The Alleged “Inevitable” Tendency Toward Monopoly Has Been Largely Confined to the Two “New Eras”

Every era of speculation brings forth a crop of theories designed to justify the speculation, and speculative slogans are easily seized upon. The term “new era” was the slogan for the 1927-1929 period. We were in a new era in which old economic laws were suspended. . . .

The new era of 1924-1929, like the earlier new era of 1896-1903, was characterized by a great consolidation movement. The alleged “inevitable tendency toward monopoly” in American business has been largely confined to these two “new eras.” It has not been due to technological or industrial reasons, but rather has been due to the ease with which new securities can be issued when money is excessive and stocks are rising — which makes it easy and profitable to organize holding companies and buy out competing concerns. There have been, in fact, only two great periods of consolidation in our history, the three-year period 1899-1902, and the five-year period 1924-1929. Both were periods of cheap money and excited stock markets. There were, in fact, a great many consolidations in the years 1924-1929. . . .

Bank consolidations, carefully considered, are often wholesome and beneficial, but the activities of promoters in throwing together a great many banks, as an incident to an excited stock market, were clearly unwholesome and dangerous. . . .

Another development of the period was the rapid multiplication and rapid growth of investment trusts. The investment trust idea is good in itself, and investment trusts in England and Scotland had had a long and honorable history. Investment trust management in the United States following 1932 has been, on the whole, highly creditable. But the mushroom growth of institutions of this kind in a financial atmosphere such as obtained in 1928-1929 was bound to bring a great deal of grief and humiliation.

—Benjamin M. Anderson, Economics and the Public Welfare: Financial and Economic History of the United States, 1914-1946 (1949; repr., Princeton, NJ: D. Van Nostrand Company, 1965), 202-204.