Academic journal article Economic Inquiry

The Rise of the Chicago Packers and the Origins of Meat Inspection and Antitrust

Academic journal article Economic Inquiry

The Rise of the Chicago Packers and the Origins of Meat Inspection and Antitrust

Article excerpt

The Meat Inspection Act of 1891 and the Sherman Act of 1890 are closely tied. This link makes clearer Congress' intent in enacting the legislation. Both laws were products of economic conditions after 1880 and reflected, in part, widespread concern about the market power of Chicago meat packers. The concerns of local slaughterhouses, which were being displaced by new, low-cost refrigerated beef,, and of farmers, who sold livestock to the large Chicago packers, were echoed elsewhere by other small businesses and farmers, who feared for their livelihood during a time of structural change in the economy.

I. INTRODUCTION

In the few years between 1887 and 1891, the legislative basis was established for major intervention by the federal government into the American economy: The Interstate Commerce Act of 1887, the Sherman Act of 1890, and the Meat Inspection Act of 1891.[1] With these laws the federal government became directly involved in the regulation of railroad rates, antitrust enforcement, and the inspection and certification of food quality for consumers. Representing a significant break from what had previously been considered an appropriate role for the federal government, this legislation provided a new and permanent mandate for government regulation in the market economy.

Despite the importance of these laws, the link between the economic and political environment in the United States in the late nineteenth century on the one hand, and the legislative histories of the laws on the other, has not been thoroughly explored. As a result, the motives of Congress for enacting these laws remain both unclear and controversial. Consider meat inspection and antitrust. Although most attention in the literature is focused on the 1906 Meat Inspection Act, made popular by the publication of Upton Sinclair's The Jungle, the initial legislation, the Meat Inspection Act of 1891, came fifteen years earlier, and it addressed the production and consumption of fresh beef. But as reported in this paper, there is no evidence of a major health crisis regarding the consumption of beef at the time. Something else appears to have been on the mind of Congress when it passed the legislation in 1891. The objectives of Congress in enacting the Sherman Act are even more controversial because of the prominence of the law. Debate revolves around whether the Sherman Act was designed to promote competition and consumer welfare or to limit competition and protect special interests.2

This paper argues that to gain a better understanding of the origins of this important legislation and its early economic effects, the laws must be placed into the context of the extraordinary changes taking place in the American economy in the late nineteenth century. The linkages among the laws help to identify the underlying political and economic forces behind the legislation.

Three broad characteristics of the economy must be kept in mind in analyzing this period: First, the post-Civil War period was a time of general deflation. Between 1864 and 1900 the consumer price index fell by 47 percent (U.S. Department of Commerce [1975, 211]). In general, prices for farm products followed the overall pattern, but prices for cattle fell in real terms after the mid-1880s. Fluctuations in farm prices also appear to have coincided with periods of agrarian unrest.3 Second, as described by Higgs [1971] and Chandler [1977], the period after 1880 was a time of major structural change in the economy. The economy was becoming more industrial, and biased technological change, economies of scale in production, distribution, and marketing, as well as the lowering of transportation costs were fundamentally altering production methods and products. This affected the competitive positions of many firms, creating winners and losers (James [1983]; Burns [1983]; Atack [1985]). Emerging large firms expanded from local to national and international markets, and existing small firms found their local markets threatened by new competitors. …

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