In a series of books that were wonderfully written but were terrible economics, Galbraith argued that big corporations, such as GM, were so powerful that they could dictate to the consumer. Galbraith, much to his credit, in possibly his last interview a few years ago on CSPAN admitted he was shocked that many big companies blew up.
What happened?
Competition caught up to them and it wasn’t because of antitrust laws, rather it was because of the laws of profit and loss as well as foreign competition. It was because consumers are finicky, change their minds and a new generation of buyers often has very different ideas from the last one (How many times have you heard an old person say, “I can’t believe people pay good money for that.”).
A&P and IBM, in their times, seemed like Microsoft today. Or, to cite an example of my Bronx background, they seemed like the New York Yankees in 2000. Back at the turn of the turn of the century my beloved Yanks (I grew up in Highbridge in the South Bronx, four blocks west and north of what the Babe called “the big ballyard”), seemed unbeatable.
Having just won four championships in five years but perilous challengers were waiting to bushwhack them. And for the past eighteen years or so my Bosox brethren are the ones having the last laugh in this new century.
What happened?
Competition is a force often the most dangerous to those who are on top. (Cuidado, Red Sox! You’re now the target!)
The book, which details numerous big companies, also doesn’t quite explain the difference between predatory pricing—the attempt to wipe out competition and monopolize a market—and aggressive discounting. Here has been one of the great questions of anti-trust law and litigation, much of which has been so debatable.
Consumers demand cheap prices—especially someone like me, my nickname in Spanish is “El Mas Tacano de Todos” (The Stingiest of Them All)—and generally don’t care about the difference between predatory pricing and heavy discounting. They just want value.
I also think that the authors, who seem very through in their research, appeared to have missed the fascinating work of Gabriel Kolko. He is a leftwing historian who wrote several compelling works about the Sherman Anti-Trust Act and railroads. Kolko held that the ones leading the charge for anti-trust legislation in the late 19th century were the ones you would least expect: The biggest railroads themselves.