Finance and Industry: Against Monopoly

Dip into English industrial history in any century since William the Norman and you will find monopoly and restraint of trade in the news: the early Acts forbidding traders to corner supplies; Acts fixing prices (not forgetting Selwyn Lloyd’s 12th century predecessors fixing wages); the Tudor and Stuart kings raising revenue by selling monopoly licences to manufacture certain articles; the corn laws which restricted imports to give the landed interest a monopoly of food production; the manufacturers’ fight to get rid of the laws so that food prices, and wages, would come down; and the governmental inquiry in 1916 which found that “there is at present in every important branch of industry in the United Kingdom an increasing tendency to the formation of Trade Associations and Combinations having for their purpose restriction of competition and the control of prices.” Always the same pattern of one interest trying to form a monopoly and other interests trying to break it; and always both sides saying that their only motive is to help the poor.

The monopolists have never been at a loss to present a defence: that they are not putting up prices but “stabilising” them; that it makes for efficiency in production; and, in recent years, that it provides regular employment for the workers at high wages.

In another column a paragraph is reproduced from our issue of December, 1911, about the foolishness of expecting the politicians to carry out their promise to bust the trusts and destroy monopoly. Four years before that, a university lecturer on political economy, Mr. Frank Bower, noted in his Dictionary of Economic Terms that although “attempts have been made to secure legal control over Trusts, in order to prevent the evil effects of monopolies, . . . these efforts have not been very successful.”

Many laws have been passed since then to cut the giants down in size and enforce competition, but all that has happened is that the giants have grown fatter and stronger, and still the reformists are promising to do something about it. At the 1945 General Election the Labour Party pledged itself to enforce “public supervision of monopolies and cartels.” The Tories countered with this promise that ‘’charges of abuse of their power by Monopolies should be brought before an independent tribunal for public hearing.”

The Labour Party won the election and kept their promise by passing the Monopolies and Restrictive Practices Act of 1948—the effect of which was practically nothing. So the Tories at the 1951 election promised to strengthen the law, a move to which the Labour Party could hardly object, but at the same time the Tories said they intended to investigate restrictive practices by trade unions and the monopolistic aspects of nationalised industries. They later passed two more Acts, The Monopolies and Restrictive Practices Commission Act, 1953, and the Restrictive Trade Practices Act of 1956. Now it was the turn of the Labour M.Ps. to complain that it was next enough, but none of them seem to know quite what to do. So much so that the Fabian Society at the end of 1960 published a pamphlet by Mr. Patrick Hutber, not stating any Fabian Society conclusions, but putting forward personal suggestions for discussion in the “urgent ” task of formulating a new policy. (Wanted—a Monopoly Policy).

In the meantime, because of the spate of take-overs and mergers of the past few years, the problem has become bigger. How farcical it all is can be seen from the fact that the first Fabian Essays published 80 years ago were already discussing what to do about monopolies.

One of Mr. Hutber’s proposals is that the Restrictive Practices Court should have power to threaten an offending company, that if it persisted in its evil ways, the government would take it over. This proposal, be says, “is new.” Far from being new, it was an idea well known to the early Fabians and was ancient even then. It was Gladstone, then a Tory, who in 1844 was responsible for the first Act of Parliament giving the Government power to take over the railways. Manufacturers and traders who were being bled by the monopolistic railways had got Gladstone to pass the Act so that he could use it as a threat against the Companies unless they reduced their charges. (Nowadays traders are more likely to think that the nationalisation remedy is worse than the disease).

In the exercise of the powers given by the Act an enormous amount of work has been done examining complaints, ordering the termination of offending monopolistic or restrictive agreements, but with what result? The Economist (16/4/60) examined the results of all this activity. Since the purpose of the restrictive practices by manufacturers and traders is to force up prices to get more profit the simple test of the effect of the Act is to see to what extent it has succeeded in bringing prices down. The Economist had this to say:

  Mr. T. B. Heath of Manchester University has recently produced some extremely interesting analyses of its effects. Mr. Heath has concluded that the effect of the Act on the general level of prices has so far been very small. To date, the visible effect of the Act on retail prices has been almost nil.

What happens is that as soon as the law makes some practice illegal the lawyers get to work to discover ways of getting round it. One new and perfectly legal device is for manufacturers to agree not to fix prices (which would be illegal), but to make what are called “open price” agreements under which they set up a control agency to exchange information about the prices each manufacturer is charging, about the terms and conditions of sale, costs, the state of demand and level of output. The use they make of the information can be guessed.

Another result of the activities under the Monopolies Act has been to stimulate mergers by rival firms; if it is illegal for rivals to agree on price maintenance it is quite legal for them to merge.

Mr. Hutber, in the pamphlet referred to above, admits that after an earlier phase of anxiety among businessmen, the position at the time he was writing, was: “everything apparently going on very much as before, so that instead of gratified economists and dismayed businessmen, it is the businessmen who are gratified and the economists dismayed.”

It is claimed by some critics of the Monopolies Acts in Britain that things are different in America; and indeed the battle there has been going on longer and more ruthlessly. In April of this year the American electrical manufacturing industry was convicted for breaches of the anti-trust laws. Seven directors were sent to prison and fines of two million dollars were imposed. But those who started waging war against the Standard Oil Trust in the eighteen eighties were not promising that after eighty years the battle would be going on.

In USA, as in Britain in Gladstone’s day, the fight is in internal capitalist one, between the trust formers and their trade victims. The Financial Times (31/10/61), reports from New York:

  A large number of government agencies, private utilities and Municipal authorities, all of which have been among the industry’s biggest customers, have been preparing to claim damages from their suppliers on the grounds that the price-fixing conspiracies kept prices too high. If all the claims were upheld by the courts, the manufacturers might be obliged to pay out as much as a hundred million dollars in damages.

In the meantime, as Marxists have always held, the progress of Capitalism has involved the inevitable trend towards concentration into bigger and more costly enterprises. As Sir Hugh Beaver, former President of the Federation of British Industries wrote two years ago:

  There is a natural tendency to extol the virtues of the small man, and many seem to deplore the growth of big business, but it cannot be forgotten . . .  that we live in a world where all units are increasing in size and importance.

(Financial Times Annual Review, 1959.)

It was possible in the early nineteen twenties for J. R. Clynes, a trade union Labour M.P., who was later Minister in a Labour Government and Deputy Leader of the Labour Party, to write that “ it was better to have a large number of small Capitalists than a small number of large ones.” It would be almost unthinkable for a trade union Labour M.P. to make such a declaration today. (Ironically Clynes made the statement in the preface to a pamphlet, The Failure of Karl Marx, which purported to prove that Marx was wrong in his anticipation about the trend of Capitalism).

Nowadays the Unions and the Labour Party have fully accepted Capitalist big business, but are troubled by the dilemma of both wanting business to be big and powerful for competition with foreign rivals and of wanting to curb its power at home. The possibility of a Socialist world in which you do not have to curb market seeking, profit making industries because you have production solely for use, is still beyond their grasp.

Edgar Hardcastle