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Les diagrammes suivants illustrent la mithode. 1 2 3 1 2 3 4 5 6 Mi .♦ Jt -1 Gl -I Trusts. Combines and Monopolies By E. R. P«f,AcocK. Reprinted from Queen's Quarterly, Vol. VI, No. i, July, 1898. TRUSTS, COMBINES AND MONOPOLIES. THE subject of discussion this evening* has attracted much attention in recent years ; it has been the theme of elo- quent denunciation from the pulpit ; it has been taken up by the press of all shades of political and religious opinion and made a popular -question, and has formed an important issue in a great political campaign. Such a subject must have something in it worthy of consideration and will well repay the time spent in seeking to arrive at a knowledge of its nature and requirements. When economic problems become matters of popular dis- cussion and questions of political policy, the calm judicial atti- tude usually gives place to the more heated and impressive but less rational methods of the political arena. The denunciatory is the favorite form of expression. Prejudice takes the place of research, sentiment and passion unseat judgment, and points are made by a process of reasoning which scorns the trammels of ordinary logic. Such have been the methods pur- sued by most of those writing or speaking on " Trusts and Com- bines " for popular instruction, and their utterances have been in the main decidedly hostile. As an illustration, the words of a populist member of Congress will serve as well as any. Alter quoting from Revelation John's description of the vision in which the great red dragon appeared, he deals with " trusts " as follows : — •This paper was read at the Conference of Theological Alumni of Queen's University. QUEENS QUARTERLY. " A greater, a more terrible, a more powerful dragon than John saw is now walking up and down the earth. His home is in America. He has drawn a part of the Senators and Congressmen alter him, and they are being dragged through the mire and slums and filth of hell. This old dragon is named " Trust," or " Monopoly." He has many heads, and on each head is a crown of gold. He has the country in his terrible clutches, and his hideous body, huge and pon- derous, but hungry, lean and cadaverous, stretches across the conti- nent, while his hydra heads reach out in all directions, feeding on and consuming everything 'within his reach. He has stretched out one of his massive paws, and now the United States Senate writhes in his grasp. His greedy, glittering eyes are fixed upon great heaps of gold, and he licks out his many tongues and smacks his lips, and knowingly wags his various heads when it is proposed to enact any laws inimical to his interest. One head is the Coal Oil Trust, another the Whiskey Trust, another the Lead Trust, and greatest and mightiest of all is the Sugar Trust. The Tariff Bill, which passed the House, did not meet the ap- proval of the old red dragon, but he fixed his eyes knowingly on the Senate and licked his chops in a kind of fiendish glee as the Ameri- can people declared that the old stuffed fraud, the thief, the robber, the Sugar Trust was downed." Appeals of this kind, addressed to a people conscious of hard times and bankruptcy, but ignorant as to the real causes thereof, cannot fail to stir up hatred, all the more intense because it is irrational. " Trusts " may be bad, and dangerous, but even if so, their condemnation should rest on something firmer than a mere appeal to passion. The people should not be left for in> struction in matters of this kind to the shallow agitator or stump politician. It is the duty of those to whom men naturally look for instruction to study these problems and give the results of their calmer judgment and more careful research to the people, in place of such extreme and irritating statements as that quoted. As one might expect, exact definition or careful discrimina- tion has not characterized the more popular discussion of this subject. The words Trust, Combine, Monopoly, Ring, Pool, Syndicate, Corner, have been used, almost as if synonymous, with the result that the " Trust " has been forced to bear the iniquities of all sorts of illegitimate speculation and gambling, with which it had nothing whatever to do. Many so-called TRUSTS, COMBINES AND MONOPOLIES. 3 trusts are not trusts at all, but something else. We must, there- fore, at the outset, come to an understanding as to what we mean by each of the three words which form our subject. To possess a monopoly in anything of economic value is to have such control over its available sources of supply as to be able, materially, to affect its market value. The Cotnbine is a particular form of monopoly, and the " Trust " is a special form of " Combine." A quotation from J. S. Jeans' book on Trusts, Pools and Corners will make sufficiently clear for the present the difference between a Combine and a Trust. He says : '* The original idea of a Syndicate" (or Combine) "appears to have been that producers should come to an understanding among themselves as to how much each should produce, and what common price should be charged to the public. Each producer, however, was lett with absolute control over his own business in other respects. On the face of it this would appear to be the most natural and satis- factory arrangement for all parties. And so indeed it would ha ve been if all alike had been equally loyal and trustworthy, but it was found difficult to keep all the parties to such a compact true to the spirit as well as the letter of the bond. The combination suffered in not a few cases from the bad faith of its individual members, some of whom either undersold the combination rate or produced quantities in excess of that provided for by regulation. It was for the purpose of avoiding such possible acts of bad faith on the part of the individual members of a combination that the American institution known as a trust was established. The fundamental idea of a trust is that the affairs of all its individual members shall be absolutely controlled by the organization and /or the organization. In order to do this, of course, it is necessary that the trust shall do more than merely control production and price, although that may be, and generally is, the sole raison d'etre of the combination. The trust must be virtual, if noi the absolute, owner of all the properties or concerns that are parties to the compact." In accomplishing this the principle followed is the one with which we are more familiar in the management of the estates of infants and insolvents. But as the law declares all contracts in restraint of competition to be against public policy and illegal, various subterfuges have to be tried in order to avoid this danger, and externally, therefore, trusts take many forms. Much of the current discussion on the subject would le^c] QUEENS QUARTERLY. one to imagine that monopolies in trade are an entirely new growth, whose seeds were sown within the last decade. A glance at history, however, reveals the fact that trade monopolies are hoary with antiquity. Even in the earliest scripture records we are told of a tremendous corner in wheat, whereby one Joseph, of the Egyptian Stock Exchange, won fame for himself and brought great gain to his firm, the head of which belonged to the old Pharoah family, a family afterward famed for its sharp practices and meeting with severe censure from the Hebrew scribes as a " bloated monopolist and oppressor of labour." In fact, there is a quite modern ring in the account of how Pharoah underpaid and overworked his people, and how he forced them to "scamp" their work by refusing to supply proper materials. No doubt, too, were the narrative continued into such matters, we should find that he monopolized the brick-making business, keeping the price up and the quality down, to the great detriment of the public and the rapid enrichment of his coffers. And could we interview the organizing secretary of the " Egyptian Knights of the Trowel," we should certainly hear sad tales of the evils of non-union labour and denunciation of the " scab " workmen from the land of Goshen. Coming down to latf.r history, we find that the granting of monopolies v/as one of Uie most valuable perquisites of the Eng- lish crown, and we hear of strong protests from the English Par- liament against the monopolies in restraint of trade under Eliza- beth and Charles I. " Nothing more remarkable," says Hallam,* referring to the Parliaments of 1597 and 1601, '* occurs in the former of these sessions than an address to the Queen against the enormous abuse of monopolies. The crown either possessed or assumed the prerogative of regulating almost all matters of commerce at its discretion. Patents to deal exclusively in par- ticular articles, generally of foreign growth, but reaching in some instances to such important necessaries of life as salt, leather and coal had been lavishly granted to the courtiers with little direct advantage to the revenue. They sold them to companies of mer- chants, who, of course, enhanced the price to the utmost ability of the purchaser." 'ConstitutiotMl History, chap]v. TRUSTS. COMHINKS AND MONOPOLIES. 