America's Persecuted Minority: Big Business

by Ayn Rand

Chapter 3 of Capitalism: The Unknown Ideal.


This is one of Ayn Rand's most misunderstood essays, largely due to straw man characterizations by detractors. The essay champions free market capitalism - "big business" - over the crony "capitalism" of fascism. If one was unaware of the fundamental difference between market capitalism and crony capitalism (and ignorant of Rand's other writings) one might mistake Rand's position for "vulgar libertarianism." The reader will see, however, that she is opposing government intervention in market firms, not supporting crony firms. Also, Rand opposes the use of vague Catch-22 laws to persecute market capitalists for their virtues. - Hogeye Bill

If a small group of men were always regarded as guilty, in any clash with any other group, regardless of the issues or circumstances involved, would you call it persecution? If this group were always made to pay for the sins, errors, or failures of any other group, would you call that persecution? If this group had to live under a silent reign of terror, under special laws, from which all other people were immune, laws which the accused could not grasp or define in advance and which the accuser could interpret in any way he pleased - would you call that persecution? If this group were penalized, not for its faults, but for its virtues, not for its incompetence, but for its ability, not for its failures, but for its achievements, and the greater the achievement, the greater the penalty - would you call that persecution?

If your answer is "yes" - then ask yourself what sort of monstrous injustice you are condoning, supporting, or perpetrating. That group is the American businessmen.

The defense of minority rights is acclaimed today, virtually by everyone, as a moral principle of a high order. But this principle, which forbids discrimination, is applied by most of the "liberal" intellectuals in a discriminatory manner: it is applied only to racial or religious minorities. It is not applied to that small, exploited, denounced, defenseless minority which consists of businessmen.

Yet every ugly, brutal aspect of injustice toward racial or religious minorities is being practiced toward businessmen. For instance, consider the evil of condemning some men and absolving others, without a hearing, regardless of the facts. Today's "liberals" consider a businessman guilty in any conflict with a labor union, regardless of the facts or issues involved, and boast that they will not cross a picket line "right or wrong." Consider the evil of judging people by a double standard and of denying to some the rights granted to others. Today's "liberals" recognize the workers' (the majority's) right to their livelihood (their wages), but deny the businessmen's (the minority's) right to their livelihood (their profits). If workers struggle for higher wages, this is hailed as "social gains"; if businessmen struggle for higher profits, this is damned as "selfish greed." If the workers' standard of living is low, the "liberals" blame it on the businessmen; but if the businessmen attempt to improve their economic efficacy, to expand their markets, and to enlarge the financial returns of their enterprises, thus making higher wages and lower prices possible, the same "liberals" denounce it as "commercialism." If a non- commercial foundation - i.e., a group which did not have to earn its funds - sponsors a television show, advocating its particular views, the "liberals" hail it as "enlightenment," "education," "art," and "public service"; if a businessman sponsors a television show and wants it to reflect his views, the "liberals" scream, calling it "censorship," "pressure," and "dictatorial rule." When three locals of the International Brotherhood of Teamsters deprived New York City of its milk supply for fifteen days - no moral indignation or condemnation was heard from the "liberal" quarters; but just imagine what would happen if businessmen stopped that milk supply for one hour - and how swiftly they would be struck down by that legalized lynching or pogrom known as "trust-busting."

Whenever, in any era, culture, or society, you encounter the phenomenon of prejudice, injustice, persecution, and blind, unreasoning hatred directed at some minority group - look for the gang that has something to gain from that persecution, look for those who have a vested interest in the destruction of these particular sacrificial victims. Invariably, you will find that the persecuted minority serves as a scapegoat for some movement that does not want the nature of its own goals to be known. Every movement that seeks to enslave a country, every dictatorship or potential dictatorship, needs some minority group as a scapegoat which it can blame for the nation's troubles and use as a justification of its own demands for dictatorial powers. In Soviet Russia, the scapegoat was the bourgeoisie; in Nazi Germany, it was the Jewish people; in America, it is the businessmen.


America has not yet reached the stage of a dictatorship. But, paving the way to it, for many decades past, the businessmen have served as the scapegoat for statist movements of all kinds: communist, fascist, or welfare. For whose sins and evils did the businessmen take the blame? For the sins and evils of the bureaucrats.

