ii.iti##. I 'I'll i'!|!tl!ifl !i SGOTT HEARING ANTHRACITE An Instance of Natural Resource Monopoly By SCOTT NEARING, Ph.D. University of Toledo Author of "Wages in the United States," "Financing the Wage Earner's Family," "Reducing the Cost of Living," "Income," etc. THE JOHN C. WINSTON COMPANY Philadelphia Copyright, 1915, by The John C. Winston Company Hi) DEDICATED To an order of life in which the chief aim will be happy and noble human beings. > /ii <^oQr^ CONTENTS CHAPTER 1 Monopoly on Trial page 1. The Nature of Monopoly 17 2. Anthracite Ownership Means Monopoly . . .21 3. Monopoly Through Concentration of Ownership . 23 4. Competition, the Life of Trade 24 5. The Growth of Co-operation and Combination . . 26 6. Will Monopoly Work? 29 7. Ownership as Opporttmity 31 8. The Fruits of Ownership 33 9. Every System Must Produce Results .... 36 10. Has Monopoly Succeeded? 38 CHAPTER 2 The Anthracite Problem 1. The Parties at Interest 42 2. The Use of Anthracite 43 3. The Supply of Anthracite 46 4. The Basis for Anthracite Monopoly .... 49 5. Unsuccessful Combinations 50 6. An Effective Anthracite Combination ... 54 7. RaOroad Unity 58 8. Coal-Mine Control 60 9. The Anthracite Problem 63 CHAPTER 3 The Consumer and Anthracite Prices 1. The Consiuner's Point of View 65 2. The Status of the Consumer 66 3. The Rights of Consumers 69 4. The Obligations of Consumers 70 (5) CONTENTS / 5. Reasonable Prices . 6. Methods of Making Prices 7. Business for Profits 8. Business for Service 9. Prices and Earning Power 10. The Monopoly Principle and Anthracite 11. Recent Movements of Anthracite Prices 12. The Cost of Producing Anthracite 13. The Cost of Getting Coal to Market . 14. A Better Explanation .... 15. What Should the Consumer Pay for Anthracite? PAGE 72 74 76 79 82 84 85 87 92 93 94 CHAPTER 4 The Wages of the Anthracite Workers 1. The Economic Status of Anthracite Labor . . 97 2. Anthracite Risks 103 3. Anthracite Wages and Wages in other Industries . 107 4. Anthracite Wages and the Labor Market . . .110 5. The Adequacy of Anthracite Wages . . . .112 6. The Anthracite Wage Scale 115 7. The Anthracite Wage and Physical Efficiency . .118 8. The Anthracite Wage as a Business Proposition . 128 9. The Anti-Social Nature of the Anthracite Wage . 137 10. The Anthracite Wage and the Increased Cost of Living 141 11. A Fair Anthracite Wage 152 CHAPTER 5 The Profits of the Operators 1. The Era of Small Profits 2. Making Anthracite Profitable 3. Anthracite Profits and Railroad Profits 4. Anthracite Prosperity .... 5. Are Anthracite Profits too High? 153 156 161 167 170 CONTENTS 7 CHAPTER 6 Concrete Example — The Conflict of 1912 page 1. The Apparent Advantage of the Operators . .178 2. A Typical Situation 181 3. The Consumer in 1912 184 4. The Worker in 1912 188 5. The Operators in 1912 190 6. Some Lessons From the 1912 Experience . . .194 CHAPTER 7 An Object Lesson in Monopoly 1. The Anthracite Lesson 2. The Losers and the Gainers from Monopoly 3. The Larger Menace of Monopoly 4. The Economic Effects of Monopoly 5. The Social Effects of Monopoly . 6. Monopoly Denies Opportunity 7. The Political Effects of Monopoly 8. Anthracite and the Government . 9. The Enemy Within the Gates 196 199> 200. 201 2or 214 216 221 224 CHAPTER 8 The Future of Anthracite 1. The Conflicting Anthracite Interests 2. The Coal Owners Would Stand Pat 3. The Future for the Workers . 4. The Consumers and the Future . 5. Winners and Losers rH'i-'^ • 227 230 231 235 241 APPENDIX Shipments of Anthracite 243 Employees, Working Time and Tonnage .... 244 Index 245 PREFACE During these years of spectacular military con- flict, it is easy to forget the increasing economic turmoil that is interwoven with present-day exist- ence. Economic issues arise on every hand. Capital and labor, wages, the cost of living, unemployment — these things are a source { of endless social disruption. Economic issues may be considered in the large. They possess equal potency in individual cases, just as the drop of water contains the qualities of the ocean. Furthermore, the individ- ual instance is more easily studied, its char- acteristics are more readily comprehended, and the proper method of treatment more safely prescribed. Moreover, it is highly probable that the deductions which may be drawn from the economic conditions surrounding one specific problem are in large measure applicable to the similar problems elsewhere. Some satisfactory method of studying economic problems must be devised. Dogma will not stand the test of experiment. Preconceptions and tradition fall by the wayside. Meanwhile the world must know! Knowledge is the only weapon that will ever overcome the host of difficulties arising out of the stress of modern life. Knowledge must therefore be the keynote of social endeavor. (9) 10 PREFACE Knowledge must be spread through the land. At one time it will be propagated by means of a broad hypothesis like that of Darwin or Marx. At another, many persons, working each in his own field, will produce atoms of information, which, aggregated, will constitute the basis for still further advance. This little book is not a general study. It does not aim to set forth any new hypotheses. It aims to explain some of the more important phases of modem economic life as they apply to one indus- try, localized in one corner of one state. It is written with the hope that the propositions that hold true for the anthracite industry may be found to hold, with equal truth, for other natural resource monopolies. A BRIEF SUMMARY OF THE ARGUMENT Chapter 1. Monopoly on Trial Monopoly is on trial in the United States. The eariy colonists established a system of property ownership under which the natural resources — fertile land, timber, minerals, water power, and all of the gifts of nature except harbors and navigable waterways — might be owned by private individuals. Under the system of private owner- ship of natural resources most of the valuable parts of the earth's surface have passed into the hands of a comparatively small number of people. The owners, by virtue of their ownership of these particularly desirable parts of the earth's surface, are enabled to collect returns for the use of their properties. The system of private ownership of natural resources may succeed or it may fail. Its fate depends, in the long run, on the effect which it has on the well-being of the masses of mankind. Three centuries of property relations, tmder which any man who could buy it might place a "no trespassing" sign upon as much of the earth as he could afford to buy, has made a few people the owners of the earth. Chapter 2. The Anthracite Problem The anthracite coal fields present an excellent illustration of the ultimate effects of the private (11) 12 SUMMARY ownership of natural resources. The anthracite product has a broad, general market ; the anthra- cite field is limited in extent and localized in one small area, the ownership of the field has been concentrated in a very few hands. Millions of consumers depend upon anthracite for fuel; hundreds of thousands of families depend upon the industry for a livelihood. The way in which the consumers and the workers fare at the hands of this private resource monopoly may give many a valuable hint regarding the way in which con- sumers and workers may expect to fare at the hands of other natural resource monopolies. Chapter 3. The Consumer and Anthracite Prices The consumer is called upon to pay a price for coal which represents, not the cost of producing the coal, but a monopoly price based on the prin- ciple of "all that the traffic will bear." The monopoHst, in other words, charges all that he can for his product, his aim being, not low prices but high profits. When the cost of producing anthracite increases, the consumer is promptly saddled with an additional burden. The facts show clearly that the consumer of anthracite pays all of the costs of production plus a handsome monopoly profit to the owners of the resource. Chapter 4- The Wages of the Anthracite Workers The anthracite workers fare no better than the workers in any other large American industry giving employment to men of a similar grade of SUMMARY 13 skill and intelligence. Indeed, when the risks involved in mining are taken into account, the anthracite miner is often worse paid than em- ployees doing similar work in other industries. Many of the workers in the anthracite field receive a wage which will not buy a decent living for a family of ordinary size. Furthermore, the wage of the miners in recent years has failed to rise as rapidly as the cost of living. Consequently the income will not go as far now as it did in 1903. Certainly the miners are receiving no share of the heavy monopoly toll taken from the consumer. Chapter 5. The Profits oj the Operators Meanwhile the owners of the anthracite region have been making profits that are generous in the extreme. Measured in terms of earnings, of divi- dends, or of surpluses, the anthracite interests are reaping the full benefits of their monopoly control. The prosperity of the anthracite owners has been particularly noticeable since the forma- tion of the effective combination of 1898. Chapter 6. A Concrete Example — The Conflict of 1912 The anthracite situation is well illustrated by the events surrounding the strike of 1912. The workers gained a net increase of about five per cent in wages; this raised the labor costs of the coal slightly, and the operators promptly added twenty- five cents to the price of each ton. The increase in wages was used as a pretext to saddle additional 14 SUMMARY burdens on the consumers. The operators made milHons by the transaction. This situation brought out clearly the rule that seems to hold true of this natural resource monopoly — the workers' gains are slight, the operators' gains are immense and the consumers foot the bill. Chapter 7. An Object Lesson in Monopoly The extra burdens on the consumer, the indif- ferent position of the worker and the huge returns to those who control the monopoly, seem to represent with some degree of accuracy the situa- tion that the American people will face with all of the natural resource monopolies. The m^ani- fold effects of the anthracite monopoly power upon the consumers, the workers, and the eco- nomic, social and political organizations of the community are due, not to the fact that the monopolists control anthracite, but to the fact that they have a monopoly. Wherever it appears, monopoly leads to certain well-defined ends that are evidently in conflict with the best interests of society. Chapter 8. The Future of Anthracite The consumers, the workers and the owners have an interest in the anthracite fields. So long as the private monopoly of natural resources is permitted, the consumers will be called upon to foot the bill. Under the present system of natural resource ownership they get their fuel at an unnecessarily high figure. The worker need SUMMARY 15 expect no better treatment from a monopolized industry than he expects from a highly competi- tive industry. Indeed, where a monopoly is powerful enough to control the political machinery as well as the industrial machinery, the worker may fare worse under a monopolized than he would fare under a competitive industry. The real gainers under the present system of private monopoly of natural resources are the monopo- lists themselves. They have nothing to lose and a very great deal to win from the continuance of the present system of resource ownership. Of the three parties at interest, the monopolists and they alone will be benefited economically by a con- tinuance of the present system in the anthracite coal fields. CHAPTER 1 MONOPOLY ON TRIAL 1 . The Nature of Monopoly The owners of the anthracite coal fields are monopolists in two senses : First, they are monop- olists because they own the coal-bearing land. Second, they are monopolists because they have concentrated the ownership of the important anthracite deposits in a comparatively few hands. Economists have agreed to define monopoly as a control sufficiently great to fix a price above the competitive level. Thus, for example, if five men are spinning cotton yarn and selling their product in the same market, each one of the men will naturally try to out-do the other, either by furnishing a superior quaHty or by selling at a lower price. The price of the yam under this free competition will be lowered to a point at which the spinner who is producing at the great- est cost is getting a return for — 1. The cost of running the business, including raw materials, tools, hous- ing and the like. 2. Wages for himself as a worker. 3. A fair profit on his investment and for the risk which he incurs in carry- ing on the business. 2 (17) 18 ANTHRACITE A price including these items is called a "cost price" because it represents the actual costs of production, including a fair profit. Free competition makes cost prices. The existence of cost prices is proof of the freedom of competition. One of the five yarn spinners, who is producing more cheaply than his fellows, may decide to lower prices. He has certain efficiency devices that enable him to do this and at the same time to secure a reasonable profit on his business. Prices go down, and the four competitors who are spinning yarn under greater costs can no longer earn profits. If the situation continues, the competitors will be forced out of business, since prices cannot exist permanently below a figure representing the cost of production. The five spinners, instead of yielding to the pressure of competition, decide to combine in the interest of larger profits. One of them is a clever business man, who persuades his fellow producers to join with him and advance the price of yarn 20 per cent. The yam makers now are receiving a return for — 1. The cost of running the business. 2. Wages or returns for management. 3. Profits on the investment. 4. Monopoly power. This fourth element is the result of the agreement whereby the producers of yarn advance the price above the cost basis. ONTRIAL 19 Monopoly power is the power to establish prices above a cost or competitive basis. Any advantage that enables a person to do this is a monopoly advantage or, as it has recently been called, a special privilege. Conceived in these terms, the mere ownership of a natural resource, limited in amount and sub- ject to a demand greater than the supply, is tantamount to monopoly, because, since there is not enough of the resource to go around, those who do hold it are able to charge an extra or monopoly price for it. Land ownership is perhaps the greatest single monopoly with which society must deal. There is no sense of the word in which the private owner- ship of land is not monopolistic. Were there enough land for everyone, and some to spare, land ownership would be in no sense a monopoly. Other natural gifts like air and sun- shine exist in such quantities that all people have an ample supply of them. Could air or sunlight be privately owned and limited in amount, they would afford a monopoly power as great as that of land. The owners would be able to collect huge profits from those who wished to enjoy air and sunshine. The monopoly of air and sunshine has proved impossible hitherto. No one has yet devised a scheme for fencing them in and putting a price on them. Land can be fenced in. Unlike air and sun- shine, there is no difficulty in fixing the boundaries of land ownership. 20 ANTHRACITE Every community in the world, except a newly settled wilderness like central Canada today, faces the land problem. In every community there are more people who want a piece of land than there are pieces of land to go around. Hence, the mere title to a piece of land enables the owner to put a price on it. He may own a sand bar near a growing summer resort, or a farm in a section which has been tapped by a railroad line. He need never have seen the land, much less improved it. His ownership gives him monop- oly power. There is no cost attached to a piece of unim- proved land. The owner has done no work upon it. He has taken it just as nature gave it. Nevertheless, after he becomes the owner, if he finds that the land contains some mineral or is in some other way desirable, he may secure a very high price for the land, because he is the owner. The monopoly power of land ownership may be seen in a growing city. Near the commercial center lies a vacant lot. Each year the owner of that lot learns, from the assessor's books and from the sales of neighboring properties, that his land has increased $100 in value. His taxes and the interest on his investment are but $50 a year, so that the rise in value gives him a clear $50 mon- opoly profit. One day a storekeeper offers to rent this lot for twenty years and put a store on it. The owner consents, and for the granting of that privilege, he receives $1,000 a year. From this ONTRIAL 21 $1,000 he deducts interest and taxes. The re- mainder is monopoly profits. 2. Anthracite Ownership Means Monopoly All returns which come from land, because of its location or because of its natiu^al fertility in soil, minerals or other resources, are monopoly returns. Much of the return on anthracite coal falls in this class. The supply of anthracite coal in the United States is very limited. The demand for it is wide- spread. The owner of anthracite coal land can set a price that will represent the difference between competitive conditions and the consoli- dated ownership of the anthracite coal field. So absolute is the monopoly power that is inherent in the ownership of a natural resource, limited in supply, that the owner of a piece of anthracite coal land may receive, for his bare ownership, a price in proportion to the amount of coal that his land contains. This is true with- out any reference to the conditions under which the land was obtained. Thus, for example, a man has gone into the mountains and bought a tract of cleared land. The timber has been cut off; the hills are rugged and precipitous; the valleys narrow and unfer- tile. Some day the land will be reforested. Mean- while it lies fallow, a prey to the periodic forest fires that sweep off the undergrowth and prevent the development of a good growth of timber. This land sells for 20 cents an acre. 22 ANTHRACITE The owner feels that he has a bargain — $1,000 for 5,000 acres of land. He builds a hunting lodge, posts "No trespassing" signs, and spends a few days winter and summer hunting and fishing. To him the land would have been cheap at twice the price. A geologist, in making a survey of the region, discovers anthracite on the tract. There are two veins — one thick and fine; the other thin and poor. They are both workable, however. The nearest railroad is four miles from the 5,000 acre tract. The land has not changed in its make- up for a million years, and yet, no sooner is the discovery of this coal made known than the owner of the hunting lodge is asking $100 an acre for land that was cheap at 20 cents only yesterday. What is the explanation? Under this land there lies a vein of coal. People want it. They are willing to pay well for it, and the land owner, because he is the owner, is able to sell for $500,000 a tract that cost him $1,000. The difference in value represents the monopoly power that at- taches to the ownership of a resource, limited in amount^and generally desired by the commimity. The owner of the 5,000 acre tract may decide not to sell his land. Instead, he may make a stip- ulation that for each ton of coal dug from the mine he is to receive 10 cents. From that time on, and as long as the property is producing coal, this owner of 20-cent hunting lands will be receiv- ing an income greater or less in proportion to the amount of coal mined, so long as the property is ONTRIAL 23 productive. This royalty privilege is another phase of the monopoly power of ownership. The owner, for no reason other than his owner- ship, is able to share in the products of the land to which he holds title. The point is emphasized because of its pro- found significance. In all economic discussions the place of ownership must be clearly understood. Wherever there are two pieces of land wanted by three men, the owner of each piece of land will be able to put a price on his piece. Anthracite coal land falls in this monopoly class. There are only a few acres of such land. These few acres are wanted by a large number of people. The excess of demand over supply en- ables the owners of the anthracite coal land to set a price on it and receive a monopoly return for their ownership. 3. Monopoly through Concentration of Ownership Anthracite land owners have monopoly power because they own the anthracite land. They have clinched this monopoly power by concen- trating the ownership of the many acres of anthra- cite land in the hands of a very few people.^ The continent is so arranged geologically that for every acre of anthracite land there are 4,000,- 000 acres of land that do not contain anthra- cite. This geologic fact places great monopoly power in the hands of every anthracite owner. Add to this the successful business ventures that 1 A statement of the extent of this monopoly will be found in Chapter 2. 24 ANTHRACITE have culminated in the concentration of the an- thracite acres under the control of a very small group of interests, and the monopoly picture is complete. The fact that there is only one acre of anthracite land for each 4,000,000 acres of other land means that the chances for competition are compara- tively small. Concentrate the ownership of all the anthracite acres in a few hands, and the possi- bility of competition vanishes. 4. Competition, the Life of Trade At this point the reader will infer very readily that the complete monopoly of a natiural resource is bad. But is it ? The people of the United States are very eager to conclude that a thing is either "good" or "bad." In the case of monopoly, they have been even more than anxious to attach words of opprobrium and reproach to any business organi- zation which displayed monopoly characteristics. A long line of anti-trust statutes which have been passed during thirty years furnish abundant evi- dence of the popular conviction that the trust was "bad" and "wrong." Farmers and small business men united their influences, and state and national legislatures alike loaded the statute books with laws directed against certain forms of monopoly power. The trust was fought from all angles. Rival businesses were organized. There was, on the one hand, the trust ; on the other hand, the anti-trust ONTRIAL 25 organization, which in its turn became virtually a trust. Yet, strangely enough, a certain amount of public approval attached to the anti-trust trust because it was in a position of opposition to the original trust. Both might be, and probably were, charging similar prices. Both organiza- tions might be reaping huge returns through their ownership of natural resources, patents or other special privileges. Yet the mere fact that the first organization represented the trust, while the second organization opposed it, gave some color to the demand of the second organization for public confidence and patronage. The opposition to the trust was founded on the axiom that competition is the life of trade. The phrase is an old one. In the eighteenth century it was revived and given widespread currency by the Physiocrats and their followers. The axiom that ' ' competition is the life of trade " was accepted as the great and universal law of the economic world. Economists promulgated it and business men did their best to live up to it. For generations competition was venerated with a childlike confidence by the commercial intelligence of the Western World. Finally a change came. Experience is an effect- ive teacher. Men learned by degrees that com- petition did not pay. Producers waged cut-throat wars with one another, until experience taught them two things : First, competition may ruin the successful as well as the unsuccessful competitor. Second, whoever won, the consumer, and not the 26 ANTHRACITE producer, derived the benefits under the com- petitive regime. Experience finally convinced the business world that competition was dangerous in the extreme — almost as dangerous to the successful as to the unsuccessful competitor. Many a successful man, at the end of a price war, has gazed around him at the havoc wrought by the struggle, has estimated the cost in health and effort, and has then wondered whether, after all, it really paid. Certainly it did not pay, in business returns, even for him. It had ruined the man who lost. The consumer liked competition because it did pay. A price war meant cheap goods. Com- petition spelled plenty for the housewife. There- fore the consuming public was an ardent supporter of the competitive regime. 5. The Growth of Co-operation and Combination The manifold experiences of business triumphs and failures combined with a number of other factors to convince the producer that while com- petition might be the life of low prices, it was the death of profits. He sat down with a fellow manufacturer at a quiet luncheon and whispered this idea to him across the table. The other nodded intelligently. He, too, had reached the same conclusion, though he had never dared to breathe a word concerning it. The little luncheon gave place to a larger one, out of which grew a manufacturers' association, a gentlemen's agree- ment, a trust or a combination. The idea spread ONTRIAL 27 like wildfire and producers began to take care of themselves through the sure channels of trade co-operation and organization. The different forms of co-operation were vari- ously effective. The association with its dinners and conventions gave men in the same line of business a chance to form speaking acquaintances with each other. The gentlemen's agreement bound producers loosely together. They agreed to fix prices; to sell only certain lines of goods; to sell only within a certain territory or only under certain conditions. The gentlemen's agreement was unenforceable at law, but the erstwhile com- petitors had seen a great light. They realized the superiority of co-operation over competition and kept well in line. The trust and the combination were formal and legal. Great funds of capital were aggregated under the direction of one group of men. Entire industries were brought under the control of one corporation. Even though there was no mon- opoly in theory, there was no longer active competition in practice. Thus, through a series of "get-together" devices, the era of competition gave place to the era of co-operation and com- bination. With the cessation of competition, the con- sumers cam.e face to face with the pressing nec- essity of taking care of themselves. Prices were no longer fixed on a competitive basis. Some prices rose mightily. Others failed to decrease in proportion to the greater efficiency of produc- 28 ANTHRACITE tion. The consumers had depended for price regulation on a competitive war between pro- ducers, and the producers had declared a more or less permanent peace. The transition from competition to combina- tion led to a new definition of monopoly profits. They could be estimated no longer on the basis of a competitive price level, because there was no competitive price level. Some substitute for the competitive price level was necessary. The one most easy to apply was the "cost of production." Therefore, at the present time a monopoly profit is defined as a profit in excess of a fair return on the actual costs of conducting the business. The difference between a competitive price level and a cost price level is theoretically very small. Competitors were supposed, by their competition, to reduce prices to a point where they yielded only a fair or reasonable profit. Those who advocate the fixing of prices on the basis of cost insist that the theory behind com- petition be made the basis for regulation. When- ever a price is maintained at a point that yields more than a fair return in the actual cost of con- ducting a business, then a monopoly profit exists. This definition does not allow a business to first capitalize its earnings and then allege the charges on this capitalization as one of the costs of its business. Cost prices are figured on the physical valuation or cost of replacement of the physical property of the business. Whatever their form, industries which exact ONTRIAL 29 more than a fair profit on the cost of production are in possession of monopoly advantage. Where- ever monopoly power is being exercised there is an opportunity for a reduction of the cost of living through a reduction of monopoly prices to a cost level. 6. Will Monopoly Work? Whatever may be the theory regarding the desirability of competition and the menace of monopoly, the fact is that the business world is being rapidly transformed from a competitive to a co-operative basis. Though this co-operation does not always involve monopoly, it does involve a considerable decrease in the amoiuit of free competition. Furthermore, in a scientific age men are not content to accept any dogmatic formula without inquiring into its validity. Our forefathers said, * ' Competition is the life of trade. ' ' Their descend- ants added, "Monopoly is a public menace." The students of the present generation, surveying the competitive regime of the early nineteenth century and the monopolistic regime of the late nineteenth century, may well ask a different kind of a question. Monopoly is not a matter of figures, but of economics. It is neither good nor bad. The sole question that must be raised in regard to monopoly is its practicability or its impracticability. In short, "Will monopoly work?" In 1850, before any man had witnessed the 30 ANTHRACITE remarkable industrial developments of the last forty years, the ordinary student, as well as the ordinary business mxan, would have said tinre- servedly that competition is a good thing. He might have added, "It is a good thing because it works." The experiences of the later nineteenth century showed that however good a thing com- petition might be, there was a better thing, namely, co-operation. The business world did not work this statement out theoretically. It had tried competition. It had grown accustomed to competition. With this background of expe- rience, the business world experimented with co-operation. The latter form of organization appeared more advantageous than the former, and the business world cried: "Competition is dead — long live co-operation and combination." There is no chance that this generation will go back to the competitive regime of the early nine- teenth century. Society never goes back. There is a question, however, as to whether the present generation will continue the monopoly regime of the early twentieth century. The answer to that question depends entirely upon the effectiveness or ineffectiveness of monopoly. What has happened where monopoly has been tried? How has monopoly succeeded? Or better still. Will the monopoly of natural re- sources accomplish what it was intended to accomplish? Upon the answers to these and like questions must depend the fate of our sys- tem of privately monopolized natural resources. ONTRIAL 31 7. Ownership as Opportunity Our forefathers thought that ownership would lead to opportunity. They failed to see in it the seeds of monopoly. The early colonists accepted a system of private ownership of natural resources. They had fled from the tyranny of landlord-dominated Europe, with an abiding dread in their hearts of the oppression which grew out of a concentration of wealth control in the hands of a small ruling class. They had lived for generations in or near Euro- pean countries which were suffering from the burden of a landed aristocracy which was able to exercise formidable power over all of the institu- tions of society. These early colonists enunciated the principle of equal opportunity religiously and politically, because the weight of feudal oppression had been felt in church and state. At that time there was no clear idea abroad regarding the importance of the economic forces behind church and state. They, in themselves, were looked upon as the cause of oppression, and the early settlers declared their liberation from both. Men in the new world were to be free and were to have equal opportunity. There were instances in which the colonists denied equal rights. New Amsterdam attempted the Patroon system, under which the ownership of the soil should continue in the hands of a select landlord class. Other colonies were fur- nishing land free to settlers, and were even giving 32 ANTHRACITE bounties in the form of tools and livestock to any- one who was willing to take land and cultivate it. The competition was irresistible, and New Amster- dam was ultimately forced to do as the other colonies did and allow free opportunities in the use of the earth. The argument underlying the free use of natural resources was simple and, from the view- point of those times, irresistible. The men and women who founded the colonies had left the despot-ridden countries of the Old World, seeking a place where they might think and believe, free from oppression. Their experience told them that landlordism and despotism meant the same thing. They had been brought up in countries where practically all of the desirable pieces of the earth were owned by a small class and were handed down from generation to generation in the same families. The rest of the human race must work for and pay tribute to these land-owners. Feudal- ism was built on this assumption. The duties which the feudal baron owed to his tenants fell into disuse; the rents which the tenant paid to the feudal baron were transmuted from rents in kind to rents in money, and the peasant was compelled to surrender a great portion of the products of his toil in return for the right to live on the earth. In the days of the English Commonwealth, imder Cromwell, the Digger Movement gathered its strength. The people who had been driven off from the common land as it was enclosed by O N T R I A L 33 the great land-owners, reasserted their right, but without avail, to a use of part of the earth's surface. Everywhere throughout Europe the belief held sway that God had intended the earth for the few, and that the many must pay tribute for the right to a foothold in their fatherland. The remedy for landlord despotism clearly lay in the direction of individual ownership. "Give a man the possession of a barren rock," cried one of the champions of this movement, "and he will convert it into a garden." Acting upon this theory, the early American colonies granted to a man and his heirs forever the possession of those pieces of land for which he could secure clear title. This plan of individually owned natural re- sources succeeded admirably in a new country. For every tree that was pre-empted, a score stood waiting for the next claimant; for every acre of land that had been claimed, there were a hundred still imtilled and unsowed. The hills abounded in wealth, the streams were full of power. In the early days the forest, the rivers and the sea yielded a bountiful supply of wild animals which provided food and clothing. All of these things might be had for the taking, and to no one might they be denied, because each man could get them for himself. 8. The Fruits of Ownership This generation realizes with difficulty the meaning of a frontier. In colonial days the man 3 34 ANTHRACITE who was disgusted or discouraged stepped to the edge of civilization. He fed, clothed and out- fitted himself — not at public expense, but at nature's expense. Today, the United States is bounded by the oceans and by Mexico and Canada. There is no frontier — ^no "free for all." America is Hving a new life. With the ending of the nineteenth century the free land in the United States vanished. Long before that time the best of the natural resources — timber, minerals, water-power and fertile agri- cultural land — had been labeled "mine" by a relatively small group of powerful industrial and financial interests. The ownership of agrictd- tural land was still widely scattered. The owner- ship of the more important timber and mineral resources was being rapidly concentrated. What will be the result of this private owner- ship of natural resources? The time has come when that question must be faced and analyzed scientifically. While resources were free for the asking, no man could put a price upon them and demand to be paid because of his land ownership. The moment that free land disappears, land owner- ship commands a monopoly price. In the centers of trade and industry this monopoly power is enormous. Where it is exercised over very rich resources, like coal lands or timber lands, the monopoly power of private ownership is likewise very great. Consequently, immense prices are O N T R I A L 35 paid for pieces of land that a short time ago were practically valueless. Thus the hard, unyielding rock soil of Manhattan, all of which was sold by the Indians for a few dollars, is now valued in places at upwards of $40,000,000 an acre. This immense valuation is the result of the presence of population, of trade and of industry. The owner of the land need have done nothing in the way of improvement. The land upon which the City of Boston stands was valued at $366,000,000 in 1890, and at $672,- 000,000 in 1910. The interval of twenty years resulted in a doubling of these land values. The farm land of the United States was worth $13,- 000,000,000 in 1900 and $28,000,000,000 in 1910. During the same period the value of farm land in Illinois rose from $1,500,000,000 to $3,000,000,000; in Iowa from $1,250,000,000 to $2,750,000,000; in Kansas, from $1,000,000,000 to' $1,500,000,000. The fact that the land is limited in amount, and is in great demand, is sufficient to place upon it a high monopoly price. The private ownership of natural resources was a scheme that was devised to stimulate thrift, energy and ambition. It was intended to give an opportunity for life, liberty and the pursuit of happiness. When the principle of individual ownership was first resorted to the United States was a wilder- ness. Resources existed for all, and in abundance. Since that time free land has disappeared. The whole economic foundation of life has been revo- 36 ANTHRACITE lutionized. There is no more free land and the frontier has disappeared. Each change in economic conditions gives rise to new needs and new relations. Social forms are modified because the basis for life is altered. Two generations ago the country's adjustment to life included a safety valve in the form of a fron- tier. The frontier meant cheap grazing land, free agricultural land, free timber and free miner- als. Today each first-class piece of land in the United .States has its price. Sooner or later the American public must decide whether a system of private property in natural resources can work advantageously after free land disappears. Up to the point where land ownership carried with it no monopoly power, many legiti- mate justifications could be urged in its favor. Now that private property in land almost inevi- tably carries with it the power to lay a monopoly tax upon the industry of the community, the situation takes on a very different aspect. 9. Every System Must Produce Results The system of private ownership of natural resources, like any other social institution, must be able to stand trial. Each social institution is a device adopted by society to accomplish certain results. The bow and arrow is a means of secur- ing game. The family is a means of protecting offspring. One is an individual weapon, the other is a social institution. Each has a purpose. The bow and arrow is adopted because it is ONTRIAL 37 more desirable as a weapon than anything that preceded it. Neither the club nor the flint- headed spear is effective as compared with the bow and arrow. Once the bow and arrow is devised, it is used until some better v\^eapon is discovered. The moment, however, that the better weapon appears it automatically replaces the bow and arrow. The individual adopts the methods best calcu- lated to insure the success of the things he wishes to do. His test of the effectiveness of a given means is the results which it accomplishes. Society, in this respect, differs in no way from the individual. There are certain ends which society aims to accomplish. To attain those ends, men devise social institutions or social methods, as they might be called, such as the family, the state, private property in natural resources. So long as these institutions achieve the results for which they were established, they may hope to perpetuate themselves. If they fail in any par- ticular to accomplish these results, they are attacked and ultimately demolished. In their places rise new institutions, better calculated to do society's work. There is no law of society more inexorable than that which involves the survival of the fittest social institution. Given two ways of running an educational system, one less advan- tageous and the other more advantageous, to securing the results at which society is aiming, the more advantageous method must ultimately 38 ANTHRACITE triumph, because men, individually and socially, necessarily choose the things they believe to be to their greatest advantage. 