INDUSTRY: The Bigness Bugaboo

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"Public policy both on mergers and bigness should be one of keeping hands off." Thus, before Stanford University's 14th Business Conference in Stanford, Calif, last week, Harvard Economist Sumner Slichter took up the question of increasing bigness in U.S. business and explored it both from an economic and a political standpoint. Said Slichter: "The health of any organization, whether a business concern, a university, or a Government agency, is promoted by growth."

Size & Efficiency. There was once a doctrine, fostered by New Dealers and pre-New Dealers such as Justice Louis Dembitz (The Curse of Bigness) Brandeis, that bigness kills competition, results in high prices, low production and shady business practices. This notion is untrue today, argued Slichter: "As a matter of fact, the reverse is probably true." Because of their size, big companies are constantly in the public eye, watched over by competitors, suppliers, customers and Government officials. At times, big companies get advantages in the form of discounts and rebates because they have big orders to place, and occasionally they abuse their bargaining power.

However, said Slichter, "it must not be uncritically assumed that the ability of big buyers to drive bargains is antisocial. The supplier is saved cost by being able to produce and sell in large lots. Furthermore, the pressure put on suppliers by buyers stimulates efficiency." If anything, big buyers probably get fewer rebates than they should. "Some large suppliers, fearful of violating the Robinson-Patman Act, probably refuse to give the big buyer as favorable differentials as he is entitled to."

In most cases, concentration of production "appears to be accompanied by keen competition." In a changing and uncertain world, "the only safe thing to do i to study consumer tastes and trends, to f ish research, and to strive vigorously to grew." Mere size alone is no indication of how rapidly a company will grow. Between 1935 and 1953, for example, the giant U.S. Steel Corp. increased sales 397%, but smaller Bethlehem Steel grew 980%, and Jones & Laughlin 880%. In rubber, General Tire grew 1,225%, Firestone 750%, while the two biggest companies, Goodrich and U.S. Rubber, increased far less. "Certainly," said Slichter, "the changes in relative size of companies indicate that the big concerns did not get together and agree on how the market was to be divided. They have struggled for larger shares, and some of them have been more successful than others."