■'X'Xv.v.vX' '-* ' 
 
 

 
 JV^ 
 
 ;iTY OF CALIFORN 
 LOS ANGELES 
 
 THE GIFT OF 
 
 MAY TREAT MORRISON 
 
 IN MEMORY OF 
 
 ALEXANDER F MORRISON
 
 THE PLAIN FACTS 
 
 AS TO 
 
 THE TRUSTS AND THE TARIFF
 
 T^^^^- 
 
 m^ ^"*-^
 
 THE PLAIN FACTS AS TO 
 
 THE TRUSTS and THE TARIFF 
 
 WITH CHAPTERS pN 
 
 The Railroad Problem and Municipal Monopolies 
 
 BY 
 
 GEORGE L. BOLEN 
 
 Neto Yorfe : 
 THE MACMILLAN COMPANY 
 
 LONDON: MACMILLAN & CO.. Ltd. 
 1902
 
 COPTKIGMT, 190a, BT 
 
 THE MACMILLAN COMPANY. 
 Set up and electrotyped June, 1902.
 
 ^5 p 
 
 6 
 
 PREFACE. 
 
 This book is written with the belief that there is no 
 
 sufficient reason why sound knowledge of the trusts and 
 
 the tariff should continue to be confined so narrowly to 
 
 the few. To understand these, which, with connected 
 
 topics, are the most important questions of the day — 
 
 political, economic, and social — the average man of some 
 
 education does not seem to lack capacity. The merchant, 
 
 Pi the wage worker, or the farmer, discerns keenly the 
 
 jv slightest change for better or worse in the conditions by 
 
 cc which he is directly affected. Could he not carry his 
 
 ^ thinking to causes further back — to conditions that affect 
 
 him less closely ? When evil, the former conditions, such 
 
 g as an ordinary fall in wages or profits, are temporary, and 
 
 '2. can be improved, by moving or by varying one's effort ; but 
 
 (K the latter conditions, after a lapse of time not very long, as 
 
 ' when changing methods gradually take away a person's 
 
 occupation, are of momentous permanence, and when not 
 
 ^ foreseen may hold him down inexorably. Among the 
 
 flc socially beneficent changes of the latter class are others, 
 
 continually approaching, which are portentous to all, and 
 
 o which are only to be prevented by timely action from 
 
 £ the many. 
 
 Not only ou^^/it the average man to carry his thinking 
 further, to become more intelligent in citizenship and 
 more capable in business, but it seems that he desires to 
 do so. As far as leisure permits, he reads the mass of 
 matter placed before him, and with an intention to know, 
 as well as to be entertained. Is not his lack of economic
 
 vi Preface. 
 
 knowledge due chiefly to the fact that it is not served to 
 him ? That which he gets is too often a one-sided view 
 from partisan sources ; and when it comes from the ablest 
 and fairest writers, it requires too much study, and too 
 much previous information, to be generally appreciated. 
 
 The attempt in this book, therefore, is to gather up 
 and convey to the general reader, busy with every-day 
 affairs, a considerable measure of that deeper economic 
 and political knowledge which is usually confined to 
 men of special education or experience. Both sides of a 
 question are presented, but only so far as the truth seems 
 to demand, not with effort to say as much for one side as 
 for the other. For the views presented, it is hoped 
 that the reasons given will be sufficient evidence of 
 soundness. The object is to enable the reader to un- 
 derstand so easily and clearly that he will not rely 
 blindly on platforms and speakers. 
 
 The authorities mainly followed, it will be seen from 
 the foot-notes, are men of established leadership, who 
 have written within close view of American conditions as 
 they exist to-day. The list of books cited is given to 
 avoid printing full titles in the notes. Most of the sta- 
 tistics are taken from government reports, and cur- 
 rent facts from the reliable periodicals cited. Some ad- 
 ditional facts for Part I. are inserted on its closing page, 
 and a few similar additions will be noticed near the 
 close of Part II. The matter was chiefly written last 
 fall and winter, and proofs of the pages in type have 
 been finally revised during the last two months. 
 
 George L. Bolen. 
 
 Jackson, Mich., June 2, 1902.
 
 CONTENTS. 
 
 Part I. 
 
 The Plain Facts as to the Trusts. 
 
 Chapter. Page. 
 
 I. Origin and Purposes ...... 3 
 
 II. Possibilities for Good and for Evil . . . .17 
 
 III. Kinds of Monopolies ..*... 38 
 
 IV, The Railroad Problem 44 
 
 V. Municipal Monopolies . . . . . •91 
 
 VI. Remedies for the Evils of Trust Monopolies . .112 
 
 VII. The Proper and Necessary Measure of Monopoly . 160 
 
 VIII. The Evil of Railroad Competition . . . .190 
 
 IX. The Trusts and the Future of Society . . . 208 
 
 Part II. 
 
 The Plain Facts as to the Tariff. 
 
 X. Foreign Trade and Protection 
 
 XI. The Future of Protection in America 
 
 XII. The Arguments for Protection 
 
 XIII. Protection and Wages ... 
 
 XIV. Protection and Recent Prosperity 
 XV. The Tariff Question as it Stands To-Day. 
 
 239 
 
 273 
 313 
 356 
 387 
 405
 
 LIST OF BOOKS CITED. 
 
 ( The date given is the year in which the book came from the author. ) 
 
 Adams, Henry C. Public Debts. 1887. New York : D, Appleton & Co. 
 Bowen, Francis. American Political Economy. 1870. New York : 
 
 Charles Scribner's Sons. 
 Bullock, Charles J. Introduction to the Study of Economics. 1 897. 
 
 New York : Silver, Burdett & Co. 
 Clark, J. B. The Control of Trusts. 190I. New York: The Macmillan Co. 
 Coler,Bird S. Municipal Government. 1900. New York: D. Appleton & Co. 
 Collier, William M. The Trusts. 1900. New York : Baker & Taylor Co. 
 Dabney, W. D. Public Regulation of Railways. 1889. New York: 
 
 G. P. Putnam's Sons. 
 Ely, Richard T. Monopolies and Trusts. 1900. The Macmillan Co. 
 Hadley, Arthur T. Economics. 1896. New York : G. P. Putnam's Sons. 
 Hadley, Arthur T. Railroad Transportation. 1885. G. P. Putnam's Sons. 
 Ingram, J. K. Article on Political Economy, Encyclopedia Britannica. 
 
 Vol. XIX. 1885. New York : Charles Scribner's Sons. 
 Jenks, Jeremiah W. The Trust Problem. 1900. New York : McClure, 
 
 Phillips & Co. 
 Levasseur, E. The American Workingman. 1900. The Johns Hopkins Press. 
 Nettleton, A. B. Trusts or Competition. 1900. Chicago : Leon Pub. Co. 
 Newcomb, H. T. Railway Economics. 1898. Philadelphia : Railway 
 
 World Publishing Co. 
 Patten, S. N. The Economic Basis of Protection. 1890. Philadelphia : 
 
 J. B. Lippincott Co. 
 Political Science Quarterly. Boston and New York : Ginn & Co. 
 Roberts, Ellis H. Government Revenue. 1884. Boston: Houghton, 
 
 Mifflin & Co. 
 Rogers, J. E. Thorold. Article on Free Trade, Encyclopedia Britannica, 
 
 Vol. IX. 1878. Boston : Little, Brown & Co. 
 Shearman, Thomas G. Article on Free Trade, Encyclopedia of Social 
 
 Reforms. 1898. New York : Funk & Wagnalls Co. 
 Spahr, Charles B. America's Working People. 1900. New York : 
 
 Long;mans, Green & Co. 
 Stebbins, Giles B. American Protectionist's Manual. 1883. Chicago: 
 
 C. H. Kerr & Co. 
 Sumner, William G. History of Protection in the United States. 1876. 
 
 New York : G. P. Putnam's Sons. 
 Von Halle, Ernest. Trusts. 1895. New York: The Macmillan Co. 
 Wright, Carroll D. Industrial Evolution of the United States. 1895. 
 
 Meadville, Pa. : Flood & Vincent.
 
 PART I. 
 THE PLAIN FACTS AS TO THE TRUSTS.
 
 CHAPTER I. 
 
 ORIGIN AND PURPOSES. 
 
 The First and Greatest. — The purpose for which most 
 of the trusts have been organized is some degree of 
 monopoly. The advantage of being practically alone in 
 a business, and able to raise price without losing cus- 
 tomers, can easily be imagined by a business man. Both 
 the name and the purpose were learned from the first 
 and greatest of all the trusts — the Standard Oil Com- 
 pany, worth ;^842, 000,000 at the highest market price 
 of $842 a share (May, 1901) and paying ;^48, 000,000 
 in dividends in the year 1900. Here market value rose, 
 as usual with corporations, until the dividend rate was 
 about 6 per cent.^ The name trust was derived from 
 the organization by the leaders of the Standard, in 1882, 
 of a number of petroleum refiners in Pennsylvania, 
 Ohio, and adjacent states, into one consolidated con- 
 cern, managed by trustees for all the separate refin- 
 ing corporations, of each of whose stock the trustees 
 were given a majority to hold and vote. During the 
 preceding eleven years the separate corporations had 
 
 > Of course, the total is not a selling value when the property of a cor- 
 poration is based on market prices of its shares. Offering many of them 
 for sale causes prices to decline. As the Standard paid ^48,000,000 again 
 in I901, while the price of its shares has lately ranged as low as $645, it is 
 to be presumed that investors do not expect a continuance of the large 
 annual dividends. At par value the Standard's capital is ^100,000,000, in 
 shares of ^100 each.
 
 4 The Plaiji Facts as to the Trusts. 
 
 been united by simpler agreement, and more or less from 
 the start had acted together, charging the same price for 
 oil, and diAiding territory in which to sell. They grad- 
 ually monopolized the oil refining business, driving out 
 independent refiners by selling oil for awhile in their 
 localities below a living profit, and by getting from the 
 railroad companies, as the principal shippers of oil, 
 freight rates materially lower than those charged to 
 competitive refiners. 
 
 Public Opposition Aroused, — The Standard trust from 
 the first was rich and powerful. By 1885 definite infor- 
 mation of its secret agreements with railroads began to 
 arouse public fear of monopolistic combination ; though 
 several years before the alarming extent of discrimination 
 by railroads was revealed by state investigations. Before 
 1890, the American Sugar Refining Company and various 
 other trusts having appeared in the meantime, anti-trust 
 legislation began to be agitated. The building up of one 
 shipper and the pulling down of his competitors, by means 
 of discrimination in freight rates, led to the enactment 
 by Congress of the Inter-State Commerce Law of 1887, 
 designed to secure for all shippers impartial railway ser- 
 vice. The Sherman Anti-Trust Law was passed by Con- 
 gress in 1 890, and similar laws have been made by the 
 legislatures of thirty-one states. But these laws have 
 had little or no effect to prevent the formation of trusts. 
 From lack of clear understanding on the part of their 
 framers, and of definite purpose, the laws have in most 
 cases not even checked the evil practices. With some of 
 the laws the main object perhaps was to gain party ad- 
 vantage by meeting a demand of the people, without 
 much concern as to effective results. In a few cases these 
 laws have been declared unconstitutional, for excepting
 
 Origin and Purposes. 5 
 
 from penalty combinations of workingmen or farmers.* 
 Trusts could not be lightly brushed aside. They rested 
 on economic causes too strong. 
 
 The Trust Craze. — Previous to the panic of 1893 many 
 trusts were organized ; including the American Tobacco 
 Co. (cigarettes), the American Book Co. (school books), 
 the American Cereal Co. (oatmeal), the United States 
 Baking Co. (crackers), the Diamond Match Co., and the 
 National Lead Co. But after 1898 the trust craze 
 reached its high-water mark. About two hundred 
 trusts now exist, occupying some division of the field 
 in nearly every general line of business.^ Large de- 
 mand for products at high prices, increasing dividends 
 and rising market value of shares, with the consequent 
 eagerness of people to invest money that hard times 
 had kept idle, then enabled the promoters of a new trust 
 to obtain from its shares and bonds the means to buy 
 out at enormous prices the separate concerns to be 
 
 1 Collier, 152. A decision of the United States Supreme Court in 
 March, 1902, setting aside the Illinois law for excepting farmers, will 
 have the result of setting aside laws with the same defect in twelve other 
 states. 
 
 ^The Number of Trusts. — Nettleton, page 295, gave at the beginning 
 of 1900 a list of 130 trusts, having each a capital stock of over ^10,000,000, 
 aggregating in all ^5,000,000,000. A long list, compiled by Byron W. 
 Holt, appeared in the Review of Reviews oi June, 1899 ; and another list of 
 163, corrected by him up to Dec. I, I901, and giving facts in some de- 
 tail, is published in the World Almanac for 1902. Perhaps the most 
 accurate count of industrial trusts is that of the national census of 1900, 
 from which pools and loose combinations are excluded. A summary of its 
 figures is given by Superintendent Merriam in the Atlantic for March, 1902. 
 The total is 183, with 2,203 plants, and with a capital of ;53, 569, 6 1 5, 808. 
 Their total output for the census year, ;^i, 661, 000. 000, shows that they 
 absorb less of the industrial field than is commonly supposed. The total 
 output of all manufacturing (not yet computed) is expected to reach about 
 ;? 1 3, 000, 000, 000. In iron and steel products there are 69 trusts, with 469 
 plants ; in food products 23, with 277 plants.
 
 6 Tlie Plain Facts as to the Trusts. 
 
 united, and to reserve for themselves great fortunes in 
 trust stocks readily convertible into cash. Trusts sprang 
 up like mushrooms, people buying everything offered 
 in stocks, without being particular to investigate the 
 promises of earnings. 
 
 Millions in It. — Such opportunities for a shrewd 
 financier or business solicitor to make money quickly, 
 the world never knew before. There have been mill- 
 ions in trust making for these promoters, for bank- 
 ers advancing capital, and for the separate concerns 
 selling out. The men of the latter have generally re- 
 mained in control of their plants sold, sometimes with- 
 out change of the concern's name ; and payment for 
 plants has been made chiefly in preferred stock or mort- 
 gage bonds of the new trust. The selling price has 
 usually been so high that whatever becomes of the 
 trust, the important concerns selling to it have been 
 richly rewarded for their part in its formation. Some 
 estimates in figures of promoters' profits are given in 
 Chapter II. 
 
 Large Capitalization. — To provide money from buyers 
 of the new shares, and plenty of common stock for pro- 
 moters, and to throw in extra to sellers of plants, the 
 total capital stock of a trust is made very large, from two 
 to five times the actual cost to reproduce the physical 
 property it buys, but perhaps not larger than as a mon- 
 opoly it might pay five or six per cent dividends upon 
 in the present flood tide of vast business and high prices 
 for products. The capital stock of an ordinary trust 
 ranges from ten to seventy-five millions of dollars. The 
 largest of all the trusts is one of the latest. This is the 
 United States Steel Corporation, organized in March, 
 1 90 1, under the leadership of J. Pierpont Morgan, by
 
 Origin and Purposes. 7 
 
 consolidating the Carnegie Steel Company with nine 
 other great concerns, most of which had previously been 
 formed by combination of smaller ones. Other concerns 
 were absorbed afterward.^ 
 
 Sale of Stocks and Bonds. — The bonds issued by a trust, 
 bearing a fixed rate of five or six per cent interest, and 
 secured by mortgage on property, are applied on the pur- 
 chase price of plants bought, and are sold for cash, at 
 about face value, to investors of large sums. The shares 
 of preferred stock, on which a fixed dividend of five to 
 eight per cent is paid first from net earnings, come next 
 in value to the bonds, being based on substantial property, 
 and are disposed of in a similar way. There have been 
 cases, it is said, in which bonds and preferred stock 
 exceeded the cash value of a business when fairly com- 
 puted. The shares of common stock, on which a divi- 
 dend of some percentage is paid if any balance is left 
 after paying the fixed dividend on the preferred stock, 
 
 1 The World's Greatest Corporation.— The total of the Steel Corpora- 
 tion's shares, nearly all issued to stockholders, is ^1,1 00,000,000, divided 
 equally in preferred and common stock ; and besides, it issued ^304,000,- 
 000 in 5 per cent bonds, all of which are believed to have been paid Mr. 
 Carnegie for his 60 per cent interest in the steel company bearing his 
 name. (Indus. Commission, Vol. XIII.) The Steel Corporation's total 
 capitalization is therefore ;? 1,404,000, 000. Its net earnings for its first 
 nine months, ending November 30, were 584,779,298, exceeding 10 per 
 cent on its stock. In August it was said to be negotiating for absorption 
 of the trust comprising the great iron companies of Tennessee and Ala- 
 bama ; and lately it was reported to have bought iron mines in Sweden. 
 The Steel Corporation supports a million people, counting families of em- 
 ployees, controls two-thirds of the American steel industry, owns 115 lake 
 ships, 6 railroads, 80 per cent of the known deposits of Lake Superior 
 iron, 105,000 acres of land in Pennsylvania, and leases 98,000 acres of 
 gas land. To this list must be added 50,000 acres of coal land recently 
 leased in West Virginia. See article in McClure's Magazine, Nov. I901, 
 and the corporation's full report in New York Financial Chronicle, Feb. 
 I, 1902.
 
 8 The Plain Facts as to the Trusts. 
 
 are sold at lower prices in the stock market, according to 
 prospects of earnings, and are divided liberally among 
 the promoters as payment for services, and among the 
 sellers of plants as extra portions of purchase price. 
 Only 9 out of 30 trusts reported their common stock as 
 sold for cash, and but i mentioned cash alone. Good 
 will was usually the consideration mentioned — earning 
 power prospective, or under favoring conditions.^ 
 
 Common Stock Based on Water has long been the rule 
 with American railroad and street car companies, the 
 necessary money being paid in on preferred stock or 
 mortgage bonds. The advantages of this method are 
 that the organizers need furnish only a little cash for start- 
 ing expenses, the rest being practically borrowed, and 
 that when monopoly gains arise they are hidden, being 
 but a low percentage on a capitalization doubled with 
 watered stock. Monopoly gains publicly known may 
 cause trouble, such as legislation to lower fares, or tax- 
 ation to take a share for the public. The later trusts 
 have usually issued preferred stock instead of bonds. 
 With such stock, though often similar to bonds in being 
 a lien on the property, the company's business is not 
 passed by the court to a receiver in case of failure to 
 pay the interest, but is left in control of its directors. 
 Except on false pretense of earning power, issue of 
 common stock on expectations requires some monopoly, 
 at least in good will not soon to be taken by a competitor. 
 
 • United States Labor Bulletin, No. 29. Good will here includes 
 patents and trademarks, and also the favor of customers. The latter kind 
 is often lost, to some extent, by entering a trust. By the census of I900 
 the trusts had a total capital of $3,569,615,808, but only $1,458,522,573 
 of tangible property ; less by $216,600,000 than the total of bonds and pre- 
 ferred stock, leaving for good will and water J2, 01 8, 000, 000. ( The At- 
 lantic, March, 1902.)
 
 Origin and Purposes. g 
 
 The Change from Trusts into Corporations. — Most 
 of the trusts are now regularly organized corporations, 
 though some are still united by pools or agreements. 
 The separate concerns forming the oil, sugar, and other 
 trusts united in each case into a single corporation about 
 ten years ago, laws having been enacted in some states 
 against combination by means of trustees holding and 
 voting the shares of stockholders, and courts having 
 decided such action to be outside the powers of a cor- 
 poration.^ In combining now, as a rule, the separate 
 
 ' " The Secrecy of the Trusts, their power to refuse information, and 
 their complete lack of responsibility, was indeed a very great danger." 
 (Von Halle, 109.) This very secrecy was evidence that the motive of 
 consolidation was not good — an indication of preparedness to resort to 
 bribery or corrupt lobbying. An evil influence from such organizations on 
 legislatures is inevitable (on courts also some have believed), in view of 
 the necessity they make for restraint by law ; though blackmailing legis- 
 lators sometimes propose a bill against a corporation to force it to buy them 
 off — demanding in one case it seems, as pay for passing a good bill, ^I50>- 
 000 for the party in power. (Jenks, 191.) Among the charges against 
 trusts, apparently truthful in a few cases, were attempting to blow up rival 
 plants, burning record books, stealing public documents, and mutilating court 
 records. The ablest lawyers were employed to draw the trust agreements, 
 embodying in them as little information as possible. And after the change 
 to corporations the secrecy in some cases continued. More publicity was 
 desired, but instead there was a more complete withdrawal from publicity. 
 " Nothing shows more clearly the mistake of the present anti-trust legisla- 
 tion. The trusts comply with the letter of the law only to more safely cir- 
 cumvent its intentions." (Von Halle, 102.) The Standard trust dissolved 
 into twenty separate corporations, but as the nine trustees held a majority 
 share of each, they continued to control as before, and have since increased 
 the stock of one, the present Standard Company, to be exchanged for the 
 shares of all the others. (Jenks, 114. ) 
 
 The Objection to Trust Stocks. — One reason why trust stocks, called 
 "industrials," are held in disfavor has been dishonesty in some cases by 
 managers, who, knowing disaster was to happen, sold out their stock and 
 threw losses on innocent buyers. There have evidently been cases where, in 
 order to lower their fellow stockholders' shares for their own buying, trust 
 managers have closed down plants, injuring the business, and reducing 
 workmen to idleness. Real prosperity in the company has been kept
 
 10 TJie Plain Facts as to the Trusts. 
 
 firms and corporations sell out their plants and business 
 to the one great new corporation that is to include them 
 all. Some of the largest combinations bought the shares, 
 not plants, of the uniting concerns. This method is de- 
 scribed further on. 
 
 Yet the Word Trust is Still Properly Used. — It has a 
 meaning of its own, distinct from that of the word cor- 
 poration. The latter means a company of persons, own- 
 ing and holding its capital in shares, organized to carry 
 on some business through directors and officers. The 
 word trust includes all this, but with the additional mean- 
 ing that it owns most of the plants in its line of business, 
 and holds in some measure a monopoly of the supply of 
 the commodity it produces, which monopoly enables it to 
 charge a higher price than its members could have ob- 
 tained while they were yet separate and competing pro- 
 ducers. 
 
 Latest Form of Trust. — The United States Steel Cor- 
 poration is a new form of trust, though but one among 
 a number of its kind, organized since 1898, and called 
 "parent" or " holding " companies. Its purpose is to 
 perform the service of owning and controlling the stock 
 of the separate corporations united ; that is, it owns the 
 shares for the owners — does for them the work of own- 
 ing and managing, and especially of uniting and harmon- 
 izing all their varied business. Its shares were exchanged 
 for the shares of the separate companies, according to 
 the differing values of the latter ; and being the majority 
 stockholder, it manages each of the companies through 
 its absolute power of choosing their directors. They still 
 
 hidden for the same purpose. (Jenks, i86, 214. ) In some cases, it has 
 been believed, trust managers buying their own company's shares made the 
 purchase a personal transaction when there was a gain, but a company 
 transaction when there was a loss. (/'. S. Quarterly, 1895, p. 2)i3-)
 
 Origin and Purposes. 1 1 
 
 exist as before, and operate their mills, though the Steel 
 Corporation succeeded in buying 99^4^ per cent of all 
 their stock. The remaining fraction of 5^ of i per cent 
 probably accounts for the frequent sales on the New 
 York stock exchange of shares of the Republic Steel 
 Company, one of the concerns united. 
 
 Its Business is to Own Stock. — The Steel Corporation^ 
 therefore, which has no mills, only an office, exists for I 
 the same purpose as did the old Standard Oil Trust, j 
 The difference is that the oil trust had no legal right to / 
 exist, not being incorporated, and resting on agreements 
 which the law forced the separate corporations to annul. 
 But the steel trust has taken as its business the owning 
 and voting of the stock of the companies it has united, 
 and has been legally incorporated to perform that service. 
 It manages each of them, and from its income, all de- 
 rived from dividends on their stock it holds, it pays the 
 dividends on its own stock. As dividends from the old 
 stock are used to pay dividends on the new, organizing 
 the Steel Corporation was not a watering of capital stock 
 in manufacturing except so far as it may have bought / 
 stock in its companies at inflated prices with its own / 
 stock, of which its total issue exceeded the total of the 
 united companies by ^484,000,000.* 
 
 ^ Detailed information of the Steel Corporation was given in testimony 
 to the Industrial Commission, Vol. XIII. 
 
 Railway Parent Companies. — In November, 1901, the Northern 
 Securities Company, with a capital stock of ^400, 000,000, was organized 
 in New Jersey to hold the stock of the J. J. Hill railway combination, 
 composed of the Great Northern, Northern Pacific, and Burlington systems. 
 As consolidation of parallel roads is contrary to their statutes or constitu- 
 tions, Minnesota and the states further west are seeking in the United 
 States Supreme Court to dissolve this parent company ; and consequently, 
 the Southern Securities Company, organized a few weeks later to hold the 
 stock of roads not yet made known, provided in its charter that state laws 

 
 1 2 The Plain Facts as to the Trusts. 
 
 Methods of Securing- a Monopoly. — With many of the 
 newer trusts there was doubtless little expectation among 
 the competitors combining, that theirs was to be a mon- 
 opoly of permanence. A manufacturer willingly enter- 
 ing sold to the combination because its promoters paid 
 high prices for his property, and still left him in charge 
 of his factory, with territory in which his branch was to 
 have all sales in reach, and in which he might go on 
 alone as before in case the combination should be dis- 
 solved. There is very little property that cannot be 
 bought if a price high enough is offered. A firm or cor- 
 poration not consenting readily to enter a new trust has 
 often been induced to join from fear that the trust w^ould 
 force it out of business by selling in its territory for less 
 than a living profit. An aggressive ink maker says he 
 was warned that he would be " crushed like a caterpil- 
 lar." A leading concern, specially desired to head the 
 list for the influence of its action upon others, may be in- 
 duced to join by offering an exceptional price, and by 
 tendering to its chief owner the presidency of the trust. 
 Sometimes a separate producer sells out for cash, not 
 taking any stock, and engages in other business. Pur- 
 chased plants not well equipped, nor favorably located, 
 are usually closed out by the trust, sooner or later. Some 
 other than the territorial basis for dividing business is 
 adopted where that is unsuitable. 
 
 Need Not Control All the Supply to be a Monopoly. — 
 The nearer a trust attains the position of a complete 
 
 were to be observed. By this method of parent companies, sometimes 
 called proprietary companies, the simpler agreement of community of 
 interest among leading owners is changed by adding the strength and per- 
 manence of the old trust combination. For twenty-five years the Pennsyl- 
 vania Company has existed as such a corporation, formed to unite control 
 of the companies it absorbed, such as the Fort Wayne and the Panhandle, 
 with the original Pennsylvania proper.
 
 Origin and Purposes. 1 3 
 
 monopoly, the better as a rule are its immediate chances 
 to get high prices from consumers, and the greater its 
 power to keep competitors out of its field. Though the 
 word monopoly originally meant control of the whole 
 supply, cases of absolute monopoly probably do not exist 
 aside from copyrighted books and patented articles. The 
 Standard Oil Company for some years has produced 
 from 80 to 85 per cent of the total American output of 
 refined petroleum, and in June, 1901, it bought out a 
 leading competitor of Cleveland — Scofield, Shurmer & 
 Teagle. The sugar trust at one time produced 98 per 
 cent of the total output. Yet a monopoly business fall- 
 ing short of completeness by 15 or 20 per cent may 
 often be more desirable to its owners than if it produced 
 the whole of the supply. The existence of competing 
 concerns, which are thought sometimes to be really 
 owned by the trust or in alliance with it, relieves it to 
 some extent from the public disfavor in which a mon- 
 opoly is held ; while a few weaker concerns in its field, 
 at the mercy of its monopolistic club, and sometimes 
 having to sell lower because too small to be depended 
 on for a supply, will not be able nor disposed to inter- 
 fere substantially with its designs. Even with an out- 
 put composing but half the supply of a commodity — 
 perhaps less — a producer, by withholding from mar- 
 ket, might obtain a price somewhat monopolistic in 
 a time of strong demand.^ Independent concerns per- 
 mitted to live make a good profit when the trust raises 
 price. 
 
 Monopoly Buying as well as Selling. — A strong 
 monopoly may be practically the only buyer of its raw 
 material, as well as practically the only seller of its fin- 
 
 1 Sidgwick, quoted by Bullock, 302.
 
 14 Tlic Plain Facts as to the Trusts. 
 
 ished product. In that case it may exact monopoly 
 gains at both ends, arbitrarily lowering the price at 
 which it buys, and raising the price at which it sells. 
 The Standard Oil Company has been the only important 
 customer of owners of oil wells. At times it paid the 
 well owners of a district very high prices for crude oil, 
 until the capital of a rival pipe line, having to pay as 
 much, was exhausted, forcing it to sell out cheap to the 
 Standard ; and then, having the w^ell owners in its power, 
 the Standard made its prices to them very low, some- 
 times forcing them to sell out to it also. Such action, 
 proved by testimony of well owners, has been admitted 
 by the Standard to be substantially true in some cases, ^ 
 
 ' Jenks, 155. Also in North American Review, June, 1901. 
 
 Some Extreme Cases of Forcing Down Price. — Producers of some 
 farm, forest, or mine products, on which price is not fixed by export to 
 world markets, may fall under the power of a trust as a monopolistic 
 buyer. The Big Four meat combination or pool, consisting of Messrs. 
 Armour, Swift, Morris, and Hammond, have regularly set and changed 
 prices for cattle in some markets. " They annihilate independent butchers 
 by cheaper sales through their own agents. If a seller of cattle refuses to 
 take the first bid, he is generally forced to accept a lower one. The pur- 
 chasing agents are instructed never to overbid each other. The principals 
 do not interfere with each other in certain localities. They bid jointly for 
 public contracts, and ruin those who dare to appear against them." (Von 
 Halle, Trusts, 1895, page 22.) The above was probably a true statement 
 of conditions when at their worst. 
 
 Possible in Various Lines of Business. — The leather trust noticeably 
 lowered the price of hides when it began business, as the cigarette trust did 
 with its kind of tobacco. (Von Halle, 70. ) The sugar trust claimed (New 
 York trust report of 1897) that by forcing down prices of raw sugar it had 
 lowered its cost of producing refined. Similar claims have been made of 
 the rubber trust's buying in .South America, from whose partly civilized 
 people, living in an interior wilderness, shrewd agents might get valuable 
 materials by trading cheap goods, and might so influence or force them as to 
 keep out rival traders. Tropical products are thus monopolized effectually, 
 being obtained in some cases, as with ivory in Africa, from animals or plants 
 becoming extinct. Obviously, by buying unitedly in a trust, instead of bid- 
 ding against one another, a number of buyers could save by lowering price,
 
 Origin and Purposes. 1 5 
 
 No Monopoly if Strong Concerns Refuse to Join. — In 
 
 some cases the promoters of a trust fail to obtain as 
 members one or more of the leading separate concerns. 
 The trust then has few of the advantages of a monopoly. 
 This was the case when Barnhart Brothers & Spindler 
 of Chicago refused to join the American Type Founders' 
 Company, organized in 1892. Being the most aggressive 
 firm of type makers in the country, with an annual busi- 
 ness at or near the first rank, they were beyond the reach 
 of threats or punishment. The new company obtained 
 some monopolistic advantage through its ownership of 
 the good will of old foundries not changed in name or 
 management, and through its possession of the services 
 of most of the original designers of new faces of type. . 
 
 But it never gained control of enough of the type output yX 
 to enable it to raise prices without good reason. 
 
 Partial and Local Trusts. — Some of the trusts organ- 
 ized since 1897 are not trusts in the full monopolistic 
 sense, but combinations of a portion of the established 
 concerns, formed to lessen (not destroy) competition, to 
 reduce expenses by consolidating management, to gain 
 perhaps the partial monopolistic advantage of controlling 
 a large portion of the supply, and perhaps most of all 
 sometimes to float the new combination's stock at the 
 high prices of the times. The Federal, the Republic, 
 and the National steel companies are each a combination 
 of a portion of the steel industry ; similar concerns are 
 
 though if supply fell short they would have to offer more to increase it. A 
 beet sugar factory, usually a monopoly buyer, must pay well to induce 
 farmers to grow beets. If they were to get into a rut of beet growing, and 
 be slow to give it up, advantage might then be taken of them. 
 
 A Trust Could Force Down Wages Likewise, but perhaps would not 
 thus provoke public hostility. When controlling practically an entire in- 
 dustry, a trust is a monopolistic buyer of its special kind of labor.
 
 1 6 The Plain Facts as to the Trusts. 
 
 the steel hoop, steel sheet, tin-plate, wire, and bridge 
 combinations. All these are now included in the Steel 
 Corporation, Outside of it are still a number of impor- 
 tant concerns. The American Locomotive Company- 
 does not include the Baldwin works at Philadelphia, 
 which are a much larger concern than any one of those 
 united. The combination will manufacture about two- 
 thirds of the total American output of locomotives. The 
 Amalgamated Copper Company includes the large mines 
 of Montana, but not the large mines of Michigan, one 
 of the latter being the second largest in the country and 
 the world. The flour trust includes many of the leading 
 spring wheat grinders of the Northwest, but not the 
 Pillsbury Mills at Minneapolis, the largest of all, and of 
 course not the hundreds of local mills in the grain states. 
 The concerns owning four of the large planing mills of 
 the Saginaw Valley have lately combined, to reduce gen- 
 eral expenses and lessen competition. Theirs is a local 
 trust, of which there are a number formed among brew- 
 ers and ice dealers, and sometimes among bakers. A 
 very small monopolistic trust is that of local newspapers 
 in Ann Arbor, Mich., owning for a time every newspaper 
 press in the city.
 
 CHAPTER II. 
 
 POSSIBILITIES FOR GOOD AND FOR EVIL. 
 
 Monopolies Odious for Three Centuries. — Monopolies 
 granted to favorites by the king, or sold for money, 
 having become odious three centuries ago, and a body 
 of law having since grown up against them, beginning 
 particularly with the English Monopolies Act of 1623, — 
 it is not surprising that the American people have re- 
 garded the trusts with disfavor and anxiety. Inherited 
 dislike of monopolies was deepened by the Standard Oil 
 Company's methods of destroying competition, so long 
 felt to be the life of progress in trade, and the safeguard 
 of low prices and fair treatment to consumers. But 
 monopolistic as they are, not all features of the trusts 
 are bad. Besides, as shown in their rapid increase, the 
 motive for consolidation is strong, and influences a large 
 proportion of the country's most important class, the 
 commanding captains of industry. The question there- 
 fore is how to direct the combining force, to avoid its 
 evils and to secure its advantages. 
 
 Trusts may Promote tlie Public Welfare in various ways. 
 
 By Making Best Goods. — First, the larger a corpora- 
 tion, as a rule, the better the goods it can produce. 
 When capital and trade reach largest proportions, the 
 labor of highest skill, and the world's best materials, 
 are at ready command. Scientific experts of the first 
 rank may then be employed, to devote all their time to 
 studying out improved processes and appliances. Pos- 
 2 17
 
 1 8 The Pla'ui Facts as to the Tj-usts. 
 
 sibilities of human progress might become decidedly 
 greater when utiHzed with the unHmited capital and 
 picked wisdom of the trusts, than when left to the desul- 
 tory efforts of hundreds of struggling competitors. 
 
 By Making Goods Cheapest. — Second, the larger a 
 corporation, as a rule, tlie cheaper it can sell the best 
 goods and services. A great trust can buy quickly the 
 latest machinery as it is introduced, and operate it with 
 that highest paid labor that turns out most and best 
 products, and at lowest cost per item, placing every man 
 where his product will be largest. Such a trust can 
 buy raw materials at the lowest prices, which are given 
 in sales of largest quantities, and can transport them 
 and its products at the lowest freight rates, which are 
 allowed for largest shipments. By combination it can 
 save, and apply toward reduction of the consumer's 
 price, many of the costs of general management, adver- 
 tising, traveling salesmen, and of multiplied agencies, 
 all of which costs are necessary for every one of sepa- 
 rate competitors. Combination also gives it the benefit 
 of the patents, trademarks, and special experience or 
 skill of every concern uniting. 
 
 Many Ways of Saving. — A trust can engage profit- 
 ably in making its own supplies, as the Standard Oil 
 Company makes barrels and cans, and like that com- 
 pany, can extract all the by-products worth the expense 
 of saving them. When handling bulky materials, it can 
 operate like the steel trust its own mines, ore fleets, and 
 
 ilroads, giving each mill a regular supply (very im- 
 portant) of raw materials, from the ships and mines in- 
 volving least expense and delay of transport. Like the 
 steel trust also, it can carry its products from their first 
 forms into forms nearer the finished commodities, chang-
 
 Possibilities for Good and for Evil. 19 
 
 ing steel into tin-plate, wire, and pipe. From its occu- 
 pation of the whole field, its managers can estimate 
 demand accurately, sav^e interest by dropping needless 
 varieties and keeping down the stock on hand, and avoid 
 making goods not wanted, whose accumulation lowers 
 prices ruinously, throws men out of employment, and 
 brings hard times. Reaching the highest limit in qual- 
 ity, and the lowest in cost, it can develop with its ample 
 capital an export trade throughout the world, employ- 
 ing additional labor, and increasing the country's busi- 
 ness. In short, a well managed trust can work its field 
 in every direction for all there is in it, and the vast 
 aggregate it thus saves it can divide with the public in 
 higher wages to its own workmen, and in lower prices 
 to consumers. 
 
 But are Trusts Organized to Confer all these Benefits on 
 the people ? Hardly. The fact that they can be con- 
 ferred is no evidence that they lidll be. Human nature 
 and business motive remain the same — certainly not less 
 alert to self-interest than heretofore. Likelihood of re- 
 ceiving these benefits regularly is swept away by men- 
 tion of the one word monopoly.^ 
 
 ' Trust Stocks for Savings. — It has been said that trusts benefit their 
 workmen and others by giving them a part in the ownership of industry, 
 through sale of shares on the stock exchange to buyers everywhere. The 
 present has even been called a time of cooperation or public ownership, 
 and ten years ago a time of individualism. But is there a real change for 
 the better? Scattered holders of a few shares act less than they are acted 
 upon. Instead of helping to direct a business, they only add to the capital 
 and power centralized with the few by whom a trust is controlled. Safer 
 means of investing savings were in reach before, in local bank and factory 
 stock, and in railroads and mines, though more investment securities, safe 
 and readily salable anywhere, such as the best railroad shares, were and 
 are needed to gather up the smaller sums of idle capital. Trust stocks 
 bought at recent high prices are not the kind of investment for small sav-
 
 20 Tlic Plain Facts as to tlic Trusts. 
 
 Competition No Bugbear to a Seller of Best Values. — If 
 
 the purpose of consolidation were to increase capital 
 
 ings. If it is true that industry now has ten times as many owners as 
 formerly, small holders may have reason to regret it. 
 
 Ownership of Monopoly Stock Lowers Morals. — Perhaps one sure 
 effect of a wide sale of trust stocks would be a lowering of morals among 
 purchasers toward the level of stock-watering promoters and club-wield- 
 ing managers. If it is true, as reported (Ely, Cosmopolitan, Aug. 1 901), 
 that 75,000 people in Philadelphia own stock in monopolies, the notorious 
 corruption of that city is more easily understood. Distributed ownership 
 is sometimes an evil. The French government in the later seventies might 
 have lowered interest on the national debt, but did not, for fear of losing 
 political favor with the many thousands of bond-holding voters. (Adams, 
 43. ) Mr. Flint even says that consolidation came too late to prevent the 
 gathering of great fortunes, but that it may make such fortunes rare here- 
 after. How this can be does not appear. Besides vast gains from stock 
 manipulation on a gigantic scale, monopoly profits now increase many a 
 millionaire's wealth faster than ever before. In view of the increase of 
 price to consumers by trusts, and of their tendency to lower prices paid to 
 farmers, there seems to be more reason for the complaint, usually exagger- 
 ated, that trusts tax the common people to enrich the plutocrats. Other 
 phases of this part of the subject are discussed in Chapter VII. 
 
 Scarcity of Facts to Justify Trusts. — Stronger proof of lack of facts 
 to justify trusts could not be asked than that furnished in the forty pages of 
 well written matter contributed by some of the ablest trust officials to the 
 A^orth American Review of May, 1901. Mr. Logan's article, whose pur- 
 pose was to show that ignorant competition made trusts necessary, really 
 argued on the other side, by explaining how producers who guess at costs, 
 and cut prices blindly, soon fail ignominiously and disappear of themselves, 
 leaving good profits to concerns conducted legitimately. The weak pro- 
 ducer does not long set a price for the strong, nor keep the latter from rais- 
 ing wages when this is required for pushing his business. The strong goes 
 ahead on his own judgment, not waiting, like the weak, to see what others 
 do. The other articles in the Re^new are little less open to attack. The 
 tangled web woven in defence of trusts must have enmeshed one of these 
 writers when two months earlier, in the same periodical, he saitl an excess 
 of imports was the same as a merchant's net loss, as if the British would 
 or could continue their foreign trade year after year with an annual loss of 
 three-quarters of a billion. Another wrote as if the sugar trust were 
 liberal in taking as small a profit as it has. 
 
 The Relation is Unnatural When Buyers Must Depend on a 
 Seller's Generosity. He alone is then "judge, jury, and executioner "
 
 Possibilities for Good aiid for Evil. 21 
 
 and ability in order to make better goods, and to reduce 
 cost ' for the sake of lower prices, there would be little 
 
 A despot, however good, is out of place in modern society. Indirect 
 efifects adverse to the seller, such as making poorer the society in which 
 he lives, are too far removed to restrain him properly. Nature adjusted 
 the usual economic relations to save people from such temptation. By 
 yielding to it, in the opportunity of railroad discrimination, some men of 
 noble traits have become relentless monopolists. There are few whom 
 monopoly would not bring to the standard said to have been expressed by 
 Mr. Havemeyer : " I don't care two cents for your ethics ; I'm in this for 
 business." (Nettleton, 74.) Where price is kept down, it is hardly to 
 help the consumer, but to avoid arousing competition, and provoking hostile 
 legislation. 
 
 ' Great Salaries. — The report of a salary of ^225,000 a year for Presi- 
 dent Schwab of the steel trust did not sound economical, nor did the report 
 that President Callaway, of the locomotive trust, was to receive a salary of 
 ;? 100,000 and a bonus or extra sum of $500,000 of the trust's stock. 
 Whether or not these reports were correct, the larger a corporation, as a 
 rule, the higher are its salaries. With a small company one man is some- 
 times president, treasurer, and manager, when he can do the work of all. 
 If fitted to produce cheaply, a company need not join a trust to economize 
 in salaries. 
 
 Trust Gains from Side Lines of Business. — The practice of engaging 
 in the various side lines of business that a large concern must patronize has 
 always been open to any who were prepared to follow it. It is probably safe 
 and economical when the side lines are monopolies, or not to be depended 
 upon under separate ownership, as in the case of the iron mines, steamships, 
 and railroads of the steel trust. The Federal Steel Company was and is a 
 combination to secure steady supply of materials, being composed of con- 
 cerns not competitive but in different and independent stages of manufacture, 
 passing from mines upward toward finished products. But railroad com- 
 panies that have command of all the capital and managing talent they could 
 use, do not build many of their own cars and locomotives, nor manufacture 
 their own ties and lumber. The Pennsylvania Railroad bought in 1901 the 
 Cambria Steel Company and the Pennsylvania Steel Company — doubtless 
 to keep out of the power of the steet trust in buying rails. The Gould rail- 
 roads were reported to have bought the Lackawanna Steel Company for the 
 same reason. As capital in a side line must pay dividends no less than the 
 main capital, and as the main business need have no more officers than its 
 work keeps busy, the advantage in having a side line would not ordinarily 
 appear where that is not necessary to keep out of the power of a monopoly. 
 This practice is the opposite of specialization, which is supposed to be a
 
 22 TJic Plain Facts as to tJic Trusts. 
 
 reason for a trust's trying to get rid of competition. The 
 company making the most and best goods at lowest cost 
 is not troubled about its weaker competitors. The worry 
 is with them — over what to do to meet the splendid 
 values offered by the new concern. This is the case 
 with the largest department stores, which are not monopo- 
 listic in a bad way, because they make no effort to buy 
 out or driv^e out competitors, but get the lattcr's trade 
 without buying it, simply by giving the people better 
 values. 
 
 Loading Down with Useless Plants. — Again, if the pur- 
 pose of consolidation were not quick monopoly, but only 
 to get trade by giving best values, a trust would not 
 
 characteristic of the times. To learn one business well is enough for most 
 men — too much for many. Impossibility of finding general managers 
 knowing different lines of business has been mentioned as one limit to con- 
 solidation. As a rule, where there is highest excellence in product, not 
 many kinds of business are carried on by one concern. Yet since the de- 
 velopment of the factory system, the tendency has been to connect processes 
 readily harmonized, such as spinning and weaving. No doubt, by adding 
 closely related processes, as well as by other means, industry has lately 
 been advanced. This movement has been marked in some cases. In the 
 great shops of British railways, for repairing and manufacturing, nearly a 
 hundred trades are represented. (Webb, Industrial Democracy ■, y^2>-^ 
 
 Successful in Department Stores. — The success of uniting different 
 lines in department stores, which do not make goods, but only sell them, 
 may be due to the gathering of crowds of buyers, to the saving of rent by 
 using upper instead of ground floors, and to the fact that in many retail 
 lines the uncertain profit of the proprietor does not average above the 5l>ooo 
 to $5,000 salary guaranteed to him as a department manager. Besides, 
 best effort from him is often stimulated by allowing him a share of the profits 
 of his department, making him really a partner. 
 
 As to Saving By-Products, a concern able to carry on its business is 
 generally able to get also what value there is in waste materials, either by 
 utilizing them itself in by-products, or, when without capital to do this, by 
 locating in a center of its industry, where there is usually a market for waste 
 materials, at prices equal to what they are worth. The savings of a trust 
 in buying materials, selling goods, and in other particulars, are considered 
 in Chapter VII.
 
 Possibilities for Good and for Evil. 23 
 
 load itself down with useless plants, sometimes at high 
 prices when the owner holds out, but would consider 
 only the best equipped and best located estabHshments. / 
 Better goods and lower prices would soon get the trade^^ 
 of the others for nothing. If additional capacity were 
 needed, new plants of unequalled equipment would be 
 built. A leader of an industry seldom wants to buy an 
 established business and allow pay for its good will unless 
 it is solidly prosperous. He prefers to make his own 
 good will. Capital in old machines and scattered real 
 estate, and in good will that often does not exist, is a 
 dead weight to a concern that desires to render its best 
 service. 
 
 To Cheapen Product, or to Get Promoters' Fees ? — With 
 many a trust a position for good service seems not to have 
 been thought of The whole movement in some cases 
 was evidently to get big fees for promoters, and inflated 
 prices for plants sold, with little concern for the new 
 trust's fate after payments from it had been obtained. 
 In other cases the motive was a stronger and more per- 
 manent monopoly. There probably are few trusts that 
 bought only first-class property at fair prices, to be con- 
 solidated for the one purpose of getting business by giving 
 best values. And if cheapest production were attained, 
 there would be no need to lower prices with a monopoly. 
 Reduction of cost might only add to its profits. 
 
 Trusts Seldom Started by the Uniting Concerns. — With 
 exceptions since 1897 so few as only to prove the rule, 
 the movement to consolidate has started with the pro- 
 moters, not with the producers, who alone would be 
 moved by desire to stop cut-throat competition and to 
 cheapen production.^ Selecting a suitable industry, and 
 
 »Nettleton, 56.
 
 24 The Plain Facts as to the Trusts. 
 
 temptingly showing from the success of the sugar trust 
 what can be done, promoters first get options on about 
 three-fourths of the separate concerns, to obtain the 
 monopoly necessary to sell watered stock, and then with 
 these options secure the assistance of a group of bankers, 
 called underwriters. At an agreed price, and by an 
 agreed time, the latter contract to buy, if not sold to 
 others, enough of the shares and bonds, left over from 
 payment on plants, to provide working capital and to 
 carry the organization to completion. About ten per 
 cent of the securities subscribed for by the bankers they 
 take and pay for at once, that amount of cash being 
 sufficient for immediate payments. The pay of the 
 bankers is usually understood to be a cash return of 
 about five per cent on the total stock they subscribe for, 
 of which, if it sells well, they may not be called on to 
 take more than the original ten per cent [World's 
 Work)} 
 
 ' The Profits to Underwriters of the Steel Corporation, as shown in 
 its report issued in January, 1902, were more than five times five per cent. 
 They contracted to pay ^200,000,000 on demand at any time within fif- 
 teen months, but as the stock sold well, they were called on to pay only 
 ^25,000,000, advanced as working capital, and about ^3, 000, 000 for 
 expenses. Within ten months the transaction with them was closed. 
 They received as compensation 649,987 shares of preferred stock and an 
 equal amount of common stock. Taking $90 as recent market value for 
 the preferred, and $40 for the common, they now have in their stock, if 
 not previously sold, a value of ^84,500,000; deducting the ^28,000,000 
 advanced, leaves $56,500,000 as profit, besides their regular dividends. 
 From this profit J. P. Morgan & Co. are understood to have charged twenty 
 per cent for managing the underwriting syndicate, and besides they were 
 its heaviest subscribers. Profits in this case were unprecedented, as was 
 the whole enterprise. Underwriters have realized great gains in suc- 
 cessful cases, because of the risk, and because few are prej^ared to advance 
 and guarantee the enonnous sums required. Above figures are taken 
 from New York Post article in Public Opinion of Feb. 13, 1902, As to 
 underwriting, see WorhV s Work, Sept, 1901.
 
 Possibilities for Good and for Evil. 25 
 
 Who Bears the Loss? — After the trust has been organ- 
 ized and turned ov^er to its officers, the promoters and 
 bankers sell out the stock that has fallen to them, and 
 are ready to form another trust. Not buying for them- 
 selves, they can afford to be reckless in offering high 
 prices for plants, in issuing stock, and in taking great 
 fees for their services. Uniting concerns are secured 
 against loss by high prices received for plants. Buyers 
 of stocks are secure also if monopoly prices can long be 
 exacted for a full output of products. All the loss then 
 falls on consumers. But very probably most of it even- 
 tually will fall on smaller investors, who bought stock 
 trusting in the judgment of the underwriting bankers, 
 many of whom, as cashiers and directors, are believed 
 to have been influenced by large payments of stock, and 
 even of cash, to themselves as individuals. Here there 
 was serious risk to the solvency of the banks, and a 
 deplorable lowering of morals in highest circles of 
 business.^ 
 
 Amount of Gain to Promoters. — In one of the whisky 
 trusts, testimony seemed to show that for every $100,- 
 000 of cash or property put in by a concern joining, it 
 was issued preferred stock for that sum, and also the 
 same amount of common stock as a bonus or premium. 
 But the underwriting bankers got more, $100,000 in pre- 
 ferred and ^150,000 in common. The promoters re- 
 ceived only $150,000 of common, making in all, for each 
 ;^ 1 00,000 of real capital, $600,000 of stock to pay divi- 
 dends upon by means of monopoly power. Giving a 
 share of common stock free, with every share of pre- 
 ferred stock paid for in cash or solid property, seems to 
 have been the general custom. Judge W. H. Moore of 
 
 • Jenks, q6.
 
 26 TJic Plain Facts as to the Trusts. 
 
 Chicago, the promoter who organized the tin-plate trust, 
 buying the plants as cheaply as he could, and paying all 
 bonuses, "divvies," and legal fees, is believed to have 
 received the round sum of ^10,000,000 in common stock 
 for his services and expenses. At the market price then 
 ruling for the common stock, this ;^ 10,000,000 was esti- 
 mated to be worth ;^4,ooo,ooo in cash. For the 1^46,- 
 000,000 of stock issued by the tin-plate trust, it is believed 
 to have received $4,000,000 in cash for running^ capital, 
 and plants on which the option prices were understood 
 to aggregate $18,000,000. In a later combination of 
 four whisky trusts into one, the stock falling to pro- 
 moters and underwriters, if sold quickly, would have 
 given them for their services a net sum of from $3,000,- 
 000 to $4,000,000. But large sales of stock would 
 have lowered price, which in some cases fell in six months 
 to a point so low as barely to have sufficed to carry out 
 promoters' contracts.^ To dispose of large quantities of 
 stock, it was therefore necessary to offer it gradually in 
 small lots. A leading promoter was believed to have 
 received, within three years, from $30,000,000 to $40,- 
 000,000 in stocks, realizing for them in cash about $10,- 
 000,000. A St. Louis man sued for $1,875,000 as his 
 half of the profits in a case of promotion claimed to have 
 been taken from him and entrusted to others.' 
 
 Natural Safeguards Against Monopoly. — There are 
 some natural .safeguards against the evils of trusts. If 
 these safeguards are sufficient, the evils need not cause 
 concern. 
 
 Hard Times Squeeze Out the Water. — Those trusts that 
 have most water in their capital — the least amount of 
 
 'Jenlcs, 90, 94. 
 2 Collier, 211.
 
 Possibilities for Good and for Evil. 27 
 
 solid property in proportion to tlicir total stock — will 
 scarcely hold their monopoly power through a period of 1 
 hard times, which are nature's cure for fever in the busi-] 
 ness body, allaying extravagance in hope and effort, anc 
 bringing back a sober realization of the limitations of 
 this mortal life. If a trust's net earnings then are not 
 sufficient to pay interest on bonds issued, the mortgage 
 will be foreclosed and the plants sold, leading perhaps to 
 separation into competitive concerns as before. If inter- 
 est on bonds leaves too little for dividends on stock, with 
 no prospect of raising earnings to a fair dividend rate, the 
 stock will fall in value, credit to borrow will sink, repairs 
 to equipment will fall behind, and new competitors not 
 burdened with old debts may soon become the leaders 
 of the industry. The rope trust, in the summer of 1901, 
 was said to be doing very little more business than each 
 of two or three rivals, and in the early fall it failed, los- 
 ing ;^487,ooo in the past year.^ 
 
 •Uncertain Value of Trust Stocks. — The high dividends paid by 
 trusts in the spring of 190X, an average for 47 trusts, not including the 
 Standard Oil Company, of 7.44 per cent on par value and 13.6 per cent 
 on market value, indicates that their present earning power is considered 
 temporary, which is also shown by the fact that higher interest on loans 
 must be paid when industrials are deposited as collateral security. With 
 more reliable railroad stocks the dividend rate on market value (which 
 buyers are not afraid to raise) ranges from 4 to 8 per cent, averaging 4.85 
 per cent in the spring of 1901 with 37 roads, including the best. The ex- 
 tent of present monopoly gains is indicated by these figures, taken from 
 Charles R. Flint's article in the North American Revieiu for May, I901. 
 Despite over-capitalization for ordinary times without monopoly, these 
 trusts are under-capitalized in relation to the dividends mentioned. Invest- 
 ors, considering these temporary, do not raise market value accordingly. 
 Overcapitalization is corrected by falling market value as soon as regular 
 earning power is learned by investors from experience. Henry Clews, in 
 recommending railroad stocks instead of industrials, says that by bankruptcy 
 and reorganization railroad earning power has been brought down to a solid 
 basis, while most trusts, started under best chances, have not thus been
 
 28 TJic Plain Facts as to the Trusts. 
 
 Dull Times Will Not Remove Strong Monopolies. — But 
 strong monopolies, like the sugar and oil trusts, are too 
 
 pruned down by adversity. On December 7, 1901, the preferred and com- 
 mon stock of 50 industrials, amounting at par to $2,463,553,708, had been 
 scaled down in market value to a total of $1,506,743,990. (March 
 Atlantic. ) 
 
 Is Par Value of Any Importance ? — Whether the par value of each 
 of a company's 10,000 shares were put at ?lo or $100, making its capital- 
 ization $100,000 or $1,000,000, would be of little consequence if the 
 statement required by the stock exchange, before listing shares, showed 
 fairly the company's dividend-earning capacity per share, and if the actual 
 facts reached all investors. Market price would then become such a sum 
 as at proper interest would make the dividend. But many investors, not 
 being experts in industry and finance, cannot be expected to find out soon 
 the actual facts, and they reasonably consider par value, upon which divi- 
 dend rate is based, and which is supposed to represent the estimate of 
 organizers as to what the business will be worth. For this reason stock 
 watering, which usually includes deception, is resorted to — to sell stocks 
 for more than they are worth, and thus to provide profits for promoters, who 
 by the chance to water stock were attracted into the trust-forming business. 
 Stock watering would not occur if law secured to the public a just inventory 
 of assets and prospects. Inexperienced investors taking the safest course 
 do not buy new stocks at all. Issue of watered stock tempts directors to 
 earn dividends by monopoly prices, or to pay them unlawfully out of capital, 
 less perhaps to get the dividends themselves than because if not paid the 
 stock may fall in value before they sell out, or credit may sink and compe- 
 tition arise. 
 
 Investors to Blame Also. — For over-capitalization promoters are to 
 blame only so far as they deceive or unduly influence investors. The latter 
 also are in fault in their reckless buying, depending on monopoly gains in 
 industries not justly to be monopolized. Earning power is the proper basis 
 of value, even though it makes the good will worth more than the plant. 
 The good will of the National Cordage Company was appraised in 1893 at 
 $2.S, 000,000. The trademark and business of a popular medicine built up 
 by advertising, might be worth a million, with all tangible property worth 
 less than a tenth of that sum. A new monopoly, likely to last, would 
 rightly sell for a great sum if it had no property at all, nor any business yet 
 established, like a street railway franchise. The value of such a monopoly 
 franchise would be such a sum as at about 6 per cent would yield its net 
 earnings. By making a monopoly trust's capital large enough to reduce its 
 hifjh income rate to that of ordinary dividends, monopoly gains are taken 
 out by the first owners, who have a right to do so if they make no false
 
 Possibilities for Good and for Evil. 29 
 
 rich in substantial capital, and too secure in their mon- 
 opolistic position, to give way in dull times. These and 
 similar trusts held their power during the depression from 
 1893 to 1897, while the cordage, iron safe, and other 
 combinations failed, and when reorganized were not in a 
 position to harm competitors. What other natural forces 
 are there, besides dull times, to save the people from an 
 exaction of tribute to monopoly ? Two other forces to 
 check monopoly are worthy of consideration. 
 
 A Moderate Price May Yield Most Profit. — First, a 
 monopoly can make more aggregate profit from a mod- 
 erate selling price, with large consumption of its com- 
 modity, than from a high price, which leads to decreased 
 sales, and to use of other commodities as substitutes. 
 But to raise price is the purpose. At all times perhaps, 
 except when engaged in killing competition by means of 
 sales without profit, or when making a show of good to 
 the public, a monopoly will charge a price higher than 
 it would be if no monopoly existed. 
 
 There are Few Sellers Who "Would Not Raise a Price if 
 they knew the buyer would pay the excess and continue 
 buying. So a buyer must do with a needed commodity 
 
 pretenses, and buyers of stock get only the usual rate of dividends on their 
 investment. But when earnings temporarily at the highest point are con- 
 sidered as 6 or 8 per cent of the stock's value, the latter is so inflated 
 that a heavy fall is inevitable. Of the many British coal and iron 
 industries converted into corporations at high valuation in the great pros- 
 perity of 1S72, "most of those that did not speedily disappear have been 
 derelicts ever since ; and some of them only just managed to earn profits 
 in the piping times of 1900." [Boston Transcript, Sept. I901.) In 
 Germany, where trusts are numerous, business stagnation began early in 
 I901. By tariff duties and subsidies, production there has been stimulated 
 towards the point of intoxication. The large scale on which German 
 trusts, especially the electrical, have taxed the people by inducing them to 
 buy inflated stocks, and by forcing towns into contracts for things not 
 needed, is described in The Forum for March, 1902.
 
 30 The Plain Facts as to the Trusts. 
 
 when he cannot find another seller asking less. But 
 however strong the demand, the fact that a buyer can 
 try other sellers, some of whom may weaken in price, 
 has a tempering effect on the charges of a seller who 
 would like to have more customers, which desire is true 
 of practically all sellers. In the case of a monopoly 
 trust, there is no other seller that can supply the goods 
 quickly, and equal in quality and quantity. 
 
 Can Add Much to Prices of Necessaries. — Therefore, 
 the price charged by an established monopoly would 
 tend to be as high as consumers would pay without 
 noticeably stinting their consumption. With necessaries 
 they might soon be trained to bear a price pretty high. 
 A sudden change in the price of hard coal from $6.50 to 
 ^8 a ton would cause many people to turn from it to soft 
 coal. But if the price were raised graduaUv . not all in 
 one season, consumers would soon become accustomed 
 to the higher prices, and would use nearly as much hard 
 coal as before. Many staple commodities, such as sugar, 
 soap, and oil, were used just as freely by most people a 
 few years ago as at present, though their prices were then 
 a quarter higher. Potatoes are used nearly as freely at 
 50 cents a bushel as at 30 cents, owing to habit, not be- 
 ing an important item of expense. A price would not 
 seem high after it had been paid for a while, especially 
 if the trust allayed opposition by calling attention to some 
 slight improvement of quality and increase of wages. 
 
 Various Methods of Monopoly Gain. — Hence, with many 
 commodities, the tendency to stint consumption would 
 not long keep down a monopoly price. A trust would 
 not act so unscrupulously to maintain its monopoly unless 
 a considerably higher price could be obtained. An ad- 
 dition to price that does not reduce sales is all clear gain
 
 Possibilities for Good and for Evil. 3 1 
 
 when not based on increased cost of labor or material. 
 With a selling price of 10 cents for an article costing 9 
 cents to produce, a raise of price to 1 1 cents doubles the 
 profit. There would be reason for lowering price to in- 
 crease sales where crop failure or dull times had lowered 
 ability to buy ; though in extra good times price could 
 be carried as far the other way. Articles monopolized 
 by patent are usually sold at a low price in a country 
 where people earn little, and at a high price where people 
 will pay more. Monopoly may sometimes be strength- 
 ened by monopolizing substitutes also. British railroads 
 have bought many competing canals, while gas and elec- 
 tric companies sometimes unite. A street car company 
 was said to have opposed better paving for fear cabs 
 would be more used. By keeping price everywhere just 
 high enough, so as not to drive buyers to substitutes, 
 nor to start competition, nor to provoke hostile legisla- 
 tion, a monopoly could long absorb wealth that people 
 would otherwise save, or use in buying additional goods. 
 The wire nail pool in 1895-96, known to be temporary, 
 reaped its gains quickly, holding for a year at $3 per 
 hundred a price raised from $1.45.^ The American ice 
 monopoly in New York in 1900, though fitted for some 
 permanence, exerted its power so outrageously, doubling 
 the price of ice in hot weather, and getting city officials 
 and judges as stockholders, that a storm of public indig- 
 nation invoked the law, and gave competition a foothold 
 at once. 
 
 Price of Luxuries Might be Lowered Considerably. — 
 A trust might lower price materially in the case of com- 
 forts and luxuries, with which, unlike necessaries, lower- 
 ing price causes a decided increase of consumption. But 
 
 * Jenks, 62.
 
 32 The Plain Facts as to the Trusts. 
 
 this fact is not important, because a trust can seldom 
 control supply of a luxury, aside from a few things such 
 as diamonds, produced from monopolized mines. Com- 
 petition arises too easily with finished goods, which are 
 too far removed from limited source of materials. If 
 fashionable articles, necessarily sold at a high profit, 
 could be monopolized, their price may not be higher. 
 Whether produced by one or by many, their high price 
 is fixed by popularity, and by necessity of selling quickly 
 before their value disappears.^ 
 
 High Price Brings Competition. — Second, if a selling 
 price yields a profit much above the cost of production, 
 owners of uninvested capital are induced by the high 
 profit to enter the business, thus increasing competition 
 and lowering prices. In this way, by increase of supply, 
 price is lowered where no monopoly exists. 
 
 But Not auickly When a Trust Must be Fought. — But 
 a powerful trust understands all this very well. There 
 is plenty of capital awaiting investment, but not much to 
 be spent in fighting a trust. While the enormous profits 
 of each of many different monopolies must be invested, 
 above the personal spending of stockholders, profits 
 
 ' A Trust Improving a Backward Industry Would Lower Price. — 
 
 In an industry previously carried on crudely by small and backward con- 
 cerns, a progressive monopoly, largely reducing cost of production, might 
 find a price materially lower to be most profitable. (Marshall). In that 
 case, as in all others where it has a monopoly solely because it serves the 
 public best, a trust is to be welcomed. But a concern already producing 
 at the lowest possible cost might make highest profit, not by forming a 
 trust, but by allowing weak producers to stay in business ; because need of 
 their product would keep price for all above their high cost of production. 
 There is no need to buy out the weak to concentrate production in the best 
 plants if their superiority is considerable. If the strong concerns produce 
 enough to lower price, the weak will stop of themselves. The claim of 
 the trust that it benefits society by producing from the best plants will not 
 pass as a reason for monopolistic organization.
 
 Possibilities for Good and for Evil. 33 
 
 gained so successfully in monopoly will seldom be in- 
 vested in competition if monopolistic fields are accessible. 
 Into a business closely controlled by a trust, a monop- 
 olist of vast capital might buy admission at quicker and 
 larger profit than by starting as a competitor and con- 
 quering a foothold. Capitalists of less wealth are dis- 
 posed to follow his example, buying shares in corporations 
 already strong. Besides, against natural monopolies, such 
 as the best mines, or the railway in the best streets, no 
 amount of capital can contend. 
 
 Monopolists do Not Fight One Another, as a rule. 
 Not only has some consolidations taken place in most 
 lines of business to be effectually monopolized, but a 
 number of the largest separate monopolies have fallen 
 under control of Messrs. Morgan and Rockefeller and a 
 few associates. These include the oil, anthracite coal, 
 tin-plate, wire, and steel trusts, the best iron mines and 
 lake fleets, ocean lines for which a subsidy is asked from 
 Congress, the important railroads, divided into five or six 
 consolidated groups, and now the leading banks of New 
 York and Chicago. Profits made from street car and 
 telephone monopolies in one city are invested in the 
 same monopolies in other cities, until many of the best 
 of these properties have fallen into a few hands. 
 
 Expert Ability Scarce. — The greatest financiers there- 
 fore, with the leading banks they control, are already 
 absorbed in monopolies. There is likely to be little 
 competition among them until the possibilities of monop- 
 oly are exhausted, a consumm.ation perhaps far in the 
 future. The ablest superintendents and experts are 
 probably absorbed also. Though capital cannot now be 
 cornered in wealthy America, capacity to conduct a 
 large business may be cornered to a considerable extent. 
 3
 
 34 The Plain Facts as to the Trusts. 
 
 Men possessing this capacity in largest measure are high- 
 salaried officials and employees of the trust, in line of 
 promotion to still better positions. The best of these 
 cannot usually be hired away from the trust by tempt- 
 ing offers from new ventures less likely to be permanent. 
 Former Experience of Little Use. — Men formerly en- 
 gaged in the business, in these days of rapid change, 
 cannot return to it after a few years and be equally com- 
 petent with those whose experience has been unbroken. 
 Experience ten or twenty years old is often little better 
 than no experience at all. The fact that many of the 
 trusts have managed their business well, saving in 
 every way, improving and cheapening product, and ex- 
 tending sales at home and abroad, shows that they have 
 guarded their monopoly by not provoking competition. 
 But the longer they hold the field, the weaker poten- 
 tial competition becomes. Changing methods may ren- 
 der former competitors unable to engage in the business, 
 placing the trust firmly in the saddle, and weakening its 
 incentives to progress.^ 
 
 ^ Battles of the Strong. — The hope of the people for competition able 
 to cope with the present unregulated monopolies, lies with a few independ- 
 ent capitalists of the first grade, whether from experience, natural ability, 
 or both, who succeed in whatever they undertake, and who appear to like 
 a contest with a trust. Arbuckle Brothers, of New York, for many years 
 leading coffee roasters, took up sugar refining in 1898, when the trust had 
 put prices high, and have since seemed to be about as strong as the trust. 
 Their competition, with that of the Claus Doscher refinery, was for a time 
 valuable to consumers, making the margin between cost of raw sugar and 
 price of refined " very decidedly lower " than when the trust had practical 
 control of the market ; though by 1901 the price had been raised to yield 
 refiners a good profit, the trust evidently having found that the Arbuckles 
 could not be driven out. The Carter White Lead Company, of Chicago, 
 has competed successfully with the lead trust. H. C. Frick has been 
 arranging to start a great steel industry east of Chicago. It was reported 
 in October from Youngstown, O., that experienced steel makers who had 
 sold their stock in companies uniting with the Steel Corporation, would
 
 Possibilities for Good and for Evil. 35 
 
 The Club of the Giant. — Besides, hiring experts is a 
 secondary matter compared with bearing up under the 
 attacks by which a trust clubs a competitor out of its 
 field. The Standard Oil Company's old practice of in- 
 fluencing railroads to charge its competitors higher freight 
 rates is not now resorted to so extensively as formerly. 
 But it is still a grave abuse, and the law to prevent it is 
 inadequate.^ 
 
 join soon with independents and form another gigantic steel trust. When 
 independent concerns appear early, before the trust is strongly established, 
 its monopoly may not become important. 
 
 Peace May be Monopoly. — Of course there is always a chance that 
 the independent concern may be bought out by the trust, so long as a 
 monopoly seems practicable ; and after forcing a peace a strong new con- 
 cern may act with the trust in a monopolistic agreement, as the independent 
 sugar refiners are now apparently doing. The Spreckels sugar refineries, 
 built in 1889 to get the trust's high prices, were bought by it after a two 
 years' fight. High prices by the wire trust have lately caused many new 
 rod mills to be built — in some cases to force the trust to buy them. The 
 Pure Oil Company, which is considered able to realize all economies of 
 large production, is said to have placed its stock in the hands of a voting 
 trust, to keep its stockholders from selling to the Standard, which has long 
 blocked its effort to complete its pipe line a short distance in New Jersey 
 to the seaboard. As people do business for profit, agreement or'combina- 
 tion may be the rule where competitors are few. ( The Fo>um, April, 1901. ) 
 
 Peace Thus Maintained Keeps the Public Better Supplied in the 
 long run than competition intended to destroy. Where the trust is able 
 to supply all the demand, a start by a strong competitor duplicates plant, 
 necessitating idle capacity and wasting capital unless the new plant has 
 improvements, or is soon to be required by increasing demand. Combina- 
 tion, then likely to come, must take a lower profit rate by reason of un- 
 necessary capital. The strongest competition to a trust is that of another 
 related trust which adds the former's business as a side line to its own, 
 with its main line to depend upon. This was partly the case with the 
 Arbuckles. Secure possession of markets in foreign lands, and in isolated 
 home districts, besides various other advantages, makes defeat and loss 
 probable in a contest with such a monopoly as the Standard, so long as 
 trusts are allowed by law to resort to their cut-throat methods for killing 
 competition. 
 
 ' The Standard's Rebates. — For a number of years the .Standard trust 
 not only secured lower freight rates for itself, but the excess sums paid by
 
 36 TJic Plain Facts as to the Trusts. 
 
 Other Methods of Attack have been common with trusts. 
 One is to induce persons from whom materials are bought 
 to refuse to sell to an anti-trust competitor, who conse- 
 quently may be unable to get materials to advantage. 
 For a while Barnhart Brothers & Spindler had to send 
 to Germany to buy strip brass to make printers' rule, 
 because the type trust had thus cornered the American 
 supply (bought up all of it).^ Sometimes a trust re- 
 quires a dealer to buy from it all the styles of an article 
 
 its competitors in their higher rates were turned over to the trust by the 
 railroads. An official of the Pennsylvania road, who afterwards became 
 its president, testified before a New York legislative committee in 1 88 1 
 that in eighteen months the Standard combination had received such 
 rebates from the railroads to the amount of $10,000,000. By such a proc- 
 ess, varied to suit conditions, competition from independent oil refiners 
 was secretly strangled. J. F. Hudson, in his book. The Railways and the 
 Republic, describes these discriminations in a chapter entitled " The 
 History of a Commercial Crime." 
 
 ' Cornering Tin-Plate Machinery. — " Specific testimony seems to make 
 it clear that this practice prevails" — securing contracts from producers of 
 materials and machinery used by a trust not to sell to its competitors. ( U. 
 S. Labor Bulletin No. 29, page 674.) In October, 1901, the Pittsburgh 
 Post (quoted in The Outlook of Oct. 26) published the information that the 
 Steel Corporation, intending to depend solely on offering good values, had 
 decided to discontinue the contracts of this kind made with makers of their 
 machinery by two of its constituent trusts — the tin-plate and the sheet steel 
 companies. To secure these contracts, some of which, in October, still 
 covered from two to three and a half years, the machinery makers were 
 paid cash subsidies aggregating "somewhere near ^1,500,000 annually"; 
 and the subsidies were increasing, because new firms starting to make the 
 machinery had to be paid likewise to keep competitors from being equipped. 
 The Steel Coi-poration is commended for stopping this illegal monopolistic 
 practice, as for its issue of reports, telling its 60,000 stockholders and the 
 public many facts as to its business. Its policy of not using its power to 
 raise prices has been compared with the policy of the copper trust, whose 
 excessive. prices have checked consumption and caused loss to itself. It 
 is hoped that the good example of the steel tnist, in taking the public 
 into its confidence, will be followed by other trusts. Indications are that 
 some others will do so willingly, to prove their soundness to the investing 
 public.
 
 Possibilities for Good and for Evil. 37 
 
 he handles, and will not sell to him if he helps a com- 
 petitor by handling his anti-trust goods. The trust's 
 goods being the best known and most demanded, a dealer 
 cannot well carry on business without them. A milder 
 and more usual method of influencing dealers is to allow 
 a rebate to those who prove they have not bought anti- 
 trust goods. A moderate payment of this kind for all 
 one's custom, in view of the costs of selling, seems not 
 unreasonable, and has been upheld by courts.^ 
 
 Buying- up the Patents in a business is a means of 
 strengthening some monopolies — not always to use the 
 patents, but to keep them from competitors. The 
 Western Union Telegraph Company has long been a 
 purchaser of electrical patents. Concerns are some- 
 times bought that own secret processes, which are the 
 same as patents in effect. And usually the heaviest 
 blow of all a new competitor must bear is the old prac- 
 tice of selling in his territory for less than a fair profit, 
 while reaping full profits elsewhere, until by thus ex- 
 hausting his capital his competition is stifled. 
 
 'This is further discussed in Chapter VI. 

 
 CHAPTER III. 
 
 KINDS OF MONOPOLIES. 
 
 Natural and Artificial Monopolies. — All the above de- 
 scribed means of keeping strong competition out of a 
 monopolized field may be resorted to by trusts, or arti- 
 ficial monopolies — those formed by buying up all the 
 valuable patents and plants in one industry. Competi- 
 tion is thus prevented from removing imposition on the 
 public.^ But without these a natural monopoly may 
 often hold its field securely. 
 
 Railroads and Street Car Lines. — A railroad company 
 occupying the best route between two cities possesses a 
 natural monopoly of the best means for supplying trans- 
 portation, especially when it has also in each city the 
 most central station. No other company can compete 
 for business with equal chances — can offer the same 
 grade of service. It has an absolute monopoly of rail 
 transportation at stations not reached by other lines. A 
 street car company in a city possesses a similar monopoly. 
 Its franchise gives it exclusive use of the best routes ; 
 and its service can not be supplied from elsewhere, but 
 must be used in connection with its plant. The latter 
 
 ' A Capitalistic Monopoly is another name for a trust or artificial mon- 
 opoly, meaning that it keeps down competition by its possession of larger 
 capital, finer equipment, better established business, and abler management. 
 The trusts, though artificially combined, are usually strengthened by con- 
 nection with legal or patent monopolies, and with natural monopolies in 
 ownership of mines and in discrimination by railroads. As to whether a 
 capitalistic mono]ioly can long exist entirely unaided by natural or legal 
 monopolies, will he considered in Chapters VII. and IX. 
 
 3S
 
 Kiiids of Monopolies. 39 
 
 is a characteristic of other service monopoHes, A large 
 city may have non-competing street car lines, occupying 
 different districts. 
 
 A Gas Company also has a natural monopoly. In its 
 case there is room for more pipes, in locations perhaps 
 equally good ; but, like steam and street railways, it can 
 supply more customers without expense for equipment, 
 while a competitor must make a large investment in 
 a new plant. As there may not be enough business 
 to yield a profit on two plants, and as enlarging the 
 one would be far less costly than building another, a 
 second can seldom be built with advantage to the pub- 
 lic. Sometimes a second is built to force the first com- 
 pany to buy it. Real competition rarely lasts long in 
 any of these cases. Sometimes the two companies agree 
 on prices and divide the field ; sometimes price cutting 
 by the old company forces the second into consolida- 
 tion with it, or the new company may build better and 
 absorb the old. The latter outcome has seemed prob- 
 able in the case of a new telephone system now being 
 established in Jackson. Chicago has had as many as 
 nine gas companies at once, with three sets of pipes in 
 one street. Consolidations have taken place there re- 
 peatedly.^ 
 
 'The West Shore Railroad, completed in 1883 between New York 
 and Buffalo, which was called into existence by high dividends of the New 
 York Central, was a noted example of the futility of trying to compete with 
 a natural monopoly. Being parallel to the New York Central, it could get 
 no business that the latter might not easily have handled without laying 
 any new track ; and having to take second choice of routes, it was unable 
 to offer service fully equal to th.it of the Central, which was also much 
 stronger in capital and equipment, and reduced its charges to meet the cut 
 rates of its new competitor. The result was that the West Shore soon 
 became unable to continue bearing its losses, and was bought by the Cen- 
 tral at a low price.
 
 40 TJic Pi'ain Facts as to the Tjnists. 
 
 Monopoly in Mines and Forests. — Another kind of 
 natural monopoly is one formed by agreement or pur- 
 chase between the owners of the best mines or best re- 
 
 The Nickel Plate road, paralleling the Lake Shore from Buffalo to 
 Chicago, similarly failed about the same time. Building these two parallel 
 lines was a part of the extravagant speculative enterprise of 18S0-83, when 
 the new mileage laid was three times what was needed. Some new roads 
 were built to force old roads to buy them ; and others, with all the money 
 raised on bonds (sometimes sold at heavy discount), the stock representing 
 only water, were organized by men who paid the money to themselves as 
 contractors. The stoppage of this excessive building of railroads caused 
 the depression of 1884-85. (Hadley, Railroads, 53.) 
 
 Waste of Capital. — Besides the loss to the owners of the millions of 
 capital put into the West Shore road and never gotten back, the public 
 must continue to lose from that unfortunate venture. So far as the new 
 line absorbs capital in tracks and buildings above what would have been 
 necessary to handle all the business on the old line, its existence adds to 
 the rates that the Central must charge in order to pay a reasonable dividend 
 on its total investment. The land occupied is kept from agriculture, and 
 there is waste in the decay of unnecessary buildings. Because there are 
 two roads the mileage is doubled, reducing earnings per mile, on which 
 the legislature may fix passenger rates. It is of concern to the public that 
 no losses be incurred by anybody, and that no more capital be invested 
 in any enterprise than is necessary to render its best service. There are 
 always many real needs that capital may be used to supply. 
 
 Useless Railroads Not Built Now. — The utter failure of the West 
 Shore, and of similar roads, by reason of the natural monopoly involved, 
 will hereafter prevent such waste of capital, investors having learned to in- 
 vestigate better the prospect of earnings. In most states, under a general 
 law, a company can build a railroad anywhere, whether needed or not. Up 
 to 1884 the feeling was that the more railroads the better. In a few states, 
 as in all at first, a special charter must be obtained from the legislature, 
 which, like a city council with a franchise, can refuse it if not designed for 
 the public good, though often a corrupting lobby must then be resisted. 
 In New York and New England the building of a railroad now must first 
 be approved by the state commissioners. Over-building in the West was 
 largely due to the people's zeal in giving bonuses for new lines, though 
 they were often influenced by paid speakers, and by railroad promoters or 
 others who had bought vacant land through which the road was to pass. 
 After the Nebraska board had said the state had a third too many railroads, 
 Lincoln gave {^50,000 toward a new line into Omaha, with which it was 
 already connected by four roads. (A. G. Warner, P. S. Quarterly, 189J. )
 
 Kinds of Monopolies. 4 1 
 
 serves of timber. Such sources of wealth are Hmited. 
 A monopoly price for a scarce mineral, though the mine 
 operators remain competitors, may be maintained by the 
 railroads, through an agreement on freight charges, 
 which must be added to the consumer's price. Such has 
 been the case with anthracite coal, found only in north- 
 eastern Pennsylvania. The Standard Oil Company's 
 monopoly is now chiefly maintained by its ownership of 
 a great system of pipe lines between the oil fields and the 
 seaboard, and of many well located refineries, ware- 
 houses, and docks. The oil business might not be suf- 
 ficient to yield a profit on another similar plant, and if it 
 were, the Standard had first choice of locations, placing 
 it at the head, like the best railroad. Besides, the oil 
 monopoly is strengthened by the economies of its large 
 and perfected business. So far as based upon control of 
 natural supply of crude oil, its monopoly has been weak- 
 ened by the discovery in 1900 of many wells in Texas 
 and California, flowing more copiously than any previ- 
 ously known. Probably stronger competition in refining 
 will now spring up. New corporations to compete with 
 the Standard have been chartered in Texas. 
 
 Telegraph, and Telephone Monopolies. — The Western 
 Union Telegraph Company secured a monopoly by pur- 
 chase of other systems, though the Postal Company has 
 competed with it during the last fifteen years over some 
 parts of the country. Similar to the gas business, the 
 telegraph business is a natural monopoly because after 
 one system of lines is in operation, connecting all the 
 important cities, another company can not compete 
 in supplying equal service until it has an equal system 
 of lines, in a business field for v/hich the first system 
 would be ample. A telephone system is a monopoly
 
 42 TJic Plain Facts as to the Trusts. 
 
 for the same reasons, and for the additional reason 
 that with one system a person can talk with every 
 telephone subscriber in the city, or long distance district, 
 while to do this with two systems he must be a sub- 
 scriber to both, at a greater total cost usually than with 
 one. Besides, both the telegraph and telephone monopo- 
 lies, especially the latter as covering the country, have 
 rested partly on purchase of patents, as does the trust 
 or capitalistic monopoly of the American Steel and Wire 
 Company, owning all the important patents, and that of 
 the General Electric Company, The steel trust's mon- 
 opoly rests on its ownership of mines, ore fleets, rail- 
 roads, and patents. The express business is a monopoly 
 because the railroad is a monopoly whose lines it has 
 the exclusive right to use. 
 