A disastrous intellectual package-deal, put over on us by the theoreticians of statism, is the equation of economic power with political power. You have heard it expressed in such bromides as: "A hungry man is not free," or "It makes no difference to a worker whether he takes orders from a businessman or from a bureaucrat." Most people accept these equivocations - and yet they know that the poorest laborer in America is freer and more secure than the richest commissar in Soviet Russia. What is the basic, the essential, the crucial principle that differentiates freedom from slavery? It is the principle of voluntary action versus physical coercion or compulsion.

The difference between political power and any other kind of social "power," between a government and any private organization, is the fact that a government holds a legal monopoly on the use of physical force. This distinction is so important and so seldom recognized today that I must urge you to keep it in mind. Let me repeat it: a government holds a legal monopoly on the use of physical force.

No individual or private group or private organization has the legal power to initiate the use of physical force against other individuals or groups and to compel them to act against their own voluntary choice. Only a government holds that power. The nature of governmental action is: coercive action. The nature of political power is: the power to force obedience under threat of physical injury - the threat of property expropriation, imprisonment, or death.

Foggy metaphors, sloppy images, unfocused poetry, and equivocations - such as "A hungry man is not free" - do not alter the fact that only political power is the power of physical coercion and that freedom, in a political context, has only one meaning: the absence of physical coercion.

The only proper function of the government of a free country is to act as an agency which protects the individual's rights, i.e., which protects the individual from physical violence. Such a government does not have the right to initiate the use of physical force against anyone - a right which the individual does not possess and, therefore, cannot delegate to any agency. But the individual does possess the right of self-defense and that is the right which he delegates to the government, for the purpose of an orderly, legally defined enforcement A proper government has the right to use physical force only in retaliation and only against those who initiate its use. The proper functions of a government are: the police, to protect men from criminals; the military forces, to protect men from foreign invaders; and the law courts, to protect men's property and contracts from breach by force or fraud, and to settle disputes among men according to objectively defined laws.

These, implicitly, were the political principles on which the Constitution of the United States was based; implicitly, but not explicitly. There were contradictions in the Constitution, which allowed the statists to gain an entering wedge, to enlarge the breach, and, gradually, to wreck the structure.

A statist is a man who believes that some men have the right to force, coerce, enslave, rob, and murder others. To be put into practice, this belief has to be implemented by the political doctrine that the government - the state - has the right to initiate the use of physical force against its citizens. How often force is to be used, against whom, to what extent, for what purpose and for whose benefit, are irrelevant questions. The basic principle and the ultimate results of all statist doctrines are the same: dictatorship and destruction. The rest is only a matter of time.

Now let us consider the question of economic power.

What is economic power? It is the power to produce and to trade what one has produced. In a free economy, where no man or group of men can use physical coercion against anyone, economic power can be achieved only by voluntary means: by the voluntary choice and agreement of all those who participate in the process of production and trade. In a free market, all prices, wages, and profits are determined - not by the arbitrary whim of the rich or of the poor, not by anyone's "greed" or by anyone's need - but by the law of supply and demand. The mechanism of a free market reflects and sums up all the economic choices and decisions made by all the participants. Men trade their goods or services by mutual consent to mutual advantage, according to their own independent, uncoerced judgment. A man can grow rich only if he is able to offer better values - better products or services, at a lower price - than others are able to offer.

Wealth, in a free market, is achieved by a free, general, "democratic" vote - by the sales and the purchases of every individual who takes part in the economic life of the country. Whenever you buy one product rather than another, you are voting for the success of some manufacturer. And, in this type of voting, every man votes only on those matters which he is qualified to judge: on his own preferences, interests, and needs. No one has the power to decide for others or to substitute his judgment for theirs; no one has the power to appoint himself "the voice of the public" and to leave the public voiceless and disfranchised.

Now let me define the difference between economic power and political power: economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction. The businessman's tool is values; the bureaucrat's tool is fear.

America's industrial progress, in the short span of a century and a half, has acquired the character of a legend: it has never been equaled anywhere on earth, in any period of history. The American businessmen, as a class, have demonstrated the greatest productive genius and the most spectacular achievements ever recorded in the economic history of mankind. What reward did they receive from our culture and its intellectuals? The position of a hated, persecuted minority. The position of a scapegoat for the evils of the bureaucrats.

