Monopoly Menace: The Rise and Fall of 'Cartel Capitalism' in Western Europe, 1918-1957

Abstract

Cartels are illegal around the world. But this has not always been the case. Until the end of World War II, business associations that rig free market competition to achieve monopoly were legal, popular, and ubiquitous—especially in Europe. After 1945, however, Western European countries and Japan began dismantling, controlling, and prohibiting cartels. How, then, did cartels become bad? That is the fundamental question this dissertation poses. Monopoly Menace investigates the causes and consequences of Europe’s anti-cartel revolution. It then situates this great reversal within the history of European and international political economy across the long 20th-century. The dissertation begins by tracing how a governing consensus in interwar Europe—comprising international organizations, statesmen, industrialists, technocrats, and socialists—promoted cartels as a solution to the challenges of reconstruction: namely peacebuilding and the failure of free-markets. Part II argues that this consensus broke down under the shock of the Great Depression, fascism, and total war. Prosecutions and investigations by the U.S. antitrust agencies, French Resistance, British government, and Nuremberg Tribunals criminalized the Nazis’ weaponization of cartels. These proceedings further condemned Allied businesses’ cartel collaborations with the Axis as sabotage of the anti-fascist war effort. Consequently, a transnational anti-cartel consensus emerged by 1945 which delegitimized cartels as the enemy of democratic sovereignty, peace, and prosperity. Parts III and IV finally showcase how French, British, and German postwar planners designed new national democratic welfare-states and a united Europe on anti-cartel foundations. This research challenges two misconceptions in the history of antitrust law. First, the U.S. neither invented the anti-cartel project nor enjoyed a monopoly over its ideals. Second, Europeans—unlike Americans antitrusters—did not look to trust-busting as the main remedy to monopoly power. Instead, the French, British and West German postwar governments curbed cartels and trusts by restructuring their whole economies through nationalizations, co-determination, patent reform, intergovernmental commodity controls, and supranational competition law. As corporations grow ever-more powerful in our 21st-century world, many Americans clamor for more trust-busting. Regulators would do well, however, to recover the broader set of anti-monopoly policies that transformed Europe from the interwar heartland of cartels into today’s leading anti-monopoly regulator.