Antitrust and Business Activity: The First Quarter Century

The modern corporation arose out of the trusts, mergers and holding companies of the late 19th century, an evolution that generated volatile political reactions. Though economists and business historians have analyzed the rise of the corporate form, they have neglected a second, related problem: Did attacks on the modern corporation depress business activity, as critics of Theodore Roosevelt and Howard Taft claimed? This paper has three aims. First, it covers the relevant analytical issues, including the effects of policy uncertainty on business investment. Second, it reviews the history of shifting governmental policy in the light of its possible economic effects. Finally, it examines die statistical link between antitrust enforcement and business activity for the years 1891–1914. Antitrust case filings against large firms coincided with business downturns, while filings against small firms did not. These findings provide supporting evidence though not decisive proof for the charge that trust-busting hurt business activity.