5 Green, in speaking of Charles I., says* : " Monopolies abandoned by Elizabeth and extinguished by act of parliament under James were again set on foot, and on a scale far more gigantic than had been seen before ; the companies who under- took them paying a Bxed duty on their profits as well as a large .um for the original concession of the monopoly. Wine, soap, salt, and almost every article of domestic consumption fell into the hands of monopolies and rose in price out of all proportion to the profit gained by the crown." And an extract from a speech on the subject, delivered in the Long Parliament by Colepepper, reads like an editotial against departmental stores by the versatile editor of Saturday Night. " They sup in our cup," he cries indignantly, " they dip in our dish, they sit by our fire ; we find them in the dye-vat, the wash-bowls and the pow- dering-tub. They share with the cutler in his box. They have marked and sealed us from head to foot." Monopolies in trade then existed long before our time, and seem to have caused much outcry and considerable oppression in those early days. Many of them, too, far from coming as the result of certain movements in industry, arose by arbitrary enactment on the part of the crown. Yet, it was their perversion that caused the trouble, for they had their origin in the necessity that trade should be regulr.ied as to purity of goods, honest measurement and weight, etc. But they opened up so tempting a field for revenue and patronage that their abuse was inevitable. And how were these evils remedied ? By removing restrictions, by giving greater freedom in trade, and refusing special privileges to certain classes. Combinations and monopolies have changed greatly in form with the changes in industrial conditions, but some of the principles underlying the old monopolies are still applicable, and there are still men who have not learned the lesson, that restrictions put upon industry or commerce foster privileged classes and monopoly prices. The monopolies of which we have just been speaking werj not as a rule natural growths, arising out of the con- ditions of industry : they were established by arbitrary enact- ment and could usually be removed in the same way. The 'Short History of the Etigliih People. QrRKN'S QUARTERLY. industry of the times did not call for large capital. It was the day of the small artificer and his apprentices, of the workshop and the hand-loom. The workshops were scattered over the country and disposed of much of their output in the immediate vicinity. The country carding mill and the rag carpet loom are isolated examples to-day of industrial conditions which were the rule two hundred years ago. When capital was in so dispersed a state great combinations of capitalists to prevent competition and raise prices were impossible. Within a little more than a century, however, all this has changed. The movement began about 1760 with the invention in rapid succession of a number of machines which revolutionized the cotton and woollen trade. Watt soon afterwards made useful for practical purposes the steam-engine, and a little later began that improvement in the means of inter-communication and transport which in its ad- vances has quite kept pace with the increase in manufacturing power. To take advantage of such possibilities, however, con- solidation became absolutely necessary, and the history of in- dustry from that day to this is the history of successive steps in concentration among both capitalists and labourers. The process of change and its results are clearly outlined by Baker in his Monopolies and the People, as follows : — "In order to realize the greatest benefit from these devices it has become necessary to concentrate our manufacturing operations in enormous factories ; to collect under one roof a thousand workmen, increase their efficiency tenfold by the use of modern machinery, and distribute the products of their labour to the markets of the civilized world. The agency which has acted to bring about this result is competition. The large workshops were able to make goods so much cheaper than the small workshops that the latter disappeared. Then, one by one, the larger workshops were built up into factories, or were shut up because the factories could make goods at less cost. So the growth has gone on, and each advance in carrying on production on a larger scale has resulted in lessening the cost of the finished goods. Competition, too, which at first was merely an unseen force among the scattered workshops, is now a fierce rivalry ; each great firm strives for the lion's share of the market. Under these con- ditions it is quite natural that attempts should be made to check the reduction of profits by some form of agreement to limit competition. TRUSTS, COMBINES AND MONOPOLIES. Many attempts have been tried, which attempted to effect this t)y mere agreements and contracts, methods whicli left each property to the control of its special owners, but none have been permanently successful. Hy the trust plan of combination the properties are prac- tically consolidated, and the failure of the combination through with- drawnl of its members is avoided. It offers to manufacturers, close- crowded by competition, a means of swelling their profits and insur- ing against loss ; and encouraged by the phenomenal success of the standard oil combination, they have not been slow tu accept it." If we study the course of history during the last hundred years, we shall find that in all depan n^nts of human activity the tendency has been steadily and irresistibly towards consoli* dation. We have noticed its effp^ti in industrial life, and in other quarters we find the same t' Hg going on ; as the interests at stake become greater and the machine v of management more complex the guiding powers draw more ci^sely together and con- certed action takes the place of individual effort. The despised money lenders have been to a large exteui replaced by the great banking institution, with branches in various paits of the country ; the young people's societies in connection with our churches have united in a Christian Endeavour Society embrac- ing the whole continent ; the liquor traffic is now fought by the Dominion Alliance and the VV.C.T.U. The modern workman may live in a Co-operative society's house, have his children cared for during the day at a great institution solely devoted to the care of children, earn his wages from a trust, eat his meals at one of the many lunch-rooms of the W.C.T.U., spend his even- ings at the workingmen's club, and worship on Sundays in a United Presbyterian Church. Time was, in the educational system in this province, when there were hundreds of schools managed locally and each determining for itself the text-books to be used, the methods of teaching, etc. Now all that has been changed ; these powers have been centralized in one great de- partment of the government, which prescribes almost everything. In the industrial world the tendency towards combination is so constant and steady that certain students of the subject have actually formulated the laws of its development as follows : "In any given industry the tendency towards monopoly increases — I. As the waste due to competition increases ; g QUEEN'S QUARTERLY. 2. As the number of competing units decreases; 3. As the amount of capital required for each competing unit increases ; 4. As the number of available natural agents decreases." And the conclusion they arrive at is that " monopolies of every sort are on inevitable result from certain conditions of modern civilization." As civilization has advanced life has become more complex. The requirements for the carrying on of a successful manufactur- ing business have increased incalculably in number and difficulty. We have no longer the little mill, run by a mountain stream, em- ploying a dozen hands and selling its products within a radius of twenty miles. Nowadays there must be a plant costing hundreds of thousands, experts at the head of each department, hundreds or thousands of workmen. The market is now the whole world, and through the various agencies which the time provides we must keep well posted on the condition and wants of even the most distant markets. Buyers and travellers are sent in all di- rections, we must advertise extensively, and skillfully anticipate the ever-varying caprices of a perhaps distant public. Above all we must exercise the most rigid economy in every department and " let nothing be lost." Only the other day I was talking of the recent failure of a manufacturer to an expert in the business, and he attributed the failure to the fact that the firm had made no line of goods to use up the waste from the higher grades. " Such a policy," he said, " is suicidal as manufacturing is now carrried on and shows that the men at the head of the concern did not know their business." Of course, the great company or combine is much better able to accomplish all this than the indi- vidual manufacturer as a rule, so the tendency is to unite. First comes the partnership, then the chartered company, and then the combine, including many companies. But there are other companies in the same business with expensive plants and many employees, and they have much capital invested on which they desire a dividend. So there is a fierce fight for the market, in which all suffer severely through over-production and the cutting of rates. This cannot go on forever, so presently some one pro- poses a truce, and following the example of the church when in doubt, calls a conference. " See here," he says, when the leaders / TRUSTS, COMBINES AND MONOPOLIES. of the trade have assembled, '* what is the sense of our cutting one another's throats as we have been ? My company can pro- bably stand it as lon^ as any of you, but we want to make some- thing on our invested capital, and so do you. Giving the public cheap goods is all very well, but we are part of the public and must live like the rest. Furthermore, this cut-rate work is destroying the good name of the trade, for there is more adul- teration and general shady work than would have been dreamed of a few years ago. Now, why should not we all combine and agree to produce only so much of honest goods among us as will keep the price at a profitable figure, instead of wildly over-pro- ducing in order to ' grab ' sales, regardless of the price." The idea strikes the assembled manufacturers as good, a committee is named to devise ways and means ; it recommends that a ring or combine be formed, the members binding themselves to pro- duce only up to a certain pre-determined quantity, and agreeing to pay in, for distribution to the losers, so much per ton or yard, or whatever it may be, on all goods which they manufacture over the proportion allotted to them. A central committee, composed of some of the leading men in the business, is formed to direct matters, decide as to how far the output is to be curtailed, the scale of prices, the relative share of each member of the combine, etc. Sometimes all the profits are put into a common pool and distributed to the members according to capital invested, but often each company looks after the profits for itself. Soon, owing to the reduced production the price rises, and is put up by the committee as far as they think safe under existing circum- stances. If old competitors refuse to come in, or new ones spring up, they are bought off or killed by rate cutting, unless un- important, when they reap the benefits without undergoing the dangers, and are not molested. In this way, if the combine is successful, a large profit is secured, but the members have to make haste to get all they can, for they well know that some one's cupidity will soon lead to a break. And this very haste is often the undoing of the combine. If the leaders