Competition and Big Business (1953)

[Music] [Music] [Music] [Music] [Music] oh [Music] and in our society the thing we are aiming at is free choice the freedom to choose the job we want the people we want to vote for the things we want to buy and always to have many things to choose from now the important question is can this kind of society survive with big business appearing to get bigger and bigger is Big Business compatible with a free competitive Society you know I was in the barber shop this morning you excuse the degression gentlemen but I think you'll be interested in knowing that this very subject was the only thing they talked about competition H that's a l as if everyone don't know there's no such thing as competition anymore in this country take Charlie Bates you know I'm time sure the guy who owns a grocery store the guy guy who used to own the grocery store so they ran him out of business who's they well this big chain store moved into the same block he was on Bingo that was the end of Charlie's store what's he doing now he's got little Roadside restaurant next to a truck stop all the drivers pull in there seems to me he's found something he can do better at and what about this guy in my neighborhood he's doing okay and there are two chain stores in his block I know that store Tom the women really like that place sure he gives them free delivery stays open on Sundays lets them have a charge account and starts any brand his customers called for that fell is selling extra service and that's why he's still in business of course he gets a little more in most items sure but all that extra service is worth it that's what my wife says well she can order by telephone anytime she wants to she doesn't have to leave the kids to go shopping well maybe but all the same I don't understand what's going on in this country seems to me the big fell are slowly choking off the little guys they're swallowing up the wealth the power and if you ask me doing away with free enterprise too I don't know about that boys I just don't know me I'm not even sure I know what a big business is let alone what it's doing to competition in this country so in this study the first question we asked was just how does Big Business fit into our competitive economy for ours is a competitive economy in which everyone is trying to increase his real income to see how big business fits in we've set up a sort of a scale which describes the main facts of our economic structure at one end of the scale we find Enterprises owned and operated by the government such Services must be available and must meet certain minimum standards it falls to the government to see that they do closely related to the government operated Enterprises are the those the government has come to regulate chiefly Railways and such Public Utilities as gas and electric companies and Communications like the Telegraph and telephone companies the duplication of facilities in this area would be wasteful and costly so such businesses are regarded as natural monopolies we have placed them under government control since Banks and insurance companies are custodians of the people's funds they are vested with a special public interest therefore they too are subject to some degree of government regulation but there are other types of Enterprises requiring far less detailed government regulation among these are small businesses which originate 45% of the nation's income these include Farmers professional men and Merchants most of whom own and manage their businesses these small businessmen are free to compete as they see fit within the broad framework of certain general laws small businessman man compete on a personalized basis they specialize in individual deals fitting their services and prices to the conditions of local markets their methods of competition are flexible responding to short-run Opportunities now returning to our scale we find toward the middle firms of intermediate size which account for 23% of the national income while many of these concerns are managed by their own ERS they commonly engage in business requiring large plants big staffs and considerable resources thus their methods of competition are less personalized more formal than those of smaller businesses but up the scale a bit and actually there is no clear dividing line we find managerial Enterprise contributing 133% of the nation's income corporations run by professional managers who may or may not own stock in the company it is among managerial Enterprises that we find big businesses which for our purposes are those industrial concerns listing $100 million or more of total assets these are the Giants of Industry whose very existence involves organizations of capital labor and raw materials on a tremendous scale because of their vast size the plans policies and competitive practices of big businesses must operate on a long-term BAS basis in contrast to the more limited scope of most corporations practically every Big Business cuts across the entire Community its stockholder owners are found in many levels of society its managers are chosen because of their training and experience its thousands of employees come from all over the country and its suppliers raw materials and its customers often come from all over the world this makes of every Big Business a community of Interest this community of interests means that the decisions of big business affect large segments of society therefore Society demands that big business transactions be open for public scrutiny but is public scrutiny enough or does the very fact of bigness mean that competition is being increasingly restricted this is the next question I studied but first let's go back to the barber shop they were talking about this very problem of bigs business there you sir here just look at this can I buy a cop at less than this price can I no of course you can't but you can shop around and make a better deal on your old one like I did well sure you