Rand, Ayn – Capitalism

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,

II Ibid.

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 prehistori-cal 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.

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