The Government and Private Interests, 1962 and 2019

Last Saturday’s New York Times reported that the Justice Department has warned four leading car companies—Ford, Volkswagen of America, Honda and BMW--that it may pursue an antitrust case against them for sticking to a deal with the of California that would commit them to meeting mileage targets for their cars—and corresponding targets for carbon emissions—that are much stricter than the loose ones that the Trump Administration has just announced.  I immediately remembered another case, more than 57 years ago, in which the Justice Department threatened leading firms in a major American industry with antitrust action and helped change its behavior to meet a policy goal of the Kennedy Administration.  The comparison is a terrifying illustration of what has gone wrong in American life and American government since the early 1960s.

Some background is in order.  The 1940s, 1950s and 1960s saw remarkable economic growth in the United States, dominated by major industries such as automobiles, energy, and steel.  Meanwhile, they also saw a remarkable growth in the reach and power of the American labor movement, which had successfully organized coal miners, autoworkers, steelworkers, and just about every other major industry.  The unions made pretty steady wage gains for their workers, and their employers passed some of those gains on to consumers.  Inflation had become an intermittent problem during the 1950s, reaching about 3% annually in the middle of the decade, but falling in 1958-9 because of a recession.  Another recession struck in 1960-1, and the new Kennedy Administration, which included a number of prominent economists, wanted to encourage recovery without triggering a new round of price increases.  To do so, the administration, led by its Labor Secretary Arthur Goldberg—himself a labor lawyer—tried to intervene in major contract negotiations.

The American steel industry in 1962 was easily the world’s largest, and changes in its wages and prices always had immediate effects throughout the economy.  Its union contract was expiring in the spring of 1962.  In meetings that included both union leaders and Roger Blough of US Steel, Goldberg and the President made clear that they wanted a new contract that would not lead to a steel price increase.  Blough said nothing in response.  Then, when the parties had reached a settlement, Blough immediately announced that US Steel was raising its prices—a signal to the rest of the industry to do the same.   The President reacted immediately, opening a press conference by declaring that the price increase constituted “a wholly unjustifiable and irresponsible defiance of the public interest.” When the nation was asking the military, union members, and all its citizens for sacrifice, he said, “ the American people will find it hard, as I do, to accept a situation in which a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility can show such utter contempt for the interests of 185 million Americans.” (Readers who follow this link and read Kennedy’s entire statement will find a rather extraordinary contrast with a day or two of our current President’s tweets.)  The President led a government-wide effort to force Blough to back down, including the opening of an FBI investigation into price fixing in violation of the antitrust laws, and a shift of Defense Department steel purchases to companies that did not go along with the increase.  Within a few days, Blough rescinded the increase.  Kennedy had scored a remarkable victory for his Presidency—followed within the next six months by the successful attempt to secure the admission of the first black American to the University of Mississippi, and then, his remarkable resolution of the Cuban missile crisis.  During 1963 he followed those up with the introduction of the great civil rights bill that would end discrimination in public accommodations and the negotiation of the Test Ban Treaty with the Soviet Union.  No subsequent president has shown such a consistent ability to deploy the power of his office for the public good.

The Trump Administration’s decision to threaten the auto manufacturers with anti-trust action if they continue to observe their agreement with the state of California has an opposite purpose.  Kennedy successfully forced the steel companies to subordinate their private interests to the public interest.  Trump and Attorney General Barr want to help private interests—specifically, energy companies—at the expense of the public interest and the very future of human life on our planet.  Because of its vulnerability to pollution, the state of California has the right to set its own emissions standards, and because of the size of the market it represents, the car companies have an interest in observing those standards.  13 other states also follow California’s rules. Reducing the fuel consumption of our automobiles—now the single largest source of carbon pollution in the United States—is of course critical to any attempt to halt climate change.  The Trump Administration, however, remains in denial about climate change, and does not seem to want to lessen reliance on fossil fuels.  Its Justice Department is now accusing the auto manufacturers of conspiring to build more expensive cars, in an attempt to force them to abandon the California standards.  No one but Koch industries and other fossil fuel producers will benefit if the administration succeeds.

From the 1930s through the early 1960s, a sense of the public interest dominated the political life of the United States.  That enabled us to fight the Depression, prepare for and win the Second World War, and rebuild Europe. We expanded the nation’s housing stock and its school systems, undertook the interstate highway system, and mounted the civil rights movement.  Now nearly every politically active element in our society makes its demands on behalf of a particular economic interest or demographic group, not for the good of the nation of the whole.  That may be the biggest single reason for the catastrophic state of our political life.