by Charles R. Geisst
Oxford University Press * 2000 * 355 pages * $30.00
Reviewed by Burton Folsom, Jr.
The current Microsoft court case, hotly debated and full of economic implications, makes a historical study of monopolies and antitrust law very relevant. Unfortunately, business historian Charles Geisst's Monopolies in America is incomplete and one-sided, mostly reiterating the traditional statist interpretation of big business and monopoly. Geisst ignores a wealth of contradictory writings and evidence, and shows little understanding of the dynamic role of marketplace competition.
Geisst's goal is to describe the relationship of big business and government from the Civil War to the present. He gets off to a shaky start by confusing oligopoly and monopoly. Monopoly, strictly speaking, means only one seller in a particular industry. But whether a company is an active monopoly or merely one that strongly dominates its industry, Geisst implies that it has inherent and insurmountable advantages that government needs to dissolve.
In arguing his case, Geisst asserts that predatory price-cutting was a common technique in the late 1800s and that "pooling" was effective in stabilizing a company's share of the market. However, the detailed research of D.T. Armentano, Thomas DiLorenzo, Butler Shaffer, and Larry Schweikart (which Geisst ignores or overlooks) shows that markets created competition and gave customers low prices. Pools didn't endure, and predatory price-cutting was rarely tried because, as John McGee demonstrated for Standard Oil, it would have been self-defeating. Standard Oil, with the largest market share, stood to lose more than it would have gained from cutting prices below cost. Competitors, meanwhile, would simply have reappeared when prices rose. None of that is new or obscure, but Geisst gives no evidence of familiarity with the free-market critiques of conventional theory.
Geisst maintains that the Sherman Antitrust Act was needed because big businesses had the ability, or at least the potential, to restrain trade. He therefore deplores the first major antitrust decision, the E. C. Knight case (1895) because it allowed American Sugar Refining to buy Knight and thereby control 98 percent of the sugar refining market in the 1890s. Geisst neglects to mention that new sugar companies entered the refining business quickly after the Knight consolidation and had slashed American Sugar Refining's market share to 25 percent by the mid-1920s. The market, not government, created this competition. …