Antimonopoly

The conviction that economic concentration harmed the economy and gave big business excessive political power was an important part of 20th-century liberalism going back to the Progressive Era and especially to the ideas of Louis Brandeis. But while Brandeis (a Supreme Court justice in the 1930s) and his views continued to have significant influence among liberals, antimonopoly (or antitrust) policy did not figure prominently in New Deal reform and recovery programs until the mid - and late 1930s. Efforts to reduce the size and power of the corporate giants then lost momentum during World War II.

The most important development in antimonopoly policy in the Hoover presidency involved labor rather than business. The 1932 Norris-La Guardia Act, sponsored by Republican senator George Norris of Nebraska and Republican congressman Fiorello La Guardia of New York, prohibited the use of federal court injunctions under the antitrust laws to enforce “yellow dog” employment contracts forbidding workers to join unions. President Herbert C. Hoover, an opponent of monopoly and of suspending or easing antitrust laws for business trade associations, reluctantly signed the legislation.

With the election of Franklin D. Roosevelt to the presidency in 1932, antitrust advocates, including Brandeis disciple Felix Frankfurter, a Harvard Law School professor, tried to influence New Deal policy in an antimonopoly direction. But the so-called First New Deal of 1933 sought instead to combat the Great Depression by cooperating with big business in national planning and controls. The National Industrial Recovery Act (NIRA) of 1933 suspended antitrust laws so that the National Recovery Administration (NRA) could develop “codes” of fair competition with cartel-like arrangements in industry. The NRA, however, failed to bring economic

In June 1934 President Franklin D. Roosevelt established the Securities and Exchange Commission. The measure was intended to protect consumers and the national economy, but as the cartoon shown here indicates, some felt the federal government's efforts to regulate trade were simply not powerful enough to destroy all the "roadblocks" facing small businesses. Cartoon by Philip Dorf (Private collection)

Recovery and came under sharp criticism for breeding monopoly power from such progressive Republicans in Congress as Gerald Nye and William E. Borah as well as from liberal Democrats. In 1935, the Supreme Court found the NRA unconstitutional in Schechter Poultry Corporation v. United States.

Frankfurter and his proteges in the administration had more influence on the Second New Deal of 1935. The Public Utility Holding Company Act sought to dismantle the giant corporations that dominated the electric power industry. New Deal taxation beginning with the Revenue Act of 1935 aimed at taxing big business much more heavily than before, and the undistributed profits tax proposed in 1936 had an important antimonopoly dimension. The Robinson-Patman Act of 1936 prohibited manufacturers or wholesalers from giving special discounts to chain stores and other large purchasers, and the 1937 Miller-Tydings Act extended such “fair trade” protection to small retailers. Nonetheless, antitrust efforts remained secondary to other New Deal programs.

The recession of 1937-1938 then gave antimonopoly policy a far more central place in administration priorities. A number of New Dealers, including Leon Henderson, maintained that concentrated economic power allowed business to restrict production and fix prices higher than they should be, which in turn led to depressed sales, unemployment, and insufficient consumer spending power. Brandeisians had long held that the depression itself could be ascribed in large part to such monopoly power—and the recession, they said, provided more evidence yet. In April 1938, just after he had also announced an increase in federal spending, Roosevelt asked Congress to conduct an investigation into concentrations of economic power, and Congress created the Temporary National Economic Committee (TNEC).

The creation of the TNEC, with Henderson as its executive secretary, and the 1938 appointment of Thurman Arnold as assistant attorney general in charge of the Antitrust Division of the Justice Department gave antimonopoly efforts impressive new momentum. The TNEC undertook a massive investigation of the American economy from 1938 to 1941, calling some 552 witnesses and publishing several dozen volumes of testimony and analysis. Arnold enlarged his division’s budget and staff fivefold, greatly stepped up its antitrust suits (some of them against labor unions), and had significant early successes. Yet the antimonopoly momentum was soon spent. When the TNEC issued its final report and recommendations in 1941, they attracted little attention, and Arnold encountered increasing resistance and difficulties.

World War II proved decisive in the ebbing of the new antimonopoly campaign, despite Arnold’s efforts and the concern of liberals in Washington about the growing size and power of big business in wartime economic mobilization. Wartime spending and the resulting prosperity confirmed the doctrine of Keynesianism that government compensatory spending could fire the economy, and antitrust policy lost appeal as a way to enhance consumption and bring prosperity. Conservatives and businessmen won increasing influence in national policy. By mid-1942, antitrust efforts were essentially called off for the duration of the war when business and the military persuaded the administration that antitrust efforts distracted business and impaired mobilization efforts. In early 1943, Roosevelt appointed Arnold to the Washington, D. C., Court of Appeals. By the end of the war, antimonopoly efforts had lost much of their force and support.

Further reading: Alan Brinkley, “The Antimonopoly Ideal and the Liberal State: The Case of Thurman Arnold,” Journal of American History 80 (1993): 557-79; Ellis W. Hawley, The New Deal and the Problem of Monopoly: A Study in Economic Ambivalence (Princeton, N. J.: Princeton University Press, 1966); David Lynch, The Concentration of Economic Power (New York: Columbia University Press, 1946).