A system of pure, unregulated laissez-faire capitalism has never yet existed anywhere. What did exist were only so-called mixed economies, which means: a mixture, in varying degrees, of freedom and controls, of voluntary choice and government coercion, of capitalism and statism. America was the freest country on earth, but elements of statism were present in her economy from the start. These elements kept growing, under the influence of her intellectuals who were predominantly committed to the philosophy of statism. The intellectuals - the ideologists, the interpreters, the assessors of public events - were tempted by the opportunity to seize political power, relinquished by all other social groups, and to establish their own versions of a "good" society at the point of a gun, i.e., by means of legalized physical coercion. They denounced the free businessmen as exponents of "selfish greed" and glorified the bureaucrats as "public servants." In evaluating social problems, they kept damning "economic power" and exonerating political power, thus switching the burden of guilt from the politicians to the businessmen.

All the evils, abuses, and iniquities, popularly ascribed to businessmen and to capitalism, were not caused by an unregulated economy or by a free market, but by government intervention into the economy. The giants of American industry - such as James Jerome Hill or Commodore Vanderbilt or Andrew Carnegie or J. P. Morgan - were self-made men who earned their fortunes by personal ability, by free trade on a free market. But there existed another kind of businessmen, the products of a mixed economy, the men with political pull, who made fortunes by means of special privileges granted to them by the government, such men as the Big Four of the Central Pacific Railroad. It was the political power behind their activities - the power of forced, unearned, economically unjustified privileges - that caused dislocations in the country's economy, hardships, depressions, and mounting public protests. But it was the free market and the free businessmen that took the blame. Every calamitous consequence of government controls was used as a justification for the extension of the controls and of the government's power over the economy.

If I were asked to choose the date which marks the turning point on the road to the ultimate destruction of American industry, and the most infamous piece of legislation in American history, I would choose the year 1890 and the Sherman Act - which began that grotesque, irrational, malignant growth of unenforceable, uncompliable, unjudica-ble contradictions known as the antitrust laws.

Statists want monopoly government to protect them from
"greedy" market entrepreneurs. Cronies crave protection
from abler competition. What could possibly go wrong?

Under the antitrust laws, a man becomes a criminal from the moment he goes into business, no matter what he does. If he complies with one of these laws, he faces criminal prosecution under several others. For instance, if he charges prices which some bureaucrats judge as too high, he can be prosecuted for monopoly, or, rather, for a successful "intent to monopolize"; if he charges prices lower than those of his competitors, he can be prosecuted for "unfair competition" or "restraint of trade"; and if he charges the same prices as his competitors, he can be prosecuted for "collusion" or "conspiracy."

I recommend to your attention an excellent book entitled The Antitrust Laws of the U.S.A. by A. D. Neale.[1] It is a scholarly, dispassionate, objective study; the author, a British civil servant, is not a champion of free enterprise; as far as one can tell, he may probably be classified as a "liberal." But he does not confuse facts with interpretations, he keeps them severely apart; and the facts he presents are a horror story.

Mr. Neale points out that the prohibition of "restraint of trade" is the essence of antitrust - and that no exact definition of what constitutes "restraint of trade" can be given.

Thus no one can tell what the law forbids or permits one to do; the interpretation of these laws is left entirely up to the courts. A businessman or his lawyer has to study the whole body of the so-called case law - the whole record of court cases, precedents, and decisions - in order to get even a generalized idea of the current meaning of these laws; except that the precedents may be upset and the decisions reversed tomorrow or next week or next year. "The courts in the United States have been engaged ever since 1890 in deciding case by case exactly what the law proscribes. No broad definition can really unlock the meaning of the statute . . ."[2]

This means that a businessman has no way of knowing in advance whether the action he takes is legal or illegal, whether he is guilty or innocent It means that a businessman has to live under the threat of a sudden, unpredictable disaster, taking the risk of losing everything he owns or being sentenced to jail, with his career, his reputation, his property, his fortune, the achievement of his whole lifetime left at the mercy of any ambitious young bureaucrat who, for any reason, public or private, may choose to start proceedings against him.

Retroactive (or ex post facto) law - i.e., a law that punishes a man for an action which was not legally defined as a crime at the time he committed it - is rejected by and contrary to the entire tradition of Anglo-Saxon jurisprudence. It is a form of persecution practiced only in dictatorships and forbidden by every civilized code of law. It is specifically forbidden by the United States Constitution. It is not supposed to exist in the United States and it is not applied to anyone - except to businessmen. A case in which a man cannot know until he is convicted whether the action he took in the past was legal or illegal, is certainly a case of retroactive law.