10. Has Monopoly Succeeded? The present system of monopoly in natural resources was devised to stimulate ambition, thrift and initiative. It was aimed to inspire men to put forth greater effort in order to avail themselves of the greater opportunities. At a time when there were more farms than men seeking farms, the private ownership of farm land did stimulate and energize. That day has passed, however. At the present time there are many individuals who would like to hold possession of every desirable resource in the United States. Therefore, the owners of these resources put a monopoly price on them and secure a return based on their resource ownership. Another thing has happened which was not generally foreseen. The argument in favor of natural resource monopoly was based on the supposition that each man would take a piece of land large enough for him to cultivate, and that upon this land he would expend his own energies. Two things have intervened to prevent the reali- zation of this hope. First of all, men took more land than they could use and held it for an increase in value. In the second place, successive generations have concentrated land ownership to a greater and greater degree. So long as there were more farms than men, ONTRIAL 39 it was difficult to get labor. Why should you till my land and reap my crops when for the asking you could get a farm of your own on which to expend your energies? Today there are more men than farms. Those who do not own farms, in order to live, must work for those who do. Consequently, the owners, instead of expending their own energy in the work of production devise means whereby they permit others to use their property and to give them, in return for this use, an income upon which they may live without themselves expend- ing energy. There is a second but equally important point. A few people have secured possession of all of the valuable resources. Herbert Spencer, in the now famous ninth chapter of his "Social Statics," pointed out the inevitable logic of a system of private ownership in natural resources. One man, he explains, may own land to the exclusion of everyone else. There is no limit to the amount of land which any one man may own. There- fore, it is perfectly conceivable that one person shoiild obtain possession of an entire township, county, state or nation, whereupon all other people would be trespassers and might remain only while they did the bidding of the man who owned the property. Of course, the time when one man might own the United States is very far distant. Even today, however, most of the rich resources are in the hands of a very few people, who exercise 40 ANTHRACITE their right of ownership to exclude all others from the use of these resources until they, the owners, are ready to develop them. It is now manifest that the ownership of the important resources — the choice bits of land — is concentrated in the hands of a very few people. The incentive is taken away from a great majority of people because the essence of the argument in favor of private ownership of resources was that the ownership would stimulate the owner. As a matter of fact, the owners of the great resources are not stimulated to do anything except to get other people to work for them upon their resources. In return for this concession, they secure a royalty or rent based on the resource value. There is another angle from which the matter must be considered. Children are being born into the world every day. From the standpoint of ownership, what situation do the children face who are bom at the present time? Children now come into a world in which all of the "corner lots" are pre-empted. Most of the desirable property which is not in the hands of the government is labeled "mine" by some private holder. What chance has the prospective worker as against these owners? Merely this chance — unless his ancestors through their accu- mulations can constitute him an owner, he must work for the owners on their property until he has accumulated enough property to be an owner in his turn. In other words, the method of ONTRIAL 41 private ownership in natural resources automat- ically excludes the new-bom citizen from the use of those resources except on the terms — the monopoly terms — which the owners prescribe. There is a broader point of view from which the matter may be analyzed. No social scheme can succeed unless it makes men well and happy. Any social system which produces a surplus of unhappiness is doomed to dissolution. Even where a social system is well established, if any other plausible scheme promises greater health and happiness than the one in vogue, or if the proposed scheme grants happiness to a larger number of people than the one in vogue, it will ultimately be tried, and if it succeeds, it wiU replace the established order. There is no necessity for people to adjust themselves to the conditions of monopoly. Mon- opoly is not a standard to which men must con- form. It is a method of obtaining social results. If it achieves these results, it will be retained as a social institution. If it fails to achieve these results, it will be condemned and replaced by some social institution that appears to be ulti- mately more advantageous. Monopoly must be adjusted to human needs. Monopoly must result in health and happiness. Unless it does these things, it cannot hope to endure. CHAPTER 2 THE ANTHRACITE PROBLEM 1. The Parties at Interest The situation that has prevailed in the anthra- cite regions during the past dozen years gives a vivid idea of the conflicts that must precede any solution of the issues that are raised by the pri- vate ownership of natural resources. The anthra- cite situation has been the object of investigation by the Federal as well as of the State govern- ment of Pennsylvania. Charges have been heaped upon charges, suits have been instituted and appeals taken. The phials of public wrath have been poured out liberally through various govern- mental and journalistic channels upon the vexing questions which the anthracite problem has brought to the fore. The public is not alone in its impeachment of the anthracite situation. The mine workers like- wise have played a part, and at times a very energetic one, in the assaults upon the coal mine owners. Labor disturbances have followed one another in rapid succession. At times they have been settled by means of a peaceable agreement; at other times they have resulted in prolonged, bitter strikes. Since 1898 the labor situation in the anthracite regions has never dropped far below the boiling point. (42) THE PROBLEM 43 The public has vented its wrath. The workers have made their protest. Consumers and work- ers alike cry their anathemas against the exactions of the operators. In striking contrast to the dissatisfaction dis- played by the public and by the mine workers is the spirit of contentment evinced by the coal operators and the coal-carrying railroads. These parties at interest seem to have no cause for com- plaint, and they display no desire to alter the present status of the industry. Each monopoly of natural resources by private capital leads to a controversy between the same parties. The consumer, the worker and the oper- ator or owner of the resource, each represent a viewpoint. Thus far in the anthracite field, the operators are the only parties at interest who are convinced that things should be left as they are. 2. The Use of Anthracite Anthracite is a concentrated, monopolized nat- ural resource upon which tens of millions depend for fuel and tens of thousands for a livelihood. There is probably no resource of like value which affects directly a larger number of people. Many resources reach the consumer by a round- about path. The iron ore travels a long road from the blast furnace to the watch-spring. A white oak undergoes many changes before it appears in the dining room table. Numerous processes intervene between the wheat in the field 44 ANTHRACITE or the hide on the cow's back and the muffins or the trim half-shoes. Some resources never reach the consumer at all. The steel in the freight car, for example, merely transports the wheat that finally appears as muffins. The copper and wood in the locomotive do not even come into contact with the wheat. The steel rails, ties and ballast, the bridges and cement culverts make the transportation possible. Yet the consumer never even sees or hears of these things. The relation between anthracite and the con- sumer is direct and immediate. Anthracite is used mainly for home consumption. In 1913, of the 71,296,000 tons shipped from the mines, 61.6 per cent were of sizes above pea. This total in- cludes lump coal and broken coal, much of which is used for commercial purposes. At the same time it excludes pea coal, a great deal of which is now used for domestic purposes. Anthracite is sold chiefly in four sizes — egg, stove, chestnut and pea. For 1913 the shipments of these four sizes were as follows ■} Egg 8,928,792 long tons Stove 13,841,777 " Chestnut 17,065,632 " Pea 8,142,571 " Since pea, as shown by the recent change in its price, is now primarily a domestic and not a com- mercial coal, it appears that these four sizes of coal » "Mineral Resources of the United States, 1913," Part II, page 889 jf. THE PROBLEM 45 alone account for about five-sevenths of the total amount of coal shipped. In other words, the amount of anthracite which goes every year to the consumers of the United States is approximately 50,000,000 tons. No accurate statement can be made of the number of persons who use these 50,000,000 tons of anthracite; but if the average sale per family is five tons, 10,000,000 famihes (about 45,000,000 people) are dependent for their fuel upon the supply of anthracite. If the sale averages ten tons per family, about 22,500,000 people would be dependent upon anthracite. These figures are only approximations, but they give some idea of the enormous extent to which anthracite is used in the homes of the American people. There were, in the United States in 1910, 91,- 000,000 people, Hving in 20,000,000 families. This makes just under five persons per family. If the suggestion in the last paragraph was in any measure correct, from a quarter to a. half of the families in the United States depend more or less directly upon anthracite for their cooking and heating. From a quarter to a half of the population of the United States is dependent upon the supply of anthracite coal, which comes pri- marily from five counties in the northeastern part of Pennsylvania. There is no other an- thracite coal of importance now being mined in the United States. The whole anthracite industry is concentrated in one small section of 46 ANTHRACITE one State. ^ It thus affords an ideal opportu- nity for monopolization. If the anthracite deposits were scattered, as the bituminous deposits are, through all parts of the country, monopoly would be more difficult. With the available supply of anthracite concen- trated in one small area, the possibilities for monopolization are unexcelled. The anthracite industry, although restricted in area, has a widespread influence through the large number of consumers who look to it for their fuel supply. The millions of families who depend entirely or partly upon the supply of anthracite coal for their fuel comprise the greater part of the population of the northern and eastern sections of the United States. Here is a great body of people, all using the output of a natural resource which can be supplied from only one tiny part of the area upon which these millions live. Many workers are dependent upon the anthra- cite industry. The payrolls of the operators contain the names of 175,000 men and boys. In addition to this number, tens of thousands of persons employed by railroads and other businesses which depend for their existence upon the anthracite industry must be counted in as having a direct relation to anthracite. 3. The Supply of Anthracite When mining operations began a century and a half ago, the three Pennsylvania anthracite ' For an elaboration of this point see "The Anthracite Coal Combination," Eliot Jones, Cambridge, Harvard University Press, 1914, Chapter 1. THE PROBLEM 47 regions contained approximately 19,000,000,000 tons of coal. Since that time, the amount taken from the mines or made unavailable by the aban- donment of old workings is equal to about 5,000,- 000,000 tons, leaving an estimated reserve of 14,000,000,000 tons. Apparently, the unused supply of anthracite is three times as great as the amount already used. Another important fact must be borne in mind, however. The amount of anthracite actually mined to date is only about 2,000,000,- 000 tons. The amount "wasted" and "left in old mines" is 3,267,500,000 tons. Under the system of privately owned resources, which was so generally relied upon to stimulate ambition and arouse initiative, for each ton mined a ton and a half was left unused. To be sure, some of the old mines are being reopened at great expense, and the coal that they contain salvaged. For the most part, however, this coal must be a permanent loss. Experts figure that 25 per cent of the coal can still be secured from old mines and that 50 per cent of the coal can be had from the new mines. The total available supply of anthracite is therefore about 8,000,000,000 tons.^ Taking the amount actually mined as a stand- ard, it appears that the coal still in the mines is equal to seven times the amoimt of the product • The figures on which these statements are based will be found in "Increase in Prices of Anthracite Coal," House Document No. 1442, 62d Congress, Third Session, p. 126. 48 ANTHRACITE to date and that the coal that can be made available for consumption is equal to four times the production to date. Anthracite is still, and for years will be, a resource that must play an important role in the life of the com- munity. At the present rate of mining, the supply of anthracite will last about one hundred years. Four generations of people will therefore look to the anthracite field of Pennsylvania as a source for their fuel supply. Discoveries and inventions may replace anthracite with some far more usable source of heat. Let the present situation continue, however, and for a century to come the anthracite field will present a prob- lem to the American consuming public. Although these figures are rough estimates, they are based on the best available expert knowledge. They may be incorrect in detail, but in the large they furnish conclusive evidence of the immense importance of anthracite to the consumer of today and of the great probability that for a long time to come anthracite will be a resource of the first importance to the American people. Millions of consumers and hundreds of thou- sands of workers depend directly and indirectly upon the supply of anthracite. This supply, to the extent of 8,000,000,000 tons is still avail- able for use. This and the succeeding generations must determine the conditions imder which this anthracite shall be produced. THE PROBLEM 49 4- The Basis for Anthracite Monopoly No less important than the facts regarding the available supply of anthracite are the facts that relate to the control of that supply. Here are millions of people who depend for their fuel upon one resource. Are they in a position to say how much coal shall be mined and under what circumstances? Their happiness and well- being depends, in part, on the anthracite coal which they use. Can they decide what shall be done in the coal fields? Obviously they cannot. First, because the coal fields are privately owned under a system of property ownership that permits the owner to do practically as he will with his own. Second, because the virtual control of the anthracite fields is vested in a very small group of persons who make common cause wherever their interests are threatened. The owners of the anthracite fields have suc- ceeded in establishing a monopoly of the most absolute character through a system of inter- corporate relations. There have been times when the monopolists were at a loss to make profits on their vast holdings of unused coal land. In recent years, however, the system of railroad control has brought huge benefits to the mon- opolists. There are quite a number of sources from which may be gained some idea of the extent of the combination in the anthracite industry. The inquiries conducted by the Interstate Commerce 50 ANTHRACITE Commission and the Pennsylvania Railroad Com- mission provide much material. Some sugges- tions occur in the report by the United States Commissioner of Labor on the "Increase in Prices of Anthracite Coal following the wage agreement of May 20, 1912." Arthur E. Suffem devotes a long chapter of his book on "Concilia- tion and Arbitration in the Coal Industry of America" to an analysis of the anthracite situa- tion. The most elaborate and complete study, to date, of the anthracite combination is that pre- pared by Prof. Eliot Jones, and published in 1914. Professor Jones has gone carefully into the cor- poration reports, the various investigations of the anthracite industry, thereby securing data from the corporation as well as the governmental point of view. Professor Jones' book gives by far the best summary of the co-operative activities of those who own and control the anthracite mining operations. The anthracite field has for many years been the scene of attempts at combination, particularly between the carriers of coal and the coal operators. During the later years, however, the combina- tions have been primarily between the coal- carrying railroads. 5. Unsuccessful Combinations The first combination to control the anthracite industry was formed early in 1873. From that time on to 1898 there was a succession of com- binations, each of which was dissolved because THE PROBLEM 51 of the lack of group feeling among the partici- pants. The combination of 1873 was a combination of carriers. The Philadelphia and Reading, the Central Railroad of New Jersey, the Lehigh Valley, the Lackawanna, and the Delaware and Hudson were responsible for the formation of the combination. No attempt was made to restrict the output, but the amount of coal shipped to competitive points was limited in the following manner. An estimate was made of the total amount of coal at tide-water points during the year, and this total was divided among the com- panies entering into the agreement, according to the capacity of the mines shipping over the various lines. This agreement was to be enforced through a Board of Control composed of the presi- dents of the railroads involved in the combination. While the combination lasted it had a marked effect. Prices were higher and more stable as a result of the combination. Between 1876 and 1878 the anthracite coal trade remained under competitive conditions. There was a considerable increase in the produc- tion of coal. Prices fell and competition proved to be the death of profits. Even those who succeeded in the competitive wars felt the onus of reduced earnings. The effects of the com- petition were so marked that, to quote Professor Jones (p. 44), "In 1877, at least four of the important transportation companies, each of which had been paying liberal dividends for sev- 52 ANTHRACITE eral years, suspended their dividend payments, and several others reduced their customary rates." The results of competition were so evidently disastrous that a new effort at com- bination was made in 1878. For the next few years, while there was no actual allotment of the amounts of coal which any railroad might produce during the year, there was "a friendly under- standing among the companies" which resulted in "a combination, perhaps as effective as a formal agreement. "^ Under this tacit agreement, the number of days during which production of coal should be discontinued was regulated in accordance with the demand. For example, during 1880, Dr. Jones reports that the "pro- duction of coal was restricted SS days," and cites the annual report of the Reading Railroad as authority for this statement. During the next few years a number of rail- roads changed hands. There was considerable buying and leasing, and interwoven with these commercial activities there was a strong effort at more complete combination. As a matter of fact, no effective organization was formed until the Reading system came into being. The spectacular rise of the Reading interests makes one of the most significant chapters in the history of modern finance. The Reading Rail- road leased the Lehigh Valley Railroad, and through the incorporation of the Port Reading Railroad it was able to secure a lease of the 1 "The Anthracite Coal Combination," op. cil., p. 46. THE PROBLEM 53 Central Railroad of New Jersey. The Phila- delphia and Reading Coal and Iron Company also secured control, through a lease, of the Lehigh Coal Company, and by another business arrangement, of the Lehigh and Wilkes-Barre Coal Company, The Lehigh Valley Coal Com- pany was a mining company of the Lehigh Valley Railroad, and the Lehigh and Wilkes-Barre Coal Company was "practically owned" by the Cen- tral Railroad of New Jersey. As a further asset in the organization of the anthracite field, Presi- dent Sloan of the Lackawanna announced "that the management of the Lackawanna was in sym- pathy with the plans of the Reading." "The Reading Railroad had thus secured control of two competing railroads and their coal companies, and had established, through purchases of stock and interchange of directors, a community inter- est with still another railroad (the Lackawanna)."^ As a result of these transactions the Reading interests controlled 70 per cent of the total ship- ments of anthracite coal. At the same time, the Reading purchased largely of Boston and Maine stock, and an effort was made by the Reading system to secure a new market in New England. The effect of the combination on prices was immediate. Stove coal advanced more than a dollar per ton between February and September, 1892. This advance led to a public outcry; the Attorney-General of New Jersey appHed for an injunction to dissolve the lease by which the • "The Anthracite Coal Combination," op. cii., p. 52. 54 ANTHRACITE Reading held the Central Railroad of New Jersey ; the attempt of the Reading to enter New England met with hostility from an influential New York banking house ; the credit of the Reading, already over-strained, broke during the panic of 1893, and in February of that year the Reading failed. From this failure until 1898 there was no effective union of anthracite interests. The strenuous efforts made between 1873 and 1898 to perfect an anthracite combination are ascribed by Professor Jones to two causes: "First, the need of meeting the interest charges upon the huge obligations incurred by the companies in attempting to secure control of the coal lands. Second, the intermittent character of the trade." (Pp. 57-58.) The experience of the railroads during this period taught some emphatic lessons. While an effective combination was maintained, prices went up, but so did dividends. Combina- tion and comfortable profits, to all appearances, were synonymous terms. On the other hand, the absence of combination led to bitter price wars, to lower prices, to vanishing dividends. Competi- tion was deadly; combination revivified profits. The lesson was plain. The moral was beyond question. The anthracite carriers accepted it and went about the formation of an effective combina- tion. 6. An Elective Anthracite Combination Since 1898 the co-operation between the anthra- cite operators and carriers has been most com- THE PROBLEM 55 plete. Professor Jones ascribes this co-operation to "railroad consolidation"; "the development of a community of interest among the railroads"; and "the practical elimination of the independent operators." (P. 59.) The Erie Railroad, early in 1898, purchased a controlling interest in the New York, Susquehanna and Western Railroad. The purchase was effected by means of a large Erie stock issue, the shares of which were exchanged for Susquehanna Rail- road stock. The purchase was carried out by the Erie in order to remove the danger of competition which the rapid development of the Susquehanna threatened. The movement toward railroad consolidation received a great impetus through a purchase by the Reading Company, which was the holding company of the Philadelphia and Reading Rail- way Company, and of the Philadelphia and Read- ing Coal and Iron Company, of a controlling in- terest in the Central Railroad of New Jersey. Court proceedings and bankruptcy had com- pelled the Reading interests to relinquish their former hold on the Jersey Central. The obsta- cles to consolidation were removed by the pur- chase in 1901 of 145,000 Central of New Jersey shares (53 per cent of the total outstanding stock) at $160 per share. The price paid for the Jersey Central stock was high, as compared with market quotations, but "the combination of the two railroads placed nearly one- third of the total shipments of coal 56 ANTHRACITE under the control of the Reading Company." For the future, the advantage was even greater, be- cause the Jersey Central owned the second largest reserve supply of coal. Through the acquisition of this reserve, "the Reading system owned and controlled about 63 per cent of all the unmined coal in the state of Pennsylvania."^ The President of the Reading Company gave the following explanation of the purchase of the Central of New Jersey by the Reading Company: ' "The Reading must get to New York over the Jersey Central system. ... In December, 1900, I happened to be in New York and I was told that the gentlemen who controlled the New Jersey Central were tired of it and that the stock was for sale. I was also told that the Baltimore and Ohio Railroad had made an offer for this stock, which the parties had refused because they considered it too small. This information was a great surprise and I at once went to Mr. Morgan, who was a voting trustee of the Reading Company and told him that the situation was most alarming; that it would be the ruin of the Reading property if an antagonistic company got control of the Jersey Central, or if the Baltimore and Ohio got us by the throat in that way and could control our terminals in New York, and that therefore the matter called for prompt action. I told him then that I always thought that the Jersey Central could be legally bought; that the limitations in the laws of New Jersey applied only to leasing and that, under the powers of the Reading Company and under the statutes of New Jersey, we could undoubtedly buy a majority of the stock. He told me to keep my own counsel and look up the whole subject and see what could be done. I came home and I made a critical and careful examination of the reports of the New Jersey Central Railroad for a number of years, to see what in my judgment its stock would be worth, taking into account the future possibilities. I also took up the ques- 1 "The Anthracite Coal Combination," op. cit., p. 62. THE PROBLEM 57 tion of how we could buy it and finance it. I made a report to Mr. Morgan in about a week's time. It took me a good while to get aU the information I got, because I had to do it secretly, you know, as counsel. I sent it to Mr. Morgan. . . . When I got home, one night in Reading, there was a call at the telephone and I went to the phone and Mr. Morgan was there, telHng me to come to New York immediately, that I must come on at once about that Jersey Central business. I went to New York the next morning. I saw Mr. Alorgan. ... He said to me, "What do you think is the fair price?" I said, "I have named what I think is the fair price in there." He called for Mr. Baker, who was the chairman of their committee, or a lead- ing man in it. Mr. Baker came over and we sat down and dick- ered for about five minutes, until Mr. Baker said they would take one hundred and sixty and I said I thought I would advise that, and I went to the phone and called up Mr. Welsh and Mr. Harris, who were, with myself, a majority of the executive com- mittee and they said, "Yes," and the deal was closed. That is the whole story. We did not even make a writing about it. Mr. Baker said he would undertake himself and with Mr. Max- well and friends to deHver us a majority of the stock."^ Professor Jones feels that President Baer over- emphasized the danger of competition. He seems to have minimized the obvious desirabihty of securing so large a proportion of the future coal supply. These transactions placed the Reading in a position of supreme importance. Holding nearly two-thirds of the available supply of unmined anthracite, and with a third of the annual ship- ments from the anthracite regions, the Reading interests were in a position to exert a great influence over the anthracite industry. 1 "The Anthracite Coal Combination," op. cit., pp. 63-64. 58 ANTHRACITE The movement toward combination was fur- thered by a large extension of control by a nimi- ber of other railroads over coal companies and coal lands. These developments placed under the direct control of the coal carriers the unmined anthracite and the machinery of production. They already owned the means of transportation. The control was thus made absolute, from mine to consumer. 7. Railroad Unity Harmony in the anthracite coal fields has been furthered by the establishment of a greater degree of common interest among the railroads. This has been made possible through the inter- ownership of stock and through interlocking direc- torates. During the early periods of combination tonnage division had been resorted to as a method of establishing a community of interest. The newer device has proved far more effective. Professor Jones gives the following instance of the method pursued in carrying forward the movement. "An important step in bringing about greater unity of action in the management of the coal trade through the interchange of stock owner- ship was the joint purchase by several of the coal roads of a large block of the stock of the Lehigh Valley Railroad. Early in 1901 the Lake Shore and Michigan Southern, owning over 21.6 per cent of the stock of the Reading Company and in turn controlled by the New York Central, agreed with the Reading Company, the Central THE PROBLEM 59 of New Jersey, the Lackawanna and the Erie to purchase $5,700,000, $1,000,000, $1,600,000, $1,850,000 and $1,850,000 respectively— in all $12,000,000— of the stock of the Lehigh Valley, or nearly 30 per cent of the total stock. The stock was not all purchased at the same time, but it is clear from President's Baer's testimony that the railroads jointly agreed to piirchase the stock, for in his testimony he said that the Lehigh Val- ley was in bad shape, and it was thought very dangerous to let it go into a receiver's hands, because of the efTect it would have on the other railroads and on general business. "After talking that over with a number of gentlemen, Mr. Morgan being anxious that it should be done, I came over to Philadelphia and saw Mr. Stotesbury and suggested that he see the trustees of the Packer estate and of the college — the Lehigh University had an interest in it. We agreed to buy the stock. Then we divided it up between the four systems. I in- sisted that the Lake Shore and the Vanderbilt System, which was the strong system, should take a big block of the stock and the rest of us should not be loaded down, because I did not know whether we could save the Lehigh Valley. "After the purchases had been constunmated, Mr. Thomas, who had been president of the Erie Railroad, was elected president and a director of the Lehigh Valley; Mr. Baer, president of the Reading System and of the Central of New Jer- sey, became a member of the Executive Com- 60 ANTHRACITE mittee and of the Board of Directors, and Mr. J. R. Maxwell, Mr. G. F. Baker and Mr. H. McK. Twombly, all officers or directors of some of the other companies, became directors of the Lehigh Valley. The anthracite coal railroads thus virtually secured control of the Lehigh Valley and brought it into assured harmony with the controlling interests in the anthracite coal trade. "1 8. Coal Mine Control The establishment of interlocking directorates has worked toward the same end. The presence on one Board of Directors of a man representing other transportation, mining or industrial inter- ests goes far toward bringing these interests into closer working harmony. Another important factor in the development of an effective anthracite combination has been the elimination of independent operators. This has been done in two ways: first, by purchase; second, by the general establishment of percent- age contracts. An interesting instance of this purchase method is the use made by the Reading Company inter- ests of the Temple Iron Company, which had a charter granting it very broad powers. Simpson and Watkins, who were large independent opera- tors, were bought out through the Temple Iron Company. The stock of the company was largely increased; bonds were issued, and through the 1 "The Anthracite Coal Combination," op. cil., pp. 68-69. THE PROBLEM 61 firm of J. P. Morgan & Co., the Simpson and Watkins property was sold for $5,000,000. Through an involved financial transaction, the Temple Iron Company finally obtained title to the property. The Reading Company, the Central of New Jersey, the Lehigh Valley, the Lackaw^anna, the Erie and the New York, Sus- quehanna and Western — all protected the credit of the Temple Iron Company by agreeing to take certain percentages of the capital stock of the company and of its funded debt. These per- centages were determined by the proportion of anthracite tonnage handled by each railroad. The purchase agreement became effective January 1, 1904. By means of a proxy the practical con- trol of the Iron Company was left with the presi- dent of the Reading interests. "He and the presidents of the roads entering into the guar- antee were elected directors of the Temple Iron Company, as were also a few personal friends of Mr. Baer."^ Although the original agreement included only part of the anthracite roads, "the other anthracite coal roads, except the Pennsyl- vania, have, since 1899, at some time or other, been represented on the directorate of the Temple Iron Company. "2 An effort made by the Pennsylvania Coal Com- pany to build an independent railroad to tide- water led to the purchase of the company, through the firm of J. P. Morgan & Co., by the Erie. This > "The Anthracite Coal Combination," op. cil., p. 80. 2 Ibid., p. 82. 62 ANTHRACITE gave to the Erie the full tonnage of the Pennsyl- vania Coal Company, which was producing in 1899 neariy 5 per cent of the total anthracite coal shipments. A number of other purchases were effected about the same time. "Since 1900, numicrous other firms have been purchased by the different rail- roads or by their subsidiary coal companies."^ The railroads purchasing coal companies included the Delaware and Hudson, the Pennsylvania Railroad, the Lehigh Valley, the New York, Ontario and Western, and the like. The remaining independent operators were brought into close affiliation with the carrying railroads by means of percentage contracts. After a long history of conflict between the rail- roads and the producing coal companies, a form of contract was drawn up which provided that the coal company should sell all of its coal to the contracting railroad; that the contracting railroad was to call for this coal as the condi- tions of the market seemed to require; that the call for the coal should be as equitable as pos- sible, and that for all sizes above pea, "sixty- five (65) per cent of the general average free on board prices of said sizes received at tide- water points" should be paid by the railroads to the producer. These contracts, since modified by the United States Supreme Court, gave stability to the busi- ness of the producer. At the same time, they I "The Anthracite Coal Combination," op. cii., p. 85. THE PROBLEM 63 secured to the coal operators an increase in the price which they received for their coal. The operators "practically surrendered forever their independence, agreeing to sell to the railroad, or its subsidiary coal company, their entire future output, to be delivered in such quantities and at such times as the buyer dictated. Mr. Simpson, of the old firm of Simpson and Watkins, testified before the United States Examiner in a recent suit that the railroads would not give him a contract for his coal, unless he made the con- tract for the life of the collieries."^ The oper- ators seemed to have been willing to enter into these agreements because they could thus secure a higher return for their coal than they would have been able to secure through any means of independent marketing at their disposal. 9. The Anthracite Problem The anthracite problein as it stands today, may be siimmarized in these terms. A valuable natiu-al resource, localized in one small geographic area, is depended upon by millions of consumers and by tens of thousands of workers. For years this resource has been the object of constant public attention. The consumers have clamored against high prices; the workers have demanded higher wages and better conditions of labor. Meanwhile the owners of the resource have been actively engaged in efforts to increase their profits. The attempts of the owners of the coal fields '"The Anthracite Coal Combination," op. cil., p. 93. 64 ANTHRACITE to secure larger profits have culminated, since 1898, in a combination which has virtual control of coal lands, coal mines and coal-carrying rail- roads. The coal land owners have thus put them- selves in control of the means of marketing as well as the resource and the means of producing coal. Here is a resource privately owned. The ownership of the resource, as well as of the means of developing and marketing it, are concentrated under the control of one group of interests. This is the logical end of Herbert Spencer's reasoning, except that, instead of securing con- trol over an entire country, the anthracite inter- ests have secured control over an entire industry. The question now arises — given a natural resource of wide public importance, privately owned by one group of interests which also con- trols the means of transportation, what will happen to the consumer who uses the product of the monopoly, to the worker who sells his time and energy to the monopoly, and to the indi- viduals who participate in the property ownership by the monopoly? CHAPTER 3 THE CONSUMER AND ANTHRACITE PRICES 1. The Consumer's Point of View The consumer is vitally interested in the proper use of natural resources. He derives his liveli- hood from their products. His well-being depends upon the quality of these products and the prices at which he can get them. The consumer's interest is the largest and must always be the dominant interest in dealing with any natural resource. Every member of the com- munity is a consumer. Children and old people are consuming without producing. Those who are engaged in productive work are both consum- ers and producers. Each member, old and young, in the entire living population is a unit in the body of the consuming public. The consumers are the community. Anything which affects the con- sumer therefore affects the entire community. The consuming public outlives any individual in the community. There are 25,000 people in your city today. Ten die and ten are born. There are still 25,000 people. Each of these people is a consumer. Individuals come and go. The consuming public persists. The figures worked out by expert mining engi- neers indicate that unless some adequate substi- tute is found, the consuming public during the 6 (65) 66 ANTHRACITE next century will depend more or less upon anthra- cite for its supply of fuel. The personnel of this pubHc will change. The body of it will remain. There will be millions of people in the United States to whom anthracite Vn^IU be a resoiu"ce of real and immediate significance. The anthracite problem as it exists today in the northeastern cor- ner of Pennsylvania for a long time will bear an intimate relation to the well-being of a great body of American consiimers. 2. The Status of the Consumer Everything that is made is intended, directly or indirectly, for use. Any manufacturer will tell you readily enough that he is not in busi- ness for his health. He spends his time turning out a product which someone wants. The man- ufacturer whose products supply no wants will sell no goods. Manufacturing is carried on for the purpose of giving people things that they desire. All business is based on the wants or demands of the consumer. Coal is broken in certain sizes because people want those sizes. The price of chestnut coal is higher than the price of certain other sizes because there is a greater demand for it than for any other of the domestic sizes. Unless someone wanted it, no coal would be mined. At the time when there was no apparent use for the smaller sizes of coal — buckwheat, rice and dust — they were thrown out on the culm dump with the other refuse of the mine. As soon PRICES 67 as it was found that these finer grades of coal could be used, they acquired commercial value. In some cases the owners of great culm dumps were better off than the owners of mines. The culm was washed over and the fine coal sold at a good profit. The consumer is the objective point of product- ive activity. He is more than that. He is the beneficiary of productive activity. He is even more than that. He is the arbiter of productive activity. Every ptirchase is a vote. The consumer (pur- chaser) is constantly engaged in voting productive activities in or out of office. At one stage in the development of society everyone depended upon soft soap which was made in the home. At another stage hard soaps be- came commercially practicable and were made and sold in great quantities. At the present time, powdered soaps are coming into favor. Each time that a consumer buys a washing pow- der in preference to a hard soap he votes in favor of washing powder and against hard soap. There was a time when oatmeal stood under the grocer's counter in a barrel. Today it is sold in pack- ages. To be sure, the cost is greater, but there is the advantage of greater cleanliness and greater certainty as to the correct weight. Each con- sumer who buys oatmeal by the package rather than in bulk votes against oatmeal in bulk and favors package oatmeal. So effective has this vote been in recent times that bulk oatmeal is almost 68 ANTHRACITE never met with in the large centers. In its place there are numerous brands of package oatmeal. The consumers have voted bulk oatmeal out of office. The consumer need not be intelligent in order to vote. He need not even be conscious that he is voting. When he puts down his ten cents for the package of oatmeal he makes the decision which determines that oatmeal shall be wrapped in packages rather than sold in bulk. No consxmier can escape voting. Each pur- chase that he makes registers his decision, even though it be an unconscious one. The con- sumer is thus able to stimulate one kind of pro- duction or to retard another. He is able to make one brand of goods succeed at the expense of another. Advertising is the means that the pro- ducer takes to make the consumer vote in his favor. There is a sense in which the consiimers are the dominating factors in the industrial world. If the consuming public were effectively organ- ized, it might decide that one brand of break- fast food should remain on the market and that another should go; that one kind of clothing should be worn and that another kind should be discarded. Unorganized as it is, the consum- ing public follows the fashions rather blindly, but none the less effectively. The decision of the con- sumer to wear or not to wear a certain type of hat determines whether the manufacturers of that kind of a hat shall be prosperous or go bankrupt. PRICES 69 3. The Rights of Consumers Consumers have certain rights as regards them- selves, as regards those dependent upon them, as regards the character of goods and as regards the price of goods. Some of these rights are well recognized, others are still indefinite. The consimier has a right as regards himself and those dependent upon him. He has a right to know, for example, that when he buys a food product, his health will not be in danger because of poisonous preservatives. The consumer has another right entirely independent of his health or well-being — that is his right to have goods as represented. The markets of the East teem with traders whose one object in life is to misrepresent their goods. Among them the deceit of a cus- tomer is considered good business. This attitude was reflected until very recently in the well- known precept of the English common law caveat emptor — "let the buyer beware!" During recent times a complete" revolution has taken place in the relation of buyer and seller. The seller places certain goods upon his counter. If they are misbranded, he is liable to prosecution. In the great centers of trade, reputable merchants and manufacturers stand ready at any time to make good losses which the consumers feel that they have sustained in pur- chasing goods that are not what they were repre- sented to be. The consumer is coming to regard his right to goods as represented as one of the fundamental rights in the economic world. 70 ANTHRACITE The third, and by far the most important right of the consumer, is his right to goods at reason- able prices. So significant is this right that it will be dealt with at greater length in a subsequent section. The consuming public, comprising the entire community, is developing certain rights, and is coming to look upon them as belonging natur- ally to consumers. The consumers are not yet conscious of either their rights or their power. Nevertheless they are learning to understand both. They are insisting upon legislation, de- manding reform, and above all else, they are interesting themselves in the prices of things. 