Elizabeth Popp Berman writes that the history of the antimonopoly movement and industrial policy in the United States shows that antitrust and industrial policy, currently considered by many to be in conflict, can complement each other in pursuit of shared goals.
Today, antitrust and industrial policy appear to be in tension. Laws like the CHIPS Act, which subsidizes semiconductor manufacturing, or the Inflation Reduction Act (IRA), which incentivizes investment in renewables, prioritize goals like national security and decarbonization, and decenter the promotion of competition. Indeed, it may seem that many forms of industrial policy, given that they aim to directly benefit some economic actors over others, are simply incompatible with the antitrust ideal.
But the history of antitrust and industrial policy (with the latter defined here as policies that support, limit, or reshape particular sectors of the economy) reveals a more complicated relationship. Understanding the ebb and flow of these distinct approaches to economic governance, and how their supporters have sometimes been the same, and at others bitterly opposed, casts a different light on today’s tensions. Rather than seeing antitrust and industrial policy as inevitably in opposition, we should understand them as evolving parts of larger economic policy programs with distinct answers to three questions: How much of a threat is private power? Can government effectively promote the development of specific sectors without being captured by special interests? And just how important is the promotion of competitive markets?
The spaces of antitrust and industrial policy have been configured and reconfigured over time in relation to these questions. Understanding how can help us think more precisely about where the real conflict is, open our eyes to the full scope of industrial policy today, and recognize the wide historical range of antimonopoly concerns.
When antimonopolists hated industrial policy
The Sherman Act itself, which established antitrust policy in the United States, can be understood as a defensive maneuver in a fight over industrial policy. In the years leading up to its 1890 passage, the antimonopolists who sought to contain the trusts, like Standard Oil, also had a strong position on what was, effectively, industrial policy. Originating with Midwest farmers and merchants, and aligned with the cotton-producing South, the antitrust movement feared government-granted privileges as well as the newly concentrated power of the railroads and rapidly expanding industry.
The federal government had granted land to those railroads and protected those industries with tariffs that were raised to unprecedented levels during the Civil War and had not come back down. Though the term is anachronistic, the tariffs were in fact a form of industrial policy meant to support development of the railroads and Northeast manufacturing—the same industries that were being targeted, because of their size and power, by the antitrust movement. Indeed, the tariff was popularly known as the “mother of trusts.”
By the late 1880s, the tariff had become the dominant economic policy issue, with Republicans (aligned with those manufacturing interests) supporting increases, and Democrats (representing farmers, merchants, and the South) wanting reductions. The year 1888 saw the “Great Tariff Debate” unfold, as a major tariff reduction bill made its way through Congress and the tariff became a decisive question in a hotly contested presidential election.
The outcome of that election was the presidency of Republican Benjamin Harrison, who supported the industrial tariff and would, in 1890, sign another significant increase into law. Yet Harrison, with most of his Republican peers, also voiced opposition to the trusts—politically, an almost unavoidable position, given the popularity of the antitrust movement and the Republicans’ growing reputation as the “party of monopolists.” Republicans, in fact, actually ended up taking the lead on antitrust legislation, with Republican senator John Sherman outmaneuvering multiple Democrats to establish personal jurisdiction over the space.
But Senator William McKinley’s Tariff Act, simultaneously under debate and which would substantially raise tariffs on imported goods, was more important than an antitrust bill—even a friendly antitrust bill—to Congressional Republicans. Indeed, there was some suggestion that McKinley might attach an antitrust section to his tariff bill, preempting the need for Sherman’s legislation entirely.
Ultimately, the Sherman Antitrust Act became law in July 1890, just three months before the McKinley Tariff Act (unexpectedly topical again) followed it. Antimonopolists did win their legislation—but legislation written by their opponents, and which went hand in hand with a form of industrial policy that subsidized the very combinations they feared. Nor was the Republican strategy of passing a grand but vaguely defined law to deal with the trust question enough to counterbalance the political effects of the unpopular McKinley tariff. In midterm elections a month later, Republicans lost a historic number of seats.
When antimonopolists loved industrial policy
Today, positions have realigned: advocates of an expansive vision for antitrust are now on the same side as the most vocal supporters of industrial policy. The reformers of the 1880s saw industrial policy as subsidizing groups that were already at an economic advantage. But present-day industrial policy advocates see it as necessary to support critical industries that need a hand, whether because of the urgency of climate action, the national security need for semiconductors, or other key goals.
Their belief that government can get it right—that it can choose to invest in particular industries in economically appropriate, public-serving ways, and not simply subsidize the most politically influential—raises a question. Shouldn’t we expect those suspicious of concentrated corporate power to be skeptical of concentrated government power as well? Certainly, the risk of regulatory capture is always real. But rather than condemn contemporary supporters of both aggressive antitrust and active industrial policy as intellectually incoherent, we should consider that they, too, have a historical precedent: the antimonopolists of the mid-nineteenth century, whose particular fear was concentrated ownership of land.
