From the Rolls-Royce experimental archive: a quarter of a million communications from Rolls-Royce, 1906 to 1960's. Documents from the Sir Henry Royce Memorial Foundation (SHRMF).
Article page discussing competition, government regulation, and the structure of the American oil industry.
| Identifier | ExFiles\Box 133\3\ scan0018 | |
| Date | 3rd December 1938 guessed | |
| PROGRESS IN THE OIL INDUSTRY 739 served the public well. They are free from monopoly, and competition has been a chief factor. Nevertheless, there is demand for government to invade the oil industry's field with measures which under the guise of helpful “regulation,” would before long develop the paralyzing rigidities of government control. It is at this point that we descry the real crisis that menaces the oil industry. On one side are those who believe in limiting the size of corporate units, and who demand such limitations. On the other side are those who raise the question whether, in present-day conditions, large units are not only necessary, but sometimes afford the best insurance against monopoly, the soundest guarantee of effective competition, and the surest protection of labor's rights. Smaller Units Fostered My own feeling is that if the great concerns can operate in the general interest, within our free enterprise system, then they should not be molested merely because of their size. But I strongly feel that we must foster the smaller units and give them such encouragement that they will always be part of our system. The small units of today will be the big units of tomorrow. Through them industry and enterprise must receive constant infusion of new blood, new talent, new energy and ever-widening outlook. We must have the smaller units as well as the larger, complementing each other, and together giving us a properly rounded and coordinated business structure. The discouragement of small business would shortly precipitate conditions in which all enterprise would be smothered. I hope Senator O'Mahoney's Temporary National Economic Committee will thoroughly study all the evidence in these regards. Such a study, I am confident, will refute the theory entertained by some people that a few big oil companies dominate the market and fix prices. That is constantly disproved in day-by-day experience. I have been at pains to inform myself about the experience of some large companies which have been in the gasoline business a good deal longer than I have. These companies all testify that while their volume of business has grown, their percentage of the total business has greatly shrunk through the years. How did it happen? The answer is that a good many of the small companies of 10, 20 and 30 years ago have been getting increasing shares at the expense of the so-called “market leaders.” Year by year leadership in either volume or price has tended to be diffused rather than concentrated; and that is another phase on which I hope the Temporary National Economic Committee will thoroughly inform itself, the public, and the lawmakers. The instances just cited bring us back to the debate over whether there is an economic point beyond which the size of the industrial unit cannot grow. Personally, I think there is. Too wide a diffusion of managerial authority and responsibility carries with it the danger of a complexity of red tape, of weakening authority, and, in the vernacular, too much buck-passing. This point may vary greatly with different industries and organizations; but I am convinced that there is such a point, and that fact is a chief guarantee that there will always be room for the new ambitious, energetic and resourceful enterprises. I think there will be little dissent from the view that if natural economic forces are adequate to keep business on a sound basis, there is no occasion for governmental interference. I mean sound from the standpoint of all concerned—owners, labor, management, customers and the public. Only when natural economic forces fail is there justification for governmental regulation—and then for only the minimum of regulation necessary to reestablish the sound basis. Let me be quite clear on this matter. It is proper for government to lay down general rules to preserve competition, to prevent monopoly, to enforce sound business ethics. Having laid them down, government should enforce them. But when the arm of government is thrust into the intimate workings of business, when government undertakes to dictate policy, to fix prices, to interfere with the very competition which it assumes to be protecting—then we have government control; and that is inevitably paralyzing to initiative, invention, adventure and enterprise. Regulation may impose rules, to be enforced through the courts; but that is different from the control which enters the picture when a board, or commission, or other administrative authority is vested with managerial discretion, and, from the inside of the business structure, exercises at once the functions of the judicial, the administrative and the executive agencies. That is the domination that our ardent economic planners would have government exercise; the domination in which will be written the death sentence of free enterprise. Our American system of free enterprise is far more than just a way of doing business. At its best it comprehends good sportsmanship, gives free play to the laws of supply, demand, and competition, develops discipline, character and initiative, raises the standard of living, and improves the morale of the people. When I speak of free enterprise at its best I mean when it is entirely free—free from monopoly, private or governmental; free from government control or intimidation; free from price or production controls after the manner of the cartel system in Europe. My quarrel with the economic planners is based on my belief that they know so many things that simply are not true. They do their (Turn to page 746, please) FROM one point of view competition has been expensive, for it has demanded a constant reorganization and modernization of plants and processes to keep them in step. The establishment that is today's last word in progress, and has cost millions, is likely to be outmoded by next year; it must be brought up to date on pain of being elbowed out of the race. Yet this seeming wastefulness is in truth the essence of sound industrial economy. The fraction of a cent of saving per gallon, or the shade of improvement in quality, is quickly multiplied into wider acceptance, expanding volume, and strengthened position. These are the things which keep us constantly on the keen edge of competition, and which | ||