4. The Obligations of Consumers With rights go obligations. Consumers may justly assert certain rights to which they con- sider themselves entitled. At the same time, as consumers, they necessarily assume the obli- gations which go with their position as members of the consuming public. The first obligation of the consiuner relates to the kind of goods that he buys. A man with a ten-dollar bill in his pocket can direct the course of production within the limit of ten dollars. For example, he can vote in favor of the manu- facturer of shoes by the purchase of a pair of shoes ; in favor of a manufacturer of liquor by the purchase of champagne; in favor of the manu- facturer of jewelry by the purchase of a watch charm. Hats and shoes are necessaries; cham- PRICES 71 pagne and watch charms are luxuries. The consumer is under a blanket obligation to see that the proper kind of goods are produced. If the community is in need of hats and shoes, he must vote for hats and shoes. The consumer must recognize an equally im- perative mandate to conserve the welfare of the future. Grant for the moment that the public sale of alcoholic liquors in a community is dis- advantageous to the on-coming generation. The consumer who casts his vote for alcoholic liquors, casts his vote against the future welfare of his own community. The moment he is convinced that alcohol will low^r standards, he must vote against alcohol in favor of public health. The second obligation of the consimier is less important. The consumer must vote for the right quality of goods. Every purchase of a cheap or tawdry article is a vote in favor of establishing such standards in the community. The conscien- tious consumer will cast his ballot for quality. The third obligation of the consumer is in some ways the most important. The consumer must cast his vote in favor of reasonable conditions of production. The conditions surrounding the production of goods differ very widely. Food, clothing and fuel may be turned out by men and women who are well paid and carefully safeguarded against the risks incident to work in their industry, or they may be underpaid, oven\^orked and forced to face constant and unnecessary dangers to life and 72 ANTHRACITE health. Which of these two producers shall the consumer patronize? If he buys the goods pro- duced by the first, he is voting for fair conditions of production. If he buys the goods of the second, he is voting for the inhuman conditions of life and work. Such contrasts exist in many industries, and between these two extremes the consumer must choose. The consumer who takes his obligations seri- ously has only one path open. Whenever pos- sible he must make his choice in a way that will banish every banishable evil from industrial life. He must cast his vote against child labor; he must cast his vote against the sweat shop; he must cast his vote against the exploitation of women; he must cast his vote against inade- quate pay and over-work. In short, he must cast his vote against everything which in any way reflects unfairness as between industry and the worker. If the American consuming public would recog- nize this obligation to the workers and would exercise its power by voting energetically against bad working conditions and in favor of good ones, it could revolutionize the lives of millions of toilers. 5. Reasonable Prices Among the rights upon which the consumer insists, the most tangible one, and the one which must attract the most permanent interest, is the right to reasonable prices. The consumer PRICES 73 may not appreciate the quality of the goods. It is often difficult or impossible for him to know personally about the conditions under which the goods were produced. He does come into contact with prices. Each time that he pur- chases an article he faces the price problem. Price is the one thing about goods concerning which the consumer can have a really accurate knowledge. Price is forced upon his attention each time he makes a purchase. The consumer has a right and an obligation as regards prices. His right is the right to goods at a reasonable price. His obligation is the obligation to pay a price that will allow for fair conditions of production. Provisions for health and safety are frequently expensive. No matter what they cost, the consumer must expect to pay a price that will cover them. The consumer believes, and with every color of justice, that he has a right to goods at a reasonable price. The difficulty arises when he attempts to make a concrete estimate of what constitutes reasonableness. What is a reasonable price? There is, of course, no final way in which such a question can be answered. There are limits, however, within which prices may be called rea- sonable and beyond which they may be called unreasonable. The difficulty of defining "reasonable" as applied to price is enhanced by the difference that always exists between the viewpoint of the 74 ANTHRACITE producer and the viewpoint of the consumer. The producer wants high prices. The more he gets for an article, irrespective of its cost of pro- duction, the better he is off. With the producer high prices and prosperity are synonymous. The viewpoint of the consumer is exactly opposite to that of the producer. The consumer wants low prices. The less he pays for an article, the better he is off. With the consumer, low prices and prosperity are synonymous. Any examination of the reasonableness of prices must take these two points of view into consider- ation. In the nature of things, a price which would appear reasonable to the maker would seem high to the buyer. At the same time, the price which the buyer would regard as high would be looked upon by the maker as low. It seems impossible, rmder the circumstances, to accept a standard of reasonableness set by either the producer or the consumer. Each approaches the question from a different angle; neither can fully understand the reasons which prompt the attitude of the other. There is nothing for it but to establish some scientific method of deciding reasonableness. Such a method would afford a price measure in terms of which the fairness of any given price might be decided. 6. Methods of Making Prices Prices may be fixed by many different methods. First of all, there is the monopoly method of PRICES 75 charging for an article all that can be gotten out of it. The phrase commonly used to describe this monopoly price is taken from railroad nomen- clature — "all that the traffic will bear." This phrase means that in making a given rate, the railroad charges all that it can possibly charge and still secure the traffic. Where competition is keen this price would be very near the cost of doing the business. It might even be fixed at a figure below the cost of production in individual cases. Where there is no competition, the rate is placed at a figure so high that the shippers will find it profitable to ship, but so that any addition to the rate would lead shippers to stop shipping. The rate maker aims to get the maximum traffic at the maximum rate. He is trying to get all he can. The principle of monopoly price may be illus- trated roughly in this manner. A group of inde- pendent ice companies which were in the habit of harvesting a million tons of ice a year and charging five dollars a ton for it, finds it cheaper to harvest half a million tons and charge ten dol- lars a ton. One-half the labor is saved, and the net profits are therefore considerably greater. To be sure, people may suffer or even die because of the high price of ice. This, however, is not a matter with which monopoly concerns itself. The object of monopoly is maximum profits and minimum expense. The monopolist fixes his price without any ref- erence to the cost of making the article. Thus, if you are worldng in a psychological laboratory, 76 ANTHRACITE you will find it necessary to ptirchase certain appliances. A patented device which costs twelve cents to make, sells for a dollar. If the manu- facturer is asked, "Why do you charge a dollar for an article that costs twelve cents to pro- duce?" he will reply that only a few of the articles are made, and the profit must necessarily be high on that few, and that besides, he has a monopoly on the manufacture of the article, and people will pay a dollar for it as readily as they will pay fifty cents. Why then should he not charge a dol- lar? The laboratory chief, when asked about the matter, says that the laboratory needs these appliances, and that there is no other way to get them, except from this firm, and therefore the price demanded must be paid. The producer has his patent monopoly; the consumer wants the product and is able to pay well for it. The result is a price many times the actual cost of manufacture. Monopoly prices are fixed with the interests of the monopolist in view. There is no pretense at considering public interest. The purpose of monopoly is to make profits — the higher, the better. To be sure, a monopoly will not resort to illegal methods in order to make these profits. It will, however, use every legal means at its dis- posal to increase dividends. 7. Business for Profits The supposition on which monopoly prices are fixed is common to the modern business world. PRICES 77 The business man is not in business for his health, nor is he in business in the interest of his com- petitors or of the people. He is in business, primarily, to make profits. Perhaps he is presi- dent of a corporation in which sums of money are invested by numerous people, who look to him, as business director, to return to them a six per cent dividend on their investment. Most people regard this dividend as legitimate, and the first duty of the corporation president is the duty of making the dividend. If, in order to make this dividend, he must raise the price of ice, bread or coal, he is popularly justified in doing so. The business world puts profits first. The business man is taught to make returns on his investment. The way to do this is to keep a generous margin between the cost of making a thing and its selling price. The business man expects a fair return on his investment. What is an investment? There is no general agreement as to what shall constitute an investment. Every enterprise that records a capitalization of half a million dollars does not represent the investment of so much mone}^ Investment or business capital is made up, now in one way and now in another. The capital behind many businesses has been invested a dollar of money for each dollar of capi- tal. There are many businesses, however, in which the capital stock is based, not upon cash invested, but upon earning power. The books of a company show that during the past ten years it 78 ANTHRACITE has been earning $300,000 a year; $300,000 will be a 6 per cent dividend on $5,000,000, therefore the company may be capitalized at $5,000,000. A charter is secured; stocks are issued to the ex- tent of $5,000,000, and the company, being a well-managed concern and a stable business, con- tinues to pay a regular dividend of 6 per cent on its capital stock. Now, it so happens, that in this particular case, the company controls a number of valuable patents, and because of this patent control, it was able to sell its product at a very high price. The men who established the busi- ness did not invest more than $1,000,000 in it, all told, and the cost of replacing the plant at the time it was capitalized did not exceed $2,000,000. The difference between the $1,000,000 invested and the $2,000,000 cost of replacement included $1,000,000 worth of plant that was built out of earnings or profits. The investment was, there- fore, $1,000,000, the value of the plant was $2,000,000, while the capitaHzation was $5,000,000. In this case, the organizers of the company "capitalized earning power." The popular mind looks upon the $5,000,000 of capital stock as property. As a matter of fact, it is not tangible property at all, because the total value of the tangible property, new, would not exceed $2,000,000. The $5,000,000 represents tangible property plus good will, monopoly power and expectancy of future earnings. It is not tangible property, but earning possibility. There is a sense, of course, in which monopoly PRICES 79 power is property. Since it will earn dividends, and since it may be transferred from hand to hand, a patent right may be regarded as property. At the same time, it is not investment in any sense of the word, and a very clear distinction must be made between the $1,000,000 which was investment in this plant, the $1,000,000 which was taken from earnings and used to build up the plant, and the $3,000,000 which represented capitaHzed earning power. It is perfectly conceivable that the earnings of the plant might be increased to $400,000. For example, it might be true that the prices charged for the monopolists' products are not full monop- oly prices. They may be represented by some- thing less than the exercise of full monopoly power. They are not "all that the traffic will bear." It might be assimied that by increasing the price of its product, this concern, by advanc- ing earnings to $400,000 instead of $300,000, could issue another $1,000,000 of stock and pay 6 per cent upon it also. This last million would repre- sent nothing less than the exercise of monopoly power. 5. Business for Service The "get all you can" policy is not the only poUcy that is being followed in modem business. There is a large, and we have every reason to believe a growing, tendency for the producer to look upon his work as a profession and upon himself as a professional man whose business it 80 ANTHRACITE is to supply people with the things they need — the best things at the most reasonable prices. Such business men try to see how low they can keep prices. One of the most striking illustrations of this point of view is the attitude which the Ford Motor Company has adopted towards its busi- ness. The original investment of the Ford Motor Company is small. The actual value of the plant is vastly greater than this original investment. The plant has been built out of earnings, and the company might readily capitalize not only the value of the plant, but the earning power of the plant. For example, if the Ford Motor Com- pany's earnings last year were $18,000,000, the business could be capitalized at $300,000,000 and pay a dividend of 6 per cent. The plan followed, in the case of the Ford Motor Company, is exactly the reverse of this, however. Instead of capitalizing its earning power and pay- ing dividends, the company has chosen to increase the wages of its employees and decrease the price of its product to the consumer. If the Ford Motor Company were to capitalize at $300,000,000, and were to earn 6 per cent on this capitalization, it is probable that no one would raise the least question in regard to the legitimacy of such a procedure. The reverse policy of sharing up the profits of the industry with the employees and with the pur- chasers has given rise to widespread commendation. The Ford scheme is a new one. In the past, and particularly during the era of trust organiza- PRICES 81 tion which followed the Spanish-American War, earning power was capitalized in every direction, and great floods of bonds and stocks were issued against earning power as well as against tangible property. The business world told itself con- fidently that it had a right to everything that it could get. "All that the traffic will bear" was looked upon as a legitimate definition of business profits. During this period of business expansion great profits were reaped by the business interests, and the basis was laid for further profits by the issue of stocks and bonds based on earning power. The Ford plant is a long step in the opposite direction. Mr. Ford seems to look upon the actual investment as the legitimate basis for earn- ing power. He does not even care to capitalize the profits which have been turned back into the business. Instead, he aims to share his prosperity with his employees and ;;he public in the shape of higher wages and lower prices. The contrast may be put in these terms. A soap manufacturer discovers a new formula which greatly improves the quality of his soap and lowers the cost of production by 50 per cent. This manufacturer has been making a reasonable profit. His new formula reduces the cost of pro- ducing a cake of soap from 3 cents to 1 cent. In the past, his soap has retailed for 6 cents. Shall he pocket the 2 cents which his new plan saves him, or shall he give it to the public in the form of cheaper soap? The answer of the old-time busi- ness world was that he must pocket all of the 2 6 82 ANTHRACITE cents. The thought that Ues behind modem business is that he must at least share his 2 cents with his employees, with the pubHc or with both. In other words, the manufacturer must say, "I have perfected a means to give the public cheaper soap," with the same pride that the scientist says, "I have devised a means for preventing the spread of tuberculosis." A long distance intervenes between the atti- tude toward the present method of doing business and the one suggested at the end of the last para- graph. There seems to be no question, however, but that the movement of a part of the business world is away from the most barbarous phases of the "all that the traffic will bear" doctrine, toward the idea of sharing with worker and consumer the accruing advantages of industry. 9. Prices and Earning Power From the standpoint of the consiimer, the matter sums itself up in these terms. If every business is to be organized and managed on the *'all that the traffic will bear" basis, the con- sumer must organize some form of counter-activity that will regulate or eliminate monopoly power. Otherwise, he will be eaten up by the demands of the monopolized industries. If all businesses were built on original investment, if there were no watered values in capitalized earning power, the prices of most products now sold in the United States would be lower by many per cent than they are at the present time. PRICES 83 Take the railroads as an illustration. The Interstate Commerce Commission is at present engaged in a physical valuation of railroad prop- erty. No one can predict what the outcome of this will be, yet it seems very probable to many experts that the actual value of the railroad property today will be equal to the capitalization of approximately $19,000,000,000. A question must be asked, however. How much of this $19,000,000,000 of railroad property represents investment? First of all, there were the men and women who put their money into railroad projects. This money is a legitimate investment. Then there were the cities and states which sub- scribed to railroad securities. This money is in the nature of public investment. Then there were the numerous grants of agricultural, timber and mineral lands which were made by the State and Federal governments to induce the railroads to build. Then, in the fourth place, there were the immense increases in land values which have occurred during the past few years, and which, more than any other single factor, have raised the actual value of much railroad property to a point approximating its capitalized value. If railroad interest and dividends were today paid on the orig- inal cash investments, there could be a very considerable cut in freight and passenger rates. The railroads have no intention of doing any such thing, however. They have capitalized their public land grants just as they have capitalized all of their other assets, and on 84 ANTHRACITE these assets they propose to pay both interest and dividends. The question of monopoly prices resolves itself into the question of the method by which prices are to be determined. The unyielding monop- olist wishes to charge everything that he can get. The consumer demands that prices be fixed at a point that will yield a reasonable return on the actual business investment. 10. The Monopoly Principle and Anthracite These general considerations regarding the status of the consumer, have a direct bearing on the anthracite problem. Anthracite consumers, like any other consumers, are the objective point of the productive process. Anthracite coal is produced in order that it may be consumed. If there was no demand for it there would be none produced. The consumers of anthracite have certain rights. There is no question regarding the adul- teration of anthracite, nor can any issue be raised in connection with the character of the goods. The question of reasonable prices necessarily comes to the fore as the chief problem involved in the anthracite situation. The consumers' obligations in the case of anthracite are practically Hmited to the condi- tions under which the coal is produced. The public, during recent years, has taken a more or less effective stand in regard to the living and working conditions of the anthracite miners. PRICES 85 The dramatic labor struggles in the anthracite region have focused public attention on that ques- tion and stimulated in the great body of the con- suming public a sympathetic attitude toward the anthracite worker. 11. Recent Movements of Anthracite Prices The Bureau of Labor at Washington publishes figures showing the increase in the wholesale price of anthracite coal since 1890. In that year chest- nut sold at $3.35 per ton; egg at $3.61 per ton; and stove at $3.71 per ton. During the subse- quent years prices ranged over a wide field. They were lowest in 1895 and highest in 1913. This holds true of each of the different grades of coal. The increase in the price of chestnut has been greater than that of any other size. This is ex- plained by the rapidly growing demand for chest- nut as a kitchen fuel. The wholesale price in 1890 was $3.35; in 1913, $5.31. Egg advanced in price from $3.61 to $5.06; stove advanced from $3.71 to $5.06. The relative prices of three grades of anthracite appear in Table I, on the following page. The extreme fluctuations in the prices of these prepared sizes of anthracite coal occurred prior to 1898. Since that time there has been an up- ward movement most rapid in the case of chestnut and least rapid in the case of stove coal. The movement is none the less effective in all cases. Between 1898 and 1913 the price of chestnut increased almost exactly 50 per cent. During 86 ANTHRACITE the same period, the price of egg coal increased 40 per cent and the price of stove coal 33 per cent. Table I. — Index Numbers Showing the Relative Prices OF Certain Grades of Anthracite Coal, 1890-1913.1 Year Chestnut Egg Stove 1890 93.3 100.6 97.8 1891 96.7 104.4 101.6 1892 109.7 110.8 109.4 1893 115.9 107.2 110.5 1894 98.5 94.3 94.9 1895 82.9 84.3 82.4 1896 98.9 98.8 100.0 1897 103.9 105.7 105.8 1898 98.8 100.2 100.1 1899 101.4 93.8 97.6 1900 108.9 99.7 104.0 1901 120.4 112.9 113.9 1902 124.0 121.5 117.6 1903 134.2 134.3 127.1 1904 134.2 134.2 127.1 1905 134.1 134.3 127.1 1906 135.2 135.3 128.1 1907 134.1 134.2 127.1 1908 134.1 134.1 127.1 1909 134.1 133.2 127.0 1910 133.9 133.9 127.0 1911 139.0 133.8 126.7 1912 146.9 140.0 132.6 1913 147.8 140.9 133.4 Previous to the combination of 1898, the importance of which has already been noted, the price of hard coal was subject to very much the I Wholesale Prices, 1890-1913. U. S. Bureau of Labor Statistics. Bulletin No. 149. Washington, Government Printing Office, 1914, pp. 134-35. PRICES 87 same extremes of variation that may be noted in the price of bitiiminous coal at the present time. Thus, chestnut coal was $3.35 in 1890; $4.17 in 1893; $2.98 in 1895. The price of egg coal was $3.03 in 1895; $3.80 in 1897; $3.37 in 1899. The price of stove coal was $4.19 in 1893; $3.13 in 1895; $4.01 in 1897. These figures typify the price movement upon which Professor Jones has so fully commented. Since 1898, however, fluctu- ations disappear and the climb of prices is con- sistent and regular. The price of anthracite, like the prices of many other products, has risen during the past few years. Indeed, the operators have repeatedly alleged as one of their reasons for increasing the prices, the increasing cost of operating the mines- The real question of importance, therefore, centers,, not in the price of the coal, but in the cost of the coal. If the law of monopoly price is to prevail in fixing the prices of anthracite, the operators will get all that they can. If some equitable basis for prices is to be maintained, the cost of production must be taken into consideration before the price of coal is fixed. i 12. The Cost of Producing Anthracite There has been a great deal of comment regard- ing the cost of coal production. Even after the vast body of data submitted at the investigation made by the Interstate Commerce Commission and the Pennsylvania Railroad Commission has been sifted, there remains some ground for specu- ^8 ANTHRACITE lation. At the same time, the report made by the Bureau of Labor following the labor difficulty in 1912, cites several detailed reports of the cost of coal production that are quite illuminating. Many consumers believe that the miner receives a major part of the $7 which they are called upon to spend for a ton of coal. They have been told repeatedly by the coal companies that if the wages of the miners are raised, let us say 10 per cent, a corresponding increase must be made in the price of the product in order to recompense the coal companies for the increased cost of pro- duction. As a matter of fact, the mining costs constitute a comparatively small element in the price of a ton of coal. Company A, cited on page 97 of the Federal Report on Anthracite Prices,^ is described as "one of those whose operating costs have most largely increased during the period under consideration." In 1904, according to the figures, the cost of coal at the colliery was $2,046; in 1912, the cost was $2,215. In other words, in 1912, the 8,671,013 tons of anthracite coal produced by this com- pany cost, on the average, $2.22 at the mine. The company reported in that year a total of 27,463 employees. The $7-ton of stove coal pur- chased by the constimer in New York or Phila- delphia actually cost the coal mining company a little over $2. A number of items enter into the cost of coal. The actual mining, or cutting and loading coal, '"Increase in Prices of Anthracite Coal," op. cit., p. 97. PRICES 89 cost in 1912, 54 cents. Other labor costs inside the mine included the cost of maintaining road- way, of ventilation, of repairs, of piimping, of "general expenses," "extraordinary expenses," "improvements," bring the total labor cost up to $1,309. In short, the actual cost of mining the coal and putting on the cars in the mine is only about two-fifths of the labor cost inside of the mine. Supplies, machinery and miscella- neous costs other than labor costs bring the net cost of coal inside the mine to $1,674. Outside the mine, the labor costs are $0,419 and the net outside costs $0,541. Inside and outside costs combined give for the total labor cost on the ton of coal $1,728, and for all costs $2,215. This illustration is only one of a number of instances, declared in the report to be typical, which the investigators brought to light in the course of their researches. The coal at the mine costs less than $2.25 average, per ton. These mine cost figures are most generous in the nimiber of items they include. No effort has been spared to load on the cost account every item which it might be asked to carry. A number of items are included in some of the cost statements which seem unwarrantably high. For example, on page 104, under "general ex- penses," one company charges $0,052 per ton of coal for the expenses of the New York office. The same company includes in its charges such fixed charges as "taxes," "mine rents," "insur- ance," "law expenses," "other New York office 90 ANTHRACITE expenses," "real estate department," "sinking fund" and "extraordinary expenses." These items combined, add $0,306 to the cost of each ton of coal. Even with these additions, the total cost of this company per ton at the mine was only $2,179. The consumer who pays $7 for a ton of stove coal distributes his money somewhat as follows:^ Retailer .. $2.00 $2 . 00 Retailer Ton of] Stove [ $7 • Freight .. $1.75 . $1.75 Freight Coal J Mine Profit Cost of Selling. . . .. $1.00 ' .. $0.10 > $1.10 Operator Mine Up-keep . . . Other Labor .. $0.35 ' .. $1.25 . $2. 15 Mine Cost Mining .. $0.55 The figures in the foregoing diagram are neces- sarily estimates. They will vary from one mine to another and from one part of the anthracite field to another. They are typical rather than specific, yet they give a rough idea of the way 1 It should be noted that the mine profit of $1 per ton applies only to the domestic sizes of coal. Some of the smaller sizes are sold at an apparent net loss, which, according to one line of reasoning, shotild be borne by the domestic sizes. PRICES 91 in which the price paid for a ton of coal is divided among the different parties at interest in its pro- duction. The figures for the mine costs are taken from the Federal Report on anthracite prices already referred to. The total v\^holesale price at tide-water, minus the freight rate, gives an amount equal to the mine costs, plus the cost of selling, plus the mine profit. The Federal Report on the Production of Coal for 1913, made by Edward W. Parker (pages 886 and following), seems to show a mine profit on domestic sizes of about $1.00. The dift'erence between the wholesale price and the retail price represents the amount that goes to the retailer. This amount, of course, is not profits. All of the expenses of the business must be taken out of ic. Unfortunately, no figures are at hand that show what part of this $2.00 is business costs and what part is profit. Thus, while the figures are approximations that would not hold true of this or that particular mine, they probably are, true of the anthracite mines in general. The figures as cited in the above diagram are suggestive. The entire cost of the coal on the cars, ready for shipment from the mines, is only a little over $2.00, or less than one-third of the price paid by the consumer. Of this mine cost, only a quarter goes to the man who does the mining. All other labor costs, including the cost of keeping the mine in repair and the labor costs of improving the property, in so far as the mine can be improved, are equal to $1.25. 92 ANTHRACITE The miner, together with every form of mine labor, therefore gets only $1.80 per ton, or one-fourth of the total amount paid by the consumer. It is evident from these figures that people must give over the idea that the miner is the chief beneficiary of the price paid for coal. The mine v/orkers of all descriptions get only a quarter of it. The mine operators and the railroads together get the lion's share of the money paid by the consumer for his coal. Mine profit, selling cost and railroad freight rate cover $2.85, or two- fifths of the price of the coal to the consumer. This, it should be remembered, is secured by the coal owners and carriers after the cost of keeping up the mines (except taxes, interest and other fixed charges) have been charged against mine costs. The amount taken by the operator and the railroad is greater than the entire labor cost of each ton of coal, or even than the total mine cost of the coal. When the consumer pays $7 for a ton of stove coal, he is paying a far larger part of his money to the operator, the railroad and the retailer than he pays to the miner. 13. The Cost of Getting Coal to Market The relation of the consumer to the price of domestic sizes of anthracite may be stated in a different manner. What are the actual costs of getting a ton of stove coal to market? The mine costs are clear. For labor the cost PRICES 93 is $1.80; for mine upkeep, 35 cents, making a total mine cost of $2.15. There is a cost of selling the coal, which is prob- ably about 10 cents. This would bring the total cost of the coal, on the cars at the mines and sold, up to $2.25. The operating cost to the railroads of carrying a ton of anthracite, for example, to Philadelphia, is apparently about 50 cents, varying somewhat with the route taken. ^ Adding this cost to the total cost at the mines, it would seem that the actual cost of getting the prepared sizes of anthra- cite to the Philadelphia market, including the cost of selling, is about $2.75, or about one-half of the wholesale selling price. These are not final costs. The coal companies and the railroads must still pay their fixed charges. These figures do give some idea, however, of the relation existing between the amount that a con- sumer pays for coal and the fraction of this amount that gets into the hands of the men who mine and load the coal. 14- A Better Explanation No one pretends that the price of anthracite is fixed with relation to its cost of production. Many of the producing companies have inadequate systems of cost determination, and the railroad officials representing the anthracite carriers have always insisted that it was impossible to make an accurate analysis of traffic costs as applied to one 1 "The Anthracite Coal Combination," op. cit., pp. 137-38. 94 ANTHRACITE commodity. However true this may be as a general proposition, the Interstate Commerce Commission and the Pennsylvania Railroad Com- mission found it possible to discover the costs of anthracite traffic. There is another explanation of the movement of anthracite prices. While costs have not been seriously considered, monopoly possibilities have received increasing attention. Until 1898 the prices of anthracite fluctuated as extensively as did the prices of bituminous. In 1898 an effective combination of anthracite car- riers was formed. Since that time the price of anthracite was held stable until 1912. As if by common consent, all of the anthracite producers carried out an identical policy. In 1912, and subsequent to the strike, the price of coal was advanced 25 cents per ton, and again this was done with a truly astounding unanimity by all of the large anthracite interests. The truth is that the effective combination organized in 1898 has been doing what it will with prices. The price fluctuations, which are as great in bituminous coal between 1898 and 1913 as they ever were during a like period, have no counter- part in anthracite. Anthracite prices display a stability which suggests a far-reaching monopoly power. 15. What should the Consumer Pay for Anthracite? Th-ere is no one answer to the question, "What should the consumer pay for anthracite?" If a PRICES 95 reasonable price is to be charged, it must vary with each locaHty. The method of ascertaining a price that will be reasonable in a given locality may be briefly indicated. It is understood, in the first place, that a reasonable price includes the cost of pro- duction, plus a reasonable profit on the actual money investment. This would not include a return on increased land values nor a return on stock issues. The basis of profits in each case must be cash investment. The elements in such a reasonable price would be as follows: 1. The cost of taking coal from the mine. Plus a fair return on the actual investment. 2. The cost of transporting coal from mine to market. Plus a fair return on the actual railroad investment involved. 3. The cost of retailing from the railroad car on the siding to the consumer's cellar. Plus a fair return on the actual investment in the retailing business. There is no way of putting these statements into accurate figures in the present limited state of the public knowledge regarding the anthracite industry. If the figures suggested in Section 13 of this chapter are approximately correct — that is, if the ton of coal, from the mine to the retailer, costs $2.75 for operating expenses, and if, as 96 ANTHRACITE has been frequently asserted, $1 a ton will market coal from car to cellar — the operating costs on a ton of coal would not exceed $4 in a market like Philadelphia. The sums that must be added to these operat- ing costs, as representing a reasonable profit on the investment, must be determined. There is apparently no information now published that covers the field. An intelligent accountant, with full power to investigate and report, might throw a great deal of light on it without much trouble. The consumers of anthracite are anxious to pay reasonable prices for their coal. There is just one way to proceed. The facts must be ascertained by men competent to determine such issues. Until such facts are a matter of public record, it is idle to speculate on the probable outcome of the investigation. It is worth not- ing, however, that there is every indication that the present prices of anthracite represent mon- opoly power rather than cost of production. CHAPTER 4 THE WAGES OF THE ANTHRACITE WORKERS 1. The Economic Status of Anthracite Labor A VISITOR to the anthracite coal fields would never suspect that the workers there were occupied in developing one of the richest of American resources. The annual production of only three minerals and fuels — pig iron, copper and bitu- minous coal — exceeds anthracite in value, while the value of the anthracite coal mined each year is twice the value of the gold and four times the value of silver mined annually in the United States. Anthracite, be it remembered, is not only a valuable natural resource. Concentrated in area and important as a commercial product, anthra- cite has been brought, imder the domination of a small but powerful group of railroad interests. The anthracite miner is therefore working in a region which, from a standpoint of natural advantage, is extremely rich; in an industry which produces a valuable and highly marketable commercial product; under the control of a number of splendidly organized railroads which work in substantial harmony. All of the advan- tages accruing from a modem business organiza- tion engaged in the developm.ent of a highly advantageous resource should be met with in 7 (97) 98 ANTHRACITE the anthracite region. If there is any industry in the United States which should contain a rich| promise of advantage for its workers, it is the anthracite coal industry; yet the visitor to that region is brought face to face with condi- tions of hardship that probably are not exceeded by those in any other industrial community of equal size in the northeastern section of the United States. ^ An examination of the facts shows that anthra- cite labor seems to enjoy no particular advantage because of the fact that it is employed by a highly organized industry in the production of an im- mensely valuable commercial product. In other words, the benefits which must necessarily accrue from the peculiar advantages of the anthracite business do not accrue to the anthracite workers. The most obvious method of contrasting the status of the anthracite miner with that of other men doing Hke work is to compare wages. The figures that are available do not allow any very accurate comparison between anthracite wages and the wages in other industries, because since 1902 there has been no adequate statement of anthracite wages. An appeal to operators and miners alike has failed to provide statistics of wages classified according to wage groups. Under the circumstances, the only recourse is to wage averages. > For a description of the anthracite region, see "Anthracite Coal Communi- ties." Peter Roberts. 1904; "The Coal Miners." F. J. Wame. 1905; and "The Coal Miner," E. A. Sailers. 1912. WAGES 99 Wage averages are, in one sense, extremely unsatisfactory, because the averaging-in of the higher paid and lower paid men does not give any accurate idea of the amount actually received by the individual man under consideration. At the same time, the averages do show, for a large group of men, the amounts received. These amounts, compared with similar averages for other groups, give an idea of the relation between the groups which are made the subject of comparison. The anthracite mine worker is not paid at a higher rate than the workers in other forms of mining. The only recent collection of material on mine wages was made by the United States Census Bureau, and published in a special report on "Mines and Quarries," 1902. The figures are very much out of date, yet they give some idea of the relation then existing between the wages of anthracite and of other miners. Table II. — Per Cent Distribution of Wage-earners According to Daily Wage Rates in the Production OF All Minerals and of Certmn Minerals.' All Min- A nthra- Bitu- Pig Gold and erals, cite, minous. Copper, Iron, Silver, Rate per Day Per Per Per Per Per Per Cent Cent Cent Cent Cent Cent Less than 51.50 16.4 30.7 8.5 2.5 22.6 2.3 2.50 61.8 84.8 73,8 54.6 90.1 10.2 3.50 95.0 96.5 97.6 70.1 99.5 71.7 14.25 and over 4 .7 .1 1.5 .1 1.3 Total men employed.. 581,728 69.691 280,638 26,007 38,851 36.142 ' Special Report on "Mines and Quarries," 1902. Washington, Government Printing Office, 1905, pp. 96 and 97. 100 ANTHRACITE This table shows that one-third of the anthracite workers received less than $1.50 daily; that more than four-fifths of them received less than $2.50 per day, and over nineteen-twentieths of them received less than $3.50 per day. The wage rates paid in the pig iron industry are apparently lower than those paid in anthracite. The v^ages for bituminous, for copper and for gold and silver are higher. The anthracite wages are probably modified by the presence of a number of breaker boys. This fact undoubtedly accounts for the large proportion of persons receiving less than $1.50 per day. However, anthracite wages appear at a disadvantage when compared with the other principal mineral industries in 1902. These figures must not be taken too seriously. The census officials note the extreme difficulty of getting satisfactory wage facts. Moreover, the wages in Pennsylvania and California cannot legitimately be compared unless some note is made of the differences in the cost of living. Though not at all conclusive, these facts suggest that the anthracite miner enjoys no peculiar advantage because of the character of the in- dustry in which he is working. Some later and more specific figures lead to the same conclusion. The Secretary of Internal Affairs of the State of Pennsylvania, in his report for 1912, Part III (pp. 321-22), shows the fol- lowing figures of average yearly earnings for anthracite miners: WAGES 101 Table III. — Average Number of Wage-earners Emplo\'ed IN THE Anthracite Coal Mining Industry, with Aver- age Yearly Earnings and Average Daily Wage. Average No. of Wage- Average Average earners Yearly Daily Employed Earnings Wage Contract miners 43,201 $728.84 $3.54 Miners' laborers 33,292 495.92 2.40 Other inside men 48,024 541.23 2.63 Outside workmen 29,554 526.88 2.56 Breaker employees 16,238 358. 17 1 . 