LEC+12+MGR+CAP+S12-1

LEC+12+MGR+CAP+S12-1 - UGBA - AS 172 THE AGE OF MANAGERIAL...

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1 UGBA - AS 172 THE AGE OF MANAGERIAL CAPITALISM and MASS CONSUMPTION BEGINS
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2 BA- AS 172 PERIODIZATION l 1800s - 1860s: Industrial Revolution l 1860s - 1890s: Rise of Big Business l 1890s - 1930s : Emergence of Managerial Capitalism and Mass Consumption l 1940s – 1960s : Golden Age of Managerial Capitalism l 1970s - Today : Global Capitalism
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3 Finish up history of Anti-trust l Why the paradox? Sherman Act passed in 1890 PROBLEMS 1895 Knight Sugar Trust case 1904 Northern Securities case Key case was the Standard Oil Case (1911)  rule of reason doctrine
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4 RULE OF REASON DOCTRINE l What constitutes an unreasonable restraint of trade? l PROBLEM OF PROOF
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5 OUR CASE l 1917-18 meat packing industry case Industry was already in public eye Upton Sinclair’s “THE JUNGLE” Meat inspection laws
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6 ANTI-TRUST IN MEAT PACKING l 1890s, 1900s investigations Pooling, mergers l FTC investigation (1917-18) Highly concentrated industry “BIG 5” COMPANIES
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7 WHAT FTC FOUND l Yes – there was a monopoly l It was based on ECONOMIES OF SCALE VERTICAL INTEGRATION
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8 Economies of scale in beef and sheep packing - early 1900s
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9 Big 5 Economies of scale related to vertical integration l More by product processing Revolving bone washer Power Hoof Puller Cattle head splitter
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10 Settling kettle for oleo oils Driers for processing blood, rendering tankage wastes, etc. into fertilizer
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11 BIG 5 VERTICAL INTEGRATION l Ownership of stockyards l Refrigerated warehouses, railroad cars l RR terminals l Branch houses
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12 WHAT FTC FOUND l Monopoly existed in interstate trade in meat products ( not local trade ) l Real efficiencies but also barriers to entry l No evidence of collusion of abuse of monopoly power
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13 OUTCOME: NO PROSECUTION l 1920 CONSENT DECREE Companies agreed to Divest some assets Not collude No non-meat food lines Gov Dropped anti-trust suit
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14 FURTHER OUTCOME l 1921 HAUGEN BILL PASSED Weak rate regulation Oligopolistic market structure left intact Your reaction? Should this industry have been broken up?
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15 IMPACT OF RULE OF REASON l United Shoe Machinery Co. Case (1918) - 90% OF MKT l U.S. Steel Case (1920) - OVER 60% OF MKT
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16 IMPACT l U.S. = THE LAND OF BIG BUSINESS, THE FREE MARKET l + IMPERFECT COMPETITION AMERICANS LEARNED TO LIVE WITH TODAY? Is this still a big, symbolic issue? What are we afraid of?
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