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Constructing a Competitive Order: The Hidden History of British Anti-Trust Policies.

Reviewed by Tony Freyer

As the twentieth century closed, global market pressures impinged upon national economies, fostering reevaluation of regulatory policies. A contentious issue, world-wide, was the extent to which a nation's institutions and culture facilitated or retarded the harmonization of governmental policies regulating domestic and transnational business conduct. The issue of regulatory harmonization raised anew, moreover, the old problem of regulatory failure. During the late-nineteenth century, the United States and European nations began experimenting with new bureaucratic structures and policies, as a traditional capitalist order of small-scale enterprise confronted a new form of capitalism based on big corporations run by managers. In response to this confrontation, critics charged that bureaucrats had failed to hold big business accountable to the public interest. Indeed, Gabriel Kolko, William Appleman Williams and many others argued that big business had captured the regulators. Tracing the development of British antitrust from roughly World War I to the 1960s, Helen Mercer makes an insightful contribution to the critical tradition, implicitly raising important questions about the future potential for international regulatory harmonization in the field of antitrust.

Both within a national and transnational comparative context others have studied how Britain adopted antitrust. Pioneered by the United States near the end of the nineteenth century, antitrust was increasingly after the Second World War adopted by regulators in the world's leading industrial nations to achieve different goals at different times. Thus regulators employed antitrust to protect small enterprise from big business, to preserve a competitive market for all legitimate business activity, to defend consumers, and to maintain what economists call the market's "allocative efficiency." Even so, the rationales for why nations adopted antitrust and its diverse policy goals varied. Some, as is the case with much British scholarship at least until Mercer's perceptive critique, explained the process in terms of the progressive improvement of public opinion. Others, as Mercer has done so skillfully for Britain, rely upon an understanding of the complex interplay of interest groups. Similarly, a transnational, comparative approach suggested that the most influential interests included the factions represented by organized political parties - big and small business, labor, and consumer constituencies - technical experts (economists, lawyers, and accountants), official policy-makers such as civil service bureaucrats, elected executive and legislative officials, the courts, and at least for a brief period resulting from World War II, the United States itself.

Mercer makes a significant contribution to a comparative study of the transnational adoption of antitrust. First, she refines an understanding of the role of big business in the emergence of British antitrust. Other studies have suggested that many top managers of Britain's largest corporations, especially those involved in international markets, exercised a predominant influence within the Conservative Party, working through the Federation of British Industries (FBI), other interest-group lobbies, or as officials in wartime governments. As Britain episodically developed antitrust institutions from World War I to the 1960s, the leaders of big business thus helped to abort Britain's first significant antitrust body, the Standing Committee on Trusts, 1919-1921: they were also quite influential in the struggle with the United States over the enactment of the Monopolies and Restrictive Practices (Inquiry and Control) Act of 1948, and its revision in 1953. Big business also had much to say about the most effective British antitrust legislation, the Restrictive Trade Practices Act of 1956, and the restructuring of the system accompanying passage of the Resale Prices Act of 1964.

This same work has shown, too, that other forces offset big business influence. Factions within the Labor Party, including the Trade Unions and the Co-operative movement, many professional economists, and, during the unique wartime and post-war era of the 1940s and 1950s, the United States, were active and sporadically-effective pressure groups. Yet, like others before her, Mercer demonstrates that holding the balance of power were civil servants. Better than anyone else, however, she employs a careful reading of many primary documents located at the Public Record Office and elsewhere, to reconstruct the governmental environment - from the grass-roots level to the Cabinet and Parliament - within which big business maneuvered. From this often exhaustive probing she reaches the same conclusion for Britain that Kolko and Williams arrived at for the United States: that, notwithstanding the temporizing influence of other groups concerning details, ultimately, the antitrust institutions civil servants created for Britain reflected the dominant power of big business.

A second valuable contribution Mercer makes is to clarify the role of trade associations. At some point prior to, during, or after the adoption of antitrust institutions every industrial nation has permitted or actively encouraged the use of trade associations to limit competitive market pressures. As a result, trade associations often spawned extensive and fairly long-lasting cartelization. Mercer shows that in Britain a few large firms were at the center of a network including numerous small firms, all operating within trade associations. She is very good at revealing the market and political outcomes, especially for diminished competition, of the complex inter-relationship between large and small business. Indeed, on this point I am not aware that anyone has done a better job.

