Corporate Giants Have a Big Uncle
WASHINGTON, D.C.–The crumbling ideology of big business is being hastened by the deeds and words of big business itself. For years, large corporations have built up big government as a bustling bazaar of accounts receivables, indirect tax subsidies and official insulations from market competition. Now a further dimension is being added to the construction of that corporate socialism which feeds off the average taxpayer for handouts and manipulates government authority, such as import quotas, licenses, non-enforcement of anti-monopoly laws and bloated procurement contracts. This dimension is the bold and open rejection of the competitive enterprise system.
Some recent developments will illustrate the point. AT&T, needled by the new competition of the interconnect industry which sells customers telephone equipment, has prepared a confidential report suggesting ways the company can fight the popular concept that competition means lower prices and better service. The report said that AT&T’s fight against these interlopers was obstructed by the public’s “deeply held beliefs about the ‘American way-of-life’ namely, the inherent benefits of competition or ‘free enterprise’…”
“Monopoly is not a Four-Letter Word” blares forth a full page advertisement by Delmarva Power, a Delaware utility. Apparently, such a monopoly of electric services in New York City did not prevent Consolidated Edison from forcing the New York state legislature to pass a law obligating the state tobuy two of Con Ed’s unfinished plants. “Lemon socialism,” or bailing out a deteriorating and mismanaged company, is not restricted to railroads or utilities.
Take the nation’s 20th largest bank, Franklin National. Growing out of Long Island and into New York City in recent years, the bank overextended itself, made some bad investments and was heading for a collapse. Enter that lender of last resort for the banking industry, the Federal Reserve. In addition, urged by the Federal Reserve, a group of other New York City banks are moving to help save their corporate brother. Big companies don’t go bankrupt anymore, they just go to Washington. The crucial factor of market risk as a disciplining force is falling as corporate politics push more corporate welfare impositions onto the federal treasury.
Other business behavior is topsy turvy to the supposed market ideology. So-called competitors, such as the steel companies, pursue lock-step price increases. When one of the steel giants announces a price increase, the other companies follow right on, presumably raising their prices to meet such competition. In the old days, prices were dropped to meet the competition, not raised.
Also in the old days, when companies faced unused capacity or declining sales, prices were dropped to increase sales. The airlines do the opposite. Under their protective price fixer, the Civil Aeronautics Board, they confront declining volume or overbuilt capacity with price hikes, notprice reductions. And when some, like PanAm and TWA, get into trouble due to such policies plus recent fuel cost increases, they move for subsidies from Uncle Sam instead of re-examining their contempt for real competition for the consumer and fighting the oil industry cartel.
Since October 1st, General Motors’ sales have declined 24.5% over the prior year period. So what does GM do? Simply increase its 1974 delivered vehicle prices seven times, totaling an average vehicle surge of $550 (including optional equipment) over the 1973 models, according to Automotive News.
The pace of establishing the government as insurer-lender, profit-guarantor and subsidizer for the wealthiest economic institutions in the country is quickening. The massive corporate tax reductions three years ago, allegedly to induce more investment, are not enough, according to Treasury Secretary William Simon. He wants still more tax reductions for big business. Pretty soon the withering corporate tax contribution will offer no more opportunities to bribe business with these tax subsidies and a future Mr. Simon will recommend a special surcharge on ordinary taxpayers to pamper these goliaths.
In an extensive recent poll, a majority of people thought big business should be broken up. Popular criticism of monopolistic practices and corporate collusion is at an all‑time high, especially after the food and energy gouges. So what is the Justice Department’s Antitrust Division doing with its anti-monopoly laws? Going after the big boys? Notyet. The Division has busied itself with fundamentals; it has obtained an indictment and filed a civil action against four manufacturers of wood toilet seats for conspiring to fix prices over the past decade.