This is the essay for the 7th week of the Tom Woods Homeschool Government course. In this blog post, I will be discussing two things:
1. How the history of Antitrust laws is different from what you think it is.
2. Why World War II was not a time of prosperity for the United States.
Antitrust are laws that prevent companies from lowering supply and then increasing prices. It also prevents big companies from merging together to stop monopolies from forming. The first Antitrust law was passed in the Sherman Antitrust Act of 1890 and was later expanded in the Federal Trade Commission Act of 1914. The problem is that Antitrust never went after businesses that were raising prices and lowering supply, only the opposite. One of the more famous cases used to justify Antitrust is the fight against Standard Oil of New Jersey in 1911. The common view is that Standard Oil was monopolizing the industry, that they were using predatory pricing and raising prices. If you don’t know what predatory pricing is you can read this blog post I made on it. However, Standard Oil did none of these things, they didn’t use predatory pricing, they were lowering prices and their market share was falling.
Another Antitrust case is the case of American Can in 1949. American Can persuaded customers to sign a long-term lease that would give them large discounts on large orders. The court said that American Can, coerced its customers to agree to the lease. Their solution? It was to force American Can to raise their prices so they would be at the same level as other can manufacturers. Remember, that Antitrust is supposed to benefit customers, do you think that higher prices would be better or worse for customers? United Shoe Machinery Corporation was anti-competitive because its machines were superior to those of the competitors, their leasing rates to customers were low and they would repair machines for free. They were given restrictions to equal the playing field for competitors, which led to the destruction of the company. In 1962 the government didn’t allow Brown Shoe Company who had 1% of the market share from acquiring Kinney Shoes which also had 1% of the market share, which would give them an overwhelming 2% market share.
A phrase you might’ve heard is: “World War II was a time of great prosperity in the United States.” People support this argument by saying that the war employed 40% of the labor force. This meant that the 20% of the labor force that was unemployed before the war, became employed.
The first step to dissecting these arguments is to see whether the so-called prosperity is “real prosperity”. Before the war, 80% of the labor force was producing consumer goods that benefited consumers and thus the economy. The other 20% were unemployed and was being supported by the other 80%, using checks from the government. It is important to note that anything that benefits the economy benefits consumers. The problem is that consumers can’t benefit from products that are produced during wartime, because they can’t buy the products. When the war employed 40% of the labor force, that meant that the 60% that was still producing consumer goods now had to support 40% of the labor force instead of only 20%. The extra strain that was put on businesses would result in higher prices or a loss of quality.
“Wait, the annual growth rate from 1941-1943 was 20%, which was the first and only time it has ever happened!”. This argument can be broken down by questioning the legitimacy of the statistics themselves. During this period, the government set levels that prices could not go above, this means that the amount of products that were bought and sold doesn’t reflect what the free market would’ve done. This makes the annual growth rate and other statistics meaningless because when you add arbitrary prices together, you get one big nonsense number. The final nail in the coffin for wartime statistics is that in 1946 when the price controls were abolished there was supposedly a depression, even though production done by private companies increased by 30%.