Business: End of the Bigness Bugaboo

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As any businessman knows, a cardinal tenet of New and Fair Deal gospel was that a big company was probably bad, i.e., it was tarred with monopolistic sin. Many an economist, both liberal and conservative, went along with this view, vigorously expounded in 1934 by Louis D. Brandeis in The Curse of Bigness. But last week, when 4,000 members of ten economic and statistical societies gathered in Washington for their annual meeting, the economists surprised one another by their new and friendly view of big business and their calmer attitude toward monopoly. Said Yale's Assistant Professor G. Warren Nutter: "The bigness bugaboo took a licking here."

New Birth. There were still some dissenters who complained that the majority was "trying to define away monopoly." But for the first time, the apostles and supporters of Harvard's late Economist Joseph Schumpeter were in command. In his book, Capitalism, Socialism & Democracy (1942), Schumpeter held that inventions and innovations within business brought about constant "creative destruction" of old economic forms and the birth of new ones. In showing the creative role of large business organizations, he insisted that what looks at any moment like restraint of trade may be necessary for the encouragement of competition, as it has actually functioned in the economy. In most industries, Schumpeter concluded, practices which appear to restrain trade in the short run tend to promote dynamic advance in the long run.

Schumpeter's thesis was elaborated at last week's meeting by Harvard's Economics Professor John Kenneth Galbraith. "Anciently," said Galbraith, "two solutions have been recognized to the problem of [concentrated] economic power. One is competition. The other ... is regulation by the state." But a third result of such concentration, often overlooked by economists, may be of even greater importance: the rise of large "countervailing powers," such as the labor federations and farm bureaus, or the organization of large chain and department stores to offset the market power of great manufacturers. "Those who are subject to the aggressions of economic power have both a negative and a positive incentive to organize resistance." This being true, said Galbraith, the tactics of great corporations should be viewed in the same manner as the efforts of labor and farmers.

This lessening of the importance of monopoly got support from M.I.T.'s W. Rupert MacLaurin, who had ranked 13 different U.S. industries according to their technological progress. He had found no important correlation between their progress and lack of monopolistic restraint, as traditional theorists assumed there would have to be. The moral, said MacLaurin, is that trustbusters should take into account the creative contribution to the economy of a company's research (i.e., the argument Du Pont used to persuade a federal court to dismiss an antitrust suit against it on Cellophane [TIME, Dec. 21]) as an offsetting factor in the definition of monopoly.