I recommend to you a brilliant little book entitled Ten Thousand Commandments by Harold Fleming.[3] It is written for the layman and presents - in clear, simple, logical terms, with a wealth of detailed, documented evidence - such a picture of the antitrust laws mat "nightmare" is too feeble a word to describe it.

One of the hazards [writes Mr. Fleming] that sales managers must now take into account is that some policy followed today in the light of the best legal opinion may next year be reinterpreted as illegal. In such case the crime and the penalty may be retroactive. ... Another kind of hazard consists in the possibility of treble damage suits, also possibly retroactive. Firms which, with the best of intentions, run afoul of the law on one of the above counts, are open to treble damage suits under the antitrust laws, even though their offense was a course of conduct that everyone considered, at the time, quite legal as well as ethical, but that a subsequent reinterpretation of the law found to be illegal.[4]

What do businessmen say about it? In a speech entitled "Guilty Before Trial" (May 18, 1950), Benjamin F. Fairless, then President of United States Steel Corporation, said:

Gentlemen, I don't have to tell you that if we persist in that kind of a system of law - and if we enforce it impartially against all offenders - virtually every business in America, big and small, is going to have to be run from Atlanta, Sing Sing, Leavenworth, or Alcatraz.

The legal treatment accorded to actual criminals is much superior to that accorded to businessmen. The criminal's rights are protected by objective laws, objective procedures, objective rules of evidence. A criminal is presumed to be innocent until he is proved guilty.

Only businessmen - the producers, the providers, the supporters, the Atlases who carry our whole economy on their shoulders - are regarded as guilty by nature and are required to prove their innocence, without any definable criteria of innocence or proof, and are left at the mercy of the whim, the favor, or the malice of any publicity-seeking politician, any scheming statist, any envious mediocrity who might chance to work his way into a bureaucratic job and who feels a yen to do some trust-busting.

The better or more honorable kind of government officials have repeatedly protested against the non-objective nature of the antitrust laws. In the same speech, Mr. Fairless quotes a statement made by Lowell Mason, who was then a member of the Federal Trade Commission:

American business is being harrassed, bled, and even blackjacked under a preposterous crazyquilt system of laws, many of which are unintelligible, unenforceable and unfair. There is such a welter of laws governing interstate commerce that the Government literally can find some charge to bring against any concern it chooses to prosecute. I say that this system is an outrage.

Further, Mr, Fairless quotes a comment written by Supreme Court Justice Jackson when he was the head of the Antitrust Division of the Department of Justice:

It is impossible for a lawyer to determine what business conduct will be pronounced lawful by the Courts. This situation is embarrassing to businessmen wishing to obey the law and to Government officials attempting to enforce it.

That embarrassment, however, is not shared by all members of the government. Mr. Fleming's book quotes the following statement made by Emanuel Celler, Chairman of the House Judiciary Committee, at a symposium of the New York State Bar Association, in January 1950:

I want to make it clear that I would vigorously oppose any antitrust laws that attempted to particularize violations, giving bills of particulars to replace general principles. The law must remain fluid, allowing for a dynamic society.[6]

I want to make it clear that "fluid law" is a euphemism for "arbitrary power" - that "fluidity" is the chief characteristic of the law under any dictatorship - and that the sort of "dynamic society" whose laws are so fluid that they flood and drown the country may be seen in Nazi Germany or Soviet Russia.

The tragic irony of that whole issue is the fact that the antitrust laws were created and, to this day, are supported by the so-called "conservatives," by the alleged defenders of free enterprise. This is a grim proof of the fact that capitalism has never had any proper, philosophical defenders - and a measure of the extent to which its alleged champions lacked any political principles, any knowledge of economics, and any understanding of the nature of political power. The concept of free competition enforced by law is a grotesque contradiction in terms. It means: forcing people to be free at the point of a gun. It means: protecting people's freedom by the arbitrary rule of unanswerable bureaucratic edicts.

What were the historical causes that led to the passage of the Sherman Act? I quote from the book by Mr. Neale:

The impetus behind the movement for the earliest legislation gathered strength during the 1870's and the 1880's. ... After the Civil War the railways with their privileges, charters, and subsidies became the main objects of suspicion and hostility. Many bodies with revealing names like "The National Anti-Monopoly Cheap Freight Railway League" sprang up.[7]

This is an eloquent example of the businessmen serving as scapegoat, taking the blame for the sins of the politicians. It was the politically granted privileges - the charters and subsidies of the railroads - that people rebelled against; it was these privileges that had placed the railroads of the West outside the reach of competition and had given them a monopolistic power, with all its consequent abuses. But the remedy, written into law by a Republican Congress, consisted of destroying the businessmen's freedom and of extending the power of political controls over the economy.