 Other Monopolies of Location. — A manufacturer using all 
 of a valuable water power, not equalled elsewhere, would 
 have a natural monopoly of that advantage. A merchant 
 in the best stand has a natural monopoly in location if no 
 other equally good stand can be established. A monopoly 
 of the right to supply meals is sold to the concern pur- 
 chasing the restaurant concession from an exposition. 
 Such is a natural monopoly of place. Landing places for 
 vessels have long been valuable monopolies, and bridges 
 built in the best locations. A monopoly of the right to 
 solicit business in trains and stations is leased by a news 
 company, and by a baggage transfer company. The lessees 
 are then faiily sure of a paying business, and the railroad 
 company knows the service will be attended to properly. 
 
 Government Monopolies. — The postal service is a 
 government monopoly in all countries, becau.se it is 
 essential to civilization, must often be carried on at a loss 
 where population is sparse, and must reach every part
 
 Kinds of Monopolies. 43 
 
 of the country. The French government has a fiscal 
 monopoly of the tobacco business, for the sake of the 
 large revenue it yields. For the same purpose, other 
 European governments have a monopoly of the sale of 
 salt, and India of the trade in opium. The state of South 
 Carolina and the countries of Russia, Switzerland, Nor- 
 way and Sweden, have recently made the liquor business 
 a state or a city monopoly for the sake of its regulation. 
 Similar control of this troublesome business has been 
 considered by the municipality of Glasgow. Russia's 
 national monopoly of liquor exists partly for the sake of 
 revenue, yielding over ^100,000,000 a year. Japan has 
 a monopoly of the trade in opium in her Chinese island 
 of Formosa, to lessen its use there.* 
 
 Patents and Copyrights are legal monopolies. Of this 
 kind were those formerly granted by the king, some- 
 times for a payment into his treasury, and sometimes 
 as a gift or reward to a favorite. To encourage in- 
 vention of useful things needed by society, the govern- 
 ment rewards an inventor with a patent, giving him for 
 seventeen years the exclusive right to make and sell his 
 new contrivance. A copyright is a reward of the same 
 kind to an author, giving him for twenty-eight years the 
 exclusive right to make copies of and sell his book. The 
 time of a patent is limited, because the invention would be 
 of little use to the inventor if society did not do its part by 
 affording a market for it, and because he could never have 
 invented his contrivance if his idea had not been developed 
 in society's needs and experiences. Registering a trade 
 mark gives the exclusive right to use it on an article of 
 merchandise, and enables its owner to reserve for himself 
 the benefit of the reputation he has built up for his goods. 
 
 > Ely, 47. Public Opinion, 1902, p. il.
 
 CHAPTER IV. 
 
 THE RAILROAD PROBLEM. 
 
 Always to be Monopolies. — The kinds of business that 
 are naturally monopolistic will probably remain so al- 
 ways. Generally it is useless to tiy to make them com- 
 petitive. 
 
 Government Must Control. — The remedies for their 
 evils lie with the government. Its right of control over 
 them has long been exercised. A body of law sufficient 
 for their regulation seems to be growing up as the need for 
 law appears. Abuses showing this need exist for some 
 time before effective measures against them are enacted. 
 It is vain to turn aside from law, to depend wholly on 
 natural safeguards. Enlightened self-interest, no less 
 than honesty, would lead a railroad company to make 
 moderate charges, and to benefit its patrons in every 
 reasonable way, that from their increasing wealth it 
 might obtain more and more business. But the manage- 
 ment of a railroad may sometimes want the gain quickly, 
 to prove its ability and make a showing of success, 
 feeling that a levy on the people by means of charges 
 slightly excessive will not unfavorably affect their pros- 
 perity and demand for railroad service. In many cases 
 previous to 1887 managers made their freight levy all 
 their patrons could bear, and in many other cases un- 
 equal freight charges drove patrons out of business. 
 
 Our Living Dependent upon Eailroads. — The necessity 
 for closer control of railroads by law than of ordinary 
 
 44
 
 Tlic Railroad Problem. 45 
 
 occupations arises from the natural monopoly of rail- 
 roads. Under the modern system of division of occu- 
 pations, each person and each community following the 
 one or the few lines of business that seem to yield most 
 wealth, transportation of goods is not less essential than 
 exchange. One community's few kinds of products ex- 
 ceed many fold in quantity its own needs, necessitating a 
 shipment of the surplus to be consumed elsewhere ; 
 while a large variety of the supplies it consumes must be 
 shipped in from other places of production. In settling 
 distant lands and engaging in a few occupations, with no 
 attempt to supply all needs by local production as in old 
 times, people depend largely upon railroads for their liv- 
 ing. This is why it has been said of railroads that their 
 power is truly sovereign, their charges being in the na- 
 ture of a tax. Monopoly of the means of transportation 
 is complete where one railroad is the sole outlet and 
 inlet. Without its control by law the people served 
 would be at its mercy. The wagon transportation of 
 eighty years ago could not be resorted to, because prod- 
 ucts thus transported to market would have cost when 
 sold more than the selling price. 
 
 Communities on Lakes and Rivers are kept from the 
 power of railroad monopoly by boat transportation, 
 which is often an efficient regulator of railroad rates. 
 The second-class fare by rail between Quebec and Mon- 
 treal, 170 miles, is only $2 during the season of naviga- 
 tion. When the river is frozen the fare is about double 
 that sum. The lower rate is fixed by boat competi- 
 tion — perhaps too low to be profitable to the railway. 
 The higher rate is fixed by what the traffic will bear. 
 To make it still higher, if allowed by law, would check 
 travel and make the railroad unpopular. Considering
 
 46 TJic Plain Facts as to the Trusts. 
 
 possible growth of traffic, charging what it will bear, 
 with best results to the company in the long run, is 
 usually about the just course toward the public. Here 
 there are two railroads, but their mutual interest is to 
 agree, and to act as one concerning charges. Mutual 
 interests are the same where there are three or more 
 roads. It pays a company better to be at peace, and to 
 allow each competitor to have a fair share of the traffic, 
 than to get more traffic for itself by cuts in rates that are 
 discovered.^ 
 
 By Nature, Therefore, Railroads Must be Monopolies. 
 Of this fact no complaint can be made. But as they 
 are subject to state control, it may well be asked. Is 
 their service as good and as cheap as it ought to be ? If 
 not, in what respect is it faulty ? 
 
 Our American Passeng-er Service, both in low charges 
 and in efficiency, bears comparison well. The New York 
 Central's first-class rate of 2 cents a mile (no other class) 
 is the same as the English third-class rate in little old 
 
 'A Differential (reduction from highest passenger fare) is allowed in 
 some cases by agreement among the managers to be charged by those com- 
 panies whose routes are longest, and whose service is inferior in quickness 
 to that of the foremost companies, which, to keep the agreement, must 
 charge the higher rate. Between Chicago and New York the fast lines 
 charging $2 extra, ;^20 in all, are the Lake Shore, the Michigan Central, 
 and the Pennsylvania. With any one of these, the quickest running time 
 is 24 hours. The others are the Grand Trunk, the Nickel Plate, the Erie, 
 the Baltimore and Ohio, and the Wabash. When one of the latter runs 
 a train regularly between the two cities in less than 28 hours, it must 
 charge, to keep the agreement, $l extra for each hour less. When one 
 company breaks the agreement, the others are likely to break it too, to 
 meet the competition, and from the consequent unsettling of rates all the 
 roads may incur loss. The Lake Shore and New York Central line, a 
 high oflficial said, is kept from making the trip as quickly as it might, by 
 the fact that other lines would then cut rates to balance its advantage of 
 extra speed. ( Ely, 72. ) They would be compelled to do so to get any 
 considerable share of the through business.
 
 The Railroad Problem. 47 
 
 cars with no hallway lengthwise. The third-class rate 
 on the Continent in worse cars, a rate often commended 
 for cheapness, is given in the carefully edited Baedecker 
 guide-books as averaging about 1.9 cents a mile in Amer- 
 ican money. The present third-class rate of ^3.35 be- 
 tween Brussels and Paris, about 200 miles, with an ex- 
 press train speed of less than 3 5 miles an hour, does not 
 seem specially low in comparison with the first-class rate 
 of $8 over the 440 miles between New York and Buffalo 
 at 45 miles an hour, or the 1^8.50 rate in the world's 
 finest trains at 50 miles an hour.^ 
 
 'Passenger Rates in Europe. — The Inter State Commerce Commis- 
 sion collated several years ago the following list of rates per passenger 
 per mile : 
 
 
 I St 
 
 2d 
 
 3CI 
 
 
 ISt 
 
 2d 
 
 3d 
 
 
 Class. 
 
 Class. 
 
 Class. 
 
 
 Class. 
 
 Class. 
 
 Class. 
 
 
 Cents. 
 
 Cents. 
 
 Ce>!ts. 
 
 
 Cents. 
 
 Cents. 
 
 Cents. 
 
 Great Britain, 
 
 4.24 
 
 i-n 
 
 2.02 
 
 Sweden, 
 
 3-03 
 
 2.22 
 
 1. 61 
 
 France, 
 
 4.04 
 
 303 
 
 2.02 
 
 Norway, 
 
 1. 61 
 
 1. 01 
 
 •50 
 
 Germany, 
 
 303 
 
 2.22 
 
 1. 61 
 
 Denmark, 
 
 3-23 
 
 2.22 
 
 I 61 
 
 Russia, 
 
 3-63 
 
 2.82 
 
 1. 61 
 
 Holland, 
 
 3-23 
 
 1.62 
 
 1. 61 
 
 Austria, 
 
 3.83 
 
 2.82 
 
 1. 81 
 
 Belgium, 
 
 2.42 
 
 1. 81 
 
 1. 21 
 
 Italy, 
 
 3-63 
 
 2.62 
 
 i.Si 
 
 Switzerland, 
 
 Z-^i 
 
 2.62 
 
 2.02 
 
 Spain, 
 
 4.24 
 
 323 
 
 2.02 
 
 Turkey, 
 
 5-85 
 
 525 
 
 2.82 
 
 The following figures were submitted to the Industrial Commission (Vol. 
 IV. 758) by Waiter E. Weyl, as having been carefully compiled for 1897 : 
 
 
 Passengers per 
 
 ATerage 
 
 Fare per 
 
 Millions 
 
 
 Head of 
 
 Trip in 
 
 Wile in 
 
 of 
 
 
 Population. 
 
 Wiles. 
 
 Cents. 
 
 Passengers. 
 
 Germany, 
 
 13.2 
 
 14-5 
 
 1.08 
 
 692.5 
 
 Great Britain, 
 
 27.0rt 
 
 
 
 1030.4 a 
 
 France, 
 
 10.3 
 
 18.3 
 
 1. 17 
 
 396.7 
 
 India, 
 
 0-5 
 
 39-2 
 
 .z"] b 
 
 151. 2 
 
 United States, 
 
 1898, 6.6 
 
 26.7 
 
 1.97 
 
 501.2 
 
 a. Not including season ticket travel. 
 
 b. This rate of but little over a quarter of a cent per mile is based on 
 the gold value of the silver rupee, but as it passes for more, being under 
 limited coinage, it would be more nearly correct to put the rate at about a 
 half cent per mile. See also the table in a note a few pages further on. 
 
 The Very Low Rates of Austria, less than l cent a mile in some cases, 
 may be brought down by the kind of traveling a young Hollander told of.
 
 48 TJie Plain Facts as to the Trusts. 
 
 Our Freight Service bears comparison as well or better. 
 In efficiency of service, both passenger and freight, the 
 United States comes first and England second — both 
 countries entirely under private ownership and operation. 
 With them trains are run fastest and most frequently. 
 
 He said : " In Germany they have fourth-class cars. In them sometimes 
 you sit down, but mostly you stand." They are largely used for soldiers. 
 Fourth-class travel, according to Mr. Weyl, is 28 per cent of the total in 
 Germany, and over 90 per cent in India. This accounts in part for the low 
 average rate of these two countries. In Europe generally, third-class travel 
 ranges from 80 to 90 per cent of the total. With the Russian Government's 
 Siberian railroad, the object now is not profit in fares, but settlement of the 
 country. For the trip of 3,404 miles from Moscow to Irkutsk the first- 
 class fare is only ;?38.25, including sleeper and stop-overs. The second- 
 class fare is ^23.02. The third-class fare is much less, being designed for 
 poor immigrants. These figures were lately published in newspapers, from 
 information furnished by travelers. 
 
 The Usual American First-Class Rates are 3 cents a mile for short 
 rides and about 2 cents for long rides. The common excursion rate of 
 one fare for the round trip is never higher than i}i, cents, except in a few 
 sparsely settled regions, where the regular rate is 4 cents. Excursion 
 rates are often as low as I cent, sometimes lower. Summer and holiday 
 rates, and cheap excursions to fairs and conventions, come so frequently 
 that a person seldom has occasion to travel for pleasure at full fare. Ten 
 or more persons, going and returning together within three days, are given 
 by the Michigan Central a local party rate of 2 cents a mile. Much of the 
 long distance travel is on second-class tickets at less than 2 cents a mile. 
 Commercial travelers use first-class 1,000-mile tickets at 2 cents, good for 
 one person for one year, over all the roads of a large section. Many com- 
 panies sell 500-mile tickets for i!io. 
 
 Electric Railways. — The 3-cent local rate will affect few passengers 
 in the densely populated states, after the growing network of electric 
 lines has been further developed. Electric fares seldom go above 2 cents 
 a mile, ranging about a half-cent lower for rides of some distance — some- 
 times down to I cent. The steam railway meets the 25 -cent rate between 
 Detroit and Pontiac, about i cent per mile. To some extent this has long 
 been done, in competition with street cars, by ste.im railroads running sub- 
 urban trains into Inrge cities. 
 
 Low Average of Rates. — Reduced by these various kinds of low rate 
 tickets, avcrnge income per passenger per mile, in all the steam railroad 
 traffic of the United States, was 1.925 cents in 1899, 2.42 in 18S3, and 1.85 
 in 1882.
 
 The Railroad Problem. 49 
 
 Government Railroads. — On the Continent many rail- 
 roads are owned and operated by the government, espe- 
 cially in Germany, Russia, Austria, and Belgium. In 
 the latter country the government owns and operates all 
 the railroads. Italy owns its main lines, but leases them 
 to operating companies. The French railroads will fall 
 to the government in about fifty years. It has given 
 them large subsidies in money, and now owns and oper- 
 ates one system — the least important of the country's 
 lines. Continental rates for passengers are usually low ; 
 but in the best state railroad system, that of Germany, the 
 amount and speed of train service, " whether for passen- 
 gers or freight, are, according to English and American 
 standards, miserably inadequate." ^ 
 
 Privately Owned Railroads, though less than two-thirds 
 the world's mileage, have furnished practically all the 
 improvements. The French railroads have always been 
 privately owned, but as each has a monopoly of its terri- 
 tory guaranteed by the government, the benefits of pri- 
 vate ownership do not appear, and the service is on a 
 level with the German.^ 
 
 The State or the Individual ? — Yet it is not to be sup- 
 posed that if America and England had state ownership, 
 and the Continent had private ownership, the superiority 
 of service would be reversed. No doubt the Americans 
 and the English have private ownership because of their 
 individualistic experience, and because for them it secures 
 greatest progress, which they pursue to the utmost, 
 adopting the system that best promotes it ; while the 
 Continental peoples follow their habit of depending on the 
 government to do things for them. Their idea is that 
 
 ' Hadley, 399. 
 *Hadley, 399. 
 
 4
 
 50 TJic Plain Facts as to the Trusts. 
 
 government should do all it can ; the English and Ameri- 
 can idea is that government should do only what private 
 enterprise cannot.^ On the Continent, it is clearly notice- 
 able, they have efificient government but timid people. In 
 America we have people of unequalled enterprise, but 
 government that needs improvement in some particulars. 
 We like our way best, feeling that the government exists 
 for the people, not the people for the government. The 
 encouragement of large product, high wages, and means 
 of advancement, has made American labor the most effi- 
 cient in the world ; but it would probably deteriorate in 
 time if looking to the government became a habit here. 
 Americans Pay Well for a Good Service. — For passen- 
 ger service, as for other things, Americans prefer to pay 
 well in order to get the best. Continental railroad ser- 
 vice, though cheap, would not be tolerated in America, 
 any more than Continental living in general. We have 
 larger incomes, and can enjoy better things. But con- 
 sidering the difference in quality, our passenger service 
 seems at least as cheap as theirs. English passenger 
 rates are high considering amount of traffic (1,142,- 
 000,000 passengers in 1900, against our 577,000,000). 
 But they are not high considering the short local trips 
 of England, and the long trips of America. British roads, 
 being owned by stockholders at home, and being in favor 
 with the government, are allowed by law to charge a 
 fairly high rate, 2 cents for third-class ; while our roads, 
 owned usually by residents of other states, are closely 
 watched, with a tendency toward lowering their rates by 
 law.^ 
 
 ' Iladley, Railroads, 187. 
 
 * In Railroad Speed France now comes first with a few exceptional 
 trains. England led until late years, For several weeks in 1888, until
 
 The Railroad Problem. 5 1 
 
 It is in Low Freight Charges that America Leads 
 Farthest. And aside from the comparison our freight 
 
 stopped by unprofitable expense and wear, the East Coast and the West 
 Coast lines ran each a train about 400 miles, from London to Scotland, at 
 a fraction over 50 miles an hour. The New York Central and Lake Shore 
 Exposition Flyer, for four months in 1893, ran between New York and 
 Chicago, 952 miles, in 20 hours — 47.6 miles an hour. This speed for the 
 distance is still unequalled with a regular train. 
 
 The World's Fastest Trains. — The Paris and Calais Express, in 
 December, 1900, began a new schedule, running the 184 miles in 184^^ 
 minutes, a trifle under 60 miles an hour. Deducting one stop of 2.}^ 
 minutes, the rate is 60.66 miles. The South Express, four times a week 
 from Paris to Bayonne, 486.25 miles, ran for a year or more at an average 
 of 54.13 miles per hour, deducting no time for stops. In 1901, after an 
 accident, the speed was reduced to about 50 miles per hour. During the 
 last ten years the New York Central's Empire State Express has been run- 
 ning from New York to Buffalo, 438.96 miles, in 8^ hours, from 8:30 to 
 4:45, an average of 53.2 miles an hour. These are the fastest regular 
 runs over long distances. The fastest train of this class in England is now 
 that of the Great Northern road between London and Edinburgh, which 
 covers the 393.50 miles in 73^ hours — 50.77 miles an hour. The fastest 
 regular train, previous to the starting of the service by the Empire State 
 Express, was on the Prussian state railway between Berlin and Hamburg. 
 For a short run the fastest train has lately been that of the Reading rail- 
 road, which covers the 55.36 miles between Atlantic City and Philadelphia 
 in 50 minutes — 66.34 miles per hour. The longest regular run without 
 stop is that of the Great Western from London to Exeter, I94 miles. The 
 Northwestern of England comes first in the world in high average speed 
 of its six fastest trains — 46^ miles per hour. 
 
 Highest Speed for Single Runs. — In 1848, on Great Western of 
 England, 53 miles, 68 miles per hour. In 1895, on Lake Shore, Chicago 
 to Buffalo, 510 miles, 63.61 miles per hour; same train to New York, 
 952 miles, 54.20 miles per hour. In 1895, on Northwestern, London to 
 Aberdeen, 540 miles, 63.28 miles per hour. In 1897, on the Burlington, 
 Chicago to Denver, 1,025 miles, 58.74 miles per hour. In 1 876, special 
 train from New York to San Francisco, 3,311 miles, 39.53 miles per hour. 
 In 1893, Empire State Express ran I mile at the rate 112.50 miles per 
 hour. In 1899, a Burlington train ran 2 miles at the rate of 130 miles 
 per hour. In 1901, on the Plant System in Florida, a train ran 5 miles at 
 the rate of 120 miles per hour. In all these cases, in computing speed, no 
 time is deducted for stops. Most of this information is taken from the 
 World Almanac for 1 902, and all of it may be accepted as reliable.
 
 52 Tlie Plain Facts as to the Trusts. 
 
 rates generally seem low enough. The all-rail rate on 
 grain from Chicago to New York, 980 miles, was re- 
 duced in May, 1901, from lyyic to 15c. per 100 pounds 
 (13 yic when shipped for export). A rate as low as loc. 
 was then reported, given by roads that had unused cars. 
 By the usual differential, the rate to Philadelphia and 
 Baltimore is a cent and a half lower than to New York. 
 A rate of 6c. from St. Paul to Chicago, 400 miles, then 
 
 But in Freight Traffic the United States is in a class by itself, carry- 
 ing in 1900, 1,101,000,000 tons. The English freight cars, which they 
 properly call wagons, carry each from 5 to 10 tons only, against the 30, 
 40, and even 50 tons of the newer American cars. Checking of baggage, 
 sleeping cars, and a hallway lengthwise through passenger coaches (for 
 toilet privileges) were recently introduced on a few trains in European 
 countries, involving in many cases high extra charges. Against the 
 American baggage allowance of 150 pounds, theirs varies from 25 to loo 
 pounds. Until lately their railway systems were operated with little regard 
 for any but local traffic. Their small and frail coaches, entered from each 
 side between every two seats, are still called carriages in England, after 
 which they were patterned as well as named. In general, American rail- 
 way superiority is in size of cars and engines, passenger accommodations, 
 and through traffic arrangements. Superintendent Watson, of the North- 
 eastern of England, said in September, 1 901, after riding on the Penn- 
 sylvania Limited: " We have nothing to compare with that." British 
 railways carried in 1900, 425,000,000 tons of freight. 
 
 Cost of Roads and Mileage.— English roads were built more costly, 
 usually with double track from the first, stone stations and bridges, and no 
 grade crossings. Their cost on the average, in total stock and bonds in 
 1885, was $204,500 per mile, against about $115,000 for Continental roads, 
 and $61,885 (in ^Qoo) for American, ours being brought low in part by 
 cheapness of land, but raised in many cases by stock watering. (Hadley, 
 Railroads, 154.) Holland, Denmark, Bulgaria, Norway and Sweden, the 
 only European countries whose railroad capital per mile is lower than ours, 
 have a service greatly inferior. In 1900 the United States had 189,295 
 miles of line, Europe 172,621, Asia 35,938, Africa 12,501, the world 
 479,900. {World Almanac, 1902, copying from Archiv fur Encnlahn- 
 wesen.) Now (Jnnuary, 1902) our total mileage is slightly below 200,- 
 000. Our total railroad capital is now nearly twelve billions of dollars; 
 annual gross earnings a billion and n half; net earnings more than a half 
 billion ; and number of employees fully a million.
 
 Tlie Railroad Problem. 5 3 
 
 made the all -rail freight on grain from St. Paul to New 
 York 21C., against I9>^c. by rail and lake. These are 
 among the lowest of all rates, being made under compe- 
 tition among many carriers, and for a large traffic. The 
 2^-cent reduction from Chicago was restored in Octo- 
 ber, 
 
 On Wheat per Bushel from Chicago to New York (the 
 above figures are for 100 pounds), the average all-rail 
 rate for the year was 33)^c. in 1870, 20c, in 1880, H^c. 
 in 1890, and loc, in 1900(9.08 for export). By lake 
 and rail the rates for these years were 22c., 15 ^c, 8 J^c, 
 and 5c. By lake and Erie Canal they were lyy^c, 
 I2^c., sH^-> ^"^ 4/^c, From New York to Liverpool 
 the rates for these years were ii^c, 12c., 5c., and 7c, 
 
 For All Freight the Average Rate received by rail- 
 roads in the United States per ton per mile, in cents and 
 fractions of cents, was 1.99c. in 1870, 1,17c, in 1880, 
 1.03c. in 1887, .93c. in 1890, .80c, in 1897, and ,73c, in 
 1899. The lowest rate here was when freight business 
 was largest. Times then being good, a rate consider- 
 ably higher might not have checked traffic in many lines. 
 The average for all freight is brought down by the low 
 rates necessarily given on heavy products, such as coal, 
 ore, and logs, to make their transportation profitable to 
 shippers. 
 
 Local Freights. — Yet some local freights on small 
 shipments seem not less reasonable. The rate on goods 
 in boxes (first class) from Chicago to Jackson, 210 miles, 
 is 33c, per 100 pounds; from Detroit, ^6 miles, 25c,; 
 newspaper in bundles from Chicago (third class) 22c, 
 Large shippers get a rate much lower by the carload, 
 which is the minimum quantity with the grain rates given 
 above. The rate on first-class freight from Staunton,
 
 54 The Plain Facts as to the Trusts. 
 
 Va., to Jackson, Mich., a zigzag and little traveled jour- 
 ney of 700 miles, is only 60c. for small shipments. 
 Doubtless the rates are higher where railroad competi- 
 tion is lacking, but that is the case with few places of 
 consequence.^ 
 
 ^How Much Lower Freight Rates Than in Europe? — "Railway 
 freight rates in the United States are less than half those of other principal 
 countries. Our railways carry our chief products l,ooo miles to our sea- 
 board for less than the railroads of other countries charge for carrying these 
 products 200 miles inland from the seacoast after they have crossed the 
 ocean." (F. B. Thurber, N. A. Revieiv, May, 1901.) In this quotation 
 the second sentence lessens the force of the first. There may be cases in 
 which the local freight on goods shipped from New York 200 miles inland 
 would be more than the through freight on the same goods to New York 
 from Chicago. Undoubtedly European roads give low rates when neces- 
 sary for carrying on a large business, as on Russian oil from the Caspian 
 Sea, and on logs from the interior of Norway. Our freight rates are the 
 lowest in the world because quantities are largest and distances longest. 
 English rates are highest because distances are short, and also because the 
 railways, like our express companies, collect and deliver the higher-valued 
 freight, and ship very promptly. They keep no record of their rate per ton 
 per mile. An English authority, E. Phillips, writing of freight rates in 
 steel making, says the American are about one-sixth of the British. {^En- 
 gineering Magazine, May, 1 90 1.) 
 
 Professor Frank Parsons submitted the following table to the Industrial 
 Commission in 1901. (Vol. IX. ) Compare with the two tables previously 
 given. 
 
 
 Rate Per Ton 
 
 Average Haul 
 
 Passenger 
 
 Average 
 
 
 Per Mile 
 
 Per Ton, 
 
 Rate 
 
 Passenger 
 
 
 in Cents. 
 
 in Miles. 
 
 in Cents. 
 
 Trip. 
 
 United States, 
 
 •75 
 
 130 
 
 2 
 
 26 
 
 Germany, 
 
 1.40 
 
 60 
 
 I.I 
 
 20 
 
 Austria-Hungary, 
 
 1.40 
 
 57 
 
 I 
 
 23 
 
 Belgium, 
 
 1.30 
 
 40 
 
 .88 
 
 12 
 
 Switzerland, 
 
 2.80 
 
 35 
 
 »S5 
 
 12 
 
 France, 
 
 1.48 
 
 88 
 
 1. 21 
 
 20 
 
 Great Britain, 
 
 2.10 
 
 — 
 
 2 
 
 10 
 
 The above figures are probably the latest to be found, and when com- 
 pared with the other tables given, and with prevailing opinion, they seem 
 to be reliable. The French rate per ton per mile averaged 1. 63 cents in 
 1881, and the Belgium 1. 3 cents. The Belgian passenger rate also was 
 then lowest of all except that of India. (Hadley, Railroads, 201, 215.)
 
 TJie Railroad Problem. 5 5 
 
 Summing Up therefore, no complaint from comparison, 
 considering the prevaiHng conditions, can be made against 
 either the efficiency or the cheapness of American rail- 
 road service. In freight carrying it is not approached in 
 either respect by the service of any European country. 
 In carrying passengers it may be equalled by the English 
 service in speed and number of trains, but not in accom- 
 modations, nor in low cost for long rides. The Conti- 
 nental roads have lower fares, but for accommodations 
 not suitable here, A German imperial commission, sent 
 to investigate railroad methods, reported last year that 
 American roads furnish the best service in the world, at 
 the lowest rates, and pay much higher wages to em- 
 ployees than are paid in any other country.^ 
 
 Our Inter-State Commerce Commission published in its report for 1894 
 the following table of average rates per ton per mile, in cents of American 
 money : 
 
 Great Britain, 
 
 2.8 
 
 Italy, 
 
 2.5 
 
 Belgium, 
 
 1.6 
 
 France, 
 
 2.2 
 
 Sweden, 
 
 3-2 
 
 Switzerland, 
 
 3.26 
 
 Germany, 
 
 1.64 
 
 Norway, 
 
 2.4 
 
 Canada, 
 
 1.02 
 
 Russia, 
 
 2.4 
 
 Denmark, 
 
 288 
 
 
 
 Austria, 
 
 2-3 
 
 Holland, 
 
 1.56 
 
 
 
 ^ The German Report on American Railroads. — This sentence in the 
 text was made up from an American newspaper paragraph. In a private 
 letter to the author, in March, 1902, from Mr. Frank H. Mason, United 
 States Consul General at Berlin, he gave a synopsis of the verbal state- 
 ments made by Baron von Thielen in reply to his inquiries for the sub- 
 stance of the German commissioners' report. That synopsis was as 
 follows : 
 
 "It states that the American railway system is a marvelous creation, 
 admirably adapted to the conditions existing in the United States, but for 
 many reasons not adaptable in many particulars to the conditions which 
 exist in Germany. Here, as you are aware, the Prussian government owns 
 practically all the railways in the state. They are operated as a branch of 
 the government machinery. The element of competition between parallel 
 lines is entirely eliminated. Rates for freight are high, and those for first 
 and second-class passengers likewise, as compared with the rates which 
 prevail in the United States. The railways are prosperous in that they 
 earn a surplus, and not only pay the entire interest on the Prussian debt, 
 but turn millions of marks each year into the Prussian public treasury. It
 
 56 Tlie Plain Facts as to the Trusts. 
 
 Government Ownership for American Railroads. — As to 
 
 efficiency, having already the best railroad service, could 
 we make it still better under government ownership ? 
 A negative answer must be given. By no possible change 
 of ownership or management, it seems, could our most 
 successful railroad systems be made to render better ser- 
 vice to the public. They are now in the hands of trained 
 experts, brought up from generations of experience, who 
 have made American railroad operation a model for the 
 world. 
 
 Managers Work Best for Themselves. — It is unlikely 
 that under government ownership and operation these 
 would strive so intensely to reach the limit of possibility 
 in improvement. Those men have not yet lived in 
 America who as government officials, however liberal 
 their salaries, could force themselves to care for a public 
 railroad with the lifelong devotion of the managing own- 
 ers of the best lines. 
 
 And Secure Best Service from Employees. — Nor could 
 they as government officials, with hungry place-hunters 
 on every side, quickly advance men of talent to the posi- 
 tions in which they could be most valuable. There 
 would doubtless be faithfulness, from the highest officer 
 to the lowest employee, but not that live, prompt, for- 
 ward-reaching interest and efficiency that are continually 
 taking the initiative with such splendid progress in per- 
 is impossible for any one outside of the Prussian Ministry of Railways to 
 quote any part of the language of the commissioners' report. It is a con- 
 fidential document, and will be kept so." 
 
 Europeans Studying Our Railroads.— A number of English rail- 
 road officials have been in America in recent months studying our methods, 
 especially in handling freight. A falling off in dividends has aroused 
 British stockholders to the necessity of raising their rolling stock to higher 
 efficiency. During the last few years many Europeans have come to study 
 various American industries.
 
 The Railroad Problem. 57 
 
 sonal enterprise, and in corporation service where high 
 merit is promptly recognized and rewarded. 
 
 Nor Could Average Charges be Lowered by a change to 
 government ownership. Economy is doubtless carried 
 as far now as efficiency and safety will permit. The 
 tendency is toward the most effectual of all economy — 
 use of best equipment, operated by picked men at high- 
 est wages. Costs could not fail to be higher under oper- 
 ation by the government. It must pay highest wages, 
 but without freedom to pick and change men, and in 
 buying supplies it is too often influenced by the seller. 
 Equal efficiency in railroad service could hardly be 
 reached without considerable addition to cost. Civil 
 service reform, carried to the European standard, as far 
 off as this seems, might not secure a degree of faithful- 
 ness equalling that in the best corporate service. And 
 as indicated above, faithfulness in work is not the same 
 as efficiency, by a great deal. The one may be dull and 
 mechanical ; the other is marked by active individuality. 
 
 We Could Not Tax One Citizen to Give to Another. — Pri- 
 vate owners are satisfied with low and falling interest or 
 dividends as their share of railroad receipts. Unless the 
 government collected in railroad charges as much inter- 
 est on its capital, it would be taking one man's capital in 
 taxes to serve another man whose payment for railroad 
 service did not include full interest on the capital used. 
 The one would be deprived of receiving interest, in order 
 that the other might be relieved from paying interest. 
 The slightly lower rate at which the government can 
 borrow on bonds would be overbalanced by the expen- 
 siveness of public business ; and its risk in earning profits 
 would probably be greater, requiring dividends at least 
 as high. Holding government capital to be worthy of
 
 58 The Plain Facts as to the Trusts. 
 
 its hire, in profits, would be necessary to secure justice 
 between taxpayer and freight-payer, and to prevent 
 wasteful transportation. 
 
 Light Business Must Make Poor Service. — Likewise, 
 the unsuccessful roads the government could not oper- 
 ate better than income warranted, unless it gave to their 
 patrons, without return in charges, the benefit of taxes 
 taken from others. These poor lines have mostly fallen 
 into possession of the great systems, which will do all to 
 improve them that they will afford traffic to pay for. 
 When they are so operated as to deserve and get all the 
 traffic in reach, it is a childish fret to complain that the 
 service is not better. On some little branches in Quebec 
 the company is to be commended for running trains three 
 times a week instead of daily. It thus avoids giving for 
 nothing, that elsewhere it may render good value for pay 
 it receives. 
 
 The Large Profits of the Best Roads could not be dis- 
 tributed to the public, under government ownership, by 
 reducing rates. When a railroad pays dividends on a 
 capital of market value much larger than the sum it 
 would now cost to build its lines and equipment, the 
 excess of dividends, over dividends at the same rate on 
 present cost, consists of rent for favorable location, and 
 of surplus profit on a risk that turned out well. Pay- 
 ment of extra gain here cannot be avoided. Buyers of 
 the company's stock in the recent past have paid in its 
 high prices for their share of the property's added value. 
 Owners of stock from the beginning have waited for their 
 share, and have paid for it too, to the extent that in any 
 year they obtained a return on their capital less than they 
 might have gotten if it had not been in the road. In 
 another way they have paid toward the extra value by
 
 The Railroad Problem. 59 
 
 bearing, while it accrued, a risk of loss. By the likeli- 
 hood of gain, such risks are balanced, and by it people 
 are induced to take them. Others would now pay high 
 prices for the stock. The government would have to 
 pay the same prices or rob the owners, and on capital 
 thus paid would have to collect interest in charges for 
 service, or give the service partly free. 
 
 The Fact that There Was Little Risk — that the best 
 located roads were practically sure to become immensely 
 profitable, does not lessen the right of the original 
 owners to added value. Others might have gotten it by 
 buying stock before the value accrued. Their not buy- 
 ing shows they were unwilling to take the risk. Such 
 gains will occur in forecasting the future, balanced by 
 equal losses in other cases. Legislators, less far-sighted 
 perhaps than railroad builders, misunderstood the situa- 
 tion where they failed to reserve for the public a larger 
 share of the monopoly value arising from growth of the 
 country. Hereafter, in the entire business field, chances 
 to realize monopoly value and earnings may be few. 
 Change and improvement may be less rapid and gen- 
 eral ; and besides, knowledge of monopoly, gained from 
 experience, will raise at first the price of opportunities 
 (franchises) to reap from it, and will cause legislatures to 
 withhold in various ways its advantages for the public* 
 
 'How Much Profit Should Railroad Owners be Allowed?— The 
 valuation on which a railroad company is permitted by the state to earn a 
 fair rate of profit, cannot be based on earning capacity when the road is 
 operated at a loss, nor when it is operated with a great net income above 
 expenses. To let the company have, in rise of its dividends and stock 
 value, all the so-called unearned increment of value that comes from 
 growth of the country, would be to overlook that railroads are public high- 
 ways. Charles Francis Adams said in the Massachusetts report of 1875 
 that excess of net earnings above dividends should not go into improve- 
 ments, but should bo taken by the state through lower charges, leaving
 
 6o The Plain Facts as to the Tnists. 
 
 Earlier Losses in Railroads. — The hundreds of millions 
 of dollars lost in railroads by earlier stockholders are 
 now gone forever, so far as they and their times are con- 
 cerned. Their experience is still valuable, whether the 
 cause of loss was lack of need for the road, or waste in 
 building it, or operation too inefficient to develop the 
 business there was, or swindling by controlling owners 
 in excessive salaries to themselves, and in stock-watering 
 schemes for getting the money of innocent investors. 
 Excessive cost of these roads does not affect their sell- 
 ing value now. The able railroad men who buy them 
 get them at prices fixed by their earning power. If for 
 any reason one of these old roads fails long to serve its 
 territory reasonably well, and there is traffic not cared 
 for, a new line over a different route is built, unhampered 
 
 improvements to be made with outside additions to capital. (Dabney, 92. ) 
 This principle is followed by Michigan in passenger fares based on gross 
 earnings per mile, but as a rule it does not seem to be carried far. It was 
 lately pointed out that the Northwestern is now earning more than double 
 its dividends, putting the surplus into improvements, which do not raise 
 stock value so high as larger dividends would ; and that in 1900 all the 
 roads, improving property likewise, earned above interest and dividends a 
 surplus of ^142,000,000. Though recent earnings have been perhaps 
 temporarily high, the effort of different states to find the real cost of rail- 
 roads for taxation will doubtless lead soon to taking for the public, in lower 
 fares and freights, a large part of increasing earnings. The state may dis- 
 regard over-capitalization, and Congress, in fixing rates, would not be sub- 
 ject to state charter contracts. Henry C. Adams, Statistician of the Inter- 
 State Commission, who recently, with others, took a careful inventory for 
 Michigan of all its railroads, urged before the Industrial Commission (Vol. 
 IX.) the importance of finding the cost to reproduce railroads. 
 
 It has been argued that a railroad deserves a large increase of value 
 because the value was made by its construction into the territory. But the 
 road was no more essential to the people than they were essential to it. 
 Sometimes they have given gre.it bonuses. The Burlington and Missouri 
 River road, up to 1890, had realized $8,452,203 from its land grants, and 
 |2, •^72,800 from bonds donated by counties and towns. (A. G. Warner, 
 P. S. Quarterly, 1 89 1.)
 
 The Railroad Problem. 6 1 
 
 by debt and failure. The public good is then provided 
 
 for. 
 
 Is Our Railroad Service Perfect Then in every respect, 
 needing no attention from the public ? No ; the agita- 
 tion against it has been well grounded. The fault is not 
 in efficiency of service, nor in average charges. It is in 
 secret discrimination. As mentioned in the case of the 
 oil company, railroads have built up one shipper by pull- 
 ing down others — charging them higher rates, neglect- 
 ing to furnish them cars, and delaying their shipments 
 along the way. Through inequality of charges they 
 have also built up some towns by checking the growth 
 of others. Railroad discrimination has been the worst 
 of all the forces of monopoly. 
 
 Necessary Discrimination. — But much of the discrimi- 
 nation in railroad charges results in benefit to all, and 
 must be allowed. It arises from charging what the traffic 
 will bear, which principle is necessary to develop the 
 most business, and to render the most service to the 
 most people. Local fares, and tickets not limited in 
 time, are sold high, because persons using them will pay 
 well. Excursion rates are put low, for otherwise nobody 
 would go. Cutting down local fares to the excursion 
 level, though it would increase traffic, would give no 
 profit at all from total passenger receipts. The extra traffic 
 secured by means of excursions, at a little profit above 
 cost of running the extra trains, may have enabled the 
 company to put local fares as low as they are, and still 
 earn in the aggregate a fair return on capital. 
 
 Extra Traffic Secured by giving a through passenger 
 fare somewhat lower per mile, necessitated by the dis- 
 tance, and by competition with other roads, adds to 
 profits in the same way. A city's possession of pas-
 
 62 TJic Plain Facts as to the Triists. 
 
 senger facilities from several competing roads arose from 
 its size and location, and may be only one among other 
 natural and proper advantages. The case is similar with 
 freight rates. They have been lowered everywhere to 
 increase traffic, but in each case lowering is stopped above 
 the point at which more traffic does not give more aggre- 
 gate profit. 
 
 Long Distance Rates Must be Low, or goods would not 
 be shipped. There would be no wheat industry in 
 Dakota if freight rates to the sea were anywhere near 
 the local basis. Sometimes freight from a side line must 
 be taken at the junction for less than freight there started, 
 or the shippers on the side line, such as sugar beet 
 growers, could not engage in the business. Coal and ore 
 could not be shipped unless carried at very low rates ; 
 hence the necessity for first, second, third, and fourth 
 classes of freight. The rate on each is intended to be 
 placed where increasing traffic yields most aggregate 
 profit. The more valuable goods, in the higher classes, 
 must bear the road's general expenses ; the cheaper 
 freight yields but little above direct cost of handling it. 
 Fragile goods, such as furniture, on account of risk of 
 breakage, must bear an addition to the first-class rate.' 
 
 'Varying Rates of Profit in Other Business are quite common. 
 Coffee and sugar are retailed at prices very near cost. The same is partly 
 true of the staple dry goods called domestics. Low profit on these is bal- 
 anced by high profit on other goods, especially with the finer dry goods, 
 bought by people better able to pay, and with shelf groceries to which 
 dealers may not allow price cutting to extend. On some kinds of small job 
 printing the profit is so low that shops could not exist if it became the rule 
 with all work. These prices are lowered by competition from other towns, 
 as with deposit slips and hotel stationery ; and occasionally by miscalcula- 
 tion a low price is given that is afterward insisted on by the customer. 
 Such prices yield a little profit above cost incurred by taking the job, but 
 contribute nothing toward rent, management, etc.
 
 The Railroad Problem. 63 
 
 Some Cases of Discrimination Seem Monstrous. — The 
 rate on French hops from Boulogne to London was at 
 one time 17s. 6d. per ton, while 35s. were charged on 
 shipments from intermediate stations. Here it was a 
 foreigner who was favored. In an American state, ship- 
 pers in other states have been favored hkewise,^ 
 
 But Even Here There is Another View. Freight may be 
 paid on the hops before reaching Boulogne. At the des- 
 tination the total charge on the through shipper is fully 
 as high as on the local shipper. The discrimination only 
 balances the local shipper's monopolistic advantage in 
 location. As price of a commodity is fixed by the cost 
 of that portion of the necessary supply which is placed 
 in market with greatest aggregate difficulty, lowering 
 freight to the local shipper would only increase his 
 profit, without lowering prices to consumers. Local 
 people are favored in the same way when they ship to dis- 
 tant markets. Without lower rates on long hauls, which 
 cost the railroad no more in terminal handling than short 
 hauls, far-reaching commerce could not exist, and local 
 people would have a monopoly as in the days of wagon- 
 ing, keeping population small. It seems, therefore, that 
 to maintain civilization, there must be some discrimina- 
 tion. To suppress it completely would be to sacrifice 
 
 The Exact Cost of Hauling an Article of Freight cannot be deter- 
 mined. On the same train many other things are carried, to different places, 
 sometimes with a full load returning, and sometimes with empty cars, a 
 trip with the latter costing the road nearly as much as a trip with a full 
 load. A share of officers' salaries, repairs, taxes, and interest could not 
 be assigned to each freight rate. Hence, the only way is to make total 
 income yield a fair profit on capital, without attempting to have a uniform 
 rate of profit on each article shipped ; and to make every rate reasonable to 
 other rates, so that no person, town, or commodity is placed at a dis- 
 advantage. 
 
 ^ Hadley, Railroads, 181.
 
 64 TJie Plain Facts as to the Trusts. 
 
 many local consumers for the sake of a few producers. 
 The latter have some advantage anyhow in quicker time 
 and closer acquaintance. The fact that Owensboro 
 wagons are sold in Jackson, and Jackson wagons in 
 Owensboro, two places separated by over 300 miles, 
 shows freights to be so low that the manufacturer has 
 many states to sell in, and the local consumer many 
 states to buy in, both being relieved from monopoly. 
 
 What the Traffic will Bear. — Charging varying rates, 
 according to what the traffic will bear, is simply using all 
 sources of profit, making the most at every point, as a 
 butcher saves horns, hoofs, and bristles, which may yield 
 but little above cost of saving and marketing. He is 
 thus enabled to sell meat cheaper, and still have a fair 
 aggregate profit. This is considered the correct system 
 of railroad charges when present gain is not secured by 
 sacrificing the future, but when the present interests of 
 the road are viewed as bound up with those of all its 
 patrons, especially the local people, who, as its main- 
 stay, should be built up to the utmost. To hold man- 
 agers to the latter view is considered to be the province 
 of legislation (Hadley). Railroad owners and the public 
 are then benefited alike. The true interests of any class 
 seldom conflict with those of other classes. 
 
 The Wrong in This System is in abuses. These ap- 
 pear when shippers at local points are charged more than 
 they can bear, and are driven out of business by their 
 competitors enjoying lower rates at competing points. 
 There seems to be no reason why the total charge on 
 the local shipper should not be at least as low as on any 
 other. He could not then be driven out,* Generally 
 
 ' The road may be enabled to lower local rates by taking at reduced 
 charges through shipments for export, which do not compete with the local
 
 TJie Railroad Problem. 65 
 
 perhaps the charge should and does decrease as the dis- 
 tance decreases, though not in just the same proportion. 
 If freight rates are too low to a distant region, the total 
 labor and capital employed in producing and transport- 
 ing its products get from their value where sold a smaller 
 return than if the products had been grown nearer mar- 
 ket, and had required less transportation. On the other 
 hand, the same result may be caused by freight rates so 
 high as to restrict production to near territory less fertile 
 than that more distant, preventing the best territorial 
 division of labor. By reason of the great fertility of 
 eastern Kansas and Nebraska, their low freights on grain 
 were doubtless an advantage to the whole country and 
 to the railroads, despite the ill effect on grain growing in 
 the Northeast ; but the western portions of those states 
 were settled too soon, and the freight rates necessary to 
 maintain the roads, from the traffic offered, caused hard- 
 ship to settlers for a time, while their lack of prosperity 
 made the roads unprofitable. Collection by the railroad 
 of a reasonable profit will usually prevent transportation 
 involving a waste of energy, whether from regions too 
 far, or from too much transportation over shorter dis- 
 tances. This custom of making every shipment yield a 
 profit over the cost it necessitates, and also to bear a 
 share of general fixed costs when this does not prevent 
 the shipment from being made, leads too, perhaps, to a 
 fairly just system of charges, as well as to a desirable 
 measure of transportation.^ 
 
 shipper. With profit from such business, a road may give its local patrons 
 some of the advantage possessed by those living on competing lines better 
 situated. 
 
 'Newcomb, 69, 73. The Inter- State Commission in 1889 allowed New 
 York roads to charge the same rate on milk from every station at distances 
 varying from 21 to 183 miles, consumers being benefited, and the market not 
 being over-supplied, Where xmembarrassed by the long and short haul 
 
 5
 
 66 TJlc Plain Facts as to the Trusts. 
 
 The Worst Practice is giving one shipper lower rates 
 than others on the same traffic. In 1879 ^^^^ the New 
 York Central's total freight business was done at rates 
 specially agreed on. Of the business done at Syracuse, 
 over three-quarters was at special rates.^ The evil of 
 this was not then realized. Eventually it harmed the 
 railroads by ruining customers and injuring supporting 
 towns, and also by enabling the Standard Oil Company, 
 as the only important shipper in its line, to dictate its 
 own rates by threatening to withdraw its patronage. No 
 matter how low a rate may be, a shipper may be ruined 
 if competitors have a rate still lower. He could do bet- 
 ter with a higher rate if it were charged to all.^ 
 
 The Life Blood of Industry. — There are few mer- 
 chants who will not lower price a little to make a large 
 
 clause, and guided only by the rule to be reasonable and just, the Commis- 
 sion has been able to make rulings least open to criticism. (Dabney, 227. ) 
 
 ^ Railroad Tyranny in the Past. — It was felt then that the companies 
 had a full right to make any rates they chose — to resort to unmitigated 
 tyranny, in discrimination between persons, between places, or between 
 commodities. In 1884 coal carried 90 miles to Philadelphia was sold at 
 $(>.So, against $5.70 at Boston, 354 miles distant. Philadelphia, which 
 largely supported the roads, then paid extra on coal, by reason of discrimi- 
 nating freights, a sum estimated at $3,750,000 a year. The freight on a 
 tub of butter brought 165 miles to New York was 75c., but when brought 
 1,000 miles from Elgin, 111., it was 30c. In 1884 the grain rate from 
 Chicago to New York varied loc. per bushel within 60 days. In 1878 
 this rate was iSc. to New York but 25c. to Pittsburgh, half way. Freight 
 from inland points in Pennsylvania, bound for the West, was often shipped 
 first to New York to get its low rates ; and freight in different states was 
 sent to a distant competing point and shipped back to its destination at a 
 local point, to avoid the high rate of the latter. One special rate at Syra- 
 cuse was only a fifth of the full rate. Never did a peddler depart further 
 from the one-price system. A promise not to ship by canal was a reason 
 for some of the special rates. These facts were brought out by the Hep- 
 burn Committee of the New York Legislature in 1881, in 5,000 pages of 
 testimony. (J. F. Hudson, Railways and the Republic.') 
 
 SHadley, Railroads, 108-124.
 
 TJic Railroad Problem. 67 
 
 sale, or to get a valuable customer. Here the harm is 
 slight. But the case is different with monopolistic rail- 
 roads. Their service is the life blood of modern indus- 
 try, and must circulate impartially to preserve health in 
 the commercial body. 
 
 Government Ownership Not the Remedy. — Wrongful 
 discrimination could be effectually prevented by govern- 
 ment ownership. But would equality for all balance the 
 loss — in lower efficiency, in slower improvement, and 
 perhaps in higher cost ? Most people think not. Hence, 
 a continuance of the policy of regulating railroad traf- 
 fic by law, though this has become difficult in the com- 
 plexity of the business, seems to promise far better 
 results in America than government ownership.^ 
 
 Government Control, as obviating necessity for govern- 
 ment ownership, affords now an outlook for success sat- 
 isfactory to reasonable expectation. Where there is 
 much traffic, competition among different railroads, to 
 excel in service and to lower rates, is probably as sharp 
 as the most desirable public service requires. While there 
 is a disposition among competing roads to agree on and 
 maintain rates yielding a fair profit, there is usually a 
 tendency to make concessions in order to develop busi- 
 ness. Unfortunately, the benefit of this tendency in low- 
 ering all rates is lessened by the inducement to lower 
 them most for the largest shippers. 
 
 Charges Must be High Enough. — It is best for the 
 people that the railroads charge enough, not only to 
 maintain safe and effective equipment and pay good 
 wages, but also to pay fair dividends, so that controlling 
 owners will receive sufficient regular return on their 
 capital to escape the temptation of speculative gain. 
 
 1 Hadley, 402.
 
 68 TJie Plain Facts as to the Trusts. 
 
 Cashiers are paid well to make them honest. Fair wages 
 must be paid to get good service from anybody who knows 
 what others are getting. It is the same with capitalists. 
 If they are to save capital, and to maintain it at its best, 
 it must be allowed to yield them a full return. 
 
 State Regulation of Passenger Rates seems to be all 
 that could be desired. In the sparsely settled Upper 
 Peninsula of Michigan the earliest rate of 5c. a mile was 
 reduced by the legislature in 1889 to 4c. and was about 
 to be reduced by the legislature of 1901 to 3c., which 
 has long been the limit in the Lower Peninsula. The 
 State Commissioner of Railroads, in compliance with 
 law, required the Wabash road in 1901 to lower its fare 
 in Michigan from 3c. to 2c. a mile, because the passenger 
 earnings of the Michigan portion of its lines had reached 
 a yearly aggregate of ;^3,ooo per mile. The Grand Rapids 
 and Indiana rate was reduced to 2 i^c, its passenger earn- 
 ings having reached ;^ 2,000 per mile. The Lake Shore 
 voluntarily reduced its rate from 3c. to 2c. nearly a year 
 before it would have been required to do so by the law 
 of 1900 that repealed the special charters granted before 
 1 850. By that repeal of the earliest charters, the general 
 law fixing passenger rates was made to apply to all roads 
 in the state. Beginning January i, 1902, the Michigan 
 Central, on its main line in Michigan, whose passenger 
 earnings reach ;^4,ooo per mile, reduced its rate to 
 2c., and the Detroit and Milwaukee to 2^c. Com- 
 peting roads, without the large earnings requiring 
 the reduction, find it necessary to lower rates at many 
 points to meet the competition of the lines mentioned. 
 The other states that have fixed rates by law as low as 
 2c,, varying up to 3c., are Maryland, New Hampshire, 
 and Wisconsin. Connecticut has the one legal rate of
 
 Tlie Railroad Problein. 6g 
 
 2c. The rate by New York law for the New York 
 Central is 2 cents.' The law repealing the Michigan 
 Central and other old charters provided for suit by the 
 company against the state for damages. An important 
 case is expected, determining in some particulars the 
 right of the state over railways. In North Dakota, 
 after three years' negotiations, the railroad commission 
 has lately secured from the Northwestern, the St. Paul, 
 and the Great Northern companies an agreement to re- 
 duce freight rates, and to lower the passenger fare from 
 4c. to 3c. Similar reductions are expected in South 
 Dakota (the Black Hills rate from 5c. to 4c.). The 
 Minnesota senate has just adopted a resolution directing 
 the railroad commission to order fares reduced, with a 
 minimum of 2c. and a maximum of 2 3^c. An Iowa 
 legislative committee has just reported favorably on a 
 bill to reduce fares in that state to 2c. 
 
 ' A Two-Cent Fare Nearly Fifty Years Ago. — The New York Cen- 
 tral's passenger fare was fixed at two cents by the legislature in 1853, when 
 the New York roads forming the Central were consolidated. It is said the 
 Central Company spent hundreds of thousands of dollars to defeat the low 
 fare measure, but that, by reason of the low fare's effect to increase travel, 
 the great sum spent was earned back the first year. The legislature refused 
 to put the rate above two cents during the war, when railroads had to bear 
 an internal tax. This two-cent rate must be met of course by competing 
 lines. Some think that railroad companies, which generally resist legisla- 
 tive reductions, do not give rates low enough to find out the figure at which 
 large traffic will give greatest total profit. They doubtless try to reserve 
 the traffic that will pay full fare, while attracting other travel with excur- 
 sion rates. A short experimental electric line in Michigan, stopping at a 
 small village, was run at a loss for two years, but finally developed a pay- 
 ing business. A railroad president testified that ^10 would be a profitable 
 rate for passengers, from New York to San Francisco, if the cars were 
 always filled. However, aside from pleasure traveling in excursions, put- 
 ting fares below two cents would probably not increase travel sufficiently 
 to balance the loss. Lowering fares on street cars increases travel largely, 
 but they, unlike railroad traveling, save time for the mass of the people.
 
 70 TJic Plain Facts as to the Trusts. 
 
 State Control Protects the People. — Laws requiring 
 roads to sell 1,000-mile tickets good for any member of 
 a family have been proposed in the Michigan legislature. 
 A Massachusetts law of 1900 requires workingmen's 
 trains to be run into Boston when ordered by the rail- 
 road commission, with tickets for 1 5 miles at a rate not 
 over ^3 per mile per year, or ^i per mile per quarter. 
 State governments exercise ample power to enact laws 
 for the safety of railroad passengers and employees. 
 Between 1892 and 1901, though after long struggle 
 against the requirement, ^17,405,000 were spent by rail- 
 roads at Chicago in elevating 5 5 miles of line, to comply 
 with law requiring track elevation at street crossings and 
 elsewhere ; and ordinances have been passed for elevating 
 about as much more. City councils have power to reg- 
 ulate speed of trains within the city limits,' and to require 
 crossing gates. The present requirement of automatic 
 
 ^To Resist Regulations, a railroad company, it would seem, will not 
 move its shops from a city when the authorities require only what is right, 
 and with the honesty and ability that brook no threats nor bribes. Such 
 removals have been threatened in some cases. Formation of a habit of 
 obedience in railroad companies has undoubtedly been checked by faulty 
 control, with laws too stringent to be enforced, or too lax, and with officials 
 and legislatures whose pliable character suggested the corrupting influence 
 to which they yielded. A Michigan law empowers the commissioner to 
 order a station established where conditions demand it. The Inter-State 
 Law, and some state constitutions, require railroads to interchange traffic. 
 Requiring reasonable connection of passenger trains, sometimes purposely 
 avoided, has not been a practice in some states. Usually the companies 
 try to make good connections. 
 
 State Inspection. — The mechanical engineer of the Michigan railroad 
 department inspects annually every railroad track, bridge, and switch in 
 the state ; and the approval of the commissioner must first be obtained for 
 opening a grade crossing, and for stringing wires across a track. The 
 latter sees that the railroad laws are obeyed, and investigates complaints of 
 their infraction. Generally the companies comply quickly when he calls 
 their attention to the law, without his issuing an official order.
 
 Tlic Railroad Problem. 7 1 
 
 couplers and air brakes on all freight trains, which was 
 made by a law of Congress, passed in 1892 and taking 
 effect in 1900, has caused a diminution of 35 per cent 
 in the number of persons killed while coupling cars, and 
 of 52 per cent in the number injured, 
 
 Regulation of Freight Rates, though far more impor- 
 tant than regulation of passenger rates, has been less 
 successful. Freight rates are more secret, and must vary 
 greatly according to class of goods, quantity shipped, 
 and necessity for low charges in some cases to develop 
 business. 
 
 Serious Discrimination Still Continues. — In its report 
 for 1900 the Inter-State Commerce Commission says 
 that under the present law it is " inevitable that frequent 
 discrimination should occur, and endless acts of injustice 
 be committed, both in performing service and in apply- 
 ing rates." That this discrimination favors the few at 
 the expense of the many, aids the strong and handicaps 
 the weak, often subjecting the latter to destructive disad- 
 vantage. That it has been easy to get the roads to 
 adopt and publish rates satisfactory to shippers, but that 
 " in traffic actively competitive it has been found impos- 
 sible to secure actual observance of rates published." 
 Raising of rates also is effected, by changing an article 
 to another class ; and the orders or rules of the Commis- 
 sion are habitually disregarded. The Commission said 
 in its report in 1899 : "There is probably no one thing 
 to-day which does so much to force out the small oper- 
 ator, and build up trusts and monopolies, as discrimina- 
 tion in freight rates." ^ 
 
 ' The Inter-State Commission, and the National Association of State 
 Commissioners, have been endeavoring to secure from the railroads a uni- 
 form classification for the whole country.
 
 J 2 The Plain Facts as to the Trusts. 
 
 Shading Rates for Large Shippers must be reduced to 
 the minimum, it would seem, to prevent undue growth 
 of great cities at the loss of smaller places, and to save 
 the less important shippers from ruin. Only for solid 
 economic reasons should people be drawn into large 
 cities, and the gap widened between ordinary men and 
 the princes of industry. The much-desired railroad com- 
 petition is the cause of the trouble. Vicious discrimina- 
 tion seems impossible to prevent without permitting pools.^ 
 
 The Inter-State Law. — A party aggrieved has access to 
 the Commission, and to the courts, under the Inter-State 
 Commerce Law. But this law apparently is valuable 
 less for what it is than as a start toward what it may be 
 made. By clearly revealing the difficulties, it has pre- 
 pared the way for their removal. At the convention 
 held in Milwaukee in 1900 by state railroad commis- 
 sioners, at which nineteen states and the Inter-State 
 Commission were represented, it was unanimously recom- 
 mended that Congress give to the latter the power to fix 
 rates. Material change is needed to make the Inter- 
 State Law a means of effective control. Senator Cul- 
 lom's bill for this purpose has been held back session 
 after session by a Senate committee.^ A bill passed by 
 the lower house of Congress several years ago was 
 thought to go too far in its restrictions on railroads. A 
 bill considered very good passed the House in 1895, and 
 " would unquestionably have received the support of a 
 
 For discriminating favors, large shippers reward a railroad by giving it 
 their business, promptly paid for, which keeps the road steadily busy ; and 
 they accommodate it by sending more or less freight according to its un- 
 occupied capacity. 
 
 • These are discussed in Chapter VIII., and discrimination is further 
 treated in Chapter VI., in connection with trust monopolies. 
 
 » Albert Watkins, l^he Forum, Oct. 1 901.
 
 The Railroad Problem. 73 
 
 large majority of the Senate " had not the closing of 
 the session prevented a vote upon it.^ 
 
 ^Some changes recommended by the Industrial Commission for the 
 Inter-State Law are summarized near the end of Chapter VI. 
 
 Defects of the Inter-State Law. — "To state that the law in its pres- 
 ent condition cannot be enforced is only to repeat what has already been 
 said. Until further and important legislation is enacted, the best efforts at 
 regulation must be feeble and disappointing." (Inter-State Report, Jan- 
 uary, 1899.) 
 
 The Commission's Orders to Make Reasonable Rates and classifica- 
 tion, according to the Inter-State Law, have not been obeyed by the rail- 
 roads except in cases of little importance, or where the justice is so clear 
 that disregard might provoke public opposition. The reason is that the 
 orders are not final, having to be enforced through courts, where with new 
 evidence the roads may delay a case several years. To give or receive a rate 
 discriminating in favor of a shipper, is punishable by fine and imprisonment. 
 For discriminating in favor of a certain town, or a certain commodity 
 shipped, the railroad must correct the rate or classification, and may be 
 sued for damages. Discrimination in favor of a shipper is secret ; the other 
 two kinds are not. The first, though less common since the law was 
 enacted, will continue, without pooling, to be given by a road to its favored 
 large shipper, on whose freight its vital revenue largely depends. The 
 effect of this to build up the oil and beef combines is well known, and the 
 sugar trust, believed by some to have the same advantage, is at least in a 
 position to demand it. 
 
 A Rate to an Intermediate Point may be and usually is as high, under 
 the Inter-State Law, as the rate to the more distant competing point, but 
 not higher except under special conditions, such as those of Texas points 
 reached from New York by water, and those of Northwestern points reached 
 by the Canadian Pacific road. These points have lower rates than other 
 points nearer New York. This is considered as justifiable at present, but 
 as an evil to be remedied by perfected regulation. By reason of the com- 
 plicated network of routes, there is still much discrimination that holds 
 back the growth of towns and large districts. A large town, especially in 
 the South, is made a basing point to which a low rate is given, and this, 
 added to the local rate from there to a small town further on, makes the 
 high rate that keeps the latter town small. Rates from New York to the 
 central West are percentages of the Chicago rate — 78 per cent to Detroit, 
 87 to Cincinnati, 1 16 to East St. Louis. After one discriminating rate has 
 been corrected by the Commission, roads serving towns located at some dis- 
 tance laterally may and do so lower their rates as to restore the discrimina- 
 tion as before ; and may even be excused, in view of their duty to build up
 
 74 TJie Plain Facts as to the Trusts. 
 
 Public Desire for Removal of Discrimination in rates has 
 not yet been strong enough to overcome in Congress the 
 opposition of those who, not discerning that rate com- 
 petition with railroads is necessarily evil, still fear pool- 
 ing as dangerous monopoly ; nor has it been strong 
 enough to overcome adverse influence from some rail- 
 road companies that object to the regulation proposed. 
 The main opposition to pooling, it is said, comes from 
 some strong railroad companies that are already getting 
 satisfactory rates.' There is need here for public awaken- 
 ing. The people and the country are being injured, and 
 the railroads as a whole are not being benefited. The 
 trivial favor of giving free passes to people of influence 
 in business or politics has been legislated against ineffect- 
 
 and protect their own towns. So far-reaching is the interdependence of rates 
 that to determine if a rate on wheat from Chicago to New York is reason- 
 able, it might be necessary to consider rates on similar freight to every 
 Atlantic and Gulf port, and from every interior starting point. 
 
 Correction of Unjust Classification applies to but one case, leaving 
 many similar cases unremedied in adjacent territory. A rate on live hogs 
 to Boston, standing in June, 1887, at 46 per cent of the rate on dressed 
 hogs, was changed by July, 1888, to 135 per cent. The Commission 
 corrected this inequality in time to save Boston butchers from being driven 
 cut of business. Such discrimination arises from favoring the product of a 
 heavy shipper depended upon, or of a town where competition is shaqi. 
 Putting the rate on wheat lower than that on flour would in time transfer the 
 immense milling business of Minneapolis to places nearer the Atlantic coast. 
 Changing hay in 1900 from sixth to fifth class shut out Western shippers 
 from New England. To pass on the many thousands of rates, made by 
 hundreds of carriers, would be an endless task, whatever the Commission's 
 power to enforce. The remedy is to remove, by pooling, the competition 
 that causes the trouble. A manager responsible for earning a sufficient 
 income for his road, can scarcely afford to refuse a reduction demanded by a 
 large shipper who is about to take his business to another manager who 
 will not refuse. Unlike in other business, competition can never avail with 
 naturally monopolistic railroads. Under a pooling agreement the other 
 manager would refuse too, and the rate would be the same for all shippers. 
 (H. T. Newcomb, P. S. Quarterly, 1896, 20I-22I.) 
 
 > Indus. Com. IV. 90.
 
 The Railroad Problem. 75 
 
 ually, and still strengthens the railroad power.^ What- 
 ever is lacking in the Inter-State Law can doubtless be 
 supplied by Congress, under its constitutional power to 
 regulate commerce, if an earnest effort is made to do no 
 more regulating than is needed, and in a spirit, not of 
 antagonism, but of exact justice to all, the companies 
 included. Statutes prompted by a wrong spirit, and 
 attempting too much, are evaded by the railroads, some- 
 times because they cannot be obeyed, and tend to weaken 
 the force of law. Some such statutes were enacted by 
 Western States about twenty-five years ago in the 
 Granger movement, when there was a strong feeling 
 among farmers against railroads.^ 
 
 1 Giving Free Passes. — The Trunk Line and Western Passenger asso- 
 ciations recently joined in a movement to abolish exchange of passes be- 
 tween roads, to be extended, it was said at first, even to those issued to 
 presidents. The Western roads finally decided not to enter the agreement, 
 but by all the trunk lines it was put into effect January I, I902, and at the 
 start was said to be fully observed, though indications since have been that 
 it will not last long. So many people seek or accept passes, and the com- 
 panies get with them so many favors without money cost, that a strong and 
 united effort will be necessary to stop the practice of issuing them to per- 
 sons not in the railroad business. Some public officials of high char.icter 
 have refused passes, on the ground that they are bribes. Unfortunately 
 this is not the case with many public men. It is said that a few years ago, 
 when, after abolishing its passes to legislators, a New York road found it 
 necessary to get from the legislature an extension of a sleeping car license, 
 it was induced to issue the passes by fear that enough members would not 
 vote for the measure. There is said to be an agitation among public offi- 
 cials for repeal of Wisconsin's new law against giving passes. Just now 
 there is a bill before the Iowa legislature to require railroads to furnish 
 passes to all public officials. By such a law, it would seem, the element 
 of bribery would be removed. 
 
 * Beginnings of State Regulation. — Both in America and in Europe, 
 about 1872, the possession of monopoly power by railroads was suddenly 
 realized, and legislation to protect the public was begun. Previous to that 
 time, especially in America, the only thought was to get more roads. The 
 English railroad commission was then established, and the Continental sys- 
 tems of state railroads. (Hadley, Railroads, 22.) American state com-
 
 ^6 TJic Plain Facts as to the Trusts. 
 
 Regulation of Local Freights. — The Inter-State and 
 other laws of Congress regulate traffic between different 
 states. Regulation of local freight rates by state law 
 was proposed in 1901 in the legislature of Michigan. 
 The plan was to have the Governor appoint two special 
 commissioners, to act with the general railroad commis- 
 sioner, with the power to fix and adjust all local freight 
 rates. Though the bill was not passed, it received favor- 
 able consideration. The legislators who had charge of 
 it say there is need for such a law in local freight 
 rates varying widely without good reason.^ 
 
 missions, first appearing then, have become very important. About 200 
 persons connected with such commissions attended at San Francisco in 1901 
 the thirteenth annual meeting of their association. Among the subjects 
 considered by this association, at its meetmg in Charleston in Pebruary, 
 1902, were railroad taxes, fair valuation, rate making, necessary legislation, 
 and delays in obeying orders of commissioners. The state's right to con- 
 trol railroads was questioned for a long time, but is now being thoroughly 
 established. 
 
 'Lowering of Rates by State Commissions. — The Te-xas state com- 
 mission lately reduced a rate on crude oil from 15c. to 12c. per loo pounds. 
 The .Southern Association of Railroad Commissioners has been arranging a 
 plan for a uniform system of local freight rates to govern all Southern roads. 
 The Nebraska commission's lowering of local rates in 1887 by a third, 
 upheld by the state supreme court, resulted in a compromise, by which the 
 companies lowered through rates on coal, lumber, and grain, and the com- 
 mission's local reduction was lightened by about half. The concession from 
 the companies was a great advantage to the vital industries of the state. 
 Reduction of a third would have brought local rates to the standard of Iowa, 
 where business was much larger than in Nebraska, yielding a profit from 
 low rates. A law of the Nebraska legislature of 1893, placing maximum 
 local rates 29^^ per cent lower, was set aside as unconstitutional by the 
 United States court in 1898, on the ground that, allowing no profit, it took 
 property without due process of law. (F. H. Dixon, P. S. Quarterly, 
 1898.) After the compromise of 1887 the commission congratulated the 
 state on the fact that railroads were then out of politics. 15ut unfortunately, 
 Populism soon arose, with which antagonism to railroads was a craze, with 
 little pretense to view justly their side of the question ; and for self-protec- 
 tion the companies entered politics again. Dotli with railroads and with
 
 The Railroad Problem. yy 
 
 Former laws Too Drastic. — Such measures as that 
 proposed in Michigan have been enacted or agitated in 
 different states. They have usually been too sweeping 
 in their interference with the roads, tending to under- 
 handed control of the legislature by the latter to protect 
 themselves. A moderate measure would be most likely 
 to be enacted, and to grow into an effectual means of 
 regulation. A harmful law enforced would lessen the 
 safety and efficiency of train service, discourage railroad 
 building, and injure the public as much as the roads. 
 The Wisconsin law of 1874, which fixed rates so low the 
 companies could earn no profit, was gladly repealed two 
 years later.^ A measure proposed by the Farmers' Al- 
 liance in Virginia in 1892 was not passed for fear it would 
 check railroad building. By nature, injustice seldom fails 
 to react on its perpetrators. Their meaning well makes 
 no difference. In some states popular feeling against 
 railroads, by increasing risk of investment, necessitates a 
 
 city monopolies, it seems that political corruption would largely disappear 
 if public regulation were uniformly wise and just. But the corporations, 
 by swindling stockholders, and by alluring the public into giving bonuses 
 and franchises, were perhaps the sowers of their harvest of bitter political 
 opposition. What the conditions require is sounder knowledge among the 
 people, and the ablest and purest men on state boards, kept there by sala- 
 ries approaching those of the railroad attorneys with whose acuteness they 
 must contend. The importance of having ability on the side of the public 
 may be inferred from the fact that the attorney of the Northern Securities 
 Company, said to be the highest priced lawyer in America, has declined ap- 
 pointments to the United States Supreme Court, and to other lofty positions. 
 
 In many of the states the railroad commission has power to fix rates, 
 but apparently it has not been widely exercised. The Massachusetts com- 
 mission is still confined in this respect to reports and recommendations, 
 though often its recommendations have been so fair and able as to secure 
 new laws, or voluntary obedience from the railroads. In Missouri rates on 
 staple products are fixed by statute. Ohio fixes the rate per ton per mile by 
 statute, and also passenger fares, which are thus fixed in a number of states. 
 
 'Hadley, 174.
 
 78 TIic Plain Facts as to tlw Trusts. 
 
 higher return on the capital in the roads, which is col- 
 lected by means of higher charges, or by making service 
 less efficient or less safe. Low profits, with smaller busi- 
 ness, caused a reduction of the average number of track- 
 men, per 100 miles, from 124 in 1893 to 102 in 1894.* 
 
 1 Railroad Laws Must Conform to Certain Principles, of which one 
 of the best brief statements is given by Professor Emory R. Johnson in the 
 Political Science Quarlerly of March, 1900 — a magazine giving, in con- 
 tributed articles and in book reviews, the cream of the world's current 
 economic thought. The following is a skeleton outHne of his main points, 
 stated mostly in different language, and with added explanations : 
 
 1. Government regulation should promote gi-owth of railroad facilities 
 where needed, but should prevent the grosser speculation, and waste of 
 capital in useless parallel lines. By the Massachusetts law of 1894, to 
 which the Texas law is similar, the state commission must first approve, 
 after expert investigation, every issue of stock or bonds by steam or electric 
 roads. Investors are thus protected from stock watering. In New York, 
 and in four New England states, a new steam or electric line cannot be built 
 until the commission has decided that "public convenience requires it." 
 
 2. It should encourage the companies to act together in harmony. 
 Competition in excellence of service is beneficial, but in rate making it is 
 vicious. The Inter-State Law, and more especially the anti trust act of 
 1890, do not allow the cooperation (pooling) necessary to abolish the dis- 
 crimination they forbid, Co5peration between roads does not lead to 
 extortion. Rivalry of the Atlantic and Gulf ports, together with the 
 water-ways, is what makes rates low. Managers have little rate making 
 power. A company must give its shippers proper rates, or their outside 
 business will pass to shippers on other lines. The government commis- 
 sion should be a judge between shipper and carrier, not an advocate of 
 either. 
 
 3. The lowest freights (such as those on coal, lumber, and on long 
 distance grain) must cover cost of hauling and some profit. These will 
 not be shipped if much more is charged. The rate must be less than the 
 value added by the hauling. Goods of high value, such as shoes and dry 
 goods, should bear higher freight, more so than at present, Professor John- 
 son .says, to cover the road's general expenses, interest, etc. Here there is 
 more ability to pay, which should be regarded as in taxation. Such goods 
 being light, even a high freight adds little to their retail price. With the 
 heavy materials there may be no ability to bear a share of general ex- 
 penses. Total income must exceed total outgo to the extent of a fair 
 return on capital.
 
 TJie Railroad Problem. 79 
 
 We Get the Advantages and Avoid the Evils.- — By the 
 present American system of private ownership of rail- 
 
 4. Regulation should secure for all shippers, within a given area, 
 equality of advantage on similar service. In some other area, as the Far 
 West, lower through rates may be necessary, or industry would stop ; but 
 there local rates must be highest to yield a net profit, because local busi- 
 ness is smaller than where population is denser. Of course unjust favor- 
 ing of persons or places is not to be tolerated. 
 
 5. The ultimate aim is to benefit society by lowering rates as fast as fair 
 profit and healthy improvement of road will permit. This purpose is 
 attained by a moderate policy, just to the companies no less than to the 
 people, for the real interest of both parties is identical. A change for a 
 special social purpose may sometimes be good, as in lowering rates to 
 enable working people to live outside of a crowded city. 
 
 Low Fares Everywhere Have Greatly Benefited Society, by enabling 
 men to go quickly where their labor is wanted most. Austria's heavy re- 
 duction of fares in 1890 was a successful means of inducing peasants to travel 
 who remained in the lethargy of the Middle Ages. Perhaps it is their third- 
 class rate of two cents a mile that causes Britons to travel more per capita 
 than Americans. In Hungary the number of passengers was increased from 
 9,000,000 in 1887 to 35,000,000 in 1897, and the average distance doubled, 
 by lowering of rates through the system of a uniform charge for each of a 
 number of zones or belts of territory outward from the starting city. The 
 plan of some writers, gradually to enlarge such zones until a whole country 
 was in one, with railroad tickets sold as stamps without regard to distance, 
 would necessitate high rates for short rides, to earn expenses, and by exces- 
 sive cheapness of long distance fares would cause waste of time in traveling. 
 This plan seems to make of uniformity a fetich. 
 
 Rates by Carload and in Small Quantities. — E. W. Bemis, in The 
 Forum of December, 1 899, says the social advantage of equality is so 
 great that quasi-public railroads must eventually charge freights as the gov- 
 ernment sells stamps; and that in the South the practice of taking smaller 
 quantities at carload rates is already carried further than most railroad men 
 have been willing to admit as practicable. Dabney (p. 136) argues that 
 several lots filling a car should have the carload rate. E. P. Bacon, in 
 N. A. Review of January, 1902, says the difference in cost to the road for 
 handling is very small. Some western roads have lately been abolishing 
 a practice of permitting different shippers to unite to make up a carload. 
 In Russia, to get the lowest rate, 100 pounds are sufficient ; in New South 
 Wales, six tons, which may consist of different articles or commodities. 
 The public good, it would seem, requires that the difference in favor of 
 carload shipments be at the minimum, but large enough to cover extra cost
 
 8o The Plain Facts as to tJic Trusts. 
 
 roads, with governmental power (unlimited except by 
 nature) to tax, fix charges, and otherwise regulate, we 
 not only have none of the serious disadvantages of gov- 
 ernment ownership, but all its benefits seem within reach 
 if a determined effort is made to possess them. It is 
 doubtless true that often the officials appointed to regu- 
 late railroads, and other natural monopolies, have them- 
 selves been regulated by the corporations. But they 
 succeed where they are the right men, under the right 
 laws, and attempt to do only what clearly can and ought 
 to be done. If with the few laws and the few officials 
 necessary to control the roads, the government, state and 
 national, has not obtained results wholly satisfactory, 
 would it be more likely to do so by a change to owner- 
 ship, with a few more hundreds of thousands of men to 
 hire, and billions of dollars to spend ? 
 
 Could the State Control Better as the Owner ? — Could 
 we expect soon a time in this country when wealthy ship- 
 pers of freight, and sellers of railroad supplies, would not 
 be able to further their own private interests by influenc- 
 ing the government or its officials ? And would it be 
 possible to confine new lines of road to localities afford- 
 ing paying business, without regard to local party pres- 
 sure, or to prevent discriminating freight classification in 
 favor of districts having political power ? There might 
 not be better opportunity to control effectually under 
 government ownership than at present. There is now 
 no lack of power to do so, while the risk of fixed capital, 
 the hiring of men, and the spending of money, all rest 
 upon the private owners. 
 
 of handling the smaller, and thus to prevent also needless multiplication of 
 dealers, at a waste of society's capital and business energy. Albert Fink 
 testified that cost per car to the road was as low with one carload as 
 with ten.
 
 TJie Railroad Problem. 8 1 
 
 Is There a Conflict of Interests ? — There seems to be 
 no conflict between the interests of the public and those 
 of railroad owners when permanent results are considered. 
 The people, in a far-sighted view, want to pay railroads 
 well, and to get the best service that can be devised. 
 For improvements adopted they will allow substantial 
 reward in high profits, for some time, before taking all 
 the benefit to themselves in lower rates. Railroad owners, 
 on the other hand, know that injury inflicted by them on 
 patrons, whatever the immediate gains, will sooner or 
 later come back with added force on the company itself, 
 reducing patronage and forfeiting public favor. More 
 than a reasonable profit they cannot long take without 
 bringing on their road eventually a compensatory loss. 
 Since speculative building has passed, and railroad stocks 
 have been brought down to a solid value based on rea- 
 sonable earnings, it seems not too much to hope that the 
 problem will largely disappear, in frank recognition, both 
 by managers and by legislators, of inevitable principles 
 working for the good of all concerned. 
 
 State Ownership Works "Well in Europe. — In a European 
 monarchy, where military disciphne prevails, with the 
 best men permanently settled in the public service, the 
 government can carry on a business economically and 
 well, though not progressively as a rule.^ But with our 
 changing civil service, and our easy system of influencing 
 those in authority, " political reasons compel us to re- 
 duce government ownership of fixed capital to a mini- 
 mum." The Italian government, about 1880, decided 
 not to engage in the railroad business, and released its 
 
 • With such a corps of officials, government control of private owners 
 would also be far more successful. Having the best men in office is a 
 great advantage under any system. 
 
 6
 
 82 The Plain Facts as to the Trusts. 
 
 lines, " largely on the ground that politics would corrupt 
 the railroad management, and that the railroad manage- 
 ment would corrupt politics."^ 
 
 Little Desire for State Ownership. — Except among 
 people of socialistic ideas, who include a considerable 
 number of wage workers, there has not been much seri- 
 ous thought in America of government ownership of 
 railroads. The subject is considered here because it is an 
 important part of the trust problem. The same is true 
 of England and Canada. The movement in Canada for 
 government ownership of all railroads, agitated a year 
 ago by the Toronto World, is not likely to reach sub- 
 stantial results. Manitoba bought a short railroad in 
 1 90 1, and leased it with conditions as to low freight 
 rates. 
 
 We Can Get Railroads Without It. — It would no doubt 
 be wise for our government to build and operate a 
 needed line here and there if like the Russians we could 
 not get it in any other way,^ or if like the Germans we 
 
 ^ Hadley, 403. Professor E. R. A. Seligman wrote in P. S. Quarterly, 
 1892, p. 165, that this Italian commission was packed, and that what its 
 conclusion would be was known at first. 
 
 * State Enterprises Eighty Years Ago. — This was the sufficient reason 
 for the many internal improvements undertaken by the state governments 
 between 1815 and 1850. Means of transportation were then necessary for 
 developing a vast interior, inland from rivers, and as capitalists were not 
 ready to do the work it was taken up by the states. Congress built the 
 National Pike, from Washington to Columbus and Vandalia, starting in 
 1806. Many of the state enterprises were unsuccessful, coming before 
 they were needed, and piling up heavy debts. The state debt of Virginia, 
 whose readjustment was the dividing line between parties in the election of 
 1881, was contracted in part during the canal making period. New York 
 state's Erie Canal, opened in 1825, was a great success, supplying the 
 needed link in a chain of water transportation from the West to the sea- 
 board. It has been largely used in late years by boat operators paying 
 tolls (up to 1882 — free since then); and it has a beneficial effect toward 
 reducing the freight rates of railroads,
 
 The Railroad Problem. 83 
 
 had done all else a government could do, and did not 
 care how far the state interfered in the life of the 
 people. But we could not get better railroad service, nor 
 
 Canals and Railroads. — The other canals of the country have not 
 been extensively used since railroads became numerous. Some of the 
 canals were abandoned long ago. Detailed information regarding thirty- 
 eight canals still in use in this country is given in the World Almanac 
 for 1902. Unless a canal is suitable for vessels of considerable capacity, 
 its transportation is now too slow. After i860 the Erie Canal gave way 
 to the railroads. The state of Ohio's Miami and Erie Canal, between 
 Toledo and Cincinnati, was leased by the legislature in 1901 to a com- 
 pany that will tow boats with electric cars running on the bank. There is 
 greater reason for state ownership of canals than of railroads. For canals 
 there are fewer routes, and they can be used by different boat owners pay- 
 ing toll, while a state railroad must be used by one operator only, the state 
 itself, as in Europe, or by a leasing company, as with the Queen and Cres- 
 cent line, owned by the city of Cincinnati. The state of North Carolina 
 owns now ;?3,ooo,ooo of stock in the North Carolina Railway, leased to 
 the Southern. President Spencer, of the Southern, testified before the In- 
 dustrial Commission (Vol. IV. 128) that North Carolina's operation of 
 her road was unsuccessful, and that the Cincinnati road had not earned 
 interest for twenty- three years, and was leased for $400,000 less than its 
 annual interest. Many cities and counties invested in stock to secure new 
 railroads, up to about twenty years ago. 
 