can make a deal with a little guy but what I'm getting at is big businesses the bigger they get the harder it is for the little guy to get his Big Fellas just don't have to pay any attention to us how can they Ed an elephant can turn around on a dime seems to me those fellas have got to keep their eyes on the big move the long pull they can't change their mind about a million dollars or a th000 employees just to give their customers a special deal or take them for an extra 25 bucks as long as I know what the list price is I'm going to know where to shop around and I can tell of a Sharp dealer is taking me for a ride Tom's right eded the big fellows are worried most what their big competitors are going to do what do you mean worry they don't have to worry there they are a small Bunch with a lock on the market they were smart they're lucky enough to get big early and then they stay that way their gang hasn't changed for 50 years it's right when I was a kid we had the same big companies that we do now bunch of monopolies that's all we've got in this country and I don't like it so you see many people think that big business is automatically a monopoly and they think that with Monopoly necessarily comes permanent protection from competitive pressure is this true is any big industrial concern with assets of hundreds of millions of dollars automatically a monopoly one way to answer this question is to determine how complete and permanent is the hold of a big business on the market to do this let's take a look at the 100 largest businesses and see what has happened in their ranks over the past 40 years the ship building leather and coal mining industries were all represented in 199 today they are no longer among the top 100 all told only 36 companies who were among the 100 largest in 199 are still there but what about those who stayed in 199 one Steel company controlled more than 2third of the assets of the entire steel industry today this company meets strong competition from other steel companies and with the rest of the industry industry it faces the competitive pressure of lighter metals and of Alloys produced by the chemical Industries petroleum is today the biggest of the industrial groups and it was among the biggest in 199 but then there was essentially one Mammoth trust that owned more than 34s of the petroleum industry today the total assets of that industry are divided among many companies companies which compete among each other vigorously and intensively many of these newer companies are now larger than the original trust in transportation producers of railroad equipment led the field in 199 but have given ground before the competitive challenge of automobiles trucks and airplanes and within the railroad industry itself the steam locomotive is giving graph a development of the diesel why have some big businesses disappeared from view While others have grown no business after all would will willingly allow itself to be pushed out of the lead now what are the forces within industry itself which brings about such changes now wait a minute Roger I don't believe we've given enough weight to the influence of government in this field you were just talking about the petroleum industry it took the Supreme Court to break up that combine in 1911 yes of course we do point out that we can take antitrust action when necessary if a business reaches the point where it poses a lasting threat to competition despite the forces of competition we must resort to other means we can leave it as a monopoly in private hands but subjected to close government regulation or we can attack those practices which threaten competition and by enjoining them try to reestablish competition as a last resort when no other way appears to restore competition the courts May order the business divided up into units that can revive a competitive market but in most most cases much more powerful forces are at work forces found within the framework of big business itself our history shows that most monopolies have not taken over by the government topple ultimately because of their own weaknesses a giant of $100 million toppling because of its own weaknesses it sounds a little far-fetched Roger what can we give as supporting evidence well we do give this example more than 50 years ago a certain group set out to secure a monopoly on asphalt at the time the best asphalt came almost exclusively from Trinidad and Venezuela this group managed by Financial manipulations to secure an almost complete Monopoly on the world's supply of asphalt and control over 80% of the paving business in the United States but suddenly the petroleum industry in the United States discovered how to produce good asphalt from California petroleum this new product could be laid down on the Eastern seab board as cheaply as the Trinidad output and and so the big competitive advantage of natural asphalt disappeared and this huge company left high and dry with millions of dollars invested toppled over and went into receivership in 3 years many times industrial Giants have lost ground because they sought bigness without regard to efficiency thinking they could maintain a dominant position by bigness alone but bigness is not enough competitive success demands efficiency in the search for efficiency big business has to face many problems one of which is the matter of its relations with its suppliers take a company producing refrigerators it manufactures its own refrigerator walls its own shelves the metal for the ice trays and a number of other important parts but what about rubber insulation compressor valves chromium handles plastic vegetable trays and what about brick glass copper wire railroad cars paper boxes and the host to things large and small required to maintain a big plant inevitably some of these vital supplies must be procured by a big business from a number of small businesses which can produce them more efficiently and more cheaply than the big business itself suppliers