are wise^ they will seek to pass as rapidly as possible into the more permanent form of a regular trust. Having done so prudence advises them to reduce prices to a reasonable level, and seek to make most of their gains through the many economies arising from combined to QUEEN'S QUARTERLY. action. In the majority of cases, however, in their haste to be rich, some of the members of the combine begin secretly favour- ing certain buyers by reduced rates ; the results are soon ap- parent, remonstrance fails, others follow suit, and there ensues a regular scramble to get out products and secure some of the trade. The old cut-rate methods return, and with them soon come over-production, low prices, closed mills, idle hands and, for many, bankruptcy. One or two lessons of this kind teach the leaders of the trade that a more perfect form of organization is needed, whereby more control over the individual firms shall be obtained, and the trust is the result. Owing, however, to the irrational anti-trust laws of to-day all kinds of concealment and subterfuge have to be resorted to, and hereby creep in many of the abuses commonly ascribed to trusts as such. Monopolies may be conveniently divided into two classes : Natural monopolies and artificial monopolies. No sharp line of distinction can be drawn between them, for most monopolies partake somewhat of the nature of both, but usually the charac- teristics of one or the other are so prominent as to render classi- fication comparatively easy. Natural monopolies are such as from their character preclude the competition of a serious rival. The obstacle may be the lack of any other available source of supply as in the case of certain famous medicinal waters ; or the possession of some secret process of manufacture, as is the case with the thin, opaque paper which has made the Oxford bibles so famous and nets the University press an enormous revenue each year. The secret of this paper is known to only three men in the world, and they are all connected with the Oxford press, which has, therefore, an absolute monopoly of the best paper for bibles, and consequently of the best bibles. Again, what is prac- tically a monopoly may arise owing to the vast capital required for carrying on the business, and the character of the business itself. Examples are furnished by railways, municipal gas works, water works, electric lighting plants, street railways, etc. Arti- ficial monopolies are those which have been obtained by the com- bination of competing capitalists in any line of business for the purpose of getting control of the output to kill competition and increase profits. Rings, corners, combines and trusts are of this nature. TRUSTS, C0MBINP:S and MONOPOLII'S. II We have seen how the rapid growth in the interests at stake and the necessity for keeping employed the capital invested have increased the severity of competition until some form of relief became absolutely necessary, and how combination seems the best form for obtaining relief. But it is a well known fact that those who exploit new fields of activity are usually the more rest- less and lawless characters. Such was unquestionably the case in Australia, and it has to a great extent been true of the western parts of Canada and the United States also. Furthermore, in new and unsettled regions, respect for law is feeble, and crime and outrage are common. But everyone knows that all this is only temporary ; that in a short time the ever westward march of civilization and law will trample under foot the wilder spirits, or drive them further west, to prepare the way in new lands where their reckless daring will prove valuable in overcoming the dangers of a wild country. Meanwhile their recent stamping grounds are dotted with smiling homesteads and prosperous cities. Might we not, reasoning from analogy, fairly look for a similar course of events in the industrial world. With regard to the question under discussion such seems to me to be the case. In the earlier and more experimental stages of combination great risks are taken, and therefore the more reckless are the ones who go in. Under such circumstances we may look for much that is questionable and unscrupulous for a time, until the possibilities of combination and monopoly in legitimate trade become better recognized by the solid men. And has not this been the case ? An " old Hutch " cleverly corners the wheat market and gets out safely with a gain of a million dollars ; many stock-brokers are ruined, trade generally is unfavourably affected, and confi- dence on the stock market is not restored for a long time, but what of that ? " Old Hutch " has cleared a million, and why should not others? Immediately all the speculators are plotting to make millions too by securing a temporary monopoly of the sources of supply of some commodity. The plots are more or less nefariou?, many of them fail utterly, and but few attain sig- nal success, but they make an opening for the more legitimate businesses. The benefits of monopoly are not long left in the hands of the plunger. Soon the leaders in various lines of busi- ness, hard pressed by close competition, take advantage of the 12 QUEEN'S QUARTERLY. same principle by entering into agreement to act concertedly in production and sale. The pool or the combine is the usual form which their union takes at first. The wire-nail industry fur- nishes us with a good illustration of the usual course pursued. The wire-nail industry in America is of comparatively recent growth, and for the first twenty years of its existence the manu- facturers did not seek to combine, for they enjoyed the large pro- fits attendant upon a new and rapidly growing trade ; they were few in number, and each had more than he could do. But as the number of competitors increased the output was forced far beyond the demand, and prices fell to a ruinous point. Then Mr. Parks, a great Chicago manufacturer, who had been the central figure in the " tack combine," proposed that all the more important manufacturers should form a pool. His suggestion was acted upon, and the result was " The Wire-Nail Association of 1895-96." Prices and the output were always fixed for a month in advance. The aggregate product agreed upon was ap- portioned to the various companies on a basis depending partly on sales for three months before the pool was formed, partly on production in one of these three months, and partly on capital as indicated by the number of machines. A cost price was assumed, which was supposed to represent the cost of production at Pitts- burg, from which most of the raw material for this trade comes ; and the cost at every other point was assumed to be equivalent to the Pittsburg cost with freight from Pittsburg added. So the selling price from different points, including delivery at the buyer's railway station, and the assumed cost price were har- monized by the use of the Pittsburg base. All the profits above the cost prices so arrived at were paid into the pool ; and the amount in the pool, after paying all expenses, was divided monthly. The basis of division of profits was the same as the basis for the allotment of production. The pool lasted for eighteen months, and at first was quite successful. By buying off competitors and inducing the manufacturers- of nail machines to sell only to members of the pool, it was able for a time to keep the price well up and to make good profits, which, how- ever, were materially reduced in warding off competition. But there were always a few competitors and the number rapidly in- creased, while the rise in price had the effect of reducing the 1 TRUSTS, COMt5lM:«j AND MONOroLlIiS. demand from 500,000 kegs per annum to 125,000 kegs. When tliis point was reached the attempt at pooling was abandoned and the usual scramble ensued. Yet, despite the seeming failure, the leaders claimed to have done well and to have accomplished all that they had hoped for, and they soon began to take steps toward the formation of a more perfect combine, as the only salvation of the trade. The pooling of railway rates is another example of this form of combination, and where roads have been paralleled for the purpose of railway competition it seems the only way of avoiding periodic bankruptcy and receiverships. The anthracite coal combinations and the New York Milk Dealers' association are other examples of trade combinations in which only a partial control is given to the central committee, and there are no means of enforcing obedience when members prove troublesome. They are always in danger, therefore, from the disloyalty of their own members, as well as trom anti-combine legislation ; and this precarious existence tends to produce a certain recklessness re- garding the future and an undue eagerness to get the most out of the present. They r.re likely, therefore, to abuse the power which they have obtained and use it for the destruction of rivals, the coercing of those who supply them with raw materials and machinery, and the obtaining of abnormally large profits during such period of sunshine as providence may grant them. These abuses, however, arise largely from the temporary nature of the combine, and under a more thoroughly consolidated system, where authority was centralized in a few men working as a board of trustees, and able through this close combination to take full advantage of the great economies arising from union, many of the evils might disappear. The defect from the promoter's point of view of the ordinary combine, then, is that there is not sufficient central authority, that the individual members have too much power in their o^vn hands, and as a result are apt to break the combine by yielding to the desire for rapid gains. After many more or less success- ful experiments, however, a form of combine has been evolved which overcomes this difficulty, and can therefore promise a con- siderable degree of surety and permanence to those entering it. This is the modern Trust, the most stable and satisfactory form H QUEENS QUARTERLY. of artificial monopoly; (for the trust, as we understand it here, implies more or less of monopoly power. " A trust," says Cook " is either a monopoly or an attempt to establish a monopoly.") The usual method of procedure in forming a trust is simple. Suppose, for instance, that the sugar business is suffering from over-competition and the managers of the different refineries agree to form a trust. Most of them are already incorporated stock companies ; those which are