Anti-Trust law was passed to deceive the people and to clear the way for the enactment of this Pro-Trust law relating to the tariff. It was a humbug and a sham.”
There are more gems in the article.
Popular propaganda/history holds great sway in the public mind.
The errors of the past are perpetually visited upon us.
The article is dated 1890, not 1980.
Albatross,
Opponents of the tariff act like the NY Times attacked Sherman in an editorial. So what? Questioning the motives of others may be an effective technique, but it should never be confused with providing proof. Would you rely upon NY Times' editorials to give you the straight scoop on other subjects? Even if Sherman acted with base motives, that says nothing about the value or validity of the Antitrust Act itself.
July 1890: Sen. Sherman sponsors an antitrust act widely interpreted today as a device meant to protect consumers from prices made excessively high by insufficient competition — this despite the fact that the evidence shows that real prices charged by firms in those industries alleged then to be monopolized were falling. (Indeed, these prices were falling by more than the fall in prices generally during this period of deflation.)
October 1890: Sen. Sherman champions a tariff hike that more thoroughly shields domestic producers from foreign competition, enabling domestic producers to charge prices higher than they would otherwise be able to charge.
It's not proof, granted; but it's a quite-plausible conclusion from these facts that Sen. Sherman's motives for putting his name on the Sherman Antitrust Act had very little to do with protection consumers from monopoly power.
Sam,
Ooops on the date thanks for the correction.
David,
I cited the editorial, because it is proof that the same motives that Don mentioned were being questioned at the time of the passage of the act. Unfortunately, I cannot read minds, so Sherman’s true motives remain closed to us. However, I think historians spend a lot of time trying to figure out the motives of historical figures, and (considering that tariffs limit competition, while trust busting supposedly enables it) I find Don’s and DiLorenzo’s conclusions very plausible. As for the validity of the Sherman Act, well the amount of scholarship on Anti-Trust suggest that the whole field is a waste of time and that the Sherman Act and its even more evil sister (the Clayton Act) have done immeasurable harm to consumers. Wikipedia has a great quote from Alan Greenspan on the Sherman Act.
"No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible."
I thoroughly enjoyed DiLorenzo's two books on Lincoln. Walter Williams is on board, and that's more than enough for me.
http://www.lewrockwell.com/orig2/w-williams1.html
I second David Graf's take on DiLorenzo.
Considering that the act passed both houses of Congress with overwhelming support…
What further proof is needed?
True, I will concede that most economists are lousy historians, but at the same time most historians are lousy economists. However, I put forth that the nature of the Supreme Court at the time probably made Senator Sherman think that whatever he proposed would quickly be declared unconstitutional. The statute itself is tremendously vague, and Sherman would have expected it to have been either thrown out or narrowly prescribed. He likely had no idea that this act would be so expanded and so recently narrowed. At the same time, the Act would have seemed toothless, which would have encouraged Sherman (and those in the House and Senate) to vote for it. Therefore, it provides perfect cover for the passage of this abominable tariff. At the same time, Sherman’s support of this Act, while at the same (or near) time supporting a tariff, suggest that he was not so inclined to seek revenge on the “moneyed interests,” but to enable them, which would pour cold water on the claim that that Sherman passed the Act which bears his name to spite the interests that denied him the Republican nomination. Excuse my language, but despite his personal feelings over being denied the nomination of 1888, Senator Sherman did not defecate where he ate.
but at the same time most historians are lousy economists
I submit that many, if not most, historians are lousy historians as well.
Jim Powell's "Bully Boy" and Burton Fulsom's "The Myth of the Robber Barons" show the anti-trust laws maintained high prices for local goods to the harm of the consumer. The data puts the lie to the standard reasons propounded for protectionism.
Lucky enough for us that the Von Mises website reprinted this beautiful essay from Von Mises (oh, if it were only untainted by the regulators):
"Our economic system — the market economy or capitalism — is a system of consumers' supremacy. The customer is sovereign; he is, says a popular slogan, "always right." Businessmen are under the necessity of turning out what the consumers ask for and they must sell their wares at prices which the consumers can afford and are prepared to pay. A business operation is a manifest failure if the proceeds from the sales do not reimburse the businessman for all he has expended in producing the article. Thus the consumers in buying at a definite price determine also the height of the wages that are paid to all those engaged in the industries."