"No trusting the trusts"

Home Energy Digest

Spring 1981

President Reagan's invoking the name of Thomas Jefferson in behalf of his candidacy during the late campaign did not seem out of line to most people, even to those few who gave it a moment's thought. It is perfectly legal and proper and within Federal Election Commission guidelines to recruit support from the dustheap of history. After all, candidate Reagan was fishing for a symbol of freedom, and Jefferson fit the bill. Not freedom of the press, for which he is more fittingly honored, but freedom of the marketplace--that is, freedom from government interference therein. The suggestion is that Jefferson, were he alive today, would be appalled at the extent to which government has interfered. He was above all a man of reason who happened to believe in small government. But since his time, reason has fallen asleep, bringing forth the monster, or so it seems.

This is a tidy view of Thomas Jefferson, but, sad to say, rather incomplete. It is true as far as it goes, which is about halfway. The fact is that Jefferson distrusted bigness of any sort. He was no less suspicious of manufacturing and commerce than of government. Those who labor in the earth were the "chosen people," while moral corruption marks those who, for their subsistence, depend on "the casualties and caprices of the customers." True, he softened his view after a time and accepted the capitalistic order of things, but he remained steadfastly partial to the small operator, especially if that operator trailed a team of draft horses and a plow.

So what if Jefferson were alive today? Dumas Malone, the eminent scholar who is writing a biography of Jefferson, things he would be a member of the Sierra Club and Save the Whales and at least be sympathetic to Ralph Nader's consumer crusade, all of which would serve to disqualify him from a position in the Reagan Administration. Airplanes, air conditioning, Velcro, and Superglue would tickle his fancy; television, the stock market, and the Georgetown cocktail circuit would bore him to tears. He would be no less discomfitted attending a board meeting in a corporate suite than a regulatory agency rule-making session.

My guess is that, if Jefferson were alive today, he would move to Maine and begin farming. He would be a member of MOFGA (Maine Organic Farm Growers Association) and would supplement his income from his organic beets by designing small energy- and time-saving devices and gadgets, modern equivalents to those one notices when visiting Monticello: a whirlygig chair, a calendar clock, a folding ladder, a fireplace dumbwaiter, storm windows, a quartet music-holding stand, novel water-collection and indoor-plumbing systems, and an improved plow. He would display his produce and his inventions at the annual Common Ground Country Fair just down the road from Augusta.

But Jefferson is not alive today and no doubt is quite satisfied as such. The bigness he feared is plenty alive and growing, both in government and private enterprise. President Reagan promises to "whittle away" at big government because, in his view, government is the menace. Government regulation of business is the problem; deregulation of business is the simple solution. The great free enterprise system has made us the richest nation on earth, so why not let it work for us once again?

To return to the dustheap once more, history demonstrates that free enterprise is hardly a flawless economic system. Even Adam Smith, in a sense its founding father, had no special love for the "profit motive" but simply recognized it as a natural human impluse that, when practiced en masse, resulted in an institution that enabled people to better their condition.

Like Jefferson, his contemporary, Smith admired most those men who cultivate the soil. Among those he detested were the monopolists, those who "by keeping the market constantly under supplied, by never fully meeting effective demand, sell their commodities much above the natural price...."

Although Smith spotted the tendency toward monopoly in the free enterprise system, he could not clearly foresee the great changes wrought by the industrial revolution--the growth of heavy industry under corporate ownership and management, the gradual withdrawal of the tools of production from the workman's possession, the accumulation and concentration of capital, and the difficulty of preserving free and open competition under these changes circumstances.

The second half of the 19th century, the era of the "robber barons" and wage slavery and child labor and Supreme Court protection of corporations as "individuals" under the 14th Amendment, eventually brought about the nation's first anti-trust legislation. The Sherman Act, passed in 1890, made "restraints of trade" illegal and also outlawed monopolies. Teddy Roosevelt, another of Reagan's idols, emerged as the great "trust buster." The passage of the Clayton and Federal Trade Commission Acts in 1914 further buttressed anti-trust efforts, which found philosophical support in the legal opinions of Supreme Court Justice Louis Brandeis. Then came the Depression and yet another of Reagan's heroes, F. D. Roosevelt, who ushered big government into the marketplace, where it continues to upset free-enterprise applecarts. So it goes.

