Message to Congress on
the Concentration of Economic Power
Franklin D. Roosevelt
April 29, 1938
To the Congress of the United States:
Unhappy events abroad have re-taught us
two simple truths about the liberty of a democratic people.
The first truth is that the liberty of
a democracy is not safe if the people tolerate the growth of private
power to a point where it becomes stronger than their democratic
state itself. That, in its essence, is fascism -- ownership of
government by an individual, by a group, or by any other controlling
The second truth is that the liberty
of a democracy is not safe, if its business system does not provide
employment and produce and distribute goods in such a way as to
sustain an acceptable standard of living.
Both lessons hit home.
Among us today a concentration of
private power without equal in history is growing. This
concentration is seriously impairing the economic effectiveness of
private enterprise as a way of providing employment for labor and
capital and as a way of assuring a more equitable distribution of
income and earnings among the people of the nation as a whole.
[I] The Growing Concentration of
Statistics of the Bureau of Internal
Revenue reveal the following amazing figures for 1935:
Ownership of corporate assets: Of all
corporations reporting from every part of the nation, one-tenth of 1
percent of them owned 52 percent of the assets of all of them.
And to clinch the point: Of all
corporations reporting, less than 5 percent of them owned 87 percent
of all assets of all of them.
Income and profits of corporations:
Of all the corporations reporting from every part of the country,
one-tenth of 1 percent of them earned 50 percent of the net income
of all of them.
And to clinch the point: Of all the
manufacturing corporations reporting, less than 4 percent of them
earned 84 percent of all the net profits of all of them.
The statistical history of modern
times proves that in times of depression concentration of business
speeds up. Bigger business then has larger opportunity to grow
still bigger at the expense of smaller competitors who are weakened
by financial adversity.
The danger of this centralization in a
handful of huge corporations is not reduced or eliminated, as is
sometimes urged, by the wide public distribution of their
securities. The mere number of security holders gives little clue
to the size of their individual holdings or to their actual ability
to have a voice in the management. In fact, the concentration of
stock ownership of corporations in the hands of a tiny minority of
the population matches the concentration of corporate assets.
The year 1929 was a banner year for
distribution of stock ownership.
But in that year three-tenths of 1
percent of our population received 78 percent of the dividends
reported by individuals. This has roughly the same effect as if,
out of every 300 persons in our population, one person received 78
cents out of every dollar of corporate dividends, while the other
299 persons divided up the other 22 cents between them.
The effect of this concentration is
reflected in the distribution of national income.
A recent study by the National
Resources Committee shows that in 1935-36:
Forty-seven percent of all American
families and single individuals living alone had incomes of less
than $1,000 for the year; and at the other end of the ladder a
little less than 1 percent of the nation’s families received incomes
which in dollars and cents reached the same total as the incomes of
the 47 percent at the bottom.
Furthermore, to drive the point home,
the Bureau of Internal Revenue reports that estate-tax returns in
1936 show that --
Thirty-three percent of the property
which was passed by inheritance was found in only 4 percent of all
the reporting estates. (And the figures of concentration would be
far more impressive, if we included all the smaller estates which,
under the law, do not have to report.)
We believe in a way of living in which
political democracy and free private enterprise for profit should
serve and protect each other -- to insure a maximum of human
liberty, not for a few, but for all.
It has been well said that, “The
freest government, if it could exist, would not be long acceptable
if the tendency of the laws were to create a rapid accumulation of
property in few hands and to render the great mass of the population
dependent and penniless.”
Today many Americans ask the uneasy
question: Is the vociferation that our liberties are in danger
justified by the facts?
Today’s answer on the part of average
men and women in every part of the country is far more accurate than
it would have been in 1929 for the very simple reason that during
the past 9 years we have been doing a lot of common-sense thinking.
Their answer is that if there is that danger, it comes from that
concentrated private economic power which is struggling so hard to
master our democratic government. It will not come, as some (by no
means all) of the possessors of that private power would make the
people believe -- from our democratic government itself.
[II] Financial Control Over Industry
Even these statistics I have cited do
not measure the actual degree of concentration of control over
Close financial control, through
interlocking spheres of influence over channels of investment and
through the use of financial devices like holding companies and
strategic minority interests, creates close control of the business
policies of enterprises which masquerade as independent units.
