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The New Deal

Franklin D. Roosevelt Speeches

Message to Congress on the Concentration of Economic Power

Franklin D. Roosevelt

To the Congress of the United States:

Unhappy events abroad have retaught us two simple truths about the liberty of a democratic people.

The first truth is that the liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself.  That, in its essence, is fascism -- ownership of government by an individual, by a group, or by any other controlling private power.

The second truth is that the liberty of a democracy is not safe, if its business system does not provide employment and produce and distribute goods in such a way as to sustain an acceptable standard of living.

Both lessons hit home.

Among us today a concentration of private power without equal in history is growing.  This concentration is seriously impairing the economic effectiveness of private enterprise as a way of providing employment for labor and capital and as a way of assuring a more equitable distribution of income and earnings among the people of the nation as a whole.

[I] The Growing Concentration of Economic Power

Statistics of the Bureau of Internal Revenue reveal the following amazing figures for 1935:

Ownership of corporate assets:  Of all corporations reporting from every part of the nation, one-tenth of 1 percent of them owned 52 percent of the assets of all of them.

And to clinch the point:  Of all corporations reporting, less than 5 percent of them owned 87 percent of all assets of all of them.

Income and profits of corporations:  Of all the corporations reporting from every part of the country, one-tenth of 1 percent of them earned 50 percent of the net income of all of them.

And to clinch the point:  Of all the manufacturing corporations reporting, less than 4 percent of them earned 84 percent of all the net profits of all of them.

The statistical history of modern times proves that in times of depression concentration of business speeds up.  Bigger business then has larger opportunity to grow still bigger at the expense of smaller competitors who are weakened by financial adversity.

The danger of this centralization in a handful of huge corporations is not reduced or eliminated, as is sometimes urged, by the wide public distribution of their securities.  The mere number of security holders gives  little clue to the size of their individual holdings or to their actual ability to have a voice in the management.  In fact, the concentration of stock ownership of corporations in the hands of a tiny minority of the population matches the concentration of corporate assets.

The year 1929 was a banner year for distribution of stock ownership. 

But in that year three-tenths of 1 percent of our population received 78 percent of the dividends reported by individuals.  This has roughly the same effect as if, out of every 300 persons in our population, one person received 78 cents out of every dollar of corporate dividends, while the other 299 persons divided up the other 22 cents between them.

The effect of this concentration is reflected in the distribution of national income.

A recent study by the National Resources Committee shows that in 1935-36:

Forty-seven percent of all American families and single individuals living alone had incomes of less than $1,000 for the year; and at the other end of the ladder a little less than 1 percent of the nation's families received incomes which in dollars and cents reached the same total as the incomes of the 47 percent at the bottom. 

Furthermore, to drive the point home, the Bureau of Internal Revenue reports that estate-tax returns in 1936 show that --

Thirty-three percent of the property which was passed by inheritance was found in only 4 percent of all the reporting estates.  (And the figures of concentration would be far more impressive, if we included all the smaller estates which, under the law, do not have to report.)

We believe in a way of living in which political democracy and free private enterprise for profit should serve and protect each other -- to insure a maximum of human liberty, not for a few, but for all.

It has been well said that, "The freest government, if it could exist, would not be long acceptable if the tendency of the laws were to create a rapid accumulation of property in few hands and to render the great mass of the population dependent and penniless.”

Today many Americans ask the uneasy question:  Is the vociferation that our liberties are in danger justified by the facts?

Today's answer on the part of average men and women in every part of the country is far more accurate than it would have been in 1929 for the very simple reason that during the past 9 years we have been doing a lot of common-sense thinking.  Their answer is that if there is that danger, it comes from that concentrated private economic power which is struggling so hard to master our democratic government.  It will not come, as some (by no means all) of the possessors of that private power would make the people believe -- from our democratic government itself.

[II] Financial Control Over Industry

Even these statistics I have cited do not measure the actual degree of concentration of control over American industry.

Close financial control, through interlocking spheres of influence over channels of investment and through the use of financial devices like holding companies and strategic minority interests, creates close control of the business policies of enterprises which masquerade as independent units.