It is a platitude to say that economists cannot agree on whether anti-trust works, for among economists general agreement on anything is a consummation devoutly to be wished. Some say government anti-trust efforts hinder economic efficiency and place us at a disadvantage to the Japanese. Others say that anti-trust hinders competition, which it is designed to enhance. Still others say that it is not being enforced vigorously, that it serves only to keep hordes of lawyers and bureaucrats on the dole, that the regulatory agency and the industries it regulates are often in cahoots. The latter is the view of Nader & Co., which calls for an all-out anti-trust war on "the closed enterprise system."

What is known is that anti-trust violations continue apace. In 1980, the Federal Trade Commission and the Department of Justice, the main governmental bodies charged with detecting and punishing anti-trust violators, brought action against a host of U.S. companies for price fixing or other economic irregularities. Cited were companies engaged in the manufacture of corn flakes, shopping carts, paper, crayons and fingerpaint, baseball trading cards, cement and concrete, shock absorbers, candy, slot machines and laundry detergent.

Neither were service industries beyond suspicion, witness concern over solid waste disposal services in Atlanta. Price-fixing in the sale of rice and participation in an international uranium cartel ranked among the violations, not to mention strange goings-on in the oil, timber, and mining industries. Then, of course, there is the AT&T case, involving the alleged monopolization of telephone equipment, that has dragged on for years at an enormous cost to taxpayers.

We can expect Reagan to relax anti-trust efforts to speed up economic recovery. His advisers will tell him that anti-trust activity is contributing directly to the nation's decline in productivity and should be curtailed. If the price of corn flakes goes up as a result, then eat bacon and eggs.

Corporate executive officers complain that they find their days dominated by issues of anti-trust enforcement and compliance. Keeping a battalion of lawyers on hand is regarded as part of the cost of doing business. Many firms require that employees be educated in anti-trust and sign a statement acknowledging that they understand the law.

But even while corporate executives call for relaxation of regulations and insist that they are doing everything possible to comply with the current law, illegal activities manage to creep in. Less than two years ago two leading corporate executive officers--Irving S. Shapiro of duPont and Robert S. Hatfield of The Continental Group--gave major speeches warning that proposed measures to reinforce anti-trust procedures are dangerous to the economic system.

Ironically, both companies were listed in Fortune magazine's "Roster of Wrongdoing" in an article "How Lawless are Big Companies?" (December 1, 1980). duPont was cited for fixing prices of dyes in 1974 (it pleaded nolo contendere and was fined) and Continental for fixing prices of paper bags in 1976 (it was convicted and fined). The Fortune article noted that 11 percent of the more than a thousand major corporations studied had been involved in at least one major delinquency since 1970. The most common sin by far was an anti-trust violation.

If the purpose of anti-trust is to prevent the concentration of business, then it is not working. One economist states that the top 100 industrial corporations today own a larger percentage of total corporate assets than did the top 200 industrial firms only twenty years ago, largely because of mergers. Anti-trust laws probably have slowed the concentration somewhat, and if it is assumed that concentration inhibits competition--which many business and academic economists deny--then the government's anti-trust efforts have not been totally in vain. If they are indeed toning down the corrupt practices in corporate boardrooms, then maybe they are worth the cost to taxpayers to have them enforced.

That all should be sacrificed in the name of economic efficiency is a bad idea whose time has apparently come, judging from Reagan's economic philosophy and that of his Cabinet. He will set about attempting to circumvent anti-trust regulation rather sooner than later. If there is a redeeming virtue in this it is that small business--little entrepreneurs in alternative energy, independent retailers, grocers, and the like--may be helped a little, even when supposed economic efficiency is marked by corporate greed, environmental costs, and depletion of nonrenewable resources, it is foolish to thing that Smith's notion of private gain promoting the public good will do the job by itself. I doubt Smith himself would think so today, which would disqualify him from a post in the Reagan Administration.

Free enterprise economists and lawyers are quick to note that our basic liberties originated with the concept of the open marketplace. Their survival depends on its survival, they say. There is something to this, but not as much as they think. Besides, what sane American wants his or her liberties dependent on the whims and caprices of Fortune's 500? We don't owe our liberties to capitalism so much as to the individualism it spawned. Liberty is at most a by-product of capitalism, like slag, sawdust, and toxic waste. Even the great free-enterpriser Reagan--free enterprise for the few--has no special love for individual liberties. He'll probably go after a few of them by filling Supreme Court vacancies with conservative ideologues like Mr. Justice Rehnquist. He might even have the royal effrontery to invoke the name of Thomas Jefferson in the process.

(William Hoffman is a writer and editor from Blue Earth, Minnesota, and a closet admirer of Adam Smith.)

    --William Hoffman    hoffm003@tc.umn.edu