Still, some caveats are in order. Mercer's command of the primary sources generally supports the broad influence of the largest British firms during each phase of the struggle over the adoption of antitrust institutions. Nevertheless, it is fair to ask whether she has over-stated the extent to which any really powerful pressure group fundamentally questioned the economic benefit of big business. The Trade Unions and the Cooperative movement may have come closest to this sort of opposition, but as Mercer demonstrates, other interests within the Labor movement undercut such resistance. Indeed, her own evidence is consistent with other comparative studies showing that even pro-Labor, activist supporters of antitrust primarily sought merely to curb the abuse of big business. Her otherwise impressive discussion of the report authored by Labor leader Hugh Gaitskell and economist and temporary civil servant, G. C. Allen during the crucial years of 1942-43, which established the boundaries within which British decision makers discussed antitrust from the war to the 1960s, understates the intent of proposed prohibitions. Gaitskell and Allen actually wrote that they sought to "destroy and or weaken the terminable association or cartel." The prohibitions "clearly" did not, however, "touch the close combine or giant firm which pursue[d] a monopolistic policy." Toward these big corporations the intended policy was, they said, "not that of breaking them up" which might "sacrifice . . . the economies of scale," but rather one of "preventing them from taking anti-social action."

That there was no effective opposition to big business, seems to undermine the credibility of applying the Kolko-Williams thesis to Britain, at least in the ease of antitrust. Again Mercer's own evidence casts doubt on the validity of such an interpretation. She shows convincingly that despite the purported weakness of the 1948 antitrust legislation, big business was furious at the adverse consequences resulting from its relatively mild enforcement. The same was true of the even more effective enforcement of the Restrictive Trade Practices Act (RTPA). Indeed, at each phase of the struggle over antitrust adoption from World War I to the 1960s the civil service acted reasonably independently, consistent with the assessment Mercer makes of the official most responsible for the passage of RTPA: "Thus the idea that any section of business in Britain actually molded regulation to their hearts desire does not accord with experience. Instead it seems from circumstantial evidence that a wily devotee of competition, Peter Thorneycroft, used the businessmen's own programme against them (p. 147)."

Similarly, Mercer does not consider that nearly all British supporters of antitrust adoption consistently opposed a distinctively American version of antitrust. What made American antitrust different from that developed elsewhere in the world was its primary reliance upon public and private court litigation for enforcement. In this regard, the American approach reflects a dependence on lawyers - which in turn evidences a fragmentation of economic interests - that is more pervasive than in other industrial economies, including Britain. As the current debate over global regulatory harmonization suggests, the antitrust institutions adopted by all other industrial nations, including those constituting the European Union, Japan, and smaller economies such as Australian, have rejected the lawyer-based American judicial model, favoring instead a more administrative approach. This divergence reflects a more complex struggle involving big business and the international development of antitrust than may be consistent with the thesis of Kolko and others. It is a tribute to Mercer's excellent book that her fine research and careful reasoning furthers our understanding of this complexity, despite her trust in the critical tradition.

Tony Freyer is university research professor of history and law at the University of Alabama. He has published numerous articles, including "Business Law and American Economic History," in S. Engerman and R. Gallman, eds., The Cambridge Economic History of the United States (forthcoming), and nine books, including Regulating Big Business: Antitrust in Great Britain and America, 1880-1990 (1992); Producers versus Capitalists: Constitutional Conflict in Antebellum America (1994); and, with Timothy Dixon, Democracy and Judicial Independence, The Federal District Courts in Alabama, 1820-1994 (1995). In the summer of 1993 he held a Senior Fulbright Award to study antitrust institutions in Australia; and during 1995-96 the Center for Global Partnership and Social Science Research Council awarded him an Abe Fellowship to study the global harmonization of antitrust with particular reference to Japan.
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Author:Freyer, Tony
Publication:Business History Review
Article Type:Book Review
Date:Dec 22, 1995
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