The Growth of the American Economy: An Introduction to the Economic History of the United States

By Robert G. Albion; Harold F. Williamson | Go to book overview
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CHAPTER 30
Industrial Concentration and Government Anti-Trust Policy

The Concentration Movement in American Business

IN THE UNITED STATES after 1870, as in other countries of the Western World, the size of individual industrial firms began to increase rapidly. Many individual companies expanded greatly, and, in addition, groups of firme; combined or merged into single business units with very large investments, capacities, and outputs. This movement progressed so rapidly that within 35 years the control of the typical industrial market was concentrated in the hands of relatively few large firms.1

The movement toward industrial concentration was afoot before 1870 and is continuing today. Between 1879 and 1904, and again in a lesser degree during the 1920's, however, the process of industrial concentration was so rapid that it has often been referred to as a merger movement. This merger movement is a primary aspect of the recent development of the American economy, and accordingly some attention must be devoted to its principal origins, to the details of its development, to its effects on the structure of the modern economy, and to the problems it has raised for public policy toward industry.


The rise of large-scale industrial firms

The development of industrial concentration, or in a narrower sense, the rise of "monopolies" or "trusts," was in no sense an aberration from the orderly development of a free enterprise economy. It was rather one of the several phases of the adaptation of economic life to the primary stimuli of technological innovation that had influenced the in

____________________
1
The growth in the average size of individual firms from 1849 to 1899 is indicated by the following data from W. L. Thorp The Integration of Industrial Operations ( Census Monograph III, Washington, 1924, pp. 28-30) for factories and band and neighborhood industries:
YearAverage Value
of Product
YearAverage Value
of Product
1849$8,284 1879$21,152
185913,429 188926,371
186913,428 189925,382

These figures, however, understate the progress of concentration because they do not recognize the increasing dispersion among the sizes of firms. By 1904 there were at least 318 large industrial combinations in the United States that had assimilated no less than 5,200 original plants. Many of these controlled more than half the output of their rejective industries. (See John Moody, The Truth About the Trusts, pp. 485-487. New York: Moody Publishing Company, 1904.)

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