Louis D. Brandeis and the Making of Regulated Competition, 1900-1932

Published by EH.NET (January 2011)

Gerald Berk, Louis D. Brandeis and the Making of Regulated Competition, 1900-1932. New York: Cambridge University Press, 2009. xi + 282 pp. $85 (hardcover), ISBN: 978-0-521-42596-4.

Reviewed for EH.Net by William M. McClenahan Jr., Department of Logistics, Business and Public Policy, University of Maryland.?

Political scientist Gerald Berk continues themes he explored in Alternative Tracks (1997) about diverse possibilities for the structure of American capitalism in the post-Civil War period and how the regulatory schemes of the Interstate Commerce Commission resisted the mechanisms that would have made such alternative schemes viable.? In Louis D. Brandeis and the Making of Regulated Competition, 1900-1932, he brings his arguments forward to the origins of the Federal Trade Commission (1915) and the? FTC incubated “associationalism” movement of the 1920s and beyond.? Berk’s argues here that Brandeis’ ideas about “regulated competition,” grounded in scientific management, and use of innovative cost-accounting techniques could have led American capitalism down a different path.? With intensity, Berk argues that the stark dichotomies that other authors have characterized as the choices of the early twentieth century — the Progressives acceptance of large corporations while attempting to bend their behavior toward national goals or the Populist approach to reduce their size and police them — were not the only viable choices.??

Berk presents a compelling case for the consistency and importance of the analytical approaches of Brandeis; the diversity of American business organization in the post-World War I era; and the role of the FTC in the process. Brandeis and the Making of Regulated Competition will appeal mostly to political scientists, and to a lesser extent economic, business, political and legal historians.? The work’s numerous analytical and theoretical discussions and dense vocabulary will limit its value to any general reader and even some specialists.?? Berk puts his theory “up front” and quite truthfully, this is a problem.? In Berk’s first two (of eight) chapters he outlines his theory of “creative syncretism” — that institutional development is not the captive of technological and economic determinism.? Rather, institutions consist of divergent parts that actors can assemble and reassemble with more flexibility than historians in the past have thought possible.? According to Berk this could be most effectively done with prior assumptions about industry fixed cost.? Thus, industries could recast such information in a manner that could yield support for divergent competitive, political and social frameworks.?? Berk continues a refinement of this argument by discussing how Brandeis and subsequently the new FTC espoused creative syncretism, and selective tools of scientific management to recast a third alternative of “associationalist” economic principles, grounded in benchmarking.? What was created was a scheme of “cultivational regulation,” or regulated competition, which Berk argues Brandeis first advocated for railroads.? Then the concept was incorporated into the DNA of the new FTC and ultimately practiced in a significant, but limited manner in the 1920s and beyond.? The author postulates that these elements offer a third alternative interpretation to the business history and political and social developments of the period, despite the failure of regulated competition to achieve widespread acceptance and success during and after the 1920s.

Here, in my opinion, is the problem with Berk’s study.? His analysis of potential of such regulated competition does not live up to the hype of the practice of it detailed in the subsequent six chapters of his book.? That is not to say that the author has not mined sources and produced an excellent study of various associations? use of “cultivational” regulatory tools, as was the case of printers and others such as lumber, paper and printing and iron and steel.? Furthermore, the approach met several antitrust challenges and adapted and continued to exist.?? The problem in my mind is that Berk’s scholarship and deep research shows that the adoption and adaptation of such techniques, was overall limited, tentative and experimental, except with the possible exception of printers. Thus, Berk’s lengthy, impassioned, and complex discussion of his theories and analytical constructs is not really followed with an equally intense discussion of the evidence to support them.? Nor is the evidence sufficient to support the conclusion that such a “third way” was a viable alternative, except possibly in a few limited contexts.? Still Berk has produced a solid study that advances our understanding of Brandeis and the complexity and diversity of political and business choices the United States confronted in the first third of the last century.

William M. McClenahan, Jr. is a lecturer in business law and public policy at the Robert H. Smith School of Business, University of Maryland — College Park.? He is the author (with William H. Becker) of The Market, the State, and the Export-Import Bank of the United States: 1934-2000 (Cambridge University Press, 2003).? His forthcoming work (with William H. Becker) is Eisenhower and the Cold War Economy: Policy Making in the 1950s (Johns Hopkins University Press, 2011).

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