 Grants of Land and Money. —Unwillingness of capitalists to build 
 unaided, was the reason for the nation's gifts of land and loans of money, 
 between 1859 and 1870, to the Union Pacific and Central Pacific com- 
 panies. Besides opening new territory, these roads were needed for polit- 
 ical and military reasons, to bind the nation together. To encourage the 
 construction of railroads into unsettled areas, the United States has granted 
 free many millions of acres. To the various Pacific roads 150,000,000 
 acres were given. For this purpose the Canadian government '< has con- 
 tributed $88,858,000 in cash and granted 39,725,000 acres of land. The 
 various provinces and municipalities also have granted vast sums of money 
 and vast areas of land, swelling the estimated total to $223,000,000 in cash 
 bonuses, and $180,000,000 in lands, or a total of $403,000,000 contributed 
 to assist railroad building in Canada. The greater part of this sum has 
 gone to railways owned by private corporations, but government ownership 
 is represented by more than $60,000,000 expended upon the Intercolonial 
 Railway, extending to New Brunswick and Nova Scotia." Leasing of 
 this road, now operated by the government, to the Canadian Pacific, has 
 recently been considered.
 
 84 TJie Plain Facts as to the Trusts. 
 
 cheaper. We might get worse and more expensive. 
 To any important extent, added power to regulate with- 
 out loss might not come with the change. On business 
 principles we could not treat employees better than do 
 the leading railroad systems, nor get so much for money 
 spent, either in wages or for supplies. In no certain 
 way could the public be benefited, except in uniformity 
 of rates otherwise to be secured ; but by the stupendous 
 load of taking many railroads, the people and their gov- 
 ernment would very likely be harmed. Though raising 
 money to buy railroads, with their earnings available to 
 pay bonds, might not be a difficult task, and though 
 necessity might force us to provide in time a civil service 
 permanent and reasonably efficient, yet, for no solid rea- 
 son, to cover the people everywhere with governmental 
 power and activity in railroad service (our greatest indus- 
 try) could hardly fail to cause grave national injuiy, by 
 weakening our universally admired self-reliance, individ- 
 ual enterprise, and spirit of freedom.^ 
 
 ' State Ownership Prevails in Most Countries.— Railroads owned or 
 continually aided by government are the rule practically everywhere except 
 in the United States, Great Britain, and Canada. The main reasons for 
 state ownership have been military needs and lack of private enterprise. 
 On the vast arid plain of Australia, government alone is able to overcome 
 the obstacles of nature. Fortunately, these reasons have not usually existed 
 in the three countries named above. In India, government railroads are 
 built with a view of distributing grain in time of famine. The fourth-class 
 passenger rate there, about a half-cent per mile, is high for the people's 
 incomes. Farm wages range from 10 to 20 cents a day. 
 
 Reasons Against Government Ownership of Railroads in America 
 were given as follows in 1899 in testimony before the Industrial Commis- 
 sion : I. Greatest possible investment of capital is involved, with complex 
 and changing system of management. 2. Income from all roads would be 
 two or three times all other national revenue, throwing the government out 
 of balance, and making transportation its main function. 3. Highest skill 
 in management is required, for which a democracy will not pay adequate 
 salaries. For this reason the government, whose highest officials, except
 
 The Railroad Problem. 85 
 
 GOVERNMENT TELEGRAPHS, TELEPHONES, AND EXPRESS. 
 
 With Telegrapli Lines government ownership and 
 operation would be a different matter. In amount 
 of capital involved, number of employees, complexity 
 of management, and public importance, the telegraph 
 business is small compared with the railroads. It could 
 undoubtedly be added to the post-office department, 
 as in Great Britain and other countries, and carried on 
 very satisfactorily. 
 
 Is There Reason for a Change of Ownership ? — An elab- 
 orate argument for government ownership of telegraphs 
 was made in 1901 before the Industrial Commission by 
 Professor Frank Parsons, of Boston, President of the 
 National Public Ownership League. Some of his ideas 
 are too socialistic to meet with general approval ; but im- 
 mediate or early purchase of the telegraph lines by the 
 government is also advocated by conservative economists, 
 especially by Professor Edwin R. A. Seligman, of Co- 
 lumbia University, who is perhaps the leading authority 
 on taxation and government functions.^ 
 
 the President, get salaries of from $5»ooo to ;^ 10,000, could not compete in 
 progress with private companies paying jlio.ooo to $50,000. 5. The 
 motive of private gain is essential to highest success, especially in the com- 
 plicated business of transportation. Government business costs much more 
 than private. 6. The one million employees would give the controlling 
 power a dangerous political influence. 7. Theoretically, full consolidation 
 would save all the wastes of competition, but such a monopoly of railroads 
 could not be trusted to private hands, and fully a generation would be 
 required to develop competent public management. We must try now to 
 perfect regulation ; ownership may be possible in the future. The one or 
 two ardent advocates of ownership said that the change cannot come until 
 the civil service has been reformed, and the people educated to require the 
 best in government. 
 
 1 The testimony as to public ownership is contained in Vols. IV. and IX. 
 of the Commission's report. See also Professor Parson's article in The 
 Arena, Feb. 1902.
 
 86 Tlie Plain Facts as to the Trusts. 
 
 Lower Charges in Europe. — President Hadley in 1885, 
 in his book on railroads, page 256, wrote that, consider- 
 ing distances, the average charges for telegrams in Amer- 
 ica were probably much lower than in Europe, especially 
 on the Continent ; and that in efficiency we probably had 
 a slight advantage — a distinct one in utilization of new 
 methods. Professor Von Halle, of Berlin, seemed to 
 have similar ideas in 1895, as indicated in his book on 
 trusts. But the evidence submitted to the Industrial 
 Commission seemed to be decidedly to the contrary. In 
 all parts of Europe government ownership of telegraphs 
 prevails. The minimum rates in America (except between 
 New York and Philadelphia, 20c.) is 25 c, for a 10- word 
 message over much used lines up to about 300 miles. 
 The rate from Jackson to St, Louis, 500 miles, is 30c. ; 
 to New York, 775 miles, 50c,; highest rate, ;^i to San 
 Francisco, 2500 miles. The average charge for all 
 Western Union telegrams in 1900 was 30 3^c. each ; cost 
 to the company, 25 ^c, European rates are as follows, 
 regardless of distance in home territory : In Great 
 Britain, 12 words for 12c.; in France, 10 words for lOc; 
 in Germany, 10 words for 12c.; in Belgium, 15 words 
 for IOC The address and signature, given free in 
 America, are charged for in Europe, reducing a 12-word 
 message to 7 or 8 words. The charge for additional 
 words is lower in Europe, giving both in Great Britain 
 and France an average of 1 5 ^c. each for all telegrams 
 sent — about half the average charge in America, 
 
 Could American Charges be Reduced ? — A manager of 
 the Baltimore and Ohio Railroad's telegraph system, 
 which was sold to the Western Union in 1887, when the 
 railroad company was in financial straits, was quoted to 
 show that his company earned a profit with a rate of
 
 The Railroad Problem. 87 
 
 only 15c, between New York and Chicago, and of 
 15c. for each of 19 long distances, with an average rate 
 of only 16 ^c. on all messages sent, A number of 
 boards of trade, and of postmasters-general, especially 
 Mr. Wanamaker in 1890, have urged government pur- 
 chase of the telegraph lines. He thought that in con- 
 nection with the post-office department a rate of loc. for 
 10 words, regardless of distance, might pay expenses. 
 It is doubtless true that the market value and dividends 
 of Western Union stock are based to a large extent on 
 that company's monopoly, and that by adding future 
 extensions to capital at their actual cost, a paying rate 
 to the government would be much lower than those 
 now charged. 
 
 Difficulties of a Government Telegraph System in 
 America. — The British telegraph system, confined to a 
 small and thickly settled country, was operated in 1900 
 at a loss of over ;^3,ooo,ooo, and the total loss since 
 1870, when the government took the lines, has been 
 about 1^40,000,000, But the reason given, namely, that 
 the people are more eager for extension of lines than the 
 revenue warrants, explains the loss. It does not arise 
 from excess of operating expenses, but from investment 
 of income on additions to plant. So far as this is true, 
 there is no loss at all. Professor Parsons says the British 
 deficit would be small if improvements to plant were 
 made with new capital added. But as to extension of 
 lines, how would the case be in the vast sparsely settled 
 areas of America, with the local political influence usually 
 exerted on the government ? It is doubtful if experience 
 with telegraph service would differ greatly in this respect 
 from mail service, with which there is practically no 
 trouble from local demands. Country people having
 
 88 Tlic Plain Facts as to the Trusts. 
 
 mails only two or three times a week are content, never 
 having known better facilities. Growing towns deserve 
 the postal improvements given them, which are usually 
 based on the amount of postal business. Mail service of 
 some kind is so necessaiy for public enlightenment that the 
 government must often supply it at a loss. As tele- 
 graph service is not similarly necessary — is perhaps 
 not even desired by people unwilling to pay for it — 
 there would probably be little demand for telegraph 
 offices or extensions not likely to receive a self-support- 
 ing income. 
 
 Success Would "be Certain. — It is true that the success 
 of the postal department is due largely to its use of 
 capital in railroads, whose private owners bear the risk 
 and develop the improvements. But in the people's 
 willingness to pay in full for telegrams, interest on capi- 
 tal, and allowance for depreciation of plant, could be 
 included in charges, which then would doubtless seem 
 low. As the cost of all the telegraph lines would prob- 
 ably fall considerably below ;^ 150,000,000, at the high- 
 est monopoly value of shares, and as the employees 
 number only 45,000, about a quarter of those in the 
 postal service, government ownership would seem to be 
 a safe undertaking. 
 
 Benefit to Society from Government Telegraphs. — A 
 uniform rate of about a cent and a half each for first ten 
 words, regardless of distance, or even if confined to a 
 portion of the country, would greatly increase the use 
 of the telegraph, promoting business, saving time, and 
 adding to public welfare. The British per capita use 
 of the telegraph is nearly double that of the Americans, 
 despite the larger incomes of the latter. Difference in 
 rates must be the reason.
 
 TJie Railroad Problem. 89 
 
 National Ownership of Telephones also, with local ex- 
 changes in charge of postmasters, is favored by Professor 
 Seligman, Use of the telephone, especially in large 
 cities, is now restricted by high charges. Very likely, 
 both the telegraph and the telephone monopolies in 
 America will pass before long under government owner- 
 ship. The reasons for the change seem so conclusive, 
 and the transfer would be so easy, that a general attempt 
 at public regulation of charges would scarcely be worthy 
 of serious consideration. France took possession of 
 her telephone system in 1899. Great Britain also has 
 just begun to take possession of hers. The Canadian 
 government recently made an inquiry into the feasibility 
 of public ownership of telegraphs, but the result did not 
 encourage embarking in the enterprise. 
 
 The Parcels Post and Postal Savings Bank. — The Brit- 
 ish system of postal savings banks, and of sending ex- 
 press packages at low rates by mail, would no doubt 
 be very useful to the people of country districts in 
 America, Perhaps these two small lines of service 
 might well be added to the post-office department. Both 
 have lately been urged, and both will probably be 
 adopted soon. Opposition from banks, express com- 
 panies, and country merchants fearing loss of trade from 
 mail orders sent away, would be similar to opposition 
 that has always been incurred by improvements. In 
 fact a parcels post is already in operation between the 
 United States and Germany, Newfoundland, Hawaii, and 
 Central and South America. The limit of weight is 1 1 
 pounds, and the postage 1 2 cents a pound. 
 
 Rural Free Delivery of Mail, established long ago in 
 densely populated England, is now being gradually in- 
 troduced into America, somewhat rapidly during the last
 
 90 The Plain Facts as to the Trusts. 
 
 two years, and with decided success, increasing the postal 
 business, and lowering cost of postal service in some 
 cases by discontinuance of country post-offices no longer 
 needed. It is hoped that this mail service, soon per- 
 haps to reach all rural population that is not too sparse, 
 together with the electric car lines, will lead more people 
 to live in the wholesome atmosphere of the country.
 
 CHAPTER V. 
 
 MUNICIPAL MONOPOLIES. 
 
 Unlike Railroads, the tendency with local monopolies 
 is clearly toward public ownership. For the same rea- 
 sons that a city must own its water works and bridges, 
 essential every moment to its life and business, it is com- 
 ing to be felt that it must also own its car lines. Espe- 
 cially is this true with systems of vast importance and 
 costliness. The great underground rapid transit system 
 begun in New York is to be built and controlled with 
 some of the ripened wisdom of experience. Its cost will 
 be about ^35,000,000 and its length 2 1 miles. The com- 
 pany building it, at a contract price paid by the city with 
 its bonds, is to operate it for fifty years, and pay back to 
 the city, as rental, the interest on those bonds, and also 
 one per cent more, to form a sinking fund for paying the 
 bonds at the end of the fifty years. The road then be- 
 comes the city's property, unencumbered (though the 
 company has a right to renew the contract for twenty- 
 five years more). New York city owns some of her 
 docks, renting them for a good return on the capital ; 
 and some far-seeing men think she should buy all her 
 water front, to give best possible facilities to foreign trade, 
 which in late years has been drifting from her to Boston, 
 and to ports further south. ^ 
 
 Municipal Operation Not Yet Successful in America. — 
 But operation by the city, economical and efficient in 
 
 ^Coler, 126, 170. 
 
 91
 
 92 The Plain Facts as to the Trusts. 
 
 Europe, will seldom be wise in this country until poli- 
 tics for profit have become less common — until the 
 best man is sought for a city position, and is kept in it 
 as long as he remains the best man for the place. The 
 lease of the New York car line is a surer method than 
 city operation for obtaining street car service to best 
 advantage. 
 
 Nor Does Municipal Ownership Yet Seem Wise Ordi- 
 narily. — By safeguarding the public good in every 
 possible way in terminable franchises, granted to pri- 
 vate companies building their own plants, it would 
 seem that street car, gas, and electric service may usu- 
 ally be obtained with best results for the present. Such 
 safeguarding is now coming to be the prevailing prac- 
 tice. 
 
 Long Term Franchises given by a city to corporations, 
 without full return to the public in a percentage of in- 
 come, in rates fixed very low, or in a purchase price or 
 fixed rental, are no longer freely granted as they were 
 some years ago. The service to be furnished by the 
 companies was then desired and not possessed, while the 
 large future value of the franchises was not adequately 
 foreseen. New York's new charter prohibits franchises 
 for a longer term than twenty-five years. One of these 
 rich franchise prizes, worth many millions to the company 
 obtaining it, is still sought sometimes from a subservient 
 or purchasable council, and the measure rushed through 
 before the people learn what is being done. The state 
 legislature also is occasionally involved, and like the city 
 council is subjected to strong temptation by wealthy 
 schemers after franchises. Both the governor and the 
 mayor may then become tools of corruption by not 
 using their veto power. The purest-minded country
 
 Municipal Monopolies. 93 
 
 legislators then become such tools by obeying party 
 bosses.^ 
 
 ^ A Notorious Franchise Case. — The most noted case of this kind, for 
 all future time it is to be hoped, was that of fourteen street railway fran- 
 chises given away free by Philadelphia, in June, 1901, to associates of 
 Senator Quay, without requiring cheaper fares. Mayor Ashbridge, ignor- 
 ing protests of press and people, signed the franchise ordinances at mid- 
 night. They were rushed through the council the next week after they had 
 been authorized by the legislature. To stop the robbery from being carried 
 through, John Wanamaker offered the city for the franchises $2,500,000 
 in cash, depositing 10 per cent of it as earnest money, and offering three- 
 cent fares during workingmen's hours. The mayor contrived to avoid 
 receiving the Wanamaker offer until after he had signed the ordinances. 
 Mr. Wanamaker afterward renewed his offer, and even tendered $500,000 
 bonus to the men who had obtained the franchises for a release of them. The 
 city government had acted so scandalously that its attempt a few days later to 
 float $9,000,000 of bonds brought only one subscription of $5,000. ( Public 
 Opinion, June issues, 1 901.) 
 
 Comments. — " No American state or city ever suffered such open and 
 barefaced robbery. It shows that popular government has ceased to exist 
 in Philadelphia or Pennsylvania. ' ' ( New York Post. ) "The worst mayor 
 Chicago ever had would not have dared to throw into the street such an 
 offer as John Wanamaker made." (Carter Harrison.) The Philadelphia 
 Inquirer, the reputed organ of Senator Quay, seems to have been alone in 
 defending the action taken. The leading Republican paper of Philadelphia 
 estimated that $1,000,000 of corruption money had been spent in the legis- 
 lature during its last session. This paper has since claimed to have con- 
 vincing evidence that one of the state supreme judges prostituted his high 
 office, by influencing the other judges for the franchise grabbers, and under 
 their direction as if he were their attorney. Philadelphia seemed as help- 
 less as New York was thirty years ago imder the infamous Boss Tweed. 
 
 Not So in Boston. — Governor Crane of Massachusetts, not long before 
 the Philadelphia scandal, vetoed a bill granting a forty-year franchise mo- 
 nopoly in Boston. He said : " No reason affecting the public welfare re- 
 quires the adoption of this extraordinary proposition. . . . Surrender of 
 public rights, even for brief terms of years, should be permitted only for 
 controlling reasons of public policy." 
 
 Another Noted Attempt to get a franchise corruptly was that of the 
 Ramapo Water Company in 1899, with a forty-year contract to furnish 
 water to the city of New York, for a total of about $200,000,000, (Coler, 
 138.) Another was that in Detroit several years ago of inducing the city 
 to buy out the street car company at a price considered double what the
 
 94 The Plain Facts as to the Trusts. 
 
 The Referendum. — An effectual safeguard against fran- 
 chise corruption is the referendum, required in some cases 
 in cities by the new constitution of CaHfornia, and required 
 in other states occasionally by legislative acts concern- 
 ing cities. This is a vote by the people, to confirm or 
 reject the city council's grant of a franchise. The referen- 
 dum is useful for other purposes. At a regular election 
 in 1 90 1 in Jackson the question of which of two sites to 
 select for a park was also decided by vote ; as was the 
 selection later of a site for a Carnegie library. Voting to 
 authorize a city council to borrow money has long been 
 common ; also voting by a state to ratify a constitutional 
 amendment proposed by the legislature. Extended 
 application of the referendum, now in progress, will pro- 
 property was worth. The scheme here, not nearly so corrupt as the others, 
 was stopped by a court decision against the power of the city to own rail- 
 ways under the state constitution. 
 
 The Many " Ripper Bills " passed by legislatures in 1901 were small 
 schemes to benefit party men in cities by so changing the city charter as to 
 give more power to a partisan council, as to lengthen the terms of partisans 
 in office, or as to make offices appointive by a partisan mayor instead of 
 elective by the people. 
 
 So Long as Voters Stay with Their Party without regard to what it 
 does, the public good may often be trampled upon for the advancement of 
 politicians. Bosses like Senators Piatt and Quay, and Richard Croker, 
 rule legislatures and councils as they please, because the votes they control 
 among purchasable people are added to by better people who will not vote 
 against their party for any amount of corruption. These belter people who 
 thus join with the bad are the cause of the trouble. Abuses will continue 
 until they stop them by voting for better men and better measures. 
 
 The Evil of Neglecting to Vote. — And still more to blame are the 
 many citizens who enjoy the benefits of government and do not even take 
 the trouble to exercise the priceless privilege of voting. It would be strange 
 if such neglect of duty did not bring serious evils. Belgium has bad com- 
 pulsory voting since 1893, along with minority representation, and with 
 plural voting for men of property. By means of a great mass meeting in 
 Philadelphia after the franchise steal, a movement was started to rouse the 
 public conscience to the gravity of the duty of voting.
 
 Municipal Monopolies. 95 
 
 tect the people from hasty or dishonest action by their 
 representatives, whose failure to do their whole duty 
 toward the whole people is the cause of many of our 
 public ills. The initiative, which like the referendum has 
 long been common in Switzerland, is a vote by the people, 
 not to ratify a measure already passed by the legislature, 
 but to require the legislature to take up a new measure 
 proposed. Both the initiative and the referendum would 
 likely result in public expense for voting too inconsistent 
 and unreflected to make their general use wise. The 
 probable futility of large use of the referendum is shown 
 by voters' indifference to constitutional amendments, 
 which are often adopted by the vote of a small fraction of 
 the people. However, these things are nothing against 
 the value of a right to use the referendum when needed. 
 The fact that it could be resorted to would check corrupt 
 use of money to influence legislation. 
 
 Proportional Representation, not yet introduced in this 
 country, would be perhaps the most effectual means for 
 reforming city councils and legislatures. It would be an 
 arrangement by which a minority party having half as 
 many votes as the majority could elect half as many rep- 
 resentatives. At present, representation from a ward or 
 voting district is confined to the majority party alone. 
 The books and articles by Professor John R. Commons 
 are authority on proportional representation. 
 
 Nomination of Candidates by Direct Vote in a primary 
 election, instead of by a convention of delegates selected 
 in ward or precinct caucuses, is now becoming a popular 
 method of reform. Except where the two parties are 
 nearly equal, the final election is less important than the 
 nomination. Primary elections, open to every voter of 
 the party at the precinct, the candidate receiving most
 
 96 TJie Plain Facts as to the Trusts. 
 
 votes being the nominee for final election, have been 
 adopted by law in South Carolina and Georgia for all 
 state offices, and for many years in Virginia have occa- 
 sionally been used by option of the local party commit- 
 tee. Minnesota, Michigan, and Indiana have each tried 
 this plan lately with success in certain cities. It is 
 expected soon to spread rapidly, as Australian secret 
 balloting spread ten years ago. In a primary, conducted 
 according to law as a regular election, each vote directly 
 affects the final nomination, and men not in the ring of 
 the boss or party managers feel it worth while to attend. 
 In Minneapolis last year more votes were cast in the pri- 
 maries than in the preceding election for Governor, and 
 the city, it is said, never secured a better selection of 
 officers. In Lincoln, Neb., direct primaries are said to 
 have abolished bossism, and to have put the parties under 
 control of the best men. {National Magazine, March, 
 1902.) Yet the direct primary cannot change conditions 
 in a ward where the boss-ruled class are the majority. ^ 
 
 1 Encouraging Progress in Municipal Reform. — Despite the Phila- 
 delphia case, there has been encouraging progress of late toward securing 
 for the public an adequate return for the value of franchises. It was said 
 a few months ago that "a Chicago company owning 210 miles of track 
 offers to pave every street it occupies, from curb to curb, with best material, 
 if the city will renew its franchise, which expires in 1904." The assess- 
 ment of a Cleveland street railway, with a salable value admitted to be 
 over ;^io,ooo,ooo, was raised in 1 901 from $600,000 to 1^7,100,000. It 
 had been assessed on physical property only, such as cars and barns, not 
 on franchise. A similar change in a Detroit assessment was confirmed by 
 the supreme court. 
 
 Taxing Franchises. — The Illinois Supreme Court rendered in October, 
 I901, a decision by which it is said a total of over ^100,000,000, for 
 franchise values, must be added to the assessments of Chicago corpora- 
 tions. Mayor Johnson of Cleveland has been leading a movement by 
 which it is expected to add $200,000,000 to the assessed valuation of Ohio 
 steam railroads. Their rate of assessment is apparently proved to be less 
 than half that of general property ; though in some states the railroad tax,
 
 Municipal Monopolies. 97 
 
 In Reply to the Public Ownership Argument, that the 
 rich corporations regulate their regulators on the city 
 
 reaching in cases 12 per cent of net earnings, may have been so high at 
 times as to raise freights, and thus to place the state at a disadvantage. 
 (Nevircomb, 145.) New York state has a new law for taxing franchises, 
 for whose enforcement gallant efforts have been made by Governor Roose- 
 velt and the tax commissioners. Though franchises give value to street 
 railways in the same way that location gives value to land, they have 
 escaped taxation until recently. The Industrial Commission recommends 
 that franchises be assessed in market value of stock and bonds. 
 
 Provision for Municipal Ownership. — Mayor Harrison of Chicago 
 has lately been resisting vigorously unseemly haste by street railway cor- 
 porations to have their franchises renewed for twenty years, before the 
 legislature has given the city the power of public ownership, for which he 
 says the civil service may be ready before the end of that time. His elec- 
 tion pledge was that new franchises should be ratified by referendum, and 
 should provide for municipal ownership in the end. ( The Outlook, Jan. 
 18, 1902.) In different cities the tracks will fall to the city at expiration 
 of present franchises. Provision for city ownership was made in San 
 Francisco's charter of 1899. Virginia's proposed new constitution requires 
 that franchises be limited to thirty years and sold to the highest bidder. 
 
 Progress in Cleveland. — A Cleveland board has just recommended 
 acceptance by the council of a bid (accompanied by ^50,000 earnest 
 money) for franchises on 17 railway routes, mostly new, 60 miles in all. 
 The bidder agrees to the city's conditions, which include three-cent fares, 
 universal transfers, arbitration of labor disputes, requirement of best appli- 
 ances, limit of franchise to 20 years, half of profit above 8 per cent after 
 10 years to fall to the city, and a right to the city to purchase any time, at 
 an appraised price, without paying for franchise. Mayor Johnson was 
 elected on a platform approving three-cent fares and no extension of fran- 
 chises. {^World's Work, Feb. I902.) 
 
 Methods of getting back old perpetual franchises are discussed by John 
 Ford in North American Review, May, 1901. The right of eminent 
 domain is available in such cases. A perpetual monopoly given Robert 
 Fulton to navigate the Hudson was of course declared unconstitutional. 
 Such binding of posterity could never be tolerated. 
 
 Municipal Good Government Will Go Forward by its own momentum 
 when it has become strong and popular, as in Europe, whose city govern- 
 ments have for many years been improving steadily, attracting into office 
 the ablest and best men. Up to the present, in America, the tendency in 
 cities of all grades has been to follow the vicious example of the Tammany 
 spoilsmen in New York, who were defeated in 1901 by the reform forces in 
 
 7
 
 98 The Plain Facts as to the Trusts. 
 
 boards, it might be said that with operation by the city 
 the aldermen and special commissioners would be no less 
 influenced by ward bosses with henchmen to provide jobs 
 for, and by wealthy bidders for contracts to furnish equip- 
 ment and supplies. There is temptation under both sys- 
 tems — public operation, or private operation under public 
 control. Under either there will be a field for bosses, 
 wielding power by control of votes. No system of own- 
 ership or government will relieve the people from the 
 necessity of elevating voters' morals above the practice 
 of receiving bribes, whether in money, or in the jobs and 
 favors bestowed by a boss ; nor will the time ever come 
 when men of wealth or intelligence can safely escape the 
 burden of taking an active part in politics. Control of a 
 comparatively small number of voters keeps an alderman 
 in office under the system of election by a single ward, 
 instead of by the city at large. A change to the latter 
 system is desired in many places. 
 
 The Advantage of Private Operation is that the city 
 avoids the risks of investing capital and carrying on 
 business, while by means of carefully prepared franchises 
 it may in some lines of service control almost as effect- 
 ually as if it were the operator. Some investigators 
 who would favor public ownership if street car service 
 were just being introduced, favor private ownership now, 
 because of the great cost of buying out the companies, 
 and of probable extravagance in operation under such men 
 as now hold office. The public of a city can own and 
 act only through its officials. Because these have been 
 unfaithful when over a few things, it is deemed unwise to 
 
 the election of Seth Low as mayor. Pittsburgh also, in February, 1902, gave 
 a rebuke to ripperism, and placed her city government in cleaner hands. 
 Chicago voted 5 to I, April, 1902, for public ownership and direct primaries. 
 Recent exposure of wholesale bribery is a start in purifying St. Louis.
 
 Municipal Monopolies, 99 
 
 make them rulers over many things. If they now, as in 
 the Philadelphia franchise case, receive a large sum for a 
 great breach of trust, would they not then receive many 
 smaller sums for committing many smaller breaches of 
 trust ?^ They would have no franchise to sell, under 
 close scrutiny from the public, but they would continu- 
 ally be giving out contracts, to which the public gave no 
 attention. 
 
 That the Presence of Corporations Causes the Corrup- 
 tion is the claim of the advocate of public ownership — 
 that if the city took from them the task of supplying the 
 service, nine-tenths of the corruption would disappear. 
 No doubt they are the chief source of campaign and com- 
 mittee funds for the boss and his machine. But it seems 
 too much to hope that the boss could be eliminated from 
 local politics by the simple change to public ownership. 
 Being a resourceful man, he would still find a way to 
 gain from his control of votes. At present the corporate 
 forces for evil are strong, but they are few, and may 
 be known and watched. Under public ownership evil 
 forces would be less powerful, but they would be numer- 
 ous, and of the personal kind that are not to be watched 
 effectually without intolerable espionage. They might 
 appear in any case of hiring men or buying supplies. So 
 long as men of influence are willing to resort to corruption 
 for the sake of gain, the way will not be lacking. 
 
 The Only Sure Remedy, it seems, is so to enlighten and 
 purify public sentiment that men willing to do such things 
 will not have influence ; that each citizen will rebuke dis- 
 
 ^ New York Nation. This reasoning is unsound if it is true that public 
 ownership would bring better men into office. That is discussed a few 
 paragraphs further on. As to the advantage of greater publicity of ac- 
 counts under public ownership, this does not purify public business now, 
 and might be well provided for in the terms of a franchise.
 
 lOO TJie Plain Facts as to the Trusts. 
 
 honesty toward the public, as he rebukes dishonesty toward 
 himself. When the man of wealth and culture lives 
 nearer to the masses in acquaintance and sympathy, they 
 will discriminate better between right and wrong, and 
 will not obediently follow the boss as their only influen- 
 tial friend. They will discern that the boss's favors 
 spring not from generous regard for the poor, but are 
 bribes for votes. Until the mass of the people know the 
 right, and desire to do it, neither public ownership, nor 
 any other system, will rid a city of corruption. 
 
 Are Not the Real Interests Harmonious ? — It seems that 
 adding to public functions a street car service, with its 
 vast business, would complicate rather than simplify local 
 government, and render its proper administration more 
 difficult. Control of privately owned street car service 
 appears to be but a slight and natural extension of the 
 control cities have long exercised over various occupa- 
 tions closely affecting the public. As the permanent 
 interests of private owners having a long franchise, and 
 desiring its renewal, are in harmony with those of the public 
 — what is best for the people being eventually best for the 
 companies — the proper measure of control, it seems, need 
 not weaken the effort of owners to care for their business 
 as their own, nor involve necessarily a conflict of inter- 
 ests. As to rates of street car fare, private capitalists are 
 usually satisfied with as low a return on their investments 
 as should be earned by the people's capital under public 
 ownership. Though some profit to private owners is 
 usually sure in a growing city, they have a right to high 
 profit when by buying a franchise, or guaranteeing cheap 
 fares, they take the risk of getting a profit too low. If 
 the city took all the risks, the company would accept 
 very low profits, as in lending on bonds.
 
 Municipal Monopolies. lOi 
 
 Is it Public Control of Private Property ? — It is hardly 
 a case of public control of privare property, contrary to 
 the owner's usual rights. The company is less'afi owner 
 than a contractor, undertak-ng fo perf of <,h *;• ''^ertaiji; ser- 
 vice during the life of the franchise, according to its 
 specified terms, whose fulfilment the other party, the 
 city, has a right to watch continually. The value 
 of the company's property in surface tracks and cars 
 is small compared with the value of the right to use 
 the city's streets. Here there seems to be no more 
 than the usual antagonism of interests to be found 
 in business contracts. Private owners cannot feel that 
 the control is unjust if it is provided for in the franchise 
 contract. 
 
 If Proper Regulation Could once be Established, with offi- 
 cials continuously elected that were too able to be deceived, 
 and too honest to be corrupted, it seems that the com- 
 pany would be honest too — that its corrupting influence 
 in politics would cease, and that its stockholders would 
 not have an interest adverse to good government. When 
 good government is an established institution, uniformly 
 supported by a strong majority of the people, nothing 
 but loss to the offender will be the result of trying to 
 undermine it. Up to the present time opportunities for 
 gain by corruption have been too tempting to be resisted. 
 The people, not appreciating the future value of fran- 
 chises, have neglected to require from companies an 
 adequate return. The opportunity to get possession of 
 a monopoly business affording untold profits has been 
 made easier by the people's choice of legislators and 
 aldermen neither able nor honest. Then, after obtaining 
 its franchise, the company finds it easy, by influencing 
 officials, to get the kind of public regulation it desires.
 
 I02 The Plain Facts as to the Trusts. 
 
 Such chances to secure monopoly gains would corrupt 
 good rncrj. L'~>ng •n'jiilj,^ence of the companies gives 
 them a show of right, and has enabled them to resist in 
 the court.'? pUempls at bcrtter regulation.^ 
 
 Municipal Corruption Can be Overcome whenever 
 enough people want to overcome it. This is true, 
 despite the strength corporations derive from possession 
 of wealth, and from their skill, trained by long success 
 in gaining their ends. Men fully as able as their best, 
 and having equal experience in large business and in 
 care of property, would now feel honored to accept 
 office, perhaps without increase of present public salaries, 
 if elected or appointed on merit, without having to become 
 politicians in order to get votes. To serve the people 
 successfully now, with an election under such conditions, 
 would seem to be a greater achievement, and more attrac- 
 tive to superior men, than to serve under a perfectly 
 working system of public ownership. 
 
 * Laws of Little Use Unless Voters Require Enforcement. — Sale of 
 a street railway franchise to the highest bidder, if carried out honestly as a 
 transaction in ordinary business, would bring a price so high as to save to 
 the people all monopoly gains, leaving to the purchaser only the usual 
 return on capital. But a law for that purpose has not been successful in 
 New York. ( Ely, 257. ) In Cleveland the state law requiring sale of fran- 
 chise to the company bidding lowest fares, the city council has evaded by 
 allowing new lines to be built as extensions of old lines. In Kansas City, 
 a few days before the Missouri law of 1895 took effect, requiring franchises 
 to be sold to the highest bidder, the city council extended the time of old 
 street railway franchises, and granted a number of new ones. 
 
 A Harvest of Monopoly Profits has been the rule in practically all the 
 large American cities. Until lately, despite public opposition, with street 
 railway franchises granted practically free of cost, of low fares, of efificient 
 regulation, and even of just taxation — the usual net income of a company 
 has been sufficient to cover corruption or bribery expenses, and to admit of 
 doubling or trebling in stock the amount of capital actually invested. A 
 legislative report of 1897 showed that street railway stock in Chicago paid 
 17 per cent in dividends, which was deemed to be at lea.st 30 per cent on
 
 Municipal Monopolies. 103 
 
 To Get Superior Men Into Office. — It does not seem 
 that displacing street railway control by ownership, with 
 a permanent corps of public employees in charge of the 
 railway, would add greatly to the dignity and importance 
 of present city offices. The claim that city officials do 
 not develop high efficiency because given too little to do, 
 might be answered by pointing to the hitherto unmastered 
 task of regulating the corporations ; or admitting that 
 their task is light, one might answer that at least success 
 in easy things should be secured first. It is difficult to 
 perceive how public ownership would secure for good 
 government the active support of the well-to-do classes. 
 They now stand aloof in the emergency of granting a 
 franchise, when the need of their help is greatest, and 
 is required for but a short time ; while under public 
 ownership the need for it would be less intense, but 
 continuing always. Public ownership would take from 
 stockholders in municipal monopolies, not a large ele- 
 ment in most cities, the inducement to seek private gain 
 at public expense ; but would they be more public- 
 spirited than the other well-to-do people mentioned ? It 
 seems doubtful if public ownership of all local monopo- 
 lies would add sufficiently to the importance of a city 
 government to draw out the interest of these classes 
 whose help is now so much needed. And the idea that 
 public ownership would draw superior men into office 
 seems to overlook the fact that they would gladly serve 
 now if they could be elected. The real remedy for all 
 the troubles, it appears, as stated above, is to get the 
 voters to want good men and good government. At 
 
 the cash investment. In 1898 street railway franchises were estimated to 
 be worth $75,000,000 in Philadelphia, and $60,000,000 in Chicago. (P. 
 .S*. Quarterly, 1898, 171.)
 
 104 'rf^^ Plain Facts as to the Trusts. 
 
 present, the masses too often prefer the boss and his 
 jobs.^ 
 
 When We Reach the Honest and Ef&cient Civil Service 
 of Europe, but not before, we may have admirably- 
 governed cities, in which the people obtain from their 
 money spent as much value in service and in materials 
 as do the best managed private corporations. And when 
 all classes, especially the educated and the well-to-do, 
 have developed a steady interest and pride in the purity 
 and efficiency of their city government, the wisdom of 
 public ownership may be unquestionable. It would seem 
 reckless, before that civic pride has come to prevail, to 
 embark in extensive public ownership, with the hope that 
 necessity would force the people to purify politics, and to 
 develop civic pride at once. 
 
 The Study of Municipal Problems. — The present study 
 by able men of the problems of municipal monopoly, and 
 the people's growing interest in the subject, led by munic- 
 ipal leagues and civic federations, promise to bring soon 
 a decided change for the better in public control. Here 
 as elsewhere the first essentials of progress are desire for 
 
 ' The City's Call for Able Men.— The New York Nation of March 
 13, 1902, is eloquent over the opportunity in modern municipal government 
 for men of talent in public affairs. " The very difficulties are like a thrill- 
 ing summons to civic patriotism. Here are the complicated questions of 
 taxation, transportation, of bridges and tunnels and docks, water supply 
 and sanitation. . . . The task is arduous, but for that reason all the more 
 attractive to men conscious of power. It touches the life and welfare of 
 millions. . . . The increasing appeal which municipal public life makes to 
 our best and strongest will call into the service of our cities a distinctly 
 higher order of talent, provided only that the citizens show steadiness of 
 purpose enough to make a career for it, both stable and rewarding, and 
 sense enough to delight to honor him that cleanseth a city above one that 
 merely taketh it." The public need for high achievement is pressing, and 
 able men stand ready to serve. But it is the voters who must assign them 
 to the task. The Chicago Municipal League is now doing this admirably.
 
 Municipal Monopolies. 105 
 
 it, and knowledge of means for attaining it. Our justly 
 prized system of educating the youth needs to be sup- 
 plemented by a practice among adults of continuing to 
 study through life, with an especial view to performing 
 well as they arise the duties of citizenship. It would 
 seem that the wise course is first to make a faithful and 
 heartily supported effort in the public control undertaken, 
 and thus to develop in the people and their officials a 
 knowledge and fitness for either kind of ownership that 
 may eventually be adopted permanently. Experience 
 in determined control will probably show clearly if pub- 
 lic ownership is really to be the best policy in this 
 country,^ 
 
 1 Failures in Public Ownership. — Toledo, after ten years experience, 
 recently leased to a private corporation a natural gas plant that has cost her 
 people over a million in bonds, and a half million more in interest. The 
 rent income will be much less than the annual interest charge. " Many 
 of those who shouted loudest for the gas plant got their start in life from 
 it, and now, having become taxpayers, urge the lease, to save them taxes." 
 (Toledo Bee.^ It was in connection with city ownership of gas works 
 that corruption first became notorious in Philadelphia some years ago ; 
 though it is said the corruption was designedly fostered by the very capital- 
 ists to whom the gas works passed in the change to private ownership. 
 The mayor reported one year a profit of |i6o,oco, but experts found there 
 had been really a loss of ^100,000. There have been many other cases in 
 which public ownership proved unsatisfactory. 
 
 As a Method of Control, limitation of profits to a certain percentage 
 on stock is evaded by means of high salaries and stock watering. If 
 obeyed it encourages waste, or makes a small traffic at high rates best for 
 the company. Though the main object of control, as of selling franchises, 
 is to save monopoly profits from the company for the people, by lowering its 
 income on capital to the usual rate in other business, increase of profit must 
 be allowed to induce lowering of fares for the sake of increasing business, 
 and to induce enlargement or improvement of service for the same pur- 
 pose. The approved method of controlling railroad and city monopolies 
 is to require such rates and such management as in the long run will be 
 best for both the company and the public. (Hadley, 166.) 
 
 A Tax on Net Earnings is an inducement to make them small by 
 means of high salaries, but it cannot be shifted by changing rates. Some
 
 1 06 The Plain Facts as to the Trusts. 
 
 Socialism or Not ? — After all, the undertaking of new 
 functions by the government — national, state, or local — 
 is only to be tested by ascertained or foreseen results. 
 If the government could do things for the people better 
 and more cheaply than they can do them for themselves 
 — adding to their supplies and not undermining individ- 
 ual energy and independence of character — government 
 functions no doubt would gradually increase until the 
 extreme socialistic hope was realized in public ownership 
 of all land, capital, and business. From the partial so- 
 
 states tax railroads on gross earnings, Ihongh perhaps those succeeding 
 best are the ones taxing on actual value or earning power, as shown mainly 
 by price of their shares and bonds. With a street railway, a tax on gross 
 earnings may make smaller business at higher rates preferable to the com- 
 pany. But street car rates are usually fixed by law and custom, and rail- 
 road rates are falling further under control of the state. A lump sum, 
 such as a yearly rental or tax on franchise, has none of the bad effects 
 mentioned. It cannot be shifted, and leaves highest aggregate profit 
 dependent upon economy, good service, and low rates. (Bullock, 304.) 
 For Safeguarding the Public from Monopoly, besides franchise sale 
 and fare restrictions, revaluation of franchise every ten years is recom- 
 mended by some authorities, with arrangement for purchase by the city of 
 the company's property at an appraised price. The following are recom- 
 mendations offered by Professor H. C. Adams in a recent address to the 
 Detroit Municipal League. Make a franchise exclusive, for competition 
 results in consolidation, with excessive capital to pay dividends upon after- 
 ward. Allow 8 per cent dividends upon capital really invested, withhold- 
 ing to the city earnings that might be made on franchise value. There 
 could then be no common stock based on expectations, whose value belongs 
 to the public by whose growth it is created. As publicity is the cure for 
 evils, have the company's accounts inspected by city auditors. Demand a 
 sinking fund to be laid by for improvements. Require uninterrupted ser- 
 vice with a franchise clause providing for arbitration of strikes, and another 
 clause fixing the form of contract with employees. Franchises should pro- 
 vide definitely for changes in their terms, with provision for possible com- 
 pensation to the company. " The single objection to this is that no com- 
 pany would care to accept such a franchise. That is then a direct argument 
 for municipal ownership." But for the present these franchise restrictions 
 can be carried as far as a company W// accept. Cleveland's present ex- 
 perience, previously described, will be instructive in this respect.
 
 Municipal Monopolies. 1 07 
 
 cialism of primitive times there was a change until the 
 extreme of individuahsm — every person for himself 
 alone, with the least help from government — was reached 
 in England and America. Now the common sense view 
 is coming to prevail, that whether a practice is socialistic 
 or individualistic is a trivial matter. The proper test is, 
 Does it yield best results, in the net well-being of the 
 whole people ? 
 
 Whichever Works Best. — Therefore, where public 
 ownership will undoubtedly work best in permanent net 
 results, by all means have it. Many a city now wisely 
 operates its own electric lighting system, the same as its 
 water works, sewers, bridges, and stone-crushing equip- 
 ment for streets. All these services the city must have. 
 The electric service is as proper as the others if by own- 
 ing it the city can get in the long run better and cheaper 
 light, London, Glasgow, and other British cities are en- 
 tering extensively into public ownership and operation 
 of street railways. In large cities these too are a neces- 
 sity. Municipal activity in Great Britain, though her 
 people have always been noted for individualism, has 
 advanced further than in any other country, and is now 
 successful, popular, and rapidly increasing. It has been 
 extended to telephones, and even to model tenements 
 and lodging houses.^ 
 
 * Municipal Ownership in America is now represented by between 400 
 and 500 electric light plants, including Chicago and Detroit. Richmond, 
 Va., and Wheeling, are successful with public gas works. The only pub- 
 lic street railways have been the short line across Brooklyn bridge (now 
 leased), and a line with a half dozen cars at Port Arthur, Canada. 
 Toronto owns its excellent system of electric lines, but leases it, putting 
 fares low, and reserving a share of earnings. Toronto's gas plant also has 
 just passed under ownership of the city. A considerable number of 
 American cities, mostly small ones, still have privately owned water 
 works. London's water supply is yet in private hands, despite her many
 
 io8 TJie Plain Facts as to the Trusts. 
 
 Public Ownership Will Probably Prevail. — It seems 
 probable that public ownership and operation of street 
 railways, gas works, electric lighting plants, and tele- 
 phones will eventually prevail in America, as it is now 
 fast coming to prevail in Europe, We shall be ready 
 for it when the city's corps of officials and employees has 
 come to consist regularly of honest and efficient men, 
 and when the permanence of this character in them is 
 guaranteed by public spirit and civic pride in a large 
 majority of the voters. There is no lack of capable 
 men, ready to serve successfully in controlling city mon- 
 opolies under private ownership, or in managing them 
 under ownership by the public. In the latter case the 
 present private managers would be kept in their positions. 
 But the voting public must first reach a plane on which 
 it can be trusted to keep public offices in the hands of 
 the best men ; and to obtain their best service it may be 
 necessary to pay them salaries approaching those they 
 get in other professions,^ 
 
 Public Ownership Not Objectionable in Cities as with 
 Railroads. — Public ownership and operation of munici- 
 pal monopolies, as previously indicated, is not open to 
 the serious objection urged against government owner- 
 ship of railroads. With railroads there would be cen- 
 tralized management under national officials, so far re- 
 moved from a voter's power as to control him instead of 
 being controlled ; while with street cars and gas works all 
 would be done more closely under the view and power 
 
 public enterprises in other lines. In Glasgow profits from public enter- 
 prises have greatly reduced taxation. Generally such profits are given 
 to the public in lovi'er charges. Great possibilities of municipal better- 
 ment are the prize within reach of good government. Birmingham's suc- 
 cess in this respect is often referred to. 
 1 Ely, 262,
 
 Municipal Monopolies. 109 
 
 of the voter, with whom pride in present success, and in 
 future possibilities, might develop his own civic character 
 to the utmost, and secure for the city the best govern- 
 ment attainable. Moreover, in local monopolies there 
 are no questions of terminal handling, classification of 
 freight, or equality of treatment to different communities. 
 Unquestioned Functions of Government. — The national 
 government may well increase its service in the mainte- 
 nance of light-houses and life-saving stations, in agricul- 
 tural experiments, in collection of commercial informa- 
 tion from abroad, and in similar lines of clearly useful 
 activity not otherwise to be performed as well. The 
 states also may well maintain agricultural and mining 
 schools, foster general education, and care for the insane 
 and other properly dependent classes. All this is good, 
 so long as the service is needed, would not otherwise be 
 done as well, does not unfavorably affect character and 
 habits, and is not causing neglect of other lines of gov- 
 erment service more important. On these subjects pre- 
 vailing opinion is in practical agreement.^ 
 
 ' Where Public Ownership is Desirable. — Professor Seligman teaches 
 that public ownership is desirable ( I ) where it promotes a widespread inter- 
 est of society, (2) where the amount of capital required is not too large, 
 and (3) where management is comparatively simple and certain. By these 
 criteria he thinks the argument for public telegraphs is substantially as strong 
 as that for a public postal service, and that public ownership of telephones 
 also is clearly wise ; that street car service is more suitable for public owner- 
 ship than telegraphs, or even water works, but that because street railways 
 have been revolutionized in the last few years (changed to electricity), and 
 in five or ten years may be revolutionized again, it is better for the present 
 with them to continue public regulation of private ownership. (Indus. 
 Com. IV. 130. ) 
 
 How Public Ownership Has Grown. — In his testimony before the 
 Industrial Commission (Vol. IX. ) Professor Parsons, quoting from Professor 
 Seligman, gave the following outline of historical changes in the control of 
 means of public service :
 
 no The Plain Facts as to the Trusts. 
 
 1. They were held in private hands for extorting tolls, as early European 
 bridges and canals, and sometimes rivers. 
 
 2. Next, charges and management, still private, are regulated by law. 
 
 3. The government takes the service, but operates it for profit, as at 
 present with European state railroads. 
 
 4. The aim is simply to cover expenses, as now with postal service and 
 water supply. 
 
 5. Cost is borne by all in taxation, and the use of the service is made 
 free, as at present with roads, bridges, and some canals, and as some 
 American city officials have proposed as to water supply. 
 
 Taxation on All, or Fees from Users of the Service ? — But the line 
 seems clear enough between services to be charged for, and services which 
 the public good requires to be free. Roads and bridges must be free, 
 because they are not operated at large expense, and are needed so constantly, 
 by so many of the people, that tolls would hamper civilization. The same 
 is true of police and fire protection. Water is now free as a rule, in street 
 hydrants, and in public baths and closets, except as consumers are properly 
 required to pay according to quantity used. The same is true of light. 
 Schools are free, being equally needed by all, and being especially impor- 
 tant to maintain good citizenship. Street cars are not needed or used by all 
 to anything like an equal extent. The same is true of mail, express, and 
 telegraph facilities, and still more true of railroads. 
 
 To Make These Free Would Harm the Public, causing waste of labor 
 and capital in useless hauling, as was explained in connection with freight 
 rates. Social welfare requires that they be paid for in proportion to the 
 use made of them. While no more than a fair profit should be collected on 
 anything, none of these things, perhaps, should long be furnished at a loss 
 except mail service, and that only in minor particulars, not in aggregate 
 results where careful management would make it self-supporting. Greater 
 strictness in admitting printed matter at newspaper rates is expected to 
 reduce our postal deficit. Rates too low to newspapers is one cause of the 
 deficit with British telegraphs, causing a waste of labor in sending long 
 speeches of many columns. 
 
 High Wages in Public Service. — The fact that labor leaders urge 
 government ownership, because employees would then have higher wages 
 and fewer hours, is a point against it. While the good citizen desires to 
 see wage workers enjoying the best possible living, it is nevertheless true 
 that every dollar paid a public employee above the most his service, talents, 
 and responsibility would bring elsewhere, is a tax on the people for his 
 personal benefit. It falls on privately employed workers too, reducing net 
 income to divide in wages ; and so far as public employees kill time, labor 
 force is wasted that otherwise would add to society's supply of goods. 
 Losses in street car service would be a tax likewise. The government can-
 
 Mimicipal Monopolies. ill 
 
 not be generous if it is to be just. It has nothing but what it takes from 
 its citizens. The advocates of public ownership are doing a good work, 
 however, when they teach, like Professor Parsons, that it should be self- 
 supporting, and that to get ready for carrying it out extensively, there must 
 first be public ownership of the government itself — a wresting of power 
 from bosses and monopolists. When the people have done this, they may 
 know clearly how far to go in the public ownership movement.
 
 CHAPTER VI. 
 
 REMEDIES FOR THE EVILS OF TRUST MONOPOLIES. 
 
 Tariff Reform. — As with natural monopolies, so with 
 the strong artificial monopolies, remedies for evils must 
 be found chiefly in law. Where a trust's power to ex- 
 act excessive profit rests upon a tariff duty that shuts 
 out its commodity from abroad, removal or reduction of 
 the duty would be a simple and effectual remedy — a de- 
 served punishment for the trust's abuse of the favor 
 shown its industry by the public in the tariff When 
 the words " control in price up to the importing point " 
 have any application to a trust's business, it is the tariff 
 from which it derives its power to exact the upper por- 
 tion of its price. The words mentioned, in substance, 
 occurred in testimony given in 1899 by President H. O. 
 Havemeyer, of the sugar trust. His saying then that 
 " the tariff is the mother of them all " must of course be 
 restricted to mean all the trusts to which the tariff duty 
 is the basis of a considerable portion of the price charged. 
 
 How Important a Source of Profit the Tariff Is to the 
 sugar trust may be known from the powerful influence it 
 successfully exerted upon the Senate in 1894 to change 
 the Wilson schedule on refined sugar into terms favora- 
 ble to itself* The tariff is likewise a source of advan- 
 
 'The Motive of Mr. Havemeyer's Remark against the tariff, some 
 have thought, was that he would be willing to give up the duty on refined 
 sugar if the duty was also removed on raw sugar, which is his raw material. 
 Beet sugar producers seem to fear that it is also for the sake of checking their 
 industry that the trust now favors free admission of raw sugar from Cuba. 
 
 112
 
 Remedies for the Evils of Trust Monopolies. 1 1 3 
 
 tage to any other trust-controlled business that would 
 strongly resist a reduction of duties. If as many lines 
 of business would now oppose tariff reduction as in 1894, 
 the tariff would probably be found to be the cause of at 
 least a portion of the high selling price in the case of a 
 good many trusts. It is so with every protected trust 
 whose commodity regularly sells higher at home than 
 the same commodity sells abroad — higher to a larger 
 amount than the freight and other costs of shipping it 
 to America. The president of the tin-plate trust testi- 
 fied in 1899 that without protection there would have 
 been in 1898 no tin-plate industry to consolidate. Per- 
 haps the trust's perfected means of production would 
 now make lower protection sufficient. Its 12^ per cent 
 dividends on heavy over-capitalization show that it gets 
 great profits from somewhere, and as its prices are mate- 
 rially higher than prices abroad, its profits to that extent 
 must come from the tariff. The window glass trust is 
 another that takes advantage of a high tariff duty to 
 exact large profits. 
 
 Selling Cheaper Abroad Than at Home. — Eight trusts 
 replied to the Industrial Commission ^ that they give lower 
 prices abroad to secure a foreign market, though a larger 
 
 The Scandal of the Sugar Trust's Control of the august Senate, by 
 methods involving elements of bribery, is briefly outlined by Taussig, P. S. 
 Quarterly, 1894, tariff article. " The part certain corporations have played 
 in corrupting poHtics is quite the gravest danger under which the country 
 suffers. The new combinations add tenfold to their power." (J. G. 
 Brooks, Engineering Magazine, Dec. 1899. ) 
 
 1 Labor Bulletin, No. 29. The article in this Bulletin appeared before 
 the investigation was completed. In his minority report Mr. Phillips, of 
 the Commission, says that of 2,000 concerns questioned, only 416 replied 
 on the matter of selling cheaper abroad, of which about 75 answered that 
 they do sell cheaper. He believes that many do so among those that 
 failed to reply. He points out that if prices were properly lowered at home, 
 there would be no surplus to dump abroad. 
 8
 
 114 '^^^(^ Plain Facts as to the Trusts. 
 
 number replied that they do not ; while President Chis- 
 holm testified that the print paper trust gets highest prices 
 and highest profits from its foreign sales. President 
 Schwab testified that the steel trust sells much cheaper 
 abroad, and prominent witnesses testified accordingly- 
 concerning other trusts. " We know that many trusts, 
 and some other manufacturers, have sold their surplus 
 abroad at prices very far below those charged at home."^ 
 One reason given for the fact that some finished goods 
 are sold abroad cheaper than at home is that the foreign 
 retailer adds less profit. With monopolized products, 
 such as patented articles, the reason for a lower price 
 abroad is that it brings larger sales and greater aggre- 
 gate profit, people there being too poor to pay the price 
 easily obtained in America. Prompt payment abroad by 
 importers is said to be the reason for lower prices on 
 farm machinery, which in America is usually sold to con- 
 sumers on long credit, with heavy expense of collection. 
 But the leading plow manufacturers give large discounts 
 to home dealers paying them cash. In any case, it would 
 seem, cash from home ought to be as acceptable as cash 
 from abroad. Another reason given is that a manufac- 
 turer selling abroad through exporting merchants has no 
 expense for foreign advertising and agencies. This would 
 indicate that a producer offering good values can sell 
 abroad without joining a trust. 
 
 That It Employs Labor and Increases Exports, however, 
 keeping plants in active operation, were the main reasons 
 given by the trust officials for selling their goods cheaper 
 abroad than at home. They testified boldly, seeming to 
 assume that the ends justified the means. Opinion is 
 often expressed which apparently involves the idea that 
 
 1 Bullock, N. A. Revinv, July, 1901,
 
 Remedies for the Evils of Trust Monopolies. 1 1 5 
 
 anything which employs labor and increases exports is 
 to be commended. Yet it can hardly be that in America 
 natural employment is so scarce, nor wage workers so 
 poor, that they need or demand a levy in high prices on 
 the public for their assistance. And if they did need 
 such help, the monopoly trust has not been given the 
 sovereign function of collecting and disbursing poor rates. 
 American products also are supposed to be wanted every- 
 where at a fair price, without contributions from home to 
 aid in forcing them on people abroad, 
 
 A Sound Reason for Selling Cheaper to Some Than to 
 Others. — But so far as charging one buyer more than an- 
 other is based on " what the traffic will bear," it may often 
 be fully justified. This is the case with varying prices 
 in the home market. A manufacturer gets lower net 
 prices on sales in Denver than at his factory in New Eng- 
 land, and prices lower still in San Francisco. He must 
 reduce his price somewhat to share the freight charges, 
 and thus reach in distant places a larger circle of buyers. 
 It is for this reason that long distance freights are low ; 
 charging more would stop the traffic. The manufac- 
 turer can sell as low as he does in New England because 
 the small profit from distant sales helps to make up the 
 fair aggregate he must realize to continue in operation. 
 Perhaps in all business the near customer, whose patron- 
 age is held most securely, pays usually the highest prices 
 if he is not known to be a close buyer. But he can easily 
 protect himself by comparing prices and qualities with 
 those of other dealers, and by utilizing the pressure of 
 their competition. 
 
 Under the Tariff the Case is Different with sales abroad. 
 As prohibitory duties ordinarily shut out imports of iron 
 and steel, and of many other things, a home buyer makes
 
 1 1 6 The Plain Facts as to the Trusts. 
 
 no effort to know foreign prices, for he cannot take 
 advantage of them. Therefore, where American manu- 
 facturers, in selHng abroad, go further than the common 
 practice of sHghtly shading prices anywhere to get a new 
 customer, or than the very shght reductions made on 
 sales to distant buyers at home, they use the tariff at 
 home to exact a monopoly tax. It can scarcely be 
 doubted that during the last few years such a tax has 
 been collected to the extent of hundreds of millions ol 
 dollars. In January, 1902, scarcity in America led 
 to efforts to ship American iron back from Europe, 
 our duties being remitted on return shipments made 
 promptly.' 
 
 Trusts in Great Britain. — During the year 1900 trusts 
 were rapidly organized in Great Britain, under the 
 influence of the wide-reaching and immensely profitable 
 trust-promoting movement in America.^ But the absence 
 
 iSee in Chapter XII. paragraphs relating to payment of the duty by 
 the foreign seller. 
 
 * Elsewhere in Europe. — A report of Professor Jenks to the Industrial 
 Commission in 1901 says that in Germany and Austria the extent and 
 power of trusts are probably as great as in the United States, though their 
 plan of organization is different. In France the trust movement is evident, 
 but to avoid violating law, the companies depend largely upon mere verbal 
 agreements. A commission sent by the French Minister of Commerce is 
 now in America, studying, among other things, the organization of trusts. 
 British trusts are admirably described in an article in the Review of Reviews 
 for November, 1900, written by Robert Donald. An amalgamation of 
 British steel industries, to be a trust of trusts like the United States Steel 
 Corporation, is now being formed by an American organizer, J. R. Bartlett, 
 the rail combination to have, it is said, a capital of $20,000,000, without a 
 drop of water. One very important condition against monopoly power in 
 Europe is that favoring discrimination from railroads is there practically 
 unknown. In all the advanced countries industry has been, or is being, 
 consolidated and harmonized, to reduce the wastes of friction and of com- 
 petition to the minimum. All this is good when monopoly is not the object 
 sought. In Germany the government favors trusts, uniting with and buying
 
 Re 7ne dies for the Evils of Trust Monopolies. 1 1 7 
 
 of a protective tariff places the British consumer in a 
 very different position from that of his American cousin 
 in exposure to trust rapacity. The British trust can only 
 raise the price of its commodity up to the lowest price 
 abroad, with the addition of the small aggregate of 
 freight and other charges necessary to ship from Ger- 
 many and place on sale in Great Britain. After paying 
 tribute to their home trusts, therefore, the British are 
 sure to fare as well as any other people — as " the most 
 favored nation." Unless they have heretofore had the 
 benefit of much lower prices than any other commercial 
 people, their trusts will have a narrow field of price dif- 
 ference to work in. But those American trusts whose 
 price is based on the tariff are limited only by the amount 
 of the duty in time of strong demand, and are little con- 
 cerned as to how much lower their commodity is sold in 
 other countries.^ 
 
 The Formation of International Trusts, uniting the 
 producers of an industry all over the commercial world, 
 has been mentioned to show the uselessness of tariff re- 
 
 from them. It thus strengthens, for the present at least, the nation's indus- 
 trial position, at the cost of home consumers, who under a paternal and 
 protective policy are used to bearing burdens ; though there a strong gov- 
 ernment is prepared to prevent many abuses. ( The Nation, Jan. 2, 1902. ) 
 
 'Trusts Not Feared in England. — "In England there is very little 
 popular objection to trusts, because they have developed a certain power 
 for good and very little for evil." (J. B. Clark, P. S. Quarterly, June, 
 1900.) 
 
 British Trusts Already Weakening. — Lack of a tariff duty has already 
 been weakening a number of British trusts. Having bought plants at high 
 prices, and being unable to raise selling price above that abroad, they are 
 unable to earn profits on their excessive capital, and their stock has been 
 falling fast. Only two British trusts are said to have done well as monop- 
 olies. These are the Coats thread trust, and the fine cotton spinners' 
 trust. The basis of the former's monopoly is described further on. The 
 latter is successful because its business exists in no other country. Such 
 causes of monopoly are rare. {Public Opinion, Sept. 19, 1901.)
 
 i l8 The Plain Facts as to the Trusts. 
 
 duction in America — or more likely, in some cases, to 
 turn attention away from such reduction because it would 
 be the opposite of useless. The international trust is a 
 bugaboo that will not cause much fright. The larger 
 the territory, and the less acquainted the producers, the 
 weaker must be the trust combination. If a single pty 
 had a tariff to protect its own producers, say makers of 
 signs for business places, its few sign painters would 
 easily agree that they ought to have higher prices. A 
 state tariff against other states would probably have no 
 effect, because agreement among its many and widely 
 separated sign painters would be impracticable. 
 
 No Trust Where Producers Are Many and Easily 
 Started. — An effectual monopoly trust covering the 
 whole United States can be formed only in those indus- 
 tries in which separate producers of importance are not 
 very numerous, and to which access of new competing 
 producers is difficult, by reason of necessity for large 
 capital, of secret processes, patents, or limited supply of 
 raw materials. If there had been as many and as widely 
 separated producers of wire and sugar as of cotton cloth, 
 shoes, and canned tomatoes, we should have had no wire 
 trust, nor sugar trust. Effective monopoly agreement, 
 to raise prices and limit output, among so many compet- 
 ing producers as the shoe manufacturers (2,082 fac- 
 tories in 1890 and now fast increasing), would have been 
 impracticable ; and the hazardous investment of buying 
 all the plants in operation would not have prevented the 
 easy starting of new ones when prices were raised. ^ 
 
 ^"The Unsuccessful Monopolistic Enterprises have outnumbered 
 the successful, while the latter have constantly been confronted with new 
 independent enterprises. Only in a minority of instances have combina- 
 tions acquired an effective control of prices. " (Bullock, 322.) This quo- 
 tation is less true now than when it was written, 1897.
 
 Remedies for the Evils of Trust Mottopolics. 1 19 
 
 Trusts Covering tlie World Not Often Practicable. — With 
 an international trust the difficulty of combining all the 
 world's producers in an industry includes not only their 
 large number and widely separated location, but also an 
 equally wide separation of self-interest. If it were pos- 
 sible to form an international sugar trust, to include the 
 hundreds of beet sugar producers in Europe, dissatisfac- 
 tion would arise with the number of refineries and per- 
 centage of output assigned to one country, say Germany, 
 and by a change of tariffs or bounties the government 
 might soon break down the hmit set upon its people's 
 industry. Likewise, a Swiss watch manufacturer, after 
 joining a trust, would not long take part in an effort to 
 club down new factories started by his countrymen, in 
 order to maintain a trust that had bought him in less for 
 his own sake than for the sake of foreign producers, who 
 cared more for his room than his company. It was dis- 
 agreement on prices, and on division of markets, that 
 prevented in 1899 a combination of the American wire 
 trust with the German monopoly in the same industry.' 
 
 The Cotton Thread Trust is International in its scope 
 and highly successful, paying in 1900 dividends to the 
 amount of ^12,000,000. It has been a success, partly 
 
 *Jenks, 48. 
 
 Some World Monopolies. — An international salt trust, lately incor- 
 porated in New Jersey, might possibly become an effective monopoly, 
 because the sources of salt, like the sources of metals, are limited. After 
 1835 there was for a long time a world monopoly in quicksilver, owned by 
 the Rothschilds. Of this there are but a few mines, chiefly in Spain and 
 California. The Borax Consolidated Works, Limited, is now a world-wide 
 trust of the few productive mines of borax. It is controlled by producers 
 in California. The South African producers have a practical monopoly of 
 diamonds. The Eastman Kodak Company, formed in I90I, is an inter- 
 national affair, being united with national trusts in Europe. Its monopoly 
 rests on patents and good will.
 
 1 20 TJie Plahi Facts as to the Trusts. 
 
 because there were few producers of the first class any- 
 where, but chiefly because several Scotch manufacturers 
 had built up a world-wide reputation, so settled in the 
 favor of sewing people as to have the effect of a patent. 
 So long as other thread makers could not include in 
 their trademarks the name Coats or Clark, they were 
 unable to reach many buyers. These favorite manufac- 
 turers, by uniting in a combination with fifteen other man- 
 ufacturers in different countries (practically all there were) 
 avoid determined competition from the latter, and pass 
 around tariff barriers. The Coats and Clark combina- 
 tion of Great Britain manufactures in the United States 
 its favorite brands of thread for this market, and owns a 
 controlling share in the American thread combination. 
 The former is also allied with spinners in various asso- 
 ciated lines, and in different countries.^ 
 
 If Thread Sold by the Trust is Really Better than the 
 best an anti-trust producer can make, the trust is justly 
 entitled to its advantage, and no complaint can be made 
 against it. If the superiority is only in the name, and in 
 its hold upon the buyer's favor, the complaint must then 
 be directed against the buyer's conservatism. In the 
 latter case a share of the favor could doubtless be gained 
 by an anti-trust thread maker who raised his product to 
 the highest quality, and proved to many buyers that he 
 had done so. In time his name and trademark would 
 also stand for excellence.^ 
 
 "^ Review of Reviews, Nov. 1900. Indus. Com. XIII. 
 
 ^Trademark Monopolies. — It is easy to perceive that the baking 
 powder trust might rest secure on the popularity of the Royal, Dr. Price's, 
 and several other brands. Many years would be required to build up an 
 equal reputation for equal goods. The capital of the American Chicle 
 Company was made nine times the value of tangible assets, and yet it has 
 paid regularly 8 per cent on common stock. It owns the trademarks of
 
 Remedies for the Evils of Trust Monopolies. 121 
 
 Where the Intention is to Preserve a Protected Industry 
 which, by reason of low natural value of its product, and 
 of its having to meet the wages of other industries, could 
 not make a living in America without a protective duty 
 to add to that value by a levy on the public — the duty 
 cannot be removed, no matter how a trust may monopo- 
 lize the industry ; though the duty might be placed below 
 the line of extortion in selling price. With an industry 
 in which the trust can produce cheaply enough to sell 
 abroad, but the independents cannot, removal of the 
 duty would drive out the independents. In such a case 
 it is only the exceptional, not the average, producer who 
 can meet foreign competition, and the industry as a whole 
 is not self-supporting. Whether or not the independents 
 were taken into the trust would not concern the public, 
 because there would be no chance of monopoly, the 
 tariff removal having given consumers the world's natural 
 price, made by competition among all nations producing. 
 But in such an industry the independents would be driven 
 out anyhow when weakening demand lowered price, if 
 they could not previously cheapen their production, and 
 if demand could then be supplied in full by the trust. 
 Retaining the tariff to maintain independents in costly 
 production, deprives the public of advantage from econ- 
 omies claimed by the trusts.* 
 
 nearly all the popular brands of chewing gum. (Indus. Cora. XIII.) On 
 the other hand, such goods as sugar and lime are easily monopolized, be- 
 cause not known by the name of the maker, who, in case of a trademark, 
 could hold his trade if he refused to join the trust. 
 
 1 Perhaps the Emptiest of all Serious Contentions is that the tariff 
 alone, by shielding independents, saves us from monopoly. This was said 
 before the Industrial Commission by a prominent writer whose vigorous 
 style carries many readers over logical gulfs. A similar contention is that 
 of the trust officials and protectionists who say that assured possession of the 
 home market enables the tariff trusts to improve processes, cheapen product,
 
 122 TJie Plain Facts as to the Trusts, 
 
 Will the Tariff be Reformed ? — Those American trusts 
 whose monopoly power rests chiefly upon the tariff have 
 until lately seemed secure in their position. The preva- 
 lent idea that a high tariff and good times go together, 
 and a low tariff and dull times, has been further settled in 
 the public mind by the events of the last twelve years. 
 Whether a high tariff will keep times good is the next 
 thing to learn about the matter from experience. This 
 question might have been settled in the negative by the 
 silver crisis of 1893 if President Cleveland's election had 
 not opportunely supplied a needed scapegoat in tariff 
 reduction. But just now a union of two forces bids fair 
 to take some wind from the sails of the tariff trusts. 
 One force is the awakening of consumers whom the trusts 
 have been oppressing. The other and stronger force is 
 the awakening of manufacturers to the facts that they 
 might have cheaper raw materials if the tariff were 
 reformed, and that if they are to continue selling goods 
 abroad some arrangement must be made by which this 
 country can take foreign goods in exchange. No matter 
 how high in quality our goods may be, nor how low in 
 price, foreign countries will not drain off their gold to 
 buy them. Tariff reform resolutions by the American 
 Manufacturers' Association, and the opinions of promi- 
 nent Republicans, are printed in Chapters XIV and XV. 
 Resolutions by the people, expressed through their votes, 
 would bring about a change very quickly ; but there will 
 be no change until it is clear that they desire it. 
 
 Monopoly from Railroad Discrimination. — The trusts 
 whose power to exact exorbitant profits is derived from 
 
 and capture the world's trade. Any kind of a hold on a buyer's custom, 
 aside from giving best values, is questionable always, and is clear reason 
 for suspicion after foreign markets have been entered.
 
 Remedies for the Evils of Trust Monopolies. 123 
 
 union with a natural monopoly, may be reached and 
 regulated, when the latter is a railroad, by increasing the 
 effectiveness of the Inter-State Commerce Law, and by 
 enacting state laws to regulate local freight rates. When 
 all freight shippers of equal quantities are treated alike, 
 and no one united with as a favorite, the railroads cannot 
 be complained of as fostering trusts. The Standard Oil 
 Company's monopolistic control of railroads, often sup- 
 posed to belong to a period now passed by more than a 
 decade, seems to have been continued. " A continuous 
 line of evidence, extending to the very month in which 
 this is written [1897] shows that the oil monopoly has 
 always received assistance from the railroads." ^ 
 
 'Bullock, 319. Discrimination is discussed in Chapter IV., and pool- 
 ing in Chapter VIII. 
 
 Lower Freights to the Trusts. — It was in 1888 that a Congressional 
 investigation made known the favors shown by railroads to the four leading 
 meat packers of Chicago. The roads refused to haul private shippers' cars 
 of cattle eastward from Chicago, allowed the meat combination nearly ;^200 
 a year for each of its cars used, and even refused in some cases to carry 
 cattle for local butchers who would not handle the combination's beef. 
 (Bullock, 319.) Professor Ely (Monopolies, 54) refers to the meat com- 
 bination's freight advantage as still possessed in 1899 ; and mentions a rail- 
 road official's statement that year that only three men could ship wheat, 
 meaning three of the leading speculators in Chicago He also mentions 
 the belief, apparently well founded, that to hold freight carrying into 
 Colorado the railroads lower inward rates and crush out manufactur- 
 ing when it arises in that state. It is believed by well informed persons 
 that by means of favorable rates from its main shipping points, more 
 favorable than are given to competing shippers from other points, the 
 Standard Oil Company and the railroads are working in virtual partnership. 
 A similar advantage is believed to be possessed by other trusts. (Jenks, 
 
 550 
 
 Their Monopoly Mainly Due to Railroad Discrimination. — "In- 
 deed, I think it scarcely too much to say that no alliance of capital, no 
 aggregation of productive forces, would prove of real or at least of perma- 
 nent disadvantage if rigidly subjected to just and impartial charges for 
 public transportation." (Chairman Knapp, of the Inter-State Commis- 
 sion. Newcomb, 96. )
 
 124 TJie Plam Facts as to the Trusts. 
 
 This Cause of Monopoly Can Be Removed. — While 
 there is no question as to the efficacy of law to stop 
 quickly such an open abuse as refusing to carry any 
 shipper's freight, — underweighing and secret rebates, 
 such as those formerly given to the oil trust, and known 
 to have been very common lately,^ may continue hard to 
 discover, and also the prompter service given one ship- 
 
 H. T. Newcomb, chief of freight rates in the Department of Agriculture, 
 testified in 1899 he would venture to assert that not a rate on sugar from 
 a refining city in the last ten years had been made without first being sub- 
 mitted to the trust ; that all through the list of trusts the same was true ; 
 and that underhanded opposition from trusts defeated the Patterson bill of 
 1894 to permit pooling, and to increase the Commission's powers. (E. 
 W. Bemis, The Forum, Dec. 1899. ) 
 
 Bad State of Affairs at Chicago. — A thorough investigation of meat 
 and grain shipments, held by the Inter-State Commission at Chicago near 
 the end of 1901, showed that by agreement of the Central Traffic Associa- 
 tion the products of five or six packing houses were allowed freight rates 
 reduced by from 5c. to loc. per lOO lbs. ; and that smaller competitors at other 
 points had mostly been driven out of business. The Commission said in its 
 report in January : " That leading traffic officials should deliberately violate 
 the law — in some cases destroy vouchers and manipulate book-keeping, and 
 pay hundreds of thousands of dollars in unlawful rebates to a few great 
 packing houses — must be surprising and offensive to all right-minded per- 
 sons. Equally startling is it that these great packers should seemingly be 
 so eager to augmenttheir gains in plain defiance of law." But the palliating 
 circumstance is the necessity of pools. The Commission, reiterating its 
 previous recommendation of pooling, says the Inter-State Law should be so 
 amended that railroad managers may obey it without risk of sacrificing their 
 roads. (See Chapter VIII.) 
 
 No Duty of Government is More Important than to see that all ship- 
 pers are treated equally in freight charges, said Chairman Knapp in an 
 address at New York, in March 1902. In emphasizing the need of reform, 
 he recommended, if found necessary, greatly increased control of railroads by 
 the public, even to the verge of public ownership. He said : "If we 
 could unearth the secret of these modern trusts, whose quick gotten wealth 
 dwarfs the riches of Solomon, and whose impudent exactions put tyranny 
 to shame, we should find the explanation of their menacing growth in the 
 systematic and heartless methods by which they have evaded the common 
 burden of transportation." 
 
 1 Ely, 259.
 
 Remedies for the Evils of Trust Monopolies. 125 
 
 per over another. But with the aid of complaints by- 
 aggrieved competitors, watching for evasion, and espe- 
 cially by permitting pools, which remove the motive, 
 discrimination can undoubtedly be reduced by law to 
 very narrow limits — similar to those in which most 
 crimes exist. The Inter-State Law may probably be 
 materially amended for the better before Congress ad- 
 journs in 1902. Two bills for that purpose have been 
 introduced. The encouraging progress that has been 
 made toward correcting abuses in railroad service will 
 soon lead, it is to be hoped, to the growth of a settled 
 body of law sufficient for all needs. The increasing 
 practice of requiring by law detailed reports of railroad 
 business will assist legislators to determine what addi- 
 tional laws or amendments would be useful. How 
 closely published tariffs are adhered to in actual charges 
 will probably be tested eventually with systematic exam- 
 ination of railroad accounts by government experts.^ 
 
 Reform in Directors' Responsibility. — Large reserve 
 power over railroads yet remains to the government. This 
 power rests not only upon the obviously public and 
 monopolistic nature of their service, but also upon the fact 
 that they are corporations, creatures of the law ; that they 
 are common carriers, held by law to special responsibil- 
 ities for centuries ; and that in taking land from an unwill- 
 
 ^ Publicity of Railroad Accounts. — In its report of January, 1902, 
 the Inter-State Commission recommends that Congress require the opening 
 of railroad books to inspection by the Commission or its agents. It said : 
 " Such publicity would be of the greatest service in exposing and punish- 
 ing illegal practices, and it is difficult to see any good reason why this 
 ought not to be permitted, provided proper restrictions are put upon the 
 use to be made of knowledge thus obtained." Professor Emory John- 
 son, Mr. Newcomb, and President Spencer of the Southern, think com- 
 plete publicity of accounts will be the most effective remedy for discrimi- 
 nation. (Indus. Com. IV.)
 
 126 TJie Plain Facts as to the Trusts. 
 
 ing seller, they make use, as confessedly public institu- 
 tions, of the state's right of eminent domain.^ The inviting 
 field for reform in responsibility of directors is practically 
 untouched — not only as to impartial railway service to 
 the public, but as to handling the money of investors in 
 corporations of all kinds. In most parts of Europe pro- 
 moters are by law held responsible for inducements held 
 out to investors ; and in England the laws are backed by 
 a public sentiment that unsparingly condemns attempts 
 by directors to acquire gain for themselves at the ex- 
 pense of stockholders. " But in the United States the 
 legal responsibility is inadequate, and the public senti- 
 ment even more so. Perhaps the most serious among 
 all the evils under which American business suffers is the 
 lack of clear understanding as to directors' responsibil- 
 ity."^ This statement seems true, in view of the enor- 
 mous amount of stock watering and manipulation by 
 which smaller stockholders have been imposed upon in 
 this country.^ 
 
 > Hadley, Railroads, 41. 
 
 ^Hadley, 179. 
 
 'Negligence by Directors of a national bank at Niles, Mich., ruined 
 by its cashier in 1901, was so gross that suits against them for damages 
 were contemplated by stockholders, who expected to be required to pay up 
 their stock a second time to meet the bank's debts. Yet wilful dishonesty 
 is worse, which has been practiced with impunity by directors of many 
 corporations. Some men of sad experience, not given to exaggeration, 
 have an idea that practically every corporation is robbed sooner or later by 
 its own directors. 
 
 Watering Stock May be Allowable when the high market value of 
 railroad shares earning great dividends over cost of service is reduced to 
 about par value by issuing new shares ; also when earnings have been used 
 to improve the property. In these cases there is solid value back of the 
 new stock, as with new stock now sold by the best railroads for cash, to be 
 used in buying a branch line, or in building terminal docks. Dishonest 
 stock watering consists chiefly of the issue of new shares by directors to 
 themselves or associates, to get control, without having adequate property
 
 Remedies for the Evils of Trust Monopolies. 127 
 
 Punishment for Crime. — Then, in addition to liability 
 of directors for damages, remains punishment for crime. 
 In Europe it is " a crime for them to divert the money 
 of investors to their own uses by lucrative private con- 
 tracts." ^ It might also be made a crime in America, and 
 with enforceable laws, for railroad directors or agents to 
 build up one shipper and pull down another by discrimi- 
 nating rates and service — after inducements to discrimi- 
 nate are removed by permitting pooling. Honesty here 
 may be as important to the public as with bank officers, 
 who are closely restricted by criminal law. The people's 
 hesitating attitude toward controlling railroads by law 
 has gradually been changing as they have found out the 
 real conditions. These corporations are not engaged in 
 private enterprises, to be changed or stopped as the 
 owner may choose. The railroad business exists because 
 we have a great civilization, for which railroad service is 
 a constant necessity. It is safe to predict that in time 
 railroad accounts, and without public ownership, will be 
 as open to public officials as government accounts now 
 are ; and that discriminating charges will seldom be 
 thought of as an abuse. 
 
 Rights, Not Authority. — But effectiveness of public con- 
 trol will rest on the rights of the case, not on authority. 
 The Massachusetts Railroad Commission, " in the days 
 of its most successful operation, had practically no power 
 except the power to report ; but its reports showed such 
 
 back of the shares, or paying enough for them. (Hadley, Railroads, 55. 
 Stock watering in trusts is discussed in Chapter II.) The word manipula- 
 tion above refers chiefly to deceptive acts or reports by which directors, 
 who alone know the company's real condition, raise or lower market price 
 of its shares, in order that they themselves may sell or buy with large gain. 
 Others buying or selling are then cheated. To know the honesty and 
 ability of directors is important to buyers of shares. 
 Uladley, 179.
 
 128 TJie Plain Facts as to the Trusts. 
 
 a clear understanding of the points at issue that they 
 were accepted as authority by impartial men on both 
 sides." ^ Court decisions have a similar effect. Legisla- 
 tures and railroad commissions, relying on their author- 
 ity, have too often departed from strict right, and have 
 attempted regulation that could not be enforced. In the 
 troubles between the railroads and the pubUc the right 
 principles are being discovered. These will eventually 
 be followed, to the direct advantage of all concerned. 
 
 A Monopoly Formed by Buying up Sources of Supply 
 Limited by Nature could not be checked by law at pres- 
 ent if not favored by the railroads nor by the tariff. If 
 some producers of anthracite coal in Pennsylvania re- 
 mained separate from the combination, and sold their 
 output at the mine lower than the combination would 
 sell there, the reasonableness of the freight rates charged 
 the buyer might be passed upon if adequate laws for 
 their regulation were enacted. But this would be no 
 remedy for extortion in coal prices, if a trust bought out 
 all the producers. If no substitute coal could then be 
 found at home, nor brought in from abroad by removal 
 of the tariff duty on bituminous coal (anthracite is now 
 on the free list), there probably could be no remedy in 
 any laws now available, nor in any constitutional power 
 yet put into practice. The government cannot tell a 
 person what price he shall charge for what he owns, ex- 
 cept in war emergency, or by appraisal in case of land 
 required for public uses. Purchase of the mines by the 
 government would probably be the remedy in Germany, 
 At present this might not be a safe departure from cus- 
 tom by a government as expensively administered as 
 
 iHadley, 177.
 