That heavy hand of integrated
financial and management control lies upon large and strategic areas
of American industry. The small businessman is unfortunately being
driven into a less and less independent position in American life.
You and I must admit that.
Private enterprise is ceasing to be
free enterprise and is becoming a cluster of private collectivisms;
masking itself as a system of free enterprise after the American
model, it is in fact becoming a concealed cartel system after the
We all want efficient industrial
growth and the advantages of mass production. No one suggests that
we return to the hand loom or hand forge. A series of processes
involved in turning out a given manufactured product may well
require one or more huge mass-production plants. Modern efficiency
may call for this. But modern efficient mass production is not
furthered by a central control, which destroys competition between
industrial plants each capable of efficient mass production while
operating as separate units. Industrial efficiency does not have to
mean industrial empire building.
And industrial empire building,
unfortunately, has evolved into banker control of industry. We
Such control does not offer safety for
the investing public. Investment judgment requires the
disinterested appraisal of other people’s management. It becomes
blurred and distorted if it is combined with the conflicting duty of
controlling the management it is supposed to judge.
Interlocking financial controls have
taken from American business much of its traditional virility,
independence, adaptability, and daring -- without compensating
advantages. They have not given the stability they promised.
Business enterprise needs new vitality
and the flexibility that comes from the diversified efforts,
independent judgments, and vibrant energies of thousands upon
thousands of independent businessmen.
The individual must be encouraged to
exercise his own judgment and to venture his own small savings, not
in stock gambling but in new enterprise investment. Men will dare
to compete against men but not against giants.
The Decline of Competition and Its Effects on Employment
In output per man or machine we are
the most efficient industrial nation on earth.
In the matter of complete mutual
employment of capital and labor we are among the least efficient.
One of the primary causes of our
present difficulties lies in the disappearance of price competition
in many industrial fields, particularly in basic manufacture where
concentrated economic power is most evident -- and where rigid
prices and fluctuating pay rolls are general.
[IV] Competition Does Not Mean
Competition, of course, like all other
good things, can be carried to excess. Competition should not
extend to fields where it has demonstrably bad social and economic
consequences. The exploitation of child labor, the chiseling of
workers’ wages, the stretching of workers’ hours, are not necessary,
fair, or proper methods of competition. I have consistently urged a
Federal wages-and-hours bill to take the minimum decencies of life
for the working man and woman out of the field of competition.
It is, of course, necessary to operate
the competitive system of free enterprise intelligently. In gaging
the market for their wares, businessmen, like farmers, should be
given all possible information by government and by their own
associations so that they may act with knowledge, and not on
impulse. Serious problems of temporary over-production can and
should be avoided by disseminating information that will discourage
the production of more goods than the current markets can possibly
absorb or the accumulation of dangerously large inventories for
which there is obvious need.
It is, of course, necessary to
encourage rises in the level of those competitive prices, such as
agricultural prices, which must rise to put our price structure into
more workable balance and make the debt burden more tolerable. Many
such competitive prices are now too low.
It may at times be necessary to give
special treatment to chronically sick industries which have
deteriorated too far for natural revival, especially those which
have a public or quasi-public character.
But generally over the field of
industry and finance we must revive and strengthen competition if we
wish to preserve and make workable our traditional system of free
The justification of private profit is
private risk. We cannot safely make America safe for the
businessman who does not want to take the burdens and risks of being
[V] The Choice Before Us
Examination of methods of conducting
and controlling private enterprise which keep it from furnishing
jobs or income or opportunity for one-third of the population is
long overdue on the part of those who sincerely want to preserve the
system of private enterprise for profit.
No people, least of all a democratic
people, will be content to go without work or to accept some
standard of living which obviously and woefully falls short of their
capacity to produce. No people, least of all a people with our
traditions of personal liberty, will endure the slow erosion of
opportunity for the common man, the oppressive sense of helplessness
under the domination of a few, which are overshadowing our whole
A discerning magazine of business has
editorially pointed out that big-business collectivism in industry
compels an ultimate collectivism in government.
