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Put Not Thy Trust In Antitrust

Until the rules of the debate are changed, arguments over the effects of antitrust laws mean nothing to small business.
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Anyone who doesn't believe that humor, particularly satire, has a meaningful role to play in the discussion of public policy in a democracy should read Art Buchwald's 1966 antitrust classic, which we've reprinted on page 162.

And anyone who doesn't find it both hilarious and prophetic in light of the present-day quotations on the same page from Attorney General Smith and his colleague Mr. Baxter -- well, he ought to have to memorize it while standing on one foot.

Mr. Buchwald's point is, of course, that we cannot rely on antitrust law and its practitioners to safeguard either competition or economic diversity. We confess that we find his judgment pretty persuasive when we read Mr. Baxter's description of a perfectly competitive 100-company American economy. We just can't chase the feeling that if we ever got there in real life, the economy would fairly quickly slide from those 100 companies down to Mr. Buchwald's one -- Samson and Delilah Corp. -- with the Antitrust Division, as he tells it, approving all along the way.

The blunt fact is that Buchwald's and Smith/Baxter's views of conglomerate mergers and antitrust laws reflect a long-standing schizophrenia. The American people seem generally to have thought the purpose of the antitrust laws was to limit the degree of concentration in the economy, the extent of dominance of industries by related corporate and financial groups, and even the size of particular businesses. The judges and lawyers who dominate this field of the law have always said -- and worked to make it true -- that the laws were intended only to protect "competition" as defined in various mysterious and complex lawyers' ways which others could not understand.

Mr. Buchwald expresses the disappointment -- even contempt -- of much of the general public with what the legal process has made of what they thought the antitrust laws were. The judges and lawyers (who control the matter completely) continue to maintain that all they are doing is reading the law the way it is written and the way it was meant to be read.

There the issue will stay unless or until some future president or Congress decides to change the boundaries of the argument. That won't happen until far more people understand the issue and decide they want the law changed.

Thoughtful people in other countries have views, that are worth noting, about the dangers of concentration. Elsewhere in this issue we interview John Bulloch, president of the Canadian Federation of Independent Business, who is an articulate spokesman on the subject (see page 39). Back in 1976, at the third International Symposium on Small Business, he had the following to say:

If small business advocates are going to convince political leaders and the general public that "small is possible," first they must understand how to overcome the forces of concentration.

In any market without new venture formation and comprised one-third of business expanding in size, one-third static, and the remaining portion declining, the market will evolve towards fewer, larger enterprises. In other words, without any other concentrating influences at work there are random forces in a free market which result in increasing economic concentration.

It is imperative therefore that public policy encourage the process of new venture formation. The survival of free enterprise is as much a "birth problem" as it is a "death problem." Bankruptcies are proof that competition exists. However, concentration of economic power is proof that new enterprises are not being formed.

The history of commerce is the history of cartels, price-fixing arrangements, and other forms of anticompetitive behavior. Any businessman who is honest will tell you that he would prefer to see increased competition among his suppliers and less competition for himself. Because of the natural tendency of man to form groupings to reduce competition, countries in the Western world have enacted various forms of combines or antitrust legislation. It should always be the policy of small business organizations to strengthen competition law as much as possible despite the difficulties of enforcing it.

In our country, the independent sector has been whip-sawed between protagonists of government and protagonists of government-sized business. Generally speaking, under the Democrats, liberals have supported the expansion of government to achieve their goals. Generally speaking, Republican conservatives have fought that expansion tooth and nail. When the Republicans are in office, it is the liberals who shout to restrain government-sized business and conservatives who defend it.

Regrettably, they shout at one another in an almost unseeing way across the small business sector.

Neither has much time, energy, or effort to spare for the small business sector. As a result, the policy pendulum tends to swing from more government to more government-sized business, from more government-sized business to more government.

What we need is a period during which we systematically expand the small business sector, so that it recovers and maintains its position.

We know the Reagan Administration is deeply committed to restraining the size of government. But if it does not, through its general policy, also encourage the growing shape of the private sector, it will simply substitute overgrown government-sized business for overgrown government.

When we started this department of INC. six months ago, we chose the name "The Buck Stops Here" as a reminder to ourselves of three things. First that the country's leaders -- both parties, all wings -- have been ducking the issue of how to preserve and expand economic diversity for a dangerously long time. Secondly, that because of that buckpassing, the federal government, generally speaking, has become a major force for concentrating the economy. Finally, on any major issue, there may be such a thing as a "point of no return" -- a point past which inertia makes it well-nigh impossible to change direction.

We're nowhere near that point, yet. But we must be aware that it is up ahead there somewhere.

A national policy that puts the growth of the small business at its center must make use of all the missions of the federal government. That includes antitrust and other laws that affect mergers. But it must also deal with taxes and regulations and capital and credit and federal procurement policy and debt collection and foreign trade.

If this department's next series of articles had a long subtitle, it would be, "Changing the federal government from a force for economic concentration to a force for economic diversity."

Last updated: Oct 1, 1981




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