THE ECONOMY: Bigness & Competition

Almost 100 years ago, Karl Marx predicted that the concentration of wealth in the hands of a few individuals and big businesses would speed up the decay of the competitive free-enterprise system. Ever since, many Americans who never read Marx and who believe firmly in the free-enterprise system have feared that the same thing might happen. Last week a man who should know tried to lay that fear to rest. He is Economist A.D.H. Kaplan, who spent seven years studying big business for the Brookings Institution and who published his findings last week in a new book, Big Enterprise in a Competitive System.

While corporations have grown much bigger, says Economist Kaplan, the number competing with each other has also grown. Where, 53 years ago, there were only four industrial companies with assets of more than $200 million, in 1951 there were 15 with assets of more than $1 billion, and more than twice as many with assets above $500 million. At the same time, the total number of businesses has grown faster than the population, increasing from 15.4 per 1,000 persons to 17.

Giant Killers. What has happened to the giants of the early 1900s? Of the 100 largest industrial corporations in 1909, only 36 appeared on a similar list drawn up for 1948. U.S. Steel dropped from first place to third; Standard Oil (later Jersey Standard) moved up from second to first. Most swings were much wider. Sears, Roebuck rose from 42nd to 13th, Western Electric from 51st to 14th and Texas Co. from 87th to sixth, while Pullman Co. dropped from eighth to 81st, Singer Manufacturing from 13th to 79th and Pittsburgh Coal (now Pittsburgh Consolidation Coal) from 15th to 94th. Five companies among the first ten on the 1948 list (General Motors, second; Standard Oil of Indiana, fourth; Socony-Vacuum Oil, fifth; Du Pont, eighth; Ford Motor Co., tenth) did not even appear among the first 100 in 1909. Says Kaplan: “Industrial leadership at the big business level is precarious.”

In the 39-year period, the 100 largest increased their share of the total assets of all corporations in their fields, but the increase was only from 24.6% in 1909 to 26.7% in 1948. Moreover, their share of income dropped from 31.1% in 1909 (and 43.4% in 1929) to 30.1%.

Competitive Change. Competition has meant great changes for whole industries as well as for individual companies. In 1909 the iron and steel industry held 30.8% of the assets of the 100 largest companies. By 1948 this was down to 12%, while the petroleum industry shot up from 8% to 29%.

Far from stifling free enterprise, big business has given it more vitality through research and the introduction of new products. Aside from the Government, only big business can afford “to convert [original ideas] into market realities.” Says Kaplan: “Big business . . . makes a contribution to the total economy that cannot be made by smaller-scale enterprises and that . . . should not be added to the burden of the state . . . Big business has not merely been kept effectively subject to a competitive system; on the whole it has also made an essential contribution to its scope, vitality and effectiveness.”