If you wish to observe the real American tragedy, compare the ideological motivation of the antitrust laws to their actual results. I quote from Mr. Neale's book:

It seems likely that American distrust of all sources of unchecked power is a more deep-rooted and persistent motive behind the antitrust policy than any economic belief or any radical political trend. This distrust may be seen in many spheres of American life ... It is expressed in the theories of "checks and balances" and of "separation of powers." In the United States the fact that some men possess power over the activities and fortunes of others is sometimes recognized as inevitable but never accepted as satisfactory. It is always hoped that any particular holder of power, whether political or economic, will be subject to the threat of encroachment by other authorities.

At one with this basic motivation of antitrust is its reliance on legal process and judicial remedy rather than on administrative regulation. The famous prescription of the Massachusetts Bill of Rights - "to the end it may be a government of laws and not of men" - is a favourite American quotation and an essential one for understanding antitrust. Without this factor it would be impossible to explain the degree of acceptance - so astonishing to those outside the United States - that is accorded to the antitrust policy by those interests, especially "big business" interests, which are frequently and expensively subject to its discipline.[8]

Here is the tragedy of what happens to human intentions without a clearly defined philosophical theory to guide their practical implementation. The first free society in history destroyed its freedom - in the name of protecting freedom. The failure to differentiate between political and economic power allowed men to suppose that coercion could be a proper "balance" to production, that both were activities of the same order which could serve as a "check" on each other, that the "authority" of a businessman and the "authority" of a bureaucrat were interchangeable rivals for the same social function. Seeking "a government of laws and not of men," the advocates of antitrust delivered the entire American economy into the power of as arbitrary a government of men as any dictatorship could hope to establish.

In the absence of any rational criteria of judgment, people attempted to judge the immensely complex issues of a free market by so superficial a standard as bigness." You hear it to this day: "big business," "big government," or "big labor" are denounced as threats to society, with no concern for the nature, source, or function of the "bigness," as if size as such were evil. This type of reasoning would mean that a "big" genius, like Edison, and a "big" gangster, like Stalin, were equal malefactors: one flooded the world with immeasurable values and the other with incalculable slaughter, but both did it on a very big scale. I doubt whether anyone would care to equate these two - yet this is the precise difference between big business and big government. The sole means by which a government can grow big is physical force; the sole means by which a business can grow big, in a free economy, is productive achievement.

The only actual factor required for the existence of free competition is: the unhampered, unobstructed operation of the mechanism of a free market. The only action which a government can take to protect free competition is: Laissez-faire! - which, in free translation, means: Hands off I But the antitrust laws established exactly opposite conditions - and achieved the exact opposite of the results they had been intended to achieve.

There is no way to legislate competition; there are no standards by which one could define who should compete with whom, how many competitors should exist in any given field, what should be their relative strength or their so-called "relevant markets," what prices they should charge, what methods of competition are "fair" or "unfair." None of these can be answered, because these precisely are the questions that can be answered only by the mechanism of a free market.

With no principles, standards, or criteria to guide it, the antitrust case law is the record of seventy years of sophistry, casuistry, and hair-splitting, as absurd and as removed from any contact with reality as the debates of medieval scholastics. With only this difference: the scholastics had better reasons for the questions they raised - and no specific human lives or fortunes hung on the outcome of their debates.

Let me give you a few examples of antitrust cases. In the case of Associated Press v. United States of 1945, the Associated Press was found guilty, because its bylaws restricted its membership and made it very difficult for newly established newspapers to join. I quote from Mr. Neale's book:

It was argued in defense of the Associated Press that there were other news agencies from which new entrants might draw their news. ... The Court held that ... Associated Press was collectively organized to secure competitive advantages for members over non-members and, as such, was in restraint of trade, even though the non-members were not necessarily prevented altogether from competing. [The Associated Press news service was considered so important a facility that] by keeping it exclusive to themselves the members of the association impose a real hardship on would-be competitors. ... It is no defense that the members have built up a facility ... for themselves; new entrants must still be allowed to share it on reasonable terms unless it is practicable for them to compete without it.[9]

Whose rights are here being violated? And whose whim is being implemented by the power of the law? What qualifies one to be "a would-be competitor"? If I decided to start competing with General Motors tomorrow, what part of their facilities would they have to share with me in order to make it "practicable" for me to compete with them?