not seek to obtain charters as soon as possible. Then trustees arc appointed, and in exchange for all, or at least a controlling interest in the stock of the various businesses, they issue trust-certificates. The trustees thus have all the concerns under their control, so no member can cut rates, over-produce, or in any other way interfere with the plans of the trustees. Some of the poorer refineries are imme- diately closed down, the rest are equipped with the latest appli- ances, and every department is watched by experts ' ith close attention. All the subsidiary trades are taken hold of by the trust, which makes its own barrels, boxes, paper, etc, thereby saving large amounts. All transactions in different branches of the business are reported minutely to the head office, where the main part of the book-keeping is done. The trustees arrange sales, the quantity to be produced each year, and all such mat- ters, and in this way the many competing factories become merely parts of one great organism. The number of trusts has increased so rapidly in the last few years that many examples could be given, but the oldest and best known is, of course, the Standard Oil trust, which dates back to 1882. It controls the coal oil trade of the United States, and is the chief factor in the world's trade. It has been for years de- nounced as having secured its monopoly through the most un- scrupulous bribery of railways to secure preferential rates, and having ever since consistently and heartlessly used its power to ruin all competitors. The trust has recently, owing to the pres- sure of anti-trust laws, ostensibly ceased to exist, but it really carries on business as before, though under some new form. It was formed by various individuals transferring to the trustees shares of stock and receiving trust certificates in payment there- for. The real capital of the trust is estimated at about $150,000,000, and the profits are very large. Thirty million ■i TRUSTS, COMBINES AND MONOrOLIIiS. •5 dollars worth of the Trust property consists of pipe lines for the transfer of oil to the great cities and the seaboard. Some 25,000 men are employed, and it refines 75 per cent, of the oil refined in the United States. One large rival pipe line company gave it considerable trouble tor a time, but has, I believe, been bought up. The story of the birth and growth of this great combination is too well known to require more than the barest treatment. About thirty years ago John D. Rockefeller was a clerk in a pro- duce commission house in Cleveland. When the discovery of petroleum fields in Pennsylvania led to much speculation, Rocke- feller and a young friend invested all their savings and what capital they could raise in buying some of the oil-bearing land and tried their hands at refining crude petroleum. Andrews, a former labourer, who had discovered an improved method for refining, joined them, and his secret, with good management, brought success. Soon, Rockefeller's brother joined them, and they had two refineries under one management. Then Mr. Flagler, a great capitalist, was induced to take an interest in the business, and the Standard Oil company was formed with a capital of one million dollars. Under Rockefeller's clever management it soon began to make its influence felt by forcing its rivals to either join it or go out of business. In this process it adopted various methods ; several were bought up, and then as it grew stronger many were coerced. A favourite method of crushing obstinate competitors at this early stage seems to have been the obtaining of heavy discriminating rates on the railways leading from the oil district. This the members of the trust have sought to deny, but it seems certain that the railways lent themselves in the earlier years, to aiding Rockefeller's designs, with deadly effect on his competitors. This was only for a short time, however, at the first. Rockefeller proved to be a genius in organizing the various forces into a great combine, and also in anticipating the wants of the market, and therein lies the main secret of his marked success. He has provided the means for supplying the public at less cost with a vastly superior article, and his reward has been great. Presently he saw the need for cheaper methods of transportation and took hold of the pipe-line system, which proved a boon to all owners of wells, enabling If) QUEEN'S QUARTERLY. them to p^et their petroleum cheaply and without trouble, to the market. S. C. T. Dodd says of this system : " Although the business was built up and owned by those who buih up and own the Standard Oil Company, the business is done for the public. Its benefit to the oil trade has been incalculable. Instead of, as is sometimes charged, the " Standard " being the sole buyer, the buyers are numbered by thousands. The producer not only gets the liighest possible price which competition to purchase will bring ; he gets also cash in hand. He never sees his oil from the moment it leaves his well. VVhen he wants his well tank relieved, he telephones a pipe line guager, sees his oil pumped, receives a ticket showing the amount, takes it to a pipe line office and gets a certificate which he can hold, borrow on or sell in any exchange, as he sees fit. No one can estimate this advantage to the business. Without combination, aggregated capital and public confidence in the security, it could not have been accomplished. Should you dis- solve the combination and disperse the capital which makes these certificates secure, the system could no longer be maintained." The Standard Company, which has been so successful that in 1882 its managers were able to consolidate most of the refining interests in the trust, set vigorously about proving that it per- formed a necessary function for society, by improving the quality and reducing the price of coal oil. As to the results of its work, so fair and careful a writer as David Wells, says in his Recent Economic Changes : " The price of crude oil during this period, (1873-1887) declined from 9*42 cents to 1*59 cents per gallon, and of refined oil from 23*59 cents to 6| cents per gallon. The decline in the price of crude oil was unquestionably due to its enormous supply, which at one time amounted to nearly 100,000 barrels per day, while the stock of crude oil rose from 3,500,000 barrels in 1876 to the stupendous figures of 41,000,000 barrels in 1884. Had refined oil declined only at the same rate, its minimum price would have been I5"75 cents per gallon. But the fall in refined oil has been g'oi cents per gallon greater than the fall in crude oil ; and as over 1,000,000,000 gallons were consum- ed in 1887, this saving of 9*01 cents per gallon to the public amounted to nearly $ioo,ooo,ooo[for that same year. Here then, some agency, other than increased supply and diminished cost of the crude oil, has unquestionably come in and operated to TRUSTS, COMblNES AND MONOFOLIICS. >7 reduce the price of a manufactured product in a ^iven period disproportionably to that experienced by the raw material from which it was derived. What was that agency ? Did any con- current change in the relative values of precious metals used as money, contribute in any degree toward effectmg such a result ? It is claimed, and without doubt, correctly, to be largely due to the fact that the whole business of refining petroleum in the United States and the distribution of its resulting products has gradually passed since 1873 into the ownership and control of a combination or 'trust' — the Standard Oil Company — which, commanding millions of capital, has used it most skilfully in promoting consumption and in devising and adopting a great number of ingenious methods whereby the cost of production has been reduced to an extent that, at the outset, would not have seemed possible." But during this time, and particularly since the " trust " was formed, its members have netted enormous profits and its opponents point to this fact as a proof that the trust must have been stealing from the consuming public, oppressing its work-people, and generally injuring society. One has only to consider the question, however, to be convinced that such is not necessarily the case. If by the increased power and economy resulting from concentration the trust has been able to save large sums, it is entitled to reap a part of the saving, so long as it sells at a reasonably low rate, lowers the price gradually and allows the public to share in the good results of its work. That the Standard Oil Trust has done the latter is amply shown, I think, by Mr. Wells' figures. That it has saved enough, through the increased efficiency, arising from its combined power, to make handsome profits for its members without exploiting either the consuming public or the wages of its own work-people, is shown by the facts which Mr. Wells and Mr. Dodds have collected re- garding the economies which the trust has effected. Mr. Dodds says : " The association of refiners united the best knowledge and skill in the business. If one had a patent it was open to all. If one had a secret the others shared it. Methods were compared. New plans were tested. Results were and are carefully collated. If one estab- lishment succeeds in saving the fraction of a cent per barrel in making iR QUEKNS gUAHTKKLY. oil, the reasun is known and tlic nictliod of saving ailoptecl. If good results are obtained in one manufactory and bad results in another, the reason is at once discovered and faults corrected. S( ientiCic men are constantly employed who have made useful discoveries in new products and new methods of manufacture. The consecjuence of all tliis is that since 1872 the actual cost of the manufacture of re- lined oil has been reduced h6 per cent. The public have the ad\an- tage of this in the reduced price at which the oil is sold, which benefit amounts to millions annually. The same cheapening has taken place in the manufacture of barrels, tin cans, boxes for enclos- ing cans, paint, glue and acids. The company use 3,500,000 barrels per annum. The saving in cost of manufacture since 1S7J amounts to 04,000,000 per annum. Tliirty-six million cans are vised per year The cost of making has been reduced alteut one-half. The saving amounts to 85,400,000 per annum. The cost of making wooden cases has been reduced one-third. The saving amounts to $1,250,000 per annum." The same process has taken place in the manufacture of tanks, stills, pumps, and everything used in the business, and all this has been