Forgot Your Password?

New to The Nation? Subscribe

Print subscriber? Activate your online access

.nation-small__b{fill:#fff;}

We Were Founded on Anti-Monopoly Principles

The premises of the American democratic vision must be applied to the economy if we are to be free in all alreas of life.

America was conceived in the midst of a fight against monopoly power.

After the British Parliament gave the ailing British East India Company a series of corporate grants to command private armies, collect taxes, and administer its own vision of justice on the Indian subcontinent, it was still struggling. The company was drowning in debt, sitting on 17 million pounds of unsold tea languishing in London warehouses. Parliament decided to bail out this “too big to fail” corporation by passing the 1773 Tea Act, which eliminated competition from American tea merchants.

In revolt, colonists dumped 342 chests, containing over 92,000 pounds of tea, into Boston Harbor. This was the anti-monopoly action that sparked the Revolutionary War. The arguments of the pro-monopoly faction of the time were similar to those used during the 2008 financial crisis: England couldn’t let the monopoly fail; doing so would trigger a credit crisis. Britain’s power was dependent on the success of the East India Company.

250 Years of Searching for a More Perfect Union

Lessons From the People’s Historian, Howard Zinn Dave Zirin

Lessons From the People’s Historian, Howard Zinn

Separation of Church and State: America’s Best Idea John Fugelsang

Separation of Church and State: America’s Best Idea

America Is Due a Third Reconstruction Michele Goodwin

America Is Due a Third Reconstruction

The colonists were not moved. Over a decade later, Thomas Jefferson, the author of the Declaration of Independence, wrote a letter to James Madison proposing that the Constitution that was being drafted for the United States needed protections for freedom of religion and freedom of the press, and that it might also be well served by language regarding the “restriction against monopolies.” For Jefferson, freedom meant freedom from the government destroying printing presses and protection against gross corporate power.

While the Constitutional Convention of the new nation decided against adding the anti-monopoly language—treating it as implicit in the basic protection of freedoms—many states were not so sanguine, and they moved to include anti-monopoly provisions in their constitutions.

What they did not anticipate, however, was the arrival of the modern corporation and the Industrial Revolution. There were very few corporations during the early years of the American experiment—around 319 in 1800. Early American corporations received their charters one by one, through special acts of state legislatures. Many of the charters were the topic of fierce public debate: Did we need a corporation to build a turnpike? Should the Bank of North America receive corporate privileges? These charters weren’t routine filings with a secretary of state; they were often corrupt affairs with connected friends obtaining special arrangements.

The processes for obtaining such arrangements began to change in the early 1800s, and those changes accelerated in the 1850s, as democratic reformers joined with investors to push for “general incorporation” laws. With general incorporation, a businessperson did not need to petition the legislature for a special charter. Now anyone who met certain requirements could incorporate by filling out forms and paying fees. However, some statutes passed in the antebellum South excluded non-white people from incorporating. New York was the first state to adopt general incorporation, passing its statute in 1811; Connecticut followed in 1837. By the 1860s, general incorporation was nearly ubiquitous. The number of corporations exploded: Thousands came into being, then tens of thousands, then hundreds of thousands.

Along the way, a new form of monopoly power appeared, threatening both the old freedoms of white landowners and the hard-won freedoms of Black Americans. Under general-incorporation laws, rival railroad and oil and sugar and whiskey and sewing-machine companies proliferated across the landscape—and the new firms colluded with one another. They bought up other companies, formed pools to suppress output, and fixed rates. They engaged in predatory pricing, slashing rates to drive out competitors and then jacking them up once they had established their monopolies. Jay Gould, who controlled the Erie and Union Pacific railroads and countless other properties, kept a special room in Albany for distributing cash to keep state lawmakers quiet while he crushed his competitors without mercy.

Monopoly now took on a new political meaning for populist reformers,........

© The Nation