are an essential item in every big business and in dealing with suppliers big business is compelled to compete I found a good example of that when I was interviewing John Harmon vice president in charge of purchasing of a large Industrial sir Harmon was trying to negotiate a new agreement with one of his smaller suppliers Harrison take a look at this H see you have a casting on the gear we're making for you yes one of our other suppliers has been working on it our tests indicate that it'll be all right in our assembly maybe so if you don't need close tolerances it'll cost us a lot less than the machine gear of course we've had some big cost increases lately and we're looking for every way a cut course up and down the line so we're thinking of switching our order to him but before we do so we want to know whether you can meet this competition we're a Precision Machining organization Mr Harmon we're not set up for casting well I'm sorry we've been doing business together for a long time but as things stand we'll have to make a deal for the cast gears I'm sorry too we worked out a pretty smooth team operation through the years I'm sure you know it's worth a lot to have our stuff delivered right where you want it and with just the right finish that's right Harrison but our competition is pushing us and we've got to keep our cost down well I guess I'll have to drum up some new business with people who have to have Precision [Music] Machining oh okay hello there Mr Harmon how are you well I'm calling to see if we can't set up a new arrangement with you we made that deal for C gears yes I know well they just didn't seem able to give us the package we needed they had trouble meeting our specifications to begin with and their quality varied I'd like to help you out but we didn't handle with our present setup we picked up a new account who one of your competitors we had to do some retooling for him and well it it take time to get set up again to do that special Machining you need lunch oh yeah sure sure and when we get together I'd like to tell you about a new valve we've developed that may be just what you've been looking for so you see big business competes with big and little Enterprises in picking suppliers any one company would have a hard time getting a tight grip on them the market is too big and too flexible A supplier looking for new business will easily find it especially if he is willing to meet the special needs of new buyers new situations are always cropping up in business and the Big Fellas feel the pressure as much as the little ones but where does that pressure originate well part of it comes from the stockholder part of it from labor and part certainly it's not all from within big business itself no as a matter of fact the ultimate pressure comes from the customer the man who buys is the man who really builds up the pressure on big business I'm sorry that won't do I know it's cheaper but I want something that will last I want to try that new Gadget nope not good enough something new something better something [Music] something here's here's the N of the problem our sales in the textile field are way off for the last two quarters our other lines are holding up all right but what can we do to get our Fabrics moving again well we're trying everything we know our sales and promotion staffs are beating the bushes for new customers we're trying out every new application we can think of draperies curtains pster what about automobile seat covers we've thought of that too what's more we've asked our Main outlets to tell us what we can do to move our stock but every time the answer seems to be that this new synthetic fiber beats us out it's just as washable moth proof fireproof and longwearing as ours but now that they found out how to make their fiber take brilliant dieses we've lost our Edge well Dr Barton I guess we'll have to turn to you again your research and development department has done a swell job as our sales Insurance staff for the last few years but we're up against a tough one this time how this new fiber puts us way behind can your boys come up with a better one and get us back into the running again how much will you need to get started well we'll need an initial appropriation of 300,000 and we'll try to recruit some special staff but you know we can't give you a real answer as to what it'll cost or how long it'll take we might hit it the first month on the first 100,000 or it may take 5 years or $10 million before we come up with the answer isn't that pretty stiff Dr Barton certainly but if you want research results you have to be willing and able to go that high we might never find the answer but along the way we might come on to something we aren't even looking for that will give the company a chance to Pioneer a whole new field yet don't forget there are other research staffs working in the same area my men down in the lab have no Monopoly on ideas somebody else eager to improve his own economic position is always waiting for a chance to wedge a new product a substitution or a new way of doing things into the market but every Innovation every new invention forces come to develop still other inventions and generates a series of new developments that result in renewed competition all along the line and in more abundant choices for us all for it is abundant choice that is one of the most important goals of a free people and our experience indicates that freedom in the market Fosters Freedom throughout Society freedom of the market freedom to enter into most lines of business freedom of movement from job to job freedom to create and invent new and better ways of providing for our needs this is the competitive process and helps distinguish democracy from dictatorship as long as big business or any business is operated in ways that promote competition it is performing its true function adding to the store of goods and services that make life Freer and richer for us [Music] all [Music] oh