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other words, are but one part of a much larger current of change. To see them in isolation from other change is artificial. In part it is what results when a social discipline passes however partially from the custody of scholars to that of specialists and mechanics.

I have also been concerned in this book with the problem of how we are to survive, and in civilized fashion, in a world of great organizations which, not surprisingly, impose both their values and their needs on the society they are assumed to serve. But these further matters are not directly at issue this morning. In any case they do not directly involve the question of the antitrust laws.

The issue of the antitrust laws arises in response to a prior question. That question is whether we can escape the concentration and the attendant market control and planning which I have outlined and whether the antitrust laws, as now used, are an effective instrument for this escape. The present hearings materialized when I urged the contrary-when I said that the trend to great size and associated control was immutable, given our desire for economic development, and that the present antitrust efforts to deal with size and market power were a charade. I noted that the antitrust laws legitimatize the real exercise of market power on the part of the large firms by a rather diligent harassment of those who have less of it. Thus, they serve to reassure us on the condition they are assumed to correct.

The facts which lead to the foregoing conclusions are not at all obscure. Nor are they matters of great subtlety. They are accepted by most competent economists and lawyers including the very distinguished men here this morning. Only the rather obvious conclusions to be drawn from these facts encounter a measure of resistance. This, no doubt, is purely temporary, but while it persists it does cause a measure of confusion.

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The most effective manifestation of economic power, all must agree, is simply the big firm. To be big in general and big in an industry & is by far the best way of influencing prices and costs, commanding capital, having access to advertising, and selling resources, and possessing the other requisites of market power. And, as we have seen, by common agreement the heartland of the industrial economy is now dominated by large firms. The great bulk of American business is transacted by very large corporations.

And here enters the element of charade in the antitrust laws. If a firm is already large it is substantially immune under the antitrust laws. If you already have the basic requisite of market power, you are safe. The Assistant Attorney General în Charge of the Antitrust Laws in the distinguished book to which I have already adverted argues that the market power of the large firm should now be made subject to the antitrust laws. This indeed is the main thrust of Mr. Turner's and Mr. Kaysen's book. If something needs to be done, he would not, of course, argue that it has been done. And in responding to the questions of this committee on May 2 of this year he affirmed the point, if in slightly more cautious language:

It is more difficult under present law to bring a case attacking existing concentration in an industry than to prevent further concentrations which firms attempt to realize through merger."

The two go together although some economists, in a desire to exculpate size while indicting monopoly, have, curiously enough, asserted the contrary.

Letter to the Honorable Wayne Morse, May 2, 1967 (his emphasis).

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But this we see is no minor qualification. If firms are already largeif concentration is already great if the resulting power to use Mr. Turner's own words, is not "merely marginal" but is "spread widely through the economy" as he says, then it means that all so favored have won immunity or virtual immunity from the antitrust laws. And this, of course, is the case.

Meanwhile, the antitrust laws are effective in two instances where the firms do not have market power but are seeking to achieve it. Where firms are few and large they can, without overt collusion, establish and maintain a price that is generally satisfactory to all participants. Nor is this an especially difficult calculation, this exercise of power. This is what we economists with our genius for the neat phrase have come to call oliogopolistic rationality. And this market power is legally immune or very nearly so. It is everyday practice in autos, steel, rubber, and virtually every other industry shared or dominated by, relatively, a few large firms. But if there are 20 or 30 or more significant firms in the industry, this kind of tacit pricemaking-this calculation as to what is mutually advantageous but without overt communication-becomes more difficult, maybe very difficult. The same result can only be achieved by having a meeting or by exchanging information on prices and costs and price intentions. But this is illegal. It is also legally vulnerable. And it is, in fact, an everyday object of prosecution as the Department of Justice will confirm. What the big firm in the concentrated industry can accomplish legally and effortlessly because of its size, the small firm in the unconcentrated industry does at the pain of civil and even criminal prosecution. Moreover, with this my colleagues will, I believe, agree.

The second manifestation of the charade has to do with mergers. If a firm is already large, it has as a practical matter nothing to fear under antimerger provisions of the Clayton Act. It will not be demerged. It can continue to grow from its own earnings; if discreet, it can even, from time to time, pick up a small and impecunious competitor, for it can reasonably claim that this does little to alter the pattern of competition in the industry. But if two medium-sized firms unite in order to deal more effectively with this giant, the law will be on them like a tiger. Again if large, you are exempt. If you seek to become as large, or even if you seek to become somewhat larger, although still much smaller, you are in trouble. And again I doubt that the committee will encounter a great deal of dissent.