74 The contract miners, in 1912, received an average v\^age of over $3.50 per day. At the same time, the mine laborers, inside men and outside men received average wages of about $2.50 per day, or in terms of yearly earnings, about $525 a year. It is interesting to note that the number of miners and of the other inside men is about equal. So is the nimiber of mine laborers and of outside workmen. These four groups make up the bulk of the mine employees. With the exception of the contract miners, . their annual earnings (1912) were in the neighborhood of $525. A comparison between the wages of Pennsyl- vania bituminous and Pennsylvania anthracite workers may be made from this same report. Such a comparison shows that in 1912 the bitu- minous miners as a group earned a higher return than the anthracite miners. The higher earn- ings of the bituminous workers are due, in part, to the higher average number of days in oper- 102 ANTHRACITE ation. Thus the bituminous mines reported 268 days in operation, while the anthracite mines reported only 206. An examination of the average daily wages shows that the anthra- cite miner makes more per day than the bitu- minous miner, while the inside and outside work- men make about the same in either case. The position of the anthracite miner differs from that of the bituminous miner. The anthracite miner is in one sense an employer, since the mine laborers work for him. The bituminous miner works for himself or in partnership with another miner. Following are the wage figures for bituminous miners : Table IV. — Average Number of Wage-earners Employed IN THE Bituminous Coal Mining Industry, showing Average Yearly lEarnings and Average Daily Wage.^ Average No. of Average Average People Yearly Daily Employed Earnings Wage Miners (pick) 54,178 $674.04 $2.52 Miners (machine) 54,158 653.72 2.44 Other inside workmen over 16 years. 30,485 708.84 2.65 Outside workmen over 16 years 21 ,489 630 .96 2 . 35 Coke workers 12,004 610.22 2.07 Where like employments are compared, as of the inside men who make roads, repair tim- bering, drive mules, handle motors, and of the outside men who are carpenters, engineers, black- smiths, dumpers, it will be found that the aver- 1 "Annual Report of the Secretary of Internal Affairs," Part III, 1912, pp. 327-28. WAGES 103 age daily wages in anthracite and in bituminous mining are about the same, while the greater number of days worked makes the annual wage of the bituminous worker $100 a year higher than the wage of the anthracite worker. There is no evidence to show that the wages of the anthracite workers are higher than the wages of workers in other mining industries. On the contrary, there are facts which suggest that, if anything, the wages of anthracite workers are lower, in certain particulars, than the wages of some other miners. 2. Anthracite Risks Much of the argument before the Coal Strike Commission was intended to show that the coal mining industry is an industry of peculiar risk, and that those who take up the work of coal mining, being employed in a particularly hazardous industry, should be paid in proportion to the hazards involved. The Commission summed up its opinion regarding the hazards of the anthra- cite industry by stating: ""We find that it should be classed as one of the dangerous industries of the country, ranking with several of the most dangerous. The statistics so far available . . . . do not show a greater hazard than obtains in some other occupations, notably in the fisheries and in those of switchmen and freight-train crews on our railroads. Still, the requirements are exacting."^ J "Report of the Anthracite Coal Strike of 1902." Washington, Government Printing Office, 1903, p. 51. 104 ANTHRACITE If this statement is correct, the wage of the an- thracite workers should reflect these unusual risks. The accident rate for the anthracite mines is extremely high. The figures for 1913 showed that out of 175,310 employees, there were 624 fatal accidents, or 3.56 fatal accidents per 1,000 employees. The fatal accidents per 1,000,000 tons of coal produced were 6.81.^ The report of the Interstate Commerce Commission for the year ending June 30, 1913 (Statistical Abstract of the United States, 1913, p. 284), shows 3,635 employees killed, out of a total of 1,716,380. The rate of mortality in the anthracite industry is therefore almost twice as high, taking all of the employees into consideration, as is the rate in the railroad industry. The Anthracite Strike Commission referred specifically to the risks of railroad switchmen, and freight trainmen. The figures available do not give the accident rates for these particular groups. They do, however, give the facts for certain larger groups, which may be compared with those men who are occupied with the actual operations of mining. The figures for 1913 in the Annual Report of the Department of Mines, Part I (p. 52), show that the niimber of miners employed was 44,346; fatal accidents, 286; fatal accidents per 1,000 miners 6.45; number of miners' laborers employed was 33,973; fatal acci- dents, 148; fatal accidents per 1,000 miners' 1 "Report of the Department of Mines of Pennsylvania," Part I, 1913, Harrisburg, 1914, p. 75. WAGES 105 laborers, 4.36; average number of days worked, 242. It is impossible to make an acciirate com- parison between these figures and the railroad figures, because it is not clear exactly what per- centage of the railroad accidents referred to trainmen. The figures do show, however, that in 1912, there were 318,329 enginemen, firemen, conductors and other trainmen. The number of employees killed in collisions, derailments, "mis- cellaneous train accidents" and "other accidents in connection with railroad operation," "includ- ing employees not on duty" w^as 3,231, or 10.1 per 1,000 trainmen. The railroad crews pre- smnably worked about 300 days a year (25 per cent more than the time worked by the anthra- cite miners). Some allowance should be made in the calculation for employees killed who were not trainmen. This would reduce the ratio of 10.1 per 1,000 somewhat. Reducing this ratio by 20 per cent, to make allowance for the less number of worldng da>s, it would seem that the fatal accident rates to men in railroad train crews were only slightly higher than the rates' for contract miners and considerably higher than the rates for mine laborers. There can be little question that the anthracite industry is a high risk industry, particularly for the men who are engaged in getting out the coal. To what extent is this high risk reflected in the wages of the anthracite workers? The average yearly earnings of railway em- ployees are rather difficult to determine. The 106 ANTHRACITE Interstate Commerce Commission reports the total number of employees of each grade and the total amount paid in wages to these employees by the railroads. Thus, for example, in 1912, in the Eastern District^ there were 30,760 engine- men, 31,892 firemen and 66,346 trainmen. Con- ductors (whose wages are slightly lower than those of enginemen and considerably higher than those of firemen) are excluded because there is no occupation in the anthracite industry which compares in any way with that of the conductor. Their wages rank next to the wages of engineers. The average yearly earnings of these men, as shown by the Commission figures, ^ are: engine- men, $1,522; firemen, $901; other trainmen, $940. It will be seen very readily that the rail- way employees are compensated on a scale far above the scale of the anthracite miners. If the amounts of skill and technical knowledge required of the engineman and the contract miner are ap- proximately the same,^ some sort of a comparison may be made between the two. It would appear that the engineman gets twice as much as the contract miner. The fireman and other train- men, compared with inside workmen, mule driv- ers, switch tenders, road menders and the like, show yearly earnings almost twice as great as the yearly earnings of miners' laborers and inside men. 1 The Eastern District will be used as a comparison because the anthracite mines are in this district. 2 Annual Report for 1912, pp. 28 and 29. 3 To date the engineman is a more highly educated and perhaps a more skilled man. WAGES 107 There is one fact that must not be lost sight of. The miner is working undergroimd. The condi- tions surrounding his work are, in a sense, dis- agreeable. He is working in the dark. He is working often in damp places. Frequently the chamber is filled with dust. The railroad em- ployee is, on the other hand, always above ground. With the exception of the enginemen and firemen, the work is not particularly dirty or disagreeable. Furthermore, the hours of the railroad employees are extremely short. It would seem that no un- biased person would hesitate for a moment between railroading and coal mining, as far as the relative agreeableness of the occupations is concerned. The figures show that the risk of the underground men is almost as high as that of the railroad employees. Nevertheless, the earnings of anthracite miners are only one-half the earn- ings of railroad men doing work of an approxi- mately similar grade. 3. Anthracite Wages and Wages in Other Industries The anthracite wages may be compared with the wages in other trades employing men. The comparison is made in these terms because the industries in which women and children are employed usually report lower wage figures than the industries in which men alone are employed. The Annual Report of the Secretary of Internal Affairs for Pennsylvania, Part III, 1910,^ gives average yearly earnings for anthracite and bi- 1 Since that date most of the wage data have been omitted from the report. 108 ANTHRACITE tuminous workers and for workers employed in a number of other Pennsylvania industries. The number of days worked by the anthracite mines was 226; by the bituminous mines, 264. In^ other words, this year was an average year in' both industries. The average yearly earnings in the anthracite mines were: miners, $711; miners' laborers, $468; other inside men, $527; outside workmen, $541. In the bituminous mines the average yearly earnings were: pick miners, $588; machine miners, $537; other inside work- men, $641; outside workmen, $518. Compare these figures for miners with the earn- ings in certain other industries where large num- bers of men are employed. Table V. — Average Yearly Earnings in Certain Pennsylvania Industries, 1910. Average No. of Men Yearly Itidustry Employed Earnings Pig iron 16,771 $626 Steel production 11,319 693 Rolling mills 131,430 678 Tin and temeplate 10,240 779 Cement 10,882 527 Machinery 16,385 633 Locomotives 36,202 718 Only one industry (cement) reports earnings of less than $600. Every group of miners with the exception of anthracite contract miners re- ceived annual earnings of less than $600. The general level of wages seems to be lower in mining WAGES 109 than in the other great man-employing manu- facturing industries of Pennsylvania. Similar figures are available in the Report on Statistics of Manufactures in Massachusetts, 1911, page 2. Table VI. — Average Yearly Earnings in Certain Massachusetts Industries, 1911. No. of Men Yearly Industry Employed Earnings Cars and shop construction 5,152 Electrical machinery 14,393 605 Leather, tanning and finishing 9,742 566 The Massachusetts figures, like those for Penn- sylvania, seem to show that the large manu- facturing industries employing men pay average yearly earnings as high as the earnings received by the anthracite contract miners and consider- ably higher than the earnings of the miners' laborers and inside and outside workmen. The wage figures published by the New Jersey Bureau of Statistics yield similar results. There are employed around the outside of the mine large numbers of men — blacksmiths, car- penters, mechanics, firemen, common laborers and the like. The wages of this group average about $525. The machinists, carpenters and "other shop men" employed by the railroads in the Eastern District are $881, $736 and $687 respec- tively. (Annual Report, Interstate Commerce Commission, 1912, p. 29.) Here again the wage rate seems to be lower in the anthracite than in other man-employing industries. no ANTHRACITE As far as the relative wages of anthracite miners and other workers in occupations of a similar grade are concerned, it would seem that the bal- ance is in favor of the workers in other occupa- tions. Despite the high risks of mining, most other occupations employing men in large numbers pay higher wages or wages equally high. When a comparison is made between anthracite and occupations of equal risk, like the railroad in- dustry, the evidence is overwhelmingly against anthracite wages. 4. Anthracite Wages and the Labor Market The figures show that anthracite wages differ little from wages in other industries that are operated under similar conditions. If there is any difference, it is against the anthracite mine worker. This same point might have been argued deductively in view of the fact that in the United States, as in any other open labor market, wages are fijced by the laws affecting the entire labor world, and not specifically for any industry. The prospective anthracite miner must choose between working in an anthracite or in a bitu- minous mine; between working as a contract miner or as a track layer; between working in the mines and working in a grocery store; be- tween working in a mine and handling baggage for a local express company. The same grade of work, all other things being equal, will pay about the same rate of return in any one of a group of neighboring industries. The common laborer in WAGES 111 a certain district is paid $1.50 per day whether he spikes down rails for the raikoad or shovels gravel for the local contractor. In many cases, the existence of unions fixes the rate of wages. In any case, the laws of the labor market or the rules of the unions make a rate for labor, not for the particular industry in which the person is employed, but for the kind of work he is doing. This being true, no one is surprised to find that the anthracite miner is paid a wage approximately the same as the wages of other men doing similar work. Indeed, when the comparison is made between the railroad industry and the anthracite coal industry, one fact must be borne in mind, that among the best established and most con- servative trade unions in the United States, are the railway brotherhoods. Years of hostility and of aggressive diplomacy have finally placed these unions in a position where they can make and enforce effective demands against the employing railroads. There is probably no group of indus- tries in the country where the tinionization is more complete or more effective. The result is the high wages already noted, and it is to be assumed that if the anthracite miners had an equally effective union, they woidd secure equally high wages, provided they could win as much public attention and public sympathy as the railroad brotherhoods have won. The anthracite coal operator does not ask him- self, "How much will I be able to pay John Strzynski?" Instead he asks, "For how much 112 ANTHRACITE will John enter my employment?" The rate of wages that John will demand in the anthracite industry is fixed very largely by the rate of wages in the general labor market. Fact and logic alike lead to the conclusion that the anthracite miner enjoys no particular eco- nomic advantage because he is an anthracite miner. The fact that he is employed on a wonderfully rich natural resource yields him no additional income. He receives no share at all in the prosperity which goes with natural resource monopoly. 5. The Adequacy oj Anthracite Wages Turn for a moment from the comparison of anthracite with other wages, and ask a different question. Are the wages of anthracite miners adequate ? This question bears no relation to other indus- tries. It confines the issue to the anthracite industry alone. When the anthracite miners present demands to the operators for increased wages, they may base their contention on one of three propositions. First, they may argue that their wages are lower than the wages of other men doing similar work. Second, they may argue that they are not receiving a fair share of the product which they are instrumental in creating. Third, they may argue that their wages are inadequate. The first two reasons have already been disposed of. The third one is now up for discussion. WAGES 113 The adequacy of a particular wage,^ like any other scientific question, must be discussed in a spirit of honest truth-seeking. On all sides the problem of wage adequacy is leading to endless and often to bitter controversy between employ- ers and wage-earners, who usually base their con- tention that wages are too high or too low upon tradition or prejudice rather than upon facts. The result is dissension and misunderstanding. The problem of wage adequacy should be ap- proached scientifically. First, the scientist exam- ines the wage facts; second, he decides upon some standard by which wage adequacy may be measured; and third, he compares the prevailing rate of wages with that standard in order to determine the adequacy of wages. There are three propositions which are funda- mental in any consideration of wages: 1. Industry must pay a wage sufficient to maintain the efficiency of its workers. 2. Society must oppose any wage that leads to poverty, hardship- or social dependence. 3. Wages must be sufficient to enable the worker and his family to live like self-respecting members of the community. These statements are generally accepted. It seems evident that unless industry pays wages . V This argument appeared originally in the "Annals of the American Acad- emy," May, 1915. 8 114 ANTHRACITE that will maintain efficiency, its labor force must necessarily deteriorate. It seems equally evident that unless society insists on a wage sufficient to prevent poverty, hardship and inefficiency, the family, the school, the state and every other social institution will suffer. At the same time, if progress is to be made, wages must be sufficient to provide for self-respect, while they stimulate men to activity. So long as the present social system prevails the man's wage must be a family wage. The home is looked upon as the basic social in- stitution. Each man is expected to make a home and, having made it, to earn a living that will permit the wife to devote her time and energy to the care of the home and of the children. The mother's duty calls her to preside over the home. The father's duty calls him to secure a wage sufficient to keep his family on a basis of physical health and social decency. The average family as shown by the census figures contains somewhat less than five people. If, however, there is eliminated from the census figures the famiUes consisting of one person and of two persons — that is, families in which there are no children — the average family will consist of nearly six persons. Among the foreigners, who make up the bulk of the anthracite workers,^ the famihes are considerably larger than among the Americans. Some unit of family size must be adopted in ' The Secretary of Internal Affairs for Pennsylvania, in his Annual Report, Part III, 1912, p. 322, gives 53,441 American and 86,997 foreign anthracite mine workers. WAGES 115 any discussion of the family adequacy of wages. The family most frequently used in recent social studies consists of a man, wife and three children under fourteen years of age. Such a family corresponds in size with the average American family. The children are too young to work for wages and the mother should be in the home taking care of the children, not working outside. The situation in the anthracite field would seem to call for a somewhat larger standard family than that of three children. For the purpose of the present study, four children will be regarded as the normal or type family for the anthracite regions. 6. The Anthracite Wage Scale A discussion of wage adequacy begins neces- sarily with an analysis of wages. What is the anthracite wage? The figures available showing the wages actually paid in the anthracite regions are meager in the extreme. There is, first of all, the statement of average yearly earnings and average daily wages, published by the Secretary of Internal Affairs (1912, Part III, page 322). These wage figures, upon which comment has already been made, are unsatisfactory because they appear in the form of averages. They show briefly that during the year 1912, when there were 206 working days, the average yearly earnings of the contract miners were $729; of miners' laborers, $496; of inside workers, $541; outside workers, $527. 116 ANTHRACITE The only really satisfactory figures on wages in the anthracite region appear in the report of the Anthracite Strike Commission, and relate to the year 1901. During that year the average annual earnings of contract miners "ranged be- tween $550 and $600. Perhaps it would be safe to put the average at $560" (p. 50). A typical scale of annual earnings for 1901 was furnished by the Lehigh Valley Coal Company and pub- lished in the Report of the Commission (p. 178). Table VII. — Annual Earnings of Contract Miners Work- ing Throughout the Year of 1901, and Average Days on which Miners Worked, Classified by Annual Earnings, for the Lehigh Valley Coal Company.^ Classified Annual Earnings Miners $1,000 or over 10 $900 or under $1,000 10 or under $900 33 or under $800 93 $600 or under $700 204 $500 or under $600 295 $400 or under $500 176 $300 or under $400 76 $200 or under $300 16 Under $200 10 Average 923 236 100.0 Days on which Miners Worked Per Cent of Total Miners Reported 254 1.1 252 1.1 258 3.6 250 10.1 249 22.1 238 31.9 221 19.1 206 8.2 185 1.7 159 1.1 1 This report includes only such miners as worked in their respective collieries throughout the year, and whose names appeared, for some days, at least, on pay rolls of each month in the year. WAGES 117 Tables published on subsequent pages of the report for the Lehigh and Wilkes-Barre Coal Company, the Philadelphia and Reading Coal and Iron Company, the Delaware, Lackawanna and Western Railroad Company and other coal companies, show approximately the same facts. A study of this table shows that one-third of all the miners receive between $500 and $600, while one-fifth receive between $600 and $700 and another fifth between $400 and $500. Ap- proximately three-quarters of these miners were earning annually between $400 and $700. A considerable modification must be made in these figures in order to allow for the wage changes which have occurred since they were compiled. The average number of days worked per year, during the last few years is higher than the figures shown in this statement by five or six days, although in 1913 the mines worked 257 days. The earnings also have increased. The wages of the miners were raised 10 per cent in 1902, and again 10 per cent in 1912, so that the wage figures given in this table would have to be increased by a slight margin to allow for an increase in the number of working days and by about 21 per cent to allow for the increase in wage rates. This difference is shown by the difference in average earnings. The Commission found the earnings of contract miners to be somewhere between $500 and $600. At the present time the average earnings of contract miners are in 118 ANTHRACITE the neighborhood of $700. This would repre- sent an increase of some 20 per cent since 1901. The contract miners constitute only a fraction (about one-quarter) of the total number of anthra- cite workers. The average annual earnings of the other workers in the mines appear to be from $150 to $200 less than the average annual earnings of the contract miners, Unfortiinately, the Commission published no figures showing classified earnings among other than contract miners. If these facts were available, it would add greatly to the clarity of the issue. Are these wages adequate? Do the amounts paid by the anthracite industry to its employees enable them to support a family decently ? Three phases of the matter will be considered: 1. The adequacy of wages to provide health and decency for a man, wife and four children under fourteen years of age. 2. The adequacy of wages in terms of the business accounting and busi- ness practice employed by the anthracite companies. 3. The adequacy to meet current social obligations and social standards. 7. The Anthracite Wage and Physical Efficiency The adequacy of wages may be tested in terms of the health and decency which are involved in the maintenance of physical efficiency. If in- WAGES 119 dustry is to support its workers, if society is to see to it that families are not forced to depend upon the community, wages must be sufficient in amount to enable the wage-earners to buy health and decency. At the present time the wages paid to a considerable portion of the anthracite workers are insufficient to permit decent family living. A number of attempts to ascertain the cost of a decent standard of living have been based on the assiunption that physical health, education up to the age of fourteen and the other minimum requirements of m_odern American life were in- cluded in the term "decency." . There is a certain minimum of food, clothing, shelter and the other necessaries of life below which physical health and social decency are impossible. That minimum exists in terms of bread and butter, shoes, overcoats, medical attendance and school books. It is fixed by the demands of nature and by the standards of society, wholly independent of cost or price; therefore, any discussion of the cost of a decent living begins with an analysis of the various items which comprise living decency. The amount of food required by the man or by his family can be fixed with scientific accuracy. The amount of clothing is not susceptible of such an accurate statement, but it can be designated in terms of a certain number of garments per year. Most students of the standard of living have agreed that three or four rooms are necessary to 120 ANTHRACITE house a family of five people decently. They have, likewise, made an allowance for medical attendance, for saving, for insurance and for recreation. The ordinary family with an income of less than $1,000 a year devotes about two-fifths of its expenditures to food. The food question may be handled with comparative ease, because modem science has given a fairly satisfactory basis for computing the food necessities of an individual or of a family. The ordinary man, doing moderate physical work, requires approximately 3,500 heat imits of energy per day. Unless they are supplied in his food, he must ultimately become devitalized through lack of proper nourishment. A question might well be raised as to whether the work of the man in or about the anthracite mine is not of a character to require an increased quota of energy units. Some of the occupations are, of course, much more strenuous than others. On the whole, the probabilities seem to be rather in favor of a somewhat higher ratio than 3,500. However this may be, 3,500 calories will be accepted for the time being as a standard. An adult man requires 3,500 units of energy; an adult woman requires eight-tenths as much. For the convenience of discussion, a family upon which this study will be based includes a boy of twelve, a girl of ten, a girl of seven, and a boy of five. These children require respectively, seven-tenths, six-tenths, five-tenths, and four- WAGES 121 tenths as much as an adtdt man. The family taken together would, therefore, represent a con- suming power equal to that of four adult men.^ A number of standard of living studies have placed varjang estimates upon the cost of 3,500 heat units per day. The Federal Government dietitians in 1907 agreed that physical efficiency could not be maintained by families spending at the rate of 22 cents per man per day. Since 1907 there has been an increase of 23 per cent in food prices, which would increase^the mini- mum limit to 27 cents. This is the minimum estabHshed by the New York Association for Improving Conditions of the Poor, and by the New York State Factory Investigating Com- mittee. The Bureau of Standards of New York City, after reviewing these and other facts, accepts a standard of $7,304 per week (27 cents per day, for their family was $7 per week).^ These figures refer to food prices in New York, where, according to the British Board of Trade Report and to other evidence, a poor man can buy his food more cheaply than in the outlying districts. An examination of the price schedules issued by the Bureau of Labor suggests that prices in the anthracite regions differ little if any from those in other parts of the Middle 1 For fuller details regarding the methods of estimating the dietary, see "Financing the Wage-earner's Family," Scott Nearing, New York, B. W. Huebsch, 1913, Chapter 2, Section 7. 2 Report on the Cost of Living for an Unskilled Laborer's Family In New York City, 1915, p. 13. 122 ANTHRACITE Atlantic States, They are, therefore, probably at least as high as those for New York. The Federal study made in New England and the Southern States during 1908-09 fixed the cost of food per man per day at 26 cents for New England and 24 cents for the Southern States. From 1909 to 1914 the prices of food, rated according to the average consumption in working- men's families for the North Atlantic States, in- creased by one-fifth. If the estimates made in the Federal study were correct, the food cost in 1914 would be approximately 30 cents per man per day. There has been a considerable, and it would seem a legitimate, question concerning the ade- quacy of the Chapin diet. The diet adopted in the Federal study certainly seems more reason- able.'- It would be conservative, therefore, to accept 28 cents per man per day as a basis for estimating the food needs of a family in the anthracite regions. The food requirements of the family of four for a day would therefore be: Father = 1.0 X 28c. = .28 Mother = 0.8 X 28c, = .224 Boy of 12 = 0.7 X 28c. = .196 Girl of 10 = 0.6 X 28c. = .168 Girl of 7 = 0.5 X 28c. = .14 Boy of 5 = 0.4 X 28c. = .112 $1.12 This equals $7.84 per week, or $408 per year, 1 " Financing the Wage-earner's Family," Scott Nearing, 0^), c»t., Chapter 2, Section 8. WAGES 123 If recent dietary studies are correct, $408 per year should buy enough food to keep the anthra- cite mine worker, his wife and four children in physical health. A comparison m.ay be made at this point between this food estimate and the estimates submitted to the Anthracite Coal Strike Com- mission in 1902. The Report states (p. 199) : the "average quantity of principal articles of food consumed per family" in the anthracite region for 1902, was $275.14. Between 1902 and 1914, the cost of the principal articles of food, according to the United States Bureau of Labor, increased about 39 per cent. Thirty- nine per cent added to the Strike Commission estimate would give a total of $382.44. This estimate, however, is for the "principal articles" of food, and includes families of all sizes. Such a statement would leave open the probability that incidental articles of food added to the cost of the "principal articles" would bring the food cost for a family of six very near the estimate here set down, $408. The second largest item in the family budget is the rent cost. Students of the standard of living have assumed that a family of six should have not less than four ordinary rooms in order to maintain health and decency. A four-room house in the smaller towns of the anthracite region costs about $80 a year. In the larger towns and cities the cost is about $130 per year. The next considerable item in the budget is 124 ANTHRACITE clothing, and on this item there is a wide diversity of opinion. Chapin, in his New York study, allowed %33 per year for the man's cloth- ing; $23 for the woman's clothing; $15 for cloth- ing each girl and $12 for clothing each boy. There was an additional allowance for soap and laundry utensils. On such a basis the family which we are considering would spend $110 for clothing. The New York Bureau of Standards (1915) places the clothing item at the same figure as Dr. Chapin. The Federal study adds about one- third to the Chapin estimate. If the Chapin estimate is accepted, it is a bare minimum. The additional items of expenditure which are ordinarily met, appear in the following list, with amoimts set after them equal to the amounts prescribed in the Federal study for a cotton mill town in Massachusetts. Fuel and light $24. 00 Doctor and medicine 13 . 98 Insurance 20.80 Amusement 15 . 60 Church 10.40 Newspapers, etc 8 . 84 Incidentals 26 . 00 Total $119.62 These amounts, it should be noted, are for the most part lower than the allowances made for like objects by the New York Bureau of Stand- ards. Carfare is omitted. It is a necessary part of the budget in many cases. WAGES 125 Summing up, the costs of physical health and decency for a family of six in the anthracite region would be : Food $408 Rent 80 Clothing 110 Additional items 120 Total $718 The rent item here used is for villages. In the cities $50 must be added for rent, bringing the cost to $768. This simi — $768 — the cost of decent living for a family of six persons in an anthracite city — is an estimate. Accurate information can- not be obtained until a first-hand investigation is made in the anthracite regions. The point that should be enforced is not the $768, but the fact that there is some minimum of subsistence below which health and decency are impossible. An investigation may show that $768 is too high — then the amount must be lowered; or that $768 is too low — then the amount must be increased. There is a minimum cost of living decency in the anthracite regions. At the earliest possible mo- ment it should be determined by a careful investi- gation. Until that minimum is ascertained there can be no final adjustment of wages that will be either tolerable or equitable. Meanwhile the $768 estimate for the anthracite regions may be compared with the standard of liv- ing studies made in recent years. In New York City, for example, Chapin estimates the cost of 126 ANTHRACITE decency at from $800 to $900 for a family of five persons. In Fall River, Mass., the Federal study makes an estimate of about $750; for Buffalo the estimate is $850; for Chicago it is $800.^ The most recent estimate, made after a careful study by the New York Bureau of Standards, sets the cost in New York City at $840. The Fall River estimate ($750) is perhaps most comparable with the situation in the anthracite ■fields. The population of Fall River in 1910 was 119,295; the population of Scranton in the same year was 129,867; and of Wilkes-Barre 67,105; of McKeesport 42,692; of Shenandoah 25,774. Thus two of the large anthracite towns correspond somewhat in population with Fall River. The food costs in the anthracite region, as shown by the reports on retail prices, published by the United States Bureau of Labor, do not differ materially from other sections in the eastern part of the United States. The rent cost for Fall River was about the same as that for the cities of the coal regions ($130 per year). Other items of expense, such as clothing, fuel and light, health, insurance, etc., do not differ in the two places. It would seem, therefore, that with the exception of the clothing item, which was estimated at a rather high figure in Fall River ($136.80), there should be a fairly accurate correspondence between the requirements of a family in the two places. The fact should be borne in mind that the Fall River study was based on a family of five, and 1 "Financing the Wage-earners* Family," Scott Nearing, op. cii., Chapter 3. WAGES 127 this study is assuming a family of six. The fact should be further emphasized that all of the studies, with the exception of that of the Bureau of Standards, were made from four to isix years ago. During that time the cost of living has in- creased considerably. How does this figure ($718 for villages and $768 for cities) compare with the wages paid to anthra- cite workers? In so far as averages are an index of wages, many of the contract miners receive a wage of $800 or more. The laborers, inside and outside workers, with average daily wages of $2 to $2.50, would be able to earn $750 a year only by working a full year of 306 days. The largest number of days worked by the anthracite miners in recent years was 257 days, and that was well above the average of the five-year period. Many contract miners are apparently in receipt of annual earnings that will provide living decency for a family of four young children. The great bulk of anthracite workers, however, seem to be in receipt of wages that will not buy such Hving decency. There are many ways in which the miner may maintain conditions of living decency. He may refrain from marrying or from having children; his wife may take boarders; when his children grow older they may contribute to the family income; his wife may work at some regular occu- pation ; he may find extra work outside of mining towns; or he may supplement the family income with a cow, pigs, chickens or a truck patch. All 128 ANTHRACITE these are possibilities. Nevertheless, the obliga- tion remains upon industry to pay a Hving wage to its workers, and the bald fact of a wage scale largely below the cost of decent family living stares every man with young children square in the face. From the standpoint of social well-being, every man in the anthracite region who is receiving a wage that is insufficient to buy physical health and decency for his family of young children is inadequately paid. How many such men are there? Future investigations alone will show. 8. The Anthracite Wage as a Business Proposition The wages paid by the anthracite industry to a great body of its workers are inadequate to pro- vide health, efficiency and decency for a moderate- sized family. They are even more inadequate when they are considered from the standpoint of up-to-date business practice. Many a successful business man, who is con- fident that "the workers are paid all that they are worth," and that "wages are far too high, anyway," has never stopped to analyze wages from a strictly business point of view. The wage- earner is, in reality, a business man. His place of business is his home. The object of his business activity is the rearing of a family in good health and with a generous supply of education. To this end, the worker labors during most of his adult life. Business men have worked ardently to safe- WAGES 129 guard business interests. They have talked a great deal about the importance of business stability; of conservatism in finance; of the returns due a man who risks his wealth in a busi- ness venture ; and of the fundamental necessity of maintaining business on a sound basis. After centuries of experiment they have evolved what they regard as a safe and sane method of financial business procedure. Every successful business man tries to live up to the following well-estab- lished formula : First. He pays out of his total returns, or gross receipts, the ordinary costs of doing business — materials, labor, repairs and the like. These payments are known as running expenses or up- keep. Second. After up-keep charges are paid he takes the remainder, called gross income, and pays out of it the fixed charges — taxes, insurance, interest and depreciation.^ Third. The business man, having paid all of the necessary expenses of doing business (the running expenses and the fixed charges), has left a fund (net income) which, roughly speaking, is the profits of the business. Out of this net income. 1 A depreciation charge is one that is made against the wearing out of capital. A paper maniifacturer buys a machine for which he pays $1,000. Experience tells him that this machine will wear out in ten years. Therefore the manufac- turer sets aside each year a sum which at the end of ten years will equal $1,000 (a new machine). In this way the business man keeps his capital intact. While the individual machines, tools and the like do wear out, the accounts of the business are so kept that these pieces of capital will be automatically replaced when they are too old for use. The depreciation charge is recognized everywhere as a legitimate and necessary fixed charge on business. 9 130 ANTHRACITE dividends are paid, improvements and extensions of the plant are provided for. Fourth. The careful business man increases the stability of his business by adding something to his surplus or undivided profits. This formula may be stated in terms of anthra- cite bookkeeping. Very few of the coal mining companies make any satisfactory public statement of accounts. Here is one that will illustrate the principle involved.^ Table VIII. — Statement of Operations of the Lehigh AND Wilkes-Barre Coal Company, 1912. Gross earnings $18,742,623 Total expenses^ 14,982,263 Net income $3,760,361 Deductions Interest $814,390 Sinking Fund 460,000 $1,274,390 Surplus for the year $2,485,971 Dividends 1,197,625 Total surplus, June 30, 1912 $3,683,596 The expenses of doing business were $3,750,000 less than the receipts. Even after interest, div- idends and $500,000 for a sinking fund had been paid out, more than $1,000,000 remained. This 1 "Poor's Manual of Industrials," 1913, p. 706. 2 Includes colliery [improvements, $261,181; royalties, J341,089; taxes, J719,469; and "value of coal sold from stock. $1,469,365." WAGES 131 sum, added to the surplus accumulated from pre- vious years, left the company, at the end of the year, with over $3,500,000 of "surplus." The profits in the anthracite business go very largely to the railroad interests, and since the railroad accounts are clearer than those of the coal companies, a statement of anthracite rail- road accounting will serve as a further illustration of the methods of sound business practice accepted by the anthracite owners. The operating statis- tics of the Delaware, Lackawanna and Western Railroad for 1912 are reported in Poor's Manual of Railroads, 1914, p. 193. Table IX. — Operating Statistics of the Delaware, Lackawanna and Western Railroad, 1912. Gross earnings $37,564,5 1 1 Total expenses 24,146,423 Net earnings 13,418,088 Other income 6,054,567 Gross income $19,472,655 Deductions: Taxes $1,771,980 Rentals 5,847,278 Interest on bonds 6,486 Renewals and betterments 1,720,698 Miscellaneous 84,242 Dividends 6,028,800 Total deductions $15,459,484 Surplus for the year 4,013,171 Total per cent earned on stock. . . 33 . 17 132 ANTHRACITE The bookkeepers of the Lackawanna begin with the total returns or gross earnings of $37,000,000. From these they deduct the expenses of carrying on the business. To the net earnings which remain they add incidental income from divi- dends, rentals, other properties, etc. The total is gross income. Observe that in the operations of this road, a third of the gross earnings appears as net earnings, and the gross income of the road is equal to half the gross earnings. From gross income is deducted taxes, rentals and interest. These are the fixed charges, obligations which must be met if the business is to continue. From gross income the bookkeepers also deducted $1,750,000 for renewing and improving the prop- erty of the road, as well as $6,000,000 for dividends. After all of the necessary deductions had been made, $4,000,000 (an amount equal to 11 per cent of the gross earnings) remained as surplus, which the road lays aside for a rainy day or a special dividend, as circumstances may dictate. Like every carefully handled business, the Lack- awanna — 1. Paid its running expenses. 2. Paid its fixed obligations. 3. Divided up its profits. 