I was discussing monopolies and the free market the other day with an old friend of mine (who is also a fellow an-cap) and I mentioned that I believe monopolies are always a product of government intervening in the market. He said he wasn’t so sure about that. I asked him historically what monopolies have not been the product of government intervention and he mentioned the steel industry in the United States. I’m not too terribly knowledgeable about the specific history of the steel industry, so I really couldn’t dispute him on that assertion.
My question is: Does anyone know if the government granted particular privileges to certain companies in the steel industry during that time period? And if so, specifically what those privileges were and how they allowed said monopolies to arise?
From what I recall, the federal government imposed tariffs on steel at various times, as well as having in the “contracts” for the transcontinental railroad that all the steel be made in the US. That certainly establishes privilege.
US tariffs on steel are a recent development: before 2002 the tariff was a paltry 1% if I remember correctly. President Bush imposed a new tariff on imported steel (Section 201) in 2002: rates were between 8 and 30%. Imports from Canada, Mexico and a few other countries, Thailand for example, were exempted. The tariff was dropped in 2003 following harsh reactions from the WTO and some foreign governments (Japan, Korea etc).
Steel production in the US dropped dramatically at the end of the '70s but it’s still the third worldwide, though its companies cannot compete in sheer volume against the Asiatic giants, and let’s not forget Japanese and Korean companies own directly and indirectly a good chunk of the US steel production. Also a good number of US steel producers have gone belly up in the last thirty years following the contraption of US manufacturing base and the costs involved with new enviromental legislation.
To answer your final question let’s take a look at US Steel, the largest US steel company. It was founded by combining the operations owned by the Gary and Carnegie families, though Andrew Carnegie quickly sold his share to J.P. Morgan (and he wanted to be paid in gold… a smart fellow!) and in the first years of operations it pursued an aggressive campaign to acquire competitors: the same antitrust laws which broke up Standard Oil failed to make an impression on US Steel, which produced more than two thirds of the steel consumed in the US before the Great Depression, a clear sign of the company’s political weight. After WWII the company’s power started to decline (Truman even tried to nationalize the mills but was stopped by the Constitutional Court) but the US government started to take an interest in the company, an interest which grow as the trade union’s power grew and the US manufacturing system started tanking.
Harry Truman nationalized the steel industry after a nation-wide strike was threatened in the 1950s but luckily the U.S. Supreme Court declared it unconstitutional shortly thereafter. Wikipedia actually has a decent amount of information regarding this event, though for more detail you will want to consult other sources as well: http://en.wikipedia.org/wiki/1952_steel_strike
Rothbard described the steel industry as his least favorite industry. Steel has been a favored industry of the US government since the days of Alexander Hamilton. The steel industry was the original “infant industry” in Hamilton’s Report on Manufactures. I can’t think of any industry in US history that has had more protection and favoritism than steel. And there had been no period in US history when steel was not heavily protected in some way.
Yeah I was thinking the railroad contracts probably had a big part to do with it. Thanks.
Thanks. But I still don’t see what the government did that caused this monopoly to arise. And if the government wasn’t responsible for it, then that kind of dampens the claim that monopolies won’t arise in a free market setting.
Right, but from my understanding, that was well after monopolies in the industry had sprung up. My question is what protections/favoritism did the government grant particular companies that led to these monopolies.
Thank you though.
Thank you. Do you happen to know where I can find out specific legislation and whatnot that shows this government favoritism?
The simple is that the only non absurd defintion of monopoly (or quasi monopoly) is an industry in which there is restricted entry. By definition this is impossible without the state (or some similar institution).