In the case of Milgram v. Loew's, of 1951, the consistent refusal of the major distributors of motion pictures to grant first-runs to a drive-in theater was held to be a proof of collusion. Each company had obviously valid reasons for its refusal, and the defense argued that each had made its own independent decision without knowing the decisions of the others. But the Court ruled that "consciously parallel business practices" are sufficient proof of conspiracy and that "further proof of actual agreement among the defendants is unnecessary." The Court of Appeals upheld this decision, suggesting that evidence of parallel action should transfer the burden of proof to the defendants "to explain away the inference of joint action," which they had not, apparently, explained away.

Consider for a moment the implications of this case. If three businessmen reach independently the same blatantly obvious business decision - do they then have to prove that they did not conspire? Or if two businessmen observe an intelligent business policy originated by the third - should they refrain from adopting it, for fear of a conspiracy charge? Or if they do adopt it, should he then find himself dragged into court and charged with conspiracy, on the ground of the actions taken by two men he had never heard of? And how, then, is he "to explain away" his presumed guilt and prove himself innocent?

In the case of patents, the antitrust laws seem to respect a patent owner's right - so long as he is alone in using his patent and does not share it with anyone else. But if he decides not to engage in a patent war with a competitor who holds patents of the same general category - if they both decide to abandon that alleged "dog-eat-dog" policy of which businessmen are so often accused - if they decide to pool their patents and to license them to a few other manufacturers of their own choice - then the antitrust laws crack down on them both. The penalties, in such patent-pool cases, involve compulsory licensing of the patents to any and all comers - or the outright confiscation of the patents.

I quote from Mr. Neale's book:

The compulsory licensing of patents - even valid patents lawfully acquired through the research efforts of the company's own employees - is intended not as punishment but as a way in which rival companies may be brought into the market ... In the I.C.I, and duPont case of 1952, for example, Judge Ryan ... ordered the compulsory licensing of their existing patents in the fields to which their restrictive agreements applied and improvement patents but not new patents in these fields. In this case an auxiliary remedy was awarded which has become common in recent years. Both LCI. and duPont were ordered to provide applicants, at a reasonable charge, with technical manuals which would show in detail how the patents were practiced.[10]

This, mind you, is not regarded as "punitive"!

Whose mind, ability, achievement, and rights are here sacrificed - and for whose unearned benefit?

The most shocking court decision in this grim progression (up to, but not including, the year 1961) was written - as one would almost expect - by a distinguished "conservative," Judge Learned Hand. The victim was ALCOA. The case was United States v. Aluminum Company of America of 1945.

Under the antitrust laws, monopoly, as such, is not illegal; what is illegal is the "intent to monopolize." To find ALCOA guilty, Judge Learned Hand had to find evidence that ALCOA had taken aggressive action to exclude competitors from its market. Here is the kind of evidence which he found and on which he based the ruling that has blocked the energy of one of America's greatest industrial concerns. I quote from Judge Hand's opinion:

It was not inevitable that it [ALCOA] should always anticipate increases in the demand for ingot and be prepared to supply them.

Nothing compelled it to keep doubling and redoubling its capacity before others entered the field. It insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connections and the elite of personnel.[11]

Here, the meaning and purpose of the antitrust laws come blatantly and explicitly into the open, the only meaning and purpose these laws could have, whether their authors intended it or not: the penalizing of ability for being ability, the penalizing of success for being success, and the sacrifice of productive genius to the demands of envious mediocrity.

If such a principle were applied to all productive activity, if a man of intelligence were forbidden "to embrace each new opportunity as it opened," for fear of discouraging some coward or fool who might wish to compete with him, it would mean that none of us, in any profession, should venture forward, or rise, or improve, because any form of personal progress - be it a typist's greater speed, or an artist's greater canvas, or a doctor's greater percentage of cures - can discourage the kind of newcomers who haven't yet started, but who expect to start competing at the top.

As a small, but crowning touch, I will quote Mr. Neale's footnote to his account of the ALCOA case:

It is of some interest to note that the main ground on which economic writers have condemned the aluminum monopoly has been precisely that ALCOA consistently failed to embrace opportunities for expansion and so underestimated the demand for the metal that the United States was woefully short of productive capacity at the outset of both world wars.[12]

Now I will ask you to bear in mind the nature, the essence, and the record of the antitrust laws, when I mention the ultimate climax which makes the rest of that sordid record seem insignificant: the General Electric case of 1961.