 Remedies for the Evils of Trust Monopolies. 129 
 
 ours. It might tend to other ills worse than high prices 
 of coal. 
 
 Yet Abuse of Private Ownership of Mines — waste of 
 nature's store, or imposition on the public — could not 
 long be permitted by the government. For ages gov- 
 ernments have controlled such wealth. Prussia in 1865 
 reserved to the government most of her mineral wealth 
 then unappropriated, separating by law the ownership of 
 underground wealth from that of the surface. The 
 earlier constitutions of a number of the older American 
 states for a long time contained clauses reserving to the 
 state the ownership of all gold mines. ^ Our govern- 
 ment's present attention to forestry and irrigation, in 
 plans for setting apart of woodland reserves, and in plans 
 to utilize mountain streams in the West, will probably 
 extend some day to minerals. The work of the national 
 and state geological surveys, in promoting discovery of 
 minerals, may be extended to rational preservation of 
 those already found. Our share of nature's treasure is 
 limited, and to avoid waste of it is a duty to posterity. 
 Government ownership and control would probably 
 answer here, with private operation. But for the pres- 
 ent it is very likely that with all mineral wealth now in 
 
 1 See Collier, 200, and Ely, last chapter. 
 
 Government Ownership of Mines. — Professor Ely, in The Cosmo- 
 politan, Aug. 1 901, mentions an Indiana court decision in which was 
 asserted the state's power to prevent an owner from wasting natural gas. 
 H. W. Macrosty, in P. S. Quarterly, 1S98, p. 431, says it seems likely 
 the British would prefer nationalization of mines to a coal monopoly pro- 
 posed in 1893 by a leading mine owner, but not agreed to by other owners. 
 In Germany a number of important mines have long been owned, and in 
 some cases operated, by the state. In her parliament a bill is now pend- 
 ing that provides a large appropriation for purchase of coal mines, to sup- 
 ply the navy, and to protect the public from private monopoly. Russia's 
 ownership and operation of many mines of various minerals is a survival 
 of the usual custom of governments in former times. 
 
 9
 
 130 The Plain Facts as to the Trusts. 
 
 private hands, self-interest of the owner would lead to its 
 proper supply to the public if tariff duties were removed, 
 and if railroads were prevented from favoring one ship- 
 per over others.^ 
 
 The Print Paper Trust, whose monopoly power was 
 gained through purchase of the best American and Ca- 
 
 ^The Coal Monopoly has power to cause more injury than perhaps 
 any other combination. In many Northern towns a majority of the people 
 would pay ^8 per ton or more for hard coal before they would change their 
 stoves and use dirty soft coal. Prices of anthracite were expected to be 
 higher this season than for a number of years. The June price was ^6.75 
 per ton in Jackson against $5-75 last year, and i^S-S"^ i'* previous years. 
 The winter price was expected to reach 57- 5°, but up to Februar)' had not 
 passed ^7, the winter price of last year. An increase of 1^25,000,000 in 
 the coal combine's profits for 190I was reported as anticipated — output 
 54,000,000 tons in 1899. Its power to tax consumers might perhaps be 
 broken by wide introduction of cleanest grades of soft coal, and of stoves 
 to burn them best. Means of change to soft coal are still more needed if 
 present prices of anthracite are really no higher than they ought to be to 
 yield producers and carriers a fair profit. 
 
 By Reason of its Small Area, the Anthracite Coal Field has been 
 variously monopolized by combination for over fifty years. The leading 
 mining concerns are the railroads — especially the Reading, the Lehigh, 
 and the Lackawanna. Six other railroads enter the district. A railroad 
 owning mines would naturally treat itself better than other shippers. The 
 railroads, as mine operators, produce about three-fourths of the total out- 
 put. Between 40 and 46 per cent of the price of coal in New York has 
 consisted of freight charges — about three times as high as the freight paid 
 on soft coal carried much farther. (Von Halle, 35. ) Yet because anthra- 
 cite is more valuable, it will bear higher freight than bituminous. A reason 
 given for the higher freight is that the different sizes of anthracite must be 
 kept separate. Only about 5 per cent of the coal lands. Von Halle says, 
 were in independent hands in 1895. One reason for combination has been 
 the fact that mining capacity is too large for the demand, causing annually 
 long periods of idleness. [The Atlantic, lAa.rch, 1901.) During 1894-97 
 the miners had an average of but 150 days of work per year, against a 
 previous average of 275 days. A railroad mine manager told C. B. Spahr 
 in 1898 that there could be no relief until a third of the people left the 
 business ; but independent operators said the market was restricted by the 
 high freight charges. (Spahr, 120.) In 1900 the roads and mines were 
 further pooled or consolidated by J. P. Morgan.
 
 Remedies for the Evils of Trust Monopolies. 1 3 1 
 
 nadian forests of pulp timber, and the best water powers, 
 could be reached by placing the tariff duty below the 
 line of extortion. The duty is a half cent per pound on 
 paper worth 2 ^ to 3 cents — much higher on finer 
 paper, which is controlled by another trust. When 
 prices of print paper rose in 1 898-99, partly from large 
 demand for war news in the daily papers, and largely 
 perhaps from trust combination, German paper in con- 
 siderable quantities was sold on the Pacific coast, in com- 
 petition with paper shipped overland from the lake 
 region. The print paper trust (International Paper 
 Company) was producing in the summer of 190 1 about 
 70 per cent of the total American output. Substitutes 
 for wood pulp may be discovered, as all monopolies may 
 be changed in time by progress ; but new inventions 
 are usually patented, and the meantime may be many 
 years. 
 
 Old and New Law for Monopolies. — For those trust 
 monopolies whose harmful power cannot be curbed by 
 tariff reduction, nor by government regulation of freight 
 rates, some new laws may be necessary. The old com- 
 mon law precedents against contracts in restraint of trade 
 have already been reenforced by many anti-trust stat- 
 utes. Not a few provisions of the latter were evidently 
 enacted in the heat of politics rather than the coolness of 
 wisdom, and therefore are not to be enforced.^ But it 
 
 ^ The Anti-Trust Statutes Too Stringent.— Most of the anti -trust laws 
 are too sweeping in their condemnation to be well enforced. The North 
 Carolina law of 1889 imposes a penalty of ^10,000 fine, and ten years' 
 imprisonment, for any arrangement to raise or lower prices. The national 
 anti-trust law of 1890 makes the penalty $5,000 fine and one year's 
 imprisonment. Though upheld by three well known decisions, it has been 
 easily evaded, and few prosecutions have taken place under it. Public
 
 132 The Plam Facts as to the Trusts . 
 
 is thought by many that application of the common 
 law by judges, heartily supported by public opinion, will 
 prove a sufficient remedy for the evils of this class 
 of monopolies. It would be fortunate if these latter 
 day needs could be met from our common law, the 
 greatest fountain of justice known in all history. Filling 
 the statute books with dead letters against the trusts 
 adds to the trouble. The fewer set laws and rules the 
 better, after the purpose of law is accomplished. As 
 will be seen in Professor Clark's suggestions, given fur- 
 ther on, the common law may possibly be made effec- 
 tual with very little new legislation. 
 
 The Contracts Forced on a Raw Material Producer not 
 to sell to an anti-trust manufacturer, and on a merchant 
 not to buy from him, would be void in court because in 
 restraint of trade. But this would not help the merchant 
 if for breaking the requirement the trust punished him 
 by having nothing further to do with him. Perhaps he 
 might evade the punishment by making purchases from 
 the trust in a roundabout way.^ The trust could not be 
 
 opinion has not sanctioned it sufficiently to require its enforcement by the 
 federal attorneys, against the legal technicalities easily resorted to by de- 
 fendants. By the anti-trust laws of Missouri, Texas, and other states, 
 that of Texas, passed in 1899, being most stringent of all, trusts are denied 
 the use of the state courts for collection of debts. But United States 
 Supreme Court decisions indicate that agreements to restrain competition, 
 among any except quasi-public corporations, such as railroads and gas com- 
 panies, must be unreasonable to be unlawful, whatever the provisions of 
 an anti trust law. (Collier, 294.) Such has seemed to be the view of 
 state courts also, in applying anti -trust laws. 
 
 'Rebates from Trusts to Dealers. — A trust holds a dealer's trade for 
 itself, and away from its competitors, by a contract allowing him a rebate 
 in specially low prices when he handles its goods exclusively. This 
 arrangement is called the factor's agreement. E. W. Bemis, in The Forum 
 of December, 1899, quotes a Chicago wholesale grocer as writing that for 
 years the Diamond Match Company had allowed extra profit to whole-
 
 Remedies for the Evils of Trust Monopolies. 133 
 
 required by law to buy of the raw material producer ; 
 but possibly a corporation, the creature of the law, 
 might be required to sell to any one person, when he 
 tendered the price, the same as to others.^ Strong dis- 
 approval from the public, even to the extent of individ- 
 ually boycotting where practicable the goods of a trust 
 acting in these pernicious ways, and by encouraging 
 competition against it, would probably be an effective 
 and justifiable remedy. These practices of trusts, though 
 frequent of late years in this countiy — notorious in the 
 case of plumbers' supplies at Chicago — and now said to 
 
 salers handling its matches alone ; that the biscuit and sugar trusts did the 
 same ; that only one grocery house in Chicago did not sign ; that the 
 trusts did likewise to hold retailers who bought anti trust goods; and that 
 the practice was common outside of the grocery lines. 
 
 Are Rebates Illegal? — Von Halle, page 77, says courts have decided 
 against a pledge in advance not to buy of others, but have upheld the 
 allowance of a rebate when a dealer shows that during a previous time he 
 has bought from the trust alone. The amount of the rebate, with the full 
 price, might indicate whether it was simply a fair allowance in lieu of 
 other costs of increasing sales, or whether it was designed to strangle com- 
 petition. A certain building material trust sold its product to a Michigan 
 dealer, during a part of 1900, for just half the regular price, to induce 
 him to cease buying from an independent producer. It is improbable that 
 Under the Constitution this practice of shutting out a competitor is beyond 
 the reach of new law, if it is not already illegal. Giving by rebate a 
 lower price, in order to sell a dealer all of the large total he handles, is 
 imobjectionable ; but stipulating that he shall not buy additional quantities 
 of others is a different thing. Men have a right to combine to get all the 
 trade for themselves, but their action becomes criminal conspiracy when 
 the object is not directly to get for themselves, but to harm another. This 
 distinction has been made repeatedly by courts against sympathetic strikes 
 and combinations to boycott. It was made with emphasis against a trust, 
 because of its formidable power, where it refused to sell to any dealer who 
 handled Dueber watch cases. (F. J. Stimson, Tabor Law, 199, 244, 
 266.) 
 
 ' A case in which the Illinois Supreme Court decided that the Associated 
 Press must sell its news to any paper applying for it, is mentioned in The 
 Forum, Nov. 1900, page 293.
 
 134 I'Ji^ Pla'm Facts as to the Trusts. 
 
 be extensively resorted to in Germany, may not long be 
 continued.^ 
 
 The Trust Practice of Selling^ Without Profit in a 
 Rival's Territory, to drive him out of business, might 
 possibly be stopped by a simple law requiring a price to 
 be uniform to all buyers of equal quantities under sim- 
 ilar conditions of purchase. There is a clause for this 
 purpose in the anti-trust statute of Texas. It would 
 seem that no good reason, not against public policy, 
 could be given for charging one buyer more than another, 
 except perhaps a slight concession to buyers at a great 
 distance ; though in comparing the price of oil from a 
 local depot at one place with the price at another place, 
 it would be necessary to consider differences in costs of 
 shipment, and in total quantity sold, with prices pre- 
 viously charged. The anti-trust producer aggrieved 
 could generally furnish evidence in support of his com- 
 plaint. If found necessary, examination by state experts 
 of home companies, and of the state agency accounts of 
 outside corporations, as with banks and insurance com- 
 panies, might be provided for by state law. In some 
 states an outside corporation must become in part a home 
 corporation, by being rechartered. But conditions can- 
 not be imposed upon its inter-state business. Through 
 agents it could make sales and ship goods into a state 
 even though that state prohibited its own citizens from 
 engaging in the occupation, and if shut out of the state 
 courts it could sue in the federal courts.^ Forfeiture of 
 
 1 The various criminal methods of some trast monopolies are described 
 by H. D. Lloyd, with citations of testimony, in his book Wealth Against 
 Commonwealtk . 
 
 2 Collier, 293. State inspection of corporations must be reasonable and 
 just. In 1S99 a federal court in Kansas declared unconstitutional, as being 
 virtual confiscation, a state law vesting a "court of visitation" with ex-
 
 Remedies for the Evils of Ti'ust Monopolies. 135 
 
 charter for clubbing is a penalty in some of the states. 
 Federal law might reach cases in which orders sent to 
 headquarters from one state were filled at higher prices 
 than similar orders from another state. If the trust put 
 the low price in effect all over the country, the anti-trust 
 producer would have to stop business until the trust be- 
 gan to charge more, which it would do soon, not retain- 
 ing most of its profits as when its price cutting is con- 
 fined to one district, and incurring loss in proportion to 
 its volume of business when selling below cost.^ 
 
 It Might be Better if Resort to New Laws Could be 
 Avoided in this class of offenses. Probably it would be 
 unnecessary if the tariff and the railroads were thor- 
 oughly reformed, and if active public opinion regarded 
 all these practices as disreputable. The fact that so 
 many independents advertise themselves as " not in the 
 trust," shows that public disfavor is to some extent a 
 remedy against monopoly evils. But in view of the 
 varying laws of the many states, and of New Jersey's 
 and Delaware's method of enriching their state treasuries 
 
 cessive power of control over corporations. A number of anti-trust laws 
 have not, and others doubtless would not, bear the test of review by a 
 high court. 
 
 1 Repeated cuts in price by the cane sugar trust at San Francisco, 
 in the fall of 1901, to apply to the region west of the Missouri, were 
 mentioned in the papers as its "campaign against the beet sugar indus- 
 try," which, west of the Missouri, is sufficient to supply a great part 
 of the demand. An expected cut in price against Michigan beet sugar 
 was not made. 
 
 As explained above in connection with rebates, it seems that to prohibit 
 local price cutting, it would only be necessary to prove that the main pur- 
 pose was not to get trade, but to injure competitors. Such proof would 
 usually be obtainable. In testimony before the Industrial Commission it 
 was said by officials that the tobacco trust cuts price sometimes to introduce 
 a new brand ; and that the salt trust sells low where there is competition, 
 making up by higher prices elsewhere. But an inquiry how low would 
 reveal the motive in the latter case.
 
 136 The Plain Facts as to the Trusts. 
 
 by abusing their power of chartering corporations — hav- 
 ing licensed trust promoters, it might be said, to prey 
 with impunity upon small stockholders and the public — 
 national control of corporations doing business in more 
 than one state seems clearly desirable. A law for this 
 purpose might effectually prevent unwholesome practices 
 by trusts.^ The laxity of law and opinion as to cor- 
 porate management has already been discussed in this 
 chapter. Our tariff, patent, railroad, and corporation 
 laws have offered many facilities to unscrupulous mon- 
 opolists. 
 
 " A Trniform Corporation Law for the whole United 
 States seems indispensable, above all, for the beginning 
 of an effective solution of the difficulties." ..." No 
 authority has conceived better the meaning of the cor- 
 poration problem than Henry C. Adams." He asks for 
 publicity of accounts, a control through public commis- 
 sions, and responsibility of directors for observance of 
 law,^ The New York trust committee, in 1897, recom- 
 mended a constitutional amendment giving Congress 
 control over industry. Such an amendment would pos- 
 sibly fail of approval by the requisite three-fourths of 
 the states, many of which are still jealous of their rights. 
 With general reform of corporation laws, an amendment 
 might not be necessary for some federal control of cor- 
 porations doing business in more than one state. Con- 
 gress having now ample power over inter-state com- 
 merce. The movement among lawyers' associations to 
 induce states to enact uniform laws, which has effected 
 good results in some lines, might be very useful in cor- 
 poration laws, though it reached only a few of the larger 
 
 1 Bullock, The Atlantic, June, 1901. 
 
 2 Von Halle, I46.
 
 Remedies for the Evils of Trust Monopolies, 137 
 
 states. Each has considerable power to require New 
 Jersey corporations, when doing business through branch 
 offices within its borders, to conform to the laws regulat- 
 ing its own corporations after they have begun business. 
 But other states cannot remove the water from the 
 stocks of New Jersey corporations, nor prevent her from 
 continuing to permit stock watering. Massachusetts, 
 which in many lines comes first in good laws, now per- 
 mits no corporation to issue stock or bonds in excess of 
 an officially approved valuation of assets. Her law has 
 been attended by very hopeful results, greatly lessening 
 the evils of secrecy. 
 
 Closer Control of Corporations is recommended by per- 
 haps all thinkers on the subject of trusts, even including 
 Mr. John D. Rockefeller, president of the Standard Oil 
 Company. President Roosevelt said early in September 
 at the Minnesota fair : " In the long run we go up or 
 down together. More and more it is evident that the 
 state, and if necessary the nation, has got to possess the 
 right of supervision and control as regards the great cor- 
 porations which are its creatures ; particularly as regards 
 the great business combinations which derive a portion 
 of their importance from the existence of some monopo- 
 listic tendency," Mr, Roosevelt, in his message of 1900 
 as Governor of New York, brought out forcibly the need 
 for publicity as the first step in control — for exact infor- 
 mation, by which to decide what to do, " Then , . . 
 competition or public sentiment will give the public the 
 benefit of lowered prices, and if not, the power of taxa- 
 tion remains." In his recent message as President he 
 made similar recommendations, and a bill to carry them 
 into effect by national law has been introduced by Con- 
 gressman Littlefield, of Maine.
 
 138 The Plain Facts as to the Trusts. 
 
 Will the National Constitution be Amended ? — Demo- 
 crats, who as a rule oppose increase of federal power, 
 declared in their Massachusetts platform of 1901 for fed- 
 eral regulation of trusts. The lower house of Congress 
 in 1900 passed a bill, but not by the requisite two-thirds 
 vote, proposing a constitutional amendment for giving 
 the national government complete power to regulate 
 inter-state corporations. Most of the important corpo- 
 rations do business in a number of states, and hence can- 
 not be fully controlled by any one state government, 
 A national department of commerce and industry, to 
 supervise corporations, among other functions, was 
 recommended by President McKinley in his annual mes- 
 sage of 1900, and also by President Roosevelt in 1901. 
 A bill to establish such a department, introduced by 
 Senator Nelson, of Minnesota, has lately been considered 
 in Congress, and with favorable prospects. The Indus- 
 trial Commission has recommended the creation in the 
 treasury department of a corporation bureau, which per- 
 haps would answer better there than in a new depart- 
 ment. President Roosevelt in his message said he 
 believes a very useful national law, subjecting inter-state 
 corporations to publicity, and to some such control as 
 Massachusetts exercises over her own corporations, could 
 now be enacted by Congress, following experience with 
 the national banking laws and the Inter-State Commerce 
 Law ; but that if Congress lacks the power, the Consti- 
 tution should be amended to confer it. By the sugar 
 trust decision of the Supreme Court, Congress has now 
 no power to control monopolies except to prevent them 
 from directly restraining inter-state commerce, Consid- 
 ering the increasing complexity of modern business, with 
 the dangerous monopoly power to be attained by trusts
 
 Remedies for the Evils of Trust Monopolies. 139 
 
 and railroads, the federal powers that proved sufficient 
 for the simpler conditions of the nation's first century- 
 will very probably require some enlargement to provide 
 government adequate to the needs of the times. Giving 
 the states more power to regulate manufacturing and 
 trading corporations engaged in inter-state commerce, 
 has been suggested. This apparently would not make 
 for the uniformity desired. ^ 
 
 In England the Companies Act, as well as free admis- 
 sion of foreign goods, prevents abuses by trusts. At 
 first promoters can resort to some threats and force to 
 make a producer join, and their success in securing reck- 
 less investment by the public is well known,^ but after a 
 corporation has been formed, directors are held to good 
 behavior. Once a year in open meeting minority share- 
 holders can question freely, and if directors hold back 
 detailed information the stock falls at once on the mar- 
 
 ' Admitted Need of National Control. — "Scores and hundreds of 
 students of the trust problem, Democrats as well as Republicans, have 
 admitted the necessity of an amendment giving Congress full power over 
 corporations engaged in inter-state commerce." (Collier, 288, 297.) J. 
 B. Dill, who is credited with having drawn the charters for the greatest 
 aggregate of capital in trusts, says a similar need to that which called for 
 the national banking law will no doubt eventually call for centralization of 
 control of corporations under a national law. Such was the opinion of the 
 St. Louis trust conference of 1899, participated in by governors or attorneys- 
 general of eleven states. 
 
 * The late Lord Chief Justice Russell, in an address several years ago 
 after the exploits of the famous promoter, Mr. Hooley, dwelt on the need 
 in Britain for greater publicity, and expressed a hope that Parliament would 
 soon take further action to secure it, which was done in the Companies 
 Act of 1900 (described in International Year Book). He said that from 
 1891 to 1897, in British companies wound up compulsorily, shareholders 
 lost ^100,000,000 and creditors $35,000,000. Shareholders in Germany, 
 where corporation laws are strict, have been losing heavily of late in fail- 
 ing companies. No law can relieve investors from the necessity of using 
 judgment and caution. {Engineering Afagazine, ]sin. 1901.)
 
 140 Tlie Plain Facts as to the Trusts. 
 
 ket. Clubbing of competitors has the same effect, show- 
 ing dishonest management. The fact that common 
 stock is usually in shares of ^i shows the dependence 
 upon the small investor. Besides, books must be ex- 
 amined by chartered accountants, who cannot be bribed 
 or influenced, their reputation being their valuable asset. 
 When their report is qualified, showing a questionable 
 condition, the fall in shares is serious. They inspect 
 allowances for depreciation, and inventory values, find- 
 ing out if dividends are really earned,^ 
 
 ^ ReT'ie-u 0/ Rcviaas, Nov. I900. 
 
 Meager Statements from Trusts. — It was pointed out that the United 
 States Steel Corporation's September report gave profits, which invite in- 
 vestment, but not gross business, which might reveal a monopolistic rate 
 of gain. By New Jersey law, under which nine-tenths of the trusts are 
 formed, no confidential information need be given in the annual report. 
 Bradstreef s stated October 5, I901, that many industrial stocks had 
 "declined sharply, due to a New York anti-trust decision, poor earnings, 
 and lack of definite information about their financial condition." The 
 Outlook of the next week, commenting on an omission of previous extra 
 dividends by the Anaconda and Amalgamated copper companies, caused 
 by shrinkage of electrical demand in Germany, and followed by a fall of 
 Anaconda stock to ^34 from ^54 early in the summer, and of Amalgamated 
 to i?88 from 5 130 earlier — stated the following well known truths about 
 trusts: "The real reason is the mystery in management. The business 
 is masked ; there is no open accounting to stockholders. In view of 
 the long list of other stocks about which regular detailed statements are 
 published, it is incredible that thinking men not on the inside should buy 
 trust stocks when they represent anything but aboveboard investments." 
 By the end of December the Amalgamated trust's shares had fallen to $65 ; 
 the price of copper, long held at l6^^c., had fallen to I2}4c. (lie. later), 
 and the total value of copper shares had shrunk by $200,000,000. 
 
 Dividends on Water, Raised from Monopoly Profits, Must Disap- 
 pear when demand fails or anti-trust product becomes large. Early in the 
 fall of 1901 came a dismal report from tlie Republic Steel Company, in 
 spite of continued strength in the steel market ; also a second collapse of 
 the rope trust, and a price reduction by the linseed oil trust from 82c. a 
 gallon to 55c., which was about the price before the tnist gained control. 
 Prices were also reduced by the woolen goods trust, only to find that the 
 independents did not fear it, claiming to be able to buy more cheaply, as
 
 Remedies for the Evils of Trust Monopolies. 141 
 
 The Evils of a Monopoly Formed by Purchasing Patents 
 might be remedied, in time at least, by issuing every 
 new patent with the condition that if the contrivance 
 were not put into actual use the patent upon it would 
 become void. This change would stop the buying of 
 patents not to use, but to prevent competitors from get- 
 ting them. The public good requires that useful inven- 
 tions be placed within reach of people desiring them. 
 Another practicable change in patents would be a con- 
 dition that use of a patented contrivance must be sold 
 for a reasonable consideration, to be determined by a 
 commission. Probably, by reason of long tolerance of 
 absolute control of patents, though having no right of 
 monopolistic abuse might be thought of as implied, the 
 courts and the public would not sanction these changes 
 by law in patents heretofore issued. But such changes 
 in new patents would scarcely make them less desirable 
 
 well as to manufacture at less expense for competent management. ( The 
 Outlook^ October issues. ) The New York Journal of Commerce, comment- 
 ing on trust organization during September, said : " The unfavorable show- 
 ings made recently by many industrials have made it difficult to secure 
 underwriting for such deals, and some will probably have to be abandoned 
 from lack of support. ' ' 
 
 Recent Combinations. — Few combinations of sufficient importance to 
 be mentioned generally in newspapers have been formed in recent months. 
 The Northern (5400,000,000 capital) and the Southern Securities com- 
 panies, to hold railroad stock, were organized in November, and in December 
 a combination of producers of photographic supplies ($2,500,000 capital). 
 Early in January, 1902, the asphalt trust collapsed from over-capitalization, 
 and the crude rubber trust from having undertaken a greater task of mon- 
 opolizing than it could carry through. The latter's liabilities were set at 
 ^2, 000, 000 in excess of its assets. It was announced from Philadelphia 
 in November that a steel trust of $50,000,000 was being formed among 
 the plate mills; and from Grand Rapids, Mich., in January, that a gj-p- 
 sum combine, to compete with the main trust, had floated its stock of 
 $10,000,000. In April two-thirds of the hardware wholesalers completed 
 a $120,000,000 combination.
 
 142 The Plain Facts as to the Trusts. 
 
 to the extent of weakening the inducement toward inven- 
 tion. They have been recommended by different writers. 
 Suggested Changes in Patent Laws. — Taxation of a 
 patent, increasing each year, which has been suggested, 
 could be apphed to previous as well as to future patents ; 
 and taxation could be used to get back for the public 
 excessive gains of other monopolies not to be reached 
 differently. An excellent suggestion, apparently, is to 
 grant to the inventor, not absolute ownership of his con- 
 trivance, but the right to a royalty, fixed by the patent, 
 and imposed on all the makers of the contrivance.^ 
 Reservation of a right by the government to buy a 
 patent, and make it free to all, has been recommended. 
 Shortening the time of a patent's life below the pres- 
 ent seventeen years would have to be done guardedly, 
 to avoid lessening the encouragement to inventive effort. 
 To obtain the inventions that make modern civilization, 
 the people can well afford to reward an inventor with the 
 exclusive right to his invention for a time. Monopoly 
 to that extent is necessary to get inventions. So many 
 inventors spend labor and money for naught that there 
 is little ground for jealousy of the few who succeed. 
 Our patent laws are excellent in some features, but do 
 not safeguard the interests of society so well as do those 
 of England and Germany.^ 
 
 The People Must First Want to be Rid of Monopoly. — 
 If diligent application of present laws proves insufficient 
 to control the trusts, the American people can have addi- 
 tional laws if they want them. There is no need for dis- 
 couragement over the menace of monopoly. Ample reme- 
 
 ' Jenks, 221. 
 2 Ely, 267.
 
 Remedies for the Evils of Trust Monopolies. 143 
 
 dies are at hand without important change of national 
 constitution or practice. The well known acts by which 
 a trust injures society can be prevented, whatever its 
 ingenuity in evasion by change of method or organiza- 
 tion. But the people must first want to be rid of monop- 
 oly, and then unite in sensible opinion on active measures 
 to be taken against it. Legislatures are the people's 
 servants, not their teachers — too much so. The peo- 
 ple's opinion or desire must be formed first. The millions 
 of profit in it will keep monopoly powerful, and induce it 
 to exercise its power remorselessly, so long as public 
 opinion is passive, or undecided what to do. Such temp- 
 tation men could not be expected to resist. The division 
 and weakness of current opinion must have pressed on 
 the mind of the prominent economist who was quoted 
 (perhaps incorrectly) as saying, in March, 1901 : "We 
 shall have an emperor in Washington within twenty-five 
 years unless we can create a sentiment which, regardless 
 of legislation, will regulate the trusts." 
 
 Power of Public Opinion. — He expressed in an exag- 
 gerated way the need for a cool and decided public opin- 
 ion. This need, to unite intelligently on rational control 
 of the trusts, and to avoid vain attempts to oppose inev- 
 itable forces of nature, was the subject of Justice Brewer's 
 recent address at the Yale Bi-Centennial Celebration. 
 Such opinion will answer partly in place of new legisla- 
 tion, giving maximum effect to the laws we now have. 
 A prosecuting attorney seldom takes effective action 
 against law-breakers — could not do so if he desired — 
 unless he is supported or driven by the desire of a ma- 
 jority of the people. Without such support his effort 
 usually amounts to little. Decided opinion may also in- 
 fluence trust policy, as stated before, through the business
 
 144 1^^^^ Plain Facts as to the Trusts. 
 
 need of public favor. The self-interest of a trust in the 
 contentment and prosperity of all the people, that they 
 may desire and be able to buy its wares, may not deeply 
 affect managers with whom to-day is the hay-making time. 
 But they will quickly change their policy when public 
 disfavor reaches the point of doing without their goods, 
 to use substitutes, to patronize struggling competitors, 
 and to unite on vigorous enforcement of law. After the 
 last three centuries of political and industrial progress in 
 this Western Hemisphere, the American people will now 
 hardly cease to rule. 
 
 Professor Clark's Method for Control of the Trusts. — 
 A leader in devising means for control of the trusts is 
 Professor John B. Clark, of Columbia University, who 
 stands in the front rank of economists. The following is 
 a brief outline of his plan and of his reasons, given mostly 
 in different language, and with added explanations. His 
 suggestions are given at length in the Political Science 
 Quarterly, June, 1900, and September, 1901 ; also in his 
 new book, TJie Cofitrol of Trusts, published by The Mac- 
 millan Company. 
 
 1. Protect the Investor, through laws for inspection of actual assets by 
 public officials. Publicity arising from this inspection, applied to prices 
 and discounts, will also protect consumers from extortion, and competitors 
 from unjust discrimination by means of prices lowered to destroy. Every- 
 body needs this publicity except the few promoters and managers, who 
 sometimes are ready to sacrifice both their own stockholders and the public. 
 
 2. Permit Railroad Pools, with state regulation of rates. This must 
 be allowed to avoid necessity of government ownership. If in an attempt 
 to preserve competition, pooling is not legally recognized, railroads will 
 have competition, but by their discrimination in favor of a few, all other 
 business will fall under monopoly. It will be easier to keep rates reason- 
 ably low under publicly supervised pooling, than to stop discrimination 
 under present temptations to resort to it. 
 
 3. By Law Disarm the Trust of its Clubs, and thus, by keeping open
 
 Remedies for the Evils of Trust Monopolies. 145 
 
 the way to competition, get the benefit of the trust's lowering of producing 
 cost, and at the same time save the capable independent producer, whose 
 presence, actual or potential, is the force that will prevent monopoly extor- 
 tion. Protect the independent, and he will protect us. Then the trust can 
 only serve, not tax. It will have not only the power to serve, but the 
 motive also, the latter of which is lacking when monopoly is strong. It 
 can now tax considerably, because, by brandishing its clubs, the potential 
 competitor can be frightened away. Exorbitant profits to the trust are now 
 necessary to induce him to incur the danger of the clubs. When his proof 
 of fitness to survive— his offer of best values — cannot save him, the time has 
 come for the state to interfere. One of its main functions is to protect 
 property. Here the robbery is refined but no less real, because the com- 
 petitor, being prevented from continuing to use his plant and sell its prod- 
 uct, is unjustly deprived of its usefulness. Keeping from him the reward 
 for his attainment of cheapest production is putting a blight on progress, 
 for monopoly does not greatly encourage invention. Potential competition 
 is now neutralized by the second potentiality — that the trust will use its 
 clubs. Effectiveness can be restored to competition by a third potentiality, 
 namely, that the law will disarm. 
 
 4. The Clubs Are ( i ) giving a rebate to the dealer who handles the 
 trust goods only; (2) cutting price below cost in the competitor's terri- 
 tory, while selling at full price elsewhere; (3) cutting price everywhere 
 below cost on the one grade or style a competitor makes. 
 
 5. Enact Statutes Forbidding These Three Practices. The second 
 and third will be easy to prove from arbitrary changes in price. Require 
 that price shall be uniform to buyers under similar conditions, thus secur- 
 ing the lowest price for all. Enforce the statutes vigorously, but not with 
 dependence on them alone. If legal technicalities hinder their enforcement, 
 use of the clubs will prove the existence of a monopoly, which by the com- 
 mon law is not to be tolerated. Decisions by judges, under the common 
 law, have already been the most effective force against trust evils, and 
 under this plan the common law will be the main dependence. The com- 
 mon law condemnation of monopoly extends to its means of action. A 
 statute to prohibit a trust's boycott of a dealer who sells anti-trust goods 
 will follow established legal principles. So will a statute requiring uniform 
 prices. A person buying without asking price can resist by law a charge 
 of more than is customary. Uniformity therefore is already a principle 
 of price regulation. The monopoly of trusts has been overlooked so far 
 because of their possibilities for good, in improving and cheapening the 
 people's supplies. By this method the fangs of monopoly will be extracted, 
 while the trust's power for good will remain. A producer controlling total 
 supply is not a monopolist to be feared if a way is open by which others 
 can enter the business.
 
 146 TJic Plain Facts as to the Trusts. 
 
 Comments. — The admirable simplicity and evident 
 soundness of Professor Clark's method of control can 
 hardly fail to command general approval. It affects no 
 act that is not clearly against public policy — not obviously 
 intended to support unlawful monopoly. It attacks no 
 combination, however large, not even a trust comprising 
 all the trusts, that does not clearly attempt to rob 
 society. It is in no sense a demagogic cry of " Smash 
 the trusts," but leaves them free to realize every possi- 
 bility of advance in production and distribution of goods. 
 For the minds of judges it seems to divide unmistakably 
 the beneficial in combination from the harmful ; and ap- 
 parently it involves no insurmountable difficulties of 
 enforcement. Documentary proof of the use of the 
 first club might usually be obtained by an aggrieved 
 producer from friends among the dealers. The readi- 
 ness of potential competitors to build new plants would 
 push the trust forward in improvement. And in all 
 cases where combination did not give positive advantage 
 in producing cheaply, the trust would soon be only one 
 among many producers. Very likely the trust menace 
 would soon be forgotten outside of the realm of natural 
 monopolies, to which Professor Clark's means of con- 
 trol do not fully apply. 
 
 General A. B. Nettleton, in his excellent book, Trusts 
 or Competition, page 170, after giving many suggestions 
 offered for control of trusts, commends Professor Clark's 
 as the best. Apparently, he says, it would apply to all 
 trusts, present and future, would be acceptable to any 
 state desiring to regulate, and in other states would reach 
 New Jersey's 95 per cent of all trusts, from taxation of 
 which she more than pays all expenses of her state gov-
 
 Remedies for the Evils of Trust Monopolies. 147 
 
 ernment. Many think that abolishing freight discrimi- 
 nation and clubbing would not leave much of the 
 monopoly problem. " It may be that thorough public 
 discussion of this suggestion will bring favorable action 
 sooner than Professor Clark expects." Laws to prevent 
 over-capitalization would now be of little use, since 
 trusts have already been organized where conditions per- 
 mitted. ^ 
 
 1 The Courts and Monopoly. — By quotations from the important deci- 
 sions of the last few years, under the common law and anti-trust statutes, 
 General Nettleton shows that the highest courts, state and federal, are 
 practically unanimous in a readiness to apply the laws to suppress monopoly. 
 The plea that a trust changed to a corporation cannot conspire, because it is 
 but one, was brushed aside in August, 1899, by a St. Louis court, which 
 showed the monopolistic purpose to be unchanged. The Illinois Supreme 
 Court, in October, 1 899, decided in the Glucose Case that by the laws of 
 that state protecting minority stockholders, a corporation cannot abdicate 
 its chartered functions and sell its property or business in that state to form 
 a monopoly. But purchases to monopolize, in view of the property right to 
 sell at will, could probably be made in most cases, aside from the grounds 
 of this decision. Perhaps no decision yet rendered against monopoly has 
 not left a way open for the trusts to continue practically unchanged. A 
 pooling agreement not in the form of a contract, but consisting of a state- 
 ment by each railroad company of what it intended to do, was upheld as law- 
 ful by the Tennessee Supreme Court in May, 1899, following the federal 
 court's decision in 1898 in the Joint Traffic Case. (Nettleton, 190.) The 
 New York Supreme Court, in 1895, declared a milk trust's charter to be 
 forfeited because it was a monopoly. Also, in 1895, by the Supreme Court 
 of Illinois, for the same reason, the Chicago Gas Trust was stopped from 
 exercising its chartered privilege of buying and holding the stock of four 
 gas companies of Chicago. 
 
 American Ideas of the SufiSciency of Competition. — Some writers 
 think the American courts, unlike the European, are too much influenced 
 by the older ideas of competition, depending on its regulation by mere 
 agreement, and not sufficiently recognizing the necessity for firm pooling 
 contracts with railroads and other industries that are naturally monopolistic, 
 or in which competitors are few. Perhaps the attitude of judges will be 
 different when the Inter-State Law is amended to permit pooling, which, 
 whether reasonable or not, is contrary to the common law and to the anti- 
 trust statutes. But the agreement among courts as to the unlawfulness of
 
 148 The Plain Facts as to the Trusts. 
 
 A Few Reforms in Trusts will Largely Settle the Prob- 
 lem. — However, in view of the ownership of trust stocks 
 by thousands of innocent purchasers, and of the well 
 managed trust's possibilities of improving service to the 
 people, it is to be hoped that law and opinion against 
 clubbing will be obeyed voluntarily, and that dissolution 
 of trusts, by court decisions or new statutes, will thus 
 be avoided. The readiness of trusts to obey just laws 
 is indicated by the charter provisions of the Southern 
 Securities Company, that state laws are to be obeyed, 
 and that any holder of not less than a hundred shares 
 shall have the right to inspect the company's records. 
 In the World's Work for February, 1902, commenda- 
 tion is given to a recent industrial corporation, organized 
 in New Jersey, whose charter provides that the direct- 
 ors shall give fullest publicity, opening the books to 
 stockholders, and rendering yearly a detailed report. 
 
 monopoly makes success of Professor Clark's plan seem certain, if public 
 opinion will only require from legislatures a simple statute to prohibit club- 
 bing — making monopoly consist, not in form of organization nor in purchase 
 of plants, but in clubbing competitors out of the field. So far, despite the 
 many and stringent anti-trust laws, practically nothing effective has been 
 done to remedy the abuses. 
 
 Quotations from Highest Courts. — Evidently the general opinion of 
 judges, as of most other people, was expressed by Justice Peckham, of the 
 United States Supreme Court, when he said in 1897 that " trusts or com- 
 binations . . . have an essential similarity, and have been induced by 
 motives of individual or corporate aggrandizement as against the public 
 interest." (Nettleton, 184.) "Monopoly in any kind of business is 
 odious to our form of government. . . . All combination ... for the 
 purpose . . . ought to receive the condemnation of all courts." (Supreme 
 Court of Michigan. ) Possibly, without any more statutes at all, cases 
 might be brought into court that would involve enforceable decisions dispos- 
 ing of monopoly, the common law being re-enforced everywhere by state 
 and federal anti-trust statutes. " The principles of the St. Louis and Glu- 
 cose decisions, if applied in a half dozen leading states, or if affirmed by the 
 federal supreme court, will, it is held, disrupt practically and promptly 
 nine-tenths of the trusts." (Nettleton, 173.)
 
 Remedies for the Evils of Trust Monopolies. 149 
 
 Perhaps, before long, many corporations will voluntarily 
 follow this policy, to gain public confidence. 
 
 Clubbing is the Evil to be Removed. — Apart from gen- 
 eral reform of corporation, tariff, patent, and railroad 
 laws, this element of harmful monopoly, clubbing, seems 
 to be about all that can be directly prohibited in the 
 continuing business practices of trusts now in existence. 
 When clubbing is given up, under law to prevent re- 
 sort to it again, the acute feature of the trust problem 
 will have been settled ; and not by palliative regulation 
 of capitalistic monopoly, but by actual removal of the 
 essentially monopolistic element. Combinations will 
 then separate of themselves, with the least shrinkage of 
 stock values and the least disturbance of business, unless 
 consolidation gives some productive advantage beneficial 
 to the public. 
 
 Professor Jenks' Plan for Control of Natural Monop- 
 olies. — Professor J. W. Jenks, of Cornell University, who 
 by special study during the last twelve years, and as eco- 
 nomic expert for the Industrial Commission since 1898, 
 has become perhaps the highest authority on trusts, — 
 proposed in 1894 a plan for controlling the trusts, espe- 
 cially suited to those which are naturally and permanently 
 monopolistic. The following is a brief outline : ^ 
 
 1. Permit monopoly. 
 
 2. To protect investors and consumers, establish boards to inspect and 
 control monopolies, as the comptroller of the currency inspects banks. 
 Give power to call frequently for full reports, sworn to by proper officers. 
 Perhaps at first inspection should be confined to trusts monopolizing neces- 
 saries. As great a number of people may be affected by discrimination in 
 prices of oil and sugar, as in freight rates ; therefore, what socialism there 
 may be in such inspection of trusts would rest on equal grounds with our 
 socialistic control of railroads and banks. 
 
 1 P, S. Quarterly, September, 1894.
 
 150 The Plain Facts as to the Trusts. 
 
 3. Like the Inter-State Commission, this board might have power to 
 keep prices reasonable, and later perhaps to set a maximum price, as states 
 do in passenger rates. It is to be expected that a large proportion of pro- 
 duction will hereafter be on a monopolistic basis. Monopoly power for 
 evil, as well as good, requires action for its control, and quickly. Trusts 
 may welcome such control in preference to the more violent way of the 
 anti-trust statutes. The Inter-State Commerce Law has accomplished its 
 main purpose. Before its enactment, according to an experienced shipper, 
 discrimination favored four times the freight and twenty times the people 
 that are favored now (1894), and favors now are largely within the law. 
 
 Permission of Monopoly is recommended because the 
 many anti-trust laws, sometimes enacted for temporary 
 political or even demagogic reasons, were attempts to 
 abolish monopoly, its good features and all, by forbid- 
 ding various kinds of agreement common in business and 
 necessary to industrial progress. By non-enforcement 
 of these laws monopoly has been freely permitted up to 
 the present time. 
 
 Many Permanent Monopolies. — Undoubtedly, like rail- 
 roads and street cars, many of those industries connected 
 with mines, or with any materials limited by nature, will 
 in time be on a permanently monopolistic basis. For 
 society's protection, therefore, the state must either own 
 and operate these in a socialistic way, or must directly con- 
 trol their private ownership. The latter will be preferred 
 as heretofore, because under wise public regulation a 
 man's best effort for himself, and best care for his own, 
 drawn out by the right of property, are also his best ser- 
 vice to society — increasing, improving, and conserving 
 its supplies. Hence, as the state must eventually con- 
 trol these monopolistic industries, it may as well begin 
 quickly, before evils have become settled. That draw- 
 ing on the earth's treasures has at last revealed their 
 comparative scarcity, need not give rise to a gloomy 
 view of the future, but demands that they be developed
 
 Rejuedies for the Evils of Trust Monopolies. 151 
 
 with rational care, with the highest good of society in 
 view. Experience in recent years has shown forces 
 tending to monopoly in many parts of the industrial 
 field. The task of the present is to overcome these evil 
 tendencies in social forces, as the task of the recent past 
 was to overcome physical nature by transportation and 
 productive machinery. Undoubtedly, the menace of 
 monopoly can be removed without great difficulty by a 
 union of government agencies — by the city and state in 
 the case of street cars and gas works, and by the state 
 and the nation in the case of railroads and other inter- 
 state corporations. A need for state bureaus of corpora- 
 tions, acting with a federal bureau, to secure publicity 
 and honest management, was generally acknowledged at 
 the Chicago Trust Conference of 1899. 
 
 The First Steps to be Taken, however, are to reform 
 thoroughly the tarifif, the railroads, and corporations in 
 general. This will involve no departure in legislation 
 — will be doing only what disinterested minds have long 
 acknowledged as necessary. By that time the wise 
 course to pursue in controlling such monopolies as mines 
 will doubtless appear. The reforms just mentioned may 
 leave little else to be done. The establishment of the 
 proposed new department of commerce and industry 
 would be a start toward the government control Pro- 
 fessor Jenks has recommended. If it fell into the hands 
 of able and earnest men, it might contribute much to the 
 solution of the problems of monopoly. The same pur- 
 poses might be carried out by the federal corporation 
 bureau, recommended by the Industrial Commission. 
 
 The Legislation Proposed by the Industrial Commission 
 of 1898, in their preliminary report in 1900 to Congress,
 
 152 TJie Plain Facts as to the Trusts. 
 
 after a year's investigation, comprised the following as 
 the main features : 
 
 Certain evils of combinations should be checked with laws by the states, 
 or so far as possible by Congress : 
 
 1. To require promoters to furnish investors with full details as to prop- 
 erty and services for which stock is issued, its amount and kind, etc.; and 
 to hold promoters responsible for damages where prospectus fails to make 
 full disclosures. 
 
 2. To require a certificate of incorporation, open to inspection by any 
 investor, showing all powers granted to directors and officers. 
 
 3. To require ( I ) a reasonably detailed financial report to stockholders 
 at least once a year, verified by an auditor; (2) information to stockhold- 
 ers of the business by granting them proper access to records of directors' 
 meetings or otherwise; (3) a list of members, their addresses and hold- 
 ings, to be provided members before the annual meeting. 
 
 4. To require from the large corporations, or so-called trusts, an annual 
 published report, showing in reasonable detiil assets and liabilities, with 
 profit or loss, such report and audit under oath to be subject to government 
 inspection. 
 
 5. To give the Inter- State Commission authority to prescribe the forms 
 of railroad accounts, to demand such detailed reports as it may require, to 
 inspect and audit said accounts, to prescribe classifications of freight, and 
 to make regulations for transportation. 
 
 6. To make decisions of the Inter-State Commission operative at a day 
 fixed in the decision, and until reversed by a court ; and to make the 
 penalties fines against the company and not imprisonment of its officials. 
 
 The report is signed by seventeen members of the Industrial Commis- 
 sion, composed of senators, representatives, capitalists, and labor leaders. 
 Printed in full in Jenks, 235. A long account of the Commission was pub- 
 lished in Review of Reviews, December, 1901. 
 
 The Industrial Commission's Final Recommendations, 
 based on more than three years of investigation, and on 
 testimony and expert reports filling nineteen volumes, 
 were delivered to Congress February 7, 1902. 
 
 As to the Inter-State Commerce Law, the Commission 
 
 recommends new legislation — 
 
 I. For more stringent regulation of publication of rates, and requiring 
 60 days notice of change, unless authorized by the Commission. Also 
 new law to the effect —
 
 Remedies for the Evils of Trust Monopolies. 153 
 
 2. That strict adherence to published rates be required, and rebates or 
 discrimination prevented by increase of penalties. 
 
 3. That the long and short haul clause be strengthened, and rigidly 
 enforced unless the carrier is released by the Commission. 
 
 4. That the Commission be given a definite grant of power, never on 
 its own initiative but on formal complaint, to pass on the reasonableness of 
 freight and passenger rates, and to declare them unreasonable, as it does 
 at present, but with power (not now possessed) to prescribe reasonable 
 rates in substituti>on. 
 
 5. That rates on imports billed to the interior, lower than rates on the 
 same kind of goods shipped from the receiving port, be prohibited. 
 
 6. That laws similar to those of Massachusetts against stock watering, 
 be enacted by the states. Also new law for 
 
 7. A specific grant of power over classification, but not to require the 
 Commission to promulgate a uniform classification for the United States. 
 
 8. For a permanent corps of expert auditors, under the Commission, to 
 examine periodically the operating and financial accounts of all railroads. 
 
 Commeiits. — These recommendations are substantially 
 in accord with the Cullom bill, considered by Congress in 
 1900, except as to uniform classification. Following the 
 principle on which was based that experiment and com- 
 promise known as the Inter-State Law, the plan here is to 
 go deeper into artificial compulsory regulation, prescrib- 
 ing rates and classification, and watching closely to en- 
 force competition where the natural result is combination. 
 This plan of control is contrary to the teaching of most 
 of the scientific thinkers on the subject. The other plan 
 is to follow natural law, using legislation to supplement 
 it, without attempting to resist it. The main feature of 
 the second plan is to permit pooling, which European 
 courts early perceived to be based on sound economic 
 principles. Pooling is considered the only method of 
 preventing competition by secret rate cutting.^ As 
 quoted from Mr. Newcomb in Chapter IV., whatever the 
 Commission's powers to enforce, it can never be able, 
 
 * W. A. Robertson, The Forum, April, 1902.
 
 154 T^Jic Plain Facts as to the Trusts. 
 
 without pooling, to keep secret discrimination from all 
 of the many thousands of rates involved. 
 
 As to Control of Trusts, the Commission repeats its 
 preliminary recommendations of 1900 for publicity, and 
 now recommends 
 
 1. That district attorneys be directed to institute proceedings for viola- 
 tions of the federal anti-trust laws. 
 
 2. That combinations in restraint of trade or production, which by con- 
 sensus of judicial opinion are unlawful, should be so declared by legisla- 
 tion uniform in all jurisdictions and as to all persons, and such statutes 
 should be thoroughly enforced. 
 
 3. That stringent laws be enacted by Congress and state legislatures, 
 making penal and criminal the vicious practice of discriminating between 
 customers, and cutting prices in one locality below those which prevail 
 generally, for the purpose of destroying local competition ; and that such 
 laws give any person damaged a right to sue for and recover prescribed 
 penalties, and that they require officers to prosecute offenders. 
 
 4. That to prevent over-capitalization the states enact laws similar to 
 that of Massachusetts ; and provide state supervision of public service 
 corporations, with power to pass on the public desirableness of new service 
 proposed, and to regulate rates. 
 
 5. That an annual franchise tax be imposed by Congress on the gross 
 inter state earnings of all state corporations, with a low minimum rate, 
 gradually increasing with earnings. 
 
 6. That in the treasury department a new bureau be created, to register 
 all state corporations engaged in inter-state or foreign commerce, to secure 
 reports, collect the franchise tax, enforce penalties, and gather information 
 for use by Congress in future legislation. 
 
 7. That if a department of commerce and industry be established, one 
 of its functions should be to point out from time to time such economic 
 changes as suggest modifications of the tariff; also to point out oppor- 
 tunities for reciprocity, and evils in combinations that tariff changes will 
 correct. 
 
 8. That in view of the practice by some exporters of making lower 
 prices abroad than at home, Congress provide at once for a commission, to 
 study and report as soon as possible what tariff concessions may be made 
 without endangering wages or employment at home, and what advantages 
 abroad may be obtained therefor. 
 
 Comments. — Determined enforcement of the present 
 anti-trust laws is to be desired, because so far as they
 
 Remedies for the Evils of Trust Monopolies. 1 5 5 
 
 are unwise or unconstitutional, it would clear away dead 
 letters by repeal and judicial decision. In the next two 
 paragraphs the Commission are in hearty accord with 
 Professor Clark. Nearly all thinkers will agree with para- 
 graph 4 — perhaps also with 2 and 3. But the federal 
 franchise tax is objected to by some able editors, on the 
 ground that no revenue is needed, that adoption of the 
 other remedies would answer better without it, and that 
 it would lay a higher tax on big corporations because they 
 are big. The latter would doubtless be proper if size 
 arose from monopoly, and might be justified as an income 
 tax, yet it would seem well to enforce the other remedies 
 first. They might leave nothing further to be desired. 
 No. 6, which is in line with Professor Jenks's proposals, 
 and No. 7, will be generally concurred in, especially if the 
 new department did its work scientifically, not politically. 
 Is It to Save the Tariff ? — But No. 8 is sharply criti- 
 cised by newspapers advocating tariff reform. They say 
 the present Commission investigated the tariff trusts, 
 and that passing the matter to another seems to be a 
 shirking of the duty to report unwelcome truth. Ex- 
 Congressman Phillips of Pennsylvania, who is said to 
 have been changed by the investigation from an extreme 
 protectionist to a tariff reformer, made a minority report, 
 urging that as the tariff is being used by trusts to exact 
 monopoly prices at home, the duty should be removed 
 from metals, ores, wood pulp and raw materials in general 
 of restricted supply. Old-time protectionists would have 
 agreed with him. Doubly strong is their position in the 
 present day of monopoly trusts. 
 
 A Model Incorporation Law, embodying the best fea- 
 tures of the English and Australian acts, and approved
 
 156 Tiic Plain Facts as to the Trusts. 
 
 by many leading lawyers, professors, business men, and 
 accountants — was prepared by Professor Jenks in 1900, 
 to be proposed to the New York legislature according to 
 suggestions in Governor Roosevelt's able message of 
 that year. Such a law, it is believed, if enacted in a 
 number of the leading states, would gradually remove 
 many of the evils of trusts and corporations in general. 
 It gives larger privileges, of especial value to honest 
 corporations, but balances them with rigid requirements 
 as to publicity of accounts and methods, directcs' 
 responsibility, etc.^ 
 
 The Privileges include a right to contract, and to acquire or sell any 
 kind of property, including its own stock and that of other corporations, 
 to the same extent as a natural person. Judgment of directors to be final 
 as to value of property or services for which stock is issued. 
 
 The Restrictions include the following : l . A public office open con- 
 stantly, containing for any stockholder's inspection a book showing all 
 members, their holdings, and all transfers. 2. An incorporation certifi- 
 cate, to be furnished any one for $1, showing all powers of directors, etc. 
 3. A four-fifths vote of stockholders to change business or slocks, or to 
 issue new stock, with purchase by the company for cash, at an appraised 
 price, of the stock of dissenting members desiring to withdraw. 4. New 
 by-laws not valid unless copy is mailed to each stockholder. 5. Corrected 
 list of members and their shares for inspection at annual meeting, and to 
 be mailed previously to members requesting it. 6. Bonded auditors chosen 
 at annual meeting by ballot, to protect stockholders against directors. 7. 
 Statement to any stockholder, at a charge of not over ten cents per loo 
 words, of all salaries, contracts, and agreements. 8. Increase of salaries 
 to be ratified at annual meeting. 9. Directors signing false statement to 
 be jointly and severally liable for company's debts. 10. If annual meet- 
 ing not held at proper time, salaries to cease until it is held, and paying 
 deduction later to be unlawful. II. At annual meeting any stockholder to 
 have a right to demand the record of directors' meetings. 1 2. Any share 
 of stock to be collectible at par in cash unless a contract on file in the 
 ofiice for public inspection discloses in detail its consideration (cash, prop- 
 erty, or services). 13. Every share not issued for cash to have stamped 
 on its face, notice of above contract, and the total of shares so issued. 14. 
 Annual report to show stock issued in previous two years, and whether for 
 
 1 Printed in full in Jenks, beginning at page 244.
 
 Remedies for the Evils of Trust Monopolies. 157 
 
 cash or otherwise. 15. Officials not filing sworn reports, etc., to be in- 
 eligible for one year to hold office. 16. Every prospectus or advertise- 
 ment for selling shares or bonds to give a long list of detailed information, 
 comprising no proper business secrets but all else an investor could ask, 
 including bonuses and promoters' fees. Promoters not complying with the 
 law to be liable for damages to party aggrieved. Laws fully as strict with 
 promoters are now in force in Victoria and other countries. 17. Balance 
 sheet to be mailed before annual meeting to each stockholder (and included 
 in report), giving full details as to stock issued and for what, debts, assets, 
 earnings, depreciation, and bad accounts. 18. Auditors to be liable to 
 injured party in case of neglect or false certifying. 
 
 The Publicity Provided For is deemed to be sufficient 
 to obviate the necessity of subjecting all corporation 
 accounts to frequent inspection by state officials, which 
 practice might put sound concerns in risk of blackmail. 
 Aside from protecting investors, one purpose of the 
 publicity is to inform employees, that they may not make 
 demands and strike, as they often do, when declining 
 business dooms them to failure. Other purposes are to 
 inform the state, for its functions of taxation and regula- 
 tion ; and to inform would-be competitors of high profits, 
 that they may know when to enter the business. The 
 publicity required is for stockholders, who in large cor- 
 porations are so numerous as to place it before the gen- 
 eral public. Small corporations composed of a few 
 stockholders might keep their business secret as at pres- 
 ent. Such corporations seldom engage in practices 
 harmful to the public. Additional personal liability for 
 directors, who, unlike other stockholders, know and con- 
 trol the business, has been generally recommended, to 
 a measure similar to that of trustees of savings banks. 
 Corporations, however large, do not harmfully centralize 
 control of wealth where by means of publicity and proper 
 laws the small stockholder can exert an influence in pro- 
 portion to his holdings. The increase of names on rail-
 
 158 The Plain Facts as to the Trusts. 
 
 road stock books, showing wider distribution of stocks, 
 might well extend to all sound corporations under laws 
 securing honest management.* 
 
 Finally, There is No Lack of Remedies, it will be seen, 
 many of them tried and proved in other countries ; nor 
 in agreement and desire, among the best thinkers, to take 
 the action required by conditions. Bringing our cor- 
 porations to the publicity and honesty prevailing in 
 Europe, reforming the tariff, prohibiting clubbing, and 
 exercising watchfulness over naturally monopolistic re- 
 sources and services — in these and other lines, legisla- 
 tion safe and easy of enactment seems to be within reach. 
 Public evils spend themselves now and then, and subside 
 from notice for a time ; but their causes usually continue, 
 and soon, if not removed, the evils lessen materially the 
 sum of human well being. Allowing the trusts to go 
 ahead unchecked, until their excesses were removed by 
 the laws of nature, would be little more excusable than 
 to abandon a community to be thus relieved from a seri- 
 ous contagious disease. It seems that these monopoly 
 problems have been considered long enough, and that 
 the time for a start in action of a new and effective kind 
 will be in the earliest sessions of Congress and of the 
 
 1 New York's corporation law was slightly amended in April, I901, 
 making directors liable for paying from capital dividends not earned, and 
 adopting partially the suggestions in the proposed law above as to the stock 
 book for members' inspection, and as to consideration for issue of stock. 
 Some such changes were made in 1900 in the law of New Jersey. Gov- 
 ernor Nash of Ohio recently sent in a strong message on controlling and 
 taxing corporations. The main purpose of the New York legislation of 
 1901, however, was not additional restriction, but greater liberality, to at- 
 tract incorporated capital. Liability of stockholders and directors was 
 lessened, the tax was reduced, and the power to borrow was enlarged. 
 
 The French and German corporation laws are now similar to that pro- 
 posed by Professor Jenks, but in Germany a demand has arisen for greater 
 publicity with trusts. ( The Natio7t, Jan. 2, 1902. )
 
 Remedies for the Evils of Trust Monopolies. 159 
 
 state legislatures. Even a little legislation of Jthe right 
 kind would be of great benefit, especially in corporation 
 laws similar to that proposed for New York. The part 
 of each voter in the movement is carefully to inform him- 
 self, and to add his individual ideas to the great current 
 of public opinion. Only through it does legislation come.* 
 
 • Prospects Are Unpromising Just Now for the above reforms. Con- 
 gress this session, to a larger extent perhaps than usual, has been occu- 
 pied, not with legislation likely to result in (or even designed for) benefit to 
 the people as a whole, but with measures urged in each case by a class 
 expecting to reap personal profits, or urged by politicians hoping thus to 
 hold or gain favor among voters. One of these measures is the bill to pay 
 millions annually in subsidies to shipping, despite the facts that our ship- 
 yards are now vastly more prosperous than at any other time since the 
 Civil War, and that we have enterprise and capital without limit to establish 
 new lines of ships over every route offering natural profits. Another meas- 
 ure is the bill to tax oleomargarine out of existence, that poor consumers 
 may not choose to use this cheap and wholesome article, but must buy 
 butter or nothing. Another movement is the effort to retain every 
 fraction of tariff advantage, without regard to consequences in Cuba, 
 or among unprotected producers and consumers at home. And labor 
 unions, whatever their resolutions on the wrongs of the common peo- 
 ple, follow the custom of seeking class benefit at public expense, de- 
 manding eight-hour and anti-contract laws by which public labor must 
 cost more than it naturally sells for. In all this class clamor there is 
 scant attention anywhere to the only means for actual removal of 
 wrongs complained of — to reform of railroad, tariff, and corporation 
 laws on lines suggested by the Industrial Commission, and by Presi- 
 dents, Governors, and economists. Widespread complaint of the raise 
 of prices by the beef trust includes little demand for a real remedy — for 
 revision of the Inter-State Law so as to abolish discrimination, and for free 
 admission of cattle and meat from Canada and South America. In view of 
 the ease with which capital prevails in a contest for special favors, it is not 
 very surprising that Mr. W. J. Ghent, in his notable article in The Inde- 
 pendent of April 3, concludes that now, as in ancient democracies, the 
 people will let their liberties slip away, and that the power of wealth will 
 be established in a modem feudalism, marked by benevolence to the classes 
 ruled, because they can thus be exploited most effectively. But are not a 
 series of unblushing demands ar.d practices necessary to awaken the great 
 honest public, and to force it into permanent reforms ? That an irresistible 
 movement for tariff revision is about to set in, is admitted by some who are 
 are trying hardest to stave it off. With it may come other pressing reforms.
 
 CHAPTER VII. 
 
 THE PROPER AND NECESSARY MEASURE OF MONOPOLY. 
 
 Monopoly From Giving Best Values. — Any trust that 
 continues to exist as a monopoly solely because no com- 
 petitor can offer goods equally desirable, cannot be wisely 
 attacked, either by law or by public disfavor. So long 
 as it makes no effort to weaken or drive out competitors, 
 but goes ahead surpassing them all in serving the public, 
 it is a benefactor, and will not only deserve but will 
 receive substantial reward. It is doubtful if there ever 
 has been such a trust — one that long remained in power 
 without help from a patent, a taiiff, or a natural mon- 
 opoly. If the Standard Oil Company has entirely given 
 up evil practices, it may now be such a trust in part, so 
 far as not made a natural monopoly by its pipe lines and 
 terminals, unless present merit is lessened by bad methods 
 in past attainment. If it surpasses competitors by means 
 of valuable processes, it cannot be censured for keeping 
 them secret, as any business man would do.^ 
 
 1 Has Monopoly Caused Improvement ? — But the Standard's improve- 
 ments in refining and distributing oil are no argument for trusts. Greater 
 improvements and cheapening have taken place in other lines of business 
 not combined into trusts. Perhaps there is no business not improved in 
 some way. "Charges for refining oil and sugar have decreased very 
 slightly since the formation of these monopolies." Considering the value 
 of many new by-products, it is thought the charge for refining oil, over cost 
 of the crude, may have increased slightly since 1882. There are probably 
 no trusts that have not raised or kept up prices (their main purpose) when 
 it paid them to do so, though the most successful have allayed opposition 
 and earned profit by making improvements. Comparison of the usual 5 to 
 8 per cent gains of ordinary business with the Standard's 48 per cent on a 
 
 160
 
 Proper atid Necessary Measure of Monopoly. i6 1 
 
 Large Concerns Desired Where They Serve the People 
 Best. — The steel trust likewise would be a public benefac- 
 tor if its vast profits, 554,954,8/ 1 for the first six months, 
 were derived from production made economical by com- 
 bination, with cheaper and better products than could be 
 shipped in from abroad if there were no tariff duty. 
 Massing capital into billion-dollar corporations could 
 scarcely be legislated against if it were necessary to at- 
 tain for consumers goods of best quality and lowest 
 price. So far as combination into larger concerns gives 
 each person a better living, society wants combination 
 for the same reason that it wants invention. It could 
 hardly be wise to attempt by legislation to keep an in- 
 dustry divided among small producers, despite the good 
 effect on character, if economic law in cheapness and gain 
 drew them together. 
 
 Have the Trusts Brought Benefits? — But apparently 
 proof of public benefit from great massing of capital is 
 not to be found in the steel trust. Its sales abroad, 
 against world competition, it seems to be undenied, have 
 
 capital considered somewhat watered, gives an idea as to whether mon- 
 opoly does not keep up prices. A large margin of profit over cost of raw 
 sugar has been taken by the sugar trust from the start when not engaged in 
 fighting competition. It has paid 12 per cent on common stock deemed to 
 consist largely of water. " Practically invariably " trusts have raised or 
 kept up prices. (Jenks, N. A. Review, June, 1901.) 
 
 Two Changes May Not be Cause and Effect. — Similar to the argu- 
 ment of attributing improvements to trust combination is the argument of 
 attributing American prosperity to the tariff. During the last half century 
 England has prospered almost as much under free trade, with outflow in- 
 stead of inflow of people and capital, without any new land to settle, and 
 with nothing to compare with the variety of American resources. In the 
 last twenty years she has probably surpassed America in steadiness and 
 wide distribution of increase of wages, and increase of favorable conditions 
 for labor. Our tariffmay have been good for certain purposes, but few would 
 attempt to prove that without it our growth would not have taken place. 
 
 II
 
 1 62 The Plain Facts as to the Trusts. 
 
 been regularly made at far lower prices than its sales at 
 home. If that is the case, a portion of its profits are a tax 
 it levies on home consumers by means of the tariff Ger- 
 man trusts have been doing this extensively, charging high 
 prices at home and selling their surplus abroad for what 
 it will bring. This is believed to be a common practice 
 of American monopolistic trusts, in harmony with their 
 principle of serving where they must, but of taxing where 
 they can. Clear proof of public benefit from trust com- 
 bination does not yet appear. Combination for the sake 
 of cheaper and better products, as explained before, 
 would scarcely have taken the monopolistic plan of buy- 
 ing out a majority of the competitors, and then of doub- 
 ling or trebling capital with watered stock. 
 
 Enlarging Plant to Cheapen Product. — It is not likely 
 that the leading plants are operated more successfully 
 now than before being united into trusts, nor with 
 greater improvement than they would have made if con- 
 tinued alone. They had then the best machinery made, 
 and ample capital in other forms. Manufacturing is a 
 business of decreasing cost and increasing profit, as the 
 scale of operation enlarges, up to the point at which all 
 the equipment is of the best kind, and sufficient in size 
 to employ the best methods, with a force of men that 
 includes every variety of talent required. Above this 
 point of maximum efficiency, enlargement will usually be 
 a disadvantage.* 
 
 How Large a Business Must be to Reach the Point of 
 Lowest Cost, enabling it to sell at lowest prices to con- 
 
 ' Greatly Lowered Cost for Added Business is the rule with rail- 
 roads and municipal service companies, strengthening their other means 
 of monopoly. A passenger train as long and as crowded as an en- 
 gine can pull costs little more to operate than a shorter train partly empty.
 
 Proper and Necessary Measure of Monopoly. 163 
 
 sumers, depends upon its class and field. Local enter- 
 prises in small cities, and to some extent in larger, such 
 as those of carpenters, painters, plumbers, tailors, bak- 
 ers, and printers, require but httle capital, from ^500 to 
 ;^ 1 0,000, to render the best service at lowest cost. With 
 them personal attention to work is more important than 
 large capital and extensive business. Such is the case, 
 even in very large cities, with various kinds of repairing, 
 and especially with artistic or difficult work requiring 
 individual skill. The case is usually different in the 
 production of an article sold by dealers over a wide ter- 
 ritory. But here, to reach the lowest cost and best 
 quality of product, the gigantic establishment is neces- 
 sary in few lines. Perhaps nine-tenths of the factories 
 of the country are not large, employing each from 20 to 
 500 people, yet they make good products and are run 
 on a solid basis, meeting all competition that arises. The 
 average number of employees for each of 5,572 factories 
 inspected in Michigan in 1901 was 34. 
 
 Did Enlargement of Factories Cause Progress ? — All 
 industrial history, says Professor Gunton,* shows that 
 equally in all industries production cheapens, prices fall, 
 and wages rise, in proportion as large enterprises sup- 
 plant small ones — as concentration of capital increases. 
 In cotton manufacturing he says the increase of average 
 capital per factory from 1^50,702 in 1831 to ^275,503 in 
 1880 caused the fall of 60 per cent in price of cloth, 
 and the rise of 80 per cent in wages, of nearly 400 per 
 cent in product per laborer, and of 100 per cent in 
 per capita consumption of cloth. If this were true the 
 801 mills in 183 1 would have been consolidated into 
 fewer than 756 (his number) by 1880 — doubtless by the 
 
 •Quoted by Collier, 142.
 
 164 The Plain Facts as to the Trusts. 
 
 present time into less than a score, controlled by one 
 trust ; and consolidation of all industry under a social- 
 istic state would soon come to pass. But no such 
 mighty cause as that can be claimed for the trusts, instead 
 of the gains of monopoly and stock watering. Not the 
 larger the factory, the cheaper the product and the 
 greater the gain. It is product-cheapening machinery, 
 with cheapened transportation, that has lowered prices. 
 Wheat has fallen in price about one-half since 1870, but 
 farms tend to grow smaller, and this in the best wheat 
 sections. Sometimes in a single year scores of new 
 cotton factories, mostly small, are started in the South. 
 They must meet the prices of the larger, and to live 
 must produce about as cheaply, for the profits of many 
 of the larger average low.' Factories employing three 
 or four men make and sell brooms against any compe- 
 tition. Many a concern having less than fifty employees 
 thrives in making underwear with sewing machines. To 
 have the machinery for doing the particular work cheap- 
 est is the essential condition, whether employees num- 
 ber one or one thousand. 
 
 Increase of "Wealth Brings Larger Factories. — What- 
 ever the industry suitable for a large capital, even sell- 
 ing papers on trains, — large plant, with those desiring to 
 use large capital, is necessary to make a sufficient aggre- 
 gate of profit. The increase of a producer's wealth is 
 usually invested in his own business, often no doubt, as 
 in the case of a village expressman adding more wagons, 
 until additions of capital bring a lower rate of profit. 
 In most industries continued enlargement shows that 
 
 ' Labor Bulletin 34, page 478, gives the number of cotton mills as 801 
 in 183I, 1005 in 1880, and 905 in 1890. Mr. Edmonds, of the Baltimore 
 Manufacturers' Record, recently stated the number in the South as now 
 being 668 ; 113 were established there during 1899.
 
 Proper and Necessary Measure of Mo7iopoly. 165 
 
 the owner had savings to invest, not that he realized 
 through enlargement a higher rate of profit than his 
 competitor on a smaller scale. Only where small scale 
 competitors disappear is there certain proof of decided 
 advantage to the large factory — proof that enlargement 
 caused the ability to produce cheapest and best. 
 
 And Where Largest Capital is Required to produce at 
 lowest cost, the great plants were built before the trusts 
 came.* The Carnegie Steel Company, with its twenty 
 millions of annual profits, and unlimited credit to bor- 
 row, had no need to combine with smaller concerns in 
 order to raise more capital or to hire experts. It does 
 not readily appear, aside from stock watering, why any 
 local company making profits should desire a wider mar- 
 ket for its stock or bonds through consolidation. The 
 American works that surpass the world in locomotives 
 were a dozen separate concerns up to June, 1901. So 
 are the shipyards yet, now fast taking a place with the 
 first ; and independent still are scores of leading manu- 
 facturers of machinery, and not all of them large, who 
 sell against any competition in the world. 
 
 If Consolidation into Trusts Has Increased Exports of 
 manufactures, it must have been because monopoly 
 prices at home enabled them to cut prices abroad. As 
 already stated, it is unlikely that consolidation since 1898 
 made strong concerns more efficient than they were be- 
 fore, or caused them to improve faster. It is offering 
 best values that makes foreign trade, as well as trade at 
 home, though in either case some capital may be well 
 spent in opening agencies to let the value be known. 
 
 *A report of the United States Geological Survey in 1901 says: "The 
 day is rapidly approaching when no Portland cement factories will be profit- 
 able except those producing several thousand barrels per day."
 
 1 66 The Plain Facts as to the Trusts. 
 
 Where superior value is clear, as with harvesters and 
 sewing machines, exports were large long ago, before 
 trusts appeared. It would undoubtedly have been the 
 same with oil if no oil trust had been formed. Profit 
 in exporting it would have attracted the requisite capital 
 and skill for introducing it in foreign lands. Use of oil 
 would have become universal there, as it had become 
 universal here before the time of the Standard. With 
 its monopolistic opportunity to collect millions annually 
 in freight rebates, and in extra price to home consumers, 
 it had little inducement to make the most of the foreign 
 field. Can it be doubted that four or more strong com- 
 panies, devoted to legitimate business, not to fighting for 
 monopoly, would have served the world better in sup- 
 plying oil? 
 
 Why Have Exports Consisted of Trust Products ? — The 
 bulk of our largely increased exports of manufactures 
 have lately consisted of trust-made goods, because trusts 
 have been formed in the steel and other industries easily 
 monopolized, whose products, limited by nature and pro- 
 tected by patents, happened to be demanded quickly and 
 largely in many lands. These products would have been 
 demanded as widely if there had been no trusts. Until 
 lately the bulk of exports consisted of farm products, 
 furthest removed from combination. Our steel products 
 were taken by foreign demand just as soon as they 
 became the cheapest and most desirable, and in 1898, 
 before the time of the steel trusts. Aside from cutting 
 prices abroad below the home level, organization into a 
 trust can extend foreign trade in no case except in that 
 of an industry having insufficient capital and skill to pro- 
 duce most cheaply, and to push foreign sales. Such an 
 industry trust promoters seldom choose. They naturally
 
 Proper afid Necessary Measure of Monopoly. 1 6"/ 
 
 prefer those industries having already a monopolistic 
 excellence that will float watered stock. And for the 
 much-talked-of, and properly desired, supremacy in the 
 world's markets, beyond a temporary picking up of bar- 
 gains by foreigners, more will be required than giving 
 the best values. Some arrangement will have to be 
 made, through tariff reform, for taking the goods with 
 which alone foreigners can continue to pay. 
 
 Buying Materials in Large Quantities. — The supposed 
 advantages of buying raw materials in large quantities, 
 often mentioned to justify trusts, will not bear examina- 
 tion. This advantage is small with staple materials 
 widely dealt in, of solid value all the year round. On 
 one carload the price is usually as low as on two car- 
 loads or more. With salt and lime the wholesale price 
 from the producing trusts is now not one cent a barrel 
 lower on an order for 10,000 barrels ; though the higher 
 price of the wholesaler is put a little lower on a large 
 order, because his expense of making sale may be no 
 greater than with a small order. On anthracite coal the 
 trust price for one carload is the lowest ; but on bitumi- 
 nous coal, sold by many producers, the price to retailers 
 falls as quantity bought increases, up to about 100 car- 
 loads. On flour from the large mills of Minneapolis a 
 small order is often cheapest. Their price card to whole- 
 salers frequently states that not over five carloads will be 
 sold to one purchaser at the price given. Unsold stock 
 is then small. Unlike lime, the price of flour at the 
 mills changes often with wheat. When unsold flour 
 happens to accumulate, or grinding capacity is not fully 
 utilized, a very large order is taken at a price some- 
 what lower.
 
 1 68 The Plain Facts as to the Trusts. 
 
 Slight Variations in Price as Quantity Changes are 
 
 doubtless the rule with lumber, brick, iron — materials 
 in general, and consumable necessaries. The purchase 
 required to secure the lowest rate does not consist of 
 many cars. Too large a purchase tends to make a 
 scarcity and raise price, ^ In 1899 and 1901 an extra 
 price was frequently paid to have a large order of crude 
 iron products filled promptly. Very large orders are 
 often divided, for the sake of quicker delivery, and to 
 iavoid raising price. In time of weak demand, price of 
 materials, on a large order, is lowered considerably ; but 
 only until unsold stocks are reduced to correspond with 
 the slack demand, or until mill capacity is again fully 
 utilized. 
 
 In Dull Times, When Mills Are Idle, a Heavy Cut in 
 Price of materials would be made to obtain a very large 
 order ; but the purchaser then earns the reduction by 
 taking the risks of ownership. Besides insurance, stor- 
 age, and loss of interest on the money paid, his material, 
 whether held idle or manufactured into unsold goods, 
 may fall still lower in value. That is the case where 
 entire output of a mill is bought by the year or season. 
 Where value is certain to the buyer, it is usually certain 
 to the producing seller also, and he advances his prices 
 accordingly. By risks still greater the owner of a depart- 
 ment store earns his heavy discount on large purchases 
 of summer novelties, which may not all be sold before 
 the short season ends, and the next season may be out 
 of fashion. Price is lowered materially, as a rule, on 
 large orders for finished goods, because on account of a 
 
 ' " At Fall River the print cloth market received an impetus from several 
 liberal orders, regulars advancing to 3 cents." [Dun's Review, Sept. 14, 
 1901.)
 
 Proper ajid Necessary Measiire of Monopoly. 169 
 
 multiplicity of styles and qualities, with frequent change, 
 the expense of selling such goods is heavy. Generally, 
 the more staple an article, like sugar or coffee, the lower 
 the profit, the less the risk of selling, and the smaller the 
 gain on a large purchase. 
 
 The Expense of Selling Finished Goods, which is a 
 branch of work almost as necessary as making them, 
 can never be eliminated by any degree of consolidation. 
 The bulk of the country's products will continue to be 
 sold as heretofore, through wholesalers and retailers, 
 reached by traveling salesmen. If these classes are 
 leeches, living on industry without rendering a return, 
 why were they not dispensed with long ago ? If a trust 
 did without their services, their work would still be done 
 nevertheless, and others would be employed in some way 
 to do it. Several of the leading manufacturers of bug- 
 gies do not reach retailers through jobbers ; but they do 
 the jobber's work by maintaining central agencies of 
 their own. 
 
 To Save the Retailer's Profit, a small proportion of the 
 people will take the risk and trouble of sending off to 
 buy many goods from a direct selling manufacturer or 
 a department store. Of course, consumers might thus 
 get their supplies for less, and if the large class of mid- 
 dle men could be released to engage in making things, 
 supplies for all would be much cheaper and more plenti- 
 ful. But the merchant's work the consumers would 
 then have to do themselves, and bear his risks. They 
 would rather pay the merchant for doing it, for the same 
 reason that they pay for their laundry work, which each 
 person might do for himself and save money. It is by 
 hiring a manager and buying a stock, at their own risk 
 and trouble, and by partly giving up exercise of choice
 
 I/O The Plain Facts as to the Trusts. 
 
 as to where to deal, that buyers obtain a saving through 
 a cooperative store. In America the energy of buyers 
 has been too valuable to them, and the merchant's work 
 too well done, to admit of large growth of cooperation. 
 
 Selling to Dealers is a Necessary Work likewise. The 
 ;$5 to ;^io a day expense of maintaining each traveling 
 salesman is a heavy tax on manufacturers and whole- 
 salers, and the consumer pays this, with all other costs 
 of getting the goods to him. If this expensive system 
 of selling to dealers could be given up, prices to con- 
 sumers might be much lower. But it is unavoidable. 
 Manufacturers of new articles not well known would get 
 few orders if they waited for them to come by mail ; and 
 their sending out of salesmen makes the same method 
 necessary for other manufacturers who would not fall 
 behind. Few consumable commodities are so settled in 
 public favor that active effort, through advertising and 
 salesmen, would not increase profit from sales beyond 
 the expense thus incurred. 
 
 Is Advertising a Waste ? — Fewer goods would be 
 sold, and consumers would have less enjoyment, if wants 
 were not continually awakened by tempting advertising 
 — especially by expensive pictures in magazines, and by 
 store window displays costing hundreds of dollars to • 
 arrange. Professor Jenks was surely mistaken when he 
 wrote of advertising as a waste. It is made necessary 
 by nature, the same as sleep, which might be said to 
 waste a third of the time of mankind. Effort to sell 
 overcomes ignorance and inertia, as sleep removes fatigue. 
 In the one case the cost to a person is in time ; in the 
 other case it is in added price. Either sleep or effort to 
 sell is harmful if carried too far. The benefit to society 
 from advertising, and from other effort to sell, is the
 
 Proper and Necessary Measure of Monopoly. 171 
 
 enjoyment and elevating effect of varied consumption. 
 The $250 paid by Colgate or Pears for a page in a maga- 
 zine may not cause society to use more soap, but it cer- 
 tainly induces enough people to use better soap, or such 
 expense would be stopped. For the cost of advertising, 
 experienced men know almost exactly what results they 
 get in return. If there is a gain to all advertisers of 
 fine soap, it cannot be that one attracts customers from 
 another making an article equally good. If pushing of 
 sales could be avoided with a popular article, the way 
 would seem easy in taking advertising expense from its 
 selling price. Both dealers and consumers would soon 
 notice the bargain. To one producer doing that alone, 
 the fact that others still had the advertising expense 
 might be an advantage. That price is not thus reduced 
 by the amount of advertising expense, or cost of premi- 
 ums given, seems to show that advertising is necessary. 
 Taste for Better Things Needs to be Encouraged, and 
 by more forces than the example of others. People 
 could get along with poorer and fewer supplies, down to 
 the tramp who wrote in a soap testimonial that he had 
 used no other for two years. Even with an article that 
 was decidedly the best of its kind, advertising would 
 cause more people to know that fact. A trust making 
 every pound of its article produced in the world might 
 still advertise and push sales until every person con- 
 sumed all that would benefit him. Life insurance is 
 acknowledged to be of great value, but how much of it 
 would be sold, and among the most intelligent people, 
 without agents and advertising ? The case is the same 
 with sewing machines and pianos, whose sales are prob- 
 ably trebled by means of easy payments. Many a per- 
 son is led to subscribe for a magazine by an advertise-
 
 1/2 Tlic Plain Facts as to the Trusts. 
 
 ment that simply reminds him of excellence he already 
 knows. Though no doubt payments for advertising and 
 for traveling men are often injudicious, wasteful, and 
 badly overdone, like other kinds of human activity, 
 sometimes raising the cost of selling above the cost of 
 making, — still they cannot be abolished in a society for 
 which a large and ever changing variety of supplies is 
 made. This expense of selling new things is a part of 
 civilization, and especially of progress. It would be 
 less noticeable among barbarians, or among people 
 introducing nothing new. 
 