4. And kept a nest egg. The year 1912 is not an exceptional year in the history of the Lackawanna. From 1905 to 1912 the per cent earned on the stock varied from 22 per cent in 1906 to 53 per cent in 1909. The amount paid in dividends was $1,838,000 in 1898. WAGES 133 It remained at this figure until 1903. From 1904 to 1908 the dividend payments were about $5,000,000 per year. In 1909 the dividend rate was 85 per cent, including a special dividend of 75 per cent. The total dividends paid that year were $22,861,586. In 1910, $6,000,000 in divi- dends was paid, and in 1911, $16,399,200. The showing made by the Lackawanna is in one sense exceptional, because of the high dividends paid by that road. On the other hand, the method of carrying on business is typical of the method pursued by every soimd business organiza- tion in the United States. Here, for example, are the operating statistics of the Lehigh Valley Railroad, another anthracite carrier. Table X. — Operating Statistics of the Lehigh Valley Railroad for 1913.i Gross earnings $43,043,372 Operating expenses 29,107,820 Net earnings ^. 13,935,552 Other income 2,023,545 Gross income $15,959,097 Deductions : Taxes, rentals, interest on bonds, miscellaneous $7,197,268 Dividends 6,060,800 Adjustments 1,079,500 Total deductions $14,337,568 Surplus for the year $1,621,529 Total surplus, July 1 $25,066,231 1 "Poor's Manual," 1914, p. 263. 134 ANTHRACITE The dividend rate and total dividend payments of the Lehigh Valley are lower than those for the Lackawanna. Nevertheless, the same general principles hold good. Expenses are paid out to total earnings. The balance must be sufficient to meet the necessary fixed charges, to pay dividends and to leave an adequate surplus. In the case of the Lehigh Valley, this surplus has mounted up to $25,000,000. Every modern business man disposes of the total receipts of his business in some such way as that indicated. The business man who cannot pay his running expenses, fixed charges and dividends, and show some surplus, is scanned critically. Should he fail to pay dividends, he is considered unprosperous. If he does not meet the interest on his bonds, he is taken into court and declared a bankrupt. Running expenses, fixed charges, dividends and surplus are not merely fair; they are essential to business success. They are con- sidered a "right" by the organizers of every legitimate business. Suppose the anthracite worker, who is striving to support a family on a wage ranging from $2.50 to $3.50 a working day ($500 to $900 per year), should apply to the financing of his family affairs the financial formula adopted by any well-managed modem business. Since he must allow for riinning expenses, fixed charges, dividends and surplus, he would proceed as follows : First. He would pay, from the total family WAGES 135 income, the family running expenses — food, cloth- ing, housing, medicine and the like. Second. From the remainder, his gross income, he would take interest on the investment which has been made in bringing up and educating his wife and himself ; insurance against all reasonable contingencies, such as sickness, accident, death and unemployment; and a sum for depreciation sufficient to compensate for the inevitable de- crease in his earning power and for the old age during which he and his wife can no longer earn anything. Third. The remaining net income should be sufficient to enable the worker to pay himself dividends proportionate to the excessive risks which he runs in bringing a family into the world and attempting to rear it; and sufficient to add at least something to the surplus which the family lays aside to provide against such imtoward events as births, deaths and prolonged sickness. The worlonan who conducted his affairs on this basis would be a sound, sane, safe financier. He would also be a seven-day wonder.- If the pre- ceding section established any point, it was that a large percentage of wage-earners receive a wage which will not pay even decent running expenses. Any business man who attempted to conduct a business on a basis that would pay only the flimsiest of up-keep charges would be regarded as a subject for mental treatment, yet the bulk of anthracite workers find themselves in exactly that predicament. They are conducting a family 136 ANTHRACITE business on a basis that will not pay reasonable running expenses. The legitimate fixed charges of business — interest on the investment, adequate insurance and depreciation — are far above the reach of most wage-workers who have a family of six to support. The ordinary worker's family is a bankrupt concern — it cannot even meet the interest on its bonds. And dividends ? The ordi- nary worker is thankful if he can pay the bill incident to up-keep. Dividends are a luxury of which he does not dream. Place before any level-headed man of affairs this proposition: "I have a business which is barely able to pay running expenses. We can't meet our fixed charges, and our wildest flights of imagination have never carried us as far as divi- dends and surplus. Will you join in the venture ? ' ' The statement is grotesque, yet it sets forth the financial position of a great body of anthracite wage-earners. One further point should be noted. After the business man has paid running expenses and fixed charges, the remainder is income — "net income." The great mass of wage-earners who never receive enough to pay more than their bare running expenses have no "income" in the real sense of that word. They are getting mere up-keep or subsistence. As a business proposition, for a family of six, the ordinary anthracite wage is absurdly inade- quate. No business man would consider it. It violates every business standard which the prac- WAGES 137 tice of "-.he modern man of affairs recognizes as legitimate. Every concept of modem business management cries "shame" at the very thought of the business proposition which the anthracite wage-scale presents to tens of thousands of its workers. 9. The Anti-Socid Nature of the Anthracite Wage The health inadequacy and the business inade- quacy of the anthracite wage can be demon- strated statistically. The proof of the social inadequacy of wages rests upon more general considerations. Society must develop a system of compensa- tion which will stimulate industry and thrift among the people who do its work. A wage sys- tem or any other system of distributing the products of industry must be based on an adequate appreciation of this fundamental principle. The first, and probably the most fundamental, social objection which may be raised against the present wage scale is that it fails very largely to stimulate the ambition of the worker. There are two reasons for this failure. On the one hand, the wage scale is so utterly rigid that the man doing good work is placed on the same footing with the man doing poor work; the enthusiastic worker is placed on the same basis with the indifferent worker. This holds true of piece-rate payment as well as of time-rate payment. The rule of most producing establishments is "any- thing that will pass the inspector." Furthermore, 138 ANTHRACITE / the individual may work as hard as he pleases, devoting all of his energy to the work in hand; despite this, he is unable to raise his wage rate and very frequently is unable to increase his wages. At the same time, industry is organized on such a large scale basis that the number of positions "at the top" is strictly limited. Among the employees of the American railways, for example, one in one htmdred is an officer. The proportion is higher for manufacturing industries, although it is seldom that more than 10 per cent of the men employed in an established industry hold positions which involve even a moderate amount of respon- sibility and initiative. The wage scale is fixed either by agreement between the employer and the union, or by custom and common consent. No one even pretends that there is a definite relation between the values pro- duced by the worker and the wage which he secures. The worker is not paid in proportion to his product. Wages are never fixed on that basis, with this single exception — that no employer can afford to pay any more in wages than a group of men are producing in product. The law of monopoly, "all that the traffic wiU bear," is the law which fixes the anthracite wage. An employer has a Scotchman working for him at $3 a day. An equally efficient Lithuanian offers to do the same work for $2. The employer is not in busi- ness for his health, and the work is given to the lowest bidder. WAGES 139 An employer never determines a wage by asking the question: "How much does this man pro- duce?" Rather he asks, "What will it cost me to get another equally efficient person in his place?" It is the cost of replacement and not the values created in production which determines the wage that a man receives. The phrase, "He gets all that he is worth," means merely this — that the employer is paying him as much as he has to pay another equally efficient person to do the same thing. Whether he is hiring bricklayers, bookkeepers or coal- heavers, the wage that he pays depends upon the supply and demand of labor. This law is excellently illustrated during a time of financial and industrial depression, when there is a surplus of labor and a dearth of oppor- tunity for employment. Many industries at once reduce their wages because they are able to get all of the people that they want at a lower figure. The wage contract, as it is called, knows no social morality and is based on no standard of social ethics. It is subject only to the law of supply and demand, and to the law of monopoly price. The employer pays his labor as little as he can. The worker demands a.nd gets as much as he can. Until recently there has been no general idea that a minimum wage was a social necessity. The individual laborer, bargaining with the employer, made the best terms he could. If labor was scarce, he was successful; if it was a drug on 140 ANTHRACITE the market, his wages were reduced to a starva- tion level. Another consequence follows from the ruthless bargaining of the competitive labor market. The bargain takes place between the employer and a worker, irrespective of social obligations. The consequences are doubly disastrous to the man with the family depending upon him. A common occupation, quarrying, for example, may be car- ried on by married or by single men. The em- ployer does not even put himself to the trouble of asking whether the prospective employee is mar- ried or single, because that makes no difference if a man is handy with his tools. The man with a family is brought into active competition with the man who has no family obligations. The native-bom head of a household must accept labor terms which are satisfactory to the foreign- bom single man. Industry does not inquire into a worker's' social obligations. It simply asks whether he is able to do the work, and at what price. The competition of the labor market does the rest. Society demands and expects that men shall support families. The future of the state hinges upon the fulfillment of this presupposition. At the same time, the modem economic organization makes no attempt to assist the man who is bring- ing up a family to face the competition of the man who has no family dependent upon him. There is no relation between the social (family) needs of a man and the wage which he receives. WAGES 141 Wages are fixed wholly independent of social relations. The anthracite wage is anti-social. The present system of wage payment fails to stimulate workers to industry and thrift because it has not given them a reward in proportion to their exertions and abihty. There is no relation between product and wages. Rather wages are fixed by competi- tion and monopoly. The present wage scale fails completely to provide a return in proportion to social needs. The simplest requirements of social progress call for ambition, for justice, and for the provision of health necessities. The present anthracite wage scale offends even these primitive social standards. 10. The Anthracite Wage and the Increased Cost of Living The wage of many anthracite workers, when measured in terms of physical, economic or social adequacy, is meager. The wages paid to a great body of the anthracite mine workers are not sufficient to maintain physical, economic and social efficiency. Another phase of the matter remains to be considered — the relation between the increase in anthracite wages and the increase in the cost of Hving. Granted some will insist that the wages of the miners are not entirely adequate to provide for the demands of efficiency, it is still true that the miners have been constantly bettering their position. 142 ANTHRACITE The past few years have witnessed several bitter labor struggles in the anthracite region. The workers have maintained a powerful trade union at great cost. During the labor disturb- ances, the workers have sacrificed, the wage loss has been enormous, property has been destroyed, and the social and political organization has broken down. What is the outcome ? Three periods must be considered. First, there is the period 1890 to 1914; second, the period 1903 to 1914; and third, the period 1911 to 1914. The cost of living facts that are available date from 1890. The great labor struggle of 1902 marks an epoch in the struggle of the anthracite worker for better conditions of Hfe; and the readjustment in 1912 gives a brief period of contrast with the situation at the present time. The ordinary worker's family spends at least two-fifths of its money for food, one-fifth for rent; one-sixth for clothing; and the remainder for miscellaneous things like insurance, saving, recre- ation, education, health. The "United States Bureau of Labor has been collecting figures on food costs since 1890. Dtir- ing those years, in the North Atlantic States, the cost of food rose 60 per cent. From 1903 to 1914 the cost of food rose 40 per cent. From 1911 to 1914 the cost of food rose 17.2 per cent. Rent costs are difficult to secure. No one has made any study of rent costs; hence there are no figtu-es available. Isolated instances indicate that there has been a considerable increase in rent WAGES 143 during the past twenty years. Just how great that increase has been no one is in a position to say. The most complete clothing figures are pub- lished in the wholesale price bulletins of the United States Bureau of Labor. Between 1890 and 1913 the wholesale prices of clothing rose about one- fifth. Between 1903 and 1914 the prices rose about one-third. If the figures were available it would be profit- able at this point to work out the increase in the total cost of living, weighted, or apportioned according to the amount of money spent for each item. The figures, unfortunately, are not to be had. There is another very important consideration that is frequently overlooked in discussions of the cost of living. "Living" means doing the things that are done in the group to which one belongs. The cost of living means the cost of keeping up with the social standard. During the past twenty-five years there has been an immense increase in the standard of life. Many new lines of expenditures have been intro- duced, as, for example, the cost of health, of recre- ation and of education. Doctors, dentists, moving pictures, compulsory education laws, newspapers, magazines and the like have all been added to the list of things that the ordinary American considers necessary to his welfare. Twenty-five years have made these numerous additions to the standard of living. Those who live in American commimi- ties must keep up with the times. 144 ANTHRACITE It is no argument to say that a great body of the anthracite workers are foreigners. One of the chief aims of American social organization is to "Americanize" the foreigner. If that means any- thing it means getting the foreigners to adopt the American standard of Hving. Twenty-five years have witnessed a consider- able increase in the price of the articles necessary to maintain life. They have also witnessed a rapid rise in the standard of life. Has the increase in anthracite wages been sufficient to offset this increased cost of Hving ? Following the labor disturbances in the late eighties, there was a period of a dozen years dur- ing which the workers bargained individually with their employers and took what they could get. During the period immediately preceding the break-up of the union, the miners had worked out a rather high standard of co-operation. The union paid sick and death benefits and benefits to widows and orphans. There was a miners' newspaper, which encouraged unity of action. There were co-operation stores, and through the efforts of the union, the first mine inspection law was passed. Another law was enacted which compelled the v/eighing of coal.^ The union was broken up through the per- sistent efforts of the operators. "With the sur- render of the men, they were compelled, as a condition of obtaining work, to sign away the right of having their coal weighed. The sHding t^ » "Conciliation and Arbitration," op. cit., p. 214. WAGES 145 scale continued in operation, but the determina- tion of the basis and the prices paid to labor were entirely in the hands of the operators till the strike of 1900. "^ Until 1900, therefore, there was no such thing as a standard wage in the anthracite fields. Hence, no adequate descrip- tion of the wage conditions during these years can be given. Indeed, it is not until the investi- gation made by the Anthracite Strike Com- mission in 1902 that a really adequate statement of the wage problem is made. State reports do contain some material on wages during this period. These figures, gathered by Mr. Suffem, are as follows i^ Table XI. — Earning and Working Time of Anthracite Mines, 1890-1911, Earnings of Contract Miners Days Average Year Worked Daily Yearly 1890 179 $2.39 §427. 81 1897 233 1.79 417.84 1902 175 2.83 495.97 1904 231 2.96 684.78 1906 207 3.09 " 641.13 1909 213 3.06 651.28 1911 233 3.19 743.79 The earlier figures are extremely unsatisfactory. The average yearly earnings are secured by mul- tiplying the average daily wage by the number of days worked. There is no indication of the 1 "Conciliation and Arbitration," op. cit., p. 214. 2 Ibid., p. 360-61. 10 146 ANTHRACITE method that was pursued in ascertaining the average daily wage. The figures, from many- points of view, are open to grave question. Taking the figures on their face, they show that the average daily wages of contract miners in- creased 33 per cent — or almost exactly one-third, between 1890 and 1911. Suffem gives no figure for average daily wages in 1897, but dividing the yearly earnings by the number of days worked, a figure of $1.79 is secured. If this figure is correct, the rise in average daily wages since 1897 is far greater than it was since 1890. Turniag now to average yearly earnings, the increase has been considerably greater than in average daily wages, because of the higher number of days worked during recent years, Suffem states the niimber of days worked in 1890 as 179. The United States Geological Survey places it at 200 and makes the average number of days worked in 1890, 1891 and 1892 abotit 200. Accept- ing this figure, the average annual earnings in 1890 (at $2.39 per day) would have been $478; and the average yearly earnings in 1911 were $743.79 in a year that reported 233 working days. The increase in average yearly earnings is therefore 55 per cent. Between 1911 and 1914 wages were increased (1912) about 5 per cent. In 1914, however, the number of days worked was only 229. There would, however, be some addition to this 55 per cent. No further use will be made of these figures, because they are unsatisfactory in the extreme. WAGES 147 It may be noted that the figures for the anthra- cite industry published by the Biu^eau of Mines, the United States Geological Survey and the Secretary of Internal Affairs of Pennsylvania do not always correspond. Several instances of this have already been noted. Suffem is not specific regarding the origin of all of his figures, and further analysis seems to promise little result. The figures, on their face, show that between 1890 and 1911, the wage rates of contract miners increased by about 33 per cent, and the annual earnings by about 55 per cent. The really reliable wage data must be drawn from a period subsequent to the investigations of the Anthracite Strike Commission of 1902. The first complete year since the work of this Com- mission is 1903. As a result of an immense expenditure of time and effort, the Commission of 1902 fixed a wage scale which seemed to them equitable. Their conclusions are open co question, but accepting them at their face value, and assuming that the wage which they established was a fair wage, what changes in wages and in the cost of living have occiuTcd since that time ? The Commission established a sliding scale, under which the miners' wage was to be increased with each advance, beyond a certain point, in the wholesale price of anthracite coal. For 1903 this sliding scale award set the wages of the miners at a point 4 per cent above the rate awarded by the Commission. In 1912 the sliding scale was 148 ANTHRACITE abolished and a flat increase of 10 per cent for contract miners and of IH per cent for inside day workers was substituted. That agreement expires in March, 1916. Until that time the increase in wage rates for anthracite miners over the award of 1902 is practically 10 per cent. In other words, the anthracite workers are receiving a wage rate of 10 per cent more in 1915 than they received in 1903. There has been a considerable increase in aver- age yearly earnings. The average number of days worked in 1903, 1904 and 1905 was 207. In 1912, 1913 and 1914 the average was 239. Here is an increase of 15 per cent in the working time, making a very substantial increase in the amount earned by the anthracite workers. The real test of wages is not the number of dol- lars received, but the amount of food, clothing and shelter they will buy. The facts available before 1903 are too crude to permit of effective calcula- tions, but since 1903 there are figures that wiU allow of some elaboration. There are, first, the figures for number of days worked, and second, of food prices. The real wage, resulting from these two sets of figures, will give the purchasing power of anthracite wages in terms of food. The Anthracite Strike Commission, in that part of its report which deals with the work of con- tract miners, concludes that the annual earnings of contract miners, "based upon returns for the year 1901, range between $550 and $600. Per- WAGES 149 haps it would be safe to put the average at $560." (P. 50.) In order to illustrate the type of situation upon which this conclusion was based, the next two paragraphs of the report contain two illustrations, from the Lehigh Valley and the Lehigh and Wilkes- Barre Coal Companies, "whose work seems to have been conducted as regularly and systemat- ically as any in the region." (P. 50.) "The reports of these two companies included only such miners as worked in their respective collieries throughout the year, and whose names appear, for some days at least, on the payrolls of each month in the year." (P. 50.) The Lehigh Valley figures show annual earnings ranging from $667 to $465 and averaging $568 per year, or $2.41 per day. The average number of days worked was 236. The figures for the Lehigh and Wilkes-Barre Company show annual earnings ranging from $686 to $451. The average annual earnings were $589 and the average daily earnings $2.47. The number of days worked was 238. These two sets of figures correspond very closely and lead to the conclusion that in 1901, a year of 236 working days, yielded average annual earnings of about $575. With these figures in mind, the Commission decreed that 10 per cent advance be given to all contract miners. In addition to this 10 per cent, the sliding scale provided for 3 or 4 per cent annually. An attempt will be made, on the basis of the 150 ANTHRACITE figures on which the award of 1912 was based, to show what changes occurred in the purchasing power of the miners' wage from 1913 to 1914. The $575 base, representing 236 working days in 1901, must be increased, for 1903, by 14 per cent increase in wages. At the same time, for the whole anthracite region the number of days worked in 1903 was only 206, or 12.7 per cent less than the basis adopted by the Commission. The earnings figure for 1903 would therefore be $571.25. Accepting this figure as a base, and calling it 100, the earnings for subsequent years, weighted in proportion to the number of days worked, and to the percentage added to the wages by the changes in the sliding scale, appear in Colum.n two of the following table. In the next column are the figures of the United States Department of Labor, show- ing the increase in food prices. The last column is the ratio between wages and food prices, or real wages in terms of food. It must be noted that the price of food has increased faster than the prices of the other things the worker buys, though how much faster no one can say accurately. Expressed only in terms of food prices, the real wages of the con- tract miners have been decreased during recent years, in spite of the increase in the wage rate and of the number of working days. No statements can be made about the wage of the other anthra- cite workers, for, despite the fact that they are in a large majority, and that their wages are much lower than the wages reported for the contract WAGES 151 miners, little attention was paid to their wage situation by the Anthracite Strike Commission, and the data regarding them are meager. Table XII. — Estimates of Average Annual Earnings, Price Index and Real Wages of Anthracite Miners, 1903 TO 1914. Price Estimated Index, Average North Annual Atlantic Real Earnings States. Wage of Weighted or Pur- Contract per Con- chasing Miners sumption Power 1903 100 100 100 1904 97 102 95 1905 106 101 105 1906 95 105 90 1907 107 109 98 1908 97 111 87 1909 100 115 87 1910 117 119 99 1911 126 119 106 1912 118 131 90 1913 ,. 132 137 96 1914 '. 117 140 83 Although there are no satisfactory wage figures for the great body of the anthracite workers, if the position of the contract miners is any indica- tion of that of the other anthracite workers, they have failed, in spite of the immense expenditure of time and effort and money on the organization and upkeep of the union, to get an increase in wages equal to the rising cost of food, and pre- sumably to the cost of living at large. 152 ANTHRACITE 11. A Fair Anthracite Wage Each anthracite worker may justly ask for a wage that will buy a decent living for him and for a family of reasonable size. This is the minimum of fair wages. In addition to the minimum wage, based on the cost of a decent living, the contract miner, the mine laborer and such other men as are subject to unusually great risk, should receive a wage that recognizes the extra hazard of their occupations. In the case of the contract miners, it is evident that this extra compensation for risk should be considerable. Beyond these considerations, the amount of skill demanded and the disagreeableness of the work should exercise a determining influence in fixing a fair wage. Assimiing that the wage decreed by the^Anthra- cite Strike Commission was a fair wage, all groups of anthracite workers are entitled to a very consid- erable increase in wages, based on the great increase in the cost of living since 1903. In deciding the extent of this increase, the greater number of days worked each year, during the last few years, should be taken cognizance of. Should the foregoing statements regarding a fair wage be accepted as substantially sound, the figures cited in this chapter, though obviously incomplete, make it clear that, looked at from any standpoint, the anthracite workers are en- titled to a material increase in wages. CHAPTER 5. THE PROFITS OF THE OPERATORS 1. The Era of Small Profits The anthracite field has always been profitable in two senses: First, the product has a wide market that has been growing steadily from year to year; second, in this, as in any other hidden resource, the owner may, and frequently does, "strike it rich." If the question of profits is faced from either side, anthracite is a profit- able business. During the early years of anthracite produc- tion the market was strictly limited by the limited transportation facilities. Coal was a heavy com- modity that could be carried only by water. Until the railroads entered the field there could be little general sale for the product. The coming of the railroads with the rapidly widening market which they offered led to an era of specula- tion in coal lands, and of energetic efforts on the part of the anthracite railroads to secure large coal areas. Under the spur of these speculative and monopoly activities, coal prop- erties were bought at prices on v/hich profits could not possibly be made. During the periods of feverish buying and leasing by railroad inter- ests of anthracite property, agreements were (153) 154 ANTHRACITE entered into that were plainly opposed to sound business procedure. The Reading interests, which were leaders in the later efforts to establish a control in the anthracite fields, went on the rocks in the dev- astating industrial storm that struck the United States in 1892 and 1893. The Reading had bought in large, undeveloped tracts of coal land; it had assumed onerous business obligations in its efforts to secure control of other railroad interests. It had overstrained its credit at a time when credit was being restricted. Although the Read- ing properties were of immense potential value, they could not be realized on imm.ediately. The financial crash came and the fate of the Reading interests was temporarily sealed. The period was one of readjustment. Busi- ness was still highly competitive and chaotic. Among business men generally there was mani- fested little of that feeling of group solidarity which they have since displayed. The industrial world was still a big game, which every man played for himself. The competitive fever had played havoc with the interests of the anthracite coal owners. Under its spur, agreement after agreement in the anthracite field had been abandoned or dissolved. The producers had a vague understanding of their mutual interests, but it was instiificient in extent to down the competitive impulse. The sweep of the 1893 panic taught American business men a lesson. Competition, instead of PROFITS 155 being the life of trade, was in reality the death of trade, because it was the death of tradesmen. Competition was dangerous in the extreme to all concerned. The successful rival suffered with the vanquished. The period from 1893 to 1898 was a dismal story of industrial hardship. Times were bad. Orders were light. Collections were poor. Credit was shaken. The whole industrial world paused in its onward rush. The anthracite business was affected as severely as most others. Prices dropped to impossibly low figures. Men worked their colHeries at a loss in order to keep their places in the market. The anthracite railroads cut or passed dividends. Capitalized at high figures, struggling with en- cumbering fixed charges in the shape of bonded debt, lease obligations and the like, the anthra- cite operators passed through a period when profits were meager indeed. These hard times in the anthracite coal field were in part due to the country-wide industrial depression and in part to the hit-or-miss fashion in which the anthracite trade had been conducted. The operators had displayed little regard for one another. They had fought when they should have signed truces. They had engaged in price wars at a time when they might have been reaping monopoly profits. The lesson of the long industrial depression that ended with the boom year of 1898 was unavoidable. Co-operation paid. "Mutual help- 156 ANTHRACITE fulness" was a formula far superior to "every man for himself." If profits were desired in the anthracite field or in any other field, there was only one thing to be done — those interested in the anthracite coal fields must learn the ele- ments of team work. The result to the American business world of this famous lesson of the nineties was an effec- tive spirit of combination that brought people together. Since that co-operative spirit took possession of the anthracite field the industry has been profitable. 2. Making Anthracite Profitable Since the formation of the anthracite com- bination in 1898 the anthracite industry has paid. Even in hard years dividends have been regular and surpluses have been laid by with unfailing regularity. Table XIII. — The Average Wholesale Price of Stove Coal at New York Harbor, 1890-1904.1 1890 First Period 13.71 ... 3.85 Second Period 1898 $3.80 1891. 1899 3.70 1892. 1893. 1894. 4.15 4.19 3.60 1900 1901 1902 1903 1904 3.95 4.32 4.46 1895. 3.13 4.82 1896. 3.79 4.82 1897. 4.01 1 Bulletin 149, United States Bureau of Labor, p. 135. PROFITS 157 The men behind the combination of 1898 saw that the chief thing necessary for the financial prosperity of the anthracite fields was a higher price for anthracite products. Between 1898 and 1903 this higher price became a reality. The movement in the price of stove coal illustrates the point. The figures in the First Period give an idea of the price movements up to the formation of the combination. The figures show astonishingly sudden changes. The price was at $4.19 in 1893 and at $3.13 in 1895. By 1897 the price was up to $4.01. When the fact is borne in mind that these are wholesale prices in a staple product, some idea can be formed of the instability of the anthracite business during those hard years. Stove coal prices touched rock bottom in 1895 ($3.13). The combination of 1898 found prices at the level they had occupied in 1890 ($3.71), when the Reading interests were attempting to control the field. The Second Period chronicles the success of the anthracite combination of 1898. Under the im- petus of this co-operative venture, prices rose from $3.80 in 1898 to $4.82 in 1903. At that figure they continued until 1912, when they went to $5.06. The jump in the price of anthracite was sud- den, and was not in any sense parallel to the general rise in the cost of living that was taking place at the same time. The United States Bureau of Labor (Bulletin No. 140, page 11) reports an increase in food prices between 1898 and 1903 of 158 ANTHRACITE 15 per cent. During the same period anthracite prices rose 27 per cent. From 1903 to 1912, while food prices increased 34 per cent, the price of anthracite remained stationary. The rapid jump in hard coal prices between 1898 and 1903, and the stability of prices after that date, is evidence of the existence of a com- bination to control price movements. Professor Jones (pp. 160-61) cHnches the point by point- ing out the manner in which the price increases were brought about. "The advance in 1902 was made in October, the various companies putting out a uniform schedule of monthly prices for the prepared sizes of coal, averaging about 50 cents higher than the previous prices. The schedule for stove, egg, and chestnut was $5 per ton at the terminal points nearest the city of New York, and 5 cents less at the terminal points farther away. These uniform advances in the price of coal were put out at the same time, after consultations among the presidents of the railroads or their coal com- panies, each of whom was aware of the price which the other companies were to charge. President Truesdale of the Lackawanna testified in 1908 that the advance in the circular price of the Lackawanna in 1902 was made by the officers of the coal sales department of the rail- road after consultation with him. "President Thomas, when asked with whom he consulted in the fixing of the price in 1902, re- plied, 'I do not recollect now. I think probably PROFITS 159 I consulted with Mr. Baer; very likely I asked Mr. Truesdale what he was going to do. I know I asked Mr. Walter what he was going to charge for coal.' It is significant that this considerable advance in the price of the prepared sizes of anthracite, made by the presidents after con- sultation, remained in force until 1912, with the exception of the omission of the April discount in 1906 on account of the suspension of mining operations in April of that year." The anthracite combination, through concerted action, increased the price of coal between 1898 and 1903 by an amount sufficient to yield hand- some returns in the form of earnings, dividends and surpluses. This statement may be sub- stantiated in a number of ways. Take first a single illustration. "The report of the Lackawanna Railroad for 1903 showed a net profit on the sale of coal of over $3,000,000. This was 85 per cent greater than its profit in 1901. When asked before the Interstate Com- merce Commission whether he attributed 'that gain of 85 per cent in profit very largely to the excess of the new price over the increased cost of mining,' President Truesdale answered, 'That had considerable to do with it, of course.' "^ Another measure of the effect of the price increase may be seen in the increase of dividends declared by the anthracite carriers. The production of coal was increasing. In the years from 1895 to 1899 the total produc- i"The Anthracite Coal Combination," op. cil., p. 158. 160 ANTHRACITE tion of anthracite varied from 41,637,864 tons (1897) to 47,665,204 (1899). (Mineral Resources, 1913, Part II, p. 889.) In 1897 the mines worked only 150 days; in 1899, 173 days. (Mineral Resources, 1913, Part II, p. 753.) Between 1900 and 1904 the production moved up from 45,000,000 to 57,000,000 tons; the days of operation from 166 to 200. Note how this increase of 27 per cent in production compares with the increase in dividends. The year 1898 shows dividends as follows: Central Railroad of New Jersey 4 per cent Lackawanna 7 " " Delaware and Hudson 5 " " Pennsylvania Railroad 5 " " Lehigh Coal and Navigation Company .. . 4 " " By 1903 a transformation had occurred. The dividend of the Jersey Central rose from 4 to 8 per cent; the Delaware and Hudson, from 5 to 6 per cent; the Pennsylvania, from 5 to 6 per cent; and the Lehigh Coal and Navigation, from 4 to 6 per cent. The next year, 1904, shows a slight increase in dividends, and in 1905 the dividends declared were as follows : Reading Company 3| per cent Central Railroad of New Jersey 8 " Lehigh Valley 4 " Lackawanna 20 Delaware and Hudson 7 " Pennsylvania 6 Ontario 41 Lehigh Coal and Navigation Company. . . 8 " Philadelphia and Reading 20 " PROFITS 161 In 1898 the Reading Company, the Lehigh Valley, and the Ontario had declared no dividends. The dividend situation in 1905 was eminently satisfactory. The price schedules adopted in 1903 proved profitable, from the standpoint of dividends, up to 1912, when the next price increase occurred. Thus in 1911 the dividend rates were: Reading Company 6 per cent Central Railroad of New Jersey 12 Lehigh Valley 10 Lackawanna 55^ Delaware and Hudson 9 Pennsylvania 6 Ontario 2 Lehigh Coal and Navigation Company 8 Philadelphia and Reading 15 The story told by the dividend rates is clear and emphatic. The price schedules which the combination of 1898 was able to establish in 1903 proved highly remunerative over a series of years, some of which were prosperous and others unprosperous. During good and bad years alike the dividend payments of the anthracite roads have been eminently satisfactory from the stand- point of the investor. 3. Anthracite Profits and Railroad Profits The difficulty of analyzing anthracite profits is enhanced by the baffling relation which exists between the costs of producing and of trans-* , 1 Thirty-five per cent in extra dividends. 11 162 ANTHRACITE porting anthracite. Where the mining and the carrying of coal are under the same management, the carriers have for years followed the policy of operating the mines at a slight profit, or even at a loss, while the chief profits went to the railroads. There is little question regarding the extent of the railroad control in the coal fields.^ Professor Jones begins his chapter on "The Transportation of Coal" with this statement: "The railroad coal companies, including the coal departments of the railroads mining coal directly, control over 90 per cent of the total output of anthracite coal. These companies, in turn, are controlled by the eight important anthracite carriers." When the coal companies controlled by the railroads pay freight, they really pay it to them- selves. It is therefore a matter of little conse- quence what the amount of that freight rate is. A profit is to be recorded somewhere, and no one cares particularly whether it is recorded on the books of the coal company or the railroad company. When an independent coal operator pays freight, he pays it to a raihoad in which he has no concern. Under the circumstances, the manipulation of freight rates has been one of the favorite means of controlling the inde- pendent operators. The railroads, in reaching out for an increased control over the coal fields, have adopted this as one of the most workable methods for discriminating in favor of the com- panies representing their own interests. 1 "Arbitration in the Coal Industry," ot>. cit., p. 228-29. PROFITS 163 The relation existing between coal mine profits and railroad profits is thus explained by Dr. Jones: "A high freight rate reduces the profit in marketing coal independently, and in the past has offered a strong inducement to the inde- pendent operator to sell his coal under contract to the raihoad or its coal company (and this is, no doubt, the raison-d'eire of the high freight rate). J But even including the coal formerly sold under a perpetual contract, but now released by the order of the Supreme Court declaring these contracts illegal, only about 20 per cent of the output is affected by the freight rate, and this percentage is certain to become less and less, regardless of whether the freight rate be high or low. The freight rate, however, will become of importance, should the present attempts on the part of the government to divorce the busi- ness of transportation and mining meet with success. Inasmuch as 'very few of the railroad coal companies now return a surplus of earnings above expenditures, even with the present high price of coal, were these coal companies to become independent of the railroads, most of them, unless they could advance the price of coal still higher, would be compelled at the present anthracite freight rates to go out of business." (P. 145.) The result of this policy has been the establish- ment of freight rates on coal that are generally considered to be abnormally high. The inde- pendent operators have made repeated attacks on these freight rates, alleging they are one of 154 ANTHRACITE the chief forms of abuse practiced by the dom- inant interests in the anthracite region. The freight rates on anthracite to tidewater ports are quite uniform. Thus the Erie, New York, Susquehanna and Western, Ontario, and Central of New Jersey, charge $1.60 per ton for prepared sizes from all mines to tidewater in the vicinity of New York. The Lackawanna rate is $1.58, Reading $1.55, Lehigh $1.55, and Penn- sylvania $1.40. A similar uniformity prevails in the case of pea and buckwheat sizes. ^ The Interstate Commerce Commission has prepared an elaborate report on the cost of carry- ing this coal on the Central Railroad of New Jersey. "It was found that the total operating cost (including the cost of returning the empty cars to the mines) was 59.26734 cents per ton from the Wyoming region to tidewater; 44.35119 cents from the Lehigh region; and 49.03914 cents from the Upper Lehigh region. "^ The freight charges on this coal to Port Elizabeth and Port Johnson are: Prepared sizes, $1.55; pea coal, $1.40; and buckwheat No. 1, $1.20. "If we give to the freight rate in each of these groups the weight to which each is entitled by virtue of the actual shipments, we arrive at an average freight rate for the Central of New Jer- sey of $1.40 per ton. The cost of carrying such coal to tidewater from the Wyoming region is less than 60 cents; from the Upper Lehigh region, 1 "The Anthracite Coal Combination," op. cit., p. 134. s Ibid., p. 135-36. PROFITS 165 less than 50 cents; and from the Lehigh region, less than 45 cents. On shipments from this last region, therefore, the freight rate exceeds by more than three times the actual operating cost. This cost, it should be clearly borne in mind, is merely operating cost. It does not include any return on the investment."