The list of the accused in that case reads like a roll call of honor of the electrical-equipment industry: General Electric, Westinghouse, Allis-Chalmers, and twenty-six other, smaller companies. Their crime was that they had provided you with all the matchless benefits and comforts of the electrical age, from bread toasters to power generators. It is for this crime that they were punished - because they could not have provided any of it, nor remained in business, without breaking the antitrust laws.

The charge against them was that they had made secret agreements to fix the prices of their products and to rig bids. But without such agreements, the larger companies could have set their prices so low that the smaller ones would have been unable to match them and would have gone out of business, whereupon the larger companies would have faced prosecution, under these same antitrust laws, for "intent to monopolize."

I quote from an article by Richard Austin Smith entitled "The Incredible Electrical Conspiracy," in Fortune (April and May 1961):

If G.E. were to drive for 50 per cent of the market, even strong companies like I-T-E Circuit Breaker might be mortally wounded.
This same article shows that the price-fixing agreements did not benefit General Electric, that they worked to its disadvantage, that General Electric was, in effect, "the sucker" and that its executives knew it, wanted to leave the "conspiracy," but had no choice (by reason of antitrust and other government regulations).

The best evidence of the fact that the antitrust laws were a major factor in forcing the "conspiracy" upon the electrical industry, can be seen in the aftermath of that case - in the issue of the "consent decree." When General Electric announced that it now intended to charge the lowest prices possible, it was the smaller companies and the government, the Antitrust Division, who objected.

Mr. Smith's article mentions the fact that the meetings of the "conspirators" started as a result of the O.P.A. During the war, the prices of electrical equipment were fixed by the government, and the executives of the electrical industry held meetings to discuss a common policy. They continued this practice, after the O.P.A. was abolished.

By what conceivable standard can the policy of price-fixing be a crime, when practiced by businessmen, but a public benefit, when practiced by the government? There are many industries, in peacetime - trucking, for instance - whose prices are fixed by the government. If price-fixing is harmful to competition, to industry, to production, to consumers, to the whole economy, and to the "public interest" - as the advocates of the antitrust laws have claimed - then how can that same harmful policy become beneficial in the hands of the government? Since there is no rational answer to this question, I suggest that you question the economic knowledge, the purpose, and the motives of the champions of antitrust.

The electrical companies offered no defense to the charge of "conspiracy." They pleaded "nolo contendere," which means: "no contest." They did it, because the antitrust laws place so deadly a danger in the path of any attempt to defend oneself that defense becomes virtually impossible. These laws provide that a company convicted of an antitrust violation can be sued for treble damages by any customer who might claim that he was injured. In a case of so large a scale as the electrical industry case, such treble damage suits could, conceivably, wipe all the defendants out of existence. With that kind of threat hanging over him, who can or will take the risk of offering a defense in a court where there are no objective laws, no objective standards of guilt or innocence, no objective way to estimate one's chances?

Try to project what clamor of indignation and what protests would be heard publicly all around us, if some other group of men, some other minority group, were subjected to a trial in which defense was made impossible - or in which the laws prescribed that the more serious the offense, the more dangerous the defense. Certainly the opposite is true in regard to actual criminals: the more serious the crime, the greater the precautions and protections prescribed by the law to give the defendant a chance and the benefit of every doubt It is only businessmen who have to come to court, bound and gagged.

Now what started the government's investigation of the electrical industry? Mr. Smith's article states that the investigation was started because of complaints by T.VA. and demands by Senator Kefauver. This was in 1959, under Eisenhower's Republican Administration. I quote from Time of February 17, 1961:

Often the Government has a hard time gathering evidence in antitrust cases, but this time it got a break. In October 19S9, four Ohio businessmen were sentenced to jail after pleading nolo contendere in an antitrust case. (One of them committed suicide on the way to jail.) This news sent a chill through the electrical-equipment executives under investigation, and some agreed to testify about their colleagues under the security of immunity. With the evidence gathered from them (most are still with their companies), the Government sewed up its case.

It is not gangsters, racketeers, or dope peddlers that are here being discussed in such terms, but businessmen - the productive, creative, efficient, competent members of society. Yet the antitrust laws, now, in this new phase, are apparently aimed at transforming business into an underworld, with informers, stool pigeons, double-crossers, special "deals," and all the rest of the atmosphere of The Untouchables.