 Selling Expense Small with Staple Materials. — And 
 where selling expenses could be largely dispensed with 
 by a trust, they are already unimportant, as indicated 
 before. Such is the case with raw materials and partly 
 manufactured forms, in whose realm trusts chiefly flour- 
 ish, partly because here they can monopolize nature's 
 supply. Manufacturers come after materials themselves, 
 for they are necessary for carrying on business. The 
 few producers of sugar, and of meat products sold by 
 grocers, keep merchandise brokers in cities having whole- 
 sale grocers, but sometimes less to solicit orders, for they 
 come unasked, than to carry out telegraphic changes of 
 prices. In time of good demand, a saw mill owner fa- 
 vorably known to wholesalers and exporters need hardly 
 spend a postage stamp to sell his product. Trusts are 
 less common with finished goods for consumers, apart 
 from food necessaries, not only because producers are 
 numerous and factories easy to start, with the limits of 
 nature further removed, but also because people stop 
 buying, and use their old clothes or buggies, if prices are 
 much advanced. This is why the present high prices of 
 materials fall so heavily on some manufacturers, who can
 
 Proper and Necessary Measure of Monopoly. i yt^ 
 
 not raise their selling price accordingly. With some fin- 
 ished goods, profits to makers are said to be nearly as 
 low as they were during the recent hard times, though 
 collections are better. 
 
 The Gains and the Losses of Consolidation. — It is doubt- 
 ful if a great trust, in a term of several years, could save 
 enough from buying materials in large quantities, and 
 from reduction of selling expense through elimination of 
 competition, to balance the increase of expense necessi- 
 tated by consolidation. That a trust owning ten factories 
 can produce and sell cheaper than the owner of one is by 
 no means an axiom, unless each is trying to sell all over 
 the country, which is not usually the case with the owner 
 of a single factory. His are customers near by, saving 
 freight, no less than are theirs ; and he too can locate 
 near his source of raw materials. Nobody buys from a 
 distant factory, in preference to a near one, unless it pays 
 him to do so, nor does the distant producer, under a 
 legitimate policy, give up much profit to equalize freight. 
 There is probably little overlapping effort to sell that 
 is seriously wasteful. Milkmen have their routes, which 
 are bought and sold. Where several traverse the same 
 street they accommodate customers by coming at differ- 
 ent hours of the day. Chicago traveling men do not go 
 far into territory that Cincinnati houses offering equal 
 values can supply to decided advantage in freight. Men 
 traveling over a wide territory call very seldom. Part of 
 traveling men's expenses are for board they would bear 
 at home, and keeping them on the road, moving as fast 
 as they do, is not very different from keeping clerks in a 
 store, who often spend time without making sales, and 
 sometimes induce a customer to buy what is not best for 
 him. The trust's alleged advantage would seem more
 
 1 74 77?^ Plain Facts as to the Trusts. 
 
 substantial if it produced from one or a few great new 
 plants, and not from old and scattered plants kept run- 
 ning for the sake of their good will. 
 
 Consolidation to Get the Use of Patents, secret proc- 
 esses, or business ability possessed by others, is not 
 essential to a concern that is making money without 
 them ; while the combination has no need for weak con- 
 cerns, doomed to disappear soon by failure. Except 
 with raw materials necessary to other producers, a trust 
 would lose trade by closing its selling agencies to save 
 expense. The owner of a single factory seldom makes 
 enough varieties or sizes to incur loss of time in changing 
 from one to another. If he offers good values he needs 
 no help to withhold credit from irresponsible buyers, with 
 whom he need not deal at all. 
 
 Various Expenses of Largeness. — As a rule, the larger 
 and richer the concern, the higher the salaries, the 
 more numerous the officials and assistants, the smaller 
 the amount of work done by each, the greater the need 
 for spotters and auditors, and the more elaborate the 
 requisite system of accounts. Moreover, men realizing 
 great profits from a monopoly will not usually continue 
 long to value economy as they would if it were neces- 
 sary for success. And persons selling to a wealthy trust, 
 or working for it as contractors, can generally contrive 
 to get good prices for the exacting service demanded. 
 In getting the most from capital, labor, and business 
 opportunity, and thus holding cost of product to the 
 lowest point, it is unlikely that in the long run a great 
 trust, in a business not naturally monopolistic, could 
 compete fairly with a smaller corporation, under the eye 
 of managing owners, and possessing all the capital and 
 capability required. The fatal objection to the trust's
 
 Proper and Necessary Measure of Monopoly. 1 7 5 
 
 whole claim of advantages is the question, Why then does 
 it not, with lower prices and better goods, take the busi- 
 ness from other producers without clubbing them down ?' 
 
 » Some Real Advantages of Combination. — But if the trust maintained 
 monopoly by really giving best values, without trying to stifle competition, 
 there could be no complaint. Taking aw^ay other means of monopoly would 
 give competitors a chance when growing wealth caused the trust to relax 
 effort to save. Rivalry in some cases among different plants in a trust, to 
 excel in efficiency, is now said to surpass competition in cheapening product. 
 Managers' views are interchanged, while achievement by each is accu- 
 rately compared, and is encouraged by visiting inspectors. So far as this 
 is continued without monopoly prices, the public may be benefited. Saving 
 by dispensing with the highest paid men in each plant united, and putting 
 all plants under a few experts, has been done by some trusts. This is 
 similar to railroad consolidation. It was recently reported that the Penn- 
 sylvania would soon make the Baltimore and Ohio a part of its own system, 
 like the Panhandle, and thus dispense with many general officers and solicit- 
 ing agents. Such saving would be a public benefit if used to improve ser- 
 vice and lower rates. But this way of saving has already ruined some of 
 the manufacturing trusts in England. The high salaried men left out 
 started new concerns of their own, and by personal care were soon able to 
 compete with the trust and break its monopoly. ( Public Opinion, Sept. 
 19, 1901.) 
 
 The Trusts and Wages. — Perhaps the trusts will not try to gain by 
 reducing wages without good reason in slack demand. Their able mana- 
 gers know that with labor as with machinery the best is usually the cheapest 
 — that with both of them too great economy may become the worst extrava- 
 gance. The necessity for willing service, and the odium aroused by reduc- 
 ing wages of organized labor, would probably lead a monopoly to make its 
 gains from high prices, not from low wages. This many trusts have done 
 since 1898. Other industries have done the same, both wages and prices 
 rising from natural demand, coupled with union pressure, voluntary ad- 
 vances in wages usually being rare everywhere, though more common per- 
 haps than ever before at Christmas 1901 among railroads and other large 
 employers. But with monopoly power trusts have doubtless raised prices 
 highest, increasing profits largely. Possibly the rise of 35 per cent in wages 
 of tin-plate workers {Labor Bulletin No. 29, page 738) was due to the 
 trust's monopoly, in that it had a chance to make great profits, and could 
 well afford to pay extra wages to avoid delaying production by resisting the 
 union's demand. Hence it may be easier to get higher wages from a trust 
 than from separated employers. In 1888 the whisky trust readily paid 
 more for barrels and coal that wages might be raised. Public favor could
 
 I yd The Plain Facts as to the Trusts. 
 
 The Lower the People, the Less the Competition. — Sav- 
 ing in expense to reduce selling price sounds well as a 
 pretext for combining, when the actual reason is to sell 
 watered stock or to secure a monopoly. " Without this 
 feature of monopoly there would have been no visitation 
 by the promoter, no waste of time by the manufacturers, 
 and no talk about trusts," * The wastes of competition, 
 in advertising, traveling salesmen, and manufacture of 
 more goods than are needed, it would seem desirable to 
 avoid. But aside from the fact that competition can rarely 
 be kept away except by predatory clubbing, this line of 
 reasoning soon reaches absurdity. As a complete mon- 
 opoly might produce for the people the goods they ought 
 to have, at the prices they ought to pay, avoiding all 
 waste, so a wise despot might assign to each subject the 
 work he ought to do, at the wages he ought to get, on 
 
 easily be bought thus, and the cost taxed back on consumers. Yet a mon- 
 opoly trust has power to put down wages arbitrarily. \Vhere there is but 
 one employing concern of consequence, especially when it has some non- 
 union mills running, strikers have a poorer chance than when there are 
 other employers getting the trade of a concern entirely idle. This was 
 probably one reason for the total failure of the recent strike of steel work- 
 ers. And however large its profits, a trust paying more than its class of men 
 obtained from other employers would be making a gift. More men would 
 soon learn its business if not shut out by unusual conditions. By closing 
 unnecessary factories and forcing men into other occupations, a trust does 
 only what would probably happen anyhow from failure of such factories. 
 
 Steadiness of Employment. — So far the many struggles and changes 
 caused by trusts, especially before 1899, have probably added to unsteadi- 
 ness of employment, as to the fluctuations of their own stocks. After a trust 
 had dismantled all its less desirable plants (which is done in some cases 
 without warning to employees), and had become secure in its monopoly by 
 crushing out rivals, wage workers in its industry would doubtless have em- 
 ployment unusually steady, though as never heretofore in the last half cen- 
 tury, they would have to accept what the trust offered. But not many 
 producers, down to the smallest, suspend work in depression so far as to 
 scatter their workmen and customers. 
 
 ' Nettleton, 53.
 
 Proper and Necessary Measure of Monopoly. lyy 
 
 the socialistic principle, preventing all mistakes of choice, 
 underpay and overpay, and waste of labor power. 
 Nature at first might have prevented mistakes and waste 
 by withholding from mankind the power of choice, and 
 giving animal instinct instead, fitting each person for only 
 one line of action, without knowledge of other Hnes. 
 The lower the life and power of choice, the less the risk 
 of mistake and loss. Risk is removed entirely when a 
 person ceases to live at all.^ 
 
 Yet There Has Always Been a Large Measure of Mon- 
 opoly in progressive business. The most skillful work- 
 men get highest wages because they are few, and have 
 to some extent a monopoly of the supply of their grade 
 
 ^ Is There a Waste of Labor in Family Housekeeping ? — Strange 
 ideas get into print. One writer ( The Cosmopolitan, November, 1900) 
 after figuring out $100,000,000 a year as the total spent in this country on 
 traveling salesmen, puts the waste in Indiana for fences at $200,000,000, 
 and says a great sum could be saved if instead of small farms tilled by 
 owners we had tracts of 10,000 acres under one able management. Carry- 
 ing the trust principle further, he might have found possible a great saving 
 in gathering families by hundreds into barracks, to be supplied with food 
 by machinery from a town kitchen, and with clothing on the army contract 
 plan. For fences, to avoid the labor of herding live stock seems reason 
 enough. In states having stock laws, crops are unfenced. To expect 
 better results from hirelings than from men tilling their own land is a new 
 notion. Intensive farming on a small scale has long been a hobby with 
 thinkers on the subject. Even the bonanza wheat farms of Dakota, on 
 whose level areas use of machinery was carried to the utmost, are grad- 
 ually being divided into smaller tracts. (Ely, I93.) People are not 
 raised for their flesh. The experience of self-support and family house- 
 keeping, essential to development of mind and character, will still be 
 secured by the same natural choice that leads a girl to prefer factory work, 
 with freedom and agreeable associations, to kitchen work, with better 
 board and lodging and more clear money. Science and sense agree on all 
 these things. Cooperative housekeeping, which some say is bound to 
 come, to emancipate the wife from the kitchen, will have to reduce its 
 costs about half to come within reach of people not already able to board, 
 
 12
 
 1/8 The Plain Facts as to the Trusts. 
 
 of labor. Jenny Lind and Adelina Patti had each in her 
 day a complete monopoly of highest vocal talent. It is 
 so in every kind of business. A carriage maker whose 
 vehicles are known to be the best offered in a certain ter- 
 ritory gets highest prices because he has a monopoly of 
 the supply of that grade. If many others made an equal 
 grade, the price would have to be lowered to sell all the 
 carriages produced. The highest prices in every line 
 depend upon limit of supply — upon some element of 
 monopoly. The reason a person strives to excel is that 
 he may thus rise above the common rank into a field 
 affording some monopoly advantages. Therefore, the 
 monopoly power that comes alone from surpassing ex- 
 cellence and cheapness of product is to be welcomed as 
 an evidence of progress in supplying human wants. 
 
 Department Stores. — The license tax law of Missouri 
 against department stores,^ as these do not make a direct 
 effort to drive competitors out of business in order to sell 
 higher afterward, could have helped small stores only by 
 preventing the large stores from selling the same goods 
 cheaper. The benefit to the small store would then have 
 been withheld from the consumer, increasing the cost to 
 the people of retailing goods, and supporting merchants 
 not needed in retail business, who might otherwise en- 
 gage in making things. The interest of society is to 
 have every person do the needed work he can do best, 
 that no labor be lost, and that supplies for all be in- 
 creased and cheapened. The harm to landlords in hav- 
 ing small stores left vacant is greatly overbalanced by 
 the benefit to the masses in having rents lowered. 
 
 The Waste in Trying to Make Employment. — Any ar- 
 
 1 Declared unconstitutional in 1900, as was also an Illinois city license 
 ordinance intended for the same purpose.
 
 Proper and Necessary Measure of Monopoly. 179 
 
 rangement, by law or custom, that keeps a person in 
 business whose patrons would be better served without 
 him, is as wasteful as hiring a man to wheel the same 
 sand back and forth between two piles to keep him em- 
 ployed. Few working men could bear so thin a cover- 
 ing to charity. They want their work to be useful, and 
 worth its cost. A small manufacturer or trader of just 
 mind will regard his own work likewise, and cease to 
 complain, when he realizes that his customers leave him 
 because they can do better elsewhere. Public opinion, 
 in its feeling of censure, has failed to separate those con- 
 cerns that follow the praiseworthy method of getting 
 large trade by permanently giving best values, from the 
 class of trusts that get trade by buying out and killing 
 off competition, in order to place consumers at their 
 mercy. The two classes are as different as faithful serv- 
 ants receiving a deserved reward, and a band of robbers 
 helping themselves by force. 
 
 Necessity of Agreement to Make Competition Reason- 
 able. — Not only is the public benefited by a manufactur- 
 er's attainment of some monopoly in surpassing excellence 
 and cheapness but it is also desirable that there be among 
 competitors sufficient agreement to allow a fair profit in 
 every selling price. In cut-throat competition there is 
 no thought of the consumer. His benefit is accidental. 
 The purpose often is to get another dealer's customers to 
 profit from by higher prices in future sales. A person 
 who makes a practice of cutting under a just price needs 
 watching. The goods he delivers may be different from 
 sample, and the measure may be lacking. 
 
 Price Cutting Disreputable. — All this has long been 
 well understood in business. A desirable class of trade, 
 especially in sales to manufacturers and dealers, is seldom
 
 1 80 The Plain Facts as to the Trusts. 
 
 gained by cutting under a just profit. Solidly successful 
 concerns rarely make sales or buy in that way. Cut- 
 throat competition, it would seem, was less a real source 
 of trouble than a convenient excuse for seeking the large 
 gains of monopoly and stock watering. Especially true 
 does this appear in view of the fact that nearly all the 
 trusts have been formed under the high prices and pros- 
 perous trade of 1887-92, and 1 898-1 901. The many 
 industries not yet monopolized, or not suitable for con- 
 solidation, bear competition as well as do the trust indus- 
 tries. 
 
 Competition Forcing Producers Into Trusts Was Un- 
 natural. — In the few notable cases in which trust combi- 
 nation did regulate excessive competition, the latter was 
 unnatural. The high profit afforded by the duty on re- 
 fined sugar caused too many sugar refineries to be built, 
 increasing capacity to about four times the demand, and 
 in their struggle for existence some sixteen out of forty 
 refineries failed. The trust was organized in 1887, and 
 promptly raised price. Since 1898 price has been lower, 
 as at previous times when competition appeared. In 
 1900 refiners testified there was practically no profit in 
 the business. Such the price made by a trust against a 
 new competitor is usually supposed to be. Similar con- 
 ditions of profit from the tariff, causing over-increase of 
 new plants, led to the excessive competition removed by 
 the tin-plate trust in 1898. The organization of the first 
 whisky trust in 1887 removed excessive competition 
 caused by stamp tax changes, which gave enormous rise 
 in price to owners of large stocks of whisky in ware- 
 houses.^ 
 
 'Bullock, Tke AtlanHc, ]\xx\Q, 1 901. 
 
 Ruinous Losses From Building Too Many Plants. — The whisky
 
 Proper and Necessary Measure of Monopoly. 1 8 1 
 
 Associations of Competing Producers and Dealers, which 
 have long existed in all the commercial nations, such as 
 the American Typothetae of employing printers, the 
 Wholesale Grocers' Association of Michigan, and the 
 Jackson Retail Grocers' Association, — have a salutary 
 effect in promoting good will and business progress, and 
 in holding competition within reasonable bounds. Such 
 associations have been increasing, but in any local com- 
 munity where they do not exist, business competitors 
 understand that price cutting is a bad practice. Agree- 
 ments by these associations on prices make competition 
 reasonable, but could not be enforced sufficiently to 
 become monopolistic. Apparently a good combination 
 of a new kind is the recent agreement between the Amer- 
 ican Publishers' Association and the association of book- 
 sellers, by which booksellers cutting below a fair retail 
 price on certain kinds of books cannot get more of them 
 from publishers. Selling books near cost as leaders by 
 department stores was driving out of business the reg- 
 ular booksellers, who alone carried the complete stocks 
 necessary to the publishers and to the people alike. Co- 
 operation in fire insurance saves expense of inspection, and 
 prevents competition from making the companies unsafe. 
 
 The Business Moderation and Commercial Morality pro- 
 moted by these various associations, together with the 
 information and forecasts now furnished by trade journals 
 
 trust closed 68 of its 80 distilleries, and with the remaining 12 furnished 
 an output equal to the total before. Previously many had been idle. 
 (Von Halle, 66.) Building more plants than demand requires brings 
 inevitable loss, which producers must learn to avoid, or suffer from it, and 
 society with them. Where concerns are small, the waste of plant in fail- 
 ure is little noticed. The whisky trust dispensed with about 300 traveling 
 men, and the wire trust with about 200. In the settled demand for their 
 products, from dealers and manufacturers, a monopoly would not need to 
 push sales as with most kinds of finished goods.
 
 1 82 The Plain Facts as to the Trusts. 
 
 and government bureaus, will prevent the waste of compe- 
 tition in a more healthy way than trusts can prevent it, so 
 long as their remedy is monopoly ; though if they use 
 no club, what they can save from competitive wastes 
 will be cheerfully allowed them in added profits. Where 
 competitors are too numerous to be driven out, falling 
 price, taking away profit, has usually kept output pretty 
 near the proper limit. Since the depression of 1893-97 
 caution against overproduction has been quite noticeable, 
 and outside the realm of trusts. In the summer of 1900 
 production was materially checked until demand strength- 
 ened, and business in general was lighter than in 1 899 
 and 1 90 1. Large unsold stocks had accumulated, 
 mainly because of prices that trusts had raised excess- 
 ively — 33/^ per cent higher in some cases than in the 
 greater activity at the close of 1901. ^ Present depres- 
 sion in Germany is due largely to overproduction by 
 trusts. If trusts are to be a safeguard against overpro- 
 duction, they must turn out goods with more modera- 
 tion than they issue shares and raise prices. 
 
 But All Are Learning the Risk of Producing Too Much. 
 Output is usually gauged to inflow of orders from trav- 
 eling men and wholesalers. It now seems not to be 
 expected that a factory can be run from year to year at 
 full capacity. Doing this between 1872 and 1879, to 
 avoid the losses of idleness, wasted nature's store of 
 raw materials, and brought prices ruinously below cost 
 of production, in the pig iron industry.^ Uncertainty of 
 crops, and of the weather demand for seasonable goods, 
 will always make business irregular. In this world of 
 change certain regularity would be unnatural. Repeated 
 
 » Pulilic Opinion, I90I, p. 824. 
 2Hadley, Railroads, 72.
 
 Proper and Necessary Measure of Monopoly, 1 8 3 
 
 experience with the blighting results of going ahead 
 blindly has apparently left a lasting lesson. Business is a 
 complex thing in this age, but it is coming to be better 
 understood.' 
 
 Excess of Competition Brings Monopoly, as excess in 
 many things produces the opposite extreme. Among 
 producers with large capital, pools had become almost 
 universal by 1885, before the period of trusts. With 
 different arrangements in different cases, territory was 
 divided, output restricted, and sales made through one 
 agency to hold all to the same price, a manufacturer 
 sometimes being paid more by his pool to close down 
 than he could have made by running.^ A tendency 
 toward monopoly has perhaps always been noticeable 
 where conditions favored it. Monopoly to the extent of a 
 pool or agreement of some kind, among producers in any 
 line requiring a vast plant, may usually be necessary for 
 the public good. Without such a limit to competition, 
 the stronger may drive the weaker out of business, se- 
 curing a monopoly, and then by raising price cause new 
 
 ' Spoiling a Market. — '* Professor Marshall thinks that trade morality 
 is inclined to condemn a man who ' spoils a market ' by continuing to pro- 
 duce for any price that barely covers cost of material and labor." (Bul- 
 lock, 207.) Doing this is not a real benefit to the consumer; because 
 from its weakening of producers their product will later be higher in price, 
 or poorer in quality, than it would have been otherwise. Undoubtedly it 
 is wrong to sell below cost except for such a reason as closing out a busi- 
 ness. Operation without profit may have been common with recklessly 
 managed bankrupt railroads, which cannot suspend and disappear, but is 
 not now the rule with other kinds of business. Dun's trade reports show 
 that output changes largely within a short period, according to changes in 
 inflow of orders. Continuing to produce at a loss, because by idleness a 
 larger loss must be incurred, in interest on capital and in salaries, would 
 seem to be a poor policy, in view of its effect to deepen depression and to 
 delay return of better times The market upon which a concern must live 
 is more important than losses to-day, 
 
 ^Hadley, Railroads, 68,
 
 1 84 TJie Plain Facts as to the Trusts, 
 
 concerns to be started, and then the weaker to be driven 
 out again, and so on in an endless alternation of monop- 
 oly and cut-throat competition. The gain to be obtained 
 by disregarding an unreasonable pool or agreement pre- 
 vents it usually from becoming a harmful monopoly. 
 Perhaps the danger is that it will be broken too freely, 
 with an opening of the way back to cut-throat competi- 
 tion. 
 
 Monopoly Hunger a Cause of Cut-Tkroat Competition. — 
 Because all the strong concerns in a business might lose 
 money and still not fail, is a reason why a price-cutting 
 battle of the giants seldom occurs under natural condi- 
 tions. Competition is beneficent when confined to get- 
 ting trade by lowering cost and improving goods. Such 
 ninety-nine per cent of it undoubtedly has been. Injury 
 to competitors is then but little thought of, and there is 
 a normal price, covering cost of production and a fair 
 profit, with large concerns as with small. The idea that 
 modern large scale production leads into competition 
 meant to destroy must have arisen from a few cases like 
 those of the sugar and whisky trusts. It has not been 
 so with other vast industries. Competition is not war 
 until monopoly hunger appears in cut-throat slashes to 
 destroy competitors and gain possession of the whole 
 field ; and monopoly hunger, not competition, must be 
 the mother of trusts, because competition is not destruc- 
 tive nor harmful in those industries not to be monopo- 
 lized. No capable producer in a business not naturally 
 monopolistic need fail under competition ; while the in- 
 capable fail quickly enough to leave him a fair profit. 
 As these are unfitted to survive, the more quickly they 
 drop out into work they can do, the better it is, both for 
 them and for society. The loss of their plants, which
 
 Proper and Necessary Mcasiire of Monopoly. 185 
 
 may at once become junk, is one of the unavoidable costs 
 of progress. 
 
 Was Not Reasonable Competition Always Meant? — 
 Competition, like every other force, must be governed 
 by reason, which here includes an element of monopoly. 
 It is so governed in ordinary affairs. The reasonable- 
 ness of merchants is described above, and unorganized 
 workingmen seldom offer to work for lower wages in 
 order to get employment. The theory of competition 
 seems to be true now, as in the days of the older econo- 
 mists. It must always have been seen that an element 
 of monopoly agreement would appear before greedy 
 competitors had destroyed one another.^ 
 
 Trade Union Monopoly. — Another form of proper and 
 necessary monopoly is that of a trade union. Its power 
 is derived from its monopoly of the supply of suitable 
 labor. Some labor leaders seem now more fully to 
 realize this fact, in their turning from the socialistic idea 
 of considering all rich private owners grinding monopo- 
 lists, to a position not antagonistic to trusts, which usu- 
 ally pay highest wages, necessarily admitting the right 
 of combination as belonging to workmen no less than to 
 themselves ; though the wire trust is one that will not 
 recognize unions, while some of the steel trusts freely 
 permitted additional plants to be unionized. Among 
 persons of avowed socialistic ideas, trusts are favored, 
 because by uniting industry they prepare the way for the 
 government ownership socialists hope for. Some labor 
 leaders oppose anti-trust laws, for fear they may be ap- 
 plied against labor unions. The most effective use yet 
 
 1 " The majority of men do not habitually carry competition to destruc- 
 tive lengths when acting freely by the impulse of natural motives." (F. 
 H. Giddings, P. S. Quarterly, 1 887, p. 627.)
 
 1 86 The Plain Facts as to the Trusts. 
 
 made of the federal anti-trust law of 1 890 was in the sup- 
 pression of the Chicago railway strikes of 1 894, though 
 the Inter-State Commerce law was also applied, and the 
 common law against conspiracy. 
 
 Combination Including* Both Employer and Workman. 
 The monopoly power of the combination of manufac- 
 turers of metal beds in England was maintained chiefly 
 by a compact with the trade union, in which the work- 
 men, as a return for their share of the monopoly benefits 
 in very high wages, agreed not to accept employment 
 from bed-makers outside of the combination, and to strike 
 against any employer who attempted to withdraw ; while 
 the employers agreed to hire none but union men.' This 
 was called Mr. Smith's Birmingham plan. Being a coa- 
 lition of the employer and employee to rob the consumer 
 with high prices, it indulged in not a little tyranny. 
 Relief came from the manufacture of metal beds on the 
 Continent to be admitted under British free trade ; from 
 the withdrawal of employers in spite of strikes to hold 
 them, whose nature revolted against such wholesale 
 compulsion, which Mr. Smith admitted was the secret of 
 strength ; and from dissatisfaction among workmen, who, 
 in the effect of high prices to lessen sales and make work 
 scarce, found a good deal of truth in the old wage fund 
 doctrine, that to increase too much the pay of some, 
 takes away the work of others. In 1900, after an exist- 
 ence of eight years, the bedstead monopoly was prac- 
 tically broken by withdrawal of manufacturers.* 
 
 ' See Chicago Civic Federation's book on the Trust Conference of 1899. 
 Also Reznew of Kevieivs, Nov. 1900. 
 
 The Exclusive Agreement, which is an American name for Mr. 
 Smith's plan, together with the sympathetic strike, which is usually illegal 
 (Stimson) because designed not directly to benefit the strikers but to injure 
 other workmen's employer — let into the Chicago building trades the devil of
 
 Proper and Necessary Measure of Monopoly. 187 
 
 The Necessity for a Trade Union's Monopoly lies in the 
 fact that only by such combination, in large scale indus- 
 try, can a workman bargain with his employer on any- 
 thing like equal conditions of freedom to contract or not 
 Unlike a combination producing a necessary article, a 
 great labor trust, formed by organizing each trade into 
 local and national unions, and these into the American 
 Federation of Labor, might not possess dangerous mon- 
 opoly power. Not only would united action be imprac- 
 ticable among millions of scattered workers, unlike 
 dozens of concerns in one industry, but the general cessa- 
 tion of work that would follow excessive demands would 
 soon bring strikers to a condition of need, and to a spirit 
 of compromise. Employers and the public can do with- 
 out their work better than they can do without their 
 wages, as was shown in the recent strike of steel work- 
 ers, the trust keeping half its mills running. The claim 
 of some trust officials, in their testimony, that organized 
 labor can deal better with a trust than with separate pro- 
 ducers, seems about the same as to say that Stonewall 
 Jackson, in 1862, instead of defeating Fremont and 
 Shields one at a time, would have found it more conve- 
 
 tyranny and bitterness that was only cast out by the losses and suffering of 
 the year-long strikes and lockouts of 1900. (/'. S. Quarterly, 1901.) 
 The exclusive agreement has not been very common. It was made in 1901 
 at the settlement of a strike in Indiana, between an association of building 
 contractors, meeting at Anderson, and the unions among their workmen. 
 In one recent case in Illinois, strikers in building trades demanded, as a 
 condition for returning to work, that the association of contractors disband. 
 A similar demand was made by the employers at Chicago. Collective 
 bargaining between employers and employees is to be commended, but the 
 compulsion of the Smith plan is out of harmony with the present age. In 
 Professor Clark's prophecy for the twentieth century i^The Atlantic, Jan. 
 1902) he foresees that consumers, independent producers, and unorganized 
 workmen, may unite and remove by law the monopoly of trusts and unions 
 working on the Smith plan.
 
 1 88 The Plain Facts as to the Trusts. 
 
 nient to meet them together. The hope of some labor 
 leaders seems vain, that workmen can organize sufficiently 
 to meet a trust with equal chances. A better protection, 
 it appears, is a trust's fear of arousing public opposition 
 by oppressing labor. The position of unions would be 
 strengthened by reduction or removal of superfluous 
 tariff duties. During the strike very little steel and tin- 
 plate was brought in over the tariff barrier. In such 
 conditions a trust can take its time to starve out strikers, 
 knowing that consumers will have to wait until it is ready 
 to supply them. Perhaps the unequalled power of unions 
 in England is largely due to the promptness with which, 
 under free trade, goods come in from abroad,^ 
 
 1 Futility of Sympathetic Strikes, and of Labor Contests with a 
 Trust. — All the widespread sympathetic strikes have been disastrous fail- 
 ures, for the simple reasons that the larger the number of the idle, the more 
 there are to be supported, and the fewer there are to contribute, while two- 
 thirds of the public turned against the strike, by its interruption of their 
 earning and consuming, consists of wage workers themselves. (F. S. Hall, 
 Sympathetic Strides. ) Mr. and Mrs. Webb, in their Industrial Detnocracy, 
 page 554, after pointing out that in a trust-controlled industry there is no 
 employer to leave the others and grant labor's demand, and that there is 
 but a single will to carry out blacklisting, conclude as follows : "We may 
 therefore infer that the extreme concentration of industry into trusts and 
 monopolies will lead, either to trade union failure and decay, or else to an 
 almost exclusive reliance on the method of legal enactment" (labor 
 laws). Levasseur shows that the largest corporations have easily overcome 
 unions. This was notably so in the strikes on the Burlington road in l888, 
 and at the Carnegie works in 1892, to the complete eradication of unionism. 
 
 Organizing All Industry into Trusts. — One writer (E. S. Meade, 
 The Forum, April, 1901) thinks that all classes, even farmers and wage 
 workers, might so organize themselves into trusts as to add to their own 
 charges what they lose in high prices exacted by monopoly. Undoubtedly, 
 for any class of workers or employers, it has always been wise to be united 
 and watchful. This writer says that the organization of the Steel Corpora- 
 tion was probably brought about by trusts of sheet steel and tube makers, who 
 resisted high prices for the crude forms they used, and were about to make 
 such forms for themselves ; and that now, with many industries under the
 
 Proper and Necessary Measure of Monopoly. 1 89 
 
 one steel trust, monopoly profits are not concentrated, but distributed. This 
 may be true with a few industries dependent upon naturally monopolistic 
 sources of material. But if extended far, a trust in one line would conflict 
 with trusts in others. As price is raised by limiting supply, forming all 
 occupations into trusts would make all things scarce ; and a gold producers' 
 trust might then make money scarce too, lowering money prices to the old 
 level. Each would then get a scanty living, but he would have the satis- 
 faction of knowing that no one was getting the better of him.
 
 CHAPTER VIII. 
 
 THE EVIL OF RAILROAD COMPETITION. 
 
 Restriction of Competition Among Railroads is Desir- 
 able. — Pooling, which among railroads is a formal agree- 
 ment on a division of the business to be done, and on 
 rates to be charged, is better for the public than rate cut- 
 ting or rate wars, from whose temporary low prices the 
 reaction is toward prices higher than they would have 
 been if no war had broken out. Besides, a change in 
 rates, not to be foreseen, adds to business uncertainty — 
 to the profits dealers must charge to balance their losses ; 
 and where secret rate cutting is common, the advantage 
 falls chiefly to those shippers who are unscrupulous 
 schemers.* 
 
 The Inter-State Law Dissolved the Pools that formerly 
 existed. Courts in this country, unlike those of Europe, 
 did not enforce these pools, regarding them as contracts 
 in restraint of trade. Yet from necessity the railroads, 
 since the enactment of the Inter-State Law of 1887, and 
 by approval of the Commission, have been in substantial 
 agreement on rates. These they agree upon through 
 such organizations as the Central Traffic Association, 
 and the Western Passenger Association. While the 
 rules of these associations cannot be enforced by law, 
 general compHance with them, usually voluntary, is 
 sometimes secured through boycotting or retaliatory 
 measures. A company breaking the agreement may be 
 
 iHadley, 156. 
 
 190
 
 The Evil of Railroad Competition. 191 
 
 deprived by the other companies of through ticket ad- 
 vantages, and if its rate cutting becomes serious, they too 
 may cut rates against it, to force it to abide by the agree- 
 ment. Suspicion of rate cutting arises when a road seems 
 to be getting more than its share of traffic. When the 
 association rules are closely observed, competition among 
 railroads is not in prices, but in speed, frequency, and 
 comfort of trains.^ 
 
 ' Rate Cutting on grain out of Kansas City lately threatened a rate war. 
 The Wabash in September notified the passenger association that it would 
 no longer observe the schedule of rates to Buffalo, because competitors had 
 not. The recent withdrawal of the Missouri Pacific from the Western Traffic 
 Association is said to be due to the refusal of the company to pay a fine 
 assessed against it for rate cutting. Sometimes the weak lines in an asso- 
 ciation ignore a rule pushed through by the strong lines, as to excursion 
 rates or similar matters. The Pere Marquette and the Ann Arbor had a rate 
 war in 1901, cutting the price of a ^15 ticket down to $5, then to $z, and 
 at last to 25c. Such wars are not frequent. A noted rate war occurred in 
 1881, with tickets at ^5 from Boston to Chicago (regular rate about ^18). 
 The Pennsylvania, in 1884, cut its emigrant rate to St. Louis from $13 to 
 $1, to force other companies to restore a pool. 
 
 The greatest war in freight rates occurred in 1876, making a havoc of 
 waste in railroad capital by carrying below cost, which loss did not benefit 
 shippers accordingly, because of discrimination in favor of the few. 
 
 Railroad Agreements are Still Called Pools, despite the Inter-State 
 Law, and perhaps they differ from former pools simply in being less effective. 
 The following are recent newspaper clippings : 
 
 " All roads east of Chicago have been for two years members of one of 
 the strongest pools ever formed, and managers of the lines parties to it, it 
 is said, will soon begin, now that the success of the combine is assured, 
 to prune their expense in the way of discharging soliciting and general 
 agencies." 
 
 " The three high-priced officials in charge of the so-called western pool 
 have utterly failed to secure a division of traffic or earnings, and none of 
 the roads cares anything for their edicts or demands. Their salaries 
 foot up nearly $40,000, and several roads threaten not to pay their share if 
 the situation does not improve." 
 
 " Judge Hazel of Buffalo said he would not grant the injunction against 
 ticket scalpers, because the company asking it, the Lackawanna, was a 
 member of the Trunk Line Association, which was a pool in violation of 
 the Inter-State and Sherman anti-trust laws." 
 
 ' ' Officers of certain roads will report to their traffic association cut rate
 
 1 92 The Plain Facts as to the Trusts. 
 
 Railroad Competition Not Like Other Competition. — 
 
 Excessive competition in freight carrying is a much 
 greater evil than such competition in producing a com- 
 modity. The reasonable practice of selling a large quan- 
 tity at lower prices than a small quantity causes little 
 injury to the smaller buyers of material. As explained 
 before, price reduction to the large buyer is slight, and 
 his advantage is usually balanced by his extra risk. 
 Differences here rest on a just basis, which is uniformly 
 maintained, because materials will keep, and their pro- 
 ducer has no need to give up profit in order to sell 
 quickly. But a railroad's capacity to carry freight will 
 not keep. For idle equipment every day is lost forever, 
 in the same way that idle time is lost to a laborer need- 
 ing no rest. As idle cars decay from rust and weather, 
 as interest goes on regardless of the use made of capital, 
 and as the property of unnecessary roads cannot be 
 diverted to other business, a railroad company is under 
 pressure to get large shipments by shading rates. The 
 large or grasping shipper is then enabled to undersell 
 the many smaller shippers, on whose payment of full 
 rates the road may to a large extent exist. Here is a 
 serious evil. If the large shippers could do all the busi- 
 ness, crowding out the smaller might benefit society with 
 cheaper goods ; but if the low rates given on the larger 
 
 contracts with shippers from Colorado and Utah. But an oft'icial is quoted 
 as saying that agreements with a majority of largest shippers will never be 
 revealed ; because, ' while it is true that these contracts are in violation 
 of the Inter-State Law, the railroads have assumed a moral obligation 
 they will not disown,' which arises from the fact that large shippers have 
 contracted to deliver goods at prices based on the illegal concessions in 
 freight rates. This official says that a company revealing an illegal con- 
 cession would get no more business from the shippers to whom it was 
 granted. Community of interest has not stopped illegal discrimination in 
 traffic from Colorado and Utah."
 
 TJie Evil of Railroad Competition. 193 
 
 shipments were paid on all, the carrying would be un- 
 profitable to the railroad. Hence, with monopolistic 
 railroads and steamship lines, far more so than with other 
 kinds of business, restriction of competition by some 
 method of pooling seems necessary for public welfare/ 
 Necessity for Railroad Pools. — The insufficiency of the 
 " gentlemen's agreement " to keep rates uniform, and also 
 of the best organized traffic associations, has led to a 
 settled feeling in favor of permitting pools, supervised 
 by the Inter-State Commerce Commission and subject to 
 their approval. By this arragement, rates and regula- 
 tions could be kept reasonable to the public by the Com- 
 mission, and every company could be held by the others 
 to the pool contract by law. Instead of separate agen- 
 cies, each lowering rates to get the business of large 
 shippers, one joint office would answer for all the roads. 
 A pool is much more effective than a simple agreement ; 
 because under a pool, each company, whether or not it 
 occasionally exceeds its share, gets only its percentage 
 of tonnage or of the earnings divided (according to im- 
 portance of each road) ; while under an agreement its 
 
 ^ Hadley, Railroads, 8i, 143. 
 
 Lowering Prices to Farmers on Grain. — The effect of railroad com- 
 petition in depressing local prices of grain was set forth at the Chicago 
 Trust Conference of 1899 by Mr. S. H. Greeley, of the National Grain 
 Growers' Association. (Collier, 178.) It seems that each road, to secure 
 a full share of grain to carry, favors with low rates a few shippers who 
 favor it, and that these, other grain buyers being driven out of business by 
 higher rates, soon have the field to themselves, and make price to farmers 
 lower than it would be if there were competitive buyers. It is the busi- 
 ness of the favored buyers to see that their road gets its share of tonnage. 
 " Practically all the great railroads tapping the grain belt are in the grain 
 business." The railroad favors accorded the Big Four meat combination 
 have enabled it to lower the price of cattle in the same way. Railroad 
 discrimination has doubtless been the greatest cause of monopoly, and com- 
 petition not well pooled has been the cause of that discrimination. 
 
 13
 
 194 ^^^^' Plain Facts as to the Trusts. 
 
 local agents are continually tempted to cut rates in order 
 to get business and make a good showing in tonnage 
 and earnings/ Paying back a rebate to a shipper has 
 been the favorite way of cutting rates secretly, espe- 
 cially to avoid detection by government investigators. 
 While under a settled pool competitive rates might not 
 fall so fast as heretofore, they would be uniform and im- 
 partial, giving each shipper as good a chance in business 
 as any other operating on the same scale ; and compe- 
 tition in speed and prompt service would continue, per- 
 haps without breaking the rates when under differentials. 
 The old pools were weak and unreliable, not being 
 enforceable at law, and did not keep rates too high, be- 
 cause then usually a company, by breaking a pool and 
 taking more than its share of business, could add for a 
 time to its earnings and profits. 
 
 Cause of Recent Railroad Consolidation. — The laws 
 against pooling are said by railroad owners to be the 
 cause of the recent consolidation into allied systems. 
 They say railroad values cannot be preserved under the 
 present exposure to the excesses of competition. Hence 
 they have resorted to the "community of interest" plan 
 to consolidate competing lines into a few great groups. 
 The Pennsylvania has bought a controlling share of each 
 of the three lines south of it — the Baltimore and Ohio, 
 the Chesapeake and Ohio, and the Norfolk and Western. 
 Messrs. Hill and Morgan, with their associates, have 
 bought controlling shares of the Northern Pacific and 
 the Burlington, allying them with the Great Northern, 
 which they previously owned. Messrs. Harriman and 
 Rockefeller have united thus to the Illinois Central the 
 Alton, the Union Pacific, and the Southern Pacific. 
 
 ' Iladley, 157.
 
 The Evil of Railroad Competition. 195 
 
 Smaller roads have been added to the Gould system in 
 the Southwest, consisting mainly of the Missouri Pacific 
 and the Wabash ; and to the Vanderbilt system in the 
 Northeast, consisting mainly heretofore of the New York 
 Central, the Lake Shore, the Michigan Central, and the 
 Big Four. Election of leading men from one group as 
 directors in the companies of another group promotes 
 harmony among all. Most of this consolidation has 
 taken place within the last two years, though the gath- 
 ering of small roads into systems has been going on 
 steadily since 1850, especially since 1865. It is esti- 
 mated that from 100,000 to 112,000 miles of line have 
 now fallen under control of five capitalists.^ Since these 
 consolidations, the desire for permission of pooling is not 
 so strong among railroad owners as it was. 
 
 Earlier Consolidation of Local Roads Into Through 
 Lines. — Practically all the consolidation until lately 
 seemed to have been clearly necessary for best service. 
 Without it there could have been no long distance haul- 
 ing at low rates. It is such hauling that has made the 
 West, made the railroads, and given the cheap supplies 
 that have made modern civilization. Growing business 
 
 1 E. P. Bacon, N. A. Review, January, 1902. 
 
 All Lines Passing Under Great Systems. — The following was pub- 
 lished in April, 1902 : " It appears to be certain that the control of the 
 Louisville and Nashville system has passed, or will pass, to the owners 
 of the Southern Railway. This will leave but two lines of railway in the 
 southeastern states — the Southern and the Seaboard Air Line. Although 
 it has not been officially announced, it is known that the Atlantic Coast 
 Line system will soon come under the control of the Southern. The 
 number of miles then to be under control of the Southern will aggregate 
 31,349." Mr. Prouty, of the Inter-State Commission, is quoted as saying in 
 a recent address: "Five men now actually control the railroads of the 
 United States. There is no longer any real competition. The only remedy 
 is government control of rates. We are face to face with railroad monopoly." 
 (Purchase of the Louisville was later carried out by J. P. Morgan. )
 
 196 TJie Plain Facts as to the Trusts. 
 
 has come through falling rates, made possible by steel 
 rails, large cars, and transcontinental methods. In 1853 
 sixteen local roads between the Hudson and Lake Erie 
 were united into the New York Central. Several hun- 
 dred local companies in England were gradually united 
 into about a dozen. Up to the last few years the addi- 
 tions to the great American systems seemed likewise 
 necessary. This latest consoHdation, through commu- 
 nity of interest, may not at once improve train service 
 materially, nor save much from salaries ; but it soon will 
 enable the companies to improve their property, and to 
 serve the public better and at lower charges, if it settles 
 rates, preserves profits, and makes income depend upon 
 straight-forward business, not upon sharp practices.^ 
 
 1 Good Effects of Recent Consolidation. — A supreme court decision of 
 1S98, under the Sherman anti-trust law, against such agreements as that 
 of the Joint Traffic Association, which in place of pools had been approved 
 by the Inter-State Commission, started the worst rate cutting and discrimi- 
 nation known in recent years. It was seen by state commissioners and 
 railroad presidents that the situation was serious, no early legislation being 
 probable. To stop the demoralization. President Cowen, of the Baltimore 
 and Ohio, wrote to the Inter-State Commission, promising to observe the 
 Inter-State Law, and, contrary to the usual custom previously, to help 
 detect its violation by other roads. This was significant, showing willing- 
 ness to accept state regulation and follow its spirit, and showing that the 
 Commission had at last won the confidence of railroad managers. At a 
 meeting between these and the Commission, the rate cutting was stopped by 
 agreement early in 1899. But seeing that the peace might not last. Presi- 
 dent Cassatt, of the Pennsylvania, arranged with W, K. Vanderbilt, of 
 the New York Central, a joint purchase by these two companies of con- 
 trolling shares in the Chesapeake and Ohio and the Norfolk and Western. 
 This was the beginning of community of interest, springing from the inher- 
 ent wastefulness of competition without pools. It was made possible by 
 the ease with which money was then borrowed by any one railroad system 
 to buy shares in other systems. Its benefits will be great, saving shippers 
 from discrimination, adding safety to investments, and distributing wealth 
 by diffusing reliable railway shares among many owners. Removal of risk 
 makes railroad shares suitable for a wide circle of investors. Under honest
 
 The Evil of Railroad Competition. 197 
 
 A New Law Legalizing Pools May Yet Check tlie Com- 
 bination movement. It seems that the Inter-State Com- 
 merce measure is blocked by nothing less potent than a 
 law of nature. The best thought appears to agree that 
 the government in this country cannot hope to stop 
 harmful discrimination unless it removes the cause by 
 permitting a contract agreement to be reasonable in com- 
 petition. To permit pooling contracts enforceable at 
 law is favored not only by railroad managers and by 
 economists, but also by the Inter-State Commission, by 
 boards of trade and by state railroad boards. The objec- 
 tion to allowing pools has been among some Congressmen 
 who seem not to realize the impossibihty of healthy 
 
 management, with competition between districts remaining, only a fair 
 return on capital will be expected or will be possible. (H. T, Newcomb, 
 Review of Reviews, August, 1 90 1.) 
 
 The discrimination mentioned above was described as follows by the 
 Inter-State Commission: "The situation has become intolerable, both 
 from the standpoint of the public and the carriers. . . . Enormous sums 
 are spent in purchasing business, and secret rebates accorded far below the 
 standard of published charges. . . . Concessions are mainly confined to 
 the heavier shippers, . . . and tend to the injury, and often the ruin, of 
 smaller dealers." This shows that in the business eagerness of the present 
 day, competition among monopolistic railroads must be regulated by pool- 
 ing of some kind. 
 
 Its Relation to Government Ownership. — This scientific unification 
 of railroad systems, and of their relation to one another, is viewed with favor 
 by advocates of public ownership, as preparing the way for transfer to the 
 government. But it is viewed with favor by their opponents also, because 
 the reasons for government ownership are lessened by the elimination of 
 speculative management, and of discrimination in charges. Holders of rail- 
 way shares and bonds may eventually desire to exchange them for bonds of 
 the government, changing the public ownership movement from theorists 
 over to the railway owners themselves. (Editor Review of Reviews, April, 
 I901.) But when the government bonds were paid, where would the 
 money be invested ? Some vague fear has been expressed, in connection 
 with the Great Northern consolidation, that the magnates may soon desire 
 to unload their properties on the government.
 
 198 The Plain Facts as to the Trusts. 
 
 competition in railroading, and who fear further concen- 
 tration of capital; and most of all, perhaps, it has been 
 among those who profit from discrimination. With rail- 
 roads, naturally monopolistic, capital must be concen- 
 trated to render good service ; while the " power to com- 
 pete is the power to discriminate, and it is simply out of 
 the question to have at once the absence of discrimination 
 and the presence of competition." ^ 
 
 An Irresistible Temptation. — To many managers the 
 temptation now to cut rates is likely to be irresistible. 
 The loss from it falls on those roads which are managed 
 most honestly, and obey the law best. There has been 
 least discrimination where pools have been best settled — 
 in the Southern States and in Europe. When through 
 business is pooled, making its share certain, a company 
 is left free to develop its local territory.^ Competition 
 without pools, by giving to competitive points rates 
 unduly low, keeps up local non-competitive rates to give 
 the company sufficient profit, and thus makes the average 
 rates higher. The West Shore road failed so quickly 
 because it had practically no local business of its own, 
 being paralleled its entire length by the New York Cen- 
 tral. Also, such competition among lines hauling be- 
 tween the same points keeps up average rates by multi- 
 plying the expense of maintaining soliciting agents, and 
 by causing freight to be carried over long and circuitous 
 routes, though when the latter yields some profit it 
 enables weak roads to serve better their local patrons. 
 One road terminating at New York spent in one year 
 1^87 1,291 on agencies, advertising, and commissions to 
 ticket agents. As much as $20.'jo has been paid to 
 
 ' Chairman Knapp. 
 
 2 Hadley, Railroads, 139.
 
 The Evil of Railroad Competition. 1 99 
 
 secure one second-class passenger from Chicago to San 
 Francisco ; and between Chicago and St. Paul, connected 
 by a shortest line of 373 miles, traffic has been carried 
 by a roundabout line of 734 miles. Forty -four trains 
 left Chicago daily in 1898 for New York, many of them 
 partially empty,^ With sufficient business made certain 
 under pools, such wasteful carrying would not be under- 
 taken. In some form its cost falls on the public.^ 
 
 Lawful Pools or More Consolidation. — With several 
 railroad systems serving a section under publicly super- 
 vised pools, the competition remaining would doubtless 
 be better for the people than entire absence of direct 
 competition under combination of all the systems into 
 one. Between the larger cities there are still from two 
 to over half a dozen routes, not equally good, but all 
 able to compete. A really competing line, though weak 
 
 iNewcomb, 47. 
 
 ''The Low Rates Enjoyed by Competitive Points was perhaps the 
 chief cause of the " too rapid construction of railways that has burdened 
 the country with many unnecessary, unprofitable, and bankrupt lines." It 
 has now been learned that with competitive lines the benefits of low rates 
 fall to the few towns where competition is sharpest, and there in greatest 
 measure to the few shippers whose large traffic is most depended upon, ex- 
 posing all others in varying degrees to blighting discrimination. By reason 
 of its attempt to preserve competition through the anti-pooling clause, the 
 Inter-State Law has mitigated but slightly discrimination between shippers 
 and commodities ; and has almost utterly failed to stop the far more serious 
 discrimination against towns and districts. The remedies are to remove 
 the conflict of interest between railroads by allowing pooling ; to give the 
 orders of the Commission more finality ; to give it more power to get testi- 
 mony and details of railroad accounting ; and by repealing state laws against 
 consolidation, to encourage, recognizing as a benefit, and directing for the 
 public good, the powerful economic force that is harmonizing and unifying 
 American railroads into the orderly system essential for cheapest and best 
 service to the public. " If this somewhat radical change in the attitude 
 toward the railway monopoly can be effected, it will not be long before 
 favoritism will become as rare in railway rates as in the rates of taxation." 
 (H. T. Newcomb, P. S. Quarterly, 1896, p. 221.)
 
 200 The Plain Facts as to the Trusts. 
 
 in many respects, has sometimes conferred incalculable 
 benefit, despite monopolistic agreements. By lowering 
 rates, the Grand Trunk has probably saved millions of 
 dollars to the people of Michigan/ But losses of excessive 
 competition are unnecessary, and are harmful in the long 
 run to those who at first gain. Whatever the law may 
 be, it seems that these losses are to be largely eliminated 
 from business in general. If all the railroad systems 
 work together on a basis of just rates impartially main- 
 tained, the people will fare better than ever heretofore 
 under greater competition. 
 
 The Interest of These Far-Sighted Capitalists in Public 
 Favor, and in traffic-making prosperity, is probably too 
 clear now to admit of monopoly oppression ; but if that 
 is attempted, the law is or can be made a sufficient cor- 
 rective. Each of the great railway owners has capital 
 so large, is so independent and enterprising, and is now 
 strengthening his lines with such splendid equipment, 
 that to utilize capacity a good measure of competition 
 may remain. To have a free hand, each man, or each 
 group of men, must control a system that is more or less 
 separate. Already there have been reports of building 
 of branches by the groups into one another's territory, 
 and of "a hostile feeling among the big magnates." It 
 is among a few great rivals that competition may be 
 sharpest, and if kept reasonable by pooling it may not 
 
 * Some competition seems to remain desirable, about as much perhaps as 
 exists among separate companies operating under pools. The quotation on 
 page 20I from the Inter-State Commission refers to a raise of rates occa- 
 sioned by consolidation. The rivalry among competing lines in speed and 
 comfort is unquestionably beneficial ; and the presence in a town of a weak 
 competing company, whose freight agents are ready to go out of their way 
 to serve patrons, has a noticeable effect on the accommodating spirit of 
 agents for the other roads.
 
 TJie Evil of Railroad Coiupctition, 20 1 
 
 lead to complete monopolistic consolidation. Perhaps 
 these men, already immensely rich, are drawn forward 
 less by money gains than by the honor and satisfaction 
 of achievement. With legal prevention of monopoly 
 oppression, their field in which to achieve will be the ser- 
 vice of the public* 
 
 1 But Stricter Control by Law Will Now Be Required, by reason of 
 the consolidating movement. Some of the worst abuses in railroad service 
 were in California, where there was practically a huge monopoly. [P. S. 
 Quarterly, 1892, p. 162.) The Inter-State Commission said last year it 
 was idle to claim rates would not be advanced, and pointed out that on 
 Jan. I, 1900, by change of classification, rates were raised in 818 cases an 
 average of 35 per cent — reduced in March to 21 per cent. They said that 
 railroads " cannot be, perhaps ought not be, brought under control of com- 
 petition, but those very conditions make it imperatively necessary that 
 some other control should be substituted. The lessons of history and of 
 human nature show that unlimited power brings abuse." In their report 
 of January, 1902, the Commission ask, in view of the proposed permission 
 of pooling, a complete revision of the Inter-State Law, to give adequate 
 control of rates and operation. They ask also, if revision is to be further 
 delayed, that the coercive features be strengthened, to prevent the flagrant 
 violations. 
 
 The Present Vigorous Enforcement of Federal Statutes. — In Feb- 
 ruary, 1902, after the Inter- State Commission's searching investigation of 
 discrimination at Chicago and other cities, and in view of the recommen- 
 dations for new law by it and by the Industrial Commission, the railroad 
 companies were said to be obeying the laws more closely than usual. In 
 the March Forum a Louisville and Nashville vice-president argued against 
 granting the Inter-State Commission power to make rates, saying that it 
 had long cherished this ambition, and that the present law would be ade- 
 quate if the Commission properly enforced it. This official probably had 
 no expectation of what was to happen. Beginning about March i the fed- 
 eral attorneys, acting under instructions from President Roosevelt, whose 
 zeal in such matters is well known, have been carrying out the strictest 
 enforcement yet known of the Inter-State and Sherman anti-trust laws. For 
 departing from published rates, a federal grand jury has indicted some officials 
 of the Louisville and Nashville, and other persons as shippers ; while on offi- 
 cials of the leading roads radiating from Chicago and Kansas City injunctions 
 have been served to prevent future offenses. The railway companies, gain- 
 ing the rebates not yet paid, desiring protection from one another's rate 
 cutting, and being relieved to some extent from necessity of further reduc-
 
 202 TJie Plain Facts as to the Trusts. 
 
 tions, have even favored making the injunctions permanent, a proceeding 
 in which Judge Grosscup is moving cautiously, since it would put railroad 
 business under the exceptional power of a court in cases of contempt. 
 Within three weeks 480 notices of freight rate reductions were filed by 
 companies not daring to continue them secretly. A number of companies 
 have withdrawn from the different freight and passenger associations, but it 
 is believed these will not be dissolved, as was necessary with the Joint 
 Traffic and Trans-Missouri associations, which were found to conflict with 
 the Sherman law. The pools mentioned on a previous page are being dis 
 solved. That among lines east of Chicago, said to have been the strongest 
 pool ever formed in this country, ceased to exist April i. " For each ton 
 carried in excess of its regular quota, each road paid $\o into the pool, the 
 total of which was then divided among those roads which did not come up 
 to their regular shares." By the present enforcement the Inter-State and 
 Sherman laws will be given a good trial, and if they prove inadequate, as 
 they probably will when the excitement has subsided, the way will be more 
 clear for the revision so many have urged. 
 
 Fear of Railway Consolidation, despite its advocacy by some leading 
 economists, and its advantage to the public in saving of competitive waste, 
 still prevails among the people ; though some associations of shippers have 
 petitioned the Governor of Minnesota to cease opposing consolidation of 
 the Great Northern and Northern Pacific. That there is reason for this 
 fear, in the present lack of law for effective control, may be seen in the quo- 
 tations just given above. A similar case of consolidation to that in Minne- 
 sota has lately been mentioned as probable in Colorado, another case with 
 three great systems extending westward from Chicago, and another case in 
 southern Indiana. Besides Minnesota's opposing action in the federal 
 supreme court (dismissed for want of jurisdiction), the federal attorney- 
 general is now taking action in the same case under the anti-trust law of 
 1890, an investigation of the case has been held by the Inter-State Com- 
 mission, and proceedings in the federal supreme court have been opened by 
 the state of Washington. Governor Van Sant, of Minnesota, is also pre- 
 paring to proceed against an alleged merger of the iron range railroads in 
 his state. As the Northern Securities Company was chartered by New 
 Jersey with unlimited power to buy and hold stock in railroads, it would 
 seem that its consolidation of the two systems named, by buying up their 
 stock, would be allowed to stand, despite Minnesota's laws; but some 
 think its dissolution by the courts is foreshadowed by the decisions against 
 the Joint Traffic and Trans-Missouri associations, under the antitrust law 
 of 1890. Attorney-General Knox, in his bill asking the court to perpet- 
 ually enjoin the Northern Securities Company from carrying out its pur- 
 pose, claims it was not formed in good faith to buy and pay for stock, but 
 solely as the machinery for the merger ; that it gave no consideration but
 
 The Evil of Railroad Competition. 203 
 
 It is Impossible to Get Rid of Competition entirely, A 
 railroad company owning every line in a large district 
 would be compelled to make fair rates, by the fact that 
 
 its own shares ; and that its $400,000,000 in stock, of which shares to the 
 amount of only $30,000 were subscribed for, is just about sufficient to ex- 
 change for the stock of the roads to be consolidated. 
 
 To What Will It Lead ?— It is well that the legality of this latest form 
 of consolidation (far more effective than direct purchase, lease, and com- 
 munity of interest) is now to be settled. Its possibilities awaken apprehen- 
 sion. As The Independeiit points out, a half dozen such stock-buying com- 
 panies could soon buy controlling shares of all the railroads in the country, 
 and then a few magnates in a seventh company could buy a controlling 
 share in each of the half dozen, and thus put in the hands of one board of 
 directors a complete monopoly of all our transportation by rail, which could 
 later include substantially all that by water. Before such a movement 
 (possible within twenty years) had been completed, government control, 
 now growing, would have to be enlarged until it approached actual owner- 
 ship, which, though dangerous now, might possibly prove the best solution 
 of the problem if grown into through many years. (Newcomb, 135- ) A 
 number of " securities companies" are said to have been already formed, 
 ready to begin consolidations if the Northern company is permitted to 
 stand. A corporation of the same name, lately chartered in Canada, is 
 said to have no connection with the American concern. A merger bill that 
 became law in Iowa in April, 1902, permits consolidation of connecting but 
 not of parallel lines. The Railway Securities Company, organized a half 
 year before the Northern and the Southern, was supposed to be intended to 
 unite the Harriman group of roads. In April, 1902, J. P. Morgan com- 
 pleted a consolidation of a half dozen North Atlantic steamship lines, by 
 means of a holding company to own their stock. 
 
 The Above Look Toward Socialism, however, seems unnecessary. 
 While admitting the evils of unregulated competition, the force behind the 
 consolidation craze, both with transportation and with manufacturing, seems 
 to be mainly a hunger for the power of monopoly to tax the people for pri- 
 vate gain. There is no lack of remedies for the trouble, most of which 
 are enumerated in this book. The people will have only themselves to 
 blame, not nature, if they fail to turn the corporations quickly from their 
 present carnival of greed and feudal power, promoted by the people's 
 ignorance and apathy, into a field of reasonably paid service to the public, 
 whose benefit was in earlier times the expressed reason for chartering them. 
 The consolidating movement among railways may practically cease, as it 
 has in England, when we have a better understanding of conditions by 
 the public, better legal regulation, and a more settled system of industry.
 
 204 The Plain Facts as to the Trusts. 
 
 if it did not its patrons could not ship products outward 
 in competition with other districts enjoying rates that 
 were lower. Its patrons would then be unable to buy- 
 goods to bring inward. A company owning every road 
 in America would be similarly affected. If it attempted 
 monopoly oppression, Europe would buy more grain and 
 meat of Argentina and Australia, and the railroad would 
 be harmed no less than its patrons. The ocean, like in- 
 land rivers and lakes, will always afford means of com- 
 peting with railroads. Western freight rates are about 
 two cents lower on grain for export, because at the 
 higher rate foreigners might not buy. This degree of 
 discrimination seems allowable if applying the lower rate 
 to all grain would reduce railway profits too low. It is 
 mainly the rivalry of New York, Boston, Philadelphia, 
 and Baltimore, each striving to increase its export trade, 
 not competition among roads doing the carrying, that 
 has made through freights so low as they are. 
 
 This Competition Among Producers, which reaches 
 every place and every person, is a strong guarantee 
 against excessive freight charges. In the dependence of 
 a railroad upon the prosperity of its patrons, it is forced 
 by its own self-interest to aid them with the reasonable 
 rates required by their business necessities. Both the 
 producers of the interior, and the boards of trade in the 
 cities, press for the lowest rates possible. In few cases 
 have railroad managers been so short-sighted as to fail 
 to develop supporting territory. They are especially 
 quick to lower rates when the traffic of a place is falling 
 off. It is competition without pools between roads con- 
 necting the same places that has favored competing 
 points unfairly, against the greater number of stations 
 having but one road. With all the roads of the country
 
 The Evil of Railroad Competition. 205 
 
 harmonized together as if they were one perfected sys- 
 tem, there could be the least waste of competition, and 
 the nearest approach to just rates for every place and 
 every commodity, causing the production of every place 
 to be of the kind and extent for which it was best suited, 
 and giving the maximum return for the people's produc- 
 tive effort. 
 
 The People's Share in Railroad Progress. — Competition 
 among many railroads, and many rich districts, with 
 rapid improvement of appliances, has given America the 
 lowest rates and the best service in the world. ^ Dis- 
 crimination in rates and service has injured towns and 
 individuals, but from it the pubHc is beginning to under- 
 stand the situation. Only from experience can people 
 learn, and experience is but natural when it includes 
 losses. In the aggregate the losses and their injustice 
 have been fearful, reaching their worst in the Standard 
 Oil discriminations of 1874-86, and in the wasteful con- 
 
 1 The Fall in Freight Charges During the Last Thirty Years, de- 
 spite the rise in railway wages, has been greater than the fall in prices of 
 important commodities carried, much greater than the decline in price of 
 wheat, which is now about half what it was then. The causes of lower 
 freights include steel rails and larger rolling stock, uniform gauge and trans- 
 fer of cars, through billing, and reduction of capital charges by renewing 
 bonds at lower interest, and by wiping out a part of the capital stock of 
 bankrupt roads through foreclosure and reorganization. The gold rate on 
 dry goods from New York to Chicago fell from ^1.37 in 1S67 to 50c. in 
 1897 ; on sugar from 60c. to 24c., and on soap from 93c. to 25c. 
 
 A Fall in Railroad Profits has not been prevented by the increase of 
 traffic obtained through lowering rates. Cost of operation was 65 per cent 
 of gross earnings in 1873, 58 in 1880, 68 in 1890, 70 in 1896, 69 in 1900. 
 Dividends per mile of road averaged ^1,132 in 1 87 1, ^1,004 in 1881, ^450 
 in 1S96, $592 in 1899. Interest on bonds increased from ^1,242 per mile 
 of road in 1881 to ;^l,402 in 1896. In the New England states in 1896, 
 a year of depression, dividends were paid on 79 per cent of total stock, 
 and interest on all bonds except 2 per cent, but in the states west of the 
 Rockies dividends were paid on only 2 per cent of total stock, and interest
 
 206 The Plain Facts as to the Trusts. 
 
 struction and stock watering of 1869-74, and 1879-S4. 
 Better supervision by state boards and by the Inter-State 
 Commission, with reports giving increasing publicity, 
 will doubtless secure to the public its share of the bene- 
 fits of future improvement. Hereafter it will hardly be 
 possible to keep up rates unduly by hiding gains through 
 stock watering and crooked book-keeping. Railroads 
 will be allowed good profits in good times, like other kinds 
 of business ; and to promote progress in their service, 
 they will be allowed a good share of the gains arising 
 from improvement of appliances and from growth of the 
 country. 
 
 The Situation Seems Not at all Discouraging to a public 
 possessing intelligence and purpose. A more favorable 
 experience could not have been expected in the rapid 
 growth of the last thirty years. Since 1893 there has 
 been a decided change for the better. Management of 
 railroads has been settling down to a sound and paying 
 basis ; responsible owners are endeavoring to abolish 
 evils ; waste of capital in useless construction has ceased ; 
 growth of the country has afforded business to lines 
 built too soon ; and the fact that the interests of the 
 shipper and the railroad become the same in the long 
 
 was not paid on 25 per cent of the bonds. Taxes in 1S96 took 12.37 per 
 cent of net earnings in New England, and 11.68 per cent west of the 
 Rockies. Chicago and Alton taxes took 4.24 per cent of net earnings in 
 1880, but 11.27 P^r cent in 1896. During the four years ending with 
 1897, 38,879 miles of road, with capital at par of $2,748,847,000, were 
 sold under foreclosure for non-payment of interest on bonds. (Newcomb, 
 57, 144.) Since 1898 the railroad business has greatly improved. Dur- 
 ing the four years beginning with that year only 14,964 miles were sold 
 under foreclosure (1,139 in 1901). Dividends per mile rose 10^725 in 
 1900, considerably higher perhaps in I901 ; and interest per mile fell in 
 1900 to $1,302. In 1902 many companies are paying dividends that have 
 not done so heretofore, and from the few foreclosures it is evident that but 
 little interest is not being paid.
 
 Tlie Evil of Railroad Conipctitiojt. 207 
 
 run is every day more fully realized. Those who still 
 denounce railroads do so in ignorance of progress for the 
 better/ 
 
 IF. H. Dixon, P. S. Quarterly, 1899, p. 328. 
 
 Commendable Effort to Build Up Supporting Territory is now 
 
 maintained by many well managed railroad companies, in recognition of the 
 fact that the surest way to get and hold business is to increase the number 
 and prosperity of patrons. The Baltimore and Ohio, whose lines lie in the 
 old states, has no land to sell, yet it has maintained a land department, to 
 supply information and bring settlers to further develop its territory. The 
 Chicago and Alton is soon to establish an industrial bureau, to secure new 
 industries along its lines. Western roads have lately made a practice of 
 giving low rates, and of advertising in the cities, to secure for farmers west 
 of the Missouri the help they need to harvest their crops. The Santa Fe 
 Company in August, 1 901, gave an emergency rate on corn, deducting a 
 third, to enable stockmen in Kansas to avoid sacrificing their cattle and 
 hogs on a glutted market. As a rule, any progressive railroad company 
 will now deal liberally with a new industry on its line, in building spur 
 tracks, and in granting low rates necessary for its success. The Illinois 
 Central carries breeding stock free, and by operating a "goods roads" 
 train, to exhibit improved methods, has given an impetus to road making 
 in Mississippi.
 
 CHAPTER IX. 
 
 THE TRUSTS AND THE FUTURE OF SOCIETY. 
 
 No War on Corporations. — Not much of the monopoly 
 that has agitated the pubhc mind, as indicated in Chapter 
 VII., is of the proper and necessary kinds. The rest is 
 usually harmful to the people, and not to be passively 
 tolerated. Yet in opposing weak submission to monopoly 
 trusts, there is to be no war on corporations. The cry 
 against them has seldom proceeded from cool-headed 
 people. Any one who stops to think knows that corpo- 
 rations are necessary for the great enterprises of modern 
 times. Under a corporation a manager dying is at once 
 replaced without interruption of business ; and a part 
 owner of the property, which is divided into convenient 
 shares, can sell his interest at any time. An individual 
 or partnership cannot so well gather the large capital 
 and varied ability easily obtained by a corporation, nor 
 go ahead in business with the boldness derived by a cor- 
 poration from the limited liability of its stockholders. 
 If it fails, no one of them need be ruined, having lost 
 only the money he has paid for his shares (if paid up to 
 full par value). Very different is the case where there is 
 no corporation. It was the unlimited liability' of a partner 
 for all the debts of a firm, though incurred in each case 
 by other partners, that caused Sir Walter Scott and 
 Mark Twain each to spend years of labor, late in life, to 
 pay off a great personal debt.^ 
 
 ' Limited Liability was found necessary, about sixty years ago, to get 
 from small investors the capital then required for railroads and other large 
 
 208
 
 TJie Trusts and the Future of Society. 209 
 
 Neither on Corporations that are Large will war be 
 waged. They need not be soulless if they attempt to 
 override no laws, and are contented to advance in wealth 
 by deserving patronage/ J. Pierpont Morgan has the 
 right, if he can raise the money, to buy all the railroads 
 and steel works in America, and then to go abroad and 
 buy up the British Empire. While enormous wealth in 
 a few hands gives a power dangerous to the common 
 weal, and needs to be checked in its accumulation by 
 income and inheritance taxes similar to those of Great 
 Britain and Germany, nature has provided safeguards 
 here as in other respects. Outside of the field naturally 
 monopolistic, if harmful monopoly power is taken away 
 
 enterprises. These people needed openings to invest savings, but having 
 no part in management they could not take risk. Persons selling goods to 
 a corporation know its condition better than they, and the probability of its 
 non-payment of debts. Stockholders are scattered over the country, far 
 from the company's office. That a stockholder, after losing money paid 
 for shares, should then lose all his other property, in order that a creditor 
 might lose nothing, is obviously unjust. (Iladley, Railroads, 47.) Lia- 
 bility still rests upon bank stockholders, to the extent of being required to 
 pay for their stock a second time. The suggestion to curb the power of 
 trusts by making stockholders liable as partners would stop the wheels of 
 industry. 
 
 1 Are Trusts Simply Large Corporations ? — Some writers speak of 
 trusts in general as "large corporations," as if it were largeness instead of 
 scheming for monopoly that makes them trusts. Many an independent cor- 
 poration that serves the people well, at lowest prices, is larger and richer than 
 many another monopoly trust. Because modern production required the 
 change from individual and partnership business to corporations, it does not 
 follow, as some teach, that it required a change from ordinary corporations 
 to monopoly trusts. An interesting article by Rev. Sam Jones, the noted 
 evangelist, published in 1900, was a defence of large corporations. They 
 need no defence. Any community would be glad to have the Pennsylvania 
 Company buy its little local railroad, or the Standard Oil Company to open 
 a tank station, if the intention was to sell oil by permanently offering best 
 value. It would be glad also to have a large corporation buy its struggling 
 factory if the intention was to get profit by operating it, not by closing it to 
 establish a monopoly. 
 14
 
 2 1 o The Plain Facts as to the Trusts. 
 
 by law and public opinion, the vast combination will 
 almost certainly require too much high-salaried superin- 
 tendence to produce goods cheaply, and will conse- 
 quently separate into smaller concerns under manage- 
 ment more closely personal ; or more likely, it will 
 continue united, but become in time only one among a 
 number of producers/ 
 
 1 Income and Inheritance Taxes. — In 1901 the estate of Daniel Scot- 
 ten, of Detroit, was required to pay $45,240 on $900,000 he had left on 
 deposit in Canada from the time of the silver panic of 1896. New York 
 state's succession tax yields hundreds of thousands of dollars from such 
 estates as C. P. Huntington's $70,000,000, and Cornelius Vanderbilt's 
 $50,000,000 or more. The estate of the latter paid $361,803 to the United 
 States, and $520,998 to the state of New York. The United States had 
 an income tax from 1862 to 1872, which proved unsuccessful. Since 1898 
 it has taxed personal property succession of over $10,000 3^ per cent when 
 going to nearest relatives, and 5 per cent when going to strangers (char- 
 itable bequests exempted). In New York and Illinois the state succession 
 tax, added to the federal, amounts to 20 per cent on very large estates 
 passing to strangers or distant relatives. (Ely, 265.) The United States 
 income tax of 1894, levying 2 per cent on incomes above $4,000 a year, 
 was declared unconstitutional. Massachusetts, Virginia, and North Caro- 
 lina have long levied income taxes, but with slight success. Several other 
 states have repealed income and legacy tax laws. But income and succes- 
 sion taxes will probably become general in America. They are favored by 
 many influential economists, and are becoming popular with the public as a 
 means of equalizing tax burdens. To the federal income tax of 1894 there 
 was strong support in both parties except in a few large cities. In Mich- 
 igan, which has a new tax on inheritances, the legislature of 1901 discussed 
 a tax of I per cent on income above $1,000. The same year a new law 
 taxing incomes was enacted by North Carolina. Many of the states now 
 have inheritance taxes, increasing usually with the value of the estate, as 
 does the federal inheritance or succession tax, which is multiplied by three 
 for estates exceeding $1,000,000. The Industrial Commission has just 
 recommended that this federal tax be repealed, but that all the states levy 
 a graduated tax on both inheritances and incomes. Income and inheri- 
 tance taxes are well settled in Europe. In 1900 income taxes yielded 27 
 per cent of British revenue, and taxes on intoxicants 33 per cent. Of the 
 British government's total revenue in 1901 of about $760,000,000, the in- 
 come tax yielded about $175,000,000, and showed that in a year taxable 
 incomes had increased by $300,000,000. The proposed increase of this
 
 The Trusts and the Future of Society. 2 1 1 
 
 How Far Will the Trusts Carry us Toward Socialism ? 
 
 The talk of the trust movement leading on to gov- 
 ernment ownership of railroads, and eventually to social- 
 istic state production in general, must be based on the 
 idea that the American people can easily be made to sur- 
 render to monopoly. Just the opposite now seems true. 
 It is the monopolistic trust that can easily be made to 
 surrender. 
 
 Society's Control of Industry in the Middle Ages, 
 when wages, prices, and choice of occupations were rig- 
 idly limited by law and custom, has never been relin- 
 quished. It was relaxed, and regulation entrusted to 
 competition, because with increase of general intelligence 
 and liberty, enabling each for himself to produce and 
 buy to best advantage, it was found that under compe- 
 tition supplies were improved and cheapened. In pro- 
 tax by an extra penny on the pound is but little opposed. The annual 
 total of Prussia's income tax, which reaches incomes as low as ^215, has 
 increased 46 per cent in the ten years of its operation. Both inheritance 
 and income taxes are of special importance now, to check and gradually 
 remove the monopolizing tendencies of the times. Slight changes of this 
 kind make a decided difference in less than a century, as shown by the 
 division of France into small farms under many owners, caused by a law 
 equalizing division of estates among children. 
 
 Meeting the Millionaire Menace by making the tax higher as income 
 increased would need to be done guardedly. An income tax rising materi- 
 ally might be so evaded as to yield but little. Besides, if monopolistic 
 abuses were removed, men could increase their millions only by rendering 
 to society a good return. Limiting their wealth might then be limiting 
 their service. With ruling opinion honest and intelligent, increase of 
 wealth without commensurate increase of service might not be possible 
 or profitable. Hitherto, but mainly because of easy opportunities afforded 
 by the people's ignorance, many of the largest fortunes have been made by 
 means of unjust monopoly and privilege. Yet, while 3,828 millionaires 
 own a fifth of the wealth in the United .States, 87 per cent of them built 
 their own fortunes, many of them from the bottom (New York Herald). 
 The service to society of owning needed things is real and important. The 
 speculator's profit is his pay for carrying the surplus of wheat ; rent is pay
 
 212 TJic Plain Facts as to the Trusts. 
 
 moting invention, and progress of many kinds, the system 
 of unrestricted capitalistic production has worked well. 
 Until the recent period of monopolistic consolidation, 
 the only grave fault to be noticed against the capitalistic 
 system was its causing of widespread suffering in hard 
 times by previous speculative building and overproduc- 
 tion. To captains of industry the getting of a living for 
 society is entrusted. All others follow them, lending 
 capital to them, and working for them as they direct. 
 For their leadership society pays them well in profits. 
 But too often, not regarding their public trust, they have 
 recklessly taken chances in borrowing, building, and pro- 
 ducing, until their extreme of activity has broken in re- 
 action to an extreme of dullness, bringing long continued 
 blight upon the people as a whole. More than they 
 
 for carrying the value attaching to land. The state would have to invest 
 wealth in land if individuals could not. The great fortunes have come 
 from America's rapid growth, increasing values of land, minerals, and tim- 
 ber, and giving princely rewards to foresight applied to improvements in 
 producing and serving. Proper fortune making and progress go together. 
 The former would be checked with the latter. A list of about 4,000 mill- 
 ionaires, giving name, home city, and occupation of each, but not his for- 
 tune, is published in the World Almanac for 1 902. Funk & Wagnall's 
 Encyclopedia of Social Reform gives the sources of the fortunes of 4,047 
 millionaires in 1892. New Zealand's tax on incomes above ;if5,ooo (5 per 
 cent) is double the tax on those below, except with corporations, all of 
 which must pay the high rate. Britain's general rate is 6 per cent. 
 
 New Zealand's Rising Land Tax, by which she breaks up large 
 estates and settles the people on farms, may become necessary in America 
 if a practice arises among millionaires of buying up tens of thousands of 
 acres, to form such estates as that of George Vanderbilt in North Carolina, 
 and that of Austin Corbin in New Hampsliire. Under this scale of land- 
 holding the local people tend to fall under feudal dependence. Vast un- 
 settled areas, and lack of profit in farm land, have saved America from this 
 form of monopoly, though in the West and South some large areas, oc- 
 cupied by farm tenants, are owned by land companies and by wealthy men 
 in Europe ; and a few other home millionaires have followed Mr. Vander- 
 bilt' s example in buying land not specially valuable for minerals or timber.
 
 TJie Trusts a7id the Futiwe of Society. 2 1 3 
 
 realize, capitalists are responsible for keeping workers 
 employed and the public supplied. 
 
 Where Capitalism is Found Wanting. — Speculative pro- 
 moters, rather than real leaders of industry, seem to have 
 been the men chiefly in fault. The latter, who serve 
 society, are often displaced by bold stock gamblers, who 
 enrich themselves at society's loss. The remedy for this 
 evil of stock jobbing is an increase of honesty in busi- 
 ness. Law cannot well separate the gambling from the 
 useful speculation that carries necessary risks, and fore- 
 casts the amount of future supplies by the barometer of 
 price. Reliance can be placed only on public opinion 
 among men of influence in trade. If they will not 
 accept the responsibility which goes with power, they 
 must expect to be deprived of both by a movement in 
 the direction of socialism. Such a movement is being 
 aided by every financier who neglects his company to 
 speculate for himself, by every lawyer who teaches his 
 clients to evade responsibilities, and " by every one, in 
 short, who forgets that under the existing system the pos- 
 session of money involves a public trust, with whose ful- 
 filment or non-fulfilment that system must stand or fall." ^ 
 
 Capitalists Will be Held Responsible. — Now if captains 
 of industry will eventually be held responsible for disre- 
 gard of the people in ordinary speculation, much sooner 
 will they be called to account for such as the present 
 attempts to rob the people through monopoly. Unques- 
 tionably, if adequate supplies at reasonable prices were 
 not forthcoming, society would soon find a way, despite 
 objection to socialistic methods, to require capitalists to 
 serve the public or get out of business.^ 
 
 iHadley, 120. 
 
 2 '* Necessaries like iron, coal, and sugar may pass under semi-monopo-
 
 214 1^^^^ Plain Facts as to the Trusts. 
 
 There Will be No Curtailment of Rights, if practices 
 manifestly unjust are given up. As heretofore, it seems, 
 capitalists will be permitted to buy up and centralize 
 without let or hindrance, and to join many kinds of busi- 
 ness in one concern, at least by means of branch cor- 
 porations. No reason appears why capitalistic produc- 
 tion, under public control of monopoly, should not 
 continue to give society the best, cheapest, and most 
 rapidly improving supplies. Beneficent progress during 
 the last century has been wonderfully rapid under the 
 system of separate competitors, but if trusts can improve 
 on it they will be welcomed. It is to be hoped the 
 Standard Oil Company's reported 300 by-products, such 
 as axle grease and vaseline, can be increased to 600. 
 Reward for such an increase will cheerfully be paid, to 
 the extent of raising profits of ^48,000,000 to ;^96,ooo,- 
 000. Too many good things cannot be extracted from 
 petroleum ; nor can cost of an article be made too low 
 by cutting ofif such items as advertising, and the wastes 
 of cut-throat competition. Even private ownership of 
 mines may long remain unimpaired, if it is used to serve 
 society, not to rob it. But after service the line will be 
 drawn. There it is that rights cease. Clubbing will not 
 long be tolerated in this country. That belongs to 
 Macedonian brigands. 
 
 The Trusts That Are "Wanted. — We want those trusts 
 that hold their position solely by reason of surpassing 
 excellence and cheapness of product. These trusts are 
 only too few, if they exist at all. But the club-wielding 
 monopoly trusts, formed to squeeze consumers, will dis- 
 
 listic control so delicately related to public need that the term ' private cor- 
 poration ' can no longer apply." (John Graham Brooks, Engineering 
 Magazine, Dec. 1899.)
 