effected without reducing wages. It would seem, then, that the Standard Oil trust has fo llowed steadily and witii success sound and just economic principles in building up a busi- ness. Why, then, the outcry against it? Partly, as has been already pointed out, because we are still in the transition perio d. We are in process of changing from an industrial system based on free competition to one based on combination. During such a period many must suffer severely, and suffering usually stirs up hatred. Then again, before the best form of combination was discovered, there had to be many experiments, and experimental failures in industrial life cause much trouble. Such have been the many combines, pools and corners which sought "not an in- creased concentration of productive power, but only an increased unanimity among the sellers of products to keep up or put up prices." These have caused damage to legitimate business, and a failure to distinguish between them and the regular trust has led to the inclusion of the latter in the general condemnation. I am far however, from wishing to imply that the trusts have been guiltless of all evils and steadily refused to use their immense power to force illegitimate gains. An enormous number of trusts TKUSTS, COMIilNICS AND MONOI'OLIliS. «y and combines exists in the United States ; and the sagacity and insij,'ht of the leaders of even the jjreatest of them cannot always vvitii-stand the temptation to nse their opportunities for maJiiiif; haste to be rich, any more than it will prevent many clever men from livinfj beyond their income, or speculating in risky enterprises although they know that the odds are against their winning in either case. In this way we may account for much of the popular antagonism towards trusts, for as Mr. Gunton says : " The economic law of permanent productive integration is tliat increased concentration of capital and power in fewer hands is eco- nomically justifiable and socially tolerable only on the condition of improved services to the community in better (juality or lower prices of what is furnished. I'rofits are the legitimate rewards of capital- istic enterprise ; but they should always be obtained by exploiting nature through improved methods, and never by exploiting the com- munity through higher prices. The failure of capitalists to recog- nize this principle as the inexorable social law of their existence is sure to bring social antagonism, which will result in some form of ar- bitrary, uneconomic restrictions, detrimental alike to capital and the coniiuunity. Capitalists who imagine that any amount of accumu- lated wealth can enable thfini to defy this social law are greatly mis- taken, and sooner or later will have to pay the penalty by the arrest ot their progress, if not by the entire dispossession of their present in- dustrial opportunities.' The short sketch of the Standard Oil Trust has shown some of the possibilities for effectiveness and economy, opened up by properly directed, combined effort. Furthermore, it has been shown that such effort, itnproperly directed, as in the corner, for instance, usually ends in failure or, at least, in the cessation of activity, so there is hope that in time the better elements in com- binations will survive, while the evils have been controlled and removed. It might be claimed that the Standard Oil Trust is an exception to the general rule, but a glance at the results of combination in many other industries reveals results which, though perhaps not so striking, indicate success gained in the same way ; by improving the service, lowering rates, and mak- ing profits by the economies of combined management. The history of the integration of the numerous telegraph lines into 30 QUEEN S giJARTERLY. one or two great systems reveals similar results. " Hefore this concentration took place, in 1866, it cost to send a ten-word message from New York to different western points, as follows : Chicago, $2.20, now 40 cents ; St. Louis, $2.35, now 40 cents ; New Orleans, $3.25, now 60 cents; St. Paul, $2.25, now 50 cents; Galveston, I5.50, now 75 cents; Buffalo, 75, now 25 cents; San Francisco, $7.45, now $1.00; Oregon, $10.20, now fi.oo; Washington Territory, $12.00, now $1.00." The results of the concentration of railroad interests tell the same story. During the last twenty-two years combination has gone on very rapidly among railroads, yet the rates show a reduction of over 50 per cent. Mr. Gunton has estimated that since the organization of the following businesses into great con- centrated capitalistic concerns the purchasing power of wages in their respective products has increased as follows : Telegraphing, 600 per cent. ; petroleum, 300 per cent. ; cottonseed oil, loo per cent. ; transportation, 100 per cent., and I do not think that he has exaggerated the increase. We have seen that most important economies result from the saving in clerical and office work, the work of drummers and that tremendous expenditure which, so .far as good results to the trade as a whole or the public go, is wasted by individual con- cerns in trying to capture business and kill the trade of rivals. Under competition millions are annually spent in advertising ; the trust does away with the necessity for the greater part of this, and incidentally also for most of the misrepresentation and lying which go with it. The saving resulting from the employ- ment of the ablest managers and the most skilful workmen, the best machinery and means of transportation, the utilization of products and the absorption of subsidiary industries has been already noted, and considered purely from the material stand- point is enormous. But there are social effects as well of the greatest import- ance. A great concern like a trust studying the question of pro- duction through the eyes of able experts sees that it can afford to employ none but the best workmen, and the best of anything can be obtained only by paying a good price, hence trusts should tend to keep up rather than depress wages, and such seems so far to have been the case. In the many denunciations of trusts I TRUSTS. COMIUNKS AND MONOI'OIJKS. 2t Hnd almost no serious complaints on the score of a lowering of wages ; it seenjs to have been the policy of the trusts to employ only the best men, pay them well, and get the best out of them. " In all the industries where great concentration of capital has taken place, the wages have increased, except in particular instances where through the introduction of machinery a new class of labour has been employed, as substituting women for men and young people for adults, which has been something of a feature throughout the whole factory system." Quite as import- ant as the rate of wages ir. its effect ou the social condition of the labourers is the permanency of labour. One of the worst features of the modern competitive system has been the tendency t jver-production, with its inevitable periods of depression when operations are suspended for a time and labourers thrown out of employment. The aggregation of capital in a large trust, however, is so great that a suspension means enormous loss, and having to a certain extent control of the market, the managers make greater and much more successful efforts to adjust their production steadily to the demand. The result is steady, con- stant employment for the workmen. The moral and sociai ef- fects of such a condition as compared with the precarious state under competition are worthy of the most serious consideration. There is an ever growing class of people who depend for their living upon the income accruing from investments of capital which they have neither the ability nor the desire to manage. But the amount of available capital is now so great that it becomes ever more difficult to place investments safely at a fair rate of interest. To such people the trust certificates when under proper control will offer a splendid field. At present the position of trusts is too uncertain, but when they take their proper place in the economic world, under legal recognition and proper control they will prove a boon to the small investor. Are there, then, no evils attaching to trusts ? Decidedly ; but most of them, it seems to me, do not attach to trusts as such, but to trusts as at present situated. With a change in con- ditions, therefore, they might be removed, and, as a matter of fact, most of them are not so glaring as they were a few years ago, and in the case of the older trusts many have disappeared. The evils for which trusts are held responsible are so much 22 grElCN'S gUAKTKRLY. better known than the benefits, and have been incidentally re- ferred to so often in earher parts of this paper that I do not feel like efoing into them fully here, and shall note only a few of the more real and grave ones. The temptation to trustees to manipulate trust stocks for the purpose of speculation is great, and there is no doubt that this evil has a very real existence. But if trusts were given legal status and forced to report on their business somewhat as our banks do, this could be prevented. The Bank of Montreal is noted for its stability and the careful way in which it safeguards the interests of its stockholders ; yet it is not so very long ::ince a general manager, recently deceased, by his clever but reckless speculation doubled the value of Montreal stock. He might as easily have ruined the bank. That was less than thirty years ago, but to-day the Bank of Montreal ranks third among the banks of the world in solidity, and is one of our most conserva- tive and respected monetary institutions. The corruption of the members of legislatures for the pur- pose of securing favourable legislation or killing that which is unfavourable, has in the United States been one of the worst features of the concentration of capital. It has been character- istic not of trusts and combines alone, however, but of nearly all great industrial interests, whether consolidated or not. Just beiore the passing of the Dingley Act, in the United States, the amount of lobbying that went on at Washington was tremen- dous. The representative there of the Eastern lumbermen said the other day to a friend of mine that he spent over a month at Washington trying to have the lumber clause changed, but had not enough money. " I had only $20,000 to spend," he said, "and needed $100,000; with that amount I could have had the clause changed to suit myself. The concerns that had plenty money got all they desired, for very many of the Senators and Congressmen have their price, and with them it is merely a matter of how much they can get." The sugar trust seems to have been a serious offender, and has spent large sums in influencing legislation ; it is even claimed that bribery reached the cabinet itself, and it is certain that the sugar clause agreed upon in committee was revealed beforehand to a few Senators and members of the Sugar Trust, who were thereby enabled to Trusts, combini:s axd monopolies. 