^ Similar figures were secured in Pennsylvania for the Public Service Commission by Price, Waterhouse & Co. These figures show the cost of "transporting anthracite coal from the respec- tive mining sections in the eastern part of Penn- sylvania to Philadelphia." The report was sub- mitted January 1, 1914. The Price- Waterhouse report shows that for the year ending May 31, 1913, the cost of transporting anthracite on the Reading Railway was: from the Schuylkill field, 44.698 cents; the costs on the Pennsylvania were 61.043 cents by one route and 54.378 by another. These costs are operating costs, and make no allo\7ance for the payment of fixed charges. The margin between the cost of carrying the coal and the freight rate charged for the trans- portation is considerable. The average freight rate on the Philadelphia and Reading from the mines to Philadelphia is $1.55.2 Since the operating cost of carrying anthracite coal from the Schuyl- kill region to Philadelphia is less than 45 cents, the freight rate in this instance is more than three 1 "The Anthracite Coal Combination," op. cil., p. 136, ^ Ibid., p. 138. 166 ANTHRACITE times as great as the operating cost of trans- portation.^ Professor Jones illustrates the profitableness of carrying anthracite coal on such a relation between operating cut and freight rate by citing the case of the Lehigh Valley. While it derives a large part of its total traffic from anthracite coal, its rates are among the lowest charged. During "the fiscal year 1913 the Lehigh carried 14,732,949 gross tons of anthracite. Its gross earnings from the transportation of this coal were $18,556,161, which^was over 50 per cent of its gross freight receipts, and 43 per cent of its total operating revenue. Its gross earnings per net ton per mile from the carriage of anthracite coal were 7.11 mills, and from all other freight 5.67 mills, or 25 per cent greater for anthracite. Were we to assume that the ratio of operating expenses to gross earnings was the same on anthracite as on all its traffic (67.62 per cent), the operating expenses chargeable against the transportation of anthracite would be $12,547,676 and the net earnings $6,008,485, or nearly 41 cents for each ton of anthracite hauled. But as it costs less per ton to move anthracite coal than general freight, the net earnings are even greater than this figure. "^ Often it is hard to distinguish between the production costs and the transportation costs on anthracite. The facts suggest strongly, however, ' The Price- Waterhouse Report is in the form of a 63-page pamphlet con- taining the full statement of the method used in the making of calculations. 2 "The Anthracite Coal Combination," op. cil., pp. 138-39. PROFITS 167 that freight rates on anthracite are fixed, not uHith relation to the cost of transportation, but on the basis of "all that the traffic will bear." The control of both production and transportation facilities enables the owner of the properties to make splendid returns on the investment. 4. Anthracite Prosperity During the past decade the anthracite roads have enjoyed a surprising degree of prosperity, which has been as persistent as it has been gen- erous. There are several ways in which this prosperity may be measured. First, there are the earnings of the railroads; second, the dividends; third, the surpluses; and fourth, the stock ratings. All four measures give a very definite idea of prosperity. For the year 1913 the earnings on the common stock of the principal anthracite carriers, after the payment of all expenses, including fixed charges and preferred dividends, were:^ Reading Company 17.57 per cent Central of New Jersey 26 . 73 Lehigh Valley 16.90 Lackawanna 32 . 04 Delaware and Hudson 12.95 Pennsylvania 8.86 Erie 3.67 Ontario 2 . 08 Lehigh Coal and Navigation Company . 8 . 93 The last normal year of railroad operations is 1913. The business conditions in that year 1 "The Anthracite Coal Combination," op. cit., p._140. 168 ANTHRACITE were below, rather than above, those of the ordinary year. The war conditions prevailing during 1914 make the figtires for that year dis- tinctly non-representative. Some comment has already been made on the dividends declared by the anthracite carriers. There seems to be some relation between the proportion of anthracite business to total business and the prosperity of the railroad. The Central of New Jersey, drawing nearly half of its freight revenues from anthracite, has been paying from 8 to 12 per cent for a dozen years; the Lehigh Valley, the Lackawanna, and the Delaware and Hudson, with almost exactly half of their freight revenues derived from anthracite, have been able to pay regular dividends of from 4 to 20 per cent. At the present time, the Lehigh Valley is on a 10-per-cent basis, the Lackawanna on a 20-per-cent basis, and the Delaware and Hudson on a 9-per-cent basis. The Ontario and the Erie, with respectively two-thirds and one-third of their freight revenues derived from anthracite traffic, are not in the dividend-paying class. The continued payment of these large dividends, year in and year out, is an excellent index of prosperity. Another prosperity measure is the surpluses which the railroads are able to lay by. Thus the Lehigh Valley had no surplus in 1902. "By 1909 it had a surplus of $19,200,000, in 1910 this surplus had risen to $27,000,000, and by 1911 to over $30,000,000. In 1912, largely because of PROFITS 169 the payment of the extra dividend of 10 per cent, the surplus declined to $23,400,000, but in- creased in 1913 to $25,000,000. The operations of the Lehigh Valley since 1904 have thus been highly profitable."^ The prosperity of business enterprises is re- flected, with a degree of fidelity, in the ratings which their securities enjoy in the stock market. Since the organization of the combination in 1898 there has been a strong upward movement in the stocks of the anthracite carriers. Professor Jones has worked out a careful state- ment of the stock values of the anthracite roads since the formation of the combination of 1898. He bases his figures on "the average of the high- est and the average of the lowest market quota- tions of the common stock of the eight important anthracite roads." He writes: "In 1898, the year when the beginnings in the development of the combination were made, the average of the highest prices at which the stocks of these roads sold was $76, and the average of the lowest was $63. From 1898 until 1909 there was an almost steady advance in the prices at which these securities were quoted. In 1909 the average of the highest quotations was $231 and the average of the lowest was $167. The high average in 1909 was partly in sympathy with the general high level of stocks in that year and partly in anticipation of the payment of an 85 per cent dividend by the Lackawanna Railroad. The i"The Anthracite Coal Combination," op. cU., p. 139. 170 ANTHRACITE declaration of stock dividends by the Lacka- wanna and the Lehigh Coal and Navigation Com- pany in 1909 explains a part of the dechne in 1910 of the average of the highest market quota- tions, and likewise the drop in 1911 is partly explained by the privilege given in 1910 to stock- holders of the Lehigh Valley to subscribe at par to $20,000,000 of new stock worth $125 per share at its lowest quotation On the whole, therefore, it is clear that the forma- tion of a combination, the maintenance of the freight rates at their high figure and the frequent advances in the price of coal have made the anthracite business a particularly profitable one."^ Measured in any terms, anthracite profits have been most generous since the formation of the combination of 1898. Earnings, dividends, sur- pluses and stock ratings all reflect the prosperity of the railroad interests that control the anthra- cite industry. During the past fifteen years, whether times were prosperous or unprosperous, the anthracite carriers have been earning most substantial returns on the anthracite business. 5. Are Anthracite Profits Too High? The $7 paid by the consumer for a ton of coal goes to the miner, the producer, the carrier, and the retailer. The miner gets about $1.80; the railroad company a like amount; there is the cost of up-keep and of selling the coal, before it comes to the retailer. Can the profits made I "The Anthracite Coal Combination," op. cit., p. 141. PROFITS 171 by the anthracite interests on the mining of coal, the selHng of coal and the transportation of coal be regarded as excessive? Judged in terms of results, the question cannot be handled in the same way for all of the roads. To the Erie, for example, the anthracite combina- tion has not brought prosperity. On the other hand, the Lackawanna is a remarkable example of the effectiveness of a conservative financial policy, a far-seeing and intelligent business policy and a well-controlled natural resource monopoly. Lackawanna profits are things to conjure with in the financial world. There is a wide difference between the profits made by individual roads. At the same time, the profits of the anthracite railroads as a group, since the effective combination of 1898, have been tmiformly high. The common stock divi- dend paid by ten anthracite carriers in 1914 averaged 9.1 per cent. The representatives of the Reading, the Lehigh Valley, the Lackawanna and the other patently prosperous anthracite roads are quick to insist that the profits are not excessive. The reply reaches back into the old problem of monopoly, and raises the question: "Upon what basis shall the reasonableness of profits be determined?" Take first the most flagrant case — that of over- capitalization. One company, like the Reading in the early nineties, starts a campaign to secure control of the major portion of the anthracite field. In order to achieve this result, it resorts 172 ANTHRACITE to a number of practices. First, it guarantees a company which it wishes to absorb, 7 per cent dividends on its capital stock. This 7 per cent thereupon ceases to be profits and becomes a fixed charge. The distinction between 7 per cent as profits and 7 per cent as guaranteed dividends is im- portant. A company in the course of its opera- tions is able to earn and pay 7 per cent on its stock each year for eight years. A lean year ensues. The dividend is cut to 5 per cent and kept at that figure until times become more pros- perous. Under such circumstances the dividend payment rises and falls with the prosperity of the business. Suppose, on the other hand, that a 7-per-cent dividend is guaranteed by a leasing company. Through good and bad years aHke the dividend must be paid. To meet this obligation a large surplus is carried over from good years. The 7 per cent guaranteed is a fixed charge of the same nature as an interest charge. The moment its payment ceases the company faces legal proceedings. A guaranteed dividend may be reasonable at one time and imreasonable at another. The right of the railroad to earn 6, 7 or 8 per cent in 1910 and 1912 was scarcely questioned; but when the hard times of 1913 and 1914 came on, the same earnings were looked upon as unreason- able. The whole coimtry was in the grip of a business depression. Everyone was suffering PROFITS 173 more or less, and the demand of the railroads that they be allowed to increase rates and fares at the same time that they were paying their usual dividends seemed anything but fair to a greater portion of the population. The promoter of an anthracite combination might very conceivably guarantee a dividend of 7 per cent on a property that could earn but 5 per cent. Such a profit would undoubtedly be excessive. Overpayment may take another form. An anthracite producer decides to sell out. His property is bid for by a number of industrial leaders. The man who sells the property knows that, at present coal prices, it is worth only $3,000,000. The buyer expects prices to rise in the near future, and gambling on this possibility, he pays $5,000,000 for the property. Previous to the sale, the property was earning $180,000 a year (6 per cent) . The same amount equals less than 4 per cent on a $5,000,000 capitalization. What may the new owner say to the consumer? Suppose he should make this statement: "I bought this property for $5,000,000 and paid cash for it. It is an investment of my "entire wealth. Six per cent is not an unreasonable return on an investment. I believe that I have a right to 6 per cent, and I propose to raise prices luitil the property is earning $300,000 instead of $180,000 a year." Such a statement would be out of the question in a competitive industry. Under competition 174 ANTHRACITE the lowest bidder sets the price, and if a man is so foolish as to pay for a business more than it is worth, he suffers the consequences. In the anthracite industry, however, the element of monopoly enters. Shall a plea which would be absurd under a system of competition be admitted under a system of monopoly? There is, of course, no end to the possibilities of the case. If it is possible to pay $5,000,000 for the property and raise prices luitil they yield a $300,000 profit, why not pay $10,000,000 for the property and raise prices until they yield $600,000? The matter is thus easily reduced to the absurd. The argument cannot be carried to its logical conclusion without appearing ridiculous. Where, then, is the stopping place? Obviously, there is none. So long as anthracite land may change hands at increased prices, so long will promoters and speculators anticipate price increases by offering more for the land at each successive trans- action. The new buyer, having paid a larger price, will come before the people with the old plea: "I put my good money into this venture. Haven't I a right to 6 per cent on my invest- ment?" Unlike the consumer, he is not forced to think seriously about the high price of coal. The customary business transactions in a monopolized natural resource will lead, inevitably, to increased financial obligations that must result finally in higher prices. Even in the absence of speculation and rash, imintelligent buying, this PROFITS 175 will be true. How much more will it be the case when the monopoly power which the resource possesses is eagerly sought after by groups of men aiming to secure wealth and business control ? There is another issue which must be con- sidered as an essential part of the problem of determining the sufficiency of profits. This second issue is raised by the increase of land values. A mine expert discovers coal. His employers buy the land at $100 an acre and sell it at $200 to a mining company. This mining company does not begin operations at once. A dozen years pass before the first coal is taken from the ground. Meanwhile, the demand for coal has increased. The supply has diminished and the land is now worth $600 an acre instead of $200. The question is raised as to a reasonable profit on the coal. Twenty dollars a year is a 10-per- cent retiun on the purchase price. It is only 3 per cent on the present value. Sixty dollars is only 10 per cent on the present value, but it is 30 per cent on the original price. Shall an increase in land values be regarded as an equitable basis for profits? Land value increase is due to the activity of the community. No one person is responsible for increased land values. The presence of population, the growth of commerce and industry, new discoveries and all of the forces that constitute a growing civiliza- tion make for increased land values. The indi- vidual made an investment of $200 in coal land. 176 ANTHRACITE The community has trebled the value of the land by its activities. The situation is grave. Transfers of property and speculation, on the one hand, and rising land values, on the other, provide the pretext for a constant increase in prices. For the consiimer, relief is in sight along neither of these lines. So long as increased land values may be capital- ized as a basis for profits, so long as a buyer may allege the purchase price as a reason for the return that he is receiving, there is no Hmit to the amount of profits that the coal land owners may make on their anthracite properties. The consumer will find, added to the price which he is expected to pay for his coal, a steadily increas- ing amount, representing the monopoly power of the coal land owners. Under the present system of estimating profits there is no possible basis for determining the adequacy of profits. The profits now being made by the coal owners, if calculated in terms of the present value of the anthracite land, perhaps are not excessive. If calculated in terms of the cost of the same land fifty years ago, they would be grotesque. A generation hence, imder the pres- ent system of resource ownership, the anthracite coal lands may be worth, per acre, twice what they are worth today. Suppose that they were. Then the present-day profit of, let us say 8 per cent, would be reduced to 4 per cent. Surely, that is not a fair return on the investment ! The logic of the situation will require the addition PROFITS 177 to the price of the coal of an amount sufficient to continue the payment of 8 per cent; and this procedure will be followed in the face of the fact that the increase in the value of the property is due solely to the activities of the community, and of the further fact that during half a century the owners of the coal land have made net profits equal to many times the original purchase price of the land for mining purposes. The profits made by the anthracite owners are clearly far in excess of the "cost of produc- tion plus a reasonable profit" idea, on which the statement of fair profits is ordinarily based. At the same time, since the cost price of the prop- erty to its present owners plus the rise in land value which has occurred since the purchase, may be taken into consideration, the term "reason- able profit" means nothing because of the lack of a stable base on which the reasonableness of profits may be calculated. CHAPTER 6 A CONCRETE EXAMPLE — THE CONFLICT OF 1912 1 . The Apparent Advantage oj the Operators The evidence presented thus far, dealing with prices, wages and profits, would lead to the gen- eral conclusion that the operators have the best of it. The consumers are paying more for their product; the workers are fortunate if they keep pace with the rising cost of living. The oper- ators, since the effective combination of 1898, exhibit every ear-mark of prosperity. The general facts seem to favor the operators. Specific instances afford excellent illustrations of the way in which their monopoly power has been turned to excellent advantage. Shortly after the formation of the anthracite combination in 1898, two increases in wages were granted to the anthracite workers (1900 and 1902). This increase in the labor costs was con- verted at once into higher prices. Furthermore, it was used as a pretext for additional advance in coal prices. Stove coal sold, wholesale, at $3.70 in 1899, $3.94 in 1900, $4.32 in 1901, $4.46 in 1902 and $4.82 in 1903. From 1903 until 1911 it remained at about $4.82. Since the settlement fol- lowing the strike of 1912 it has been about $5.06. The anthracite strike of 1902 gave the operators the real opportunity to advance coal prices. At the beginning of the strike (May, 1902) coal, with (178) THE CONFLICT 179 the regular discount off, was selling at $4.02. By the end of the strike (November, 1902) the price was $4.95. From that time until 1913, the November price of anthracite remained at $4.95. To what extent was this advance justified by the increase in wages granted in 1900 and 1902? The question cannot be answered with absolute certainty. Professor Jones, commenting on the point, says (p. 158): "It is a difficult matter to make a wholly satisfactory estimate of the extent to which the higher price merely offsets an increase in the cost of mining, as this cost varies so much for the different companies, and in the different mines of the same company, and because of the difficulty of allocating to any one size, such as stove coal, for example, those elements in the expenses of mining which are properly chargeable to this one size — inasmuch as all sizes are produced together under joint cost." A few available figures, covering this early period, give some idea of the extent to which an increase in wages meant increased profits to the operators and increased prices to the consumers. Figures submitted by the Delaware and Hud- son Company to the Interstate Commerce Com- mission are summarized as follows : Price Received Pavrolls Other than Office Cost of Mining 1900 $3.20 $1.16 11.43 1901 3.57 1.24 1.54 1902 3.87 1.46 1.93 1903 4.10 1.53 1.96 180 ANTHRACITE During foiir years the labor cost of the coal in- creased 37 cents (32 per cent), the entire cost of mining increased 53 cents (37 per cent), and the price received for all sizes of coal increased 90 cents (27 per cent). On the face of things the operators were modest — raising the price only 27 per cent, as compared with an increase in the total cost of mining of 37 per cent. Actually, the increase in cost was 53 cents and the increase in price 90 cents, leaving for the operator on each ton of coal sold, a net advantage of 37 cents. The increase in the price of anthracite from 1900 to 1903 may be justified, in part only by the increase in wage rates. A large slice of the increase goes to increased profits. The same facts hold true for figures submitted in the Sherman Anti-Trust case by the Philadel- phia and Reading Coal and Iron Company. Mining costs, including wages, supplies, improve- ments and general expenses, rose from $1.59 in 1899 to $2.20 in 1903— an increase of 61 cents, or 38 per cent. The price received for all sizes of coal rose from $1.84 to $2.63 — an increase of 79 cents, or 43 per cent. In this case the price received actually rose higher in percentage than the percentage of increase in labor costs. ^ Labor disturbances have been very successfully employed in late years by the anthracite opera- tors as a means of increasing coal prices. Public sympathy is won for the transaction by a simple, psychological trick. Wages were increased 10 I "The Anthracite Coal Combination," op. cit., pp. 153-59. THE CONFLICT 181 per cent in 1902. Is it not just and right that the operator should be able to make good this extra cost by an addition to the price' of, let us say, 10 per cent ? The statement is simple, nor does it occur to the ordinary consumer of coal that the increase in wages raised only the labor cost of the coal. The labor cost in 1902 was for one company (the Delaware and Hudson) $1.46. Ten per cent of this labor cost is 14.6 cents. The coal was selling at something over $5 to the consumer. Ten per cent of $5 is fifty cents. The 10 per cent is the same in each case. The amount on which the percentage is taken varies so much in the two cases that more than three times as much money, on each ton of coal, is taken by the operator from the consumer as is given by the operator in the increased wages of the workers. - 2. A Typical Situation The most complete body of evidence bearing on the relation between increased labor costs and increased prices was collected by the United States Bureau of Labor in 1912.^^ There was a suspension of work; a sharp price increase in many sections, based on coal shortage; and a final settlement that gave the miners 10 per cent more wages, while it abolished the sliding scale, and raised the price of coal about 25 cents per 1" Increase in Prices of Anthracite Coal following the Wage Agreement of May 20, 1912." Prepared under the direction of the U. S. Commissioner of Labor by Basil M. Manly. House Document 1442, 62d Congress, 3d Session. A remarkably clear and detailed presentation of the case. 182 ANTHRACITE ton. The case is typical of the relations between labor, capital and the consumer of anthracite. After a suspension lasting six weeks, an agree- ment was signed, May 20, 1912, under which the wages of the miners were increased, the price of coal was raised and the operators reaped a rich harvest of increased net profits. If the matter is examined in detail, it appears that the increase in wages was considerably less than the correspond- ing increase in the cost of living between 1903 and 1912; that the increase in the price of coal to the consumer was considerably in excess of the increase in the cost of producing the coal; and that there was a marked increase in profit to the coal companies. As an outcome of this one situ- ation, labor was a net loser, the operators were the net gainers and the consumers paid the bill. The award of the Anthracite Coal Strike Com- mission made in 1903, had continued practically unchanged by the agreements of 1906 and 1909. Some marked alterations were brought about as a result of the conflict of 1912. The 1903 agreement provided for a wage pay- ment based on the wholesale price of coal at tide- water. "For each increase of 5 cents in the price of white ash coal, of sizes above pea coal . . . above $4.50 per ton, the employees shall have an increase of 1 per cent in their compensation." (Award of 1903, Sec. VIII.) Under the operation of this "sliding scale," the mine workers received an increase in wages over the minimum figure of 4 per cent in 1903 ; and this percentage of increase THE CONFLICT 183 varied from 1903 to 1911, when it was 4| per cent. At its lowest, it was 3| per cent; at its highest (1912), 7 per cent. The average per cent of increase received by the mine workers under the sHding scale during the nine years of its existence was 4.2 per cent. The agreement of 1912 abolished the sliding scale, but in its place there was a provision for an increase of 10 per cent over the wage rates pro- vided for in the award of 1903. Following their agreement with the workers, the operators increased the wholesale prices of coal an average of 25.82 cents per ton.^ This figure is secured by comparing the prices of coal in June, July, August and September, 1911, with the prices in the corresponding months of 1912. This increase in wholesale prices resulted in a cor- responding increase in retail prices and the con- simiers were compelled to shoulder the added burden. The operators explained that the increase in wholesale prices of coal was made necessary because (1) of the advance in wages resulting from the agreement of May 20, 1912; and (2) because of the increases in the cost of production which had taken place between 1902, the date of the last increase in the wholesale prices of coal, and 1912. These increases were caused by the growing difficulties of mining, by additional taxes and more stringent mining laws.^ •"Increase In Prices of Anthracite Coal," op. cit., p. 11. s Ihid., p. 12. 184 ANTHRACITE The public discontent which was aroused by the higher anthracite prices led to an investigation of coal prices. The House of Representatives ordered the investigation which was made for the Commis- sioner of Labor by Mr. Basil M. Manly. The ma- terial secured in the course of this investigation furnishes the data on which this chapter is based. Mr. Manly was able to secure, through the Bureau of Labor, a large amount of information regarding the operations of most of the important anthracite companies. He reports furthermore, that "in every case the statistics presented by the companies have been checked as far as possible either against the books of the companies from which they were derived or against the public records of the company, the correctness of which have been certified by public accoiuitants."^ The facts regarding wholesale prices include about 70 per cent of all the anthracite coal sold. The facts regarding cost of production include about 54 per cent of the entire output of the region. The Congressional report is therefore based on the facts furnished by the coal com- panies themselves; these facts were checked wherever possible against public records, and the material represents a majority of the business done in the coal regions. 3. The Consumer in 1912 The consumer was an unqualified loser in the events surrounding the 1912 settlement. Whole- ^"Increase in Prices of Anthracite Coal," op. cit., p. 10. THE CONFLICT 185 sale prices were increased about 25 cents per ton and retail prices were increased from 25 to 50 cents per ton. In this case, as in many that have pre- ceded and that will follow it, the consiimer is called upon to foot the bill. No sooner had the operators granted the increase in wages in the agreement of May 20, 1912, than they issued a circular prescribing increases in wholesale prices varying with the size of the coal. The prepared sizes (including chestnut and larger sizes) were increased an average of 31.23 cents per ton. The price of pea and the smaller steam sizes of coal was increased 16.14 cents per ton. The prepared sizes are consumed principally in domestic use, while the steam sizes are used by the manufacturers and owners of apartment houses, office buildings and other public structures. ' ' The reason for placing the larger increase on the prepared sizes is said by the coal operators to be due to the inability to sell the steam sizes in com- petition with bituminous coal at any greater ad- vances than those which were made."^ The decision of 'the operators to increase the price of domestic sizes 31 cents at the same time that they increased the price of "steam sizes 16 cents deserves consideration. From the moment it was decided that the miners should have an increase in wages, the operators began casting about for a means of saddling the increase on the consumers of coal. Here, as in any other case of monopoly power, the rule on which prices are 1 "Increase in Prices of Anthracite Coal," op. cil., p. 57. 186 ANTHRACITE fixed is found in the famous railroad axiom, "all that the traffic will bear." The price is therefore fixed at the highest profitable point. Had the prices of anthracite steam sizes been raised more than 16 cents, the users of these sizes woiild have abandoned anthracite in favor of bituminous coal. The 16-cent increase represented the limit of the operators' monopoly power in that direction. The consinners of domestic sizes of anthracite coal presented a much easier mark than the users of steam sizes. The average householder prefers anthracite to bituminous coal because it makes less dust and dirt. Then, too, his rented furnace is built to burn anthracite and his experience is wholly with the use of anthracite. If he lives in a rented house, as more than two-thirds of the city and town dwellers do, and if he has acquired the habit of burning anthracite, the danger that he will abandon anthracite in favor of soft coal is remote. He is therefore a peculiarly fit subject for the exaction of a monopoly tribute. It is for this reason that the price of domestic sizes was increased by about twice as much as the price of steam sizes during the 1912 readjustment. The added cost of anthracite to the consumers which resulted from the 1912 price increase, is estimated by Mr. Manly at $10,832,843. Fully two-fifths of this amount covers the increase in chestnut coal, which is the most widely used of all the domestic sizes. ^ The consimier suffered another heavy loss owing » "Increase in Prices of Anthracite Coal," op. cit., p. 55. THE CONFLICT 187 to the passing of the discounts on prepared sizes during the spring and summer of 1912. For a number of years it has been customary to allow purchasers discoimts of 50 cents per ton in April, 40 cents per ton in May, 30 cents in June, 20 cents in July and 10 cents in August on prepared sizes. The object of this discount was to induce people to lay in their winter supply of coal in the spring and thus make work for the mines during the spring and summer months. The usual discount was not allowed during 1912. This suspension of discounts alone cost the consumer, according to the estimate made by the Bureau of Labor, about $2,500,000. In addition to the increase in the regular price of coal and to the suspension of the usual discoimts, there were a considerable number of cases in which coal was sold at a premiiim over current whole- sale prices. In some cases this premium is re- ported to have gone as high as $2.00 per ton above the prevailing circular prices for the same grade and quality of coal. The possibility of selling anthracite at a pre- mium arose from the shortage due to the suspen- sion of operations in the early part of the year. There were a number of communities, notably in New England, where the retail dealers sold coal at scarcity prices. Although this practice was not widespread, it proved a serious additional burden where it was in vogue. Although it is impossible to estimate accurately the increased burden placed upon the consumer 188 ANTHRACITE by the strike of 1912, it is the Bureau of Labor estimate that the increase in prices and the sus- pension of discounts alone forced the consumer to pay $13,450,000 more for his coal at 1912 prices than he had been compelled to pay at 1911 prices. This additional expenditure of $13,500,000 brought not one iota of benefit to the consumers. Indeed, it is accompanied in many cases by inconve- nience and dissatisfaction. The $13,500,000 of added cost bought the same number of tons of coal, containing the same number of heat units and prepared under the identical conditions. 4. The Worker in 1912 The consumer paid the entire bill incident to the 1912 price increase. He was forced to add more than $13,000,000 to the cost of his coal. It seems evident that someone must have profited con- siderably by the transaction, and the general supposition is that that someone was the mine worker. Oddly enough, and public opinion notwithstand- ing, the mine worker seems to have gained com- paratively Httle by the 1912 agreement. Indeed, it undoubtedly represented a net loss for him, as compared with his position in 1903. The mine worker certainly cannot be accused of getting the lion's share of the price increase. Only a little more than one-third of it came his way. The Bureau of Labor reports that "a careful computa- tion based on the records of one of the largest companies shows that the increase in labor cost THE CONFLICT 189 resulting from the agreement of 1912 and the readjustment of the wages of men not covered by the agreement, amounted to 9.75 cents per ton."^ At the same time, it will be remembered that coal prices increased on the average more than 25 cents per ton. The mine worker did benefit immediately and directly by the strike. The advance in wages which the abolition of the sliding scale and the increase of 10 per cent over the wage of 1903 provided, gave an increase of 5.6 per cent in w^age rates. Estimating the amount of this increase upon the basis of the shipments from June to December, 1912, the miners gained about $4,000- 000. Against this amount there must be placed the cost of the strike in money and in privation. The miners' demands for 1912 included a 20 per cent increase in wages. They actually received a net increase of 5.6 per cent. What did this mean to them in comparison with the increased cost of living during the same period of years? The United States Department of Labor shows, in Bulletin 140, that the cost of food increased 30.8 per cent between 1903 and 1912. During the same years the cost of clothing, shoes and the like increased approximately 20 per cent. While no extensive study has been made, it seems that the cost of rent in the anthracite fields has in- creased during the same time from 10 to 20 per cent. Figuring the food as two-fifths of the workingman's expenditure ; and rent and clothing * "Increase in Prices of Anthracite Coal," op. cit., p. 28. 190 ANTHRACITE each as one-fifth, the apparent increase in the cost of living would be from 20 to 25 per cent. The increase in the wage rate between 1903 and 1912 was therefore less than one-third of the increase in the cost of living. There is one additional factor which must be borne in mind, and that is that the anthracite miner had more opportunities to work in 1912 than he had in 1903. The total days worked by the anthracite mines in 1912 were 231; and in 1903, 206. This was an increase of 13 per cent in working time. Even counting this working time as a part of the benefits accruing to the miner during the interval between 1903 and 1912, the miner's increase in earnings did not make amends for higher prices. The conflict of 1912 left the mine workers still behind in their race with the cost of living, even though they gained $4,000,000 in additional wages. The gain of $4,000,000 was immediate. The loss through increased prices was permanent. 5. The Operators in 1912 The Bureau of Labor estimates that the oper- ators added $13,450,000 to their gross receipts as a result of the 1912 strike. They were enabled to do this because of the increase in wholesale prices and the suspension of discounts already noted. They had a further source of revenue in the sale of contract coal. Until the decision of the United States Supreme Court in December, 1912, the anthracite railroads THE CONFLICT 191 purchased under contract the entire output of a large niimber of colHeries operated by individuals and companies. Under these contracts, the price paid for prepared sizes is 65 per cent of the aver- age tidewater price. When the price of coal was increased in June, 1912, these contracts were not changed, and consequently the independent com- panies, selling on this basis, received only 65 per cent of the 25-cent increase in the price of prepared sizes at tidewater, or 16.25 cents per ton, while the purchasing operators received 35 per cent of the increase, or 8.75 cents per ton. The independent operators paid their miners the same increase in wages as the larger coal companies and were probably subject to the same general operating conditions. The independent com- panies received an addition of 16| cents per ton in the price and paid an advance of 9 cents per ton in wages, leaving a margin of 7| cents to cover the other increased costs. The purchasing companies, on the other hand, had a margin of 16 cents (25 cents minus 9 cents) on their own coal, plus 8.75 cents on, each ton that they purchased and sold under the 65 per cent contracts.^ Here, then, was an additional source of revenue for the larger operating and purchasing companies. There seems to be some basis for the operators' assertion that the cost of producing coal had increased. The agreement of 1912 added 9 cents burden to the labor cost of coal. Meanwhile, between 1903 and 1912, a number of factors 1 "Increase in Prices of Anthracite Coal," op. ciU, p. 13. 192 ANTHRACITE^ were responsible for adding to the cost of pro- duction. 1. The veins worked were growing thin- ner, which necessitated the removal of a larger amount of rock and refuse. 2. The increasing depth and area of mines added to the cost of trans- porting and handling of coal and of ventilating the mine. 3. Many of the materials entering into mine construction had increased in price. There are^a number of decreasing production costs which must be set off against those which have increased. For example, most iron and steel was lower in 1911 than in 1903. During that time advances had been made in economy and efficiency of mining, cleaning, preparing and hauling coal. Mr. E. B. Thomas, president of the Lehigh Valley Coal Company, is quoted as saying, "The improvements already made, to- gether with those now in progress, tend not only to offset the increased expense in mining, incident to the greater depth of the working and the long underground haul, but also result in a greater percentage of prepared sizes of coal, the same having increased 9.38 per cent in the last five years. "^ The status of production costs is thus stmima- 1 Annual Report of the Lehigh Valley Railroad Company, 1908, p. 48. THE CONFLICT 193 rized in the Federal report: "The present report shows that the recent increases in prices have been more than sufficient to compensate ftilly those companies whose costs of production have increased more rapidly during recent years, and at the same time has very greatly increased the profits of those companies, of whom there are at least several whose costs of production either decreased or remained stationary during the same period. "This conclusion is based on the fact that when normal years are compared, none of the com- panies has suffered an increase in the cost of pro- duction equal to the increase in the selling price over and above the recent advance in wages." As a result of the increased activity following the suspension of 1912, "the cost of production of one important company has been lower during the last six months of 1912 than during any year since 1903, in spite of the increase in wages required by the settlement of May 20, 1912. These comparatively low production costs during the latter half of 1912, combined with the in- creased prices, have created for this company during the six months net earnings greater than it has had in any entire year from 1902 to date."^ The total result for the operators was an im- mense increase in net receipts. "During the four months — Jime to September, 1912 — the seven companies which shipped 69.3 per cent of the anthracite coal during the same period received '"Increase in Prices of Anthracite Coal," op. cit., pp. 12-13. 13 194 ANTHRACITE at the advanced prices for their shipments $3,- 572,588 more for their coal than they would have received at the prices prevailing in the same months in 1911." This is equivalent to an aver- age of 25.82 cents per ton advance over 1911 prices. 