In a sweeping executive order aimed at reimposing Progressive Era regulatory policy across the U.S. economy, President Biden recounted the foundational myths of modern progressivism. The first canon of progressivism holds that breaking up the consolidating industries or trusts in the late 19th and early 20th centuries, and regulating those industries heavily until the late 1970s, benefited the economy and gave “the little guy” a fighting chance.
Progressive interpretation claims that the industrial concentration of the late 19th and early 20th centuries was evidence of the rise of monopolies, but if the consolidating industries were exhibiting anticompetitive behavior, output would have fallen and prices would have risen. The opposite happened.
Hard economic data consistently shows that the industrial concentration at the turn of the 19th century was driven by vigorous competition arising from transformative technology and improved industrial organization. Efficient producers mastered the economies of scale to provide consumers with lower prices and improved product quality. Competition and new technology destroyed the pricing power of emerging trusts, and most failed to survive.
Many trusts welcomed progressive regulation. A comprehensive study by economist George Hilton and historian Gabriel Kolko showed convincingly that railroads championed regulation. They were more than happy to have the feds set freight rates. Market forces had driven down revenues per ton-mile by some 18% between 1870 and 1890.
The 1970s brought two recessions, double-digit inflation and an end to America’s postwar economic dominance, setting off an intense policy debate. As economists, regulators, politicians, business leaders and policy advocates debated why the U.S. economy seemed to be losing its exceptionalism, a consensus formed around the belief that regulations based on the Progressive Era principles that Mr. Biden now seeks to revive were hurting consumers, workers and the economy.
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