23 buy heavily of sugar stocks and make a large profit by the rise of 34 points, which followed immediately on the publication of the clause. But evils of this kind cannot be removed by laws against trusts. They will exist, whether there be trusts or not, until a slower and more indirect cure is tried. Public opinion must be educated to a point that will prevent such senators get- ting control of affairs ; the public service must become so honour- able as to attract the best men the nation has got, and then neither trusts nor single companies can use their wealth to force the hand of the government. This is not the way of the American nation at present, with them quick action, even at the cost of rational action, is all-im- portant. They cannot abide the slow, indirect method, but pre- fer to act on the principle of the Donnybrook Irishman— "When- ever you see a head, hit it." They are not over-careful in look- ing to see whose the head is, and when the losses are counted may find as many broken heads on their own side as on that of the enemy. In view of this attitude it is not surprising that in answer to the loud outcry against trusts nearly every state in the Union has passed anti-trust legislation ; and in every case it has signally failed. Most of the laws are ridiculous in their severity, and if interpreted strictly would prohibit every form of combina- tion in trade, from the simple partnership up. The supreme court has decided that Congress has no jurisdiction over trusts as they come under the jurisdiction of the State governments. Mr. Gillett, however, discovered what he thought a loophole in the jurisdiction of Congress over inter-state commerce, and intro- duced a bill providing that anything manufactured or owned by a trust, and in course of transportation from one state to another, is liable to confiscation, and anyone knowingly aiding in such transport " shall be deemed guilty of a misdemeanor, and on conviction thereof be punished by a fine not exceeding twenty thousand dollars, or by imprisonment not exceeding five years or both." Such enactments by their extreme character foster a contempt for law that is dangerous and weakens the force of all law ; they encourage deceit and evasion on the part of those affected, and connivance on the part of officials who, owing to its severity, are afraid to enforce the law. Professor John 13. Clark, of Columbia 24 QUEEN'S QUARTERLY. University, in an article headed A nii-Trust Laws a Failure, points out that there has always been a struggle against combination in trade, owing to the fear of monopoly and high prices, and that this struggle has always had the same result, the interests which followed the natural course of events won every battle. History is but repeating itself in the case of trusts and trust legislation ; partnerships between two or more master workmen were once dreaded and forbidden ; they were combinations in restraint of competition and considered therefore contrary to the public interest. But the policy of suppressing partnerships was aban- doned, for it was discovered that competition in ample measure survived their formation. If the partnership included all the weavers in one town, those in the next would step in as cc eti- tors if prices rose appreciably. Next, corporations were a^. flit- ted. " Even these extended partnerships did not extinguish competition, and in productive efficiency had much to recommend them." We now look on them as absolute necessities of modern industry. We are at the next step now: the trust, or some similar wide combination of common interests, is needed, and will presently be permitted to take unmolested its proper place in the industrial world. We find that two influences checked the power over prices of the early partnerships — there were always some competitors left in the town, and even if not, there were the neighboring towns to be considered. We find a similar state of affairs to-day, when things are allowed to take their natural course— even the Standard Oil Trust has always had competitors. But in many countries, and certainly in North America, the force of the second check on the improper use of power is al- ways impeded and usually nullified by the protective duties, which cut off foreign competition. With the question as to whether protective duties are ever of real advantage to a country we have not to deal at present, but certainly when such a duty has become inoperative for the purpose for which it was imposed, it is almost sure to foster monopoly and high prices. For instance, if, as is claimed. North America is the natural home of the iron industry of the world, then, in the present advanced state of that industry, the duty on iron is quite inoperative for the purpose of protection, but performs a new service : it has now become a duty for the sustaining of a monopoly. Of course, the interests TRUSTS, COMBINES AND MONOPOLIES. 25 which have been establislied under a long system of protection are so great that the support upon which they depend must not be suddenly removed, but active steps should be taken looking to the gradual lowering of the walls. Our present Minister of Finance has grasped the idea of the great help given to combina- tions by import duties, and has discovered a potent means of keeping such combines in order, by incorporating into the laws a clause providing that articles, the production and sale of which is controlled by combination, may be declared by proclamation free of duty. But it would be better if the duty aid not exist, for the present clause gives an opening for three serious dangers : First, that the government may at any time yield to a popular but irrational outcry against combines and by suddenly removing duties ruin legitimate interests through a failure to distinguish between different kinds of combination ; secondly, that the government, when in need of election funds, may be tempted to play with threats of enforcing the act, to influence the contribu- tions of large concerns to the party purse ; thirdly, it encourages attempts at bribery and corruption on the part of corporations. The preceding treatment of the subject, superficial though it may be, will justify us in drawing a few conclusions and making some suggestions. We found that there is to-day in many de- partments of human activity a strong tendency toward central- ized power and combined action. This, it seems to me, is a necessary and inevitable stage in the evolution of society. If this be true all attempts to stop it must in the end prove futile. We know enough of social development to see that every advance is made against the most strenuous opposition, which, however, always fails. The struggle never ceases, and slowly but surely advances are made. The changes in modern life and industrial conditions, the rapid accumulation of capital, coincident with an industrial revolution, which has rendered necessary large invest- ments and increased immeasurably the intensity and danger of competition, made some form of close combination absolutely necessary, and the modern trust is the best outcome of the move- ment. At present we are in the transition period, and such limes are always trying. Until the new order becomes firmly esta- blished under proper regulations and with a proper understand- ing of its nature and requirements there must of necessity be 26 QUKKN'S QUARTERLY. many abuses and much suffering. But the same thing was true of the period of transition from the old handicraft system to the modern factory system and competition. Those who were dis- placed suffered intensely, yet few to-day in looking back would maintain that the gain had not quite justified the change, even including the suffering. In our own day many cabmen have been ruined by the electric car; the steam shovel has deprived thou- sands of navvies of a job, while the rapid extension of the steam- laundry system is relegating the Monday washwoman to the shades of our younger days. In other words, in passing from a less perfectly organized to a more perfectly organized system, those who have been unable to keep abreast of the times and to foresee in a practical way the drift of events are always forced out and pinched in the process. But, ultimately, the mass of the people reap benefits from the change which many times out- weigh the losses of the moment. Combination is inevitable, and as it involves great changes, suffering is also inevitable, but be- cause all progress involves suffering we should not seek to prevent progress. Let us, so far as possible, by judicious regulation, al- leviate the suffering, but with no idea of obstruction, for "it is a paradox, and yet a truth, that sacrifice is the law of life." Trusts should be recognized as a legitimate outcome from our industrial conditions and given legal status. Should they be allowed perfect freedom of action ? If the freedom were so thorough as to remove all artificial aids to monopoly it might be sufficient in most cases. But we cannot hope for so much, and even if we could, certain forms of monopoly must be reckoned with which require more than this. There are businesses which from their very nature must sooner or later become monopolies; attempts at competition may go on for a time, but they are too ruinous to last. Of this nature are railways, telegraphs, tele- phones, gas works, electric lighting plants, etc. ; other businesses again are monopolies, because the supply of the raw materials is limited and can be acquired by a few men — anthracite coal is an example. With these natural monopolies, then, we must begin in our efforts at regulation, in fact we have already begun. They have so little to fear from competition, have so strong a hold over their patrons, and owe so much to the advantages bestowed upon them by society. TRUSTS, COMl-!INl:s AND MONOFOLIICS. 