6. Some Lessons from the 1912 Experience The incidents surrounding the suspension of 1912 verify the impressions gained from previous experiences with labor disturbances in the anthra- cite industry. The operators, controlling a great natural re- source, get what they can for their product. The price of those anthracite sizes that compete with bituminous coal was increased by only half as much as were the prices of the "prepared sizes" which are used in domestic consumption and do not compete with bituminous coal. The strike, as in previous cases, was used as a pretext for adding to prices an amount equal to three times the increased labor cost of the coal. This gave to the coal companies a handsome profit of $13,000,000 in 1912 and probably $10,000,000 in subsequent years. The mine workers, after having perfected their organization and waged a costly struggle, found themselves, at the end of the struggle, still unable to cope with the increase in the cost of living. The constmiers fared worst of all. They paid a roimd increase of $13,000,000 for their coal in 1912, over the 1911 prices; they got no more and THE CONFLICT 195 no better coal in return for this immense price increase. The struggle of 1912 came and went. The operators profited handsomely, the miners fared indifferently, and the consumer foots the bill. CHAPTER 7 AN OBJECT LESSON IN MONOPOLY 1. The Anthracite Lesson The lesson taught by the anthracite situation is unmistakable. The advantages and dis- advantages of the private monopoly of natural resources are clearly portrayed. The conclusion cannot be avoided. The situation is stated in the body of facts presented in the last three chapters. The con- sumer, the worker, and the producer each face certain aspects of the issue. In its larger form, and summarized, the question resolves itself into a consideration of the price of coal to the con- sumer, the rate of wages to the worker and the rate of profits to the operator. The consumer is better off when his dollar buys a larger quantity of coal; the worker is potentially better off when he receives a higher rate of return for each hour or for each unit of labor; the producer is pre- sumably better off when he receives a larger per- centage of return on each dollar of investment. A summary of the relative position of con- sumer, worker and producer during the past fifteen years under the effective anthracite combination of 1898, appears below. The position of the con- sumer is stated in the relative number of tons of stove coal^ that $10 will buy at New York 1 The prices of egg, chestnut and pea advanced faster between 1900 and 1912 than did the price of stove coal. (196) MONOPOLY 197 wholesale prices; the position of the worker is stated in the rate of wages per hour or per unit of work; and the position of the producer is stated in terms of dividend rates. Tons of coal, wage rates and dividend rates are all reduced, in the table, to index numbers:^ Table XIV. — Index Numbers for Prices, Wage Rates, AND Dividend Rates in the Anthracite Industry, 1900 to 1914. The Figures for 1900 to 1904 Equal lOO.i CONSUMER. WORKER. OWNER. PURCHASING WAGE RATE OF POWER. RATES. DIVIDENDS. Number Wages Average of Tons Paid to Dividend for $10 Miners Rate 1900 113 95 85 1901 104 95 98 1902 100 95 75 1903 92 108 114 1904 92 108 159 1905 92 108 242 1906 92 108 268 1907 92 108 281 1908 92 108 278 1909 92 108 461 1910 92 108 281 1911 92 108 395 1912 88 114 287 1913 88 114 284 1914 88 114 272 1 The method of finding the index number is as follows: The number of tons of coal that could be bought for $10 is ascertained for each year by dividing the price of one ton Into 510. The average for the first five years (2.25 tons) is taken as a base. Arbitrarily it is stated as 100. The number of tons that the consumer received in 1900 for 110 was 2.54. If 2.54 is divided by 2.25 (the base) the quotient is 113. The results for each year are computed on a com- mon base. Since they have been reduced to a common denominator, they can be compared more readily than in their original form. Since the percentages or index numbers for prices, wages and dividends are all secured in the same way, they also may be compared. 198 ANTHRACITE The relative position of the three parties at interest in the anthracite field during the fifteen years since the combination of 1898 became effective,. shows the owners to be the real gainers. The consumer, in 1900, could buy with $10 two and a half tons of stove coal at tidewater prices. By 1914 the increase in prices reduced the amount that he could buy with $10 to a little less than two tons. The wage-earner received an increase in wages in 1903 and in 191 2.^ These two advances have bettered his position by about one-fifth. Meanwhile the average dividends paid by the ten leading anthracite railroads advanced from 2.8 per cent in 1900 to 9.1 per cent in 1914. As compared with a loss of 20 per cent to the con- simiers and a gain of 20 per cent to the workers, the owners show a gain of 220 per cent. The situation becomes even more acute if the figures are compared for the last five years, rather than for the year 1914, which, from a business standpoint, was improsperous. During the past five years the purchasing power of the consumer has remained at about the same figure, 90, as compared with 113 in 1900. The wages of the workers have increased slightly, making a figure, for the five-year period, of about 112, as compared with 95 in 1900. The average divi- dends of the anthracite carriers in the past five years have been 306, as compared with 85 in 1900. The consumer's purchasing power shows a slight decrease, the worker's wage a slight 1 There was also an increase of 10 per cent early in 1900. MONOPOLY 199 increase and the owner's rate of profits an in- crease, for the five-year period, of 260 per cent. The profits as stated here are the apparent profits in the form of dividend rates on the com- mon stock. They make no allowance for increase in capitalization, nor do they take into consider- ation the fact that the anthracite business com- prises only a part of the business of these companies. Unlike the price to the consumer and the wage rate to the worker, the dividend rate is at best merely an indication of prosperity. It is neither an accurate nor final measure. Un- fortunately, it is the only measure available. Since the Anthracite Coal Combination got a foothold the workers have gained somewhat, the consumers have lost somewhat. The supreme advantage of this monopoly period has gone to the monopolists. 2. The Losers and the Gainers from Monopoly Anthracite is only one of the many important natural resources that is being rapidly monopol- ized through the successful efforts of financial and industrial leaders to concentrate ownership. The lessons drawn from the anthracite monopoly may justly be regarded as significant and, in a large sense, typical of the results that will follow from the monopoly of other equally important natural resources. The consumer carries the burden of monopoly. Monopoly prices are fixed at a figure represent- ing "all that the traffic will bear." Increased 200 ANTHRACITE costs of carrying on business, no matter what their origin, are passed on by the monopoly to the consumer in the form of increased prices. The power of substituting some other commodity for the one that is the subject of monopoly limits the price that the monopolist may charge. Sub- ject only to this power of substitution, the mon- opolist gets all that he can. The worker gains nothing from the presence of monopoly. As an employee of the monopoly, he is paid wage rates that are not materially different from the wage rates paid in competitive industry. The present method of fixing wage rates, by competition in the open labor market, makes it inevitable that this should be so. In- dustry pays for labor not what it can, but what it must. Even though a monopoly could afford to pay a much higher wage than a competitive industry, it need not, and therefore does not, do so. The monopolist is the real gainer from mon- opoly. The worker who serves the monopolist is paid the going rate of wages, and while the consumer foots the bill, the monopolist records his advantage in the form of increased dividends. The figures show conclusively that these things are true of anthracite. There is good reason to believe that they will hold no less true for other equally powerful natural resource monopoHes. 3. The Larger Menace of Monopoly The facts cited thus far have referred to the financial cost of monopoly. They are definite. MONOPOLY 201 They are significant. They are the only mon- opoly facts that can be measured in accurate statistical terms. There are other aspects of monopoly which are more far reaching in their importance than any to which allusion has been made. Monopoly affects the economic, social and political organiza- tions of society in ways so fundamental as to attract the attention, during late years, of stu- dents, agitators, politicians, statesmen and every other group of people interested in progress. A recent writer makes this statement regard- ing the relation existing between the anthracite monopoly and the social order: "We have referred to the beginnings of concentration of wealth and ownership in the anthracite region as one of the causes of the break-up of the Union. The force of this factor increased to such an extent as not only to prevent the growth of the Union, but practically to control the industrial, social and political welfare of the region."^ Monopoly strikes at the basis of social organiza- tion. Monopoly affects society, root and branch. From every angle it appears as a menace to the democratic future of the community in which it exists. I^. The Economic Effects of Monopoly The economic effects of monopoly are of far- reaching consequence. Four will be considered here. First, the natural resource monopolist 1 " Conciliation and Arbitration," op. cit., pp. 214-15. 202 ANTHRACITE controls the jobs or opportunities for work; second, he has a price-fixing power over the thing he produces; third, he has an automatic income-yielding machine; and fourth, his mon- opoly power enables him to appropriate values socially created. These four economic effects of natural resource monopoly give the monopolist a position of overwhelming advantage. First, and most important to the immediate interests of the great mass of mankind, the natural resource monopolist controls the opportunities for work. Under the conditions of modem in- dustry all men must work for a living. The ulti- mate source of Hvelihood is the store of wealth contained in nature's treasure-house. The indi- vidual who becomes owner of a part of this treasure-house may dictate to his fellow men the conditions of life to which they must subject themselves if they are to use the things that his part of the earth produces. The owners of the anthracite regions are in a position of peculiar strategic advantage because the field is so limited and because they have so absolute a control over it. There are 175,000 men who work for the anthracite combination. There is dependent on these workers a population of perhaps 500,000. The mine owners, in theory at least, may allow or deny these men the oppor- tunity to make a living. Over great sections of the anthracite field there is no other considerable source of liveli- hood save that offered by the anthracite owners. MONOPOLY 203 The workers must take the work that the mine owners give them or else they must go elsewhere. Under such circumstances, the companies wield the final power of saying to a man and to his family, "Thou shalt eat" or "Thou shalt not eat!" The point is well illustrated by a remark made by a witness before a Congressional Investigating Committee in 1887. A railroad superintendent, when asked why he was so sure the striking men would go to work at the company's terms, replied, * * Their necessities. ' ' * * Asked if he meant * starved out,' he replied that the company did not propose to keep the men out till they starved, but re- minded the Committee that 'it (was) a necessity for everybody who works that they get work.' "^ With this control of the chance to work goes a control of the conditions of work and life that is appalling in its completeness. This same Congressional Committee found that companies were paying by the "wagon," instead of the ton, and sending in wagons that held more than the standard wagon was supposed to hold; they found that men were docked heavily if the coal sent to the surface was not of a certain quality, that the companies were often slow in making payments of wages. The committee found, further, that where the company owned a large block of property, upon which a town was built, that the company owned the houses, the stores, the butcher shops; that the men were forced to '"Conciliation and Arbitration," op. cii., pp. 237-38. 204 ANTHRACITE subscribe to the income of the company doctor; in short, that the workers were not only working for the company, but were Hving for the com- pany as well. The miners were thus subjected by their em- ployers to an economic pressure from every side. During later years many of the worst abuses, involving company houses, company stores, the sale of powder at exorbitant figures by the com- pany, and the like, were abolished. The economic pressure on the job remains, and always will remain while one man owns the resources with which another man must work in order to Hve. Perhaps the most effective weapon in the hands of the operators, for controlling the men through their jobs, is surplus labor. Wave after wave of immigration has immdated the anthracite region.^ Speaking alien languages and accustomed to varying standards of living, the alien groups have pressed hard upon one another. Where there are two men competing for one job, the strife is apt to be keen enough if the men are friends and neighbors. When the two are of alien race, nation and language, the struggle becomes brutal. In the anthracite fields, as elsewhere, the employers have relied upon the presence of more men than there are jobs for much of their power. Not until the solidarity expressed in the organization of the United Mine Workers of 1 "The Slav Invasion," F. J. Wame, 1904; "Anthracite Coal Communities," Peter Roberts, 1904. MONOPOLY 205 America began to make itself felt, was this poiwer seriously curtailed. The second economic effect of monopoly has been commented upon at sufficient length. The monopolists, through their monopoly power, fix prices and thus cut in upon the livelihood of all those who consume their product. The monopolist, in the third place, enjoys, in his ownership, an automatic income-yielding machine. The great majority of people work for the income on which they depend for a living. They exchange so many hours of effort for so many dollars of income. The owner of a desir- able natural resource is under no such obligation. His ownership puts at his disposal a wholly suf- ficient method of securing an income. Where there is land enough, or where there are resources enough for all, no monopoly price can be put on any single unit of the resource. So long as there are farms to be had for the asking, no owner can get a price for unimproved farm land. It is only after the supply is exhausted that resources possess monopoly power. In the case of anthracite, the resource is so limited that, almost as soon as its practicability was demonstrated, all the land known to contain anthracite commanded a price. This land was readily monopolized, and the entire community was clamoring for the product. Under these circumstances, the owner of a piece of anthracite land can secure, in return for his bare ownership, an income. Whether he has 206 ANTHRACITE bought the land knowing it to contain anthra- cite or whether he had bought it for some other purpose, the fact that it does contain anthracite enables him to transfer his property to a mining company with the stipulation that for each ton mined within 10 years, 6 cents shall be paid the owner in royalty; for each ton mined within more than 10 and less than 21 years, 7 cents, and so on. By such means, the owner is put in possession of an income that will continue so long as the mining operations on his property continue. The owner is under no obligation. He does not work for his royalty with either his hands or his head. He owns a piece of property, and because of this ownership he receives a share of the proceeds from each ton of coal that is mined. The owner of a select portion of nature's store- house owns for a living. He secures his income in return for his property titles. There is a fourth economic result of the mon- opoly of natural resources. A title to natural resources often becomes more valuable as time goes on. Resources are made valuable by the presence of permanent populations, educated to their use. Manhattan Island sold for $26 because the Indians had no use for a harbor. If Man- hattan had belonged to a nation of traders in- stead of a nation of hunters, it would not have sold for £1,000,000 sterling. Other things being equal, the more permanent, progressive and intensive a civilization is, the MONOPOLY 207 more will resources be worth. This is always true of the site values in city lots, for example; it is true of the power in waterfalls unless a new source of power is discovered; it is doubly true of a diminishing resource, like a fuel or a min- eral, where each ton mined is a ton less in the ground. Anthracite is a diminishing resource, limited in extent. As the supply decreases, the demand remaining constant, the price rises. As the popu- lation grows, increasing the demand, the price rises. As people build larger houses and intro- duce more extensive heating appliances, the demand increases and the price rises. The owner of anthracite land receives an income because he owns land from which coal is being mined. His income is augmented by the increase in the demand for anthracite and by the decrease in the supply. The private ownership of natural resources gives the owner an immense economic power. He has a large control over those who work for him; he places a monopoly price on his product; he enjoys an income in return for his ownership; and by virtue of his ownership, he receives, ftirther, an increase in values due to the growth and progress of society. 5. The Social Efects of Monopoly The social effects of monopoly arise largely out of its economic effects. Monopoly creates inequality; makes for class distinctions; pro- 208 ANTHRACITE duces exploitation and makes impossible equality of opportunity. In all of these ways monopoly affects the organization and progress of society. Monopoly creates inequality. Herbert Spencer a half century ago pointed out, in Chapter 9 of his "Social Statics," that if any person could own any piece of property and if there was no limit to the amount of property that might be owned by any one person, then one individual might, by gaining possession of all of the property, let us say, in Cuba, exact a tribute (rent) from every person in Cuba. This rent would be paid for the privilege of occupying land belonging to the man who had secured control of the island. Inequality of wealth is best created by per- mitting one man to own something that all of his fellows must have. The owners of the anthra- cite fields have an almost perfect example of a resource, limited in area, upon which millions depend for fuel. The inevitable consequence of such a situation is that the owners of the coal fields become rich, even though those who actually mine the coal are making less than a decent living. A reading of Gustav Myers' suggestive histo- ries of American and Canadian fortunes, in which he traces minutely the origins of private wealth, leaves in the mind one clear-cut impression — that the great fortunes were built for the most part upon the ownership of land, franchises, patents or other special privileges. The ownership of a MONOPOLY 209 natural resource gives the owner a power over wealth that inevitably makes him richer than the people who put the products of his resoturce on the market. The second social effect of monopoly grows directly out of this first one. Monopoly is the largest single factor in creating the basis for a class distinction which at the present time takes the form of a distinction between owners and workers. Democracy is opposed to class dis- tinctions. Inevitably, then, it must oppose monopoly. The owner of a resource, as has been shown, receives an income because he is an owner. If all of the people owned resources and received income from their ownership, such a form of income would make no distinguishing mark between man and man. Resources are limited in extent, however, and the ownership of a resource by one person automatically excludes other persons from a like opportunity. Owners of desirable bits of the earth's surface, without the expenditure of any effort may demand and receive rent of their fellows for the use of their property. What must become of those fellow beings who use the gifts of nature that are owned by others? The v/orkers who use the resources must put forth sufficient exertion to provide for the neces- sities of those dependent upon them, and in addition, they must produce an amount sufficient to pay rent to the resource owners. 14 210 ANTHRACITE Here, then, are two kinds of people. One kind lives upon its property; the other kind lives on its labor. One derives its income from owner- ship; the other from work. One is the recipient of property income; the other of service income. This economic distinction forms the basis for two classes in society. The distinction between owners and workers is not new by any means. If history tells the truth, the same distinction existed in Egypt, Carthage, Greece, Rome, Sometimes the work- ers were freemen; more often they were slaves. During the middle ages the great landowners, backed by the Church under the Feudal system, exacted a return in labor or in kind from the serfs who were attached to the land. The situa- tion, historically, is too well known to demand further illustration. Always those who owned property were able to live upon the labor of another group which put the property to use. The self-same distinction will exist and does exist in any community which allows private individuals to secure possession of natural re- sources and to deny to their fellow men the right to their use. The existence of class distinctions leads inevit- ably to class antagonism. Those who are living upon their property at the expense of the com- munity are willing to sacrifice anything except the right to collect rents from the rest of the world. Meanwhile, they must use some device to cover up the fact that the great body of human MONOPOLY 211 kind pays them a direct or an indirect tax because of their ownership. If no one owned undeveloped land, it would make impossible gains that are now derived from land held, unimproved, for an increase in value. The private ownership of re- sources is one of the most effective means of emphasizing the distinction between those who own and those who work. European aristocracy is built upon the dis- tinction between owners and workers. The aristocracy owned the land ; the peasantry worked it. The aristocracy lived, free from hand-soiling toil; the hands of the peasants were gnarled and rough. No member of the aristocracy could work at common labor and stay in his class. When Count Tolstoi went out into the fields and mowed with the peasants, all Europe treated the event as unique. No member of the aristocracy ever worked with his hands. The man who worked with his hands was no gentleman. Hand work branded the hand worker as of a lower social grade than was the person who never did hand work. The same feeling appears, even more strongly marked, in communities where slavery exists. The slaves do the hard work. The master class holds itself above labor. The owning class does not work. How then can it live? The answer to that question leads on to the next point in the argument. The ownership, by 212 ANTHRACITE one group in the community, of the natural resources enables the owning group to live at the expense of the working group. The oft-reiterated saying, "He who will not work, neither shall he eat," is revised by the economic world, until it reads, "He who owns the land may eat and do no work." The own- ers of natural resources are able, because of this ownership, to live without work. The way in which the owners of resources may make others pay them rent is clear enough. Men and women must live upon the products of the earth. If all of the earth is preempted, those who do not own must make terms with those who do. That is true, but is it also true that the ownership of natural resources enables the owner to live without making any contribution to the community? Does not his very ownership con- stitute a contribution? Let us see. An English earl inherits an Irish estate. He has never visited the estate nor taken any inter- est in it. Each year, however, his steward col- lects and sends to him £1,000 in rentals. What contribution does the earl make to his Irish tenants? Clearly he makes no contribution. He did not make the land; he takes no interest in it; he never improves it. The land might be owned by anyone or no one; by an idiot child or a steel manufacturing corporation. In any case, the owner would collect the rents. The English earl has never worked in England. MONOPOLY 213 He wears hats, coats and shoes that are paid for by the labor of his Irish tenants. The Eng- lish artisans exchange their labor with the labor of the Irish peasants, and the benefits are derived by the man who holds the land. The holder of the natural resource, because he is a natural resource owner, lives upon the work of those who must use his resources in order to gain a Hving for themselves. Exploitation is the term ordinarily used to characterize a condition of society under which one group of people lives upon the labor of an- other group without itself giving any return for the living it receives. Natural resource monopoly leads inevitably to exploitation. The owners hold in their possession the means whereby others must live. These others cannot choose, but must divide with the owners the product of their toil. The monopoly of natural resources in the United States has greatly accelerated exploita- tion. Huge fortunes have been built up on natural resource ownership. Thousands of fam- ilies, old people and yoiuig people alike, are engaged in the pursuit of "living on their in- come," which means living on the power of ownership. "Living on one's income" has become a com- mon pastime in the United States. The aris- tocracy of Europe has been similarly engaged for centuries. Any group of people who can monopo- lize natural resources can share in the products 214 ANTHRACITE of the labor of others, and thus "live on their income." 6. Monopoly Denies Opportunity Among all of the serious results of natural resource monopoly, perhaps the most serious is the fact that it denies opportunity. Opportunity is the corner-stone of democracy. Every child born into the world is to have a chance to develop his talents. This freedom of the individual to express himself gives all a chance to show their qualities. Thus the ablest will be called to leadership in science and art, industry and statesmanship. The early colonists had something of this ideal when they established private property in natural resources. The feudal system of entailed owner- ship had denied to most men the opportunity to show their qualities. Only the well-born, under that system, were given a chance. All this must be changed. All were bom free and with equal rights to a chance in life. The free ownership of a bit of land would insure such a result. The scheme was tried, and the time came when all of the choice pieces of the earth were taken and held in fee simple "to him and to his heirs forever." The ownership of the best re- sources was vested in great corporations and the twentieth century found all of the valuable resources in private hands. The child born today sees the doors to opportunity held shut by the very device that was relied upon to block them open. MONOPOLY 215 A few own the resources. The rest, under the driving necessity to live, must go to these own- ers and ask for a chance to work. The great body of men must accept as masters those who own the means of Hvelihood. The anthracite fields are an excellent illustra- tion of the social effects of monopoly. The anthracite fields are not for sale. They are all held, and held tight, by great corporate inter- ests which do not propose to part with them. The owners of the stocks and bonds of these corporations do not even live in the hard coal regions. There are people today drawing income from anthracite stocks and bonds who have never seen an anthracite mine. The anthracite fields are owned by a group of absentee landlords who would not work in the mines, who would not dream of recognizing the miners socially or having any personal dealings with them, and yet who do not hesitate for a moment to live upon the proceeds of the labor of the anthracite mine workers. The children born to anthracite miners have this opportunity. They may secure a common school education, and then they must go to work in the mines and labor for those who own the resource. Yes, a few of them may save their money, buy stock in the mining companies and live upon the proceeds of the labor of other miners, but is that an answer to the prob- lem? Does it not emphasize instead of solving it? 216 ANTHRACITE 7. The Political Effects of Monopoly Beside the economic and social effects of monopoly, there are certain political effects, equally well defined and equally undesirable in their out-croppings. Theoretically the citizens of a democracy are the government. Practically, the monopoly of natural resources vests a sec- tion of governmental power in the natural resource monopolists. The most vital governmental power is the taxing power. The power to tax includes the power to destroy. The taxing authority holds life and death power over his subjects. What is the taxing power? Originally it was the right exercised by people in authority, to levy on their subjects. These levies included war duty, labor in the construc- tion of some public work, a percentage of the produce of the land, or, in later times, money. In the earlier stages of civilization a ruler would "farm out" the taxing power over a province. The governor of the province would be required to pay a certain levy. All of the taxes that he collected above this sum were his own. Many of the wealthy men of Rome made their money as governors of tribute territory. The idea under- lying this taxation was "get all you can." Con- sequently, the taxing authority took from the subjects everything except a bare living. The same concept of taxation existed in West- ern Europe for centuries. In France, under Louis XIV, the entire nation was drained to MONOPOLY 217 build Versailles, equip it and beautify its sur- roundings. Earlier ages knew no such thing as a regular tax rate. The rule "get all you can" meant that the tax gatherer extorted the last farthing. Rousseau tells of a chance visit that he paid to a peasant hut. The man of the house, hospitable as his lot would permit, put on the table a piece of black bread and a bottle of sour wine. They talked for a long time over this meal, and in the course of the conversation the peasant assured himself that Rousseau was neither a tax gatherer nor a tax gatherer's spy. Thereupon he opened a trap-door in the floor and produced some white bread and good wine, with the explanation that, if the tax collector knew that such things existed in the house, his taxes would be increased. The peasant was taxed in proportion to his ability to pay, and taxed all that he had. This primitive form of taxation came to be regarded as tyranny. Why should the French peasant be reduced to thin onion soup and herbs, through the payxnent of his surplus to a king and a court that were living in extravagant luxury ? The peasant needed the surplus for his very neces- sities. The king needed it not at all; yet the king (or the prince or duke) got the surplus, because he owned the land. Many of the early American colonists fled from just such tyranny. They feared taxes because taxes meant want for the tenant and lux- ury for the proprietor. Hence, in this new land, 218 ANTHRACITE following the example already set in the more advanced countries of Europe, taxes were levied only by the representatives of the people, and the proceeds of taxation were used only for the public good. Men still paid taxes, to be sure, but the proceeds of taxation went into roads, schools, public buildings and other public works, from which all of the people could derive benefit. Taxation was no longer tyranny, but a means of promoting public welfare. Then free public land disappeared and the monopoly power of those who held the resources grew apace. The power to tax appeared in a new form — the levying of "all that the traffic will bear." The wheels of time seemed to move backward. The struggles of centuries were set at naught. A newly created master class was levying on its subjects a tax, not fixed, not destined to minister to the public welfare, but "all that the traffic will bear." This taxing power of private monopoly, or spe- cial privilege, as it is sometimes called, takes on a new form. The old-time tax collector enforced his decrees against the producer. He took from the peasant who used the land a part of the wheat and the grapes which the land produced. The modem monopolist enforces his decrees against the consumer as well as against the producer. The worker must use his resources and pay to the owner a part of the product in rent or in surplus value. The monopolist adds to the legit- MONOPOLY 219 imate costs of production an extra charge — a monopoly profit — equal to what the traffic will bear, and insists that the consumers pay a monop- oly price for the product. The owners of the anthracite coal fields are able to levy this monopoly tax on the people of the United States. They own an important resource; the public needs the products of this resource; the monopolists charge for their products the cost of production, a fair profit, plus a tax based on monopoly power. The owners of agricultural land, in feudal times, levied "all that the traffic will bear" on their tenants. The owners of natural resources in the United States today levy "all that the traffic will bear" on those who consimie the products of their resources. Then, as now, this tax went, not to increase public welfare, but to increase private wealth. Politically, no phase of monopoly is so important as its taxing power. The powers of government are divided between the people (or their represen- tatives) and the owners of the natural resources. Although the facts are not available, there is every indication that the tax paid each year by the American people to the owners of special privilege is greater than the entire amount paid by them for the maintenance of the local, state and national governments. The second political effect of monopoly or special privilege carries the argimient to the funda- mental character of the American government. 220 ANTHRACITE Democracy is based on the assumption that all men have equal rights. Special privilege is based on the assumption that some men have exclusive rights. The two ideas are diametrically opposed. When special privilege comes in at the door, democracy flies out at the window. The monopoly of the anthracite coal fields by a few, automatically excludes all others from ownership at the same time that it puts in the hands of the few the power to tax the many. Special privilege annihilates democracy. The present system of privately owned natural re- sources is in its very essence a form of special privilege. Privilege and democracy are opposed, each to the other. If privilege wins, democracy is lost. If democracy wins, privilege is destroyed. The contest between the two was never more bitter than it is today. The American government was founded on a basis of democracy. The growing monopoly power of resource ownership undermined this democracy, until in the seventies and eighties, with the rise of great aggregations of capital known as "trusts," the very existence of democ- racy was threatened. The last forty years have witnessed a growing public consciousness of the danger and a myriad of efforts to curb special privilege. Anti-trust and railroad legislation leads the list of the legislative remedies for monop- oly control that have been adopted by the Amer- ican people. MONOPOLY 221 8. Anthracite and the Government The anthracite fields have presented a pecu- liarly significant phase of the conflict between privilege and democracy, because there the natural resource monopoly and the railroads have, for many years, worked in the very closest harmony, thus combining two of the most power- ful forms of privilege. Suffern, in his analysis of the relations between the anthracite owners and the people, writes: "Large combinations of capital not only assumed all the arrogance of individual ownership, but, because they were conducting large enterprises which could not be carried on without immense capital, they believed themselves entitled to greater consideration than the small owners. The suspicion with which the monopolistic tendencies of large corporations were regarded led their representatives before the legislature to empha- size the favors which large organizations conferred upon the commonwealth and to overawe the simple legislative mind with their mighty projects."^ . . . "Since the state laws were ineffective, the con- certed action of the union was necessary to bring about the abolition of the abuses. "^ Continuing, Suffern shows the ways in which the owners of the anthracite coal properties shaped the government to serve their own purposes. The Pennsylvania State Constitution of 1874, "pro- 1 "Conciliation and Arbitration," op. cit., p. 215. « Ibid., p. 244. 222 ANTHRACITE hibited railroads from engaging in mining and manufacturing." The party in power promptly- passed a series of acts which permitted railroads to hold any coal lands acquired previous to 1874 and by an appeal to the Court of Common Pleas permitted the validation of charters rendered defective by the new constitution. As a result of these laws, the railroad interests continued the mining of coal as heretofore. Judicial interpretation was effective in giving stiU wider limits to corporate activity in the coal fields. An investigation by the Interstate Commerce Commission in 1907 showed that "the ownership of coal properties and stock in coal companies by officers of the Pennsylvania Railroad resulted in grave abuses in discrimination and distribution of cars."^ The legislature passed a law forbidding officers or employees of railroads to have an interest in coal properties along the fine of their own railroad. The same legislature created a railroad commission and passed a law forbidding common carriers to ' ' engage in any other business than that of common carriers, or hold or acquire lands, freehold or leasehold directly or indirectly, except such as shall be necessary for carrying on its business. "2 "Evidently these simple pro- visions had 'disquieted' somebody, for in 1909 an act was passed ' to quiet the title of real estate and to enable citizens of the United States, and 1 "Conciliation and Arbitration," op. cii., p. 218. '^Ibid., p. 219. MONOPOLY 223 corporations chartered under the laws of this Commonwealth, and authorized to hold real estate therein, to hold and convey title to real estate, which had been formerly held by corpora- tions not authorized by law to hold real estate in Pennsylvania Somebody must have required considerable 'quieting,' for this identical act, which had been approved by Governor Stuart, April 23, 1909, was again enacted and approved by Governor Tener, March 7, 1911, and re-enacted and approved by the same governor, Jime 15, 1911. Evidently it was thought a necessary precaution to pass the act every time transfers of property were made. "We have given this brief resume of the legal backgroiuid simply to demonstrate the practically imlimited sway held by capital in the anthracite region and how little consideration of the law was necessary before consimimating the deals which took place between 1874 and 1911. "We have referred to the extent of the owner- ship of lands in 1872 and 1873. The Reading Railroad made good use of the time, so that when the constitution went into effect in 1874 it was in possession of 100,000 acres. As we have seen, from a legal standpoint there was not much to hinder further purchases, and by 1887 the Read- ing owned 165,189 acres of coal and agricultural lands which had a bonded indebtedness of $160,- 000,000. ... By 1896 it was estimated that 96.29 per cent of the coal lands was controlled directly or indirectly by the railroads, and 90 per 224 ANTHRACITE cent was controlled by five out of the eleven roads reaching the anthracite fields. ... As we have seen, laws were passed in 1897 and 1903 to legalize transfers that had been made since 1896."^ The extensive purchase of coal lands and the extensive mining operations carried on by rail- road interests are but examples of the way in which the owners of the anthracite fields showed them- selves superior to the law. The monopoly of natural resources places in the hands of the monopolists such power that they are able to levy a tax on all consumers of their product. So great is this special privilege, given to the few and withheld; from the many, that in past years the natural resource owners have been able to direct some of the affairs of government. 