The power of a few to manage the
economic life of the nation must be diffused among the many or be
transferred to the public and its democratically responsible
government. If prices are to be managed and administered, if the
nation’s business is to be allotted by plan and not by competition,
that power should not be vested in any private group or cartel,
however benevolent its professions profess to be.
Those people, in and out of the halls
of government, who encourage the growing restriction of competition
either by active efforts or by passive resistance to sincere
attempts to change the trend, are shouldering a terrific
responsibility. Consciously or unconsciously they are working for
centralized business and financial control. Consciously or
unconsciously they are therefore either working for control of the
government itself by business and finance or the other alternative
-- a growing concentration of public power in the government to cope
with such concentration of private power.
The enforcement of free competition is
the least regulation business can expect.
The traditional approach to the
problems I have discussed has been through the antitrust laws. That
approach we do not propose to abandon. On the contrary, although we
must recognize the inadequacies of the existing laws, we seek to
enforce them so that the public shall not be deprived of such
protection as they afford. To enforce them properly requires
thorough investigation not only to discover such violations as may
exist but to avoid hit-and-miss prosecutions harmful to business and
government alike. To provide for the proper and fair enforcement of
the existing antitrust laws I shall submit, through the Budget,
recommendations for a deficiency appropriation of $200,000 for the
Department of Justice.
But the existing antitrust laws are
inadequate -- most importantly because of new financial economic
conditions with which they are powerless to cope.
The Sherman Act was passed nearly 40
years ago. The Clayton and Federal Trade commission Acts were
passed over 20 years ago. We have had considerable experience under
those acts. In the meantime we have had a chance to observe the
practical operation of large-scale industry and to learn many things
about the competitive system which we did not know in those days.
We have witnessed the merging-out of
effective competition in many fields of enterprise. We have learned
that the so-called competitive system works differently in an
industry where there are many independent units, from the way it
works in an industry where a few large producers dominate the
We have also learned that a realistic
system of business regulation has to reach more than consciously
immoral acts. The community is interested in economic results. It
must be protected from economic as well as moral wrongs. We must
find practical controls over blind economic forces as well as over
blindly selfish men.
Government can deal and should deal
with blindly selfish men. But that is a comparatively small part --
the easier part -- of our problem. The larger, more important and
more difficult part of our problem is to deal with men who are not
selfish and who are good citizens, but who cannot see the social and
economic consequences of their actions in a modern economically
interdependent community. They fail to grasp the significance of
some of our most vital social and economic problems because they see
them only in the light of their own personal experience and not in
perspective with the experience of other men and other industries.
They therefore fail to see these problems for the nation as a
To meet the situation I have
described, there should be a thorough study of the concentration of
economic power in American industry and the effect of that
concentration upon the decline of competition. There should be an
examination of the existing price system and the price policies of
industry, to determine their effect upon the general level of trade,
upon employment, upon long-term profits, and upon consumption. The
study should not be confined to the traditional antitrust field.
The effects of tax, patent, and other government policies cannot be
No man of good faith will misinterpret
these proposals. They derive from the oldest American traditions.
Concentration of economic power in the few and the resulting
unemployment of labor and capital are inescapable problems for a
modern “private enterprise” democracy. I do not believe that we are
so lacking in stability that we will lose faith in our own way of
living just because we seek to find out how to make that way of
living work more effectively.
This program should appeal to the
honest common sense of every independent businessman interested
primarily in running his own business at a profit rather than in
controlling the business of other men.
It is not intended as the beginning of
any ill-considered “trust-busting” activity which lacks proper
consideration for economic results. It is a program to preserve
private enterprise for profit by keeping it free enough to be able
to utilize all our resources of capital and labor at a profit.
It is a program whose basic purpose is
to stop the progress of collectivism in business and turn business
back to the democratic competitive order.
It is a program whose basic thesis is
not that the system of free private enterprise for profit has failed
in this generation, but that it has not yet been tried.
Once it is realized that business
monopoly in America paralyzes the system of free enterprise on which
it is grafted, and is as fatal to those who manipulate it as to the
people who suffer beneath its impositions, action by the government
to eliminate these artificial restraints will be welcomed by
industry throughout the nation.
For idle factories and idle workers
profit no man.
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