by Thomas E. Woods, Jr.
by Thomas E. Woods, Jr.: Beware
is a pretty good historian of American foreign policy of the late
nineteenth and early twentieth centuries. The other day I was flipping
American Search for Opportunity, 1865-1913, the volume he
contributed to The Cambridge History of American Foreign Relations.
In setting the stage for explaining American foreign policy in the
late nineteenth century he paints a picture of life on the domestic
front. That picture turns out to be more like a cartoon. Thanks
to the Internet, I can rectify this outrage immediately.
notes that between 1897 and 1904 (but really 1899 and 1902) "the
greatest corporate merger movement in the nation's history occurred."
He chooses to omit the central point that most of these mergers
failed. By leaving that out, LaFeber leaves us to imagine these
great behemoths growing without limit, suffocating the poor consumer
until the wise hand of government brings relief.
the same lines, LaFeber notes almost in passing that competitors
sought to "cut competition by merging." (We can leave aside the
definitional question of what constitutes competition; LaFeber clearly
holds the conventional view that competition is a matter of the
number of firms competing with each other, when a better definition
involves the state of affairs that ensues when no violent barriers
are placed in the way of entrants into an industry.) Thus we are
to believe that a merger is an anti-social act, or at the very least
But this is
an arbitrary assertion. The proper size of firms in an industry
cannot be determined in advance. Who is to say that the previous
array of firms was not suboptimal, and the post-merger state of
affairs the better one? Suppose the widget industry requires each
firm to own a gigantic amount of capital equipment, and that 15
firms exist in that industry. Is it necessarily best for 15 sets
of this expensive equipment, one for each firm, to be purchased
and maintained? Maybe so, but only the market test of profit and
loss can determine for sure whether these resources might not have
been better put to another use. (In other words, if these firms
make losses, those losses are the public's verdict on the way these
firms chose to employ the economy's scarce resources.) It could
well be that the state of demand for widgets is such that no one
firm enjoys enough demand for its product to make its large capital
What if one
of these firms merged with, say, two other firms, and (assuming
each firm produces the same output) now can triple their production
– but now need only one set of expensive capital equipment between
them? Now the arrangement may well be profitable, and the
allocation of resources is now superior from the point of view of
Carnegie, LaFeber tells us, "later admitted that he used the 1873
to 1875 depression years to buy cheaply and save 25 percent of his
costs." Note the choice of the word "admitted," as if buying cheaply
and keeping costs low were some kind of conspiracy against the public.
"Again, Carnegie exploited the economic downturn of the 1880s to
expand," LaFeber tells us further. "Exploited"! Would it have been
better if Carnegie had done nothing and the goods he purchased had
instead gone unsold?
this is not to mention that there was no "economic downturn of the
1880s," a prosperous decade in which prices fell and real wages
rose by 20 percent. LaFeber believes in the "twenty-five-year depression"
that allegedly ensued after 1873, a view that finds little favor
among economic historians today, and which Murray Rothbard – as
usual – knew to be false long before conventional historians figured
it out. (See the relevant section in his book The
History of Money and Banking in the United States: The Colonial
Period to World War II.)
it is LaFeber's coverage of the Homestead Strike of 1892 that stands
out the most. Here, in brief, is what actually happened. In 1889
workers had asked for a contract by which their pay would vary with
the price of steel. As steel prices increased, so did their wages.
And as steel prices fell, so did their wages – except after steel
went below $25 per ton, at which point their wages would not be
allowed to decline any further.
By the early
1890s, though, steel prices had fallen substantially, all the way
down to $22.50 per ton. In 1892 the company offered a new contract,
stipulating that the new floor below which wages would not be permitted
to fall would be $22 per ton. Of the company's workforce of 3800,
only the 800 members of the Amalgamated Iron and Steel Association
failed to come to an agreement with the company. The company's further
offer of a $23 floor was rejected, and the strike began.
all 3800 workers struck even though only a minority of them had
failed to reach an agreement with the company, officials at Carnegie's
Homestead plant wondered if the union had employed intimidation.
This suspicion, combined with local law enforcement's inability
to protect company property during a labor dispute years earlier,
prompted Homestead to have recourse to the Pinkerton Detective Agency.
The Pinkertons were to protect those workers who chose to work,
including replacements for strikers, and to get a sense of what
really was going on.
of all this runs as follows: "In 1892 the members demanded wages
that matched their increased productivity." Well, that isn't quite
correct. The issue in question was the price of steel that would
correspond to the wage floor along the workers' sliding scale. Steel
prices were falling precipitously, so the new contract called for
the floor to be lowered as well. LaFeber makes no mention of steel
So then what
happened? According to LaFeber, "In mid-1892 warfare erupted." Notice
the word choice. Warfare simply "erupted." What actually happened
is that the strikers surrounded Homestead to prevent nonunion workers
from gaining access to the plant. When 300 Pinkerton guards approached
the plant on two barges via a river that bordered the plant, strikers
opened fire on them, killing one and wounding four others. Only
then did the Pinkertons return fire. Then the strikers fired cannons
to sink the barges, followed by the use of dynamite and an attempt
to set them on fire.
Had the Pinkerton
guards or representatives of the company initially fired on the
workers, we can be fairly certain LaFeber would not have used the
passive construction – with "warfare" simply "erupting," without
any human actor being named – he did.
LaFeber devotes only a small portion of his book to this kind of
material. The rest is a fairly useful study.
E. Woods, Jr. [send him
his website], a senior fellow of the Ludwig von Mises
Institute, is the author of eleven books, most recently Rollback:
Repealing Big Government Before the Coming Fiscal Collapse and
How to Resist Federal Tyranny in the 21st Century, as well
as the New York Times bestsellers Meltdown:
A Free-Market Look at Why the Stock Market Collapsed, the Economy
Tanked, and Government Bailouts Will Make Things Worse and
Politically Incorrect Guide to American History. He is
also the editor of five other books, including the just-released
on the Road to Serfdom.
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