The antimonopolists of the 1880s hated the industrial policy of their day: tariffs. But their mid-century predecessors, who had a different set of concerns, found themselves allied with the industrial policy of their own era. In contrast to the 1880s fear of the trusts, mid-century antimonopolists were worried about a different sort of monopoly: land. Concentrated land ownership, whether it was in the hands of the patroons of upstate New York, the plantation owners of the South, or California land speculators, was a threat to the America of independent producers and a scourge upon the nation.
The solution, antimonopolists argued, was for the government to grant land to settlers (often, but not always, specifically white settlers). These homesteads would prevent the further concentration of land ownership, allowing ordinary Americans to become proprietors with a stake in the nation—if at the expense of the indigenous people they displaced or expelled.
But while for some reformers land monopoly was a standalone issue, for others, it was part of a larger political package. Publisher Horace Greeley, who was a major promoter and popularizer of the idea of free homesteads, thought they would provide an escape for the urban poor. But for him, and many of his peers, government-granted land was also consonant with a broader commitment to the “American System” of economic development advocated by Henry Clay and, before him, Alexander Hamilton: to protectionism, internal improvements, and a national bank. Such policies, they believed, would protect infant industries and promote commerce, thereby increasing national prosperity. Homesteads, too, fit into this agenda, contributing to the advancement of agriculture while creating a class of self-sufficient proprietors who would learn at the new land-grant colleges Greeley advocated as well.
While an 1860 version of the Homestead Act failed to pass, in 1862, Republicans took advantage of the departure of Southerners from Congress to pass a series of bills that, together, enacted a program much like the one Clay had laid out a generation before. Critics of land monopoly were delighted to see President Abraham Lincoln sign the Homestead Act into law, along with the Morrill Land-Grant Act, which made possible the land-grant colleges. These were paired with the Pacific Railway Act, granting land for a transcontinental railroad; the National Bank Act, which reestablished a national banking system; and, notably, the Morrill Tariff Act. Together, these laws formed a full industrial policy package. But in contrast to the situation in 1890, in which antimonopolists were deeply opposed to industrial policy that favored then-powerful interests, their predecessors were aligned with it when it supported what were more nascent industries.
Using history to think more broadly
Is it too anachronistic to think of the tariffs of 1890 or the land grants of 1862 as “industrial policy”? Is it too far a stretch to link the antimonopoly movement of the 1840s and ‘50s to the very different antitrust policy of today? Of course the politics of 19th century economic policy provide no straightforward lessons for parsing the intersection of antitrust and industrial policy in the present. But what they can show us is that framing today’s tension as one between “antitrust policy” and “industrial policy” isn’t quite right.
Let’s return to those three orienting questions: How much of a threat is private power? Can government effectively promote the development of specific sectors without being captured by special interests? And just how important is the promotion of competitive markets? When people say that industrial policy is in tension with antitrust, they generally mean that a “yes” answer to the second question is in tension with a “very” answer to the third—and this tension is indeed real.
But what the episodes above show is that “antitrust,” or at least antimonopoly, has not always been a space in which competitive markets were the top priority, or which stood in opposition to government support for specific sectors. And while advocacy of “industrial policy” does imply believing that sector-specific government support can work, many policies beyond CHIPS and IRA have implicitly answered “yes” to that question without being named as such. Historically, those were tariffs and land grants. Today, they include longstanding agricultural subsidies, quantitative easing for banks, bailouts for auto manufacturers, and creating markets for private insurance with Medicare Advantage—and this is hardly an exhaustive list.
Rather than see antitrust as the domain of competition, industrial policy as a handful of bills passed by the Biden administration, and the two pursuing conflicting goals, we should think more broadly. Realizing the major role of government influence in many, many economic sectors forces us to recognize that competition unaffected by a government finger on the scale is the exception, not the rule, in the American economy.
That may sound like a problem. But it actually offers us a chance to step back, recognize how fundamentally the economy is structured by government, and then make conscious choices about how we’d like it to be—though with awareness that government is subject to failures of its own. This doesn’t mean abandoning competition as a valuable thing to promote. But it means that the starting point should be a clear-eyed look at larger goals, whether those be the security of self-sufficiency in critical industries, or the pressing need to decarbonize faster than markets can achieve, and considering whether the promotion of competition is an effective, or even realistic, tool to reach them, rather than treating competition as an end in itself.
At the moment, industrial policy may be in tension with antitrust goals, at least as both are currently defined. But history shows that neither industrial policy nor antimonopoly are fixed categories. Recognizing this would allow for both a clearer evaluation of our myriad industrial policies today—and a broader conception of how antitrust might relate to them in the future.
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