Here we have the nature of modern antitrust activity. It conducts a fairly effective war on small firms which seek the same market power that the big firms already, by their nature, possess. Behind this impressive facade the big participants who have the most power bask in nearly total immunity. And since the competitive market, like God and a sound family life, is something that no sound businessman can actively oppose, even the smaller entrepreneurs who are the natural victims of this arrangement do not actively protest. It is possible that they do not know how they are being used.

As I say all of this is agreed-or at least is supported by the past writings and speeches of participants in this discussion. All I have done I wish I could lay claim to greater novelty-is to state the rather disagreeable conclusion flowing from this agreement. The anti

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trust laws give the impression of protecting the market and competition by attacking those who exercise it most effectively. I wonder if the committee thinks that charade is an unjust word?

Now let me clear up two or three secondary matters which may seem to affect this discussion but really do not. The first requires me, I think for the first time-in substance as distinct from terminologyto quit company with Attorney General Turner. Mr. Turner, while conceding that the law is largely helpless in attacking achieved as distinct from aspired-to power, holds that it is important to act preventatively to keep smaller firms from getting larger. This he has emphasized in his responses to this committee. It will surely have occurred to the committee, as it must have occurred to Mr. Turner, that this does not meet the issue of gross discrimination as between those who already have and those who aspire to market power. Nor, one imagines, can a major law officer of the Government be entirely happy about such discrimination. It condones professional and accomplished wrongdoing, as it were, but stresses the importance of cracking down on amateur wickedness. Surely this is bad law. Also, given the size and market power that has already been achieved, and given its immunity, it will be evident that this justification amounts to locking the stable door not alone after the horse has been stolen but after the entire stud has been galloped away.

Next, I must correct a misapprehension of Attorney General Turner. His responses to the committee and his extremely interesting lecture attacking my general position in London convey the impression that I am concerned with making the economic case for the large corporation. I am, he suggests, especially concerned to defend its efficiency and technical virtuosity. To this he responds by arguing that, while the big corporation is more efficient than the small firm, there is no great difference between the big corporation and the giant corporation. He doesn't make altogether clear, incidentally, how big a big as distinct from a giant corporation is. All would, I imagine, be among the five hundred or thousand firms that dominate industrial activity. But I have a more fundamental objection. He attacks me on a point that concerns me little and which is of no importance for my case.

I am not concerned with making the case for big business. Nor am I especially concerned about its efficiency or inefficiency. Doubltess efficiency is worth having. But, like truth, regular bathing and better traffic regulation, it has an adequate number of exponents. I have always thought it unwise to compete with the commonplace. Mr. Turner may be correct in his conclusions about the giants. I am content to argue that we have big business, and that the antitrust laws notwithstanding we will continue to have it, and that they give an impression of alternative possibilities that do not exist.

I conclude also that while big business and giant business may not be more efficient, their market power as manifested only on what they sell and what they buy and over buyers does give them advantages in planning their own future and insuring their own survival. Since big business is inevitable and will not be affected by the antitrust laws, I naturally go on to consider how we may come to terms with it. Much of my book is concerned with that. If my colleagues this morning disagree, as is their right, they must tell you how the antitrust laws

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are to be brought effectively to bear on the large corporation. Otherwise and here let me interpolate an important point-there is no escape from the conclusion that the antitrust laws, so far from being a threat to big business are a facade behind which it operates with yet greater impunity. They create the impression, the antitrust laws, that the market is a viable control. Then, if a drug firm has exorbitant profits, it can say this is what the market allows. Or if an automobile firm does not want to install safety appliances, it can say that the market does not demand it. Or if there is resistance to Government price guideposts to prevent inflation, it can be said that these interfere with the market.

In each case, the antitrust laws effectively protect the large business from social pressure or regulation by maintaining the myth that the market does the regulating instead.

