In 1887, Congress passed the “Interstate Commerce Act” to prevent railroads from price discrimination, but did little to enforce it. Then, in 1890, Congress passed the “Sherman Antitrust Act”, which outlawed trusts, and any other contracts that restrained free trade. It prohibited certain business activities that federal government regulators deemed to be anti-competitive, and required the federal government to investigate and pursue trusts. Many highly criticized the Act by asking if it improved competition and benefited consumers, or merely aided inefficient businesses at the expense of more innovative ones?
In his essay entitled Antitrust, former pro-business Federal Reserve Chairman, Alan Greenspan, condemned the Sherman Act as stifling innovation and harming society. He is quoted as saying, “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”. The Sherman Act would later go on to become extremely important in regulating big business.
Originally the Act was so loosely phrased, it often had unintended effects. Instead of regulating businesses, it regulated the labor unions that challenged these monopolies. State and Federal courts cited the “Sherman Antitrust Act” to restrain laborers’ right to strike. The courts often ruled that strikes violated the act’s prohibition against “a conspiracy in restraint of trade.” Today, the Sherman Act is still in place and frequently cited in business cases, though mostly applied in a civil manner. Per the Federal Trade Commissions website, “The penalties for violating the Sherman Act can be severe. Although most enforcement actions are civil, the Sherman Act is also a criminal law, and individuals and businesses that violate it may be prosecuted by the Department of Justice”.
Because of these court decisions, big business benefited from the Supreme Court’s pro-business stance and its unwillingness to restrict commercial behavior. It was not until the early 1900s that the government began to enforce the Sherman Antitrust regulatory policies in full, but ultimately it was too late. The owners of big business had solidified their stranglehold on the nation and its politicians through these powerful trusts. This cutthroat business model made them, and the people who operated them, exceedingly powerful and rich.
Once the business elite and their respective shareholders obtained their wealth and power, it was only natural they would do everything within their authority to ensure its protection. This meant controlling and corrupting those individuals who had the dominion to regulate them, our nation’s politicians. The institutionalized political corruption we know today is a direct result of these early heavy-handed business tactics, fueled by the learned behavior of human greed. The upside to this unabated power and corruption propelled the United States into the Industrial Revolution of the early twentieth-century, solidifying our position as a major world power. The obvious downside is we now are left to face a level of cancerous corruption, the likes of which, the world has never seen.
What are your thoughts? Do you feel the U.S government does enough to keep Corporate America in check?