 Tlie Trusts and the Future of Society. 2 1 5 
 
 cover that the people are not so helpless as they seem. 
 Their power to restore just conditions will appear when 
 they comprehend clearly what the monopoly trusts have 
 undertaken to do. From the survey in these chapters of 
 the trust situation, it does not seem that radical action 
 will be necessary to dispose of them. Managers of 
 trusts will then realize quickly, perhaps with voluntary 
 obedience to the public will, that now and hereafter, as 
 always heretofore, private property and capitalistic pro- 
 duction, to continue to exist unimpaired, must prove to 
 be the best system by service to society. Limiting the 
 capital of corporations, and the kinds of business in 
 which they may engage, as some economists have pro- 
 posed, will apparently be postponed until the trust proves 
 how far honest methods will maintain a monopoly. It 
 is doubtful if such limitations will ever be necessary apart 
 from the ownership of natural monopolies, such as mines ; 
 though purchase of controlling shares in other corpora- 
 tions for monopoly consolidation, as with the Northern 
 Securities Company, may have to be checked. This makes 
 monopoly too easy to acquire. In some states a cor- 
 poration is not permitted to own stock in another.^ 
 
 iThe Delay in Controlling Trusts. — That the delay in controlling the 
 trusts is permitting serious hann was the opinion expressed by Professor 
 Bullock in the June Atlantic. He is evidently correct. Many a consumer 
 has a personal idea of losses from monopoly prices, while society is doubt- 
 less harmed far more by the addition of tens of millions to the fortune of 
 many a monopolist from profits surpassing the wildest dreams of avarice. 
 " With them stock manipulation has ceased to be speculative. Their re- 
 sources are so vast that they need only to concentrate on any given property 
 to do with it as they please. . . . There is an utter absence of chance that 
 is terrible to contemplate." (Henry Clews.) The larger the fortune, 
 perhaps reaching $500,000,000 with Mr. Rockefeller when stock values 
 are higliest, the smaller the combination necessary to buy a monopoly of 
 one of nature's limited stores. The present formidable power of monopoly
 
 2i6 The Plain Facts as to tJic Trusts. 
 
 The Benefits of Competition will Continue. — Production 
 at lowest cost will require an immense plant in steel 
 manufacture, and operation on a large scale may be 
 advantageous in many industries. There will be little 
 complaint of this if goods are thereby made better, and 
 cheaper to consumers. Capital and business ability are 
 watching for opportunities to build all needed competi- 
 tive establishments of every grade, up to the class in 
 which size is largest. When they are competitive there 
 will be persistent effort to devise improvements, as here- 
 tofore ; and competition may be strongest among only a 
 few if they be well matched. But the motive to improve 
 is usually lacking under monopoly. Monopoly is desired 
 because it holds trade without improving quality or low- 
 ering price. Still is it true that competition is the life of 
 progress in industry. It does not induce lowering of 
 quality where excellence is desired ; because there repu- 
 tation is too valuable to be risked by a producer who 
 hopes to remain in business. It is potential competition, 
 from new concerns that might be started, with actual 
 competition with other kinds of business in a race of 
 progress before the public, that has given largest success 
 
 is but a natural consequence of the riotous success it has long been permitted 
 to enjoy. 
 
 Why the Law Has Been Ineffective. — But more effective effort to 
 control the trusts could not have been expected from the public opinion of 
 the times. It has been contented with faulty ideas of economics, and 
 has not frowned upon widespread scheming, in various forms, to obtain 
 gain at the loss of others. Yet in time monopoly's cup will be full. The 
 many corporate abuses that have caused grave concern over the future of 
 society cannot continue when the people realize how lax are our laws, and 
 how many proved methods of control we have not yet applied. Indications 
 are that the power of protected industries to make their own tariffs will be 
 tested soon as never heretofore in this generation. Beneficent forces in 
 society are provided by nature. To know and apply them is the task laid 
 upon the people.
 
 The Trusts and the Future of Society. 2 1 7 
 
 to those trusts whose profit comes from economies low- 
 ering cost rather than from increase of prices. These 
 economies would doubtless be lessened as a monopoly 
 became better established, with less to fear from poten- 
 tial competition and public disfavor/ 
 
 Has Enlargement of Factories Pteached its Limit? — 
 Very probably increase in size of factories for reducing 
 cost of product had about reached its limit with present 
 machinery before the later monopoly trusts appeared. 
 Where the motive in forming them was monopoly, it 
 differed from the motive of previous enlargement, which 
 was economy. Previous enlargement made monopoly 
 easier, by reducing the number of competitors. Where 
 necessity of large capital is connected with limited 
 sources of materials, as in steel making, the business is 
 naturally monopolistic. Here producers easily consoli- 
 
 ^ What Competition Does. — Economists agree that competition among 
 buyers raises the fanner's price of raw material, and that among sellers it 
 lowers price to consumers, enabling more of them to buy ; that it increases 
 production to supply the extra demand, gives thus employment to more 
 men, raises thus their wages, elevates laborers with more to spend and 
 lower prices, stimulates producers to improve quality and invent machinery, 
 and hence promotes the welfare of all classes and of the state. Economists 
 agree also that in all these cases monopoly has by nature the opposite effect, 
 and that if general and prolonged, would tend to impoverish and degrade 
 the people, and to debilitate the state. (Quoted at length from General 
 Roger A. Pryor by Von Halle, 114.) To be sure, reasonable competition 
 is meant, the kind that usually prevails. Competition would lower wages 
 by lowering net income if carried to the excess of weakening or ruining 
 employers. Consolidation that with better machinery lowered price and 
 increased sales, would pay higher wages and employ more men. The claim 
 is untenable that competition is selfish and heartless, like the destructive 
 struggle for life among wild animals. Reasonable competition (not that 
 by trusts meant to destroy) is a struggle to supply the people better, not to 
 hann any one. The producer crowded out is benefited by the competition 
 of all who supply him, which, besides giving him the most goods to enjoy, 
 leaves to the public the largest balances to spend, and makes thus the 
 largest demand for his capital or skill in other business.
 
 2 1 8 The Plai7i Facts as to the Trusts. 
 
 date, and others cannot enter the business with equal 
 chances. But in the competitive field — aside from mines, 
 railroads, gas works, patents, and secret processes — there 
 will probably be few cases in which cheapest production 
 requires a capital so large as to confine the business to 
 a few great concerns, tending to be drawn by self-inter- 
 est into a monopoly ; and here a monopoly would 
 be comparatively harmless if clubbing of competitors 
 were prohibited by law, along with favoring rates from 
 naturally monopolistic railroads. Its power to exact 
 monopoly profits could last no longer than the time 
 required to build competing plants. Only in these few 
 cases, if there be such, is there a natural development 
 into the gigantic concern. When Professor Ely says 
 that mass of capital alone cannot give monopoly power, 
 he means of course without clubbing. But with an 
 industry confined to a few strong concerns, a pool or 
 agreement on prices, as with railroads, is better for the 
 public than destructive competition. The latter will 
 hardly arise, however large the plants, if they are not so 
 few as to arouse monopoly hunger, or if law prevents its 
 gratification.^ 
 
 ' Fewness of Concerns and Large Capital have not drawn the har- 
 vester, sewing machine, nor printing press makers into trusts, though in each 
 case there are probably not over a half dozen important concerns, and though 
 patents and good will are of great value. Probably there are scores of in- 
 dustries not consolidated, each of which consists of less than a dozen im- 
 portant concerns. 
 
 No Monopoly if the Way is Open to Competitors. — By Professor 
 Clark's definition {P. S. Quarterly, Sept. 1901), a concern producing all 
 the supply is not a monopoly if the business is open to any competitor who 
 can offer as good values. As Professor Ely teaches, it seems doubtful if a 
 market could long be monopolized, among a progressive people, by any con- 
 cern not resorting to clubbing, and depending wholly on largest capital and 
 highest skill — deriving no aid from patents, mines, or railroad discrimina- 
 tion. And a patent, if not sold, is soon competed with by another pat-
 
 TJie Trusts a7id the Future of Society. 2 1 9 
 
 ent. The discussion of the preceding pages seems to show that the econ- 
 omies of combination cannot largely overbalance the extra expense it causes. 
 But one of these two things is certain : either the gains from economies are 
 small, or the trusts are grasping ; for instead of being content with such 
 gains, which consumers would gladly allow, the trusts have unscrupulously 
 fought competition, which could not seriously harm them if economies had 
 really cheapened their product. (This fighting still continues intense. It 
 is just now announced — April, 1902 — that a trust has threatened to open 
 cigar stands in Chicago, if dealers there buy of its competitors. The Brit- 
 ish tobacco trust's late offer to divide ^^50,000 among dealers buying of it 
 alone was met by the American trust's offer of £2.00,000 and of all its prof- 
 its besides. The dealers declined both offers, in view of the question, 
 What then ? Under free trade, the American trust is their safeguard. ) 
 
 The Consolidating Force in the Steel Industry was fear of an out- 
 break of ruinous competition among the few strong concerns. Exclusive 
 access to the best mines makes these concerns almost as monopolistic as 
 railroads. In their field, with their present size and power, competition 
 cannot be depended upon. Fearing to trust their earnings and property to 
 temporary pools and agreements, they united under an effectual community 
 of interest. The Steel Corporation will be able to steady prices — to limit 
 production to a paying demand. Its close relations with similar combina- 
 tions of railroads and banks give to the allied interests great power ; but 
 far-seeing prudence will probably lead them to refrain from abusing that 
 power — to stand aloof from politics, and to be just to the public. ( Review 
 0/ Reviews, April, I901.) That they must do, or private ownership of 
 nature's stores would soon be restricted by law. 
 
 The Good Despot. — Yet the Steel Corporation comes perilously near to 
 being a case of the good despot. It is repeatedly commended by trade 
 journals for refusing to raise prices during the scarcity of its products that 
 has prevailed ever since its strike last summer. Though it is restrained by 
 the fear of checking consumption, and of inviting imports, condidons are 
 abnormal when a seller has to tell a buyer that a lower price is best. It 
 would have help in fixing prices and meeting scarcity, if its tariff duties were 
 removed ; and in case of overproduction, its surplus would have the world 
 to spread over, in established lines of outflow. 
 
 The Steel Trust's Weakness, pointed out by Professor E. S. Meade, 
 in a searching analysis in the Quarterly Journal of Economics, reviewed 
 in The Outlook of April 5, 1902, is a capitalization based on earnings at 
 the highest stage of prosperity, with fixed payments of 7 per cent on |!55o.- 
 000,000 of preferred stock, and of 5 per cent on $300,000,000 of bonds, 
 now to be increased with $250,000,000 of new bonds, retiring $200,000,- 
 000 of preferred stock. Placing annual net earnings at $125,000,000 (they 
 proved to be $1 1 1,067, 195 ), Professor Meade concludes that another shrink-
 
 220 Tlie Plain Facts as to the Trusts. 
 
 Will Small Producers be Crowded Out ? — The fear tliat 
 small producers in general are to be crowded out of in- 
 dependent business will scarcely continue after monopoly 
 has been removed by law and opinion as a motive for 
 consolidation. It is probable that the change to fewer 
 and larger establishments has been balanced by the 
 starting of small concerns to make new appliances. 
 New manufacturing corporations with a few thousands of 
 capital are continually being started in Michigan, as re- 
 ported by the Secretary of State — more numerously of 
 late than before ; and her many small cities, hives of 
 separate industries, are in most cases but slightly changed 
 by trust consolidation. The many thousands of suc- 
 cessful manufacturers on a limited scale are probably in- 
 creasing with the frequent starting of small concerns on 
 upper floors, using cheap electric power, or steam power 
 rented with the rooms. Useful articles manufactured by 
 these are constantly being invented or improved. 
 
 Men of Original Capacity to devise, make, or sell things 
 are not all ready to trade their birthright for a safe posi- 
 tion under a trust. If they were all to sink to this atti- 
 tude regarding the initiative in enterprise, there would 
 be a change of progress not for the better. Doubtless 
 
 age of demand and price in iron and steel, such as that of 1890-58, would 
 admit of no payments but the interest on bonds, allowing preferred divi- 
 dends to accumulate against future years, and endangering the great cor- 
 poration's solvency. Its exceptional strength in prosperous times, from 
 gaining in high prices of materials, which it produces for itself down to ore 
 and coal, as well as from high prices of products, becomes in dull times its 
 exceptional weakness. Falling prices then take its profits both on products 
 and on materials, while what the smaller producer loses from falling price 
 of product is partly balanced by cheapness of materials he buys. Hence, 
 with the steel trust success depends on ultra conservatism, to prevent 
 another case of rising prices, erection of new mills, overproduction, falling 
 prices, and prolonged depression.
 
 TJic Trusts and the Future of Society. 2 2 1 
 
 there are many men of independence who would not be 
 held to a trust by ownership of its stock if they could 
 not be influential in directing its business. Personal am- 
 bition, mentioned as a strong motive in forming the wire 
 and sugar trusts, might also become in some cases a mo- 
 tive for disruption. Even among the few managers of a 
 trust not naturally monopolistic, high ability may cause 
 a man to withdraw after a while to go forward alone. 
 Desire for independence has kept some men from yield- 
 ing to the offer of a great price, and of a high office, to 
 induce them to join a trust. A single trust may not 
 afford room for many equals, and some men can be 
 nothing less.^ 
 
 ^ Dissolution of Trusts. — But almost universally, perhaps, a trust in 
 the form of a single corporation, having the best plants, will continue to 
 exist, whatever the competition arising. The whisky and cordage trusts 
 have failed repeatedly, but have been reorganized. Many others have fol- 
 lowed their example. The notable case of dissolution was that of the 
 National Wall Paper Company, whose plants in most cases were bought 
 back by previous owners. President Burn said he believed other trusts 
 would dissolve if a way were open not involving too much loss. Leading 
 officials of the vv'all paper and cordage trusts, and also of others, testified 
 that they would prefer to take chances as independents. Perhaps in their 
 industries new plants were too easily started. The National Fish Com- 
 pany, at Boston, a single corporation, was dissolved in 1901, after an 
 existence of sixteen months, owing to the desire of its members to continue 
 as individual firms. The glass fruit jar combine of Indiana, dissolved in 
 1901, was only a pool. The American Harvester Company, organized in 
 1890, did not begin business, owing to fear among leading concerns of los- 
 ing prestige. 
 
 Unrestrained Competition Was Mr. Carnegie's Principle — He 
 united all steps of manufacture into one compact concern at Pittsburgh, 
 and turned out steel products only, not stocks and bonds. When he was 
 about to build a great tube mill, the steel trusts, not being able to compete 
 with him, and knowing his aversion to pools, had to buy him out, substan- 
 tially on his own terms, to preserve their profits on watered stock. He 
 made his fortune, not by raising prices, but by forcing all competitors to 
 sell to the people cheaply. To get rid of his aggressive competition was
 
 222 The Plain Facts as to the Tnists. 
 
 The Trust and Ambitious Young Men. — The men of 
 exceptional ability for whom it is said the trusts will 
 make greater demand than heretofore, must be those 
 scientists and experts who develop processes but are 
 unfitted for independent management ; also bright men 
 in various positions who are fitted to rise so far but no 
 farther. These are very useful people, but they are not 
 those who have chiefly more modern progress. While 
 it is true that superintendents and foremen are given 
 large power of discretion, and develop much individu- 
 ality, yet their case, reporting as they do to superiors, is 
 very different from that of producers wholly self-directed. 
 Perhaps the reasons why so many minor officials of rail- 
 roads (not to be independently owned) rise high and rap- 
 idly are that the industry has been growing very fast, and 
 that, unlike a trust, it consists of hundreds of separately 
 managed companies, affording chances to rise by going 
 from one to another.^ 
 
 Will Consolidation Make Workers Capitalists? — Dr. 
 Albert Shaw, whose masterly editorials in the Review of 
 Revieius"^ are usually written from a survey of all sides of a 
 
 therefore the main reason for organizing the Steel Corporation. { The Out- 
 look, reviewing Prof. Meade's article.) This is a later and more specific 
 explanation of the steel trust than that on page l88, and that on page 219. 
 
 ' Mr. Schwab says young men have a better chance to rise under a trust 
 because salaries are higher, merit surer of reward, and favoritism less com- 
 mon. This seems true under a new trust well managed. But from lack 
 of acquaintance with superiors, the merit of subordinates might not be found 
 out, and after a time, especially with a rich monopoly not dependent upon 
 best service, favoritism would tend to prevail. 
 
 The method by which Mr. Carnegie shared profits, according to results, 
 with thirty-three heads of departments (Spahr, I46) is probably the most 
 effective for drawing out men's best efforts. But unless allowed substantial 
 shares as actual partners, men thus developing high ability would tend to 
 start independent plants. 
 
 2 April issue, 190I.
 
 The Trusts and the Future of Society. 223 
 
 question, seems to think that the apparent disappearance 
 of competition must result in something Hke a great coop- 
 erative organization of workers, through their investment 
 of savings in shares ; that the consoHdation of industry will 
 infallibly vest capital in workers, greatly lessening inequal- 
 ities of lot. Will this optimistic idea bear questioning ? 
 Safer stocks were on the market before — railroad, mining, 
 and local bank shares. Few wage workers cared for them, 
 having better use for savings in building homes, adding 
 furniture, and improving consumption. That consolida- 
 tion has caused any permanent increase of wages worth 
 noting is doubtful, but where successful it has usually 
 reduced the people's savings by raising prices. With the 
 mass of workers wages must continue to be practically 
 the one source of income. They can not save enough 
 to get much in dividends or interest. Dividends on 
 $ 1 ,000 in stock would be only about ^60. The man who 
 can save ^1,000, after performing his first duty of build- 
 ing and furnishing a good home and educating his family, 
 has always been able to get ahead. Consolidation less- 
 ens the power of unions to raise wages. Strikers can- 
 not remain out long enough to coerce a trust, having no 
 equal competitor to take its patrons, while a new com- 
 petitor might need from one to two years to build a plant. 
 Does it Not Have the Opposite Effect? — Consolidation, 
 unless it perceptibly increases real wages by cheapening 
 supplies and steadying production (yet to be proved), 
 makes the case worse, by eliminating the powerful incen- 
 tive of engaging in business for one's self The fact is 
 that a habit of leaving savings permanently at interest 
 weakens a nation. To develop greatest usefulness a man 
 should be continually planning, where practicable, to use 
 savings in some form of independent effort. Leaving
 
 224 '^^^'^ Plain Facts as to the Trusts. 
 
 them at interest, to be depended on, is for widows and 
 old people. The distribution of French bonds among 
 4,404,763 names in 1877 has connection no doubt with 
 the serious decline of individual enterprise in France, 
 The government salary and pension, for which they aim, 
 though desirable with many, dwarf a person who was 
 born capable of striking out for himself to do an original 
 share of the world's work. It is not surprising that 
 French trade is not growing, that the national govern- 
 ment costs nearly ;^20 a year for each inhabitant, and 
 that in twenty -five years its debt has increased ;$ 1,800,- 
 000,000, being now ;^6,ooo,ooo,ooo. 
 
 Will it Add to the Class of Idle Investors ? — Monopo- 
 listic consolidation would also, it seems, add to the class 
 of idle investors, despite falling interest. It increases the 
 securities to invest in, presumably raises dividends, and 
 diminishes business openings suitable for persons of some 
 wealth and ability. However, there is little reason for 
 alarm. Consolidation that does not cheapen supplies 
 will not last. Until it does that, calling it a revolution 
 seems to be merely a burst of enthusiasm. 
 
 If the Trust Cheapens Production, to "Whom Does the 
 Saving Fall ? — Whatever is saved by a trust, through the 
 perfection of equipment and of management afforded by 
 its ample capital and ability, is new wealth in the coun- 
 try — to its product so much has been added without 
 equal outlay. Society would be benefited if all this gain 
 were added to profits — not to be spent by trust magnates 
 in harmful luxury, but invested as capital to produce addi- 
 tional useful things. The social benefit would be greater 
 if a part of the gain fell to an increase of wages, which 
 in brisk demand organized workmen can usually secure 
 from a trust. They then live better, and are elevated in
 
 TJie Trusts ajid the Future of Society. 225 
 
 character and ability to work. But the social benefit is 
 greatest when by lowering price the gains of improve- 
 ment fall chiefly to the public. All then have a chance 
 of elevation in a more abundant living.^ Wages can 
 scarcely be raised much above the average for the same 
 grade of work in other trades. 
 
 Gain Has Been Distributed by Competition. — It has 
 been in this beneficent lowering of price that the gains of 
 improvement, except for a time at first, have hitherto 
 fallen chiefly to consumers, under free competition. But 
 when extra profit comes from higher price, without low- 
 ering cost of production, no wealth is saved ; it is only 
 taken from the pockets of consumers and put into the 
 pockets of trust magnates. No possible wisdom and 
 philanthropy, in using such profits to educate and uplift 
 the people, could make this a wholesome process, though 
 such use of great wealth gained without resorting to 
 improper monopoly is highly commendable. There is a 
 similar taxing of consumers when a monopoly prevents 
 a price from falling so fast as it would under competition. 
 A monopoly with power to force down price of materials 
 bought would scarcely use that gain to lower its price to 
 consumers ; and a small percentage of the people can 
 buy enough trust stock, even if it were always safe, to 
 balance their loss as consumers with investors' dividends. 
 Hence, monopoly gains are likely to result in net money 
 injury to society, in addition to lowering morals, and 
 weakening individual initiative. 
 
 The Passing of Small Producers is Not a New Change. — 
 But nature's forces of competition, when not suppressed 
 unfairly, which suppression is not to be tolerated much 
 longer, will save the public from the monopolistic evils 
 
 ' Jenks, N. A. Review, June, 1901. 
 15
 
 226 Tlic PI am Facts as to the Tnists. 
 
 discussed. And if progress to production of best qual- 
 ity and lowest cost closed as many small shops as some 
 frightened people have feared (not at all probable), why 
 should the future be regarded with gloomy forebodings ? 
 There would be nothing new in the change. It began 
 with civilization, when independent production by each 
 family of all it used gave way to division of labor into 
 separate occupations. The elimination of small shops 
 during the last thirty years was only the last stage of 
 the change begun a century earlier, from hand tools to 
 machinery. The cross-roads wagon-maker could not 
 have expected to continue in business. His occupation 
 belonged to the handicraft period, whose passing away is 
 evidenced by the perfection and cheapness of modern 
 commodities.^ Recent changes of scale and method are 
 slight compared with the starting of the factory system a 
 century and a quarter ago. It was then a sudden revo- 
 lution, wrecking many an ancient shop. Now it is a 
 gradual evolution, allowing producers time to adjust 
 themselves to new conditions. The most beneficent 
 change possible causes trouble to some. Closing a 
 bloody war stops the business of army contractors, and 
 leaves many soldiers out of employment. 
 
 Independent Production an Evil When Not Briskly De- 
 sired. — The majority of independent manufacturers do 
 little more than fit together materials previously prepared 
 for use. Their service to society is not greatly different 
 
 ' Sweat Shops. — The distressing poverty of sweated (overworked and 
 underpaid) clothing makers in large cities, and of various other hand work- 
 ers running little shops in England, is due to the fact that they are clinging 
 to the industries of a past age. Surest relief to them would come from 
 large factories doing their work so cheaply and so well as to drive them out 
 of business entirely. They would then work in clean factories, reasonable 
 hours, at a living wage.
 
 The Trusts and the Future of Society. 22/ 
 
 from that of a wage earner doing a part of a factory- 
 process. If that part is necessary, and he does it well, 
 and the factory's product is wanted, his living is just as 
 secure as if he alone made the product from start to 
 finish. Independent production is harmful to the char- 
 acter of the producer, as well as wasteful to society, 
 when the product is not briskly desired at its price and 
 quality. The factory worker mentioned is more useful 
 and self-respecting than an independent proprietor fawn- 
 ing on people to get their trade, and complaining that the 
 big fish are about to swallow up the little fish. His 
 attitude then tends toward that of a solicitor of alms. 
 When his little shop cannot meet fair competition, the 
 good of all concerned requires that it be closed. Some- 
 where else his labor and capital are needed.^ 
 
 * Retiring Early to Idleness, to make a business opening, and give 
 others a chance, a practice to some extent with the wealthy in Europe, is 
 thought by many to be praiseworthy. A St. Louis manufacturer retiring 
 at thirty-four on ^250,000, to take pleasure boating on Western rivers, is 
 called a young altruist. This word may be proper here from his efforts to 
 benefit his employees, but his retiring so young can only deprive society of 
 the work of a useful man. Society wants goods and services, not more 
 openings for work. The discouragement has always been that too much 
 work is required to attain earthly good. Only his competitors, making or 
 about to make the same line of goods, are benefited by his retiring. The 
 survivors would be benefited if others of their number were put out of the 
 business by lightning destroying their factories. All people in other busi- 
 ness, as consumers, want the goods made by the man retiring to be as 
 plentiful and cheap as possible, so long as profit in them is not too low for 
 steady production. 
 
 Many Persons Speak Contemptuously of the Benefits of Low 
 Prices, as if they could enjoy a larger living with all prices higher. They 
 might as well state prices in cents instead of dollars, in order to use larger 
 numbers. Human welfare must be advanced chiefly by increase and cheap- 
 ening of goods. A new machine increasing product benefits a thousand 
 consumers in lower price, necessary to sell the increase, where it benefits 
 one producer in larger quantity to sell, and fifty workmen in higher money
 
 2 28 The Plain Facts as to the Trusts. 
 
 Effect of Consolidation on the Small Town. — The same 
 may be said of the tendency of trusts to move plants from 
 the West to the East, and from the town to the large 
 city. If they gain thereby advantages that lower cost 
 of production, the economic force is too strong to be 
 overcome. The West and the town need no help that 
 any person must suffer loss to render. The means they 
 afford for getting a living will be the best in reach for 
 the population that nature fits them to have. Besides, 
 the trust movement evidently has too little economic 
 basis to cause a serious fall of property values by taking 
 factories away from small towns. When law has dis- 
 armed the trust of its club, and time has been given for 
 small factories to grow up again, it is improbable that 
 towns will fare very differently from heretofore.^ 
 
 wages. As goods are increased and cheapened in price, each person's 
 labor or product brings to him a larger living. 
 
 An Altruist Might Help Society Most by leaving an easy work for 
 the less capable, and devoting himself to the production of some needed 
 article now poorly supplied. A Chicago man, lately deceased, who retired 
 on $250,000, probably did well for society ; because his associates contin- 
 ued the factory as before, while he gave his time and money to helping 
 deserving young men to reach higher usefulness. The feeling of having 
 enough forone'sself is good; but retiring then to take ease may be as selfish, 
 and is more harmful to society, than continuing eagerly down to old age to 
 get all the money in reach. To make money, one must usually render 
 good values. By retiring partially, to give younger partners practice, 
 an elderly man might cause the firm's capacity and experience to be used 
 to best advantage. One very wealthy man thinks millionaires are just dis- 
 covering the joy of giving. His hope is that it will become a custom with 
 them to spend thought and money in later life to benefit humanity. 
 
 ' The Larger the Factory the Better the Conditions of labor is 
 usually the ride — best light and ventilation, best enforcement of factory 
 laws, highest wages and surest pay, latest machinery and best chance to 
 develop skill. This is often balanced, however, by closer acquaintance 
 with the proprietor of a small factory, and by advantages of village over 
 city life.
 
 The Trusts and the Future of Society. 229 
 
 Men's Living Was Poorest When Shops Were Smallest. 
 The fear that the occupation of small producers and 
 traders will be taken away by large corporations, is 
 sometimes coupled with the fear that employment for 
 wage workers will be taken away by machinery. These, 
 with many other dangers that might be thought of, were 
 well provided against by nature. When there was most 
 work to be done by hand, with fewest tools and ma- 
 chines, the living of laborers was poorest. Useful things 
 were produced in quantities so small and uncertain that 
 where the barbarous family had them all they were often in 
 danger of starvation. A few centuries ago, in a civilized 
 land, a linen sheet was worth thirty-two days of common 
 labor. As by invention of machinery wage workers 
 have been enabled to produce more, their share of prod- 
 uct in wages has grown larger. New wants in society 
 have appeared faster than workers to supply them have 
 been released by machinery from other employment. 
 Hence, labor power is more regularly utilized as civiliza- 
 tion advances, and the living of all classes steadily rises 
 as product is increased to divide with wage workers in 
 larger pay in money, and as abundance of goods lowers 
 their price to consumers. 
 
 American Wages Have Doubled in money during the 
 last sixty years, and have more than doubled in goods 
 enjoyed. Work in factories gathers people together, and 
 their ignorance, then being noticed, is remedied by pub- 
 lic schools, and is also lessened by development of skill 
 to use machinery,^ and by associating with more intelli- 
 
 ' Wright, 352. No matter how monotonous factory work may be, the 
 social surroundings make operatives more intelligent than farm hands, 
 whose work is of greater variety. (Marshall.) But a little schooling, 
 travel, and access to towns, makes farm hands, perhaps, the more inde- 
 pendent class of the two.
 
 230 TJie Plain Facts as to the Trusts. 
 
 gent people. In various ways the civilization of to-day 
 was brought about by machinery. 
 
 The More Labor-Savmg Machinery We Have the Better. 
 Few people would object if improvement in produc- 
 tion continued until it became no longer necessary to 
 sweat on the brow in order to eat bread. That consum- 
 mation is still a long way off — will never come in the 
 present order of nature, because human character would 
 quickly be ruined by release from the necessity for labor 
 and mental effort. The time and strength of the mass 
 of the people, despite the shortening work day, are still 
 absorbed in the struggle for existence. They might 
 make their lot easier by wanting less, but growing wants 
 are favorable to development so long as the means of 
 supplying them grow as fast. 
 
 Work for All. — There is plenty of work for every wage 
 earner and small producer displaced by progress. As 
 free men they are to find it themselves, to suit their own 
 tastes nearest, not to have it furnished for them as if they 
 were dependents, to be ordered about by a superior 
 power. Not many commodities are so good in quality 
 as they might be, nor so plentiful that more would not 
 be a benefit. Leaders in progress, studying out improve- 
 ments, are continually needing men for new lines of 
 work. The vast field of electric manufacture, and of 
 suburban electric railways, has mainly been opened 
 within the last fifteen years. About the same is true of 
 the bicycle industry. It is seldom that a prosperous 
 concern permanently lessens its force of employees, 
 however frequent its purchases of labor-saving machin- 
 ery. More commonly it enlarges its output and hires 
 more men. Machinery will always require constant care, 
 and the complicated modern system of buying and selling
 
 Tlic Trusts and the Future of Society. 231 
 
 and keeping accounts, with all the labor-saving methods 
 that have been devised, employs an ever increasing army 
 of busy people/ In the offices of the Monadnock build- 
 ing in Chicago there are said to be regularly engaged 
 more than 5,000 persons, and in a New York department 
 store 3,389 employees gather before a customer enters. 
 Business depression will be less frequent and less severe 
 when people realize how certainly unwisdom in earning 
 and spending must sooner or later be suffered for. 
 
 Decided Changes of Business Opportunity have come 
 about, and perhaps will always continue to come, unless 
 stagnation sets in. Mr. Carnegie was right when he said 
 he might do better as a boy arriving in America to-day 
 than in 1848. A person introducing new things has 
 now more people and more wealth from which to draw 
 patronage. "As trade widens, opportunities increase." ^ 
 But men to take them may increase faster, and bring our 
 conditions nearer to those of Europe. The exceptional 
 promise of to-day is chiefly for men of original capa- 
 bility. The case is different with mediocre men. One 
 of the latter starting a local store has now less chance 
 of success than his father had, when the country was 
 newer, openings more numerous, competition less sharp, 
 and a less exacting grade of service required. 
 
 Society is Now Better Served, however, because abler 
 
 *The complexity brought into modern life by growing use of machinery 
 enormously increases demand for workmen of skill. Sir Robert Giffen has 
 shown that not only a greatly increased number of men, but a much larger 
 proportion of their total, are now engaged than formerly in skilled work 
 well paid for. This effect of machinery to increase employment and wages 
 can be seen in comparing such a city as Hartford with a non-manufacturing 
 city of about its size, say Charleston, S. C. In a city like the latter there 
 is work at good wages for very few. Most of the work is common labor, 
 or but little above it. 
 
 2E. W. Bok.
 
 232 TJie Plain Facts as to the Trusts. 
 
 men conduct its business. Perhaps the competent form 
 the same percentage of the people now as in the past. 
 Business is more difficult, but more people strive to learn 
 it. Despite increase of education, increasing complexity 
 of business makes captains of industry as rare as ever ; 
 and though rate per cent of profit falls, increasing sales 
 liave been giving each a larger aggregate net return. 
 All are benefited except a few who in their respective 
 occupations are unable to keep up, and it is progress, 
 so widely desired, that causes their discomfiture. The 
 many business openings twenty years ago, for men of 
 all grades, were exceptional, due to the rapid settling 
 of new districts, and to increase of inventions. Such 
 conditions could not have continued after new regions 
 had been occupied. The period from 1865 to 1890, 
 vv^hen Mr. Carnegie built his fortune, may not soon be 
 equaled again as a time of easy success in business. 
 
 Increase of Wealth and Decay of Men. — Any one will 
 agree with Goldsmith that 
 
 " 111 fares the land, to hastening ills a prey, 
 Where wealth accumulates, and men decay." 
 
 But wealth must increase if men are to have time and 
 means for education, and for high development of civili- 
 zation. When kept by necessity under constant struggle, 
 they cannot rise far above brute existence. Wealth is a 
 blessing to all when it increases under good laws and 
 customs, elevating the whole people, not a single class. 
 Then it does not bring decay to men, but the highest 
 development of their possibilities. Present tendencies are 
 toward a wiser use of wealth than was ever known before. 
 It is wasteful and wrong for a person to be poor when 
 he is fitted to become rich and largely useful ; but it is
 
 Tlie Trusts and the Futinr of Society. 233 
 
 no discredit to be poor when one's nature or misfortune 
 prevents him from doing better. It must be remembered 
 that the poor in spirit are blessed, not always the poor in 
 pocket. Christ considered, not one's condition, but his 
 effort and purpose. He condemned misuse of wealth, 
 in hoarding or luxury, while the needy were uncared 
 for ; but unfaithfulness to duty among the poor he con- 
 demned no less. 
 
 Elimination of the Individual. — There is no danger of 
 the elimination of the individual — of degenerating into 
 human machines — so long as the unsoundness of social- 
 istic ideas is perceived, and as it pays as well as at pres- 
 ent to be an individual. No one but a thinking and 
 striving individual will long amount to much as a worker, 
 whether for profits or for wages. Even in the simplest 
 hoeing and grubbing, one must push himself to do a 
 creditable day's work. Herein lies the fatal objection to 
 anything like complete socialism. Under it the man 
 doing the least would have a sure support for himself 
 and family, while the product of the man doing most 
 would have to go in large part to the government to give 
 the man doing least a better support than he has now ; 
 for a pauper support is already guaranteed. Unless the 
 lazy were forced to work, somewhat as slaves, and 
 unless men were assigned by the authorities to occupa- 
 tions without much pretense of liberty to choose, and 
 good work gotten out of them in some way, large 
 increase of population, and diminishing product, would 
 soon be noticeable, and starvation and barbarism would 
 be likely to come in time. Socialism grows on wrongs 
 in society, thriving especially amid the class distinctions 
 that still survive in Continental Europe. In America, 
 putting recently developed natural monopoly under
 
 234 The Plain Facts as to the Trusts. 
 
 proper governmental control, together with growth of 
 sound laws to protect labor, and to raise the weak to self- 
 support, will probably make industry sufficiently social- 
 istic to remove unrest and agitation.^ 
 
 Natural Forces Not for Evil. — We may rest assured 
 that no healthful natural force, such as that of lowering 
 cost to raise profit, and that of uniting the savings of 
 many under corporate cooperation for best production, 
 will reduce self-directed business men to wage-receiv- 
 ing dependence, any further than the best interests of 
 themselves and of society require. After large factories 
 arose, general intelligence, and capacity for taking the 
 
 ' Marx's Socialistic Doctrine of Competition is that its wastes, and 
 its deepening of the misery of the masses (both effects deemed to be in- 
 evitable under natural law), will eventually force society to take all busi- 
 ness from the control of capitalists, and to put it under one great monopoly 
 conducted by the state. Professor Ely points out that those are virtually 
 surrendering to socialism who argue as if the monopoly trust is based on 
 the savings of consolidation. Mr. Schwab is quoted as saying that the 
 steel trust is "now more than ever ready to demonstrate that the greater 
 the scope of the combination, the greater the possibilities for economy." 
 [Public Opinion, Feb. 27, 1902.) If the latter were true, the steel trust 
 might soon be a part of the government. Yet the ablest thinkers have no 
 fear of this. 
 
 Economists have always admitted that competition causes wastes 
 (most of the good things cost something), but have held that these are 
 outweighed by its effect to improve production and develop character ; 
 and that competition is not self-annihilating, but a permanent force. Ob- 
 serving the benefits of competition, the increase or continuance of small 
 individual enterprises, and the general elevation of the masses — obvious to 
 every one — Herr Bernstein, a leading socialist of Germany, has given up 
 the expectation that socialism will come by growth of monopoly among the 
 rich, with increasing misery among the poor, and is teaching the good 
 policy followed by all hopeful reformers, namely, that of doing through 
 sound laws and customs all that can be done to benefit humanity. (Ely, 
 167, 179, 190.) The socialism that brings permanently good results in 
 this way is to be welcomed. An account of Bernstein's movement, to 
 change socialists from dreamers into practical workers, and purposeful 
 voters, is published in Public Opinion, Oct. lO, 1901.
 
 Tlic Trusts and the Future of Society. 235 
 
 initiative, increased as never before. The same will 
 doubtless be true hereafter, if society values things 
 rightly, and does not permit an excrescence of monopoly 
 to go unchecked as a natural evolution. Without mon- 
 opolistic clubbing, the power of the trust to lower cost 
 of goods is probably too slender to affect individual 
 progress. God evidently adjusted the forces of nature 
 to develop to the utmost the man or the society that fol- 
 lows them wisely. The need of the present, to make 
 the most of men, is an increase of the practice by which 
 each person does his own thinking and voting, and 
 selects his own work, with self-reliant watchfulness to 
 seize opportunities of advancement. By honestly doing 
 his best for himself, he does his best for his fellow men.^ 
 
 ' In the Latest Articles on Trusts, about a dozen published in The 
 Independent, May I, 1902 (after the preceding pages had been electro- 
 typed), Prof. Commons says that more dangerous than control by trust 
 magnates of railroads (to which they have now added control of shipping 
 to Europe), is the control by their New York banks of capital in money 
 and credit ; that under our inelastic currency system, with no great central 
 bank as in Europe to issue emergency paper, and with currency gravitating 
 into the treasury surplus (deposits of which the magnates can influence), 
 they can crush and buy cheaply a rival concern, by withholding credit, 
 raising interest, or calling loans. He says that, besides the tariff, taxes too 
 low on unused land favor monopoly of timber and minerals ; that because 
 it has no control of its materials (p. 218), the National Biscuit Company 
 has ceased trj-ing to buy out or drive out rivals ; and that leading more 
 voters to buy trust stocks, by making them safer with publicity, will weaken 
 power to control by law (p. 20). He gives specific figures of present rail- 
 road discrimination, saying that the Standard's rate to New Orleans on oil 
 from its refineries at Whiting, Ind., is 23c., against 33c. from Cleveland 
 for independent refiners ; who are entirely shut out of New England (which 
 the Standard reaches by water) by the New Haven road's refusal to give 
 through rates on oil. It is by these special privileges, according to the 
 article by E. H. Crosby, that American society is fast being stratified into 
 castes, as in the older nations. That we are already well started on a 
 period of decline is occasionally claimed with reasons of some force.
 
 2^6 The Plain Facts as to the Trusts. 
 
 Carroll D. Wright says in his article that while we have now even billion- 
 aires [J. D. Rockefeller has been so rated] the poor too are growing richer 
 [Bernstein points out the large increase of persons paying income taxes], 
 and the rich in America own now a smaller part of the total than 40 years 
 ago. To prove better use of wealth, he cites the ;^i 17,000,000 given in 
 large sums by philanthropic Americans in 1 901. Undoubtedly a sincere 
 idea of stewardship is taking hold of the rich. Prof. Sumner shows that 
 by nature wealth-getting must now be done as it is. But the people can 
 hold nature's workings into honest lines — can close some of the tempting 
 opportunities to resort to methods that must soon result in grave public in- 
 jury. Prof. Clark {Independent, May 29) says that if the people by law 
 (pp. 144-159) will only give a chance to competition, whose persistence is 
 now the saving force amid monopoly, no feudalism can ripen. 
 
 Increase of All Manufacturing Concerns in number (p. 163), accord- 
 ing to Census Bulletin of March I4, 1902, was 44.3 per cent from 1890 to 
 1900, against 40 and 0.7 per cent for the two previous decades. Increase 
 of cotton factories was 146 (to 1,051). Concerns making shoes decreased 
 from 2,082 to 1,600, and concerns making farm implements from 910 to 
 715 — doubtless due, as in the previous decade, to suspension of production 
 by hand. Yet decreases occurred in but 18 out of the total of 52 classes. 
 
 Other Additional Facts, published since the preceding chapters were 
 electrotyped, include the following. By a report of the Steel Corporation 
 its gross business for its first year was ^459,000,000, wages paid $113,000,- 
 000, profits $111,000,000, employees 158,000, showing a high rate of profit 
 (nearly 25 per cent), as was expected under its ownership of the best mines 
 and under its high tariff prices. In 1890, in this country's total iron and 
 steel business, capital was $405,000,000, employees 175,000, wages $95,- 
 000,000, and product $478,000,000. The steel trust's average wages per 
 man are therefore higher, but the 1890 figures included all the poor mines 
 and lowest grades of work. 
 
 As to the meat trust, the federal attorneys have charged, as existing up 
 to the present time, the various practices mentioned on pages 14, 123-4 ; and 
 from testimony of men in a position to know, it is generally believed that 
 the charges are true. A temporary injunction has been granted. 
 
 As to municipal ownership (p. 108) U. S. Consul Boyle writes from 
 Liverpool that in Great Britain 99 cities own street railroads, 240 own gas 
 works, and 181 own electric plants. Liverpool has spent over $3,000,000 
 on dwellings to rent to the poor, private enterprise having failed to provide 
 them. By the Municipal Year Book 23 American cities own gas works. 
 In the north central states 35 per cent, and in the south central 60 per cent, 
 still have privately owned water works. Of the former, 30 per cent have 
 municipal electric plants.
 
 PART 11. 
 THE PLAIN FACTS AS TO THE TARIFF.
 
 CHAPTER X. 
 
 FOREIGN TRADE AND PROTECTIVE TARIFFS. 
 
 The Reason for Exchange. — The goods of one country 
 are exchanged for those of another on the principle of 
 all exchange, namely, that each of the two parties thereby 
 gets something he wants more than what he gives. Ex- 
 change gives value to a surplus that would otherwise be 
 wasted, or not produced, and thus adds to wealth almost 
 as essentially as does production. 
 
 The Confusion Over Foreign Trade Arose from Money, 
 as difficult to understand as it is common in use. The 
 Mercantile doctrine of the early moderns, which prevailed 
 in tariff laws until the nineteenth century, and still affects 
 influential thought in leading nations — was that gold and 
 silver alone were worth seeking as wealth. Hungry and 
 shivering consumers did not think about the matter at all. 
 The fact that all necessary commodities were more truly 
 wealth than money to people needing them, who sooner 
 or later included everybody, did not prevent the develop- 
 ment of the Mercantile idea among well-to-do merchants, 
 whose needs as consumers were as nothing compared 
 with their eager desire for the precious coins. Their 
 motive was similar to that of the miser. The purposes 
 of money were partly lost sight of ^ 
 
 I Money as the Only Real Wealth.— Until late years, it seems, the 
 Mercantile doctrine was understood by modern economists to be that noth- 
 ing but gold and silver was real wealth. Doubtless this statement of the 
 doctrine was too strong. Even now, in ordinary demand, money is the 
 best kind of wealth, because easily changed into any other kind. Viewed 
 
 239
 
 240 The Plain Facts as to the Tariff. 
 
 To Cause a Nation to Sell More Than it Bought, there- 
 fore, that a balance of trade might be collected in gold 
 and silver, became a leading object of statesmanship. It 
 was even felt that what one party gained in a trade the 
 other lost, which is true only when one is cheated or 
 mistaken, and gets something different from what he 
 supposed it to be. Laws were made to prohibit sending 
 of the precious metals out of a country, and tariff taxes 
 were levied on goods imported from abroad, to induce 
 people to make commodities at home, that an unfavor- 
 able balance of trade might be guarded against. Of 
 course this policy lost much of its virtue when other 
 nations learned the same practice. Tariff was then met 
 by tariff, shrewdness on one side by shrewdness on the 
 other. But people continued as before to want many 
 things, without regard to whether they were produced 
 at home or not, and when they wanted them badly they 
 offered higher prices for them, until a supply came.^ 
 
 superficially, any business man now appears to be ruled by the Mercantile 
 idea. In its day there was some reason for it in the fact that precious 
 metals from Peru were then flowing into Europe, giving opportunity to add 
 materially to a country's stock of money. Besides, there was then growing 
 up, on the decline of feudalism, the modem system of using money to pay 
 taxes, instead of rendering military service to the king, and of using money 
 to pay rents, instead of delivering a share of the crops. (Ingram, 354 ) 
 
 ' Smuggling. — The excess of price did not always go to pay the tariff 
 duty and the high profit of the importing merchant. Smuggling was a 
 common and profitable crime in those days, especially during the latter 
 half of the eighteenth century. By reason of a feeling that such exorbitant 
 duties could not be right, the smuggler came to be regarded by many, not 
 as a criminal or enemy of society, but as a brave man defying or evading 
 unjust restrictions. Rev. John Wesley's general rules for the Methodist 
 societies, published about a century and a half ago, contained an exhorta- 
 tion against buying goods on which the duty had not been paid. This 
 indicates that such goods were frequently offered. 
 
 Some Importing Prohibited. — After 1775 importation into England of 
 woolen and silk goods, and of cattle and salt meat, was absolutely prohibited.
 
 Foreign Trade and Protection. 241 
 
 To Raise Revenue and Start Industries. — After sounder 
 notions of money came to prevail, the object of getting 
 the precious metals from other nations was partly dis- 
 placed. One object then of import duties was to raise 
 revenue for the government. Another object was to 
 develop a nation's home industries, as nearly as possible 
 to the point of producing everything its people required. 
 These have been the two main purposes of tariff laws 
 down to the present time. Few better objects than the 
 second could engage a government's attention so long as 
 wise methods were adhered to. Next in importance to 
 security of life and property is industrial growth, which 
 furnishes supplies for additional people to live upon, and 
 is the chief means of developing character and civilization. 
 The more nearly a nation produces at home every variety 
 of commodity it needs, the more independent it may be, 
 and the better prepared to bear the suspension of its 
 foreign trade by war. Also, the more closely a nation 
 utilizes its varied resources, the wider is the opportunity 
 for choice of occupations, and the higher the develop- 
 ment of individual skill. The greater the variety of 
 industries, the fewer the competitors of each person, and 
 the greater the number of his customers. 
 
 Duties on grain were so high as to be prohibitory in time of plenty. There 
 was for a time a law requiring, under strict penalties, that the dead should 
 be buried in woolen goods, to encourage the cloth industry. Bounties were 
 paid to start new industries deemed specially desirable, as Germany now 
 does. The present practice prevailed of refunding in drawbacks, on im- 
 ports sent out again, the duties previously paid on them ; and home prod- 
 ucts taxed, like tobacco in America, were given an import duty to balance 
 the internal tax. Reciprocity treaties were also made, and trade with 
 colonies was reserved for vessels of the home nation. Internal trade, 
 though far more important than foreign, was lightly esteemed, because it 
 brought in no gold from abroad. In the sixteenth century trade restriction 
 took the form of money duties, revenue being needed. Previously the 
 restriction consisted of outright prohibition. 
 16
 
 242 The Plai?i Facts as to the Tariff, 
 
 Selling Necessary as Well as Making. — But a person's 
 net profit, the increase of his wealth, depends upon the 
 selhng of his product as much as upon the making of 
 it. Therefore, if a tariff duty at home, shutting out for- 
 eign goods, prevented one from exchanging his product 
 abroad for things of more selhng value than the best he 
 could exchange for at home, the excess of value he 
 would fail to get. He would be poorer by that amount. 
 His nation would be poorer too, because its wealth, ex- 
 cepting a few public buildings and army supplies, is only 
 the aggregate wealth of its citizens. It would have its 
 own less valuable things when instead it might have had 
 the more valuable things from abroad. The foreign 
 nation would fail in the same way to get the extra value. 
 Each would then want the other's product more than its 
 own. 
 
 Admitting Free of Duty Goods Not Produced at Home. 
 This loss has been avoided under a protective system 
 by admitting free of duty desired goods from abroad 
 that are not produced at home. Free admission by the 
 other country of the articles to be exchanged gives to 
 each the full advantage of wealth increase. Such an 
 exchange would be that of farming tools sent from the 
 United States to Brazil and paid for with coffee. These 
 articles, all will agree, should be admitted free of duty 
 if there is no need to raise revenue from them. The rea- 
 son for not producing them at home is ample. The 
 United States seems to have no climate for raising coffee, 
 and the Brazilians are not a mechanical people. 
 
 But Ought Not a Country to Develop All the Resources 
 it does possess, and thus approach nearest to the position 
 of complete economic independence ? The answer to 
 this question depends upon what is necessary to bring
 
 Foreign Trade and Protectioti. 243 
 
 about that development — whether it will be worth its 
 cost. 
 
 When Benefit Exceeds Cost of Protection. — When a 
 protective duty on a commodity imported will induce 
 persons to establish its production at home, the public 
 advantage of possessing another industry, to employ labor 
 and capital, and turn untouched raw materials into wealth, 
 unquestionably justifies the imposition of the duty if by 
 the tax added to price, and by the stopping of exports 
 that tends to follow stopping of imports, the people are 
 not required to give more for the new industry than it 
 will be worth. 
 
 Can There be a Case in which loss to the people would 
 not be greater than the gain ? Yes, there doubtless have 
 been cases in which protection happened to bring good 
 permanent results, and with much less of the chance ele- 
 ment than there is in calamities bringing good in the end. 
 If the resources for the industry are ample, if it would 
 not come soon anyhow, and if the duty is to be no higher 
 at any time than is necessary to give the home producer 
 a fair profit from best effort on his own part, with a pros- 
 pect of removing the duty within a reasonable time — under 
 these conditions it will generally be admitted that a pro- 
 tective tariff may be of great public benefit. This is the 
 " infant industry " argument. 
 
 Protection Best Administered by a Czar. — But such 
 complete control by the government of a tariff duty, 
 changing it up or down so that at any time it is just as it 
 ought to be, might be possible under the Czar of Russia, 
 but never has been in the United States of America. 
 The government here is inevitably the creature of the 
 people, changed in Congress every two years to conform 
 to their will, and moulded daily by what their prevailing
 
 244 ^^^^ Plain Facts as to the Tariff. 
 
 desires are supposed to be. And no less inevitable is it 
 that those who have most to gain from government action 
 will most influence it — tenfold more per voter than other 
 classes not directly concerned. For these reasons it has 
 been said that an infant industry fostered by a tariff duty 
 may soon collar its kind benefactor, and fix the duty 
 indefinitely afterward to suit itself. 
 
 A Protective Tariff Might Develop to the Utmost a 
 country's resources of farm, forest, mine, and workshop, 
 and in the productive energy of its people, if the tariff 
 were made and changed by a wise and noble despot, 
 wholly beyond the reach of selfish petition and specious 
 argument. When a producer had lowered the cost of 
 his product, the tariff would then be lowered too, so that 
 consumers might have all their dues, and the producer no 
 more than all of his. Each would know that he could 
 have a duty to add to his price only so long as he did his 
 best to reach quickly a plane of unaided self-support. 
 When the prospect of reaching this plane was poor, the 
 duty would be removed and the industry abolished, and 
 those engaged in it would have to turn to something else, 
 in which they could make articles worth their cost, and 
 get a living without a tax on the people added to selling 
 price. 
 
 But Not Among a Self-Governed People. — Of course, no 
 such lofty minded potentate has ever lived on earth, or 
 ever will live. It is scarcely more likely that a protec- 
 tive tariff in America will ever compare long in justice 
 with the ordinary laws. It differs essentially from them 
 in the opportunity it affords for private gain at unnoticed 
 public expense, furnishing " a powerful motive for sub- 
 scription to campaign funds,^ and a temptation to corrupt 
 
 'Hadley, 440.
 
 Foreign Trade mid Protectioti. 245 
 
 practices." A large Congress of two houses could never 
 change a tariff schedule with sufificient ease and prompt- 
 ness to keep duties continually near what they ought 
 to be.^ 
 
 Money Gain Makes Greatest Activity in Politics. — No 
 probable development of intelligent patriotism among 
 the people can be expected soon to overcome the diffi- 
 culty. A man's effort to know and do his whole public 
 duty has little influence on the votes of others until he 
 begins to talk and work, and spend time and money, like 
 a candidate for office. It may be true that to do this 
 disinterestedly for the general good, without reward from 
 the party, or hope of special gain from the policy advo- 
 cated, would oftener arouse suspicion or pity than com- 
 mendation. It is probable that if temperance workers 
 had something to sell in place of whisky, and followed 
 
 'Profits Not Higher in Protected Industries. — It is not meant here 
 that profits are higher in protected industries than in others. If they were 
 higher, and the industry were not monopolized by a trust, new concerns 
 would be started until by increasing supply and lowering price the rate of 
 profit on capital was brought down to the usual level. After this lowering 
 of profits, the only gain from the tariff is that it saves its beneficiaries from 
 the trouble and loss of giving up one business and starting in another. If 
 the tariff duty had never been levied, they would not have gotten into their 
 predicament. But until they can offer about as good values as their foreign 
 competitor, they must have the tariff or go out of business. 
 
 The Loss Caused by Delay in Giving up Protection. — The tariff is 
 unjust and harmful to the public when the industry fostered is not promptly 
 getting ready to do without the duty. While it relies on the duty, its capi- 
 tal and labor are not earning the living received. Not only do the people 
 give free to the industry the tariff addition to price, getting no more value 
 in goods than they could get abroad without that price addition, but they 
 lose the advantage of having this capital and labor in some other industry, 
 self-supporting, whose product would then be more plentiful for home use, 
 or by shipment abroad would make imported goods more plentifial. A 
 protective tariff has therefore the effect to make a people poorer than they 
 would otherwise be. It turns labor and capital from industries yielding 
 greatest value of product to others yielding less value.
 
 246 The Plain Facts as to the Tariff. 
 
 the methods of practical pohtics, using money, promising 
 spoils, and making little pretense of morality and religion, 
 they would be regarded differently by a considerable 
 class who now hold them in contempt. 
 
 Work for Tariff Reform is a Thankless Task. — Among 
 consumers no pecuniary self-interest to speak of is in- 
 volved — not that the money cost to them is trivial, but 
 that being unconscious of it they are not concerned. A 
 tariff duty adding tens of millions of dollars to the in- 
 come of one great industry may not directly increase the 
 expense of an average family five dollars a year ; and 
 this expense, because unknown, may pass as nothing.^ 
 Merchants importing foreign goods, who would gain from 
 reduction of duties and larger importations, are a small 
 class. Other merchants are not concerned. Wherever 
 goods are made, people must have them, and a profit 
 must be allowed to the seller. For these reasons, direct 
 personal gain being on one side, against what at least 
 appears to be only the general good on the other, which 
 in this question few voters take the trouble to understand, 
 
 1 How Much Does the Tariff Cost a Family ? — In American Social 
 Science Journal of 1890 (Vol. 27, p. 109) Senator Hoar was quoted as 
 saying in 1888 that the tariff cost a family of seven (earning $2.50 a day) 
 I50 a year, and Carroll D. Wright as saying that its cost was ^loo to a 
 man earning ^1,000 a year. The J50 estimate now seems sufficient for a 
 $1,000 salary where the husband wears no fine imported woolens and fur- 
 nishings, the wife buys few fine silks, woolens, linens, cottons, laces, 
 gloves, etc., and the table is not generously supplied with sugar, raisins, 
 oranges, etc. To a city family, living well, $100 may be nearer the correct 
 figure. Many of the fine goods mentioned, whether made at home or 
 abroad, are increased in price by from 40 to loo per cent. Something also 
 is added to retail prices by the duties on lumber, iron, and other materials, 
 though the effect of our protection to weaken market abroad lowers prices 
 of flour and butter. To a working man's family living on less than $500 a 
 year, using common groceries and wearing cheap clothing, the cost of the 
 tariff may not be over $20 a year. It is shown in Chapter XIII. that the 
 tariff makes no net addition to employment and wages.
 
 Foreign Trade and Protection. 247 
 
 effectual reform of the tariff has been waiting for eco- 
 nomic changes to show clearly its advantage to impor- 
 tant branches of business. The interests of American 
 consumers have not been sufficient to affect tariff legisla- 
 tion. The employees of protected industries naturally 
 feel that their interests are with their employers. Gain 
 to the latter, however obtained, the skilled workmen they 
 must have may often share to some extent. All the 
 workmen share it when this gain is nothing but to con- 
 tinue in business undisturbed. If the industry were 
 wholly out of place in this country, and never could exist 
 without a high tariff — a clear gift from consumers — its 
 suspension would cause its workmen the trouble of find- 
 ing other employment. 
 
 The Historic Opposition to Protection in the South, 
 arising from its having before the war but the one indus- 
 try of agriculture, needing no tariff, and its interest in 
 having the foreign as well as the home field in which to 
 sell its cotton and buy manufactured goods, gave way to 
 some extent in 1894 to a protective sentiment in those 
 states which now have iron, coal, lumber, sugar, and 
 cotton manufacturing industries. 
 
 Perhaps Censure is Not Deserved by Either Side in the 
 tariff controversy. People's opinions are seldom con- 
 trary to their immediate self-interest. The average voter, 
 with the disconnected information he gets, cannot be 
 expected to study out the truth here involved, and then 
 to vote for it intelligently and persistently. Aside from 
 the practice of following party without question, it is 
 easy for him to feel that if any net advantage is to be 
 obtained from tariff reform, it is too distant, and too un- 
 certain, to justify his hearty support of it. The manu- 
 facturer whose business depends to any extent upon a
 
 248 The Plain Facts as to the Tariff. 
 
 protective duty, may not even force himself, if he tried, 
 to perceive the scientific truth of the doctrine of free 
 trade. Like him, his employees, the merchants who sell 
 to them, and the people in general of the entire district 
 benefited by his industry, will mainly be protectionists. 
 They all may be excused by saying they could not help 
 believing an old doctrine that is not true when it is a 
 source of gain or advantage.^ 
 
 The Fact that Common Sense in the Past has Approved 
 Protection enables these people, with some show of con- 
 science, to look away from its weak points. But the 
 common sense of the past also approved or permitted 
 conquest for tribute, slavery, royal grants of monopoly 
 for the sale of necessary commodities, forced tolls along 
 navigable rivers, and tariffs between portions of the same 
 country.^ Protective tariffs as known to-day were devised 
 
 1 Spending from the Treasury to Retain Protection. — Nor could 
 they easily avoid believing in other policies that contribute to that gain. It 
 is well known that the reasons for the present payment of $140,000,000 a 
 year in pensions comprised more than the admitted duty of helping needy 
 soldiers, and more than the votes to be gained or held by paying that vast 
 sum to nearly a million pensioners. A strong motive for the later pension 
 laws, and for unchecked spending in other ways, was to make a con- 
 tinuing need for the revenue derived from the tariff, and thus to retain pro- 
 tection as a permanent policy. (Adams, 81.) The war debt having been 
 chiefly paid, and a great surplus accumulating in the treasury, high protec- 
 tion was then (1880-90) in danger of public disfavor from lack of good 
 reasons for its continuance. Pensions paid aggregate 1^2,763,350,033, from 
 1790 to 1 901. 
 
 ^ Tariffs Between Parts of the Same Country. — Between the provinces 
 of France there were tariffs until the Revolution of 1789, which swept them 
 away, with other harmful infringements of liberty. At the present time, 
 to raise local revenue, the cities of Southern Europe levy a burdensome 
 duty, called the octroi, on food and materials brought into town. France 
 has had in late years over 1,400 communes with such a tax. (Roberts, 53- ) 
 The octroi duties of Paris, in 1866, reached ^8 per inhabitant. In Italy, 
 within the last several years, the miserably poor people have given way 
 to rioting over the octroi. Americans can imagine the vexation and loss,
 
 Foreign Trade and Protection. 249 
 
 and continued for a similar purpose, namely, to benefit 
 the people favored by forcing value from others, or by 
 preventing them from getting value. The doctrine has 
 survived because the element of injustice is usually small, 
 is generally unnoticed, can be excused by claims of patri- 
 otism, and may be overcome by growth of home compe- 
 tition in the favored industry. 
 
 Protection Might be Good for a Dull People. — Further 
 examining the doctrine of protection, it is probably true 
 that a carefully levied and well controlled protective tariff, 
 as indicated above, might be useful in a newly acquired 
 colony of stagnant civilization, whose people needed to 
 be waked up and put to work in better lines. Such a 
 tariff might possibly have the same beneficial effects in a 
 new country with rich resources somewhat difficult to 
 develop, before which industry paused timid and hesitat- 
 ing, if outside capital could thus be induced to start in- 
 dustries decidedly suitable, or if there were home labor 
 and capital not already employed to best advantage. In 
 these cases the starting of some new industries, to increase 
 wealth, employment, and purchasing power, might be of 
 more value to consumers of settled occupation than the 
 price added to some commodities by a duty on imports. 
 
 to both sellers and buyers, of tariffs against goods brought into cities and 
 states. A certain town in Virginia remembers vividly the effect of a market 
 house ordinance in driving the farmers and their custom to adjacent vil- 
 lages. For the same reason turnpike tolls have been abolished in most 
 states. A national tarifiT is really the same evil, in a form less acute. Be- 
 cause free trade is good among all our states it v/ould also be good, if once 
 established, with Canada and with every land. Many people in New York 
 and Chicago are just as foreign as those in Europe. Each person has only 
 such dealings with others, wherever they may be, as are to his own advan- 
 tage. The refusal in some cases by workmen in Chicago building trades 
 to use materials made outside the city was a form of protection about as 
 sound as other forms. (Spahr, l8l. )
 
 250 The Plain Facts as to the Tariff. 
 
 The industries might not come otherwise. People need- 
 ing to be encouraged thus to engage in industry might 
 not soon master the government for the sake of control- 
 hng the tariff from which they profited. With them 
 therefore a government of ordinary wisdom and purity 
 might suffice for tariff legislation that would result in 
 considerably more good than harm ; though even here, 
 in modern times, there would probably be better ways 
 of developing industry. 
 
 But Clearly Protection is Not the Ideal Condition of 
 industry among people of advanced civilization. Such 
 people learn best for themselves which occupations yield 
 largest returns, and engage in them without being paid 
 to do so. Not only is their government's knowledge of 
 the situation no better than that of the leading class in 
 any line of industry, and not only is it impossible for a 
 Congress of men, not of angels, to avoid being drawn 
 into favoring some by injuring others, but the best tariff 
 system conceivable would be more likely to hinder than 
 to promote wealth production in the aggregate. 
 
 The Natural Protection that Every Person Everywhere 
 Possesses in his business has been hidden from view by 
 the growth of modern civilization under protective tariffs, 
 constantly defended by the classes favored. The idea 
 that highest development of wealth production depends 
 upon protective tariffs gives way quickly when one's in- 
 quiry is carried below the surface of the subject. Every 
 producer's effort is naturally protected by the fact that 
 he gets and has only what he himself grows or makes. 
 No matter how much cheaper his product may be made 
 by others, if he is in the best field open to him he can- 
 not give up making it and buy of them. To have any- 
 thing, either to use or buy with, he must continue his
 
 Foreign Trade and Protection. 2 5 i 
 
 own or some other kind of production. He could not be 
 crowded into idleness if he wanted to be. He must con- 
 tinue to produce in order to live. So it is with every 
 worker in the country. Not one of them, unless he had 
 savings or friends to live upon, could give up labor or 
 production of some kind if foreign people made his prod- 
 uct for half its cost to him. Therefore, as every person 
 buying goods shipped in from abroad must first have 
 produced something at home to exchange for the neces- 
 sary money, importing goods can never stop home indus- 
 try until they are shipped in to be given away free. Nor 
 can importing drive unprotected producers from one in- 
 dustry to another, when each has chosen the best avail- 
 able field, except by product-cheapening improvements, 
 which have the same effect when introduced at home. 
 
 Buyers Know What They Want. — Now these enlight- 
 ened people are more likely to know than an influenced 
 government what goods they want and ought to have.* 
 
 ' To Force People's Wants in Other Ways besides protection is some- 
 times a temptation. Such is the effect of laws against oleomargarine, 
 further than to prevent deception by passing it for real butter. If law and 
 opinion permitted dealers to handle oleomargarine freely, they would be 
 content with less profit on it, offering it for sale everywhere, and poor peo- 
 ple using little or no butter would find in the former a wholesome substitute 
 they could afford to use largely, while others preferring real butter might 
 buy the dairyman's product as before. The living of those having least 
 would then be increased, and by saving beef suet of low value, thus adding 
 to wealth. If butter fell somewhat in price, larger use of it might maintain 
 the profits of its production, but whether or not that occurred, the con- 
 sumer's gain in such cases, in society as a whole, greatly outweighs the 
 producer's loss. What is saved in buying one article is spent for other 
 things, and the total quantity of production is increased. In people's 
 necessity by nature for food, and in the lack of it among many millions, to 
 prevent this necessity from being lessened by choice of oleomargarine is 
 the same in principle as a doctor's making a market for his services by 
 keeping a patient sick. 
 
 The Monopoly Spirit and Oleomargarine. — In the dairymen's present
 
 252 TJic Plain Facts as to the Tariff. 
 
 A person buys an article shipped from abroad because 
 he wants it most, and thus gets most value for his money. 
 All value is only the measure of want or desire. Goods 
 would not be imported if they were not bought, and they 
 would not be bought if they were not the most valuable 
 
 effort, after their defeat last year, to induce Congress to levy a tax of ten 
 cents a pound on substances colored to imitate butter, it is difficult to per- 
 ceive a motive other than that which influenced men in times past who held 
 tenaciously to monopolies granted them by the king. Even if oleomar- 
 garine were unwholesome, practically never claimed, dairymen's action 
 against it would be questionable. It is now taxed two cents a pound, and by 
 reason of the tax stamp its packages must bear, and by placards required by 
 some states announcing that "oleomargarine is sold here," it cannot well 
 be sold by deception for butter. Laws to prohibit coloring it yellow (set 
 aside in some states because not applying also to butter) are a confession 
 that it is so nearly as good as butter that users cannot tell the difference. 
 A different color, in addition to the stamp label, would tend to turn the 
 palate against it. Claiming " any shade of yellow " as the trademark of 
 butter, might not leave another suitable color. It seems that butter is too 
 good an article to require forcing on people by taking away their supply of 
 other things. If Chicago meat packers are monopolists by means of illegal 
 freight rates, dairymen taking a right view could scarcely desire to follow 
 the same spirit by means of law. Who believes this bill (probably to be 
 enacted) is really intended to protect from deception ? It may not bear test 
 by the rule of courts against laws not designed for what they pretend to do. 
 Rejection by the House, when passing the bill, of an amendment permit- 
 ting oleomargarine to be sold in pound packages only, each to bear the 
 name in sunken letters, shows that prevention of deception is not the ob- 
 ject, but destruction of the oleomargarine trade. Such an extension of the 
 protective principle to interior trade is not surprising. The bill's permis- 
 sion to states to control oleomargarine traffic will be important. The laws 
 of thirty-two of them prohibiting its manufacture within their borders are 
 void against inward shipments of it from other states. 
 
 " Cheap and Nasty is the expressive term applied to some British prod- 
 ucts. ... It should be borne in mind that the sole aim of cheapness tends 
 to inferiority of quality." (Stebbins, 53.) This might be called kind 
 advice to buyers. Some will remember the "cheap coat, cheap man" 
 argument used in 1888. On the contrary, according to Jacob Schoenhofs 
 article in 77/1? Forum of June, 1900, the tariff on wool has led to lai^e use 
 of shoddy and cotton in cloth sold at good prices under the 75 per cent pro- 
 tection on woolens.
 
 Foreign Trade and Protection. 253 
 
 offered at the price. The more imported goods are 
 bought, the greater is the excess of value obtained by 
 the buyers over the best they could have obtained by 
 purchasing goods made at home. What is this excess 
 of value but added wealth ? What measures a person's 
 or a country's wealth but the sum of the values of the 
 things owned ? 
 
 People Cannot Pay Out More Than They Have Taken 
 In. — Could not this be overdone, until a country's money 
 were all drained off abroad by purchasing imported goods? 
 Certainly, it could be and would be if people kept on buy- 
 ing with cash until their last dollar was paid out. But 
 nature's protection to home industry includes this danger 
 also. Getting a living is a continuing process. No per- 
 son, no family, no city or country, can pay out more 
 money than has been taken in. And to get the neces- 
 sary money, labor, crops, or goods of some kind must 
 continue to be sold if buying is to continue. Therefore, 
 a country could not, if it desired, continue long to buy 
 more goods from abroad than foreign countries bought 
 of it. The fact is that the people of each nation pay 
 those of the other with goods, not with money. As will 
 be explained presently, very little money is shipped, each 
 country keeping the money it had. On each side in the 
 exchange the country gets goods worth more to it than 
 those sent out, increasing its wealth by the excess of 
 value. Under perfect free trade this process would give 
 an enlightened people the largest possible increase of 
 wealth, the most desirable variety and quality of com- 
 modities, and the highest development away from self- 
 injuring narrow-mindedness up towards the great truth ^ 
 
 ' Common Sense and Professors' Theories. — Defenders of protec- 
 tection, perceiving the logic of free trade, have been in the habit of call-
 
 254 T^^^^ Plain Facts as to the Tariff. 
 
 that what is best for all mankind is eventually best for 
 every person everywhere. 
 
 Prudent People Find a Way to Stop Paying Out Their 
 Money before it runs low. But if they did not, and 
 kept on shipping it out to pay for imported goods, some 
 would soon be unable to buy. Narrowing of demand 
 and scarcity of money would lower prices, foreign goods 
 would then be taken elsewhere where prices were higher, 
 and foreign money would be sent in to get bargains in 
 home products. The country's proper share of metal 
 money would thus be restored, and prices raised in time 
 to the normal level. Or, describing the same process as it 
 actually takes place, when a country's exports fall below 
 its imports, with outward shipments of gold, bankers 
 become more cautious, and restrict loans ; and from 
 
 ing theirs the arguments of common sense business men, and free trade 
 principles the impractical theories of professors (suggesting the kind that 
 have to be led in out of the rain). Doubtless fine-spun theories of little 
 force have been advanced for free trade, but not often for the sake of the 
 advantage there is in it for a class, which is the chief motive for defence of 
 protection. The latter' s arguments for making trade and enriching the 
 people appear at their best when received with the common sense that is 
 convinced easily — that never takes the trouble to inquire after the truth. 
 That people cannot continue buying unless they continue producing some- 
 thing to buy with, and that they do not buy or trade at all unless they get 
 thus what they want most, are free trade truths that seem sufficiently com- 
 mon-place. 
 
 The Unanswerable Reason for Protection was grasped by a Cali- 
 fornia nurseryman. He ingenuously said to fellow traveler : "I used to 
 be undecided on this tariflf question ; but when I saw the difference made 
 in raisin growing by the Dingley bill — loo per cent profit after the hard 
 times — I knew at last that protection was the right thing." It was 
 enough to know there was money in it ; the case of the consumer was no 
 affair of his. The time necessary for lowering price by increasing produc- 
 tion was evidently to be long, or the tariff advantage would not have been 
 valuable. The fact that the duty of 2 j^ cents a pound on raisins costs few 
 families as much as ;^l a year, really makes the case worse. If it cost $lo 
 a year the people might not allow it to continue.
 
 Foreign Trade and Protection. 255 
 
 scarcity of money people soon begin to feel poorer, and 
 check their buying of all goods, foreign and domestic. 
 
 Goods Traded for Goods. — Hence, to make readier sale 
 and better prices, shippers of foreign goods into a coun- 
 try not having already an established export trade, do 
 not expect pay from its scanty stock of money, which 
 may include no gold, but consist of silver and copper of 
 various coinage. They arrange to take instead those 
 products that sell to best advantage in their own land. 
 Cloth, weapons, and utensils sent or brought from Eng- 
 land and Germany to poor or undeveloped countries, 
 such as Morocco, Haiti, Costa Rica, and the Pacific 
 islands, must usually be traded for other goods. Such 
 countries have little money to pay that foreign traders 
 would accept to take home, and could not buy if money 
 alone were demanded. Merchants at their ports, gener- 
 ally foreigners, being buyers of home products there 
 marketed, exchange them for such foreign goods as are 
 demanded — sending the home products to a foreign land, 
 and with the money they bring buying a new stock of 
 manufactures. Getting a profit on both the home and 
 the foreign goods gives large gains to such trading 
 before too many have engaged in it. The early fur 
 traders among the Indians in the Northwest enjoyed such 
 profits, as did the English, Portuguese, and Dutch who 
 opened up the trade of the East Indies. American coun- 
 try merchants, especially in the mountains of the Southern 
 States, now trade goods for goods in a similar way, not 
 paying cash for farm produce. In the barbarous lands 
 mentioned above, whether or not the same merchant 
 buys native products and brings in foreign goods also, 
 the process is unchanged. Where the business con- 
 tinues, an outflow of native products is kept up by some-
 
 256 The Plain Facts as to the Tariff. 
 
 body that balances the inflow of foreign goods. The 
 same is true of the greatest and richest nations, as of 
 every town and county in America, and of every family 
 not living on savings or outside assistance. A family 
 may exchange its labor. Use of money does not change 
 the process. Goods are traded for goods. 
 
 Inflow and Outflow of Gold. — Outflow of gold from 
 an enlightened nation, therefore, is stopped by scarcity 
 of money, falling prices, and restriction of the purchase 
 of imports, through fear of hard times. Inflow of gold, 
 on the contrary, is soon stopped by its effect to increase 
 purchases of foreign goods, money being plentiful at 
 home and prices low abroad ; and inflow is also checked 
 by restriction in buying, as just described, in the coun- 
 tries to which exports are sent, money there being 
 scarce by reason of the outflow to the country considered. 
 Besides, high prices in this country may check exports, 
 as was lately the case with American corn (shipments in 
 last December being less than a tenth those of Decem- 
 ber, 1900); and the high prices will also attract imports 
 that are admitted. By decreasing exports, with increas- 
 ing imports, this country's excessive stock of gold is 
 then reduced by outflow to its normal share, giving to 
 other countries their normal shares. Exchange bankers, 
 described in the next chapter, watch each country's need 
 of gold so closely in interest rates that the share it pos- 
 sesses is usually just what its proportion of the world's 
 business requires. By their own self-interest the quan- 
 tity of gold is regulated. Protective tariffs have no 
 direct effect.' 
 
 ' The Bad Condition of Japanese Finances in the early part of 1901 
 was the result of extravagant spending and over-investment, caused by 
 large and unnatural inflow of money from government loans, and from the
 
 Foreign Trade and Protection. 257 
 
 In Richer Nations Imports Are Bought With Money. — 
 
 In the richer nations of Europe an American manufac- 
 turer introducing his goods looks only for money, as he 
 does at home. Buyers in these countries are well able 
 to provide a money supply. Commerce is established, 
 with an export trade sufficient to balance the import 
 trade, and prevent an outward drain of gold. Importing 
 merchants in America buy in England, France, and Ger- 
 many the woolens, silks, and pottery they can sell at a 
 profit. Such merchants as John Wanamaker, Marshall 
 Field, and John V. Farwell have offices and buyers in 
 the manufacturing centers of Europe ; while European 
 manufacturers, especially with fine dry goods, maintain 
 selling agencies in New York, and send traveling men to 
 wholesalers in the interior cities. Dealers in nations of 
 this class send abroad for what they want, or give orders 
 to foreign agents. An American exporter of wheat, be- 
 fore he ships, gets a telegraphic order from a Liverpool 
 importer, which order may come in response to a tele- 
 gram sent offering wheat at a stated price. It is to the 
 South American, African, and Asiatic ports that a vessel 
 is sometimes sent in the old way, with a cargo of goods 
 not previously ordered, to be exchanged for goods or 
 money as circumstances may determine. In the eight- 
 eenth century rum and trinkets were regularly taken to 
 the coast of Guinea and exchanged for slaves.^ 
 
 Chinese war indemnity. Excessive spending for imports caused $24,000,000 
 of gold to flow outward in 1900. Lately the balance of Japanese trade has 
 changed, bringing inflow of gold. 
 
 * Introducing Goods Abroad. — Manufacturers in the commercial coun- 
 tries now send men all over the world to establish agencies, and to in- 
 duce local merchants to handle and order their goods. American farming 
 machinery has long been known and ordered by dealers wherever much of 
 it is needed. Companies doing business on a large scale, such as the Singer 
 Sewing Machine Company, the McCormick Harvesting Machine Com- 
 
 17
 
 258 TJic Plain Facts as to the Tariff. 
 
 No Danger of Poverty from Free Trade. — All these 
 things being true, as to exchange of goods for goods, it 
 will be seen that there is no danger of poverty from free 
 trade. People will not buy unless foreign goods are 
 more desired than their cost ; and whatever the purchase 
 or exchange, they get back something for what they 
 give. Not only can there be no loss, but under free 
 trade, as stated before, an advanced people can accumu- 
 late wealth most rapidly and certainly. 
 
 A System of Industry in a New Country or section, 
 settled by progressive people, would ordinarily be de- 
 veloped in about the same way as was the system of the 
 United States. When so many persons have engaged in 
 the first industries of farming, stock raising, mining, and 
 lumbering, that prices of these products fall, or from 
 lack of inland transportation the point of diminishing 
 returns is approached in their production — long before 
 that time as a rule — men of enterprise with some capital 
 notice opportunities for gain in new occupations for which 
 demand is springing up. As the American coast cities 
 grew, and as the people in the settled regions developed 
 wants and means for a larger supply of goods of finer 
 
 pany, and the Standard Oil Company, maintain their own warehouses and 
 selling agents in all countries affording a sufficient market. In the more 
 backward countries, not having reliable importing merchants, foreign sellers 
 must establish their own agencies. This is the case in Greece, as lately ex- 
 plained in a published letter from the American consul. British and Ger- 
 man exporters have agents there, who push the sale of goods, and attend 
 to credits and collections. German manufacturers have started in recent 
 years many agencies in Brazil and Mexico. It is for introducing goods in 
 our new possessions that attention has been directed to learning the Span- 
 ish language. The American Export Association, which serves any manu- 
 facturer by selling his goods in any part of the world, is described in the 
 IVorld^s /Mi/'-i of January, I902.
 
 Foreign Trade and Protection. 259 
 
 manufacture, men engaged in new industries undaunted 
 by competition from Europe. 
 
 Rise of Mamifacturing^ in the American Colonies. — 
 " The industries that now constitute the bulk of our 
 manufactures had their origin in colonial days." ^ Shoes 
 were exported from Lynn in 165 i. A permanent iron 
 furnace was started in Massachusetts in 1644, one built 
 in Virginia in 1619 having been destroyed by Indians. 
 After 1725 iron was regularly exported, and many iron 
 works were operated in the middle colonies. Besides 
 household production of clothing everywhere, manufac- 
 ture of flax and woolen cloth was followed as a regular 
 occupation in all except the Southern colonies, in which 
 effort was confined to the profitable crop of tobacco, 
 readily exchanged for manufactures from Europe. In 
 1770 there were forty paper mills in Pennsylvania, New 
 Jersey and Delaware ; ^ and Pennsylvania had then prob- 
 ably sixty iron furnaces (Levasseur). Connecticut and 
 Pennsylvania had thoroughly established before 1789 the 
 variety of metal industries for which they have ever since 
 been noted. In that year 234 of the 700 families in Lan- 
 caster were engaged in manufacturing. But the greatest 
 industry of all was shipbuilding and ocean carrying, which 
 grew up from the beginning in the Northern colonies, and 
 became important in the South also before 1789. In the 
 one year 1769 a total of 389 vessels were built, aggre- 
 gating 20,000 tons. Manufactures in 1789, it was esti- 
 mated twenty years later, reached a total output in value 
 
 ^Wright, loi. Most of the information here given is taken from his 
 valuable book. 
 
 2 A full account of the rise of all American industries is given by Wright, 
 and brief outlines by Bullock and Levasseur. The information above re- 
 garding paper mills is taken from The Story of Paper Alaking, J. W. Butler 
 Paper Co., Chicago, 1900,
 
 26o TJic Plain Facts as to the Tariff. 
 
 of ;^20, 000,000, of which the exports amounted to $\,- 
 000,000. In 1 79 1 over 1,000,000 bushels of wheat 
 were exported, and in 1792 sawed lumber to the amount 
 of 66,000,000 feet, besides timber and staves. 
 
 Alexander Hamilton's Report on Manufactures, in 1791, 
 gives a long list of articles then made on a considerable 
 scale. The principal were the following : Leather, shoes, 
 harness ; iron bars and sheets, steel, nails, implements, 
 tools, utensils, arms, carriages ; ships, furniture, cooper- 
 age ; cables, cordage, sail-cloth ; paper of various kinds, 
 and paste-board ; hats of fur and wool ; copper, brass and 
 tin wares. Besides the production of these and many- 
 other articles mentioned, carried on as regular trades, 
 there was "a vast scene of household manufacturing." ^ 
 
 Colonial Manufacturing Restricted by England. — All 
 this was done, not under protection, but under attempts 
 at suppression. Before the Revolution, EngHsh tariffs 
 were made to hinder, not to help American manufactur- 
 ing. The intention was to keep the colonies engaged 
 in producing raw materials for England, that the latter 
 might be well supplied with these, and also that the 
 colonial market might be reserved for her manufactures. 
 In 1699 Parliament prohibited the exportation of wool 
 and woolen goods from the colonies, and in 1731 the 
 exportation of hats. The making of cloth in New York 
 was prohibited by Holland with heavy penalties. In 
 1750 Parliament forbade the erection of new iron forges, 
 rolling mills, and slitting mills, to restrict the colonies to 
 the production of pig and bar iron. Colonial manufac- 
 turing, therefore, developed " not only in the face of 
 English competition, but in spite of repeated attempts to 
 destroy these industries." ^ 
 
 1 Bullock, 52. 2 Bullock, 50.
 
 Foreign Trade and Protection. 26 1 
 
 Did the Independent Country Need Protection? — After 
 the peace of 1783 many enterprises made necessary by 
 the Revolutionary War ^ were suspended, commerce hav- 
 ing been resumed with England, whose steam engines 
 and machines for spinning and weaving (invented 1767— 
 85) had meanwhile been rapidly developed. The diffi- 
 culties of hurriedly starting these American enterprises, 
 in conditions not yet ready for them, and the necessity 
 to consumers of having to put up with unsatisfactory 
 goods, were only a part of the losses of war, whatever the 
 value of the experience. Men abandoned these industries 
 because better business was at hand, yielding products 
 whose exchange for foreign wares was a benefit to all 
 concerned. But American manufacturing as a whole 
 remained vigorous, as shown above in the figures for 
 1789. While it is true that a need for systematic regu- 
 lation of industry and commerce was a cause of union in 
 1789 under the Constitution, which was the "outcome 
 of the industrial necessities of the people " (Wright), there 
 was greater need for harmonizing crude state tariffs, which 
 hampered free trade at home, than for protection against 
 manufacturers abroad. 
 
