The Founders Challenge Monopoly
The Hidden History of Monopolies: How Big Business Destroyed the American Dream
The Founders Challenge Monopoly
The more things change, the old saying goes, the more they stay the same. It’s true, at least with regard to giant corporate interests fighting regulation and seizing control of governments that might try to restrain them.
The year of 1776 had a huge impact on the future of the world. Not only did Thomas Jefferson and friends declare that they’d no longer submit to the military, commercial, and political power of Great Britain, but one of the world’s great analysts of capitalism, Adam Smith, published his book An Inquiry into the Nature and Causes of the Wealth of Nations.3
At the same time that the American colonists were decrying the monopoly that the East India Company held over them, Smith was criticizing the Company—and the others who had succeeded in creating monopoly—in Great Britain.
He started out by calling for a return to “natural liberty”— competition—to return to Great Britain’s economy “especially if the privileges of corporations . . . were abolished.” In order to make the economy work correctly, Smith said, Great Britain must “break down the exclusive privileges of corporations” and take from them the power to regulate employment “so that a poor workman, when thrown out of employment either in one trade or in one place, may seek for it in another trade or in another place, without the fear either of a prosecution or of a removal.”
He condemned the actions of the big corporations that then dominated Britain’s economy, noting that even military officers wouldn’t be as greedy to maintain their numbers and positions, and oppose any laws that might regulate their behavior, as were the monopolistic corporations:
“Were the officers of the army to oppose with the same zeal and unanimity any reduction in the number of forces, with which master manufacturers set themselves against every law that is likely to increase the number of their rivals in the home market; . . . to attack with violence and outrage the proposers of any such regulation; to attempt to reduce the army would be as dangerous as it has now become to attempt to diminish in any respect the monopoly which our manufacturers have obtained against us.”
Referencing the East India Company, Smith wrote:
“This monopoly has so much increased the number of some particular tribes of them, that, like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature.”
Indeed, many members of the Great Britain legislature at that time either were afraid of the Company and its colleagues or owned so much stock in them that their votes aligned with the monopolists’ interests—a situation not unlike what we see today in our legislatures.
“The member of parliament who supports every pro- posal for strengthening this monopoly,” Smith wrote, “is sure to acquire . . . great popularity and influence with an order of men whose numbers and wealth render them of great importance.”
On the other hand, the Company and others routinely punished—severely—those legislators who dared call for its regulation, regardless of how much power or reputation those legislators may have had. Nothing, literally nothing, Smith said, could restrain these corporations, and everybody knew it.
“If he [a legislator] opposes them, on the contrary, and still more if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services, can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists.”
Smith went on to recommend that the British Parliament take on the monopolists while preventing more from arising.
“The legislature,” he said, directed “by an extensive view of the general good,” should “be particularly careful neither to estab- lish any new monopolies of this kind, nor to extend further those which are already established.”
On the other side of the ocean, Jefferson and his compatriots eagerly read Smith, that day’s revolutionary economic thinker, along the lines of Thomas Piketty today. Jefferson so absorbed Smith’s lessons about the dangers of monopoly that he argued—and nearly took down the Constitution itself in fighting for it—that the Bill of Rights should contain an explicit ban on monopoly.
When he was the US envoy to Paris in 1786, he repeatedly attacked specific monopolistic industries. The tobacco monopolies that had been granted by Great Britain and France were particular recipients of his bile. In a January 24, 1786, letter to the governor of Virginia, he wrote:
“I have been fully sensible of the baneful influence on the commerce of France and America, which this double [tobacco] monopoly will have. I have struck at its root here, and spared no pains to have the form itself demolished, but it has been in vain. The persons interested in it are too powerful to be opposed, even by the interest of the whole country.”4
Jefferson wasn’t immune to fear of retribution from large monopolistic enterprises. The next sentence in his letter says:
“I mention this matter in confidence, as a knowledge of it might injure any further endeavors to attain the same object.”
On May 8 of that year, he wrote to James Ross, revisiting the topic:
“My hopes, therefore, are weak, though not quite desperate. When they become so, it will remain to look about for the best palliative this monopoly can bear.”5
In another letter on the same day, this one to T. Pleasants, Jefferson wrote:
“I was moreover engaged in endeavors to have the monopoly, in the purchase of this article, in this country, suppressed. My hopes on that subject are not desperate, but neither are they flattering.”6
He revisited the topic in a half dozen or more letters that year.
But it was the “operating system,” or constitution, that would direct the future of America—including the economic future—that most concerned Jefferson. When James Madison sent him a first draft of the new US Constitution that they’d worked out that summer and fall in Philadelphia, Jefferson’s response was blunt.
On December 20, 1787, he replied to his protégé:
“I will now tell you what I do not like. First, the omission of a bill of rights, providing clearly, and without the aid of sophism, for freedom of religion, freedom of the press, protection against standing armies, restriction of monopo- lies, the eternal and unremitting force of the habeas corpus laws, and trials by jury in all matters of fact triable by the laws of the land, and not by the laws of nations.”7
Every item except the restriction of monopolies made its way into the Bill of Rights.
But Jefferson couldn’t let it go; he’d been thinking about this for years, and he had written about it in some of his private papers such as his diary, and spoken about it in conversations with close friends. A constitution, after all, would become the supreme law of the land for generations to come.
Although the Constitution had come into effect on March 4, 1789, six months later he was still writing about the mat- ter to Madison. On September 6, 1789, he opened his letter by saying that he was compelled to reach out to Madison “because a subject comes into my head.”
At its core, Jefferson said, was “[t]he question, whether one generation of men has a right to bind another” because “it is a question of . . . the fundamental principles of every government.”8
Among those principles was the need to prevent monopolists from rising up and taking over America, locking us into a rigid class system that kept small economic players out of the marketplace while encumbering working-class families with multigenerational debt (like student loan debt is, by law, today, thanks to George W. Bush’s 2005 bankruptcy “reform”).
Noting how quickly wealth and business interests can corrupt government, Jefferson wrote:
“Various checks are opposed to every legislative proposition. Factions get possession of the public councils, bribery corrupts them, personal interests lead them astray from the general interests of their constituents.”
The solution? Among other things, Jefferson said that the Constitution should address “monopolies in commerce.” 9
Like Adam Smith, he never lived to see the day.
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