Tim Wu's slim little volume, The Curse of Bigness; Antitrust in the New Gilded Age, is one of those law school texts that those of us who attended law school, in fact several of them, never expected to see in print, a diminutive little paperback bearing the imprimatur of a major American university that is just bursting with good writing and well conceived ideas. Back when I was a law student some fifty years ago, antitrust law and policy was not then something I would have regarded as a way station on my career track through the thicket of law school jargon on way way toward the broader, greener uplands of eventual law practice and the career that followed. Admittedly, I was a public policy wonk with widely diverse interests that did not then include corporate law and its myriad manifestations's, tax law, and of course, either prosecuting or defending criminal defendants in poorly lit and dingy courtrooms, because that was where criminal defendants were largely to be found.
It turns out that I was missing quite a lot, and Professor Wu's little book is a gem that I might have overlooked had I been in my mid-20s now instead of my late 70s, now at the tail end of a 45 year career as a practicing lawyer. It's not that I was averse to the subject matter; rather, I had no particular interest in the world of corporate law practice the way I perceived it to be, just another worker bee in an enormous hive, along with untold numbers of other worker bees, grinding out paperwork that nobody really cared about, just to be appearing to do something important, while billing the requisite number of hours to the Firm's clientele. In my minds eye, this would be the paper chase after the paper chase.
Imagine my surprise, then, to come across this well-written discussion about the downside of scalability and corporate business operations, and what it means for the national economy as a whole. As an undergraduate, I devoted a considerable amount of my studies to the role of government in the American economy; and unsurprisingly, I was exceptionally well-versed in the ways in which American government policies and programs had advanced the cause of economic development in the two centuries that followed the end of the Revolutionary War, and fifteen years after that, the Constitutional Convention of 1787, and the formal founding of the American Republic within the year after that. My attitude then, and still is, that the role of the American government was to open up new opportunities for private development by doing things like public works, highways and bridges, dams and harbors, and all those other actions, great and small, that moved economic progress in America forward.
What I know about antitrust came from various history courses I took that focused on the so-called Gilded Age of American social and economic development running roughly between the presidency of Rutherford Hayes in 1876 through the schism of the Republican Party leading up to the presidential election of 1912 in which former President Theodore Roosevelt sought to unseat his former friend and protégé, William Howard Taft.
Roosevelt had been a popular president, acceding to the presidency upon the death of William McKinley who had been mortally wounded in an assassination attempt within a year of his election to the presidency. Result was a bundle of unquenchable nervous energy, peripatetic, subject to mood swings; today Roosevelt might clinically be diagnosed as hypomanic. Born to wealth, and the descendent of Dutch colonial settlers in New York's Hudson River Valley, Roosevelt early on became involved in New York State politics, becoming Police Commissioner of the City of New York; a New York State Assemblyman; and a few years after that, becoming its Governor. He also owned a cattle ranch in South Dakota where he lived for a number of years
The 1912 election was one that the Democratic candidate, Thomas Woodrow Wilson, should have lost, but instead one because Republican stalwarts supporting Taft could not be reconciled with former President Roosevelt's enthusiastic followers in a bitterly fought contest in which neither of them could win the presidency.
It was against this backdrop that the first successful efforts to curb corporate overreach had occurred. The Sherman Antitrust Act, proposed by Senator John Sherman in 1890 following a decade and a half of agitation by agrarian populists and other small businessmen for relief from the growing monopolization of trade dominated by corporations such as John D. Rockefeller's Standard Oil Company of Ohio, the so-called Sugar Trust, and other business combinations, which succeeded in controlling output, prices, and other financial incentives of participating companies, that was achieved by placing a majority of voting shares of each of the participants into the hands of holding companies that then use that voting power to control the corporate behavior of those operating companies in such a way as to avoid head-to-head competition between any of them. What emerged were pyramids of companies ceding control of their business operations to holding companies through transfers or exchanges of stock, so that control always rested with those who control the holding companies at the top of the industrial hierarchies that were thus created, either through direct mergers or holding company arrangements. Many of these arrangements were multilayered so that it took relatively little capital on the part of the organizers to control large sectors of the national economy simply through ownership or control of corporate shares of voting stock . Once competition between companies at the bottom of those business pyramids had been eliminated, companies whose control had been ceded to the trusts were free to do business within territories in which they enjoyed the exclusive right to do business free of competition. Restraints on market entry were enforced by ruinous competition on the basis of price. Members of the cartel could afford to reduce their prices to a minimum which would invariably be less than the cost of actually doing business, with any deficiency made up by other participating members of the trust as a subsidy for so long as the non-member competitor attempted to do business. After the newcomer had quit or gone bankrupt, the cartel would raise its prices to recoup its losses.
Fast forward to the modern era where much the same sort of anticompetitive behavior continues to plague the world economy. Airlines, shipping companies, agribusiness, retail giants squeeze small and medium size business because marketing and distribution networks are inherently more efficient, and the marginal cost of servicing each new customer goes down. The Internet's largest beneficiaries have been large businesses that benefit from scale efficiencies in distribution and marketing. The cost is wage stagnation at the bottom and a hollowing out of the middle. Small businesses survive by becoming part of a larger company's network as subcontractors who are largely dependent on work referrals from larger retail businesses who effectively control their respective markets.
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Reviews with images
Too much fluff, no substance
Reads like a pamphlet, not because it’s a quick read (which it is), but because it’s basically a biased pamphlet. If Mr. Wu is what is now considered an accomplished academic, this book says a lot about the current state of American academia.I don’t particularly agree with many instances of antitrust enforcement in the US over the past 40 some years, but this book does not contribute much to the discussion. It’s basically a Antitrust Historical Review for Dummies, tainted with extreme liberal bias.The point the author wishes to make (big company’s are bad for all except their shareholders) is supported by an incredible array of unsubstantiated claims, all of them fallacies. The most idiotic one, that European fascism was caused by monopoly power. Causation does not exist in Mr. Wu’s imagination. Other pearls include the ingenious idea that Iarge scale industrialization could somehow be achieved through mom and pop manufacturing. History and Economics are not two of the author’s forte.If you’re looking for an insightful and smart critique of US antitrust enforcement, this is not the book for you.
Top reviews from other countries
Amazon Customer
Tim Wu gets to the point of competition law
Reviewed in Canada on June 3, 2019
Verbatim
Much needed analysis of robber baron hubris
Reviewed in the United Kingdom on December 24, 2019Luca
Libro molto godibile (ma con qualche mancanza)
Reviewed in Italy on November 14, 2019