 An Aroused National Spirit, which in recent times in 
 Europe has so often appeared in self-weakening high 
 tariffs, took wiser methods among Americans after 1783. 
 While different states, in response to popular demand, 
 
 ' Protection Drove America to Revolution.— " The puqDose to mon- 
 opolize the trade of America brought on the Revolution, by unjust taxes, 
 and the crushing out of local industries." (Roberts, 59. ) The same pol- 
 icy, ruthlessly followed, brought on England the apparently everlasting 
 Irish question. The two greatest losses, therefore, the British Empire has 
 ever sustained, may be attributed mainly to protection. In these earlier 
 cases its gains were exacted from dependent territory ; in present cases its 
 gains are exacted from a submissive consuming class.
 
 262 TJie Plam Facts as to the Tariff. 
 
 enacted protective tariffs, they followed also their earlier 
 methods, then doubtless fully justifiable, of granting land, 
 remitting taxes for a time, offering prizes, and giving or 
 lending to capable men without capital a few hundred 
 dollars, to assist in starting badly needed industries that 
 would not otherwise have come soon. In the people's 
 " patriotic enthusiasm, many societies arose in all the 
 states for protection and encouragement of industrial 
 undertakings." The fact that " England sought by 
 every means to prevent the introduction of mechanical 
 industry," shows that, regardless of tariffs, the capacity 
 of the Americans, as proved by colonial manufacture 
 under English restrictions, was not to be smothered. 
 The general sentiment against use of English goods 
 gave the unforced encouragement that a person now 
 enjoys anywhere locally who starts a new industiy. 
 " All the great industries, those that are now the great 
 industries, were in existence, and so fully recognized, 
 not only by this country, but by England, that they 
 needed only the fostering care of enterprise, and the per- 
 sistent effort of proprietors of capital and of labor, to 
 secure rapid development" (Wright). 
 
 The Protective Act of 1790, which paved the way for 
 the introduction of the factory system from England 
 (Wright), was only a part of the general system of favor 
 with which the people welcomed new industries. It was 
 a revenue measure with the light incidental protection 
 that many tariff reformers now approve — Jl^ per cent 
 on iron and leather, 10 per cent on paper, 125^4 per cent 
 on chinaware, and i cent a pound on nails. But new 
 enterprises did not wait for it. Having the cotton fields 
 and the water power, with well established iron works, 
 fulling mills, and carding mills, the Americans lacked
 
 Foreign Trade and Protection. 263 
 
 only her new machinery to be ready to compete with 
 England, which prohibited with heavy fine and imprison- 
 ment exportation of machinery and drawings, and emi- 
 gration of skilled workmen. After a number of unsuc- 
 cessful experiments with home inventions of spinning 
 machinery, which, however, American ingenuity was fast 
 bringing to perfection in three different states (Wright), 
 the proffered inducements attracted from England in 
 1789 an experienced young builder and superintendent 
 of cotton mills, Samuel Slater, who brought in his mind 
 plans of the coveted machinery, and completed in 1790 
 at Pawtucket, R, I., the first successful spinning factory 
 in America. 
 
 The Embargo and tlie War Turned the People to Manu- 
 facturing. — But ship building and commerce by sea 
 remained the chief industry, absorbing capital and 
 energy, and yielding great profits, until the enactment by 
 Congress of the embargo act of 1807, which kept Amer- 
 ican ships at home to prevent their capture by the British 
 and French, who in their Napoleonic wars had blockaded 
 the European ports with which Americans traded. The 
 War of 18 1 2 with Great Britain soon followed, which 
 likewise gave protection to manufacturing by stopping in- 
 tercourse with Europe. But of greater importance, stop- 
 ping their immensely profitable ocean carrjnng drove the 
 people into manufacturing. A high tariff in 1807, leav- 
 ing ocean carrying an open occupation, would doubt- 
 less have had little effect, in starting manufacturing, com- 
 pared with the embargo. Yet manufacturing had long 
 been growing, and permanent success was assured. It 
 cannot be doubted that without any tariff at all, and 
 without the embargo and the war, American industries 
 would eventually have reached their present importance.
 
 264 TJic Plain Facts as to the Tariff. 
 
 The embargo and the war, and the higher tariff of 18 16 
 (demanded to preserve industries the war had forced into 
 existence), hastened in an unhealthy way a development 
 of manufacturing that was already coming anyhow. It 
 was the people's ability and desire to engage in new lines 
 of business, with the growing demand, that brought the 
 industries. They had been watching and seizing busi- 
 ness openings before any systematic tariff was enacted — 
 before the Revolution, while British restrictions were yet 
 in force. 
 
 Enterprise Filled the Minds of Capable Men continu- 
 ously. Two Scotchmen, Ronaldson and Binney, estab- 
 lished the present Philadelphia type foundiy in 1 796. Zenas 
 Crane, the father of several generations of noted paper- 
 makers in Western Massachusetts, including the present 
 Governor of that state, built the first paper mill at Dal- 
 ton in 1799. Eli Whitney invented in 1793 his gin for 
 taking the seed from cotton. Robert Fulton made in 
 1807 the first commercial success of a steamboat, im- 
 proving on boats that had previously been experimental 
 successes in Scotland. And Francis C. Lowell, visiting 
 England in 181 1 and studying secretly the machinery 
 there, perfected a new loom, and built at Waltham, 
 Mass., in 18 14, the first scientific and complete textile 
 factory in the world, being fitted with machinery for both 
 spinning and weaving. Previously in England spinning 
 and weaving had been done in separate mills. As 
 America therefore brought to completeness the factory 
 system that England originated (Wright), and as down 
 to the present day America has continually surpassed all 
 other nations in inventions and improvements, to say 
 nothing of her colonial manufacturing against British re- 
 strictions, it is not to be believed that her system of manu-
 
 Foreign Trade a7id Protection. 265 
 
 factures arose to any important extent from protective 
 tariffs. 
 
 Our Industries Not Due to Tariffs or Wars. — "The influ- 
 ences which secured this [development of American 
 manufacturing] must be considered as permanent, and as 
 not affected materially by periods of depression, artificial 
 stimulation, or the forces of war in either direction " 
 (Wright). The experience by which men built up Ameri- 
 can industries originally, on their own resources, against 
 British restriction and all other difficulties, made those 
 industries, it is not to be doubted, far more vigorous than 
 they would have been if England had protected them, 
 and had sent over men like Slater to induce people to 
 engage in them. And whatever wisdom in the long 
 view may be learned by us, and by future generations, 
 from our experience with protection, it is no less certain 
 that if we could have been entirely free from it, our 
 people since 1789 would have enjoyed a vastly greater 
 aggregate of well-being. 
 
 Protection Did Not Start Manufacturing in the South, 
 nor in the back country, where people were occupied 
 with other industries, and did not want to manufacture, 
 or lacked the necessary capital and skill. Neither did 
 it start large scale manufacturing in New England. 
 Having no rich soil, forests, or mines, the people there 
 needed manufacturing industries to occupy their abound- 
 ing energy and ingenuity, and they would have had 
 them if tariff protection had never been devised. So 
 far as protection started more factories than natural con- 
 ditions would otherwise have warranted, it taxed con- 
 sumers in higher price to direct the energy of people 
 who would not have failed to get as good a living in other 
 lines without public help. Inland from the ports, house-
 
 266 The Plain Facts as to the Tariff. 
 
 hold manufacture of cloth, and local manufacture of fur- 
 niture and farm tools, had from the beginning, until near 
 the middle of the nineteenth century, an effectual pro- 
 tection in lack of transportation, and in lack of means 
 or desire for better goods. Each settled community or 
 district produced practically everything it used except a 
 few imported articles of small bulk. In 1785 it cost fiv^e 
 dollars to have a barrel of flour hauled by wagon i 50 
 miles (Hadley). Gradually at places possessing water 
 power or other advantages, hand manufacturing gave 
 way to factories with machinery creditable for the times. 
 Development of the Interior. — Early in the nineteenth 
 century attention was turned to inland transportation, 
 strongly demanded for traffic with the growing West, 
 and a long era of constructing roads, canals, and rail- 
 ways was entered upon. Then followed extensive min- 
 ing and manufacturing of iron and other metals, inven- 
 tion of agricultural machinery, lumbering on a large 
 scale, and a symmetrical growth of all the industries for 
 which there were natural advantages and special demand. 
 The country was filled with resources, and the people 
 were equal to the task of converting them into wealth. 
 
 Competition is Unavoidable. — Protection is talked of as 
 if there were no competitors except those in foreign lands. 
 Only at first does a tariff protect from competition. Any 
 person beginning to produce a commodity already kept 
 for sale in his market has to compete with others that 
 are established in business. His is an infant industry, 
 and from home competitors he can have no tariff pro- 
 tection. Whatever the help given through a tariff, every 
 concern in every business, after the first, must pass un- 
 aided through infancy exposed to established competition.
 
 Foreign Trade and Protection. 267 
 
 But does this keep men from starting new enterprises ? 
 Being a universal condition, nobody thinks of avoiding it. 
 
 Natural Protection in Distance. — The capable man start- 
 ing the first concern of its kind in a town with proper 
 resources, seldom lacks abundant natural protection, in 
 his distance from home competitors, in the cost of trans- 
 portation, and especially in his hold on local patronage. 
 Are not these a ten-fold stronger protection against 
 competitors in foreign lands ? Men starting other con- 
 cerns of the same kind in the town do so because they 
 believe that by making equal or better goods, or by 
 activity in selling, they can get the necessaiy patronage, 
 which may spring from a demand growing as fast as the 
 supply. They continue to have the same natural pro- 
 tection as the first from competition abroad. 
 
 Foreign No Worse Than Home Competition. — Is there 
 a good reason to suppose that foreign competitors are 
 more merciless to a new concern than are competitors 
 at home, and that tariff protection is needed against 
 the one class any more than against the other ? The 
 cases mentioned by defenders of protection in which 
 English manufacturers in the past were said to have tried 
 to kill new enterprises in America with cut prices, as our 
 trusts now do, would probably never have occurred if a 
 protective policy had not attracted attention and started 
 a contest. Besides, so long as foreigners shipped in a 
 commodity at a lower price than the home producer 
 could bear, the public good might require that the home 
 producer make something else. The public would then 
 get the benefit of what the foreigners cut off from their 
 usual price. But their cut prices could not last long. 
 The home producer with resources for making the goods 
 would eventually have better chances to meet their per-
 
 268 TJie Plain Facts as to the Tariff. 
 
 manent competition than that of the home competitors 
 nearest to him, and knowing best how to suit his patrons. 
 As Sumner says, Lord Brougham's oft-quoted plan in 
 1816 to crush out American industries with cut prices, 
 the EngHsh knew would only take their profits and give 
 us good values, while our suitable industries would start 
 again as soon as English prices were raised.^ 
 
 Westward Spread of Manufacturing in America. — It 
 was local demand, with favoring conditions, that caused 
 manufacturing to spread westward with the movement of 
 population. The people had the ability and the desire 
 to engage in a diversity of industries. There was no 
 dearth of wants, nor of the means for supplying them. 
 Pittsburgh's first iron works were established in 1803. 
 The Cincinnati type foundry was started early in the cen- 
 tury. The C. C. Aultman thresher and implement factory 
 at Canton, Ohio, was started in 183 1. Since the war 
 the farm machinery and implement business, one of the 
 leading lines of manufacture, has been located chiefly in 
 the West, where its products are most needed. Iron 
 works, to supply the demand from shipping, lumbering, 
 and mining, sprang up in early days along the lakes. 
 Smelting works and local machine shops accompanied 
 the mining industry over the Rocky Mountain region. 
 In later years, not because of protection, existing long 
 
 ' Competition of Foreign Producers With One Another is of the most 
 effective kind to prevent the charging of arbitraiy prices on imports. They 
 cannot readily combine for the whole world. A combination kept up the 
 price of steel rails for ten years in the European countries that produced 
 them ; but Italy, which produced no rails, then obtained her supplies from 
 Germany at rates 30 per cent less than the German manufacturers exacted 
 from their home buyers. Being protected at home by a tariff, the German 
 producers, by agreement, easily collected a monopolistic price. (Hadley, 
 438. See note on this in Chapter XII.) The fact that foreign buyers fare 
 best is now being proved with emphasis by American trusts.
 
 Foreign Trade and Protection. 269 
 
 before, but because people had gotten ready and demand 
 had arisen, cotton and iron manufacturing, mining and 
 lumbering, have spread over the South. And every new 
 concern not the first of its kind has had to stand unpro- 
 tected against established competition. 
 
 New Concerns Fear Less Than They are Feared. — The 
 fact is, that as a rule the new concerns fear less than they 
 are feared. Not only are they nearest the market and 
 best acquainted with its needs, but to a large extent they 
 are started by men of original ability. The first Ameri- 
 can shops or factories in different lines were usually 
 copies of those in England. Later manufacturers, brav- 
 ing competition, on down to the present time, have grown 
 up on their own original improvements, until American 
 industrial progress has won the admiration of every land. 
 Practical men who start things in this country first see 
 that these are needed, and they are generally able to run 
 them without contributions from the people, collected 
 through a tariff addition to selling price. Protective 
 duties have been of little importance to the system of in- 
 dustries west of the Ohio River ; and whatever the direc- 
 tion they have given to industry east of that line, it has 
 been among people who unaided would have found plenty 
 to do, at a good profit. 
 
 Summarizing, no people can have or buy until they 
 first produce. An enterprising people, like the Amer- 
 icans from the earliest settlement, increase their wants 
 and rise in civilization as fast as conditions warrant — 
 adopting improvements by others, and inventing new 
 ones of their own, as fast as the need or desire for them 
 appears. The kinds of production they engage in from 
 free choice are those that to them yield best returns 
 on the capital and labor spent ; and whenever they
 
 270 TJie Plain Facts as to the Tariff. 
 
 exchange goods, with foreigners no less than among 
 themselves, it may be depended upon that they get more 
 value than they give, and thereby increase their wealth. 
 So long as degree of want makes value, and as excess 
 of value governs exchange, the people will not make 
 mistakes in their trading. The easier it is for them to 
 buy and sell anywhere in the world, as gain may lead 
 them, the higher the aggregate profits of their exchange, 
 and the greater the total value or wealth they get from 
 their production. Therefore, an enlightened people's 
 industry reaches largest results under free trade. 
 
 Enlightenment, Not Protection. — Yet it does not fol- 
 low that a government should adopt the extreme laissez- 
 faire or let-alone policy, doing little more than to pre- 
 serve order. This doctrine, still adhered to by a few of 
 an older school of thinkers, was very popular for a cen- 
 tury after its wide introduction by Adam Smith, opinion 
 passing from the one extreme of regulating everything by 
 law, to the other extreme of leaving everything to com- 
 petition. A sure way remains to promote industry and 
 human well-being — the one way in which there is injus- 
 tice toward none, but benefit for all. This way is for the 
 government to give its people the necessary enhghten- 
 ment. That is all they need in the line of help. Pos- 
 sessing it, their own self-interest leads with unerring cer- 
 tainty to wisest choice of industry and trading. Doing 
 more for them — not only telling some what to do, but 
 paying them for doing it with a tariff bounty taken from 
 others through price — reduces the aggregate of values 
 obtained, and brings harm to personal character, and 
 injustice between class and class. When enlightened 
 they readily find which lines of business yield largest 
 returns — that diversity of industry made most profit-
 
 Foreign Trade and Protection. 27 1 
 
 able by nature, not by the scheming of man. And 
 taking the initiative themselves brings highest develop- 
 ment of business capabihty. This is the ideal of civiliza- 
 tion to strive after. Toward it the American people are 
 progressing.^ 
 
 What Governments are Doing' to Elevate the People. — 
 This all-important enlightenment is being admirably sup- 
 plied by government in the United States, and to a large 
 extent in other advanced countries. More and more is 
 instruction changing from the literary, which is quite 
 desirable for its purpose, to the industrial, which is the 
 essential kind for production of wealth and for earthly 
 well-being. In the foremost states, schools of mining 
 and agriculture, supplemented by the national depart- 
 ments, are now teaching how to make the best possible 
 use of our goodly heritage in the land. Consuls are 
 reporting the progress to be learned from other nations, 
 and telling of opportunities to exchange our goods for 
 others more desired. Manual training in the public 
 schools, soon to be widespread, is early turning the 
 youthful mind toward work, the prime necessity of its 
 nature. State and national departments are gathering 
 information from which labor and capital may learn how 
 to confine themselves to production, without stopping 
 for war. Schools of engineering and practical chemistry 
 are growing in number and usefulness. 
 
 1 Thomas Jefferson and Education. — Thomas Jefferson, founder of 
 the University of Virginia, who was perhaps the greatest of all teachers 
 of some laissez-faire ideas of liberty, did not allow his adherence to them 
 to cover his practical wisdom. He said : " Giving information to the peo- 
 ple is the most certain and the most legitimate engine of government." 
 In the Southern States, where the traditional view favored the least possible 
 governing, the foremost men are now hearty supporters of public education 
 for all classes. About the same is true of England. She is being overtaken 
 by Germany, because of the latter' s superior system of scientific and in- 
 dustrial education.
 
 2/2 The Plain Facts as to the Tariff. 
 
 And Justice and Kindly Consideration for every class, 
 no less essential in business and law than in morals and 
 religion, are coming more and more to prevail. The one 
 way of truth and righteousness — to give every human 
 creature full opportunity to use and enjoy God's gift of 
 life — is at last being generally recognized. It will be 
 recognized further when by tariff reform wider oppor- 
 tunity is allowed for profitable exchange ; and the many 
 are relieved from paying a tribute that does not give the 
 few who receive it, aside from cases of monopoly, any 
 more profit than they would have gotten without it.
 
 CHAPTER XI. 
 
 THE FUTURE OF PROTECTION IN AMERICA. 
 
 American Experience with Protection Could Scarcely 
 Have Been Different. — When it was adopted as a govern- 
 ment policy, free trade was yet untried. Highest wisdom 
 is a product of ages. The sound doctrines of free trade 
 set forth by Adam Smith, the father of PoHtical Econ- 
 omy, had httle effect on British protective tariffs until 
 more than a half century had passed. And then it was 
 not abstract knowledge of the truth that brought about 
 the change to free trade. The cause was simply that the 
 manufacturing class, to be benefited by free trade, grew 
 in time to a position of power over the land-holding class, 
 deriving benefit from protection. 
 
 Protection Kept Up British Rents by making high prices 
 for farm products. Unlike America, which has a great 
 surplus of food and raw materials to export, Great Brit- 
 ain, to obtain a sufficiency, was compelled to import. 
 The change to free trade was not made, as many allege, 
 because protection had made British industries strong to 
 compete with the world. No other nation had previously 
 manufactured extensively by machinery, while since then 
 machinery has become common in many lands. The 
 protectionist quoted in the next chapter said in a great 
 speech that in manufacturing England was a hundred years 
 ahead of France and Germany, largely because she had 
 had peace at home while the latter nations were harassed 
 by hostile armies. Tlie present high protection of Ger- 
 i8 273
 
 274 '^^^'^ Plain Facts as to the Tariff. 
 
 many against American and other food products is main- 
 tained, like that of England before 1 846, by the agrarian 
 or land-holding class, said to be only i 5 per cent of the 
 people. Many manufacturers protest against it, because 
 dear food lowers real wages and quality of work. A 
 new tariff bill proposed in Germany in July, 1901, raises 
 the duty on cattle 1,000 per cent, and on swine 100 per 
 cent. Though by means of bargains between political 
 parties the bill may be enacted, it is encountering unprec- 
 edented opposition, which may eventually result some- 
 what as did the British free trade struggle of 1 846. The 
 socialists have presented against it a petition containing 
 3,500,000 signatures. Now, as in the past, protected 
 producers are ready to make the common people pay 
 double for necessaries of life. In Germany, with its poor 
 soil, the standard of living is already low. Landlords 
 can eventually take in rent practically all that is added 
 by a tariff to price of products, if tenant farmers were 
 previously earning as much as other men of their ability.^ 
 
 1 Adam Smith's Compliment to Farmers and landlords, for being free 
 from monopoly thirst, was based on fact in 1776 ; for then protection was 
 of little use to them, there being no way to transport their "rude produce 
 of the soil." Light manufactures were then the goods of commerce, and 
 still give their producers an advantage in marketing. More canals and 
 ships, and new railroads, changed conditions long before 1846. Besides, 
 people everywhere lived on farming from the beginning, and expected com- 
 petition in that industry, while ability for finer manufacture, being rare, 
 was accustomed to favors. Governments often aided men to start new in- 
 dustries. An exclusive right to make paper for ten years was granted by 
 Massachusetts in 1728, but had been denied to William Bradford by New 
 York in 1724. In the Southern colonies a few paper mills were started 
 with small loans or cash gifts from the legislature. This practice seems to 
 have been allowable where temporary help was given to needed industries 
 that could soon do well alone, and that would not have come otherwise. 
 It was only to a few of the first that sucli aid was given in America. Con- 
 necticut helped the Norwich paper mill two years, but with a total bounty 
 of only ;^77.
 
 The Future of Protection in America. 275 
 
 Repeal of the Corn Laws of Great Britain in 1846 
 opened to her factory operatives a supply of cheap food 
 from abroad — a better Hving for their money wages — 
 by enabhng her manufacturers to bring this food home 
 without paying a duty on it, and thus to sell their wares to 
 foreign peoples who could not pay money. ^ The growth 
 of British industry and commerce, marvelous before that 
 time, has been more marvelous since. Theirs is an exam- 
 ple of what a small country can accomplish, when its peo- 
 ple are content to do only those things they can do best, 
 and are allowed to bring home free of tax the wealth from 
 good trades they can make abroad. In the same way a 
 large country can progress even better, for with it diversity 
 of industry is assured by nature in a variety of resources. 
 
 'AH Classes Benefited. — The repeal was beneficial even to farmers, 
 and raised value of land and rents, because cheaper wheat from abroad 
 enabled wage workers to use more meat and dairy products, raising their 
 prices, and the price of stock feed. The repeal was a decided benefit to 
 America and other lands that then sold in England the British workman's 
 extra food. ' ' Though the people were starved, manufacture was unprofit- 
 able and foreign trade was declining, it needed the catastrophe of the Irish 
 famine to effect a peaceful repeal of laws which did no person any good, and 
 which inflicted prodigious losses on producers and consumers." (Rogers, 
 757.) To some such struggle for deliverance does a government adopting 
 protection subject posterity, if the yoke of a system of industry resting on 
 protection is not to be borne forever. British protection to manufacturing 
 was gradually abolished between 1830 and i860. Duties on raw materials 
 were mostly removed some years before the repeal of the com laws. 
 
 Ruined British Agriculture. — Of course in time, after the full opening 
 of the American West about 18S0 with cheap transportation, free trade 
 brought the present depression to British farming, but in the same way that 
 free trade with the West depressed fanning in our Eastern States. In each 
 case ten consumers are benefited with cheap food where one farmer is 
 harmed with low prices. Besides, in Great Britain the loss was mainly in 
 lower rents to landlords, whose previous gains rested on their monopoly 
 of land overpopulated. In each case farmers have a remedy in change to 
 a variety of small crops, with which the Danes and Dutch are now re- 
 markably successful.
 
 2y6 The Plain Facts as to the Tar iff. 
 
 American Protection Will Go the Same Way. — Similar 
 economic changes will undoubtedly in time overthrow 
 the protective policy in America. It is the remnant of 
 ancient class favoritism that survives in this country. 
 On the Continent of Europe there are still large elements 
 of absolutism in government, and of social distinction 
 between classes, with an old and settled civilization that 
 changes slowly. Protective tariffs, and other question- 
 able forms of government intervention, may continue 
 there for many years. But the American tariff system 
 is being outgrown by our industries, as was that of Great 
 Britain. After America's large and continued foreign 
 sales since 1897 of steel, cotton, leather, and other manu- 
 factures, easily meeting British and German competition, 
 a reason for the tariff on some goods will be difficult to 
 maintain. Yet that may not cause its repeal. Logical 
 difficulties in defending tariffs have always been easily 
 overcome when men's cash profits were thereby kept un- 
 disturbed. The decline of American protection, when it 
 comes, will be due to inexorable laws of nature. With 
 them there can be no quibbling. These laws will work 
 about as follows. 
 
 The United States is a Commercial Nation, having 
 known and enjoyed from the beginning, in spite of the 
 tariff, the gains of trading home goods for foreign goods 
 of more value. This foreign trade has become enormous 
 in amount, reaching in 1900, and again in 1901, an ag- 
 gregate of over two billions of dollars. It has become 
 equally great in importance, having long afforded a 
 market for a large portion of our farm, lumber, petro- 
 leum, and metal products, and affording now a market 
 for many of our manufactures. The people who produce 
 these goods shijopcd abroad, valued in 1901 at nearly
 
 The Fit f lire of Protection in America. 2yj 
 
 fifteen hundred millions of dollars, would be out of work 
 or business if this foreign trade should give way. They 
 must have this trade to make a living in their present 
 occupations, because the goods shipped are a surplus not 
 needed at home — not to be sold except at sacrifice prices, 
 and not all to be used then, but kept to stand in the way 
 of future production. Whether or not we could get 
 along without the " fizz and feathers " we import (Flint), 
 we could not give up our exporting without a revo- 
 lutionary change in our occupations. " The number of 
 persons whose whole income rests on exports, will be 
 found to be three times those whose work would require 
 readjustment in case of a revolutionary change of the 
 tariff" (Atkinson). 
 
 Therefore America Needs Foreign Buyers. — But in 
 order to live, she has to let live. Live and let live must 
 be every man's motto, whether he chooses it or not.^ A 
 protectionist will say that we need not concern ourselves 
 about how the foreigners get their money, so long as 
 they continue to buy of us so freely. No ; they will 
 attend to that. They are doing so now. The trade 
 balance of $6i 5,000,000 in favor of the United States in 
 the year ended June 30, 1898, and that of ^665,000,000 
 
 ^Must Let Live. — A protectionist candidate in 1898 was applauded 
 when he told of suffering in Europe that made prosperity in America, 
 caused by the duty of 1897 on soda ash used in glass making. People 
 moved by such a spirit of selfishness as those who applauded would seem 
 to be in danger of killing the goose that lays the golden eggs — of losing 
 customers by not allowing them to live. Nature provided for their case in 
 the law here referred to. Gains and losses are spread over all nations that 
 have intercourse. Europe's recent prosperity she had to share with us, be- 
 cause her demand for our goods raised their price and our profit. Her loss 
 from militarism and high tariffs we share likewise, because their effect to 
 lessen her people's ability to buy lowers prices of our products, and thus 
 we help to bear her burdens. No man liveth unto himself.
 
 27§ Ihe Plain Facts as to the Tariff. 
 
 in the year ended in 1901, are dilated upon as if it were 
 all paid in cash. Not many years of trade at that rate 
 would be necessary to give America all the world's stock 
 of gold, estimated now at ^$4, 500,000,000. But the treas- 
 ury statistics show that the excess of gold imports over 
 gold exports was only $105,000,000 in 1898, and ;^I3,- 
 000,000 in 1 90 1. In 1900 there was a net export of 
 gold, $3,700,000 ; and again in the calendar year 1901, 
 ;^2,968,ooo. Besides, in addition to the merchandise 
 figures above, ;$ 24,000,000 of silver was exported in 
 1898, and $18,000,000 in 1901. Here was a difference 
 in each year of over half a billion dollars owed to the 
 United States — her sales abroad exceeding by that vast 
 sum her purchases of foreign goods and her net imports 
 ofgold.^ 
 
 How Was This Balance Due America Settled ? — First, 
 a part of it remained abroad to pay dividends to Euro- 
 pean stockholders in American railroads and other enter- 
 prises. American industry was theirs, its net proceeds 
 
 ^ America's Vast Excess of Exports. — American exports, not includ- 
 ing silver and gold, reached $1,487,764,991 in the year ended June 30, 
 1901. Imports were $823,172,165. The years coming next in amounts 
 were as follows : 
 
 1900 — Exports, $1,394,483,082; imports, $849,941,184; excess of ex- 
 ports, $544,541,898. 
 
 1899 — Exports, $1,227,023,302; imports, $697,148,489; excess of ex- 
 ports, $529,874,813. 
 
 The only other cases in which exports exceeded a billion were 1,231 
 millions in 1898, 1,050 in 1897, and 1,030 in 1892. They were between 
 800 and 900 millions in 1880, 1881, 1883, and in each year of the nineties 
 not already given. 
 
 Imports passed 800 millions in 1891, 1892, 1S93, 1900, and 1901. 
 
 Other cases of large excess of exports were 257 millions in 1878, 264 in 
 1879, 259 in 1881, 237 in 1894, 286 in 1897. 
 
 The excess was with imports from 1850 to 1873, excepting two years, 
 reaching 182 millions in 1872. There was an excess of imports three 
 times in late years — 28 millions in 1888, 2 in 18S9, and 18 in 1893.
 
 The Future of Protection in America. 279 
 
 belonged to them, so far as it was carried on with their 
 capital. Second, another part of the balance remained 
 abroad to pay interest on European capital loaned in 
 America on national, state, city, and railroad bonds, and 
 to pay rent on American real estate owned by people 
 living abroad. Third, a part was paid to foreign vessel 
 owners who carried goods to America, their freight 
 charges being added to the reported aggregate of im- 
 ports, which is computed on the values of the goods at 
 the ports from which they are shipped. A part was 
 likewise paid in freight to foreign ships by American ex- 
 porters who delivered at their own expense iron bridges 
 and other goods sent to distant lands, though this item 
 may be overbalanced by freight collected abroad by 
 American ships carrying exports. Fourth, a part of it 
 was paid by American tourists for the pleasures of foreign 
 sight-seeing, which are in effect a part of our imports. 
 Fifth, foreigners working in America send money back 
 home to a large aggregate. An Italian banker of New 
 York testified before an immigration commission that at 
 least ^20,000,000 a year is sent back to Italy. The little 
 hoards of money brought over by immigrants, and men- 
 tioned as a benefit from their coming, amount to a small 
 portion of the money sent back. In the year ending in 
 1 90 1, the total money brought by immigrants landing at 
 New York, about four-fifths of all who come, was ;^ 5,490,- 
 080, an average of ^14. 12 a head. 
 
 Our Annual Payments Abroad. — A statistical authority^ 
 has estimated these items as follows for the year ended 
 June 30, 1901 : Freights, about ^50,000,000; dividends 
 and interest, 1^75,000,000 to ;$ 100,000,000 ; expenses of 
 
 ' Mr. O. P. Austin, Chief of the Bureau of Statistics, in a reply of May, 
 1 901, to a letter of inquiry from a native of India.
 
 28o Tlie Plain Facts as to the Tariff. 
 
 tourists, ;^7 5, 000,000 to ^100,000,000 (over expenses in 
 America of European tourists). Also he adds ^100,- 
 000,000 for investments by Americans in British, Ger- 
 man, and Russian bonds. A considerable sum might 
 perhaps be added for American capital invested during 
 the year in foreign shipping, and in productive enter- 
 prises in Canada, Mexico, Venezuela, and Europe. He 
 adds for debts due from abroad permitted to stand over 
 unsettled, ;$/ 5, 000,000 to ^100,000,000 for each of the 
 years 1900 and 1901. As the total of these items, at 
 the highest estimates, is only $450,000,000, while the 
 excess of exports was ;^665,ooo,ooo, the statistician 
 thinks that, with other invisible items, the remaining 
 ;^2 1 5,000,000 was chiefly settled with American stocks 
 and bonds sent here by European holders to be sold at 
 the high prices of the last two years. This item of 
 stocks sold seems reasonable at $250,000,000 {Dun's 
 Review) for 1901, but no such estimate could be made 
 for 1898. At the beginning of that fiscal year, July i, 
 1897, foreigners held few American stocks to be sold, 
 having been frightened into selling by the silver panic 
 of the previous years ; and in the rising prices of 1 898 
 they would have been less likely to sell than to buy. 
 The freight and divddend items may be larger than the 
 sums given, especially the freight, which some place at 
 $80,000,000.^ To be added also are the net income from 
 
 'Freights and Investments. — In Senator Hanna's recent speech in 
 favor of the ship subsidy bill, he was reported as putting our total payments 
 to foreign ships, for carrying both freight and passengers, at ^150,000,000. 
 As he seemed to count it all dead loss, he would naturally put the amount 
 high ; though on the same principle the loss of foreigners, in all their 
 buying of us in 1901, was ten times as great. The Nation, in a late issue, 
 says balances due America from abroad were not left unsettled in 1901 to 
 more than the usual extent. They may kave been absorbed by America's 
 foreign investments, which a writer in the Contempora7y Review for March,
 
 TJie FuUire of Protection in America. 281 
 
 American business of large British and German fire in- 
 surance companies, and the marine insurance on imports, 
 chiefly with British companies. Besides, the American 
 government's purchase of warships abroad, shipment of 
 army suppHes, and payment of $20,000,000 to Spain for 
 the PhiHppines, must have added materially to our need 
 for a trade balance during the last four years. A part 
 of the trade balance goes to pay American debt abroad 
 when bonds are sent home to be sold. It has been 
 noticed that railroad interest and dividends sent abroad 
 have been decreasing in the aggregate, indicating that 
 our stocks and bonds are falling into the hands of our 
 own people. To a large extent stocks and bonds, sell- 
 ing readily for cash by telegraph, are now used for pay- 
 ing balances instead of gold, the bonds themselves being 
 delivered later by mail or express. 
 
 Outflow of Values is Equalled by Inflow. — In these 
 ways foreigners are enabled to pay America for the goods 
 she sells to them in excess of the goods they sell to her. 
 When added to the visible items, various payments back 
 and forth that cannot be seen nor estimated, make a 
 country's total inflow of values, in a series of years, equal 
 to its total outflow. It gets in return as much as it gives.' 
 
 1902, estimates as now being ^450,000,000 annually. The first large pur- 
 chases by Americans of European bonds came in 1900. Many such pur- 
 chases, it is said, are now being made by them in London. 
 
 'How is it That So Little Money is Shipped when total transactions 
 are so large ? Payment is made by means of foreign exchange. Shipment 
 of coin would be too slow and expensive to admit of this immense trade. 
 Drafts drawn in America on foreign purchasers of American goods are all 
 bought and gathered together by New York bankers. By sale of his draft 
 the American exporter may collect his bill before the sailing of the ship 
 carrying the goods, all insured, and perhaps not delivered to the consignee 
 abroad until he pays the draft drawn on him. The New York banker buy- 
 ing the draft owns the foreign money it calls for. He makes a business of 
 dealing in foreign exchange — drafts calling for money due in other countries.
 
 2^2 The Plain Facts as to the Tariff. 
 
 By means of drafts on England thus bought, and mailed to his London 
 branch for collection, he accumulates money there ; and drafts on that 
 branch drawn by himself he sells in New York to persons desiring to make 
 payments in England. His London branch likewise buys drafts drawn 
 there to collect for goods shipped to America ; and sells drafts on New 
 York as he sells them on London. 
 
 International Banking Houses. — If his is a large banking house, 
 like J. P. Morgan & Co., and Brown Bros. & Co., of New York, he may 
 have a branch in Paris also — his own, or closely allied. If not, he can 
 sell in London, to such houses as that of the Rothschilds, drafts drawn on 
 any goods importer in Europe, in whose financial centers they have branches 
 of their own. Besides, great Continental banks, such as the Credit Lyonnais 
 of Paris, have branches in London, to which drafts on the particular country 
 can be sold. Each of the two New York banking houses mentioned has 
 arrangements as a correspondent with a bank in every important city of the 
 world, that holders of its drafts, or letters of credit, may cash them con- 
 veniently in any country. Drafts on all parts of the world outside of 
 Europe are dealt in by London banks that have branches in remote places, 
 such as Melbourne, Manila, Shanghai, Yokohama, Calcutta, Cape Town, 
 Buenos Ayres. A banker's draft is drawn on another bank in a foreign 
 financial center. An exporter's draft is drawn on the foreign buyer in any 
 place. A draft calls for the money of the country on which it is drawn — 
 dollars, pounds, francs, marks, roubles. It is the country buying goods, 
 therefore, whose money is used in the purchase contract. Depreciating 
 silver, causing low price for the exporter's draft, raises price of his goods. 
 
 London Exchange Used Everywhere. — Payments between different 
 parts of the world are principally made in exchange on London, which has 
 long been the world's financial center, and where banks of every commer- 
 cial country or colony have branches or deposits. Even by the Continental 
 nations, whose payments to one another are made by drafts on their own 
 leading cities, exchange on London is largely used. Much of it comes to 
 German banks in payment for German goods sold distant countries, which 
 sell chiefly to England, and have balances there ; and also in drafts drawn 
 by German exporters against sales to London. A person in New York de- 
 siring to pay I, OCX) francs in Paris may find, by means of telegraphic quo- 
 tations of exchange, that with a draft on London he can buy there the 
 francs already in Paris cheaper than he can buy in New York a draft for 
 them drawn on Paris directly. 
 
 Gold is Shipped, say from New York to London, when the balances 
 in London belonging to New York exchange bankers have fallen so low 
 that they charge above ^4.89 in New York for a pound sterling already in 
 London — worth there but ^4.862/^ as gold bullion. To pay a debt it then 
 becomes cheaper for a remitter to bear the costs of shipping gold coin or
 
 The Future of Protcctio7i in America. 283 
 
 England's Great Excess of Imports. — Returning to the 
 main subject, the case with Great Britain is the reverse 
 of that of America. Great Britain's imports ($2,548,- 
 000,000 in the calendar year 1900) exceed her exports 
 ($1,418,000,000) by a balance much larger than ours, but 
 on the other side of the account. She apparently has to 
 pay for excess of purchases nearly double what we ap- 
 parently collect for excess of sales. Settlement by Great 
 ])ritain is provided for by the industries she carries on 
 abroad. Her many people cannot find business for all 
 their capital in her little home territory. Her excess of 
 goods bought, over goods sold, represents the earnings 
 of her merchant ships carrying for foreigners, of her in- 
 surance business abroad, and of her capital invested or 
 
 bullion — about 2j4 cents for freight and insurance on each pound sterling. 
 In order to get money at his London branch to draw upon, the broker in 
 New York will now pay about ^$4.89 for drafts drawn on England by 
 shippers of American goods. Rather than pay above 54-89, the broker 
 will ship gold himself. When conditions are the opposite, and the broker 
 has little money in New York but much in London, he sells London drafts 
 in New York as low as about $4.83, to get money to pay the many drafts 
 drawn on him in New York by his London branch. He will not sell below 
 I4.83, for it would then be better to have his London branch ship gold. 
 London exchange sells high or low in New York as the total of claims 
 (sent from many lands) payable in London to Americans is small or large 
 to demand. Sometimes a banker ships gold to get higher interest on 
 short time loans. By raising its interest rate, the Bank of England is 
 usually able to stop shipments of gold from London. Being the chief 
 lender, its raising of its own rate tends to make interest firmer for all the 
 London lenders. Besides, the fact that by shipment of gold there is about 
 to be a diminution of loanable funds, tends to strengthen interest as if 
 reduction of supply had already come. 
 
 No Annual Settlements in Foreign Trade. — There is no time in the 
 year at which foreign business is all settled up, and payments made back 
 and forth, as in the daily settlement between two local banks. The treas- 
 ury statistics mean that during the twelve months ending with the June 30th 
 stated, imports and exports have amounted to the respective sums given. 
 On that date foreign business may not be more nearly settled by payments 
 than on other dates — no more than business between New York and Chicago.
 
 284 Tlic Plain Facts as to the Tariff. 
 
 loaned in America, Argentina, South Africa, and else- 
 where ; also the profit on goods she exports, on enter- 
 prises her people conduct abroad, and a considerable sum 
 in the profits of exchange to London banks, on the many 
 drafts they buy, sell or pay. With Great Britain, as with 
 the United States, commerce during the last several years 
 has been exceptionally large. Her excess of imports aver- 
 ages nearer a half billion than the enormous sum indicated 
 above. 
 
 The British Are Not Frightened by Their So-Called 
 Unfavorable Balance of trade, as those Americans would 
 be who turn from rejoicing over our balance the other 
 way, in mental view of heaps of clear gain in gold, to 
 feelings of sympathy for their apparently extravagant 
 cousins across the water. To a mind filled with the pro- 
 tective idea, the British seem to be running recklessly 
 into debt. But they, having learned from centuries of 
 world-wide trade that no large balance from abroad can 
 ever be expected in money, see in their stupendous excess 
 of imports the year's net return from all their business 
 with foreign lands. Imports are to them the same as the 
 crop brought home by a farmer who tills other men's 
 land on the shares. He cannot bring too much. The 
 larger this excess of imports the better, so long as it is 
 not necessary to export gold toward paying for it.^ 
 
 'Increase of British Wealth. — From 1854 to 1901, against exports of 
 ^58,650,000,000, British imports reached $75,220,000,000, with net gold 
 imports besides of ^780,000,000. (Harold Cox, N. A. Re^'ie'w, July, 
 1901.) Their wealth has enormously increased, as shown by their outflow 
 of capital into many foreign lands. Their capital in Argentina has been 
 estimated at ;5ii, 250,000,000, in their colonies at $2,000,000,000, outside 
 of Great Britain at $10,000,000,000. They are still the richest of all 
 people per head, the Danish coming second, and up to i88o were equal 
 to the Americans in aggregate wealth, the total for each nation being then 
 estimated at $44,000,000,000. Statistician Mulhall in 1S99 estimated
 
 TJic Future of Protection in America. 285 
 
 Steady Excess of Imports Shows Best Condition. — 
 Hence, where there is httle or n© inward shipment of gold, 
 a large balance of exports is more questionable than a 
 balance the other way. The balance apparently due 
 America shows that to a large extent her home industry 
 or its profits belong to investors living abroad. The 
 large " favorable " balance of Egypt has consisted of 
 goods sent out to pay the interest on her burdensome 
 debt. Her case has been similar to that of some Irish 
 farmers in the days of excessive rent, who made a busi- 
 ness of dairying and yet were not able to use butter on 
 their own tables. Large amounts coming in would ordi- 
 narily be preferable to large amounts going out, as any 
 merchant knows where the credit system prevails, and as 
 is suggested in the saying that possession is nine points 
 of the law. 
 
 national wealth as follows : United States 82 billions, Great Britain 59, 
 France 48, Germany 40, and Russia 32. {Harper s Weekly, Jan. 18, 
 1902.) Our annual review of commerce, mentioned further on, gives our 
 total wealth in 1900 as estimated at ^^94, 300,000,000. The United States 
 has thirty times the home territory of Great Britain and nearly double her 
 population. 
 
 Trade Balance Further Explained. — In the case of orders sent in 
 from abroad, profit on goods shipped does not belong to the British, but to 
 the foreign purchaser. It belongs to the British when they themselves 
 send out the goods and sell them through their own agencies. Probably 
 Great Britain's free admission of foreign goods tends to increase the trade 
 balance against her, for the reason that her importers are not induced to 
 undervalue goods in order to cut down their payment of duties. Possibly 
 the trade balance in favor of America is likewise increased, by the fact 
 that so large a proportion of our exports are admitted free of duty by Great 
 Britain and her colonies. Moreover, her imports, being entered at their 
 value on arrival, include freight and other expenses, while ours do not, 
 being entered at their value in the shipping port of the producing country. 
 Freight and profits make the value of our imports considerably larger than 
 the sum given. The value assigned to British imports, writes Mr. Austin, 
 American statistician, probably does not include profits, which could not 
 well be ascertained until the goods had been sold.
 
 286 TJic Plain Facts as to the Tariff. 
 
 A Trade Balance Does Not Show Gains and Losses. — 
 Neither one way nor the other is a balance of trade an 
 indication of gain or loss, or of prosperity or depression. 
 Referring to the table, page 287, it will be seen that the 
 older nations that are prosperous, with accumulated 
 capital and established foreign business, have usually a 
 large excess of imports. Especially is this true of the 
 enterprising commercial nations — Great Britain, Ger- 
 many, Holland, Belgium, Denmark, and Switzerland. 
 It is less the case with France. Her people, though 
 fairly prosperous as individuals (not as a nation), are 
 occupied chiefly at home. Sweden and Norway have a 
 large income from their shipping. Italy and Spain are 
 not prosperous, but have perhaps enough earnings 
 abroad from shipping and trade to bear an excess of 
 imports. Foreign capital also is often sent into Spain to 
 be invested in mines. Inflow of foreign capital may 
 chiefly account for excess of imports with Canada and 
 the other British Colonies, and partly also with Turkey, 
 in view of railroad building in Asia Minor, though Tur- 
 key is noted for borrowing and running into debt. Japan 
 has the second greatest steamship company in the world, 
 but her large excess of imports in 1900 was increased 
 by extravagant buying, explained in the preceding chap- 
 ter. China's excess of imports doubtless arose from 
 inflow of capital to develop the country, and from out- 
 side support of missionaries and consuls. 
 
 India's and Argentina's Excess of Exports, and the 
 excess of Brazil, Mexico, Chile, and Australasia, go 
 largely in each case perhaps to pay dividends on capital 
 invested by foreigners. Austria-Hungary's excess of 
 exports probably goes to pay ocean freights (she has 
 little shipping) and interest on debt owed abroad. The
 
 The Future of Protection in America. 
 
 287 
 
 Russians trade among themselves. Except food and 
 raw materials, they produce little that others want, and 
 are not yet sufficiently enlightened or wealthy to desire 
 fine goods from abroad/ Their product gives the mass 
 of the people a bare support of necessaries ; and their 
 
 1 The Foreign Trade of the Important Countries is summarized below. 
 These figures, which are those of the calendar year 1900, except where 
 otherwise stated, are taken from that treasury of facts, the Annual Review 
 of Foreign Commerce, prepared under the direction of O. P. Austin, Chief 
 of the United States Bureau of Statistics. This bureau's annual Statistical 
 Abstract gives a variety of figures as to our own country. Great Britain 
 has an annual publication of the same name. The Macmillan Company's 
 Statesman'' s Year Book gives statistics for every country and colony in the 
 world. 
 
 
 Imports. 
 
 Exports. 
 
 Excess of 
 Imports. 
 
 Excess of 
 Exports. 
 
 Great Britain. 
 
 $2,548,262,000 
 
 $1,418,348,000 
 
 $1,129,914,000 
 
 
 United States. 1 
 
 849,941,000 
 
 1,394,483,000 
 
 
 $544,541,000 
 
 Germany. 
 
 1,304,976,000 
 
 1,101,275,000 
 
 303,701,000 
 
 
 France. 
 
 813,919,000 
 
 752,526,000 
 
 61,393,000 
 
 
 Holland, 1899. 
 
 766,374,000 
 
 630,041,000 
 
 136,333,000 
 
 
 Belgium, 1899. 
 
 436,218,000 
 
 376,157,000 
 
 60,061,000 
 
 
 Austria-Hungary 
 
 326,600,000 
 
 377,902,000 
 
 
 51,302,000 
 
 Russia, 1899. 
 
 317,991,000 
 
 377,327,000 
 
 
 59,336,000 
 
 Britishlndia,i899 
 
 297,411,000 
 
 379,343,000 
 
 
 81,932,000 
 
 Italy, 1899. 
 
 290,773,000 
 
 276,260,000 
 
 14,513,000 
 
 
 Switzerland, 1899 
 
 224,380,000 
 
 153,630,000 
 
 70,750,000 
 
 
 China, 1899. 
 
 211,065,000 
 
 150,950,000 
 
 60,115,000 
 
 
 Canada. * 
 
 180,804,000 
 
 170,642,000 
 
 10,162,000 
 
 
 Spain, 1899. 
 
 180,751,000 
 
 1.39,901,000 
 
 40,849,000 
 
 
 Brazil, 1898. 
 
 136,181,000 
 
 168,665,000 
 
 
 32,484,000 
 
 Sweden, 1899. 
 
 122,006,000 
 
 92,435,000 
 
 29,571,000 
 
 
 Argentina. 
 
 112,760,000 
 
 178,444,000 
 
 
 65,684,000 
 
 Japan, 1899. 
 
 109,760,000 
 
 105,734,000 
 
 4,025,000 
 
 
 Turkey, 1899. 
 
 93,984,000 
 
 67,883,000 
 
 26,101,000 
 
 
 Denmark, 1899. 
 
 98,436,000 
 
 63,918,000 
 
 34,518,000 
 
 
 Norway, 1899. 
 
 83,209,000 
 
 42,715,000 
 
 40,494,000 
 
 
 Egypt, 1899. 
 
 56,552,000 
 
 75,884,000 
 
 
 19,332,000 
 
 Mexico.^ 
 
 61,305,000 
 
 76,346,000 
 
 
 15,041,000 
 
 Chile, 1898. 
 
 38,784,000 
 
 59,533,000 
 
 
 20,748,000 
 
 British Austra- 
 
 
 
 
 
 lasia. ^ 
 
 351,755,000 
 
 432,958,000 
 
 
 81,203,000 
 
 British Colonies, 
 
 
 
 
 
 1899.* 
 
 321,446,000 
 
 259,725,000 
 
 61,721,000 
 
 
 * For the year ending June 30, 1900. 
 
 * Includes specie and bullion. 
 
 3 Includes commerce between the Australasian colonies, 
 
 * Except Australasia, Canada and British India.
 
 2S8 The Plain Facts as to the Tariff. 
 
 tariff, said to be the highest in Europe, checks exchange 
 of their natural products for other things more desired. 
 With any country, change of balance either way may be 
 temporary, due to good or bad crops, loans, or wars. 
 Much of Holland's trade is in transit to Germany. 
 
 America Formerly Had an Excess of Imports. — Our 
 large excess of exports during the last few years, so far 
 as not accounted for in the above paragraph relating to 
 our foreign payments, and by various small invisible 
 items, doubtless remains abroad in the balances of inter- 
 national bankers. By reason of wars and railroad build- 
 ing, interest has lately been higher in Europe than in 
 America by about one per cent. Capital is now so 
 abundant in America that bonds of second or third class 
 cities sell at a premium so high as to lower the interest 
 to barely three per cent. Previous to 1873 the United 
 States had regularly an excess of imports. It was due 
 chiefly to the following causes : From 1789 until 1830, to 
 the foreign carrying of our ships ; from 1830 until 1850, 
 to the shipping, and also to inflow of foreign capital in 
 loans and investments, that being a period of railroad 
 building; from 1850 until i860, to shipping, inflow of 
 capital, and to net exports of California gold and silver ; 
 from i860 until 1873, to foreign loans for the war, inflow 
 of capital for industry, and export of ^677,000,000 in 
 gold and silver — nine-tenths of the output. Since 1873, 
 excepting four years, the United States has had an excess 
 of exports. The change was caused mainly by decline 
 of American shipping, by diminution of the inflow of 
 capital, by extensive travel of Americans abroad, by de- 
 cline in output of gold, and by payment of interest and 
 dividends on capital previously sent in from abroad.^ 
 
 1 Bullock, N. A. Review, July, 1901.
 
 The FiiUire of Protection in America. 289 
 
 Our Investments Abroad Will Bring an Excess of Im- 
 ports Again. — The doubling since 1897 of the balance of 
 exports indicates, aside from Spanish war outlays and 
 payment of our bonds held abroad, that this country at 
 last has sufficient capital for her own needs, and is now 
 making a net balance of loans and investments in other 
 lands. The aggregate of our export balances in the last 
 four years is about ^2,400,000,000, nearly as much as in 
 the previous twenty years. Up to the last several years 
 our energy and capital were absorbed in developing our 
 vast internal empire. Our network of railroads is now 
 about completed, and attention is again being directed 
 outward, as it was in foreign commerce before the in- 
 terior region was opened. If investing abroad continues 
 a few years, with the rapid increase of our shipbuilding 
 and gold mining (gold output now ;^8o,ooo,ooo a year), 
 the United States may approach toward conditions sim- 
 ilar to those of Great Britain and Germany. Our ocean 
 freights, gold shipments, and dividends earned abroad, 
 will then necessitate a decline in our balance of exports. 
 As our outside sources of income increase, and as our 
 bonds held abroad are paid, reducing our annual interest 
 outlay, our commerce may be marked by a permanent 
 excess of imports. We may then enjoy the benefits of 
 accumulated wealth widely invested. Great Britain and 
 Germany long ago passed this way from an export bal- 
 ance, in capital going out to be invested, to an import 
 balance, of dividends coming in to be enjoyed.^ 
 
 ^ That We Are Not Yet Becoming a Creditor Nation so fast as some 
 think, to receive interest from capital loaned and invested abroad, seems to 
 be shown by a recent article written by W. N. Allen for the New York 
 Times, summarized in The Outlook, Dec. 21, 190I. He says a record of 
 sales of American stocks and bonds shows that since 1898, during every 
 quarter except one, foreigners have bought a larger total than they sold ; 
 
 ^9
 
 290 The Plain Facts as to the Tariff. 
 
 Inflow of Capital is Chiefly in Goods. — Previous to 
 1873 it came to America in steel rails, machinery, and 
 textile fabrics. It now goes to South Africa in mine and 
 railway equipment, and in consumable supplies the miners 
 have no time to produce. It cannot come in money and 
 stay unless there is a money scarcity. The California 
 gold shipped abroad could not have been kept without 
 lowering the value of each dollar, driving away foreign 
 buyers with rising prices, and causing extravagant spec- 
 ulation and luxurious consumption. These things were 
 caused before the panics of 1837 and 1873 by inflated 
 paper currency, and this, with too much gold, caused the 
 speculation leading to the panic of 1857. The California 
 gold sent abroad bought needed supplies, at low foreign 
 prices, while if it could have been kept, much of its value 
 would have disappeared in the lowering of its purchasing 
 power through rising prices. Falling prices, attracting 
 foreign buyers, started the balance of exports in 1874. 
 In the heavy foreign buying since 1897 American prices 
 have been high, but foreign prices have been high also, 
 and many American goods have been sold abroad cheaper 
 than at home. 
 
 It is to Speculative Buyers that Gold Movement is 
 Important. — Inflow, tending to make loans easy and to 
 raise prices on the stock exchange, is to them a good sign. 
 Outflow is a warning to prepare for falling prices and 
 restriction of loans. But outflow is a serious matter to 
 all in a country having an unsound monetary system. 
 
 and he thinks unrecorded sales may be divided likewise. Ten years ago a 
 French statistician, M. Martin, estimated American securities held abroad 
 at ^2,loo,ooo,ocx). If this total is now much larger, the high dividends 
 of the present may require a yearly payment upon it of considerably more 
 than ^100,000,000, besides the rents to be paid on American real estate 
 owned abroad, which includes many buildings in the cities.
 
 The Fiittire of Protection in America. 291 
 
 The heavy outflow of gold from the United States in 
 1893 ($87,000,000), leading on to the panic, was largely 
 a withdrawal of loaned or invested funds by foreigners, 
 to avoid loss by an expected drop to the silver standard. 
 The same trouble caused an outflow of ;$78,ooo,ooo in 
 1896. Next year, after the election, 1^44,000,000 came 
 back. Inflow of gold may be started by foreign purchase 
 of stocks and property at prices below real value, though 
 then its coming tends to raise prices. A large outward 
 flow may be desirable, and in a country producing no 
 gold, if it is sent out to be safely loaned or invested. It 
 will not move outward, if the monetary system is sound, 
 unless gold is scarcer abroad than at home, in proportion 
 to the buying to be done with it. Under ordinary con- 
 ditions a movement either way does not give rise to ap- 
 prehension, being soon checked by its effect on the inter- 
 est rate for short time loans in the money market, before 
 general prices are influenced. With a movement large 
 or long continued, indicating, if outward, disorder in 
 money or in trade, the effect upon stock speculation 
 would extend to other business, and lower general prices 
 by checking the people's buying. 
 
 Outflow of Gold as Indicating Decline of Trade. — 
 From now on in America continued outflow of gold 
 would indicate that the flood of prosperity was subsiding 
 — that foreigners had ceased to want enough of our 
 exports to balance their various claims on us. Their 
 buying is already falling off, showing a decline of nearly 
 $50,000,000 in exports of manufactures for the calendar 
 year 1901 — due largely in this case to falling prices 
 rather than to decreasing quantities. In the same period 
 our imports increased by fifty millions, reaching the highest 
 point, while total exports decreased by twelve millions.
 
 292 The Plain Facts as to the Tariff. 
 
 During recent months there have been many shipments 
 of gold from America. Decline of German demand for 
 American copper is given as the chief reason for its fall 
 in price from 1 7 cents last summer to 1 1 cents in January. 
 Depression has been severe in Germany since the early 
 part of 1 90 1, over 80,000 men being idle in Berlin in 
 November. British trade each month has been decreas- 
 ing materially, exports falling off i^ 10,700,000 during 
 1 90 1, chiefly in coal ; and the decrease of i^8 36,000 in 
 imports consisted mainly of materials for manufacture, 
 while there was an increase of i^i 1,000,000 in imports 
 of food. 
 
 Will Present Prosperity Continue ? — The speculation 
 in forming trusts, and the high prices for stocks and 
 products, which have now continued over three years, 
 can scarcely change otherwise than downward ; though 
 American demand for most products, especially manufac- 
 tures, has been unprecedented since the delay of steel 
 production by the strike last summer. The year 190 1 
 surpassed all previous years in output in many lines, by 
 a large increase of railroad earnings, by high average of 
 all prices and of all wages, by stock exchange activity, 
 and by high average value of shares ; while prevention 
 of excessive rise in prices made the year surpass all 
 others in the important matter of complete sale of out- 
 puts to consumers. General conditions of business, 
 therefore, were perhaps never better than at the opening 
 of January, 1902. Though some are disposed to make 
 light of references to a decrease of our present business 
 activity, it may be taken as certain that railroads will 
 get enough locomotives and bridges to answer for a 
 while, and that even without crop failures there will be 
 an ebbing of the tide. It is to be hoped the necessary
 
 The Future of Protection in America. 293 
 
 decline from the present high level will be gradual, with- 
 out many failures. Output is now so generally gauged 
 to previous orders that apparently there will be little over- 
 production of goods, though after a time trust stocks 
 must decline with earnings, and new factory capacity may 
 not long be kept from idleness. American shipbuilding 
 during the latter half of 1901 was 15 per cent less than 
 that of the same period in 1900 ; February started with 
 railroad earnings a little below those of the year before, 
 and with a car famine giving way on some roads to light 
 freights ; while since December prices have been falling. 
 In general business, as in personal experience, life will 
 continue to have its ups and downs. By rational fore- 
 sight and self-control, losses from change may be kept 
 small, and depression stripped of most of its terrors.^ 
 
 ^The Alleged Danger of Overspending for Imports. — Roberts (page 
 213) while mentioning the invisible items in foreign trade, dwells in a warn- 
 ing tone on the danger of extravagance and debt, of spending capital for 
 living expenses, implying that Britain is probably thus wasting her sub- 
 stance, and commends repeatedly the policy of those who keep down pur- 
 chases and lay up money. With this advice we must heartily agree, but 
 what has it to do with buying and selling abroad ? Our unsophisticated peo- 
 ple are not drawn into useless buying by the wily foreigner through entic- 
 ing advertisements. He deals with such men as Wanamaker and Field, a 
 shrewd importing class in the larger cities, whom writers are not prepared 
 to counsel. If one of them becomes unable to pay, it is the foreigner that 
 loses ; this country is so many goods ahead. Protectionists, considering only 
 the seller, usually regard goods as an evil, not as a benefit, but in this case 
 the goods would be only regular stock. Moreover, collections are kept up, 
 by means of drafts passed at once to bankers. Debt is well taken care of, 
 existing in bonds and in maturing drafts held by capable men. Taking 
 away the actual gold called for by drafts, if they are not balanced by drafts 
 drawn the other way, soon informs the people when they have overbought 
 abroad, and the effect to lower prices and make money scarce brings a 
 prompt remedy. A tariff making the people buy at home reduces their sav- 
 ings with higher prices. It is to offer goods for less money that wholesalers 
 buy abroad. The total money amount of the people's buying is thus kept to 
 the minimum by foreign trade, or for a given amount they get more goods.
 
 294 The Plain Facts as to the Tariff. 
 
 Reform of the American Tariff System Will be Caused, 
 as indicated near the beginning of this chapter, by the 
 inability of foreign peoples to buy our products, no mat- 
 ter how much cheaper and better these may be than 
 others offered, unless we take their products in exchange, 
 or allow them markets somewhere on which they can 
 draw drafts to pay us.^ The necessary decline of our 
 export balance, explained before, must come through 
 increasing imports ; for it can come no other way except 
 by decreasing exports, and that means loss of the foreign 
 sales on which so many of our producers live. In the 
 last few years, to a large extent, it has been Great Brit- 
 ain's doing the world's buying that has enabled America 
 to do the world's selling, as indicated in their opposite 
 balances of trade. Great Britain bought of us in 1898, 
 ;^432, 000,000 of goods more than we bought of her, and 
 ;^393,000,ooo more in 1899, leaving in the latter year a 
 balance of only ;^ 136,000,000 in our favor from all the 
 rest of the world. Every dollar's worth of goods sent 
 out from any country as exports, must be taken in, if 
 not lost or consumed at sea, by some other country as 
 imports. So far as both are accurately computed on the 
 value where produced, the totals of the world's exports 
 and imports are just the same. The account must be 
 kept by double entiy. Where one country sells more 
 than it buys, some other country (or countries) must 
 balance that excess by buying more than it sells. 
 
 America Taking the World's Markets. — But during the 
 
 1 Triangular Trade. — England and Germany have been enabled to pay 
 us in part by means of a triangular trade. South America buys chiefly 
 from them, and sells us much more than we sell to her. Thus hides and 
 coffee shipped to us from South America are applied on the debt due us 
 from Europe. Many European ships go first to South America, then to 
 New York, and then back home, carrying three different cargoes.
 
 TJic Future of Protection in America. 295 
 
 last four years, especially in iron and steel manufactures, 
 America has been taking the markets of the world away 
 from Great Britain by offering cheaper and better goods, 
 and is now beginning to take her export trade in coal, 
 on which the British have lately levied an export duty 
 (something unusual) of a shilling a ton, chiefly to raise 
 money for the Boer war, but partly to check depletion 
 of their mines. At the same time both America and 
 Germany are making inroads on British foreign trade in 
 cutleiy and textile fabrics. Our consul at Peking writes 
 (May, 1 901) that American cottons are fast supplanting 
 the English there, and that goods from America now 
 compose thirty per cent of all imports into the three 
 northern provinces. Now if this change is to continue, 
 how is Great Britain to keep on buying the bulk of our 
 grain, cotton, dairy, meat, and fruit exports unless we 
 take her goods in return ? Producing no gold, she can- 
 not get money or exchange to pay for them if her 
 markets are taken from her — if she cannot sell to a third 
 country, like Brazil, which in turn pays us with goods 
 we buy in excess of what we sell. Her people will 
 scarcely pay out for current living expenses their capital 
 in savings laid by — draw on bank reserves of gold while 
 they last, melt down plate, pawn their watches, and sell 
 their shares in our railroads. 
 
 Could We Take England's Shipping Trade ? — If there 
 are Americans who in a desire for the whole of the 
 earth's good are worried over British supremacy in ocean 
 shipping, and they could induce Congress to offer such 
 cash bounties as would transfer that supremacy to 
 America,' Great Britain would probably have to give up 
 
 1 Can America Do It All ? — The following quotation was published in 
 May, 1 901, as the words of J. Pierpont Morgan, said to have been spoken
 
 296 TJie Plain Facts as to the Tariff. 
 
 buying the bulk of her food and materials from this 
 country. Without freights paid to her by America, 
 Great Britain might then get supplies from Argentina, 
 Egypt, India, Australia, or any other countries that 
 would take her manufactured goods in exchange. If 
 these were not so good as American manufactures, she 
 would have to give more of them — lower her prices. 
 Opposition from the predominating farming class of 
 
 in Europe to a New York Journal correspondent : " The United States 
 can solve every commercial problem if we give it time. The country can 
 supply all the markets of the world. We need carrying power. The 
 country has not anything like enough carrying power for its products. A 
 commercial coalition against the United States by European countries is 
 not possible. There are too many conflicting interests. We can do with- 
 out luxuries ; they cannot do without necessities. We have entered upon 
 an era of unprecedented prosperity." 
 
 Our Dazzling Future. — It will take a good while to solve the problem 
 of selling without taking something in return. Dazzling accounts of 
 American exports are written, sometimes by officials, in which there is no 
 mention of imports in exchange. Illustrated papers give soul-stirring pic- 
 tures of the future, showing waters covered with American ships carrying 
 American products. Their aim seems to be to show that the gain and 
 glory are all ours — to hide or leave unnoticed the fact that our exports, and 
 the accompanying gains, must be balanced by the exports and the gains of 
 the nations receiving them. With the Nicaragua canal we may get our 
 goods to China at least expense, and may gain most from trade there ; 
 but the nation taking to China the worst goods, at the most expense of 
 shipment, will still sell those goods there if it is determined to have tea, 
 and cannot do better by trading elsewhere. Its exporters will take in tea 
 the best price they can get, though it gives a poor return to the producers 
 of the goods, in the same way that a farmer sells a small crop of bad qual- 
 ity, hauled a long distance over rocky roads. 
 
 Capitalists Know Better. — But the above quotation can scarcely be a 
 fair expression of Mr. Morgan's views. Shrewd men like him never build 
 a new railroad without considering the people to be served — the freight they 
 have to haul, and the money their industry brings. Besides, the above 
 mention of necessities, and of all the markets, sounds as grasping as 
 thoughts an avowed enemy of trusts might attribute to them. The idea 
 often implied, that we may take England's industries until she has none 
 left, has been mentioned as suggesting a spirit decidedly amiable.
 
 The Future of ProtectioJt in America. 297 
 
 America would then quickly sweep away our protective 
 system. Apart from Great Britain, most of the world 
 except France and Germany has food to sell, and the 
 agricultural policy of these two countries is strongly 
 protective, even to the point of paying millions in boun- 
 ties to beet sugar producers whose product costs them 
 more than they can get for it. France and Germany 
 will not buy American food if they can well avoid it. 
 
 Unsoundness of American Dislike of England. — A good 
 illustration of the usual unsoundness of people's prejudices 
 is afforded by the trade of recent years between America 
 and England. The chief reason why our protective sys- 
 tem in its extreme form has been allowed to exist by the 
 farming class is that in England there is one place in the 
 world where large quantities of farm products are wanted, 
 and are admitted free of duty. Yet our tariffs have always 
 been especially directed against England, whose buying 
 gives our farmers living prices on products partly ex- 
 ported ; and protectionist speakers have been in the habit 
 (notably so in 1884) of stirring up the old Revolutionary 
 dislike of England, chiefly of course to please the Irish, 
 who, however, seldom vote for protection, and who are 
 not led by their just but old grievances against English 
 tyranny to settle in lands not governed by English law. 
 Some of these grievances arose from tariffs designed to 
 enrich the English by robbing the Irish. 
 
 England's Buying Makes Our Great Export Trade. — 
 Politicians who recount with satisfaction the growth of 
 American and decline of British exports, and who have 
 tried to win public favor with promises of a vigorous 
 foreign policy directed chiefly against England, seem 
 never to consider the fact that free or lightly taxed buy- 
 ing by her and her colonies makes possible our large
 
 298 TJie Plaifi Facts as to the Tariff. 
 
 excess of exports, which is balanced in the world's trade 
 by her excess of imports/ No important country but 
 England will bear an excess of imports that can possibly 
 be prevented by home production. 
 
 The Other European Nations Keep Down Their Foreign 
 Buying with tariffs similar to those of the past intended 
 to prevent sending out gold. These nations could not, 
 if they desired, bear a trade balance against them, year 
 after year, unless they had ships and investments earning 
 money abroad. Among them Germany alone has these 
 means of income on a large scale. For admitting a 
 needed American commodity free, or at low duty, their 
 tendency is to exact from us a similar favor in return. 
 Russia in 1901 shut out some forms of American steel 
 and machinery by a high tariff, prohibitory and retalia- 
 tory, because we stopped admitting free her partly refined 
 beet sugar. To a considerable extent in recent years, our 
 protective policy has doubtless tended to tighten Conti- 
 nental tariff restrictions. The recently proposed German 
 tariff strikes directly at American food products, and fol- 
 lows the French system of maximum and minimum rates, 
 designed to force other nations to ask and give reciprocal 
 concessions. An Austrian tariff proposed later is said to 
 be fully as severe. Even Great Britain's steady adher- 
 ence to free trade might be modified against us if we 
 continued to take her trade in distant lands and to shut 
 her out of America by high tariffs. Her desire for the 
 
 1 How It Has Grown. — Our sales to Great Britain in the year to June 
 30, 1 901, were nearly a hundred millions more than ever before, reaching 
 ^631,000,000 (total to all Europe ;^ 1,136, 000,000) ; but our purchases of 
 her were forty millions less than in 1893, amounting to only $143,000,000, 
 making our excess of sales to her last year $488,000,000. Since 1895 our 
 annual sales to Great Britain have increased $244,000,000, a little more 
 than our increase in all the rest of Europe. We sold France last year 
 twenty millions less than in 1 892.
 
 Tlie Future of Protection in America. 299 
 
 cheapest supply of food has probably prevented her from 
 favoring her colonies with a low duty on American and 
 other foreign grain — the reason why she has not com- 
 plied with requests from her colonies for a duty against 
 German bounty-fed sugar. Her objection to this course 
 may be lessened as Canada, Egypt, Australia, and India 
 become better able to produce food on a large scale. 
 Sometimes her Fair Trade party agitate for duties against 
 nations that levy duties against her ; and greater eco- 
 nomic independence for her has been thought of in the de- 
 velopment of food and cotton production in her colonies/ 
 Soon We Too Must Buy in Order to Sell. — If the new 
 beet sugar industry in America should become able to 
 supply all our demand, Germany would probably shut 
 out, or cease buying, our meat and fruit products, unless 
 
 1 "The Open Doors Will Be Closed. — In fact, there are signs on all 
 hands of a concerted effort to resuscitate British trade. . . . Many things 
 are pointing to a campaign in favor of English-made products as sweeping 
 and as successful as that now affecting union and non-union-made prod- 
 ucts." (Letter from an American in London, WorhV s lVo7-k, Jan. 1902. 
 
 Will England Return to Protection ? — The British government's pro- 
 posal (April, 1902) to levy a tariff duty of three pence per hundred weight 
 on imports of grain, and five pence on flour, is due to a necessity for new 
 taxes to meet an estimated expense for this year of $850,000,000. Ordi- 
 nary sources of revenue have been nearly exhausted, the duty on tea being 
 now 75 per cent and the duties on tobacco and liquors being so high that total 
 revenue from them is falling off. The grain and flour duties may be levied 
 as unavoidable, but the Liberals are earnestly opposing such a tax on the 
 food of the poor. Perhaps one of the worst effects of the Boer war is the 
 present danger that Great Britain, to increase her military strength, maybe 
 drawn into protection, through an effort to bind her colonies to her more 
 closely in an imperial federation, by means of free trade in their products 
 while levying duties on those of other lands. That is an effective way of 
 buying a strong union with colonies, as will be explained later in connec- 
 tion with Hawaii. British duties now fall on all imports alike, whether 
 colonial or foreign; but Canada in late years has favored the mother country' s 
 products with preferential or lowered duties. The demand of some of the 
 colonies for preferential treatment Mr. Chamberlain is disposed to grant.
 
 300 The Plain Facts as to the Tariff. 
 
 her sugar were taken in exchange or something else in 
 its stead. It would be the same with Brazil if all our 
 coffee should be produced in our new tropical posses- 
 sions ; and the same with China and Japan if the new 
 industry lately started in South Carolina should supply 
 all our tea. ^ It is a doubtful kind of patriotism that is 
 so anxious to produce everything at home. A country 
 that did all its own producing would soon have to do all 
 its own consuming, which it must do anyhow, but with 
 foreign exchange it has choice of quantities and varieties. 
 Ships will never come home to America loaded with 
 money. It would not do for too many people to be 
 much influenced in their buying by the suggestion of the 
 words " Made in America." Theirs would be that form 
 of withholding that tendeth to scatter. There is no need 
 for coalition of mutually suspicious European nations 
 against us in tariffs, nor in war as some predict, nor even 
 
 'YetWe Cannot Have Too Many Industries. — It is well to grow 
 sugar and tea, and all else, if we can do so at a profit ; and for the govern- 
 ment, by gathering information, and by experiments, even to the extent of 
 large cost, to encourage new lines of industry. Possibly bounties for a 
 short time, to start a badly needed industry, might be wise with a govern- 
 ment above the reach of undue influence from persons directly benefited. 
 To some extent this may have been the case with the Germans and their 
 sugar bounties, which for a time increased the world's supply of sugar, and 
 lowered its price, but which later have become an intolerable burden not 
 easily to be removed. Harm comes when consumers are forced by a tariff 
 to buy a home product not naturally worth its cost, when they would other- 
 wise, by buying a foreign product, save money for themselves and enable 
 foreigners to buy of us other products well worth their cost. When left 
 free to choose, people's self-interest will tell them when to produce at home, 
 and when to buy abroad. Then they will buy abroad neither too much nor 
 too little. We want all the industries nature has provided resources for; 
 but when public help is required to the extent of cash contributions, the 
 chances are that the industry will cause a net loss to the people. Nature's 
 industries scarcely need such assistance among people able to take care of 
 themselves.
 
 TJie Future of Protection in America. 301 
 
 in separate retaliatory action. Ceasing to buy, because 
 gold is flowing out, and hard times setting in, will be 
 more effective. 
 
 But the Intention Here is Not to Defend the English. 
 They have admitted our products free because they 
 have gained by it (the proper reason), not to help Amer- 
 ica. And until 1846 they followed the protective system 
 with the same selfish spirit pointed out above. By reason 
 of their gain from buying American goods, they have 
 seemed not to notice the unfriendliness of some classes 
 in America — to have no disposition to be unfriendly in 
 return, by transferring their custom to Argentina and 
 other food producing countries. As their wars with us, 
 in 1776 and 18 12, are very briefly mentioned in their 
 histories (doubtless in part because unsuccessful and un- 
 popular), they do not think of us as enemies but rather 
 as kindred. The French are their hereditary enemies. 
 The unreasonableness of their old hatred of France, in 
 whose prosperity as a customer they might have rejoiced, 
 was pointed out by Hume a century and a half ago. ^ 
 France is so near that free trade with her would then 
 have yielded quick returns, like internal trade at home, 
 and might have been greatly preferable to slow and risky 
 commerce with distant colonies. 
 
 Freer Trade Will Draw the World Together. — Free 
 trade, however, or rather lower and more friendly tariffs, 
 will eventually draw the world together, as the people of 
 a town are drawn together by the desire of each for the 
 prosperity of others, for the sake of trade and mutual 
 helpfulness. Friendliness over the wider circle rests upon 
 reasons similar to those of friendliness over the narrower 
 circle. Self-interest, when properly enlightened, ap- 
 
 • Quoted at length by Ely, in Problems of To-Day.
 
 302 TJic Plain Facts as to the Tariff. 
 
 preaches unselfishness. The hope of Richard Cobden, 
 that free trade would bring peace and friendliness among 
 all nations, has not been blasted — only deferred. Un- 
 limited patience is necessary in human progress.^ 
 
 Free Trade Movement Stopped by Wars. — After Eng- 
 land's change in 1846, there was a decided movement 
 toward free trade. " The United States seemed com- 
 mitted to low duties by the undoubted success of the 
 tariff of 1847, ^^^ of '^^^ Canadian reciprocity treaty of 
 1854."^ France then adopted freer trade by means of 
 reciprocity treaties. But wars soon came, in America, 
 France, and Germany, and stopped the promising growth 
 toward free trade. In America higher duties, necessi- 
 tated by temporary need for war revenue, were allowed 
 to continue ; and in Europe antagonism between nations 
 was reflected in tariffs. Small countries followed the 
 example of the larger, until before 1890 protection had 
 spread to colonies all over the world. Down to the 
 present time, as indicated by the recent German and 
 Russian tariffs against America, commercial hostility has 
 tended to increase. Yet this does not prove it to be a 
 good policy. " It is perhaps safe to regard the policy of 
 these years as a set-back in the general current of 
 
 J Foresaw That Men Would Cling to Protective Favors. — Adam 
 Smith in 1776 did not expect much of short-sighted self-interest. He 
 wrote : " To expect that freedom of trade should ever be entirely restored 
 in Great Britain, is as absurd as to expect that an Oceania or Utopia should 
 be established in it. . . . Monopoly has so increased some tribes of them 
 that, like an overgrown army, they intimidate the legislature. The mem- 
 ber who supports monopoly acquires popularity with men of wealth, and 
 reputation for understanding trade. If he opposes them, neither probity, 
 nor rank, nor public service, can protect him from infamous abuse, nor 
 sometimes from real danger." The progress of free trade, therefore, has 
 been much greater than Adam Smith expected. See note in Chapter XV. 
 regarding America as a peacemaker. 
 
 2 Hadley, 422.
 
 The Ftiture of Protection in America. 303 
 
 economic events rather than as an indication of the 
 course of that current." ^ Nations, Hke individuals, may- 
 do fooHsh things when moved by resentment. But they 
 only lose by it ; and in time they find a way to change 
 their practice. That a change is coming is now indicated 
 by many movements to unite all continents by means of 
 great railroads and ship canals. These are useful only 
 for trade, and that can flourish only under friendly tariffs. 
 
 Business Interests Would Not Now Permit a War Be- 
 tween America and England, whatever jingoists might do 
 to stir up prejudices. She needs our cotton and food 
 products, and we need her as a customer. Her conquest 
 or reduction by Russia would harm us immeasurably, to 
 say nothing of the blow to civilization in weakening the 
 influence of the nation that originated modern liberty and 
 self-government, and modern industry and commerce. 
 Enlightened business forces are less noticeable in Conti- 
 nental Europe, but they will grow. Despite the historic 
 dislike between the English and the French, France sells 
 more goods in Great Britain than in any other country, 
 and the former buys much from the latter. 
 
 Free Trade as a Preventive of Hard Times. — Free trade 
 among all nations, at least to the extent of liberal reci- 
 procity, doubtless to be realized in this centuiy from the 
 mind-broadening influences now at work, would not only 
 prevent, more perfectly than at present, wasteful over- 
 supply of food in one country with famine in another, 
 but everywhere it would make hard times less frequent 
 and less severe. To get the full blessings of free trade, 
 it must be the policy of both nations in the exchange — 
 better yet, the policy of all nations among whom exchange 
 might arise ; though where but one nation alone has free 
 
 1 Hadley, 444.
 
 304 The Plain Facts as to the Tariff. 
 
 trade she can eventually gain by it. The whole world 
 of consumers, unlike those of a single country, would 
 not suddenly be influenced by panic or distrust, and stop 
 buying goods. When this happens, whether for a good 
 reason or a poor one, factories are closed and depression 
 begins, to continue for several years until a return of the 
 feeling that things are all right. With any family enjoy- 
 ing much more than bare necessaries, consumption may 
 be cut down by a quarter or a half Hard times are at 
 first a condition of men's minds more truly than of their 
 pockets, though after business has stopped, and income 
 fails, they are very real, and must be endured. Under 
 universal free trade, a panic in one country might not 
 greatly reduce the demand from the whole world. By 
 reason of foreign demand, prices would not fall so low, 
 and production and income might soon regain their usual 
 conditions. 
 
 As a Reg^ulator of Business. — On the other hand, when 
 reviving business enlarged demand rapidly, prices of 
 materials, with the world to supply them, would not rise 
 so high as to check production ; nor would there be the 
 usual attempt to supply at home all the demand, by 
 building new plants to lie idle when flush times subsided. 
 Excesses, both of good times and hard times, would be 
 spread over the world, and in each nation the harm would 
 thereby be reduced to the minimum. This evening proc- 
 ess exists now, but usually when evils of over-supply 
 and under-supply rise high enough to overflow tariff 
 barriers. With wheat it now works well. Easy out- 
 flow prevents a good crop in America from lowering 
 prices ruinously, and saves Europeans from famine when 
 their crop fails. The only saving feature of the present 
 depression in Germany has been the steadiness of her
 
 TJie Future of Protection in America. 305 
 
 export trade, which remains good, being carried on with 
 nations now enjoying prosperity.^ 
 
 The Dethronement of High Protection is Approaching. 
 The economic forces that will dethrone high protec- 
 tion in America are already appearing. A recent change 
 in American commerce is materially modifying the views 
 of protectionists, while Great Britain and her colonies are 
 yet buying of us more freely than ever. This change is 
 our growing trade with Cuba, Porto Rico, the Philippines, 
 and China. Their people have no money to pay out, and 
 cannot take our goods unless we take theirs in exchange. 
 Upon sales in their markets some of our cotton mills 
 live. Leading protectionists are recognizing the neces- 
 sity of our buying in order to sell. President McKinley's 
 short speeches on the Pacific coast in May, 1901, and 
 especially his address at Buffalo the day before he was 
 fatally shot by an anarchist assassin, sounded almost as 
 if he were speaking for free trade.^ 
 
 'New York Tribune letter, Feb. 8, 1902. 
 
 2 President McKinley, in His Buffalo Address, his last public utter- 
 ance, said : "The problem of more markets requires our urgent, immedi- 
 ate attention. Only a broad and enlightened policy will keep what we 
 have. No other policy will get more. A system which provides a mutual 
 exchange of commodities is manifestly essential to continued and healthful 
 growth of our export trade. We must not repose in the fancied security 
 that we can forever sell everything and buy little or nothing. ... If per- 
 chance some of our tariffs are no longer needed for revenue or to encourage 
 and protect industries at home, why should they not be employed [in 
 reciprocity] to extend and promote our markets abroad ? ' ' 
 
 One-Sided Trade Cannot Continue. — Realizing that a continuance of 
 our one-sided commerce of the last four years is mathematically impossible, 
 he declared the trade statistics were "almost appalling." This sounds 
 different from the general rejoicing over our favorable trade balance of two- 
 thirds of a billion. 
 
 The Reasonable Spirit of These Later Addresses, considered with 
 his earlier views while more in subjection to party policy, will add to his- 
 tory's estimation of his high ability and noBle character. "Mr. McKin- 
 20
 
 3o6 The Plain Facts as to the Tariff. 
 
