The Curse of Bigness | Tim Wu

Summary of: The Curse of Bigness: Antitrust in the New Gilded Age
By: Tim Wu

Introduction

In Tim Wu’s insightful book, ‘The Curse of Bigness: Antitrust in the New Gilded Age,’ the author delves into the historical and contemporary challenges faced by industrialized economies regarding economic concentration and monopoly power. This book summary will take us through the Gilded Age, discussing the dominance of trusts and monopolistic companies in the American economy, and their impact on society. We’ll also examine the antitrust movement led by Theodore Roosevelt, which sought to dismantle these monopolies and ensure market competition. Overall, we’ll explore the consequences of monopolistic control, the government’s efforts to counterbalance it, and the potential for future reform.

The Age of Economic Concentration

The Gilded Age, from the 1870s to 1900, saw an unprecedented concentration of economic power in the United States. Corporations merged into trusts, which became dominant players in nearly every major industry, with some reaching monopolistic status. Famous names of the era, such as John D. Rockefeller and Andrew Carnegie, amassed vast fortunes through their monopolistic companies. The most successful monopolist of all was banker JP Morgan, who achieved monopolies in a range of industries. These men were the main drivers of the pro-monopoly trust movement, which we’ll explore in the next section.

The Trust Movement’s Take on Monopolies

The trust movement believed that monopolies were a superior form of economic organization that provided stability and efficiency to markets. They saw competition as chaotic and blamed it for the economic turmoil that had plagued the industrialized economies of the 1890s. Monopolies provided centralized control of the markets, ending the constant volatility and fragmented disarray of competition between multiple smaller companies. They accomplished this by creating economies of scale, which enabled more efficient production and lower prices.

The Trust Movement’s Defense of Monopolies

The trust movement believed that monopolies were the natural byproduct of capitalist competition. They argued that monopolies were the most capable and resilient companies in their respective markets, having outcompeted all other companies. The trust movement’s perspective was informed by social Darwinism, which argued that an entity’s survival was dependent on its adaptation to its environment. They believed that laissez-faire economics was the best approach to the market, resisting all forms of governmental intervention on behalf of the public. However, they supported government-led eugenics programs, taking the idea of letting the weak and poor perish one step further.

The Pros & Cons of Corporate Bigness

In this book summary, the advantages and disadvantages of monopolist companies are explored. While larger companies benefit from economies of scale, they eventually suffer from diseconomies of scale. As a company grows bigger, it becomes more complex and less adaptable to changes in the market. Moreover, a monopolist can decrease wages, increase work hours, and raise prices with impunity, making it hard for workers and consumers to turn to other options. In addition to creating barriers to entry into their markets, monopolists can wield their influence over political power.

Corporate Power and Government Influence

The monopolies and oligopolies dominant in concentrated industries exert great influence over the government to maintain their power and profitability. In the Gilded Age, Rockefeller and other businessmen used their economic strength to sway the government into withholding permits and bankrupting competitors. Today, oligopolies like the pharmaceutical industry spend millions to lobby the government for policies that further their interests, resulting in billions of additional revenue. These companies can easily organize and present a united front, making them more powerful than millions of diverse citizens. The government must exert serious authority to push back against this influence and protect consumers.

Trust-Busting in the US

The US government’s pursuit in breaking monopolies and trusts started with the passing of the first antitrust law in 1890, the Sherman Act. Despite initial resistance from some administrations, Theodore Roosevelt saw monopolies as a threat to democracy and filed 45 antitrust lawsuits during his presidency. The policy of trust-busting continued through the twentieth century, leading to the breakup of many monopolies, including Standard Oil into 34 separate companies.

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