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What did industrial consolidation and trusts reduce during the late 1800s?
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Due to the industrial expansion during the American Civil War in the 1860's, businesses began to coalesce into large corporations. By pooling resources, a large corporation could become very efficient and develop an "economy of scale," purchasing larger quantities of raw materials cheaper, arranging better bargains with banking, transportation, and minimizing business risk. Consolidation had the effect of reducing "cutthroat competition" where smaller rival companies kept undercutting each others prices, which reduced their profits, but favored the consumer with more choices and lower prices. If a corporation became sufficiently large, it could become a coercive monopoly and eliminate all rival competition, and set its own prices rather than allowing the market to do so, since the coercive monopoly owned the market. By the 1880's several large trusts had become monopolies by being the most efficient company in their area of business, ("merit monopoly") but it's unclear if they had become a coercive force in the marketplace ("coercive monopoly") by purposely destroying rivals and altering market prices. Nevertheless, the fear that all monopolies were engaged in such practices lead to the Sherman Antitrust Act of 1890, which forbade "restraint of trade." Ironically, this Act was used to break the organized labor unions in the Pullman strike in 1894, as it was determined that the striking laborers had entered into "a conspiracy in restraint of trade!"
Rise of the American Nation, Todd / Curti, pg. 471-473, 1972.
Posted by enotechris on January 13, 2009 at 12:38 AM (Answer #1)
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