Antitrust Legislation

6 Pages 1451 Words

The reasons that antitrust legislation was introduced was to eradicate the amount of large companies who were becoming monopolistic. Economies of scale define a monopoly as a firm who can either increase or decrease its price by 5%. During this time industry was progressing at a rapid rate and the size of companies was also increasing at a rapid rate. The work of English philosopher Herbert Spencer inspired many businessmen with his book being known as the businessman’s bible. He advocated free competition, justified ceaseless exploitation and justified ruthlessness as a means of achieving progress. Spencer’s work became the rationale for commercial thought and practices from the Civil War to the New Deal. Spencer who applied Darwin’s concept of natural selection believed that as in nature, where only the fittest survive by adapting themselves to the environment, the same was happening in industrial society in the middle 19th century where a similar situation in the form of industrial competition which allowed the elite to evolve.

Following the Civil War there was a major expansion in industry and in the late 19th century the booming US economy entered a period of rapid consolidation. Due to new innovations in the steel industry by Andrew Carnegie and electrical energy by Thomas Edison the American industry was being revolutionised. In the 1880’s there was a slump in the national economy and large manufacturing companies reacted by lowering prices, which caused price wars. The companies were also setting up “Trusts” in order that all firms of a certain industry were brought together.

The railroads were the single most important economic interest in the country. In 1890 railroad revenue exceeded $1,000 million and in 1897 its combined value was $10,635 million, which to put in perspective was eight times greater than the national debt. The railroads were fiercely competing against each other using al...