27 that she may well claim some share in the regulation of tlieir affairs. Hence we find that most municipal monopolies are more or less under the control of the municipal authorities. With repjard to the regulation of such monopolies experience seems to point to the foUovvinfj principles. If the management required is simple, and comparatively few hands are employed, the munici- pality may with profit assume the ownership of the plant, and run it for the benefit of the citizens, as in the case of the water- works in most cities and towns ; but if the monopoly is such that it requires a large number of employees and a highly organ- ized and intricate system of management, the municipality had better hand over the franchise to a single strong company, sub- ject to a carefully drafted agreement safeguarding clearly and thoroughly the rights of the citizens, and working as nearly automatically as possible. The agreement between the city of Toronto and the street railway company is a case in point and works well. Perhaps, as the character of our aldermen and municipal officers improves, we may be able to take over much more highly organized businesses than at present, but we cannot be too care- ful, for incompetence and corruption have hitherto characterized most of our more ambitious ventures in such a direction. To see that advancement is possible, however, we have but to look at some of the industrial centres in Britain and what they have ac- complished in the way of municipal control and ownership. Glasgow is proverbial for the efficient and economic way in which she attends to nearly all the wants of her citizens. Lighting, tramways, water supply, baths, amusements and a host of other things have been supplied in the best form and at a cheap rate. But Glasgow pays high wages in order to secure first-class men, and then all her ofKcers are elders in good standing in the Kirk, while some of ours are not. In dealing with mining lands, the right of way for railways, and similar privileges for which the corporation has to ask the government, grants should be made only on such clearly defined conditions as shall adequately safeguard the rights and interests of the citizens and insure for them a fair share in the future gains which result from the development of the country. In all r^iilway charters clauses should be inserted dealing with the QUEEN'S QUARTERLY. question of rates and tlie facilities to be provided, and through these should the public benefit if the expansion of the country makes the railroad a success. Much smaller grants should be given to railroads too, for if railways are really needed there is plenty of capital ready to build them, and if there be not enough people to support them, nor the prospect of this being the case in the near future, there is as a rule no justification for their ex- istence. In the case of a grant of mining lands I am strongly convinced that provision should in every instance be made for a royalty to the government should the mine prove valuable. In dealing with natural monop olies, no attempt should be made to create competition. Competition here is ruinous to all parties concerned ; the paralleling of railways in the United States has shown us something of the evils and losses whicli inevitably result from such a course. A great amount of capital is sunk in a second road, and a rate war begins, which goes on with inter- vening periods of pooling of rates, etc., until one of the roads goes into bankruptcy and a receiver is appointed. It runs on for a time giving a poor service and paying no dividends, and at last has to be Sold and is bought in by its rival. This is taking place all over the United States, and consolidation goes on apace ; while a great capital, which might have been elsewhere fruitfully employed, has been sunk in a needless enterprise and lost. Only last week it was announced that a move was on hand looking to the consolidation under one management of the great Vander- bilt railway system and its rivals, both east and west, and this is receiving confirmation in the consolidation of the New York Central and Lake Shore roads. When we pass to the more artificial monopolies, those depending on the great aggregation of capital and the consolidation of interests, the field for bene- ficial direct interference is exceedingly limited in extent, for, as Professor Ely points out, in a democratic country, corruption almost necessarily attends public efforts to control private busi- ness. " President Eliot, of Harvard University, has in a recent article pointed out how the liquor business necessarily becomes a corrupting element in politics on account of the efforts to con- trol it ; those who are controlled attempt to defeat the ends of control, and they enter politics to do this. What has been described with respect to the liquor business holds with respect TRUSTS, COMBINES AND MONOPOLIES. 29 to every business which it is endeavoured to control. Wlien tlie number of businesses which are controlled increases largely the corruption becomes more widespread, and the difficulties become infinitely greater." Permanent boards of control, like the Inter- State Commerce Commission of the United States, with few members and great power, are always open to the dangers of corruption. Furthermore, any attempt by an outside power at active interference is almost sure to destroy that freedom of initiative and rapidity of action so essential to successful business to-day. Our plan of action should be to recognize trusts and other great aggregations of capital as legitimate and necessary forms of business enterprise, so that they may occupy a normal posi- tion in their commercial and legal relations, and can be treated as other businesses are. But, recognizing also that competition has hitherto been the chief regulator in business, and that trusts tend to remove competition, we must have other regulators in reserve as an unseen force, ready always to act should necessity demand. We must not look to remove all the evils by a single cure, but must seek improvement in many ways. Cure-alls are as dangerous in sociology as in medicine. The enormous accumulation in recent years of capital eager for investment, and the consequent low rates of interest, fur- nish one of the greatest safeguards against an improper use of their powers by trusts ; and it is a safeguard of unusual value in as much as it requires no police force behind it. Professor Clark points out the results of this readiness of capital to enter new en- terprises, as follows : — " It is the danger of calling new competi- tors into the field that actually holds in check the scores of trusts now existing in the United States. Only up to a certain point can they now curtail products and raise prices; if they go fur- ther, new mills spring out of the earth, as it were, in a night, and the combination goes to pieces, leaving prices lower than ever. It is this type of competition that needs to be kept alive. It is not the actual building of the new mills that is necessary. What is wanted is such a condition that new mills are certain to be built if a trust is extortionate. Potential competition is the re- source to be depended on. The mill that does not yet exist, but will exist if prices rise, is the protector of the public." That is 3" QUEEN'S gUARTERLY. one of the numerous forces whicli help to keep in check the dan- gerous side of trusts. But to be effective it requires the removal of protective tariffs in order that competition from without may have free play. Again, as many irresponsible combinations, of a temporary nature, and seeking only a rise in price, have hitherto inflicted much damage on the industrial world and involved the more legitimate forms in the general condemnation, trusts should be made to throw open to public scrutiny such features of their business as will not be injured thereby. They ought, it seems to me, to be chartered, somewhat as banks and insurance companies are, and issue reports in the same way. Before receiving a char- ter they should clearly indicate their object and give reasonable evidence of ability to successfully attain it. Thus, the ring or pool seeking a merely temporary arrangement, for the raising of prices would be to a large extent done away with ; it could not get a charter and would have against it the huge influence of those legitimate combinations which are at present classed as il- legitimate. Trusts in this way would help to regulate combina- tions of all kinds and steady business. Having forced recog- nition after a struggle during which they suffered severely from the stigma cast on combinations through the action of temporary and unscrupulous ones, their vast negative influ- ence would hereafter be exerted against such rings, and their positive influence would make for the steadying of trade by the careful adjustment of supply to demand and the avoidance therefore of those periodic times of depression which are such a feature of our present industrial system. This, it seems to me, is as far as we may safely go in the way of direct efforts at controlling interests, but there still re- mains a vast and difficult field of labour ; one in which all may do their share, and one whose results will in the end be of infi- nitely greater value than those of any enactments which are im- mediately operative. It is a field whicli will never be exhausted, for every advance reveals new and greater distances beyond. Our efforts for the regulation of trade combinations and the amelioration of industrial evils must to a large extent follow a slow and indirect course. We must go behind the corruption of governments and the exactions of monopolies to the men who T 3IT" TRUSTS, COMBINERS AND MONOPOLIES. Ji manage them, and behind these again to the general public, who are the final arbiters. We must endeavour to instil in them a knowledge of what ought to be done and a desire to do it. We must indeed apply the knife to the cancer to give temporary re- li'if, but can hope for no permanent cure without a long and patient course of constitutional treatment. A few suggestions as to the needs of the patient and the course of treatment to be pursued will not be out of place. First of all it is necessary that people should get some defi- nite knowledge as to the nature and scope of the leading economic and social laws. These are 'aws which touch closely and at many points the lives of all, and yet the ignorance on such topics is amazing. The question under discussion is a case in point : Monopolies have been denounced in many tjuarters of late years, and the word " trust " has been the favourite epithet applied to