Seven executives of the electrical industry were sentenced to jail. We shall never know what went on behind the scenes of this case or in the negotiations between the companies and the government. Were these seven responsible for the alleged "conspiracy"? If it be guilt, were they guiltier than others? Who "informed" on them - and why? Were they framed? Were they double-crossed? Whose purposes, ambitions, or goals were served by their immolation? We do not know. Under a set-up such as the antitrust laws have created, there is no way to know.

When these seven men, who could not defend themselves, came into the courtroom to hear their sentences, their lawyers addressed the judge with pleas for mercy. I quote from the same story in Time:

First before the court came the lawyer for ... a vice president of Westinghouse, to plead for mercy. His client, said the lawyer, was a vestryman of St. John's Episcopal Church in Sharon, Pa. and a benefactor of charities for crippled children." Another defendant's lawyer pleaded that his client was "the director of a boy's club in Schenectady, N.Y. and the chairman of a campaign to build a new Jesuit seminary in Lenox, Mass.

It was not these men's achievements or their productive ability or their executive talent or their intelligence or their rights that their lawyers found it necessary to cite - but their altruistic "service" to the "welfare of the needy." The needy had a right to welfare - but those who produced and provided it, had not. The welfare and the rights of the producers were not regarded as worthy of consideration or recognition. This is the most damning indictment of the present state of our culture.

The final touch on that whole gruesome farce was Judge Ganey's statement. He said: "What is really at stake here is the survival of the kind of economy under which America has grown to greatness, the free-enterprise system." He said it, while delivering the most staggering blow that the free-enterprise system had ever sustained, while sentencing to jail seven of its best representatives and thus declaring that the very class of men who brought America to greatness - the businessmen - are now to be treated, by their nature and profession, as criminals. In the person of these seven men, it is the free-enterprise system that he was sentencing.

These seven men were martyrs. They were treated as sacrificial animals - they were human sacrifices, as truly and more cruelly than the human sacrifices offered by prehistorical savages in the jungle.

If you care about justice to minority groups, remember that businessmen are a small minority - a very small minority, compared to the total of all the uncivilized hordes on earth. Remember how much you owe to this minority - and what disgraceful persecution it is enduring. Remember also that the smallest minority on earth is the individual. Those who deny individual rights, cannot claim to be defenders of minorities.

What should we do about it? We should demand a re-examination and revision of the entire issue of antitrust. We should challenge its philosophical, political, economic, and moral base. We should have a Civil Liberties Union - for businessmen. The repeal of the antitrust laws should be our ultimate goal; it will require a long intellectual and political struggle; but, in the meantime and as a first step, we should demand that the jail-penalty provisions of these laws be abolished. It is bad enough if men have to suffer financial penalties, such as fines, under laws which everyone concedes to be non-objective, contradictory, and undefinable, since no two jurists can agree on their meaning and application; it is obscene to impose prison sentences under laws of so controversial a nature. We should put an end to the outrage of sending men to jail for breaking unintelligible laws which they cannot avoid breaking.

Businessmen are the one group that distinguishes capitalism and the American way of life from the totalitarian statism that is swallowing the rest of the world. All the other social groups - workers, farmers, professional men, scientists, soldiers - exist under dictatorships, even though they exist in chains, in terror, in misery, and in progressive self-destruction. But there is no such group as businessmen under a dictatorship. Their place is taken by armed thugs: by bureaucrats and commissars. Businessmen are the symbol of a free society - the symbol of America. If and when they perish, civilization will perish. But if you wish to fight for freedom, you must begin by fighting for its unrewarded, unrecognized, unacknowledged, yet best representatives - the American businessmen.


  1. A. D. Neale, The Antitrust Laws of the United States of America: A Study of Competition Enforced by taw, Cambridge, England: Cambridge University Press, 1960.
  2. Ibid., p. 13.
  3. New York: Longmans, Green & Co., 1955.
  4. Ten Thousand Commandments: A Story of the Antitrust Laws, New York: Prentice-Hall, 1951.
  5. Ibid., pp. 16-17.
  6. Ibid., p. 22.
  7. Neale, p. 23.
  8. Ibid., pp. 422-423.
  9. Ibid., pp. 70 - 71.
  10. Ibid., p. 410
  11. Ibid.


Library of Liberty

Ayn Rand