This post, originally published by the Yale Journal on Regulation, is part of their excellent symposium on William Novak’s New Democracy: The Creation of the Modern American State.
In his chapter on antitrust law and the American antimonopoly tradition, the penultimate substantive chapter of the book, Novak covers much familiar ground. Yet, he is not focused on the conventional areas of debate in antitrust history, which have included recovering the congressional intent behind the Sherman Antitrust Act of 1890, recreating the economic logic of early antitrust jurisprudence, or surveying the doctrinal shift from “literalism” to the rule of reason. Instead, Novak’s narrative focuses on the “legal-intellectual framework for economic regulation” posited by institutional economists and legal realists, and the ways in which that framework was operationalized, especially in the administrative law of unfair competition. What is new (and provocative) is that he portrays this framework as unitary product of the “new democracy.”
The chapter sets out two goals. The first is to prove that “American antimonopoly was first and foremost a question of the democratic distribution of power and authority in a supposedly self-governing republic.” And, this second is to show that “this democratic antimonopoly moment,” in conjunction with expanded police powers and public utility law (covered in earlier chapters), “generated a template for a modern law of regulated industries.”
Novak’s main purpose is thus to use antimonopoly and administrative rulemaking, and to a certain extent antitrust case law, as another illustration that “the economic regulatory agenda of the long Progressive Era was devoted to [a] more omnibus and encompassing cause—the social control of business,” which entailed “a reconfiguration in the very nature of modern American capitalism.” Building on his previous work overturning the myth of the “weak state”—illustrated in this period by twin historical narratives of a “race to the bottom” in corporate regulation and Thomas McCraw’s depiction of the Louis Brandeis as economically incompetent—Novak insists that this era should be characterized instead by its “creation of brand-new sites and creative new rationales for the continued regulation of corporate power.”
At the broadest level, this interpretative endeavor succeeds in providing a new intellectual and philosophical framework for understanding how democratic theory informed the long progressive era’s approach to economic regulation. However, many specialists in antitrust law and history will take issue with the general sweep of the argument. First up would be constitutional conservatives, unsurprisingly. Proponents of Robert Bork’s (in)famous assertion that congressional intent of the Sherman Act was intended solely to protect consumer welfare, which Bork translated as allocative efficiency, will not be convinced.
That said, taking on that particular debate on intent or textualism is not really Novak’s purpose here. Other scholars, however, have focused on overturning Bork’s misguided history in a variety of ways, and those are incorporated by reference. There have been many historical excavations of Bork’s argument and its effect on courts. Most recently, Robert Lande has argued that no-fault monopolization, the ability of the state to break-up durable monopolies even without bad conduct, can be found in the congressional intent. For Novak, the antitrust statutes in this period were part of a broader socio-legal movement, and it is that movement that animated not just the antitrust laws but all economic regulation that composed the modern state.
The most significant difficulty with Novak’s legal-intellectual history is that the broad sweep of its thesis loses granularity—contingency, conflict, and compromise—that guided policymaking at the time and the historical analysis developed since then. New Democracy groups together individuals and ideas that require disentangling if we are to understand how the law operated at a particular moment in time, what policy options were available, and thus how law and legal thinking changed over time. Admittedly, it would have been difficult to fully incorporate contingency and compromise given the book’s already ambitious historiographical message, which is aimed at seeing the long progressive era as a whole, overthrowing any remaining myth of laissez-faire constitutionalism, and energizing a law and political economy movement to address our current moment’s crisis of economic inequality. Nevertheless, significant disagreement among progressives existed and persisted, and mattered for policymaking.
For example, Novak’s grouping of competing progressive factions belies the stakes of the 1912 election, which is widely appreciated as a turning point in American antitrust law. On the one hand, Novak opens the chapter with Louis Brandeis’s idea of “industrial liberty” to illustrate the “broad political and social-democratic perspective on antitrust” that drove legislation and jurisprudence. Brandeis was known for his critique of large-scale industrial firms’ inefficiencies, his support of Woodrow Wilson’s presidential campaign, and his endorsement of an administrative agency to police unfair competition. Additionally, as I argued in my book, American Fair Trade, the corollary to Brandeis’s antimonopolism was the devolution of economic power to smaller business units. He made efficiency claims to support this policy preference, but his was also fundamentally a political argument. He consistently argued that the rule of reason should be expanded—and the category of illegal per se limited—to allow independent proprietors to exercise greater control through the distribution chain (e.g., through resale price maintenance agreements, which he rebranded “fair trade”) and to foster trade association activities to rationalize business methods (e.g., through FTC-sponsored trade practice conferences), for example. (Though, to be clear, Brandeis would not have anticipated the rule of reason being translated into a “euphemism for nonliability,” to quote Richard Posner. And, for more recent evidence, see Michael Carrier.) In short, Brandeis was committed to an economic and political democracy that harnessed state power to protect individualism in production, labor, ideas, and political participation.
Yet, on the other hand, Novak borrows his title from Walter Weyl’s The New Democracy (1912), a book that was written in support of Theodore Roosevelt’s 1912 “New Nationalism” campaign. As is well-known, Weyl partnered with Herbert Croly and Walter Lippmann to found the New Republic magazine in 1914, and each of them wrote books that powerfully rejected as destructive the idea of individualism and instead endorsed the idea of socialized democracy. But, for them, as for T.R., competition itself was wasteful and large scale industrial firms—loosely defined as monopolies relative to current antitrust law’s more stringent tests for market power—were as inevitable as they were efficient. Rather than forced divestiture to reinstate competition or an expanded rule of reason to preserve independents, they embraced bureaucratic control of said firms. Theirs was a vision of state, economy, and democracy at odds with Brandeis’s (which leading New Brandeis Movement activists trumpet).
Ultimately, something closer to Brandeis’s vision prevailed for some time, in part because the moderate Wilson won the 1912 election, Brandeis joined the Court, and appellate review was part of the FTC Act. But, perhaps most importantly, there was nothing inevitable about that victory, nor were these issues settled in 1912 or 1914. To Novak’s point, it is true that, in 1920, the Court proclaimed that “size does not determine guilt,” that the FTC expanded its administrative rulemaking, and that the courts enforced the Clayton Act’s prohibitions on certain business conduct. However, antitrust law through the mid-twentieth century focused on preserving the sovereignty of independents and communities by intervening to devolve market power, particularly through aggressive merger enforcement in the 1960s and early 1970s. Today’s Neo-Brandeisians may have abandoned components of Brandeis’s antitrust program—namely, his commitment to “fair trade” and his distrust of big government—perhaps placing them in closer alliance to Judge Learned Hand’s antitrust logic in U.S. v. Alcoa, but that should not obscure our historical understanding of Brandeis’s democratic vision and its place in antitrust history.
In writing New Democracy, Novak canvassed then distilled more than a century of primary sources and historical scholarship into a novel and insightful interpretation of the evolution of the American state. To accomplish this ambitious historiographical reframing, the broad sweep of Novak’s story was a necessity. But graduate students, antirust specialists, and others who want to understand the complex and contingent dynamics that produced Novak’s story should read it alongside scholars like Charles McCurdy, Howard Gilman, Herbert Hovenkamp, Gerald Berk, Richard John, and Naomi Lamoreaux. Despite these criticisms—and what book could tell the complete story of such a complex and contested transformation?—Novak offers an original and timely reconsideration of the central building blocks of American legal modernity. New Democracy will force many historians to revise conventional narratives of the long progressive era in order to account for this progressive project of democratizing the state.