Frank Albert Fetter, Planning for Totalitarian Monopoly (1937)

Frank Albert Fetter’s review article examines Arthur Robert Burns’s The Decline of Competition: A Study of the Evolution of American Industry (1936). Its central objection is that Burns mistakes deliberately produced, institutionally enabled monopoly for the inevitable result of technological progress, then uses this supposed inevitability to justify comprehensive state control. Fetter follows the book’s three questions—why monopoly develops, how imperfect competition operates, and what social control should accomplish—while arguing that its valuable descriptive evidence undermines its causal explanation and policy conclusions. Although Burns devotes most of his book to industrial practices, Fetter treats its final proposals as the destination toward which the preceding argument is directed.

The first section challenges the claim that economies of large-scale production necessarily reduce the number of sellers and ultimately extinguish competition. Fetter accepts imperfect competition as a more realistic analytical category than the absolute opposition between perfect competition and complete monopoly. His disagreement concerns the causes of concentration. Burns himself recognizes the effects of permissive corporation laws, patent legislation, weak antitrust enforcement, managerial ambition, and promoters’ incentives. These are alterable arrangements and purposive actions, not impersonal technological necessities:

But these volitional human, legal, and institutional forces so clearly recognized in passing are all in the end forgotten.

This omission allows Burns, in Fetter’s account, to convert the historical failure to preserve competition into proof that preservation is impossible. The accompanying technical confusion is between the size of a production plant and the financial size of a firm owning multiple plants. An efficient large plant need not belong to an extensive industrial combination; conversely, common ownership of geographically dispersed plants need not improve their productive efficiency. Fetter makes the causal distinction explicit:

They did not automatically result when physical size (of separate plants) was increased in pursuit of the economies of mass production; rather, increasing financial size (common ownership of a number of like plants) was the means deliberately chosen to secure monopolistic control of prices often when there was little or no intent or result of increasing the size of the separate plants.

The distinction separates productive economies from market power. Burns’s admissions that excessive size can be inefficient, and that smaller firms might achieve comparable economies, therefore do more than qualify his thesis: they weaken its claim of inevitability. Fetter sees a mixture of economic determinism and institutional analysis in which evidence of human agency repeatedly gives way to an allegedly irresistible industrial evolution.

The second section evaluates Burns’s extensive account of trade associations, price leadership, market sharing, price discrimination, non-price competition, and National Recovery Administration policies. Fetter praises its accessible synthesis of Federal Trade Commission materials, judicial reports, legal briefs, and secondary literature. But he disputes the status assigned to those materials:

He does not think of these practices as the means and methods by which the decline of competition has been brought about; they are merely passive consequences.

For Fetter, this reversal matters politically: conduct that helps create monopoly may be restrained, whereas consequences of an unavoidable transformation seem only to demand accommodation. He particularly values Burns’s treatment of basing-point pricing as discriminatory, wasteful, and conducive to higher prices. Yet Burns’s unwillingness to infer a case for corrective action turns an otherwise effective critique into support for accepting concentration.

Terminological precision is another condition of effective antitrust policy. Fetter objects that Burns frequently substitutes the ambiguous business expression “price cutting” for discrimination. General price reductions, selective concessions to particular buyers, and tactics designed to eliminate competitors consequently become difficult to distinguish. Calling price reductions “destructive” may protect the monopolist’s price structure rather than the consuming public. Fetter’s alternative is not simply more vigorous enforcement: it also requires clearer concepts of the conduct that enforcement should address.

The third section turns to Burns’s proposed state participation in concentrated economic power. Fetter finds that the discussion identifies numerous difficult choices about prices, costs, investment, capacity, and rewards without selecting governing objectives or demonstrating administrative feasibility. Decisions now dispersed among enterprises bearing their financial consequences would become responsibilities of a central authority. The contradiction is that a state pronounced incapable of maintaining competition is nevertheless expected to manage monopoly successfully:

This future state, we learn, will even be able to control competition, turning it off and on at will, preventing it just to the extent that the state desires (pp. 530–64, passim), or “enforcing” (p. 534) or “encouraging” (p. 546) it by some magic power which the present state does not possess.

Fetter then replaces the abstraction “the state” with its actual personnel and powers. Burns’s administrative commission would combine policy-making, interpretation, and enforcement, including coercive sanctions, while escaping much legislative and judicial restraint. Yet no improved appointment mechanism guarantees capable, public-minded administrators. The same fallible people whose performance allegedly discredits antitrust enforcement would undertake substantially harder tasks with greater authority.

The review’s relevance lies in its linkage of industrial organization, legal institutions, and democratic accountability. Fetter argues that declaring competition doomed can weaken the public determination needed to sustain it. His concluding claim is methodological as well as political: Burns’s case should be tested against its own evidence and assumptions, not merely opposed from another social philosophy. The review thus preserves the descriptive value of Burns’s research while rejecting the passage from concentration to inevitability, and from inevitability to an administratively consolidated economic state.