Finally, I agree that the antitrust laws have purposes other than those related to the structure of industry and the resulting power and planning. I agree in particular they are a code of what is deemed fair and decent as between seller and buyers. They exclude the resort to activities naked aggression, as in the case of the old Standard Oil Co. in the last century-based on superior economic resources, favoritism, surreptitious and unfair discounts, numerous other practices which the civilized commercial community holds in disesteem. I have no complaint about these aspects of the antitrust laws. On the contrary, I consider them serviceable. But only in the most marginal fashion do they thus affect the structure of industry. They are, in large part, a separate matter and do not affect the discussion here.

To what then does this all lead? It is possible that my distinguished colleagues here this morning will call for an all-out attack on achieved market power along the lines which Attorney General Turner has adumbrated in his book, which Prof. Walter Adams has long favored, and which I have just said would be necessary if they disagree with my conclusions on the inevitability of market power. This means action, including enabling legislation leading to all-out dissolution proceedings against General Motors, Ford, the oil majors, United States Steel, General Electric, IBM, Western Electric, Du Pont, Swift, Bethlehem, International Harvester, North American Aviation, Goodyear, Boeing, National Dairy Products, Procter & Gamble, Eastman Kodak, and all of comparable size and scope. For there can be no doubt: All are giants. All have market power. All enjoy an immunity not accorded to those who merely aspire to their power. Such an onslaught, tantamount, given the role of the big firms in the economy as I described it, to declaring the heartland of the modern economy illegal, would go far to make legitimate the objections to my position. It would mean that achieved market power was subject to the same legal attack as that which is only a matter of aspiration.

But I will be a trifle surprised if my distinguished colleagues from the Government are willing to proclaim such a crusade. I am frank to say I would not favor it myself; as I indicated at the outset, I do not think that the growth of the modern corporation can be isolated from other and intricately related changes in modern economic development. I doubt that one can operate on one part of this fabric. The political problems in proclaiming much of the modern economy illegal will also strike many as impressive.

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If this crusade is not to be launched, then my good friends have no alternative but to agree with me. They are good men; they cannot acquiesce in a policy which by their own admission attacks the small man for seeking what the big firm enjoys with impunity. I readily concede that it would be quixotic to ask the repeal of the antitrust laws although other industrial countries function quite competently without them. But the antitrust laws are part of the American folklore. They receive strong support from the legal profession and vice versa. They have a reserve value for dealing with extreme and sanguinary abuse of power as occasionally occurs. I would be content were we simply to withdraw our faith from the antitrust laws-were we to cease to imagine that there is any chance that they will affect the structure of American industry or its market power and, having in mind the present discrimination in their application, were we then to allow them quietly to atrophy. Then we would face the real problem, which is how to live with the vast organizations and the values they impose that we have and will continue to have. This being so, nostalgia will no longer be a disguise for that necessity.

Thank you, Mr. Chairman.

Senator MORSE. Professor Galbraith, I want to say it is sometimes said by biased friends of Harvard that Harvard has a monopoly on stimulation. You almost proved the case this morning, because you have certainly stimulated this committee and, I am sure, your colleagues on the panel and this audience. I wish I could go back and sit in your seminar, because you make me want to return to the books. This morning, I want to thank you on behalf of the committee for this very stimulating discussion.

I am now pleased to call our next panelist, Prof. Walter Adams of Michigan State University, who has already been credentially introduced by Senator Long.

I want to say, Professor Adams, we are honored to have you with us, and we shall listen to you now with great interest. You may proceed in whatever way you wish.

STATEMENT OF DR. WALTER ADAMS, PROFESSOR OF ECONOMICS, MICHIGAN STATE UNIVERSITY, EAST LANSING, MICH.

Dr. ADAMS. Thank you, Senator Morse, Senator Long, Senator Baker.

Time precludes more than a cursory tribute to an eminently civilized and literate political economist-a leader in that small but brave army of men who "prefer to see the truth imperfectly and obscurely rather than to maintain error, reached indeed with clearness and consistency and by easy logic, but based on hypotheses inappropriate to the facts." It is Galbraith's cardinal virtue to focus on real problems and vital. issues. His questions are invariably to the point. Regrettably, his answers are sometimes wrong.

In the "New Industrial State," Galbraith once again examines the reality of corporate giantism and corporate power, and outlines the implications for public policy. He finds that the giant corporation has achieved such dominance of American industry, that it can control its environment and immunize itself from the discipline of all exoge