That heavy hand of integrated financial and management control lies upon large and strategic areas of American industry.  The small businessman is unfortunately being driven into a less and less independent position in American life.  You and I must admit that.

Private enterprise is ceasing to be free enterprise and is becoming a cluster of private collectivisms; masking itself as a system of free enterprise after the American model, it is in fact becoming a concealed cartel system after the European model.

We all want efficient industrial growth and the advantages of mass production.  No one suggests that we return to the hand loom or hand forge.  A series of processes involved in turning out a given manufactured product may well require one or more huge mass-production plants.  Modern efficiency may call for this.  But modern efficient mass production is not furthered by a central control, which destroys competition between industrial plants each capable of efficient mass production while operating as separate units.  Industrial efficiency does not have to mean industrial empire building.

And industrial empire building, unfortunately, has evolved into banker control of industry.  We oppose that.

Such control does not offer safety for the investing public.  Investment judgment requires the disinterested appraisal of other people's management.  It becomes blurred and distorted if it is combined with the conflicting duty of controlling the management it is supposed to judge.

Interlocking financial controls have taken from American business much of its traditional virility, independence, adaptability, and daring -- without compensating advantages.  They have not given the stability they promised.

Business enterprise needs new vitality and the flexibility that comes from the diversified efforts, independent judgments, and vibrant energies of thousands upon thousands of independent businessmen.

The individual must be encouraged to exercise his own judgment and to venture his own small savings, not in stock gambling but in new enterprise investment.  Men will dare to compete against men but not against giants.

[III] The Decline of Competition and Its Effects on Employment

In output per man or machine we are the most efficient industrial nation on earth.

In the matter of complete mutual employment of capital and labor we are among the least efficient.


One of the primary causes of our present difficulties lies in the disappearance of price competition in many industrial fields, particularly in basic manufacture where concentrated economic power is most evident -- and where rigid prices and fluctuating pay rolls are general.

[IV] Competition Does Not Mean Exploitation

Competition, of course, like all other good things, can be carried to excess.  Competition should not extend to fields where it has demonstrably bad social and economic consequences.  The exploitation of child labor, the chiseling of workers' wages, the stretching of workers' hours, are not necessary, fair, or proper methods of competition.  I have consistently urged a Federal wages-and-hours bill to take the minimum decencies of life for the working man and woman out of the field of competition.

It is, of course, necessary to operate the competitive system of free enterprise intelligently.  In gaging the market for their wares, businessmen, like farmers, should be given all possible information by government and by their own associations so that they may act with knowledge, and not on impulse.  Serious problems of temporary over-production can and should be avoided by disseminating information that will discourage the production of more goods than the current markets can possibly absorb or the accumulation of dangerously large inventories for which there is obvious need.

It is, of course, necessary to encourage rises in the level of those competitive prices, such as agricultural prices, which must rise to put our price structure into more workable balance and make the debt burden more tolerable.  Many such competitive prices are now too low.

It may at times be necessary to give special treatment to chronically sick industries which have deteriorated too far for natural revival, especially those which have a public or quasi-public character.

But generally over the field of industry and finance we must revive and strengthen competition if we wish to preserve and make workable our traditional system of free private enterprise.

The justification of private profit is private risk.  We cannot safely make America safe for the businessman who does not want to take the burdens and risks of being a businessman.

[V] The Choice Before Us

Examination of methods of conducting and controlling private enterprise which keep it from furnishing jobs or income or opportunity for one-third of the population is long overdue on the part of those who sincerely want to preserve the system of private enterprise for profit.

No people, least of all a democratic people, will be content to go without work or to accept some standard of living which obviously and woefully falls short of their capacity to produce.  No people, least of all a people with our traditions of personal liberty, will endure the slow erosion of opportunity for the common man, the oppressive sense of helplessness under the domination of a few, which are overshadowing our whole economic life.

A discerning magazine of business has editorially pointed out that big-business collectivism in industry compels an ultimate collectivism in government.

