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Quotation of the Day…

… is from Thomas J. DiLorenzo’s June 1998 essay “The Ghost of John D. Rockefeller” (footnote deleted); I offer this quotation on this day, July 2nd, 2020, the 130th anniversary of President Benjamin Harrison signing into law the unfortunately revered Sherman Antitrust Act – a piece of legislation sold as attacking a non-existent problem but one later used to create problems:

The Sherman Act was a protectionist scheme in more ways than one. The real source of monopoly power in the late nineteenth century was government intervention. In October 1890, just three months after the Sherman Act was passed, Congress passed the McKinley tariff the largest tariff increase in history up to that point. The bill was sponsored by none other than Senator John Sherman himself. Sherman, as a leader of the Republican Party, had championed protectionism and high tariffs since the Civil War. In the Senate debate over his antitrust bill he attacked the trusts because they supposedly “subverted the tariff system; they undermined the policy of government to protect . . . American industries by levying duties on imported goods.” That is, the price-cutting by the trusts undermined the manufacturing cartel that was created and sustained by the Republicans’ high-tariff policies.

The Sherman Act was a political fig leaf designed to deflect attention away from the real source of monopoly power: the tariff and the true price-fixing conspirators, Congress and protectionist manufacturers.

DBx: No one who is knowledgeable about 19th-century American economic history believes that free markets were sources of monopoly power. Sources of firms unprecedentedly large, yes. (The optimal sizes of many firms’ markets were naturally expanded by the spread of railroads, telegraphs, and telephones.) Sources of unprecedentedly large personal fortunes, yes. (These fortunes – such as those of John D. Rockefeller, Andrew Carnegie, and Gustavus Swift – were earned as these men had the entrepreneurial vision, gumption, and skills necessary to take advantage of new market opportunities to better serve consumers.)

But were free markets in the U.S. back then sources of monopoly power – of the power to restrict output and to raise prices? No. All the evidence points in a direction opposite that which would support the pop notion that the United States was plagued with privately created monopoly power in the 19th century.

And as DiLorenzo argues, it is simply unbelievable that the same Congress that in October 1890 enacted one of the largest tariff hikes in American history, did, three months earlier, intend with its Sherman Act to promote consumer welfare by attacking what that Congress believed to be monopoly power.

The Sherman Antitrust Act stands as an early example of U.S. industrial policy. It is, again, legislation cynically trumpeted as helping ordinary Americans by deploying the power of government to attack a problem that didn’t exist. And it became – by being used, in the name of promoting competition, to stifle competition – itself a friend and source of what it pretends to abhor and uproot. Some of this stifling of competition was and remains intentional; other of it was and remains the unintentional result of economists and lawyers arrogantly fancying themselves able to identify which particular market arrangements and business practices are ‘good’ for the economy and which aren’t.


Pictured above is the tariff-loving Sen. John Sherman (who was a younger brother of William Tecumseh Sherman).


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