August 7, 1973

Is Big Business Bad?

Is big business bad?

That's the question to be debated soon when the U.S. Justice Department brings the International Business Machine Corporation to trial on monopoly charges.

Basis of the suit is IBM's two-thirds share of the computer market.  Honeywell Corporation - IBM's nearest competitor - has been able to sell a ten-percent segment of the market.  Several tiny, highly specialized computer firms divide up the remaining fraction.

The government holds that IBM effectively stifles cost-cutting competition and the buyers of computers pay up to 40 percent more than necessary.  Eventually, says the government, these higher costs are passed along to consumers.

IBM's big market share gives it financial muscle "beyond the comprehension of the man in the street," says A.G.W. Biddle, executive director of the Computer Industry Association.  The CIA charges this financial muscle is used in "nakedly predatory" ways.

The lawyer for IBM, Nicholas deB. Katzenbach, contends that the effectiveness of his company keeps prices low and, therefore, results in huge sales.

The whole argument strikes me like that of which came first, the chicken or the egg?

The more fundamental issue for Americans is whether bigness, in and of itself, is good or bad for the country.

Back in the days of Teddy Roosevelt, monopoly business had abused its great powers by exploiting workers and consumers.  Finally there was reaction in the form of labor unions and "trust busting."

To deal with the giant monopolies, Congress adopted the Sherman Anti-trust Law which ever since has been the principal weapon against greedy cartels of businesses.

But times have changed, and many feel the existing anti-trust law is out dated.

The Sherman act requires that a business must ABUSE its power before it is an offending monopoly.

Since that definition was accepted, we have seen the rise of "conglomerates" and "multi-national" companies - huge enterprises that rival governments in economic power.  Indeed, there are several firms - IBM being one - whose gross income exceeds that of many members of the United Nations.

The giants of American industry do not consciously abuse their power.  They contribute heavily to foundations and charities.  Their executives are leaders of countless civic projects.  They share their technology with token competitors and with other nations.

In the face of such worthwhile activity, it is difficult to prove abuse.

However, the critics of big business point out that great size creates economic impacts that tear down democratic institutions.

International Telephone and Telegraph took an active part in toppling a communist regime in Chile.  Armco - a five-company consortium of oil companies - was accused of supporting the Arab nations in the boycott of Western countries last winter.  The collapse of the bankrupt Lockheed Aircraft Company was so potentially disastrous that the government came through with a two billion-dollar loan.  The same rescue is in the offing for the Penn Central Railroad.

No one bails out you and me when our business gets into financial difficulty.  Uncle Sam is solicitous of the giant eagles, but unconcerned about falling sparrows.

Senator Philip A. Hart of Michigan, a shameless demagogue in my opinion, sees in the current business picture an opportunity to cut big business down to size - if not kill it.

I must admit that I am studying Hart's proposals seriously.  He avers that economic efficiency should not be the government's only criteria for determining how big a business can legally be.

"Raw economic balance-sheet bookkeeping alone should not determine what is acceptable," said Hart at a recent Senate hearing of proposed anti-business legislation.

Hart, chairman of the Senate anti-trust and monopoly sub-committee, has drafted an "industrial reorganization bill (S1167)" that would make it easier for the government to both prove and remedy monopoly power held by some major U.S. firms.

Specifically, the bill is aimed at such industries as computers, chemicals, drugs, electrical machinery, energy, automobiles, steel and nonferrous metals.

The Hart bill sets fixed definitions of monopoly and thus would tend to bring suits to trial more quickly.

Under the bill, a monopoly would exist (1) if four or fewer firms account for 50 percent or more of an industry's sales or (2) if one firm's after-tax return on net worth averages more than 15 percent for five out of seven years.

As a die-hard private enterpriser I shudder at the sweeping provisions of Hart's proposed bill and IBM's upcoming anti-trust trial.

Yet, I see the increasing difficulty of individual citizens to start businesses of their own and compete successfully against giant firms with unlimited capital and resources - not the least of which is government support.

The so-called American private enterprise system is the vision of a private citizen to work for himself.  Such enterprise enabled men like Alexander Graham Bell, Thomas Alva Edison and Henry Ford to get started.  Their legacy has effectively frozen out other telephone companies, power companies, and automobile companies.

Perhaps the time has come to clip the wings of the financial eagles and give the sparrows a new chance to fly.

Author: Lindsey Williams