The power of a few to manage the economic life of the nation must be diffused among the many or be transferred to the public and its democratically responsible government.  If prices are to be managed and administered, if the nation's business is to be allotted by plan and not by competition, that power should not be vested in any private group or cartel, however benevolent its professions profess to be.

Those people, in and out of the halls of government, who encourage the growing restriction of competition either by active efforts or by passive resistance to sincere attempts to change the trend, are shouldering a terrific responsibility.  Consciously or unconsciously they are working for centralized business and financial control.  Consciously or unconsciously they are therefore either working for control of the government itself by business and finance or the other alternative -- a growing concentration of public power in the government to cope with such concentration of private power.

The enforcement of free competition is the least regulation business can expect.

[VI] Program

The traditional approach to the problems I have discussed has been through the antitrust laws.  That approach we do not propose to abandon.  On the contrary, although we must recognize the inadequacies of the existing laws, we seek to enforce them so that the public shall not be deprived of such protection as they afford.  To enforce them properly requires thorough investigation not only to discover such violations as may exist but to avoid hit-and-miss prosecutions harmful to business and government alike.  To provide for the proper and fair enforcement of the existing antitrust laws I shall submit, through the Budget, recommendations for a deficiency appropriation of $200,000 for the Department of Justice.

But the existing antitrust laws are inadequate -- most importantly because of new financial economic conditions with which they are powerless to cope.

The Sherman Act was passed nearly 40 years ago.  The Clayton and Federal Trade commission Acts were passed over 20 years ago.  We have had considerable experience under those acts.  In the meantime we have had a chance to observe the practical operation of large-scale industry and to learn many things about the competitive system which we did not know in those days.

We have witnessed the merging-out of effective competition in many fields of enterprise.  We have learned that the so-called competitive system works differently in an industry where there are many independent units, from the way it works in an industry where a few large producers dominate the market.

We have also learned that a realistic system of business regulation has to reach more than consciously immoral acts.  The community is interested in economic results.  It must be protected from economic as well as moral wrongs.  We must find practical controls over blind economic forces as well as over blindly selfish men.

Government can deal and should deal with blindly selfish men.  But that is a comparatively small part -- the easier part -- of our problem.  The larger, more important and more difficult part of our problem is to deal with men who are not selfish and who are good citizens, but who cannot see the social and economic consequences of their actions in a modern economically interdependent community.  They fail to grasp the significance of some of our most vital social and economic problems because they see them only in the light of their own personal experience and not in perspective with the experience of other men and other industries.  They therefore fail to see these problems for the nation as a whole.

To meet the situation I have described, there should be a thorough study of the concentration of economic power in American industry and the effect of that concentration upon the decline of competition.  There should be an examination of the existing price system and the price policies of industry, to determine their effect upon the general level of trade, upon employment, upon long-term profits, and upon consumption.  The study should not be confined to the traditional antitrust field.  The effects of tax, patent, and other government policies cannot be ignored.


No man of good faith will misinterpret these proposals.  They derive from the oldest American traditions.  Concentration of economic power in the few and the resulting unemployment of labor and capital are inescapable problems for a modern "private enterprise” democracy.  I do not believe that we are so lacking in stability that we will lose faith in our own way of living just because we seek to find out how to make that way of living work more effectively.

This program should appeal to the honest common sense of every independent businessman interested primarily in running his own business at a profit rather than in controlling the business of other men.

It is not intended as the beginning of any ill-considered "trust-busting” activity which lacks proper consideration for economic results.  It is a program to preserve private enterprise for profit by keeping it free enough to be able to utilize all our resources of capital and labor at a profit. 

It is a program whose basic purpose is to stop the progress of collectivism in business and turn business back to the democratic competitive order.

It is a program whose basic thesis is not that the system of free private enterprise for profit has failed in this generation, but that it has not yet been tried.

Once it is realized that business monopoly in America paralyzes the system of free enterprise on which it is grafted, and is as fatal to those who manipulate it as to the people who suffer beneath its impositions, action by the government to eliminate these artificial restraints will be welcomed by industry throughout the nation.

For idle factories and idle workers profit no man.