the monsters. Yet most of those using the terms so glibly could give no definite and reasonably correct definition of either a monopoly or a trust. Many of the combines most bitterly de- nounced under the name of "trusts" for instance were not trusts at all. A clergyman high up in church circles in the East- ern States and recognized by his brother clergy as one of their leaders, told me this summer that the very life-blood of the re- public was being drained by the " trusts," and that they should be legislated out of existence at once. On being asked for ex- amples of these terrible " trusts," he instanced a milk dealers' association, composed of a number of dealers who had agreed among themselves to keep up the price of milk, but each of whom was quite independent in his power over his own business; a great departmental store, doing business under charter as an incorporated company, and owned by a single man, and finally the Louisiana lottery. Not one of them a trust, and each dif- ferent in nature from the other two ! What can we look for from the ordinary voter if these be the views of our teachers ? It behoves our preachers, and others whose position gives weight to their opinions, to carefully study such problems themselves and then strive to disseminate broader and more rational views among their followers. Our business men too, in their study of business principles, should not stop with a knowledge of the im- mediate requirements of their trade, but take broader ground, 32 QUEENS gUARTKRLY. and base their technical knowlege on proper {guiding principles. As Mr. Gunton says in writing on this very question : " Instead of applying arbitrary limitation to the aggregation of capital, the real relorins to be sought are in the education of the capitalist and the public in regard to the true relation of capital to the community. First, the capitalists must learn, or pay the penalty for their ignorance, that their right to concentrate must be paid for in improved services. It should be made a recognized prin- ciple among investors that capitalistic integration is unsafe, unless accompanied by the assurance that it will render a perceptible benefit to tin comnumity. Not that the community should have all the gain, but it must have some. The public should be educated, and here is the work of the press, to recognize the difference between genuine productive integration and mere price-raising agreements. All the influences of society should be made to support the former and discourage the latter. If this distinction were clearly established by the press and the public, it would soon become a moral and social impossibility for industrial combination to occur, without giving the public improved service." Again, the workingmen must get a clearer hold of the idea that indirectly they have their own welfare largely in their own hands, and that in the last resort no one can help tliem but them- selves. The trade unions have done a great work already in or- ganizing labour, and not only winning for it the respect of others, but induing it with self-respect. (This is much truer of Britain than of America.) Their action has often been bigoted and short- sighted, but they have accomplished much. The main object which they have hitherto set before themselves has been nega- tive in character : the resistance of attempts on the part of em- ployers to e.xploit what they considered their just wages or privi- leges. Recent events seem to indicate that their activity has been pushed to the extreme in tliis direction : it is many years since so decided a set-back has been received by any union, a^ the wealthiest and most experienced of all received the other day in the practical failure of the engineers' strike in Great Britain. The efforts of trades unions must be hereafter more and more positive in character and look to the improvement of their mem- bers and the fitting of them for the higher positions which through union effort they have won. The trust and the great corporation demand skilled workmen and offer them greater chances than TRUSTS, COMHINKS AND MONOPOLIES. 33 ever before for advancement, but they must fit themselves for it. Technical education is as yet in its infancy, and its possibilities for the improvement of the labourer and his work are only bc},Mn- ning to be realized. Again, we must inculcate in the people higher ideals and finer taste. So that any advances which they make in material welfare may not immediately be squandered in dissipation or on tawdry finery and veneer accotnplishments, but will be used in self-improvement and the attainment of a more comfortable, more intelligent, and more beautiful mode of life. There is another question about which the beliefs of the labouring classes in working out their own salvation, and, in fact, ti)e opinions of most of us, including particularly our politicians, must undergo a radical change. I refer to the question of popu- lation, a question which raises many of the most difficult pro- blems of our existence which affects every one of us closely, and yet is carefully avoided by the majority, instead of receiving, as it ought, the most careful and painstaking investigation. Here we can but take a glance at it in passing. Malthus is still worth reading ; the truths he stated years ago are still truths, and from the labourer's point of view furnish, in my opinion, the keystone of the arch of his difficulties. There has been long prevalent an idea that the parents of children are performing a duty for which the state and their fellow-citizens owe them much. Under pro- per restrictions the idea is a true and noble one, but parenthood as such is no guarantee that a citizen is helping his country. In a meeting in Toronto for the discussion of social questions, where the average of intelligence was quite up to the ordinary, I heard not long ago a man denounce as wrong the present industrial system which pays to the married and unmarried man the same rate cjf wages. "Why," said he, "at the next bench to mine works a young, unmarried fellow, who gets the same wages as I do, and yet, while he neglects his duty to his country, I have fol- lowed the Bible's injunction to " be fruitful and replenish the earth." The sentiment was applauded by the majority of those present and openly opposed by none. Under our present indus- trial conditions workmen shift soeasily from one place to another, that his responsibility for the finding of a place for each one of his children is not brought closely home to a father. " They will get a place somewhere," he says, and lets the morrow look out for J4 yri:i:N's guAin kklv. itself, it will be better for all parties concerned when the work- intjinen {,Masp the idea that they owe it to themselves, to their cliildrei), antl to society, to so start each child in life that he has a good chance of winning for himself a position in society at least as good as that of his father, and of improving on his p irent in taste and education. The first stej) in this direction should not be very difficult to take — the men whose prudence and honesty have led them to observe the rule, ami who have either refrained from marriage or are in a position to prcjperly educate and start their children, should be impressed with the fact that they are suffering a personal wrong at the hands of every man whose youthful folly or incapacity has l)urdened him with a family for which he cannot properly provide. I^et the l)etter men learn that they have to contribute for the education of these children and to the support of the large number who become paupers or criminals, only to make an addition to the army of half equipped workmen, who will presently seek to oust them from their posi- tions by underbidding for their work. Once get this idea im- pressed upon the ambitious workmen, and a tremendous pres- sure growing in intensity will be brought to bear on the evil from the ranks of the class most affected. But it is not the working classes alone who need a lesson on this subject. Many of our politicians seem to have gone mad on the population question and talk as if this country were doomed to eternal destruction if a large population be not gotten soon. "Just look," they cry, "at our undeveloped resources and the immense population they would support? But if they be not of that religious sect which believes that the end of the world is at hand, can they not afford to ior their grandchildren enjoy a few of the resources ? Are people to be counted by the head, and nothing else considered ? i have sometimes suspected onr butchers of buying their beeves on that principle, but how can we blame them if population is contracted for in the same way. Are we required to receive a hundred thousand of the scum of the earth from General Booth and thank God for a glorious increase in numbers, though they will pollute the bodies and souls of our children, and furnish us with a permanent bill of expense, a source of constant worry, and a splendid recruiting ground for our cri- minal army ? Surely it were better in estimating the value of TKUSTS, COMIHNKS AND MONOPOLlKs. 35 citizens to adopt the staiulaid of I'lnerson and Indiove that tlie true tost of civih/ation is not in the census, nor the si/e of cities, nor tlie crops, hut the kiiul 0/ men the country turns out." " Mot wh It has all this to do with monopolies ?" cries some one easer to apply the knife and be ri.l of the difficulty. I said that the field for direct and immediate action in dealint,' with the evils attaching' to monopolies was limited, but that much mi^ht Ml tune be accomplished indirectly by educatiuK and in various ways chanRin^' the con.lition of those whom the question affects I here must be a ,,'reat advance in knowled-e and character made by all of us, but more particularly by the capitalist, the labourer and lastly, by our public men. We want an independent and' fearless press which shall seek to mould public opinion, not truckle to party preiu.lice or popular passion; we want an eu- hghtened pulpit to lead and educate, not to doKmati;^e and hurl anathemas; we want a public sentiment, so strong,' and loyal that It will tolerate none but the best men in public places, and none but their best eff .rts in the conduct of public affairs. The path is a loii« and difficult one, results can be achieved only in the slowest and most painful manner, but I am convinced that m this way alone can anythin- more lastin- than momentary and paitial relief he attained. E. K. PliACOCK.