9. The Enemy Within the Gates However attractive the plan for the private ownership of natural resources may have looked to the early settlers of America ; whatever escape it may have offered from the grim tyranny of European landlordism, the project apparently has failed. It was designed to promote ambition, initiative and thrift; to create opportunity and to increase the possibilities for life, liberty and the pursuit of happiness. In practice, it has led to a new form of monopoly — the monopoly of industrial opportunity. The private ownership of natural resources has > "Conciliation and Arbitration," op. cit., pp. 119-21. MONOPOLY 225 gone farther. By giving to individuals the ex- clusive right over the choice bits of the earth's surface, it has placed in the hands of these indi- viduals an immense power — economic, social and political. Economically, it gives the monopolist the power over the opportunities for the employ- ment of his fellows, enables him to fix prices, gives him an income for which he need do no work and permits him to take possession of social values. Socially, natural resource monopoly leads to inequality, makes for classes and for class dis- tinctions, makes possible exploitation and makes impossible equality of opportunity. Politically, natural resource monopoly gives the monopolist the power to tax the community and enables him to set up an authority which frequently dominates and supplants the authority of political govern- ment. The private ownership of natural resources has centered in the hands of the resource owners an immense authority over the destinies of mankind. The early arguments in favor of natural resource ownership by individuals were based on the asstimption that the individuals who owned would be energized and stimulated. The private ownership would therefore open a larger field of opportunity for mankind. The chief resources are today owned by corpora- tions which have neither energy, thrift, ambition nor any other human virtues. Instead, they are legal entities, with perpetual life, limited liability and an immense range of authority. The owner- 226 ANTHRACITE ship of most of the important resources has passed from the individual to the corporation, and with that transfer there has gone practically every one of the original arguments in favor of the private ownership of resources. The founders of Amer- ican democracy presupposed an individual owner- ship. The revolution in the form of industrial control has made the ownership largely corporate. Although the chief reasons in favor of the pri- vate ownership of natural resources have been swept out of existence by the inauguration of corporate ownership, private ownership remains — a special privilege under the control of the few, and carrying with it a monopoly power of the most sweeping character. Exercising its authority as a means of augmenting profits, strangely blind to the public weal, this monopoly of the means of life threatens to wreck this civilization as it has wrecked its predecessors. Natural resource monopoly entered our civili- zation as a friend and benefactor. Time and experience have shown that a wolf was hiding under the sheep's clothing. The lesson of natural resource monopoly — as it appears in history, as it exists in the anthracite fields, as it may be found in other American resources — is unmistakable. The benefits go to the privileged few, while the great majority of men pay the biU. CHAPTER 8 THE FUTURE OF ANTHRACITE 1. The Conflicting Anthracite Interests The figiires that have been cited show con- clusively enough that there is, in the anthracite field, a line-up of conflicting interests. On the one side are the operators; on the other side are the workers and the consumers. The operators aim at large profits; the workers demand high wages; the consumers seek low prices. High wages and low prices threaten profits, hence the advocates of high wages and low prices are neces- sarily brought into conflict with those who aim at large profits. There is nothing imcommon about such a situa- tion. Everywhere one meets with conflicting interests ; everywhere there are gainers and losers. Opposed to each group in the community is some other group. The organization of society arises out of this diversity of interests. The important point is not that some gain and others lose, but who gains and who loses. The answer which American philosophy makes to such a conflict is unmistakably definite. The net gain must be the gain made by the majority. The principles laid down as the foundation of American political and social life allow of no other alternative. (227) 228 ANTHRACITE The American governmental idea was born at the end of a political and social system that had as its object the gain of the favored few, A special class (the aristocracy of Europe), selected auto- matically by the accident of birth, through their control of the natural resources and of the offices of trust, enjoyed the first fruits of the land. Meanwhile the great mass of mankind worked on the land owned by the few, did their bidding in peace and in war, and received for these services the barest subsistence. The government was managed in the interests of a small number of hereditarily privileged persons. They enjoyed its benefits while the remainder of the human race carried its burdens. America was the embodiment of a protest against a social system maintained in the interests of a special class. The American government was to be a government by the people, in their o'^'-n behalf. The laws of life dictate that in every conflict some must lose and some gain. Feudalism boasted a few gainers and a great many losers. The early colonists, as well as the founders of the State and Federal governments, sought a social system under which there should be many gainers and only a few losers. Was this too much to hope? Was it tinreason- able to expect that a system of society could be devised under which the majority and not the minority were to be the net gainers in life? If such a proposition is hopeless, the whole basic THEFUTURE 229 assumption of democracy is false. So long as that belief in the importance of majority welfare per- sists — so long as the democratic ideal holds sway — any question of public welfare must be decided with the welfare of the majority directly in view. The problem of natural resource control is one of those large social questions that must be tested in terms of majority welfare. Those who control the resources of the country hold under their sway the nation's "tree of life." Let one part of the people secure full control of these resources and their "yea" or "nay" is the last word that can be said. The problem of natural resources differs not a whit from any other question of social welfare save that it is more vital than most questions. The same rule of social procedure that held good in 1789 holds good in 1916. Those things that can be privately managed, with a maximum of advan- tage to the community, must be left under private control. Those things, on the other hand, that under private control might become a menace to community welfare must be publicly managed in the interests of all. The Constitutional Con- vention proceeded on this assumption, leaving all mercantile and manufacturing business to private initiative, while the control over waterways, post roads, the issue of money, and other like activities that experience had shown to be necessary to public welfare, was vested in the government. During the past century and a half the Ameri- can people have had a very definite experience 230 ANTHRACITE with the private ownership of natural resources. This experience is typified by the situation in the anthracite fields. What action shall they take in this and other cases of like import ? 2. The Coal Owners Would Stand Pat One group of interests in the anthracite fields is entirely willing to let things remain as they are. The coal owners are satisfied. They can well afford to be contented with the situation, since the net benefits from the present system of land control accrue almost wholly to them. As things stand at present, the owners of the anthracite properties have the following assets: 1. A valuable natural resource which is readily convertible into a highly marketable product. 2. A large and an assured income that is based on the continued use of this resource. 3. A property that, up to a certain point, will increase in value as years go by, and that, owing to the accepted methods of bookkeeping, will leave, after its exhaustion, a depreciation or amortization fund sufficient to return to the owners an amount equal to the high-tide value of the property. 4. So long as the present system of land ownership continues, a source of THEFUTURE 231 increasing monopoly power, based on a steadily growing demand and a decreasing supply of an- thracite. If there can be any assurance in investment, this anthracite investment is sure. 'I'he owners know this. They, better than anyone else, appreciate the supreme importance, to them, of their present position. Therefore they stand for the continuance of a system that produces huge profits for the owners and subsistence wages for a great body of the workers, while it lays the full burden upon the consumer in the form of increased prices. S. The Future for the Workers The owners are satisfied, but they are, numer- ically, only one small factor in the problem. There are 175,000 anthracite workers. What is their position ? The workers .are not satisfied with things as they are. On the contrary, they have, during recent years, expressed themselves continually and forcefully in long-continued, bitter labor wars. The workers want a change in the conditions pre- vailing in the anthracite fields, and they want it so badly that they have shown their willingness, during one suspension after another, to suffer privation and to see their families suffer privation in order to bring about the changes in which they believe. 232 ANTHRACITE The anthracite workers may demand any one of five important changes in the coal fields : 1. They may demand a minimum wage based on the cost of decent, health- ful living. 2. They may demand, over and above this "living wage," a return for the extra hazards of the work which they are called upon to do. 3. They may insist that these wages shall increase in proportion to the in- creasing cost of living. 4. They may demand a share in the phenomenal prosperity of the an- thracite business. 5. They may demand the "full product" of their labor. The first three demands may be realized through the operations of a powerful trade union. The miners have a number of excellent examples before them. The railway brotherhoods, after years of unceasing activity, have at last reached a point where they command public confidence and exer- cise an authority so strong that they have secured a wage that represents decency, risk and, in the last year or two, the increase in the cost of living. Indeed, these unions have grown so powerful that in the last request for an increase of wages on the western lines, the men were willing to argue that they were entitled to some share in the prosperity of the railroads. The building trades, the printers THE FUTURE 233 and a few other trade groups have been able to secure decency wages through their trades union. The union is therefore an agency that the mine workers may rely upon to give them wage in- creases up to a certain point. The unions have generally failed to get a share in the prosperity of the industries for which they worked, unless full time work can be regarded as a share in prosperity. This failure has been due mainly to the facility with which the employers have been able to shift the burden of increased wages to the consumer. The manner in which the increase in wages to the anthracite workers has been used as an excuse for adding even greater burdens to the load carried by the anthracite consumer, is found, in dupli- cate, wherever the employers have a sufficiently great monopoly power. The result is that the apparent gains of a few workers have been more than neutralized by the general increase in the prices paid by all workers. Unions have bettered working conditions, raised wages, decreased hours and given to the workers a feeling of solidarity. From the very nature of the case, they cannot be an important factor in securing a fairer distribution of income, so long as the employers possess a monopoly power sufficient to enable them to use a wage increase as an excuse for adding that and more to the price of the product. The demand for the "full product" of labor, voiced so persistently of late years, presupposes 234 ANTHRACITE a complete overturn of the present economic organ- ization of society. So long as the owner of a piece of anthracite land, simply because he is the owner, is permitted to take a share of the product of the mines, there can never be a "full product" to the worker. So long as the owner of the mine machinery, simply because he is the owner, is able to take a share of the product of the mines, there can never be any "full product" to the workers. The term "full product" of labor pre- supposes an economic system under which income from industry goes only to those who render some active service to the community. Such a situa- tion cannot be realized until there is a very com- plete social ownership of all of the natural re- sources and of the social tools of production. This would mean, in the anthracite fields, that the community would own and operate the anthra- cite mines, that it would plan to pay wages equal to what each man produced, and that all forms of social value, due to the value of the coal in the ground, to the value of rights of way and the like, would go into the common treasury, to be used for the building of roads and high schools for the payment of accident and old age insurance, for the extension of public work, and for the doing of other things that are necessary to public welfare. Any such program obviously requires the com- plete readjustment of some of the most funda- mental economic relations. At the same time, many of the workers are convinced that nothing except a fundamental readjustment will success- THEFUTURE 235 fully bridge over the chasm of economic malad- justments that appear to lie on all sides of the present order. The facts stated in the chapter on the wages of the anthracite workers made it clear that there were reasons why the workers might well be dis- satisfied with the present economic order in the anthracite regions. The least the miners can hope for is a powerful, aggressive union that shall raise their wages to a level of living decency and make them reflect the risks of the trade and the increas- ing cost of living. The most that the miners can hope for is a complete readjustment of the eco- nomic situation in the anthracite fields that will make the whole people the owners of the field and the employers of the miners, and that will give to the miners, as workers, consumers and members of society, the full product of their labor 4. The Consumers and the Future The consimiers are the great majority of people at interest in the. anthracite problem. Under the present system of administration of the coal mines they pay the full cost of every change in the expense of production, in the wages of the workers or in any other matter affecting the economic aspect of the anthracite situation. It is as if the operators should say to the general public, "We will be glad to make any improve- ments that you suggest, to alter our wage scale, increase the safety of our mines, reduce the amount of child labor, modify the form of our combina- tion and take such other steps as you may advise, 236 ANTHRACITE but you will readily understand that we cannot hope to do these things without incurring addi- tional expense. Since our profits are only barely sufficient now, we see nothing for it but to add the cost of these admittedly necessary improvements to the price which you pay for your coal." The consumer is thus brought face to face with the monopoly problem which was discussed in the first chapter. The operators have proved them- selves sufficiently powerful to add to the price of the coal the increases that have come from changes and improvements, and in addition a tidy sum in return for their m.onopoly advantage. The coal owners charge "all that the traffic will bear." What shall the consumers do to secure just or "cost" prices? It is obvious that the consumers are powerless as individuals. Their one hope lies in concerted action. The monopoHsts of any needed resource, under the present system of property ownership, are able to force their will as against any one per- son, or as against any group of persons, unless they are powerfully equipped to contend in the economic arena. The machinery of government is the logical channel through which the consumers may express themselves. They are the body of the people, and the government of a democracy is a govern- ment of the people. The consumers are organized in the most pov/erful organization in the com- munity — the government. They would naturally employ this organization in their efforts to secure THE FUTURE 237 justice in their dealings with the anthracite interests. There are really only two ways in which the consumer may express himself through his gov- ernment. First, there is taxation; second, there is state ownership. Some people still insist on the possibilities of government regulation, but a quar- ter century of endeavor, during which State and Federal governments have vied with one another in their efforts to "regulate" and during which together with many other natural resource monop- olists, the anthracite coal owners have succeeded in perfecting a monopoly organization that gives them virtual control of the price of their product, has convinced many of the most ardent advocates of regulation that the government cannot succeed, in the face of highly organized private monopoly, in working out a successful scheme of regulation. The reason for the failure of regulation lies in the fact, already noted in the discussion of the political effects of monopoly, that the industries that are subject to regulation often prove to be so much stronger than the government that they can make and modify laws and direct public affairs in their own interest. Their control of the resources gives them a source from which to draw the huge surplus funds that are needed to run an organization in successful opposition to the estab- lished government. The best proof of the power of these great industrial combinations is their existence after a quarter century of endeavor to overthrow them. 238 ANTHRACITE The subject may be attacked from a different angle. The community may exercise its power through taxation. The value of the coal in the ground, and the values that are added to the coal as population increases and demand grows, are social values. That is, they are created by the entire community and are not in any sense the result of the activity of any single individual. A tax might be imposed by the community on the anthracite industry that would absorb the full value of the land — the full social value — irrespect- ive of the improvements that have been made upon it. The taxation method is simple. It is direct. It makes use of governmental machinery already in existence. It introduces no new principle and therefore is not subject to the objection of unwork- ableness. All of the arguments in favor of the possibilities of the plan are adequate, barring this one objection. It is proposed to put into opera- tion a system that will prove more drastic than any form of regulation ever pretended to be, against the opposition of the same group of in- terests that have been successful in thwarting previous attempts at effective regulation. These interests have refused in the past to permit regu- lation. What reason is there for supposing that they will now accept the operation of a system of taxation that will do practically what the regtda- tive measures passed heretofore have failed to accomplish ? Wherever the mine laws, health laws, child labor THE FUTURE 239 laws and new tax laws have added to the cost of producing coal, the operators have calmly put these additional costs in the column under ' ' Fixed Charges" and asked the consumer to foot the bill. What reason has the consumer to suppose that the same thing will not happen in the case of the tax on social values ? The logic of the situation seems to force the conclusion that as long as the owners of the anthra- cite fields retain their present monopoly power, the consumers are helpless before them. There is, then, only one thing for the consumers to do, and that is to eliminate the monopoly power of the anthracite interests, which lies in their owner- ship of a natural resource. The consumers have their government founded on the idea of political democracy. Side by side with this political democracy, dominating its activities in some directions, threatening its very existence in others, is the monopoly organiza- tion of coal interests. This organization is in many respects stronger than the government itself. Through its monopoly power it exercises such governmental functions as that of taxation. The organization secures laws and interprets them. It is a form of government existing at the same time and place as the political government which the citizens of the United States for a long time believed to be the only government in the land. A house divided against itself cannot stand. Two equally powerful governments cannot exist 240 ANTHRACITE at the same time in the same jurisdiction. One or the other is bound to assume a position of domi- nance. The consumers of the United States must choose between the two governments in the anthracite industry. If they favor monopoly profits, they should decide in favor of the anthra- cite interests. If, on the other hand, they believe that the democratic principles that underly the American system of political government are still valid, and still applicable to the affairs of the people, then the people themselves must under- take the management of this and of every other enterprise whose existence threatens the continu- ance of a government by the people. The workers in the anthracite regions are in a position where they can endure the present eco- nomic system if they are able to maintain a suffi- ciently powerful union. To the consumer, the continuance of the present economic system in the anthracite fields means not only the financial burden of monopoly profits, but a far more oner- ous burden in the form of an attack on the very foimdations of the established political govern- ment, which the consumers regard, and rightly so, as their one source of protection and power. The interests of the consumer clearly demand that the community, acting through the state or the national government, shall take possession of the anthracite coal fields, operate them in the interests of the community and sell the people coal at cost. Many recent precedents for this action THEFUTURE 241 exist. The government has developed irrigation projects and sold them to the people at cost; in its largest single venture it is developing trans- portation in the Panama Canal and selling it to the people at cost. The time seems to have come when the public interest demands that the govern- ment shall take over the anthracite coal fields and sell anthracite to the American people at cost. 6. Winners and Losers A continuance of the present system of owner- ship in the anthracite fields will benefit the oper- ators alone. They are the ones primarily inter- ested in the maintenance of things as they are. The workers and the consumers, making up the vast majority of those who are interested in the anthracite problem, will benefit only through some change in the present system. The change which seems most likely to benefit both workers and consumers is an economic reorganization that will make the community the owner and director of the anthracite field and of its administration. END 16 APPENDIX SHIPMENTS OF ANTHRACITE BY SIZES, LONG TONS, 1890 TO 1913 Sizes Above Pea Sizes — Pea and Smaller Total Quantity Per Cent Quantity Per Cent Shipment 1890 28,154,678 76.9 8,460,781 23.1 36,615,459 1891 30,604,566 75.7 9,843,770 24.3 40,448,336 1892 31,868,278 76.0 10,025,042 24.0 41,893,320 1893 32,294,233 74.9 10,795,304 25.1 43,089,537 1894 30,482,203 73.7 10,908,997 26.3 41,391,200 1895 32,469,367 69.9 14,042,110 30.1 46,511,477 1896 30,354,797 70.3 12,822,688 29.7 43,177,485 1897 28,510,370 68.5 13,127,494 31.5 41,637,864 1898 28,198,532 67.3 13,701,219 32.7 41,899,751 1899 31,506,700 66.1 16,158,504 33.9 47,665,204 1900 29,162,459 64.7 15,945,025 35.3 45,107,484 1901 34,412,974 64.2 19,155,627 35.8 53,568,601 1902 19,025,632 61.0 12,175,258 39.0 31,200,890 1903 37,738,510 63.6 21,624,321 36.4 59,362,831 1904 35,636,661 62.0 21,855,861 38.0 57,492,522 1905 37,425,217 60.9 23,984,984 39.1 61,410,201 1906 32,894,124 59.1 22,804,471 40.9 55,698,595 1907 39,332,855 58.6 27,776,538 41.4 67,109,393 1908 38,319,325 59.3 26,345,689 40.7 64,665,014 1909 36,437,762 58.1* 26,250,597 41.9* 62,688,359 1910 38,415,323 58.5* 27,297,438 41.5* 65,712,761 1911 41,728,071 59.2* 28,696,126 40.8* 70,424,197 1912 39,538,583 60.6* 25,662,670 39.4* 65,201,253 1913* 43,934,919 61.6* 27,360,797 38.4* 71,295,716 ■ — Mineral Resources of the United States, 1913, Part II, p. 889. * Exclusive of coal recovered by river dredges. (243) 244 APPENDIX EMPLOYEES, WORKING TIME AND TONNAGE 1890 TO 1913 Men Employed Days Worked A verage Tonnage Per Man Per Day A verage Tonnage Per Man Per Year 1890 126,000 200 1.85 369 1891 126,350 203 1.98 401 1892 129,050 198 2.06 407 1893 132,944 197 2.06 406 1894 131,603 190 2.08 395 1895 142,917 196 2.07 406 1896 148,991 174 2.10 365 1897 149,884 150 2.34 351 1898 145,504 152 2.41 367 1899 139,608 173 2.50 433 1900 144,206 166 2.40 398 1901 145,309 196 2.37 464 1902 148,141 116 2.40 279 1903 150,483 206 2.41 496 1904 155,861 200 2.35 469 1905 165,406 215 2.18 47» 1906 162,355 195 2.25 439 1907 167,234 220 2.33 512 1908 174,174 200 2.39 478 1909 1205] 1910 169,497 229 2.17 498 1911 172,585 246 2.13 524 1912 174,030 231 2.10 485 1913 175,745 257 2.02 52» — Mineral Resources of the United States, 1913, Part II, p. 753. INDEX Accidents, anthracite, 104 Accidents, anthracite and rail- roading, 105 American standard of living, 144 Anthracite and monopoly, 21 Anthracite and the govern- ment, 221 Anthracite bookkeeping and wages, 130 Anthracite carriers and govern- ment authority, 222 Anthracite carriers, dividends paid by, 168, 197 Anthracite carriers, profits of, in recent years, 171 Anthracite carriers, stock rat- ings of, 169 Anthracite combination, activ- ities of, 158 Anthracite combination and prices, 93 Anthracite combination and railroad unity, 58 Anthracite combination, com- munity of interest estab- lished, 59 Anthracite combination, data on, 50 Anthracite combination, elimi- nation of independent opera- tors, 60 Anthracite combination, ex- tent of, 49 Anthracite combination in early years, 50 Anthracite combination in 1873, 51 Anthracite combination in 1876, 51 Anthracite combination, inter- locking directorates and, 60 Anthracite combination, net results of, 196 Anthracite combination, organ- ization of, 55 Anthracite combination, power of, 64 Anthracite combination, rea- sons for, 54 Anthracite combination, rea- sons for organizing, 56 Anthracite combination, recent developments of, 55 Anthracite combination, re- sults of, 159 Anthracite combination since 1898, 54 Anthracite combination, suc- cess of, 157 Anchracite combination, use of Lehigh Valhy in, 58 Anthracite consumers, obliga- tions of, 84 Anthracite consumers, rights of, 84 Anthracite, cost of marketing, 92 Anthracite, cost of producing, 87 Anthracite, cost of producing, illustration, 88 Anthracite, cost of production, specific items in, 88 Anthracite costs, distribution of, 91 Anthracite dividends, 160 Anthracite earnings, 167 Anthracite, extent of consump- tion, 45 Anthracite freight rates, 164 Anthracite, imoortance of, 144 Anthracite, importance of, to consumers, 66 (245) 246 INDEX Anthracite industry, relation to consumers, 46 Anthracite interests, conflict of, 227 Anthracite labor, conditions surrounding, 107 Anthracite labor, economic status of, 97 Anthracite labor, risks of, 103 Anthracite monopoly, basis for, 21 Anthracite monopoly, basis of, 49 Anthracite monopoly, char- acter of, 49 Anthracite monopoly, larger results of, 201 Anthracite, monopoly lesson of, 196 Anthracite owners, status of, 230 Anthracite prices and the con- sumer, 197 Anthracite prices, recent move- ments of, 85 Anthracite problem, charac- teristics of, 43 Anthracite problem, parties to, 42 Anthracite problem, statement of, 42 Anthracite problem, summary of, 63 Anthracite, production of, 44 Anthracite production, restric- tion of, 52 Anthracite profits, 153 Anthracite profits and land values, 173 Anthracite profits and railroad •- profits, 161 Anthracite profits, basis for determining reasonableness of, 171 Anthracite profits, increase of, 156 Anthracite profits in recent years, 161 Anthracite'profits, measure of, 170 Anthracite profits, reasonable basis for, 177 Anthracite prosperity, 160 Anthracite, relative prices of, since 1890, 86 Anthracite transportation, pro- fits from, 156 Anthracite supply, duration of, 48 Anthracite, supply of, 46 Anthracite, use of, 43 Anthracite wage, business as- pects of, 128 Anthracite wage, inadequacy of, 137 Anthracite wages and income, 135 Anthracite wages and living decency, 27 Anthracite wages and railroad wages, 106 Anthracite wages and physical efficiency, 118 Anthracite wages and the cost of living, 141 Anthracite wages and the labor market, 110 Anthracite wage scale, 115 Anthracite wages, increase of, 145 Anthracite wage, social objec- tions to, 137 Anthracite workers, demands of, 232 Anthracite workers, status of, 231 Anthracite workers, wage rates of, 197 Anti-trust agitation, 24 Average annual earnings and real wages, 151 Average earnings, anthracite labor, 101 Average earnings, bituminous miners, 102 INDEX 247 Business for profits, 76 Business for service, 79 Business practice and anthra- cite wages, 129 Capital and investment re- turns, 77 Capitalization, methods of, 78 City land values and monop- oly, 20 Classified earnings, anthracite, 116 Co-operation, growth of, 156 Co-operation, growth of, in business, 26 Combination and monopoly profits, 18 Combination and the con- sumer, 27 Combination, development of, 27 Combination, effect on prices, 53 Combination, effects of, on prices, 18 Combination, reasons for, 26 Competition and business ex- perience, 25 Competition and cost prices, 17 Competition and group con- sciousness, 154 Competition and prices, 26 Competition and the con- sumer, 26 Competition as the life of trade, 24 Competition, danger of an- thracite, 57 Competition, dangers of, 26 Competition, decrease of, 27 Competition, disasters of, 26 Competition, historic basis of, 25 Competition, lessons of, in the anthracite field, 54 Competitive price level, 28 Consumer and low prices, 74 Consumer and production, 67 Consumer, obligations of, 70 Consumer, position of, 1912, 184 Consumer, responsibilities of, 68 Consumer, rights of, 69 Consumer, status of, 66, 235 Consumer, viewpoint of,|65 Consumers and competition, 26 Consumers and the burden of monopoly, 199 Consumers, demands of, 236 Consumers, increased burden on, 1912, 187 Consuming.'public and individ- ual consumers, 65 Consuming public, rights of, 65 Cost of living and anthracite wages, 141 Cost of living, increase in, 142 Cost of living, scope of, 142 Cost of marketing anthracite, 92 Cost of producing anthracite, 87 Cost price, meaning of, 17 Cost prices and physical assets, 28 Democracy and special privi- lege, 220 Democracy, basic principles of, 228 Distribution, ownership as an element in, 23 Dividends, anthracite, 169 Dividend rates, anthracite, 97 Earning power and prices, 82 Earnings of anthracite miners, 145 Economic conflict and anthra- cite, 42 Employment, extent of, 190 Fair anthracite wages, 152 Fair prices for anthracite, 94 248 INDEX Family expenditures, 120 Food costs, 121 Free land and monopoly, 36 Freight rates, anthracite, 164 Freight rates and anthracite profits, 162 Government and anthracite, 221 Government regulation, rea- sons for failure of, 237 Group consciousness, lack of, 154 Income and anthracite wages, 136 Income from work and owner- ship, 211 Incentive and private property, 40 Independent operators, con- trol of, through contracts, 62 Independent operators, elimi- nation of, 60 Index of real wages, 151 Inequality, effects of monopoly on, 208 Labor, anthracite, status of, 97 Labor cost and prices, 1 79 Labor costs, anthracite, 88 Labor costs, increase of, and increased prices, 180 Labor market and anthracite wages, 110 Labor market and social obli- gations, 140 Lackawanna Railroad, operat- ing statistics for, 131 Land and production costs, 20 Land monopoly, illustration of, 20 Land, monopoly of, 19 Land ownership as monopoly, 19 Land problem and monopoly, 20 Land, social character of, 33 Land values and anthracite profits, 174 Land value increase, instances of, 35 Lehigh and Wilkes-Barre Coal Co., statement of operations, 130 Lehigh VaUey Railroad, operat- ing statistics of, 133 Living on income, 213 Living wage, elements in, 119 Living wage for anthracite workers, 125 Living wage, meaning of, 114 Monopoly and anthracite, 21 Monopoly and inequality, 208 Monopoly and land owner- ship, 19, 20 Monopoly and resource owner- ship, 205 Monopoly and special privi- lege, 19 Monopoly and work oppor- tunities, 202 Monopoly, as taxing power, 216 Monopoly, control of, over Uvelihood, 209 Monopoly, dangers of, 224 Monopoly, definition of, 17 Monopoly, economic effects of, 201 Monopoly, example of, 17 Monopoly, failure of 225 Monopoly, general aspects of, 201 Monopoly, larger menace of, 200 Monopoly, measure of results from, 41 Monopoly and monopoly price, 76 Monopoly, nature of, 17 Monopoly, not final, 4 1 Monopoly of resources, power through, 19 Monopoly, political effects, 216 INDEX 249 Monopoly power, 19 Monopoly power and increased prices, 185 Monopoly power, character of, 17 Monopoly, power of, over the worker, 203 Monopol/ price, content of, 1 8 Monopolr price, example of, 75, 18 = Monopol/ price, fixing of, 75 Monopoly price, principle of, 75 Monopoly principle and an- thracite, 84 Monopoly profits, basis for, 18 Monopoly profits, redefined, 28 Monopoly, social effects of, 207 Monopoly, sources of, 17 Monopoly, success of, 38 Monopoly taxes and anthra- cite, 219 Monopoly, test of, 29 Monopoly, use of surplus labor in, 204 Monopoly, will it work? 29 Natural resource control, basis for, 229 Natural resource monopoly and private capital, 43 Natural resource monopoly and public controversy, 43 Natural resource monopoly and public welfare, 64 Operators, advantage of, 178 Operators, gains of, 190 Opportunity and American Hfe, 31 _ Opportunity, denial of, through monopoly, 214 Opportunity through owner- ship, 31 Ownership and distribution, 23 Ownership, arguments in favor of, 32 Ownership and income, 205 Ownership and opportunity, 3 1 Ownership and private mono- poly, 34 Ownership and property in- come, 212 Ownership concentration and monopoly, 23 Ownership, concentration of, and monopoly, 38 Ownership, results of, 34 Percentage contracts, control of operators through, 62 Physical efficiency and anthra- cite wages, 118, 127 Physical valuation, and reason- able prices, 83 Price increase and labor cost, 181 Price increase, 1912, reasons alleged for, 192 Price increases, 1912, 183 Price increases, reasons as- signed for, 183 Price making, methods of, 74 Prices and earning power, 82 Prices and profits, 77, 179 Prices and physical valua- tion, 83 Prices, anthracite increase in, 85 Prices, effect of combination on, 53 Private ownership in natural resources, 33 Private property and oppor- tunity, 40 Private property an incentive, 40 Private property, logic of, 39 Private property, test of, 36 Production costs and increased prices, 193 Production costs, anthracite, 192 Production of anthracite, 44 Purchasing power, over an- thracite, 197 250 INDEX Profits and prices, 77, 179 Profits and the 1912 agree- ment, 191 Profits, extent of, 199 Profits in anthracite, 153 Profits, increase of, 156 Property and service income, 210 Railroad earnings, anthracite carriers, 167 Railroad profits and anthracite profits, 161 Railroad unity and anthracite combination, 58 Reading interests and anthra- !■*( cite combination, 52 Reading interests, organization of, 53 Real wages, anthracite, 148 Reasonable prices, 72 Reasonable prices, consumer and, 73 Reasonable prices, definition of, 73 Reasonable prices, measure of, 73 Reasonable profits, basis for, 78, 171 Resource monopoly, complete- ness of, 21 Resource monopoly, economic power of, 207 Resource monopoly, success of, 38 Resource ownership, arguments for, 32 Resources and monopoly, 19 Resources, private monopoly of, 31 Risks of anthracite labor, 103 Service and the business view- point, 80 Sliding scale, results from, 182 SmaU profits, era of, 153 Social institutions and social values, 37 Social success, measure of, 41 Special privilege and American government, 220 Special privilege and monop- oly, 19 Special privilege, dan2;er of, to democracy, 220 Special privilege, taxing power of, 219 Standard of living, 121 Standard of living, cost of, 122 Standard of hving, cost of, for anthracite worken, 124 Strike of 1912, lessons from, 194 Strike of 1912, results of, 178 Surplus labor and monopoly power, 294 Taxation, possibilities of, 238 Taxing power and monopoly, 216 taxing power, growth of, 217 Temple Iron Company and anthracite combinstion, 60 Trade, advantages of competi- tion in, 24 Trusts, public attitude toward, 24 Unmined anthracite, 47 Wage adequacy, measure of, 113 Wage adequacy, phases of, 118 Wage agreement, 1912, 182 Wage contract and social ethics, 139 Wage increase and increased prices, 179 Wage increase, anthracite, 146 Wage increase 1912, extent of, 189 Wage rates, anthracite labor, 100 Wage rates in recent years, 197 Wage scale, anthracite, 115 INDEX 251 Wages and the labor market, HI Wages and the 1912 agree- k ment, 188 Wages, anthracite, adequacy of, 112 Wages, anthracite, and other industries, 107 Wages anthracite, and other mine wages, 99 Wages, anthracite labor, 99 Wages, anthracite, recent changes in, 117 Wages, basis for determining, 139 Wages, increase in, 178 Wages must support faroilies, 140 Wages, Pennsylvania coal mines, 101 Workers and owners, 2 1 1 Workers, anthracite, possibili- ties for, 98 Workers, benefits of monop- oly to, 200 Workers, future status of, 132 Workers, status of, 1912, 188 Yearly earnings, anthracite and other industries, 108 Yearly earnings, anthraxrite miners, 101 IMPORTANT WINSTON PUBLICATIONS THE CRY FOR JUSTICE AN ANTHOLOGY OF THE LITERATURE OF SOCIAL PROTEST Containing the writings of philosophers, poets, novelists, social reformers and others who have voiced the struggle against social injustice. Selected from twenty-five languages ; covers a period of five thousand years. BY THE MASTER SPIRITS OF ALL AGES The "Cry for Justice" has been culled from the recorded literature of all ages and compacted into this one epoch-making volume. This is the first effort that has been made to cover the whole field of the literature of social protest, both in prose and poetry, and from all languages and times. Since a number of prominent authorities assisted the editor this volume is the prod- uct of a number of minds ; and the collection represents not its editor, but a whole movement, made and sustained by the master-spirits of all ages. ILLUSTRATED WITH REPRODUCTIONS OF SOCIAL PROTEST IN ART The work is thoroughly indexed. The material is classified in seventeen books, under the following titles: /. Toil. 2. The Chasm. 3. The Outcast. 4. Out of the Depths. 5. Revolt. 6. Martyrdom. 7. Jesus. 8. The Church, g. The Voice of the Ages. 10. Mammon. 11. War. 12. Country. I J. Children. 14. Humor. 15. The Poet. 16. Socialism. 17. The New Day. In addition, there are a complete Index of Subjects and a full Index of Authors. Brief Biographical Notes give the infor- mation desired about all authors represented. 891 pages. TWO STYLES OF BINDING ARE OFFERED Cloth Binding, vellum cloth, stamped in gold on side (i»rt /> a and back, price (very low for so large a book) Net «P^»"" Three-quarter Leather Binding, a handsome and du- rable library style, specially suitable for presentation, q»Q rn price Net «ptl»«Jll THE JOHN C. WINSTON COMPANY PUBLISHERS - PHILADELPHIA IMPORTANT WINSTON PUBLICATIONS The "International" Encyclopedia Prose and Poetical Quotations By WILLIAM S. WALSH Author of "The Handbook of Literary Curiosities," "Curiosities of Popular Customs," etc. This work is destined to supplant all other works on the subject because it is newer, fuller, and more satisfactorily arranged for ready reference, and is sold at a reasonable price. Notable Features that Distinguish The ''International" Encyclo- pedia of Prose and Poetical Quotations from Other Works of this Kind First — Any quotation can be located if only one word is remembered. Second — The sayings of any author are instantly accessible. Third — A suitable quotation on any subject can be quickly selected. Fourth — The contents are so complete as to meet the needs of writers, speakers, librarians , ministers lecturers, scholars, and its logical arrangement specially adapts it for use in the library, the oflSce and the home. The main part of the work consists of a Dictionary of American, English and Foreign Quotations grouped under sub- jects, arranged alphabetically. An Exhaustive Concordance is appended to the work, by which every important word in the Dictionary of Quotations can be found and referred to with its context. A List of all Authors Quoted, gives instant reference to any quotations from their writings. A Topical Index of Subjects, with cross references, completes the most convenient system of research ever devised for a book of this kind. The "International" Encyclopedia quotes from nearly 1,300 different authors, and contains about 1,100 pages. Price Bound in Cloth, with gold-embossed cover aq «/% design $O.UU THE JOHN C. WINSTON COMPANY PUBLISHERS - PHILADELPfflA IMPORTANT WINSTON PUBLICATIONS NOTABLE WOMEN IN HISTORY By WILLIS J. ABBOT Author of "Blue Jacket" Series, "Battle Fields and Camp Fires," "Battle Fields of 1861," "Battle Fields and Victory," "American Ships and Sailors," and other historical works. The vital part played by women in all periods of the world's history and progress is not often fully realized. Not only have they ruled as wives of great men, as crowned monarchs, or by their sheer force of character in the propaganda of reform and in arts, letters and the drama, but many, indeed, of the world's most influential women have stood behind the throne and swayed nations. For the first time in the history of literature the whole story of woman's notable achievements has been adequately summed up in Notable Women in History. Notable Women in History is a beautiful book of 448 pages, 6| X 9 inches, with gilt edges at top, printed in large type on high grade book paper, with thirty-two full-page half-tone illustrations printed on special coated paper, richly bound in red cloth, stamped in gold. Price, $2.40, Postpaid The Factories and Other Lyrics By MARGARET WIDDEMER The volume contains the widely quoted poem of "The Factories," a poignant protest against the dwarfing of all the "little sisters" of industry, and many others before which lovers of good poetry, and many who usually scoff at poetry and poets, will delight to pause. In spirit and content the poems range aU the way from the gayest of ballads to the solemn-echoing "War March," full of heartbreak and wailing bugles. Miss Widde- mer has the poet's insight into many moods and many times, and withal the gift of spontaneous and haunting music. The Chicago Evening Post says: "Her right to a high place is proved time and again. ... A remarkable book." 128 pages. 12mo. Cloth; gilt top. $1.00 Net THE JOHN C. WINSTON COMPANY PUBLISHERS - PHILADELPHU IMPORTANT WINSTON PUBLICATIONS WINSTON'S CUMULATIVE ENCYCLOPEDIA Is Kept Constantly Up-to-Date Winston's Cumulative Encyclopedia is a comprehensive encyclopedia that is kept constantly up-to-date by means of annual additions of new material inserted in its proper place in the printed books, without bother or expense, without having to send the books back, without loosening the printed pages or affecting the binding or shape of the books. Protected by three new patents — always up-to-date — always records the latest information on every important topic — is always newer than the newest work published because it can be kept up-to-date more easily than a new work can be printed. nils EVERY REQUIREMENT OF A COMPLETE WORK OF REFERENCE Winston's Cumulative Encyclopedia is planned to include the material facts on all subjects covering the whole ra ^e of human knowledge — giving exactly what everyone we to know on every encyclopedic topic. It has been special e- pared for busy, practical men and women and for childr ho require supplemental aid in their studies, and has been a^ .ed by the city schools of Boston and leading educational institu- tions all over the country. More usable than higher- oriced works of reference. Expert editors have put all the needed facts and dafc n the least possible compass, without sacrificing clearness or co. )1ete- ness, giving in ten volumes (each 65 x 9 x If ins.) a w -h of information that ordinarily would run into twenty or thi- , vol- umes — with a corresponding saving in cost. Think of it ! Ten brimful voltunes for only a few cents a day, in easy monthly payments. 5,600 pages, 40,000 subjects, 2,750 illustrations ;olored plates and maps. Complete in ten volumes. Specimen pages, description of the cumulative ;ystem, details of bindings, and prices will be furnished on req^ st. THE JOHN C. WINSTON COMPiJVY PUBLISHERS - PHILADl PHU UNIVERSITY OF CALIFORNIA, LOS ANGELES THE UNIVERSITY LIBRARY This book is DUE on the last date stamped below MIM1 61949 51 y 3Sf ^MX( iswm MAY 5 m&i r~ ^^*^ .\^iV APR 12 15 rv/ E D DESK 1955 JAN& JANlV^y nRt aor2pw<^ Form L-9 23ni-2, '13(3205) .-.i:iJ UNIVBRSITY OF CALIFORNIA AT LOS ANGELES LIBRARY 3 1158 00922 8254 '/ \ PLEA«5r DO NOT REMOVE THIS BOOK CARD University Research Library THFRN REGIONAL LIBRARY FAC