 The Open Door in China. — The contention of Amer- 
 ica, joining England and Japan, for the open door to 
 trade in China, is also out of harmony with protective 
 ideas. This contention is against the taking of Chinese 
 territory by Russia, Germany, and France, each of whose 
 policy would be to shut out other nations from its Chi- 
 nese dominions by means of a high tariff. America, 
 England, and Japan, on the contrary, are content to 
 leave China free, and to make sales there by offering 
 best values, not desiring to get trade by forcing people 
 to buy of them or of nobody. But at home America, 
 more so than Germany, deprives her people by the tariff 
 from an opportunity to choose between home and foreign 
 goods. They must take the home article, or in many 
 cases pay a high duty on the foreign. 
 
 The Now Popular Doctrine of Reciprocity, by conced- 
 ing the gain of exchange, and the necessity of accepting 
 goods for goods, also tends to disclose the unsoundness 
 of protection. Reciprocity in trade is to admit free, or 
 at lowered duty, some goods from a country that will 
 return the favor by admitting thus some goods from us. 
 It was brought into prominent notice in 1890 by James 
 
 ley has outgrown the * McKinleyism ' of his more callow statesmanship. 
 That is a most hopeful sign of further progress and of enduring greatness 
 for the nation." (Chicago Neivs.) Of the same hopefulness now, since 
 the former's death, has been President Roosevelt's hearty accord with the 
 desire for freer trade. 
 
 Preparedness for Commercial War. — Apparently these ideas of the 
 two Presidents were not shared by an official who said to a reporter in the 
 previous June : " We will produce within our own domain everything that 
 goes upon our table and upon our backs. . • . Whenever we get ready we 
 can come pretty near starving any other nation." But in justice to the 
 official it must be stated that he was talking of trade combination by Eu- 
 rope against America. It is well to possess and rejoice in resources for all 
 products. The harm comes when law keeps people from bringing home 
 extra wealth from abroad.
 
 The Future of Protection in America. 307 
 
 G. Blaine. The reciprocity arrangements negotiated 
 under the McKinley high tariff law of that year, though 
 limited closely to commodities not produced at home, 
 had considerably increased our trade with tropical Amer- 
 ica when they were repealed by the Wilson law of 1894. 
 Similar reciprocity treaties, negotiated under the Dingley 
 law of 1897, were not ratified by the Senate during its 
 last session. They were defeated by protected interests, 
 clinging tenaciously to their tariff advantages. But 
 during the last twelve months reciprocity has been 
 widely favored in influential circles. Mr. McKinley's 
 speeches have been mentioned, and in the closing chap- 
 ter other significant quotations are given. It is admitted 
 that something must be done toward freer exchange of 
 goods for goods, and reciprocity is an offer of protection- 
 ists to split the difference between their doctrine and free 
 trade. 
 
 Foreign Trade Made Necessary by Differences of 
 Nature. — Foreign trade rests upon reasons almost as 
 strong as those for division of labor. For every country 
 or colony nature has provided some special means of 
 subsistence. With Switzerland, having little in soil, 
 mine, or forest, the special means are the remarkable in- 
 genuity and industry of her people, as shown in their 
 manufacture of watches and jewelry. Her mountain 
 scenery is also a means of income from tourists. The 
 French have a rich soil and an unequalled artistic taste 
 for fine work. Great Britain had great deposits of coal 
 and iron, and her people are among the first in mechan- 
 ical ingenuity and commercial capability. Her hold on 
 her ocean carrying trade is secure so long as she buys 
 double as much as any other nation. It is the buyer, 
 not the seller, that directs how goods are to be shipped.
 
 3o8 TJie Plain Facts as to the Tariff. 
 
 The latter is usually glad to make the sale, without 
 regard to shipment. Besides, not having land from 
 which to get a living, the British will contrive to retain 
 possession of the sea/ 
 
 ^The British Patronize Their Own Shipping. — A plate matter 
 article, sent^ no doubt with the approval of protection headquarters, to party 
 papers in the campaign of 1898, before the ship subsidy bill had been pro- 
 posed, explained that Americans could not hope to carry their own products 
 at sea, because the British would not insure American vessels as they do 
 their own, and were reluctant to buy the cargo of an American vessel at 
 Liverpool. "Whether or not the article was fully true, some such methods 
 of preserving the carrying trade, upon which many Britons live, would 
 undoubtedly appear long before their ships had been driven from the seas, 
 (See note on page 299.) 
 
 America's Extensive Shipping Before the War. — America's foreign 
 shipping was at least equal to the British until shortly before i860, when 
 the change from wooden to iron ships gave the British the advantage of 
 vessels at lower cost — an advantage previously enjoyed by Americans. 
 (Bullock, 68.) This difference of cost, with destruction of our vessels by 
 Confederate cruisers, and with the effort to protect our shipbuilders by 
 denying American registry to foreign-built vessels, brought a steady decline 
 in our foreign shipping. In 1859 American vessels carried 70 per cent 
 of our imports, and 63 per cent of our exports. By 1880 these percent- 
 ages had fallen to 1 3 and 22, and by 1900 to 7 and 12. American ship- 
 ping between home ports has largely increased, foreign vessels being shut 
 out from it by our navigation laws. Shipbuilding in this country has been 
 growing rapidly of late, since our production of steel became the cheapest 
 in the world. 
 
 British Buying Makes London the World's Financial Center. — The 
 large foreign buying of the British, besides building up their shipping, 
 makes the rate of exchange throughout the world favorable toward London, 
 previously referred to in this chapter. It is on London that drafts are 
 drawn against sales to the British from every land ; and because there are 
 so many of these drafts they are sold cheap — at a discount. Besides this 
 effect of sales to the British, making their exchange well known, their 
 money is so reliable, having been solidly on the gold basis for nearly a 
 century, that banks in all parts of the world keep deposits in London, and 
 London exchange passes readily everywhere. The fact that it is easiest to 
 get money already in London makes that city a good place in which to buy. 
 It is the world's financial center because it is the world's commercial cen- 
 ter. (Prof. J. F. Johnson, N. A. Review, .July, 1901.) Contrary to a 
 statement in the World's Work, May, 1902, continuation of our half
 
 The Future of Protection in America. 309 
 
 Americans Most Munificently Endowed by Nature. — 
 
 The United States has a greater variety of natural re- 
 sources than any other country, more perhaps than the 
 much larger Russian Empire ; and the American people, 
 being the pick in enterprise from European populations, 
 and having had unequalled experience in self-govern- 
 ment and in wealth production, are probably superior in 
 industrial capacity to any other people the world has 
 ever known. 
 
 Yet They Would Lose by Refusing to Trade "With 
 Others. — But it does not follow, as protectionists have 
 taught, that America should produce at home every 
 article she can, and thus have as little as possible to do 
 with other nations. Even though our resources of soil, 
 forest, and mine, and of human capacity, enabled us to 
 produce every desired commodity with less expenditure 
 of labor and capital than would be necessary in any 
 other nation, we should still gain in every case where by 
 sending abroad one commodity we could trade it there 
 for another commodity that would cost us more to pro- 
 duce than the one traded. Then, though we could sur- 
 pass others on everything, we might advance in wealth 
 most rapidly by confining our labor and capital to those 
 industries that yielded largest returns. 
 
 That it is the Easiest and Cheapest "Way to Get Things, 
 is the one great reason for foreign trade. There need be 
 no admission by one country in the transaction that it 
 could not produce at home the things traded for, better 
 and more cheaply than does the foreigner. By offering 
 
 billion excess of exports cannot directly make New York the world's finan- 
 cial center. That sum is owed to us. Foreigners draw on, and have 
 money in, the cities that owe them. But New York will probably become 
 the world's financial center when we have a regular excess of imports, as 
 explained on page 289.
 
 310 TJie Plain Facts as to the Tariff. 
 
 to trade it simply shows that it can produce its own article 
 the more cheaply of the two. It does not consider at 
 all the foreigner's expense of producing the other article. 
 That is liis affair. His producing expense may be larger, 
 giving him less gain from the trade. Exactly the same 
 reasons control exchange at home. A lawyer living in 
 a suburban residence may be better able to grow his 
 supply of potatoes than his tenant farmer — in bodily 
 strength, capital, and even in agricultural knowledge. 
 But why should he spend his time at farm work, for a 
 return of ^1.50 a day, when for each day at his law 
 practice he earns ^^20 ? For him the place to get pota- 
 toes, and everything else, is in his law office. In the 
 same way England and Massachusetts get flour and 
 meat by making cloth, while Texas gets cloth by grow- 
 ing meat. When an enlightened people can get things 
 more easily by making them than by trading for them, 
 somebody will establish the new occupation, without 
 being paid to do so with a government tax on others. 
 
 For Yet Another Reason We Should Lose by Living to 
 Ourselves. — Not only must the few strongest people let 
 others live — first for their help in fighting off enemies, 
 then for their work, and lastly for their trade — but with 
 the less favored people the strongest must also share. 
 By Infinite Wisdom, doubtless to check the selfishness 
 of men, this law was decreed in the original constitution 
 of humanity. 
 
 The Strong Must Share, or Suffer Decay. — If America 
 could surpass other nations in producing everything she 
 used, and though she could produce any one commodity 
 just as easily as any other, she would still have to trade 
 with and thus benefit other nations to save herself from 
 decay — if ease of getting things did not bring decay any-
 
 Tlie Future of Protection in America. 3 1 1 
 
 how. It is improbable that American superiority over 
 the rest of the world is now comparable with that of 
 China in ancient times. China invented coinage, bank 
 notes, printing, gunpowder, paper, and silk weaving, cen- 
 turies before they were known elsewhere. But while 
 her people, shut up to themselves, continued to pore 
 over their classics, and to venerate their ancestors, other 
 nations attained a progress toward which the Chinese 
 now seem unable to make a start. It is plain in her case 
 that " the mills of the gods grind slowly, but they grind 
 exceeding small." ^ 
 
 ^ Begrudging the Favor of Patronizing Others. — As it is a self-injuring 
 policy for a nation or a community, as for a person or a family, to try to 
 make everything for itself, begrudging the benefit to be conferred by patron- 
 izing others, so it is dangerous for a nation, as for a person or a firm, to in- 
 dulge in self-admiration — to think of itself more highly than it ought to 
 think. A business concern desires to appear as a leader before customers, 
 but not usually before strong competitors, because leadership in business is 
 often short-lived, and is seldom so secure that it cannot be taken or shared 
 when sought with determination. A manufacturer is pleased to hear 
 praise of his wares, but he listens with greater eagerness to criticism, that 
 by remedying defects he may render success more sure. Over-confidence 
 with the British in their long leadership of industry, was a reason why they 
 were easily overtaken by the Americans and Germans. 
 
 Danger of Self-Admiration. — It was not the inefficiency of slave 
 labor that exhausted soil in the South. Slave labor, though very ineffi- 
 cient where not kindly and judiciously encouraged, was similar to horse 
 labor, and might have been used by careful farming to enrich land, instead 
 of to impoverish it. It was inefficiency of masters that ruined soil, and 
 one cause of that inefficiency was self-admiration. No doubt when one of 
 these old time gentlemen, noble in many respects, watched cradlers cut- 
 ting wheat so light that it could be caught in the hand, instead of resolv- 
 ing at once to make his farming amount to more, reassured himself with 
 such soliloquies as — " Is not this the great plantation of my father. Colonel 
 So-and-so, who was the son of General So-and-so? " 
 
 It Caused America's Present Evils. — The evils that have settled 
 upon the United States since the war — control of cities by bad men, and a 
 general practice of making merchandise of politics — sprang likewise to a 
 large extent from self-admiration ; from a habit of shutting the eyes to de-
 
 3 1 2 The Plam Facts as to the Tariff. 
 
 fects calling for remedies, to indulge in indolent contemplation of our na- 
 tion's greatness. The kind of patriotism that keeps a country at its best 
 is not shown by fireworks and hilarity, nor by censuring any one who dares 
 to see aught but perfection in the tendency of the times. It is more like 
 the watchful care of the gardener for the grounds he is responsible for — 
 like the anxious love of the mother for the child whose character she must 
 make. The fact that each citizen can do so little, makes important the 
 prevalence of a serious regard for public duty.
 
 CHAPTER XII. 
 
 THE ARGUMENTS FOR PROTECTION. 
 
 Many Easily Refuted. — Most of the common argu- 
 ments for protection a reader can refute for himself by 
 appHcation of the principles explained in the last two 
 chapters. These arguments seem convincing to an 
 audience not prepared to question, but give way quickly 
 to critical examination. Often a speaker will talk at 
 length on our first duties being toward our family, city, 
 state, and nation — on the wisdom of looking out for 
 ourselves — as if somebody were in danger of making 
 trades to help the other party. People will not fail to be 
 selfish enough, without being urged, especially toward 
 foreigners.^ 
 
 ' Buying Things Out of Town. — The complaint against persons who 
 send away from their home town to buy things is not reasonable if they are 
 thereby better suited. Not many will take the trouble and expense to do 
 so without cause. The fullness of value a dealer offers is doubtful when 
 he talks much against those who do not willingly buy of him. They make 
 him a free gift of a part they pay when they put up with what he offers, 
 in a case where the same price would get elsewhere what they would rather 
 have. As products of some kind are shipped away from a town, its busi- 
 ness is only natural when other goods are shipped in. The buyer and the 
 town gain to the extent that the goods shipped in are better values than 
 those offered at home. As explained in Chapter VII., society wants only 
 the number of dealers that will supply its needs best. To support more 
 wastes the public benefit of their labor and capital. A business that cus- 
 tomers must lose money to help is not good for the town. This business 
 as itself a customer, to be held and kept on its feet with patronage given it 
 mainly for that purpose, other dealers had better do without who them- 
 selves offer good values. Making a man's living for him in order to sell 
 to him is usually trying too hard to get trade. It is well to buy at home,
 
 314 The Plain Facts as to the Tariff. 
 
 Buying^ Cheapest and Selling Dearest. — It is said 
 that this is not the practice in every-day life ; that a 
 person so directs his buying as to enable and induce his 
 sellers to buy of him/ This is sometimes true. It is 
 the practice under the crop lien system of the South, by 
 which farmers are kept fed and clothed by the local mer- 
 chant, in order that they may raise a crop of cotton and 
 pay him with it when gathered. It is simply barter, 
 and that with a vengeance ; the merchant having to raise 
 his price about a quarter to balance his risk and trouble, 
 and the farmer, seldom seeing a dollar, and without credit 
 elsewhere, having to take what this one merchant offers. 
 In small towns in any state many people know what it is 
 to "pay in trade." 
 
 Value in Cash is the Only Value. — Who tolerates 
 such business that can well avoid it, or how under it is 
 progress possible ? Where industry is developed, and 
 in all but a minute fraction of the nation's business, a 
 price always means cash. Ready money products are 
 the only ones people handle. That the money is forth- 
 
 but not when a free gift must be made, which is a loss to the giver, and 
 weakens a dealer's effort to deserve the custom he asks. 
 
 Free Trade Gives the V/orld's Best Values. — One reason why the 
 crowded industry of England has long continued so healthy is that free 
 trade gives the people the best values offered in the world, promoting con- 
 sumption much more liberal than in protected Germany. They buy Ger- 
 man and Austrian sugar for less than the cost of producing it, bounties 
 balancing the loss to the grower. The ^1,351 each gained last year by 
 buying locomotives in Pittsburgh for Calcutta was worth more to the British 
 stockholders and their nation than giving the order to the Glasgow bidders 
 could have been. Such bargains in imports can be secured so long as 
 home industries can make other things to export. 
 
 "'The market is most desirable for you in which you can dispose of 
 your commodities. . . . You must buy in the same market in which you 
 sell. . . . Vou can better pay ten dollars in potatoes or shoes, for these 
 you have, than half that sum in gold, which you do not possess. ' ' ( Roberts. )
 
 The Arguments for Protection. 3 1 5 
 
 coming is sufficient for each seller. Where the buyer 
 gets it is his concern ; the seller has troubles of his own. 
 The best way he can help the buyer and society, aside 
 from proper chanty, which is seldom involved, is to devote 
 all his attention to giving full value. Where all pay 
 money, all who do anything Jiave money. It is then as 
 easy to buy as if everybody would take trade without over- 
 charging against it. Excepting such retail trade as that 
 of relatives and friends, and that held by reason of debt to 
 the buyer, or of social custom, each competent business 
 man, knowing the markets and not lacking credit or 
 capital, saves every dollar he can, both in buying and 
 selling. In buying a large quantity of materials, or in 
 selling a large order of finished products, a difference of 
 a fraction of a cent per pound will take the business. 
 All this is as it ought to be. Only by getting and giving 
 each possible increment of value can society enjoy the 
 full benefits of competition. It is to keep trade from fol- 
 lowing the lowest price that protection exists. 
 
 But Buying Abroad is Said to be Different, because our 
 taking of fifty -eight millions of coffee and rubber from 
 Brazil in 1900 enabled us to sell our products there to 
 the amount of only twelve millions.^ How does this 
 differ from the case of the tinsmith, repairing the grocer's 
 furnace in a year to the amount of two dollars, yet buy- 
 ing of him family supplies to the amount of a hundred 
 dollars ? Should the grocer have his furnace shifted 
 around to permit the tinsmith to work up an equal bill ? 
 Each is glad to be able to buy what he needs, and his 
 effort to return favors he does not carry so far as to spend 
 much money for less value than other sellers will give. 
 Our people did not reduce their allowance of coffee by 
 
 1 Roberts, 239.
 
 3l6 The Plain Facts as to the Taiiff. 
 
 three-quarters because the Brazilians saved money by 
 buying their manufactures in Europe. Coffee and manu- 
 factures have certain cash prices which determine the 
 trade in them in the markets of the world, just the same 
 as tinsmithing and groceries have such cash prices in the 
 market of the town. The effect of each person's follow- 
 ing that occupation in which demand seems to give him 
 best reward, is to provide each with the money and the 
 goods his labor or capital will bring. Whether he sells 
 much or little to this or that man is a minor matter, so 
 long as in the aggregate he finds his demand and his 
 goods. Tariffs are only an obstruction, similar to difficulty 
 of transportation, which likewise protects the local pro- 
 ducer by narrowing the consumer's field of choice. 
 
 How it is That Importing Enables Us to Export. — Re- 
 peating somewhat from Chapter XI., it is the total of 
 our buying abroad that eventually determines how much 
 foreigners can buy of us, without regard to whether we 
 sell most or buy most of this or that country. Drafts 
 against us for all our foreign buying are sold promptly to 
 New York and London bankers, who buy also our own 
 drafts to collect for our sales in other lands. If at any 
 time the difference of the two totals is a large gold bal- 
 ance to be shipped us, the countries losing that gold feel 
 a money scarcity, and check their buying of imports, 
 which action soon cuts down our sales abroad. Our 
 buying then of more foreign goods, by causing this gold 
 to flow back where needed, eventually increases our ex- 
 ports again, but perhaps not for some time, until busi- 
 ness has revived in the countries that had lost the gold, 
 or in other lands. When the home producer needs a 
 tariff to hold the home market, there is something wrong 
 with his prices or qualities. And by depriving his cus-
 
 The Arguments for Protection. 317 
 
 tomers of the better values from abroad, the tariff also 
 narrows the market and lowers the price of such of their 
 products as foreigners demand. It is for his own gain 
 that a person buys abroad, not to induce foreigners to 
 buy of us. Their own gain soon leads them to do that. 
 Could We Have the Rails and the Money Too? — The 
 argument that we ought to have made steel rails instead 
 of buying them, because we should then have had the 
 money and the rails too, would then have applied to 
 sugar, and to many other things we might have con- 
 trived to produce; and could be carried further, if not 
 to show that there should be a shoemaker and a tailor 
 in each large family, at least to show that each town or 
 state should have every industry that could find a market 
 in its borders and force out an existence. But could we 
 have had both the money and the rails ? Not unless 
 our capital and labor that made the rails were previously 
 idle. To make the rails they would have had to stop 
 making other things, perhaps those traded with foreign- 
 ers for the money (exchange) that paid for the rails. 
 One cannot eat his cake and keep it too — use his 
 resources to make other things and still have them free 
 to make rails. ^ 
 
 ' Does Buying at Home Encourage Home Industry ? — Simple arith- 
 metic, Roberts confidently says (p. 244), shows that a person buying for- 
 eign goods gives for them an equivalent amount of his own product, and 
 thus adds only the amount of his own product to home wealth ; whereas, 
 when he buys home goods he adds to his country's wealth not only his own 
 product, but also the product of the home people who made the goods, 
 and of those who made the component materials. By this view home 
 buying is at least thrice as beneficial. The fact overlooked is that this 
 home buying does not start anybody at work. All had to be busy before 
 to make a living, and at industries not supported by a tariff tax on the 
 public. Buying abroad, strange as it seems, encourages home industry 
 most. Exchange of a less for a greater amount of goods or money value
 
 3 1 8 The Plain Facts as to the Tariff. 
 
 Without a Tariff America Would Have Made Rails 
 
 eventually, for the same reasons that she built ships in 
 colonial times. To suppose that she would not have 
 done so implies a poor opinion of the industrial genius 
 that has made Pittsburgh and its environs, working upon 
 the world's best deposits of iron and coal, with the 
 world's best labor, and in the midst of the world's 
 largest openings for iron and steel products. The 
 supremacy of America in iron production was foreseen 
 long ago. In 1866 Professor Jevons of England wrote 
 that our fuel and ore, with the enterprise of our people, 
 put the question beyond doubt.^ If in the growth of 
 demand for rails, men long continued to hesitate to make 
 them, and were not already producing something else 
 worth more, a tariff duty to start the business might 
 have been for a while a well spent levy on the people. 
 But men who can make things strongly demanded near 
 by, with the resources at hand to compete with the 
 world, will usually find a way to do so at a profit, with- 
 out help from public contributions. If hastening the 
 development of our rail industry brought prices, as 
 alleged, lower than they would otherwise have fallen, 
 our rail producers might have gained by starting one at 
 
 gives a person greater means for patronizing his neighbors. It is people 
 who have things whose general buying is large, not those who need because 
 they have not, as protection so often assumes. Repeal of the grain tariff 
 in 1846 so cheapened wheat bread that the British laborer's spending for 
 other things increased farm prosperity, raising price of barley and oats, and 
 doubling in time the prices of meat and butter. If need made buyers, the 
 place for a large retail store would be in the slums, where homes are bare, 
 not uptown among the rich, having already goods without limit. The more 
 goods a person has, the higher his grade of living, and the more he spends. 
 As to paying freight both ways (Roberts, 245), a money cost for every- 
 thing enables the importer to know exactly what he gains. 
 1 Bullock, 75.
 
 The Arguments for Protection. 319 
 
 a time, without throwing down the gauntlet in protec- 
 tion. Benefit has been withheld from consumers, be- 
 cause rails have continually been cheaper abroad, except 
 now and then within the last several years. Belgian 
 rails for 600 miles of the Orient railroad in Mexico were 
 bought with bonds in December, 190 1, at ^6 a ton less 
 than the lowest delivered price obtainable from American 
 mills, which have lately been too busy to accept many 
 foreign orders at foreign prices.^ 
 
 Cases Where Protection Worked Well. — Perhaps an 
 example of justifiable protection were Cromwell's navi- 
 gation laws of 165 1, forbidding foreign ships to do 
 English carrying, except those of the country carried to 
 or from, and starting the English islanders in an occupa- 
 tion for which they were naturally fitted by circum- 
 stances. Other similar cases were those in which woolen 
 manufacture was encouraged by law in England in the 
 Middle Ages, and silk manufacture in France. In the 
 present age of shrewd control of government by private 
 interests, such help is not needed among enlightened 
 people, and is very likely to be abused, " Protection to 
 
 ^Do Our Tariff Industries Save us from Foreign Monopoly? — 
 
 Professor Gunton said before the Industrial Commission (Vol. XIII.) that 
 in 1867 the British charged us on steel rails, above their home price, not 
 only the freight, but also ;?25 a ton extra as pure monopoly profit, simply 
 because we made no rails. The Yankees must then have forgotten their 
 cunning, if they helplessly paid the price first asked, without getting lowest 
 rates by going from one maker to another in England, Belgium, and Ger- 
 many. (See mention of this on pages 121 and 268. ) Lowering of prices 
 of tin-plate after 1890 has been likewise ascribed to starting the industry in 
 America. But if previous prices afforded excessive profit, and were likely 
 to continue, new mills abroad would have brought them down, and doubt- 
 less new mills here also without a tariff duty. With our resources, there 
 was no more need for a tariff to bring the steel industry from England to 
 America, than there was to carry it from eastern Pennsylvania to the region 
 west of the Alleghanies, where the great works are now located.
 
 320 Tlie Plain Facts as to the Tariff. 
 
 infant industries has unquestionably proved successful in 
 certain cases. But it is open to doubt whether the 
 number of instances of success has been sufficient to 
 justify the expense involved." ^ 
 
 May Build up Shipping and Prepare for "War. — Free 
 traders have generally approved reasonable navigation 
 laws, and moderate protection for a time in other cases, 
 when necessary to develop those industries required by 
 a nation for war. They have sometimes regarded with 
 tolerance the payment of a moderate subsidy for mail 
 carrying to lines of vessels needed as a reserve fleet for 
 war, and also for developing trade. Great Britain paid 
 many subsidies, beginning about 1840, until steamship 
 connection was established with all her colonies. Her 
 present subsidies, which are in the form of payments for 
 mail carrying on fast ships running regularly the year 
 round, whether business is sufficient or not, are con- 
 sidered no more (some say less) than a fair return for 
 the service. France and Germany in late years have 
 
 1 Hadley, 437. 
 
 Produced Some Good Results in Former Times. — That the earlier 
 efforts of governments in protection, prompted by their need for weahh to 
 tax, and for denser population from which to draw soldiers, were really 
 successful in building up manufactures and commerce, and in promoting 
 civilization, was admitted by Adam Smith. In the stagnant life of the 
 times (1200 to 1700), manufacturing would have risen very slowly except 
 in a few small districts such as Venice and Flanders, where it was caused 
 to flourish by natural aptitude and accidental circumstances. (Ingram, 355. ) 
 But what the people needed was to be waked up, and educated to know 
 and do. For this, protection is a risky expedient when not held carefully 
 in check by a strong and wise ruler. In England, between 1750 and 1846, 
 as explained in the preceding chapters, protection was used by the ruling 
 class to bring the common people much nearer starvation than they had ever 
 been in the more barbarous centuries before. In France the glory promoted 
 by protection under Colbert followed naturally to the unspeakable oppres- 
 sion of the common people during the eighteenth century, thrown off by 
 them in the carnival of blood known as the French Revolution,
 
 TJie Arg uincnis for Protection. 321 
 
 paid subsidies, the former on a large scale, for mail ser- 
 vice and for carrying the flag, drawing with excessive 
 profit too many ships into business in the case of France, 
 whose commerce is now not growing ; and the United 
 States, since 1891, has had a mail subsidy contract with 
 the American line to England/ Payment of subsidies 
 may easily be abused. The advantage, if any, needs to 
 be watched and secured. Building up the navy would 
 seem to be a surer way to get vessels, and may cost the 
 people no more. That transportation follows up open- 
 ings for trade is far truer than that trade follows trans- 
 portation, as proved by railroads now built without 
 bonuses. American capital and enterprise unaided will 
 now operate steamships to South America when the 
 trade thus to be developed will afford more profit than 
 they get otherwise. They let foreigners have the low 
 profits of ocean carrying. Ships from somewhere soon 
 appear wherever there is a paying business for them. 
 Europe's shipping, kept equal to the world's needs, we 
 cannot take without narrowing her ability to buy our 
 exports. And for making a nation influential and in- 
 dependent, the intelligence and wealth derived from 
 free trade or low tariffs, as in the case of England, Bel- 
 gium, Holland, and Denmark, are incomparably better 
 than the rude strength of supplying all at home, as in 
 the case of Bulgaria. 
 
 Navigation Laws, similar to those of Cromwell, were 
 enacted by most nations, but were mainly repealed over 
 a half century ago, being a great hindrance to com- 
 merce, in preventing exporters from shipping by any 
 
 ^ Hadley, 443. The Nation, Jan. 2, 1902, gives a good account of 
 European subsidies. Also The Fontm, Dec. 1900. Complete information 
 is given in the report for 1899 of the Commissioner of Navigation. 
 21
 
 322 TJie Plain Facts as to the Tariff. 
 
 vessel sailing- first. America's remaining navigation 
 laws, which shut out foreign ships from commerce be- 
 tween our home ports, are often objected to as a relic of 
 former centuries. To the extent that such laws benefit 
 vessel owners they are likely to harm shippers, with 
 higher freights and fewer sailings. The excuse for such 
 laws seems slender, after a limited time in which home 
 shipping might grow up. A bill is now before Con- 
 gress to permit foreign vessels to carry Texas petroleum 
 to home ports. Excluding passing foreign ships from 
 our trade with Porto Rico lessens her shipping facilities.^ 
 Protection to Keep Farming from Being Overdone. — 
 The argument seems reasonable that we must build up 
 and maintain manufacturing by means of the tariff, 
 because otherwise more people would have to go west 
 and engage in farming, which is already an unprofitable 
 business from overproduction and cheapness of products. 
 It seems that a farmer could well afford to pay a small 
 extra price for his clothing, dishes, etc., in order to keep 
 the makers of these from competing with him in his own 
 occupation. But if about the proper number to supply 
 the demand in each case were engaged in farming and 
 in cloth making, would a change of the tariff change 
 that demand ? Would not the world continue to want 
 cloth as before ? If American cloth makers gave up 
 the business because they had lost their allowance from 
 the public, other cloth makers somewhere would have to 
 take it up. Foreign prices of cloth would rise from 
 reduction of American supply, and the American cloth 
 makers would find, if their business was suited to our 
 conditions, that the place for them was in their old 
 occupation, not in farming. If they had to reduce their 
 
 "'To the colonists the navigation laws were an unmitigated evil," 
 (Bancroft.)
 
 The Arguments for Protection. 323 
 
 price a little to meet the foreign price, home consump- 
 tion would increase, and by running their mills more 
 actively they might clear from a smaller profit nearly as 
 much as before, while the poor would be able to wear 
 more clothing.^ 
 
 The Advantages of Diversified Industry, when ob- 
 tained by raising prices through protection, are likely to 
 be outweighed by the check to diversified consumption. 
 A variety of goods to enjoy at low prices may be more 
 important to the people than the added variety of em- 
 ployment.^ The American rate of consumption aver- 
 ages the highest in the world. Many of our workmen 
 might save two-thirds of their wages if they stinted 
 themselves like Europeans. But that is no reason why 
 they should not enjoy more if nature affords it. There 
 are some millions of men in the South earning each not 
 over ^i 50 a year, and not a few in the West whose work 
 at ;^i and 1^1.25 a day is not regular. Admitting good 
 values from abroad might not only give them cheaper 
 
 1 Would Not be Cheaper by the Full Amount of the Duty. — When 
 the tariff kept the American price of pig iron $'J a ton higher than the Brit- 
 ish, removal of the duty would not have taken from our price all the dif- 
 ference. Access to America for British iron would have raised its price, 
 perhaps about half the difference, while a fall in America, to the extent of 
 the other half, would have closed those American furnaces producing at 
 highest cost. But in time, if mines in England would have yielded more 
 without increase of cost per ton, starting of new furnaces there would have 
 lowered the English price to what it was before, which former price had 
 then yielded necessary profit. This price, plus freight, would then have 
 ruled in America, and all American producers unable to meet it would have 
 left the business. More likely, however, as results have indicated, lower- 
 ing price in America would have increased consumption far beyond the 
 capacity of English mines, and improvements lowering cost would have 
 enabled most of the American producers to continue, and eventually to take 
 their present position at the head. Europe could not produce, above her 
 own needs, enough manufactures to supply a tenth of the American demand 
 (Shearman). *Hadley, 439.
 
 324 TJie Plain Facts as to the Tariff. 
 
 manufactures, but also, by providing a better outlet for 
 the surplus, raise farm prices and money wages/ 
 
 To Avoid Exhaustion of Mines and Forests. — The old 
 argument that by building up manufactures through pro- 
 tection a nation should avoid stripping its mines, forests, 
 and soil, to exchange raw materials abroad for finished 
 goods — is a reason why America should now admit free 
 of duty lumber, coal, salt, iron ore, wool, hides, and 
 barley, and thus save her share of the earth's crust at the 
 expense of other people's shares. When this argument 
 was urged, duties on these raw materials would not have 
 been, as at present, a source of large gain to their pro- 
 ducers ; and the protectionists of that period (18 15 to 
 1 860) had doubtless a more sincere regard for the public 
 good than the majority of those in later years. Then 
 there was little desire among teachers of protection 
 to restrict imports of raw materials, of which a variety 
 and abundance were obviously important to growth of 
 manufacturing.^ 
 
 1 " Consumption Adds Nothing to the resources of the people ; it 
 only takes away from their ability to pay any charges." (Roberts, 250.) 
 This is true of protection's addition to the cost of living. Saving by going 
 without the comforts that improve health, mind, and capability is seldom 
 good for a person or his country, unless done temporarily for a purpose. 
 At any rate, saving soon involves consumption — materials for a house, a 
 piano or repairs for the home — most of these perhaps raised in price by 
 protection. Borrowers of savings may pay less interest, selling fewer prod- 
 ucts because protective prices on other things leave people less to spend. 
 Depositing in savings banks is praiseworthy, though it usually is hindered 
 instead of helped by protection ; and in some towns without savings banks 
 people save otherwise and enjoy a high degree of well-being. 
 
 2 The Duties on Farm Products. — In later years the present duties on 
 all kinds of agricultural products were levied to make a show of balancing 
 to the farmer (for whom protectionists are fond of expressing friendly re- 
 gard) the higher prices he must pay for manufactures by reason of protec- 
 tion ; and also to get as many voters as possible interested in maintaining 
 the protective system. Woolen manufacturers willingly submitted to a
 
 The Arguments for Protection. 325 
 
 Protection of Scarce Materials Most Harmful. — It is in 
 these cases of materials limited in supply by nature that 
 protection is most harmful to a country. With them, 
 unlike ordinary manufacturing, more people cannot enter 
 the business with equal chances and bring down price. 
 The tariff benefit may go almost wholly as economic rent 
 to the owners of the natural supply, appearing especially 
 in the high value of mining shares. These owners, who 
 need pay only the usual wages, easily act together in a 
 monopolistic way, and impose on the home people who 
 gave them the tariff. " American copper has habitually 
 been sold in London, in competition with foreign copper, 
 at a price less than was paid by American consumers at 
 home. . . . Equally conspicuous is the case of lumber."^ 
 The effect of the abnormal profit afforded by the tariff is 
 to hasten exhaustion of the limited supply. Producers 
 make output as large as possible, because the tariff ad- 
 vantage may not be continued. Though America has 
 long led the world in producing copper and lumber, both 
 in quantity and cheapness, the duty on copper was re- 
 tained until 1894, and the duty on lumber, then repealed, 
 was restored in 1897. Nearly every kind of mineral is 
 protected. In the case of nickel, mica, quicksilver, zinc, 
 
 duty on wool, despite the necessity for large imports, to get the support of 
 farmers for a duty now averaging 75 per cent on woolen goods. To ours, 
 the greatest producing and exporting nation, most of these agricultural 
 duties, such as 15 cents a bushel on corn and oats, 25 cents on potatoes, 
 and 3 cents a head on cabbage — are useless to all farmers except those 
 near such border cities as Detroit and Buffalo ; and there, what they gain 
 by the tariff is hardly other than a loss to the local consumers. Increased 
 prices to the farmers in times of local scarcity not to be relieved from 
 Canada, cannot increase materially their buying in the city. So far as 
 Canadians were allowed by their tariff to take goods home, their coming to 
 the city would increase its sales. 
 
 ^ Hadley, 436. The print paper trust, protected against Canada, and 
 cornering our best forests, is stripping them with monopoly gain.
 
 326 The Plain Facts as to the Tariff. 
 
 and other commodities comparatively rare, the duty may 
 benejfit only a few scores or hundreds of people, while all 
 the rest of the population may have to bear the tax per- 
 manently, perhaps in increased price of widely used man- 
 ufactures, without hope of a lowering of price from home 
 competition in the opening of new mines. 
 
 People Too Dull to Manufacture Want Few Foreign 
 Goods. — Getting manufactured goods abroad, by ex- 
 change of farm products and raw materials, need not 
 exhaust soil and forests ; because if people are too un- 
 enterprising to start needed industries without a tariff, 
 or at most with a tariff quickly to be repealed, they are 
 also too backward to want many foreign goods. The 
 South American people have scarcely sampled their 
 resources. And where new industries require a con- 
 tinued tariff, the extra price makes necessary to the farmer 
 a larger crop than before, and greater exhaustion of soil, 
 to get the same quantity of manufactured commodities. 
 Shipping products three miles to a local market exhausts 
 the soil just as much as shipping them 3,000 miles to 
 Europe. In few cases is manure hauled from a town 
 three miles out onto farms ; and changing city sewage 
 into fertilizer, on a systematic scale, has not yet come 
 into practice. The way to enrich land, as every farmer 
 knows, is to keep live stock, selling grain and fodder in 
 the form of meat products, whose price is now largely 
 fixed by the quantity of them that can be sold abroad. 
 
 To Relieve Pressure on Land. — Turning people from 
 farming into manufacturing might relieve pressure on 
 land, lowering farm rents, and thus, by providing employ- 
 ment requiring higher skill and better pay, might in- 
 crease total wages of the working classes and decrease 
 total income of land-owners. But this effect would be
 
 The Arguments for Protection. 327 
 
 temporary with the land overflowed by a stream of im- 
 migration, much of it attracted by protected industries ; 
 besides the effect of higher prices to keep down the 
 wage worker's commodities to what he had before. Any- 
 how, lowering the values of landlords' possessions has 
 never been desired in America, Here the masses of the 
 people have always owned land, and in no other way has 
 wealth been so widely and beneficially distributed as 
 through rise in the value of millions of small farms. ^ 
 
 Dumping Goods in England Below Cost. — The prac- 
 tice of dumping in Great Britain, at prices below cost, 
 surplus manufactures shipped from Germany and America 
 by protected producers, who thus keep up their prices 
 at home, is discussed by Mr. J. P. Young, in The Forian 
 of June, 1 90 1, as if it had become a settled policy. 
 This perhaps is more than these protected producers 
 would admit, especially in the present demand for reci- 
 procity. The purpose of Mr. Young's article is to show 
 that the British should adopt protection to save their in- 
 dustries, and to utilize better their farm resources. Such 
 dumping, if it is not to be depended on as a regular flow, 
 is undoubtedly an injury, despite the good values it 
 
 ' Professor Patten, with a view more applicable to crowded Europe 
 than to America, though he calls his a distinctively American economy, 
 says that while exporting farm products gives the foreigner cheaper food, 
 its effect to raise their price burdens the home consumer with higher rent 
 profit to land owners, who have some advantage of natural monopoly ; and 
 that it also confines use of land to single and soil-exhausting crops, such as 
 cotton and wheat, which the foreigner demands. For America the reply 
 is that no business has been so depressed as farming ; that in none would 
 higher price of its products (a natural price here) benefit half so many 
 deserving people (all other people too with better markets among farmers); 
 that from exportable crops many times more land would gladly be spared 
 for new crops than any possible demand can require ; and that now the 
 exported crops are numbered by dozens, and include most of those of 
 importance.
 
 328 Tlie Plain Facts as to the Tariff. 
 
 affords to buyers. The greatest economic benefit imag- 
 inable, such as the discovery of a process for doubling 
 all crops, would have at first the calamitous effect of sud- 
 denly forcing about half the farmers into other business. 
 If this doubling could happen but one year, it would 
 perhaps be better not to have it at all, and avoid ruinous 
 disturbance of business. Possibly a tariff duty, to be 
 imposed by customs officers when dumping was at- 
 tempted, would be accepted by free traders as allowable. 
 But dumping is not likely to continue. It occurs when 
 prices are high in protected lands, and when other lands 
 need the goods dumped. 
 
 Nature Moves the World's Workshop. — Cobden's plan 
 to make Great Britain the world's workshop seems to 
 have succeeded well enough, giving her that position for 
 another half century. He surely knew that she might 
 lose her rank from future discoveries. America's present 
 supremacy in iron production, taken from Great Britain, 
 may pass before long to China, whose deposits of coal 
 and iron, said to be illimitable, will be developed by 
 Europeans and Americans. Because Great Britain can- 
 not hold the supremacy is no reason why her people 
 should not continue at the work by which they can get 
 most aggregate value. It is by money values that in- 
 dustry is measured, not by bushels and tons. However 
 great the desire of the nations to engage in all lines of 
 production, and be self-sufficient, they will find a way to 
 admit British goods when that proves necessary to hold 
 the customer buying more than any two other nations. 
 To their home industry the market in Great Britain is 
 worth more than the additional home market to be 
 gained by shutting out the smaller volume of purchases 
 from her. Distant trading does not seem to be " the
 
 The Arguments for Protection. 329 
 
 greatest of all waste " for Massachusetts, whose people 
 get their bread and meat cheapest, not from their soil, 
 but by trading manufactures for them in the far West, 
 The case is the same with Great Britain. Very likely 
 her ship freight from Russia and Argentina is lower than 
 the rail freight to Massachusetts from Dakota. 
 
 The Wastes of Transporting Goods from one country to 
 another, absorbing capital, mercantile skill, and labor, to 
 a vast aggregate, and hastening the exhaustion of the 
 world's stores of coal, impresses Mr. J. P. Young with a 
 conviction that the wisdom of protection, to develop man- 
 ufacturing where materials are produced, must in time 
 be recognized and followed universally.^ Such a view, 
 at first thought, seems reasonable. Shipping cotton 
 from Alabama to England and Massachusetts, to be made 
 into cloth and shipped back, appears as wasteful and 
 short-sighted as carrying water a half mile in pails in- 
 stead of digging a well at the kitchen. 
 
 But TMs Idea is No Discovery. — For transportation, as 
 for most other things, there is a reason, as indicated in 
 the preceding chapter. The people of the South are at 
 liberty to make cotton cloth for the world, and to drive 
 out of business the manufacturers of England and Massa- 
 chusetts. Pennsylvanians are at liberty to make their 
 steel into rails and machinery for the world. But how 
 are the extra cloth and machinery to be sold unless 
 transported, and how is the world to pay for them unless 
 other goods are brought back ? Dakota's cheap food, 
 with no other materials, does not attract Massachusetts 
 factories ; neither is Manchester or Lowell moved to 
 Alabama to save freight ; and the common sense of busi- 
 
 ^ The Forum, Dec. 1900. Mr. Young is an editor of the San Fran- 
 cisco Chronicle, and a protectionist author of high standing.
 
 330 The Plain Facts as to the Tariff. 
 
 ness will bear the test here as elsewhere. With freight 
 at 20 cents per 100, it costs only ^1.20 to carry from St. 
 Paul to New York one man's supply of wheat for a year 
 (10 bushels, 600 pounds). If freight on raw cotton were 
 a heavy expense per yard, New England factories would 
 have moved South long ago, and England would have 
 been driven out of the business. Bulky materials — iron 
 and lumber — have always passed through the first forms 
 of manufacture where they are found. But in fine ma- 
 chinery, freight on iron is a trifle compared with posses- 
 sion of developed skill ; and in such manufacture Worces- 
 ter and Providence, 500 miles away, keep ahead of the 
 Pennsylvania cities. Besides, the former may be nearest 
 to the places where their machinery is chiefly sold. 
 
 The Life of Progress in Manufacture is a widening 
 market, because the main purpose of invention is to 
 enlarge and cheapen product. The inducement to im- 
 prove is to get more to sell. This beneficent process 
 would be blighted if men of skill in manufacture had to 
 change business, or sink into stagnation, when the home 
 market was supplied, while to bring in enough immi- 
 grants to consume all would soon overtax other re- 
 sources. Having learned her trade from many years of 
 experience, Manchester kept on weaving cotton until 
 she had to send it all over the world. Mr. Young's 
 prediction, that in time all external trade except non- 
 competing will be acknowledged as wasteful, and re- 
 strained by protection, requires that an industry be dis- 
 couraged as it approaches high development. Ability 
 to manufacture and trade, formerly very rare, and still 
 not over-plentiful, is the main essential. The expenses of 
 gathering materials and transporting goods are second- 
 ary. Nature did not fit many people to do it all, under
 
 The Arguments for Protection. 331 
 
 a civilization higher than that of the backwoods. There 
 was a great saving of freight before the day of railroads. 
 Then everything, which did not include much, was made 
 in the pioneer community, nothing being shipped in 
 or out. 
 
 All Manual Labor is Moving Things. — No ; the burden 
 of transportation and of merchandising was made neces- 
 sary by nature, being a part of the division of labor ; 
 and for the same reason no doubt that food grows in the 
 form of grain instead of bread. All manual labor, as 
 was pointed out by Mill, consists simply of moving 
 things from one place to another. The object of pro- 
 duction is values, not quantities. There is less wood in 
 a chair than there was in the lumber used. Carrying 
 wheat, without adding an ounce, to where its value is 
 double, produces as much wealth as growing it at first.^ 
 
 Admitted Need for a New Argument. — The Eco- 
 
 7iomic Basis of the Protective System is the title given 
 
 by Mr. Young to his plan for getting rid of shippers' 
 
 profits, and of waste of coal on trains and steamships. It 
 
 is advanced as a basis for permanent protection, with the 
 
 admission that now, since our industries have grown old 
 
 and strong, protection must fall if supported only by the 
 
 ' Making Things or Selling Things ? — The claim that protection 
 favors production, while free trade seeks to exalt commerce at production's 
 expense (Roberts, 204), has in mind new production started by protection. 
 This not only displaces the same kind of production abroad, but the higher 
 price causes fewer of the goods to be used and made. Making and sell- 
 ing cannot be separated. In modern society makers do not use their own 
 goods, but seek the money they sell for. A new protective law narrows 
 the market of producers in other lines, lessening the money amount of their 
 production, besides taking their money in high prices. The consumption 
 of goods, and hence their production, is increased to the highest limit by 
 commerce, which takes them to every region where they can be sold. 
 Roberts (page 245) dwells on the risks of commerce as an effort io get 
 profit. Is production less risky, and if it were would not people find it out ?
 
 :)o- 
 
 The Plain Facts as to the Tariff. 
 
 infant industry argument. But is not Mr. Young's idea 
 the same thing ? How could protection keep business 
 at home except by turning capital from strong industries, 
 reaching outward for markets, into weak industries, which, 
 without a contribution from the public, would be left in 
 infancy or never have been started ? To try by pro- 
 tection to develop all of a country's resources together 
 would be the same in principle as to have required the 
 early lumbermen to clear land of all its timber. They 
 selected the pine, because it alone had value and would 
 sell. The hardwood was useful, but nobody then wanted 
 it, and to cut it to rot would have been a waste of both 
 labor and timber. It has since become valuable, and 
 labor spent upon it brings now a full return. 
 
 Resources Wasted by Developing Too Soon. — Instead 
 of saving, therefore, protection not only wastes labor and 
 capital, by turning them from one industry into another 
 from which they produce less value, but it also wastes 
 natural resources by developing them while their value 
 is yet low. Natural direction of industr}^ by comparative 
 values is safest. The usefulness to be considered in labor, 
 materials, and products, is shown pretty accurately by 
 price. Here, as elsewhere, money talks. Alleged value 
 that nobody will pay for need not cause much concern — 
 not to the extent of taxing people to pay for its develop- 
 ment. As resources yielding most wealth are exhausted, 
 others, becoming more v^aluable, take their place. Saginaw 
 and Muskegon first attained great wealth from sawing logs. 
 Exhaustion of available timber turned them to planing 
 mills and box factories, and later into various kinds of 
 manufacture.^ Farming in some Michigan counties noted 
 
 'If the government, for the year 1870, had paid our manufacturers of 
 pig iron seven per cent on their capital, and tlieir men full wages, allowing
 
 TJie Arguments for Protection. 333 
 
 for fertility was not taken up until the more profitable lum- 
 bering gave out, and a market appeared for farm products. 
 To Keep People Active in Many Lines of Industry, 
 stirring or drawing them from a static into a dynamic 
 condition, was the main thought of Professor S. N. Pat- 
 ten's Economic Basis of Protection, published in 1890, 
 when, permanent protection being desired, the infant 
 industry argument was losing force, and the high wage 
 argument, doubtless, was deemed to need help. As 
 explained in a previous chapter, people might be encour- 
 aged into highest and best directed activity — obtaining 
 largest possible product, and enjoying from it highest 
 wages and most elevating consumption — through pro- 
 tective laws made and changed continually, to suit the 
 changing condition of each industry, by a supernatural 
 power of perfect wisdom and justice. But in this country 
 we have only men of human frailty for rulers, and tariff 
 laws are inevitably moulded by the very persons whom 
 they enable to raise prices. Hence, the chances are that 
 protection will tax a good many more people than it will 
 encourage, and keep society more static than it would 
 otherwise have been. This gain to people having influ- 
 ence, taken with the old arguments, is a sufficient reason 
 why at all times many statesmen have favored protec- 
 tion. There is no need to seek for another reason in the 
 economic basis Mr. Young has proposed. 
 
 men and furnaces to be idle, and admitting foreign pig iron free of duty, 
 the American people (if foreign output could have increased accordingly) 
 would have saved $2,000,000 in cash on the quantity bought, and ;?l8,- 
 000,000 worth of coal that was consumed, besides leaving 4,000,000 tons 
 of ore for a future time when it could be developed at a profit, and releas- 
 ing 509 engines for other work. (Sumner, 32.) In the rapid develop- 
 ment of that period there was no lack of other production for the labor and 
 capital, and cheaper iron would have been a decided benefit, lowering the 
 excessive cost of railroads.
 
 334 '^^'-^ Plain Facts as to the Tariff. 
 
 To Gather People Into Towns and Cities, under the civ- 
 ilizing influences of manufacturing, and away from the 
 duHness and coarseness of country life, was urged as a 
 desirable effect of protection by Professor Francis Bowen, 
 in his American Political Economy, published in 1870. 
 This, like the ideas discussed in the preceding paragraphs, 
 is one form of the argument for diversification of industry. 
 He even mentions our country as being, " so to speak, 
 cursed with great advantages for agriculture," which, he 
 says, scatters people, and taken alone can never develop 
 skill, taste, and wealth. He thought the ancient colo- 
 nies, whose people had to gather in walled cities to save 
 their lives and goods, developed a civilization preferable 
 to that of our American colonies, whose people, shrinking 
 from no danger or hardship, stalked westward over forest 
 and plain, settling upon large farms of the best land, how- 
 ever distant it might be. 
 
 Are City People the Nation's Strength ? — Professor 
 Bowen wrote before our horizon was darkened by the 
 grave problem of the large cities, with their concentra- 
 tion of vice and crime, and of the worst kind of igno- 
 rance — inability to get a living. But the latter condition 
 was common earlier in our chief cities, before the time 
 of large immigration — during almost every winter from 
 1825 to 1850.^ At present country people of equal 
 thrift and effort have no such strained and uncertain 
 support as the many thousands of operatives at low 
 wages in cotton mills. In mere book knowledge, and 
 general culture, a city of 1,000,000 averages below a 
 
 iW. J. Ghent, The Workman's Golden Age, in T/ie Forum, August, 
 I901. Steadily increasing wages, and improving conditions for labor, set 
 in about 1850, in the solidly prosperous low tariff period of 1846-60, in 
 ■which the inflated currency panic of 1857 was recovered from in one year. 
 (Sumner, 56.)
 
 The Arguniatts for Protcctiori. 335 
 
 city of 100,000, while it may be that the highest average 
 is in cities of about 10,000 or less. And small county 
 seat market towns average in this respect but little below 
 other places of equal size having factories. 
 
 Can Factories Exist Everywhere ? — Not by any means. 
 For Massachusetts and England, possession of capital 
 and skill are no more essential to their manufacturing 
 than the fact that other regions, many times larger, such 
 as our West and Southwest, and as Spain, Turkey, and 
 China, have few or no factories of the kind considered, 
 but buy the wares of Massachusetts and England. Even 
 in the one small manufacturing country or region, the 
 factories of each kind tend to gather at a few most suit- 
 able points. England's cotton factories are within thirty 
 miles of Manchester. American woolen factories are 
 chiefly concentrated in a few small sections of Pennsyl- 
 vania and southeastern New England. In Battle Creek, 
 Mich., owing doubtless to the great success of one of the 
 first, twenty-four health food concerns have sprung up 
 in the last several years. In Danbury, Conn., thirty or 
 more hat factories have risen. In any state or country, 
 a manufacturing city is usually noted for one or a few 
 special lines of industry. 
 
 Every Region a Field for Varied Talents. — In view 
 of the above facts, it is clear that a community cannot 
 choose industries at will. Extensive and highly devel- 
 oped factories, producing the same product, exist now as 
 a rule at few places, and are convenient to a small portion 
 of the country's or the world's population. Few as they 
 are, finding sale for their goods is more difficult than 
 making them. Are the mass of humanity then doomed 
 to be rude laborers, whose large number Professor Bowen 
 thought the greatest cause of national poverty ? Non-
 
 336 TJie Plain Facts as to the Tariff. 
 
 manufacturing people are seldom troubled about this. 
 Some variety of occupations exists everywhere, and in 
 the country districts there is a very fair development of 
 talents. Country merchants, even farthest back in the 
 mountains, are capable men, buying up various products, 
 and dealing on an equality with wholesalers in cities. 
 Many of them, or their sons and clerks, eventually en- 
 gage in business in large towns and cities, or travel for 
 wholesale houses. Everywhere railroads afford a mind- 
 developing occupation to country youth not content, or 
 not needed, on the farm. Stock raisers from the Alle- 
 ghanies take their cattle in person to Baltimore, and pos- 
 sess not only money, but a full measure of shrewdness. 
 Buying up and marketing scattered timber, and operating 
 small saw mills, mines, and occasionally local factories, 
 afford a ready field for enterprise, with some variety of 
 employment. The villages require professional men and 
 a few mechanics ; everywhere some knowledge of ma- 
 chinery is to be gained by working in local flour mills, 
 and with threshing machines. 
 
 Going from Home Develops Young Men. — While 
 these openings may not be available for many, not many 
 in a sparse population may be fitted to better their con- 
 dition by leaving the farm. And those not finding suit- 
 able occupation at home are more highly developed and 
 benefited, and their country with them, by striking out 
 to seek their fortunes in the manufacturing cities and in 
 the West. In any state having a tolerable system of 
 schools, the fit among the country people are well pre- 
 pared to hold their own anywhere. Millions of young 
 men since the war have gone from the southeastern agri- 
 cultural states to grow up with the West, and with the 
 Northern cities. They have been more successful than
 
 The Arguments for Protection. 337 
 
 if they had learned some factory trade at home, like 
 Europeans who follow a trade at one place for gene- 
 rations, until they lose capacity of self-help. Young men 
 go west from New England cities too, leaving the fac- 
 tory work for foreigners. Factories are desirable ; every 
 town that can should have them ; but only a small pro- 
 portion of the earth can have manufacturing as its main 
 support. Yet for the rest nature has provided a very 
 fair range of opportunity.^ 
 
 ' Not All the Doctrinaires Were Free Traders. — Professor Bowen 
 (page 73) said that in a country having 4,000,000 farmers, changing 3,000,- 
 000 of them into artisans would make the yearly product 7.]/^ times as large ; 
 that in buying products of skilled labor with products of rude labor, the 
 labor of three men is given for the labor of one ; that the 1 ,000,000 farmers 
 left, with just as many to feed as before, could get good prices and afford 
 to pay more for manufactures protected by a tariff; and that land fertility 
 may doom people to drudgery for the paltry advantage of cheaper manu- 
 factures from abroad. Can protection be made to yield such tremendous 
 benefits? Every assertion involved seems to be untrue. If capital and 
 capacity to change 3,000,000 into artisans could be acquired in a generation, 
 other nations, to exchange for the goods made, would have to increase 
 their production likewise, not making the same goods, to avoid a glut, but 
 producing other things, most likely the very products the 3,000,000 had 
 previously grown on farms, and many more of them, if each of the new 
 artisans turned out a value trebled. It would not be necessary to tax the 
 public to pay capitalists through a tariff price for engaging in manufacturing 
 if it would treble the value of a common laborer's work. He gets only his 
 ^l to ^1.50 a day in steel mills and factories, the same as on railroads and 
 on farms. Even when skilled and running rapid machinery, men averaged 
 only ^1.13 a day in cotton mills in 1891 (Levasseur, 310), and in the ex- 
 pensive living of New England obtained less with their money than labor- 
 ers at the same wages in the agricultural West. One might as well advise 
 men to become bank presidents as steel rollers earning ^10 to ;55i2 a day. 
 Of the two classes, bank presidents are far more numerous. Not many are 
 fitted to enter highly paid occupations, and there is not room for half of 
 those who are. The people of Lancashire, almost wholly occupied with 
 machinery, have nothing like the abundant living of Texas people who 
 never see a factory. The mention of fertile land and fewer farmers reveals 
 the idea of benefit from scarcity and high prices. Of such benefit Europe 
 knows too well. 
 22
 
 338 TJie Plain Facts as to the Tariff. 
 
 Making the Most of a Nation's Possibilities, as of a per- 
 son's, consists truly, as the German protectionist Frederick 
 List taught in his great work on national economy pub- 
 lished in 1 841 — in educating its people's skill and pru- 
 dence, and in so applying their powers to its natural 
 resources as to get the greatest results in wealth and 
 well-being, not this year nor this decade, but in the long 
 run of the indefinite future. He taught that producing 
 farm products and raw materials, under free trade, was 
 best for Spain and South America, not yet being fitted 
 to manufacture ; that free trade was best for England 
 also, being fully developed in manufacturing, having 
 served her apprenticeship under protection ; but that pro- 
 tection was best for Germany and America, in their grad- 
 ual passing from agriculture to manufacturing.^ This 
 doctrine had much influence in Germany, which was then 
 rising from stagnation, and its application there in pro- 
 tective laws has doubtless been successful, under a 
 fatherly monarchial government, and with a people 
 quietly obedient, given to patiently making the best of 
 things, and to enduring much from the government with- 
 out effort to control it in their own interest. 
 
 Did Protection Make Germany ? — But in view of the 
 sturdy energy and frugality of the Germans, it is difficult 
 to believe that they would not have done as well or 
 better without protection, not making any trades at a loss, 
 and getting in cheap food from abroad more than the 
 pitifully stinted meals that many millions of them have 
 had to put up with. In America, as stated repeatedly, 
 List's theory involves prolonged loss and injustice, by 
 reason of the readiness of favored interests to turn the 
 government to their own private benefit. People such 
 
 1 Ingram, 389.
 
 The Argiwicnts for Protection. 339 
 
 as ours clearly make the most of themselves and their 
 resources when the government provides simply informa- 
 tion and good order, allowing self-interest to direct in- 
 dustry. 
 
 Where People Will Bear Much, loyally taking burdens 
 as benefits, protection makes its best apparent showing 
 (not considering America, which is so rich and strong 
 that her burden of protection is light). Under Bismarck 
 in Germany, or M. de Witte in Russia, the building up 
 of great industries by protection is viewed as a glorious 
 achievement, without a thought of the masses, doomed 
 by the high prices of protection, and by the support of 
 millions of soldiers and officials from the annual product, 
 to a living that would be distressingly coarse and scanty 
 in the poorest American state. In fact, despite many 
 good things in government, people are viewed there less 
 as men, living for themselves and families, than as sol- 
 diers and workers for the nation or the king. By pro- 
 tection, as by forced service and other taxes, great things 
 can be done, and prosperity, such as it is, maintained. 
 Ancient kings built pyramids, and their empires enjoyed 
 splendor. Counting taxation and time of army service, 
 it has been estimated that the average French working- 
 man, with some important foods fifty per cent higher 
 than in free trade England, pays a fifth of all his earn- 
 ings to the government.^ While governments with such 
 people as those of Spain, Russia, and Mexico may per- 
 haps properly induce Germans and British to come with 
 their capital and teach a few needed industries, one can 
 scarcely believe that extensive European industries rest- 
 
 1 Roberts, 54. William Pitt pointed out that taxing "the last rag" 
 from the people's backs, by means of hidden duties added to prices, would 
 cause no complaint of the duties, while a tax of seven per cent paid to the 
 tax collector would provoke an insurrection.
 
 340 TJie Plain Facts as to the Tariff. 
 
 ing on protection are not a spurious show, supported by 
 people already pressed low. Instruction how to utilize 
 resources needing no protection could hardly fail to 
 yield better permanent results/ 
 
 Variety in Farming is emphasized by Professor Patten ^ 
 as a good effect of protection to manufactures. Stating 
 that free traders assume that land and labor are best 
 used for a single product, to be exported, he says that 
 protection, aside from developing all the manufacturing 
 capacity of labor, leads to utilization of all land re- 
 sources, by creating local demand for many new crops ; 
 that from these crops the farmer gets more profit than 
 he could have realized from transportable products low- 
 ered in price by protection's effect to weaken demand 
 abroad ; and that while checking commerce in protected 
 goods, protection, with these new commodities, produced 
 at home and abroad, benefits society and enlarges total 
 foreign trade. High prices for protected articles, he 
 says, awaken wants for new and cheaper things to be 
 produced at home. 
 
 But Having Means With Which to Buy (not taken by 
 higher prices for protected necessaries) surely develops 
 more and greater wants than does forced need. With- 
 out protection, growth of demand from increase of pop- 
 
 ' Roberts' argument that protection is wise because Solomon, Csesar, and 
 Napoleon believed in it, would apply as well to the common ancient cus- 
 tom of conquering and forcing tribute money and slaves from weaker 
 peoples. To a large extent the Continental powers, following old ideals of 
 the state, still rule in the ancient way their patiently patriotic subjects, who 
 however, in present unrest, are realizing somewhat their unnecessary bur- 
 dens. After the field in which to levy tribute on strangers had been worked 
 out, support of royalty and privilege, which must always rest on labor some- 
 where, became more of a "home industry." The present ruling classes 
 mean well of course, but so did those of ancient times. 
 
 8 Chapter IV.
 
 The Arguments for Protection. 34 1 
 
 ulation, growth of capital and experience, and use of 
 every nation's improved methods, bring quickly among 
 intelligent people all the variety of farming that can be 
 made to pay, as well as all such manufacturing. Free 
 trade lets the natural profit decide whether a farmer shall 
 raise one crop or a dozen. In late years most of our 
 farm crops of consequence have been largely shipped 
 abroad, including a variety of minor commodities, but 
 because of naturally developing demand, and in spite of 
 our protection's weakening of foreign ability to buy. 
 
 "The North Would be as Poor as the South, and its 
 cities as small, if the land of the North were used for 
 wheat as that of the South is used for cotton. Had our 
 whole nation followed the lines of relative advantage, 
 advocated by free traders, our country would be divided 
 into three parallel belts, used for cotton, tobacco, and 
 wheat." ^ The change from raising wheat to producing 
 butter and small crops, it is hardly necessary to say, did 
 not cause the North's growth to half the extent that this 
 growth caused the change of farming, by affording new 
 demand and altering relative advantage. Cultivation of 
 one crop in the South was due to slave labor unsuitable 
 for other crops, to exceptional demand for cotton and 
 tobacco, and to the influence of slavery in preventing 
 development of varied industry and local demand. To 
 follow relative advantage, whatever old-time free traders 
 may have seemed to teach, is not to be bound to certain 
 staples, but to use land and labor each year so as to get 
 most profit, changing to new crops or not, as demand 
 may lead. Intelligent farmers in the North have always 
 done this, whether the demand they gain from be local, 
 inter-state, or foreign ; and to get money they do not 
 
 1 Patten, 87.
 
 34^ T^J^^ F'lciiii Facts as to the Tariff. 
 
 sell their land fertility in exhausting crops, for the same 
 reason that they do not sell boards from off their houses. 
 
 Is a Profitable Crop a Misfortune? — It is said^ that if 
 a blight upon the grape vine should force the people of 
 Portugal to cultivate a variety of crops, it would be a 
 national gain. But would not a good income from suc- 
 cessful grape culture be a better preparation for raising 
 other crops than failure and poverty ? With such sup- 
 port, a people sufficiently intelligent could have time and 
 means for learning new kinds of farming on a part of 
 their land, so far as markets could be found or made. If 
 too ignorant they would be in a position to acquire intelli- 
 gence when awakened to its importance. It is not the 
 necessity of poverty that leads people to rise, but the 
 encouragement of such an income as will permit some 
 saving of capital. 
 
 Trade with Inferior Peoples. — It is also said ^ that the 
 advantage to America of trade with Cuba has been due 
 to her disorder, with Italy to her ignorance, and with 
 Turkey to her oppression, inasmuch as by these evils 
 they are kept producing a few things we get at a profit ; 
 that " a sound national poHcy must cut off these sources 
 of profit to individuals, and make it for their interest to 
 cooperate for the good of the whole." The claim is that 
 if by protection (always to be continued, because more 
 progress is always possible) each of two countries led its 
 people to develop themselves and all their resources to 
 the utmost, they would not exchange commodities which 
 one could produce merely better than the other, but only 
 such as one produced and the other could not ; and that 
 both the superior and the inferior nation would tend to 
 
 1 Patten, 88. 
 
 2 Patten, 92.
 
 The Arguments for Protection. 343 
 
 become civilized to the highest degree, rendering each 
 other the maximum benefit, as do families of enlightened 
 neighbors. 
 
 An Idea More Theoretical Than This — further removed 
 from the practical — could not well be imagined. What 
 the world knows it learned from trade. If there is gain, 
 near or remote, to an enlightened people in developing 
 neglected resources, they can be induced to see it with- 
 out being forced to it by cutting off outside supplies ; 
 while to enable an inferior people to rise, the main es- 
 sentials are civilized goods and ideas from abroad. By 
 these Japan has been lifted up marvelously. Cuba and 
 the Philippines will not be doomed by isolation to sink 
 lower ; but Americans of enterprise and capital, under 
 proper restraint of law, will enrich both themselves and 
 the natives by production and trade, while benefiting 
 consumers everywhere with additional supplies from 
 those lands. 
 
 Let the Nation Teach, Not Help With Money. — In some 
 particulars Professor Patten's book would be sound and 
 useful if the active policy he recommends were made to 
 include, not protection, but general education, and the 
 various methods by which our nation and states supply 
 industrial information. The departments of agriculture, 
 gathering and testing plants and fruits, and studying ani- 
 mal diseases, aim to give farmers the knowledge they 
 need most as to products and markets. The geological 
 surveys promote development of mineral wealth. The 
 consuls report openings abroad for American products, 
 and send any information useful in trade. People not 
 sufficiently enterprising to appreciate practical service of 
 this kind are surely unfit to have their profits guaranteed 
 at public expense. Not only as it is, a faulty human in-
 
 344 '^^''^ Plain Facts as to the Tariff. 
 
 stitution, but even if the government were supernaturally 
 wise and pure, knowing the end from the beginning, and 
 infinitely above favoring some at the unjust expense of 
 others, it could not find another way so good as this to 
 draw out the capacity of its people, and to utilize its 
 resources. When thus led to the water they will drink 
 if it is good for them ; and industries will not be induced, 
 largely without personal fault, to fasten themselves upon 
 society as parasites. 
 
 One Nation Gains Most from the Exchange, it has been 
 asserted against free trade — a notion appearing in 
 speeches of Bismarck. When gains are unequal there is 
 no lack of remedies. The people gaining least must 
 turn to producing the most profitable things they can. 
 If the government's agricultural and mineral departments 
 prove to them which products can be made most profit- 
 able, any people capable of changing occupation will turn 
 to them, without receiving a public tax for doing so. 
 Leaving the way open for the world to bid for their prod- 
 ucts, new or old, will secure to them the largest total 
 values, both in money and commodities. On the other 
 hand, the people gaining most will soon have their profits 
 cut down, by larger production among themselves or in 
 other nations, lowering their prices, and thus giving more 
 of their goods in exchange for those of the people gain- 
 ing least. In the present knowledge of world prices, 
 gains soon drop to the minimum everywhere. In differ- 
 ent nations, as in different local towns, each can only 
 use his labor and capital so as to bring most value. 
 Intelligence is all he needs, and all he can use with- 
 out harming others. Did not nature arrange this very 
 well? 
 
 The Nation Tinder Greatest Necessity to Trade, which
 
 The Arguments for Protection. 345 
 
 it is said must take little and offer much,^ is not the back- 
 ward agricultural nation, deemed to need help from pro- 
 tection. In the case of farmers with means, the difficulty- 
 is to induce them to want and to buy. With South 
 Americans and Chinese, there is also the difficulty of in- 
 ducing them to produce something to buy with. It is 
 the manufacturing British, the Belgians, or the New 
 Englanders, that are under greatest necessity to trade, in 
 order to get food and raw materials. Their millions 
 would soon starve if trade stopped, while farming people 
 everywhere would at once adjust themselves to home- 
 spun as Southerners did during the war. Where trade 
 is not penned in, no people have a local price of their own, 
 to be lowered to induce a skipper in port to part with his 
 fabrics. Continual trade adjusts prices on everything 
 everywhere to the world's supply and demand, with good 
 allowances against obstruction in communities shut to 
 themselves by protection. The manufacturing people 
 also are first concerned as to the freight on bulky raw 
 materials, not their producers. The fact that the latter 
 often need to be educated up to the trading stage leads 
 on to the other fact that the freer and wider their trade 
 opportunities the more they will get for their raw mate- 
 rials, and the quicker they will learn to manufacture 
 healthfully for themselves.^ 
 
 'Bowen, 485. 
 
 2 Will an Industry Ever Be Ready to Give Up Protection ?— The 
 
 free trader John Stuart Mill's oft-quoted admission that as a country's 
 advantage in manufacturing may arise solely from an earlier start, another 
 country may sometimes get industries most easily by means of temporary 
 protection — was objected to by Professor Rogers in 1S78 (page 755) on the 
 ground that the only case in history of protected industries becoming full 
 grown, and desiring free trade, was that of England in 1846, after such a 
 revolutionary change by improved machinery as can not again be expected. 
 He reasoned that normally, as industries tend to lean on protection and not
 
 34^ The Plaui Facts as to the Tariff. 
 
 The Foreigner Pays the Tax, it is true, when by reason 
 of home supply price does not rise materially, and im- 
 porting continues. Then, to sell an article with the duty 
 paid, less must be accepted for it by the foreign pro- 
 ducer. This is sometimes the case with products easily 
 brought in, the cost of which is not accurately known. 
 Canadians across the river doubtless continued to sell 
 eggs in Detroit, at about the same price, after the levy 
 of the duty of five cents a dozen. Until they could find 
 a market in Canadian cities, or dispose of some of their 
 poultry, paying the duty was the same to them as bear- 
 ing at different times previously a fall of five cents in 
 price. The case was the same in 1890 with Bermuda 
 vegetables. 
 
 It May be Borne by a Monopolist. — The foreigner may 
 likewise pay all or a part of the duty on raw materials, 
 
 improve, protected industries will never catch up with foreign competitors 
 not liaving or needing artificial aid. 
 
 Our Resources Will Deliver Us, however, it is to be hoped. "While 
 protected producers may find it easier to influence Congress for special 
 favors than to work out improvements, the ability, ambition, and resources 
 of leading American producers, already placing them foremost, will prob- 
 ably lead them eventually, as explained in the preceding chapter, to join 
 with consumers to establish low duties or free trade. At present the 
 demand for reciprocity comes from makers of farm machinery or other 
 articles whose superiority has always made protection useless to them ; but 
 inability of foreigners to buy with money, and need for raw materials, may 
 soon weaken protective sentiment, hitherto strong, among foremost pro- 
 ducers needing a market for various other kinds of manufactures. The solid 
 energy and capacity of German manufacturers has now enabled many of them 
 to compete with the world, and they, somewhat as the British did in 1846, 
 are now demanding free admission of foreign food. These may be cases 
 in which industry advanced in spite of protection, not depending on its 
 " coddling." Americans from the start, and Germans after their awaken- 
 ing in 1870, would undoubtedly have been great manufacturers without pro- 
 tection. And very likely, as Professor Rogers thought, industries started 
 artificially by protection in such countries as Russia and Spain will not be 
 able to compete with the world within two centuries.
 
 The Arguments for Protection. 347 
 
 already on hand to be shipped in, or produced, Hke 
 Canadian lumber, from Hmited supply with monopolistic 
 profit. So little of the lumber used was shipped from 
 Canada that in 1897 her portion was not needed at a 
 price fully $2 higher. Articles patented, or made by a 
 monopoly trust, are often sold at lower profit abroad 
 than at home, sometimes bearing a foreign duty, and 
 sometimes lowered in price because the foreigners, too 
 poor to pay more, would not otherwise buy. 
 
 A New Duty Lowers Price Abroad on any commodity 
 until foreign producers can sell their surplus stock, find 
 new markets or lessen their output. In doing this they 
 may lower price to cost or below, and bear thus a large 
 part of our tariff tax, to induce us to continue buying. 
 Doubtless in times past, when the British were alone in 
 many industries, often reaping high profits, they bore for 
 years in some cases a part of our tax, as a dealer some- 
 times supplies a customer at a cut price. Very likely 
 the difficulty of selling abroad against tariffs hastened 
 British steel rail makers, and other manufacturers, into 
 devising improvements to lower cost of their products, and 
 into accepting lower rates of profit in order to sell more 
 goods. Sometimes miscalculation of this and other 
 difficulties brought depression and lower wages, as in 
 America, but only temporarily, for British wages have 
 risen steadily.^ 
 
 ■ Various Cases in which the Foreigner Pays the Tax. — Stebbins, 
 page 49, gives complaints of individual British manufacturers as to dullness 
 of trade and necessity of cutting prices to sell abroad against tariffs. These 
 and the above facts would serve as a free trade argument for America, show- 
 ing how it puts producers on their merits, and leads them, like free com- 
 petition in any case, to the utmost of improvement and value giving. 
 Consumers bear the tax, not only in what is added to price, but largely by 
 doing without the article because too expensive. (See page 113.) 
 
 Efforts to Shift the Tax on to Others. — Roberts, page 149, says
 
 34^ T^f^^ Plcii7i Facts as to the Tariff. 
 
 But These Are Exceptions, not now important, to the 
 rule that when regular importing continues most or all 
 the duty is added to price, and falls on the consumer. 
 In fact, a little more than the duty is usually added, be- 
 cause the duty necessitates the use of more capital by 
 merchants. Sometimes price rises as soon as the tariff 
 law is passed, six months before it takes effect. So it 
 was in recent changes of duty on sugar and tin-plate. 
 Mere proposal of British grain duties of only about 6 
 per cent in 1902, raised prices at once. The greater the 
 competition, the lower the profit in the old price, and 
 the quicker the rise. Prices of bread fixed by custom, 
 and not easily raised in money, may be raised by using 
 less flour, or are not changed when price of flour falls. 
 Profits of European manufacturers have long been low, 
 and their competition sharp. The statesman quoted 
 further on said " there is hardly a spot on the globe 
 where three generations of Englishmen, Frenchmen, and 
 Germans have not been camped in every avenue of 
 trade." If that is the case their prices and profits must 
 
 the foreign manufacturer, the American importer, and the retailer each tries 
 to shift the tariff tax on to his customer, but that making or buying too 
 large a stock usually forces each to sell for what he can get, and thus 
 mainly relieves the consumer of a tariff addition to price. This can scarcely 
 be true of other than seasonable novelties, sold first at a price high enough 
 to bear large reductions, and not of these with the great stocks of imports, 
 which are bought by importers in the foreign producing centers at the prices 
 there prevailing for all buyers, home or foreign. In foreign as in home 
 retail trade, a small fraction of business is done at slaughter prices, and the 
 seller's loss here is well balanced by a slight addition to regular prices 
 to cover such contingencies. Yet foreign producers of special products, 
 with agencies in America, lower or raise price according to what the trade 
 here and their usual profit will bear ; and in times past, before wholesalers 
 in each land watched the world for bargains, producers often sacrificed a 
 sur])lus abroad, to save home prices, as town merchants now send a bank- 
 rupt stock to country villages.
 
 The Arguments for Protection. 349 
 
 be down to bed rock — too low to admit of permanent 
 reduction to share the duty. American producers doubt- 
 less pay a part of the German duty when they sell there 
 at lower profit than at home. The American nation 
 pays a part of the foreign tariff when the duty collected 
 on leather or hides imported is refunded in a drawback 
 to the person exporting manufactures made from the same 
 materials (to enable him to sell abroad).^ 
 
 Protection in a Large Country. — The larger a country, 
 and the more varied its resources, the less harmful pro- 
 tection may be in one respect, because such a land is a 
 small world in breadth of market and in number of 
 competitors. Yet here as elsewhere protection brings 
 loss when it prevents a profitable exchange for a foreign 
 commodity. Every person who would use this commod- 
 ity then gets to consume less value from his labor and 
 capital. But in another respect protection is more harm- 
 ful in a large country. If its varied resources might be 
 forced to produce every article used, and every industry 
 needing aid were fully protected, the tariff advantage to 
 each producer would be offset, not only by higher cost 
 of many or most consumable goods, but also by higher 
 cost of the materials used in his business. Then every 
 article not produced so easily as to be beyond protection 
 would be valuable by reason of scarcity. Nothing could 
 
 1 Bowen, p. 487, seemed to teach that checking imports with a tariff 
 lowers the foreigner's price for them, and raises the price of our exports. 
 This is as attractive as trebling the value of men's work by getting them 
 away from farms. Yet by refusing to buy what he wants, and refusing to 
 sell what he does not want, a person might thus affect prices for the moment 
 until the other party went elsewhere to trade. The idea perhaps was that 
 Europe had to buy of us or go with scanty food. That is less the case 
 now, as farmers have learned to their sorrow. The statement of Bowen 
 that not over half the duty can be added to price presupposed large pre- 
 vious gains to the foreigner.
 
 350 The Plain Facts as to the Tariff. 
 
 be shipped in, and supplies to consume would be largely 
 reduced.^ 
 
 A Small Country, on the contrary, would not have 
 many different commodities to protect. The others could 
 be traded for wherever most of them would be given. 
 It is because so few things have been protected in 
 America that protection has caused so little harm. Its 
 burden has been spread upon no less than eight-ninths 
 of the people, engaged in unprotected industries, such 
 as must be carried on here, or yield larger product than 
 abroad. Abundant product from rich resources has 
 enabled them to bear easily the burden of higher prices 
 for protected goods.^ 
 
 1 Effect of Monopolizing All Products. — Organizing every kind of 
 labor and production into trusts would have tlie same effect, though worse, 
 making everything scarce. Only by diminishing the supply of its product 
 can a trust sell it all at a higher price. The higher the price the smaller 
 the sales. To make a monopoly profitable to its owners, giving their 
 money income large pmchasing power, many commodities must remain un- 
 monopolized and plentiful. 
 
 Professor Patten's Theory of Protection and Monopoly, and of pro- 
 tecting all manufactures (page 40), is that confinement of trade at home, 
 which raises price of manufactures, has the opposite effect to lower price of 
 the natural monopoly products of mines and forests, by depriving them of 
 foreign markets, and thus throws the protective burden from labor to mon- 
 opoly incomes. This of course has not been so in America, for these mon- 
 opoly products have been the main ones protected, shutting out cheap 
 supplies of them from abroad, and giving their owners great profits. Be- 
 sides, the labor producing protected manufactures raised in price is but a 
 fraction of the labor producing things not thus to be raised, but lowered in 
 price by the protective tax's effect to reduce, both at home and abroad, the 
 people's means of buying. 
 
 2 Small area was a reason why in the Middle Ages the republics of 
 Venice and Florence flourished remarkably under protection. Needing 
 everything but their own manufactures, they could bring home good trades 
 from many lands. Also, like England up to twenty years ago, they had 
 no rivals in manufacture and trade. In ancient times Tyre and Carthage, 
 having the accessible world as a field to themselves, could continue for
 
 The Arguments for Protection. 351 
 
 Only by Making Things Scarce Can It Protect. — If 
 
 protection had been pushed higher on a number of 
 important imports, such as sugar and fine woolens, the 
 people would have learned more of its true effect to 
 make things scarce. Only thus can it raise price and 
 protect. When increasing home supply of an article 
 lowers price to the foreign level, its protection is useless. 
 But so long as a duty protects, eighty-five years in some 
 American cases, it has all the time made the article scarce. 
 No matter if improved production has lowered prices of 
 American fabrics and hardware to a quarter of what 
 they were, if the duty still protects, and is desired, the 
 article has been made even cheaper and more plentiful 
 abroad. 
 
 If Not Good on Many Things, is it Good on Any ? — It 
 being clear, therefore, that people would not bear pro- 
 tection on many things for the sake of greater diversity 
 of industry, is it not equally clear that they suffer some- 
 thing when they bear it on any thing ? Nature unerringly 
 tells every community what to do. New England made 
 cloth and Pennsylvania iron, just the same in one country 
 as if they had been in two. Whether they desired or 
 not, Mississippi had to choose cotton and Minnesota 
 wheat. An intelligent people, of their own accord, will 
 trade among themselves, with no outside commerce, if it 
 pays them to do so. They soon find out, without being 
 
 centuries to exchange their wares for money metals, and rare commodities 
 of great value. 
 
 Sometimes, as in our present reciprocity discussions, it is said a large 
 country needs protection, because free trade with Canada would give her 
 our 76,000,000 people as a market, while we should get only her 5,000,- 
 000. It has been answered that on this principle Delaware should suck 
 the life out of Pennsylvania. If a small country can buy but little, it also 
 has but little to sell ; and whatever it offers, the larger population will not 
 buy unless they gain by it.
 
 352 TJie Plain Facts as to the Tajiff. 
 
 told through the law by interested parties, how far to 
 devote their labor to making things, and to avoid waste 
 of effort on mere merchandising. Perhaps Ohio is the 
 state having the greatest variety of industry. Her people 
 buy elsewhere her kinds of goods only when they gain 
 by it. For the same reason of gain, industry may be con- 
 fined to one line, with dependence on exchange for nearly 
 all commodities. 
 
 Lynn and Lowell Knew What They Were About when 
 the one chose to make shoes, the other cloth, despite the 
 advice, sometimes good, not to put all the eggs in one 
 basket. So did England when her people chose fine 
 manufacturing of various kinds. To her, outside trade 
 is vital, as with a city. Falling off in foreign trade 
 means with her a smaller income to live on, unless use 
 of her own product at home is increased to balance the 
 difference — not quickly practicable. As a rule, the 
 greater their wealth and intelligence, the more a people 
 depend upon others. Compare Massachusetts with the 
 mountains of the South. If our internal trade is twenty 
 times as large as our foreign, does not nature seem to be 
 a safe enough guide, without attempt by protection to 
 hold the people in still closer ? The incalculable gains 
 of all this home exchange, the basis of division of occu- 
 pations, indicate the possible gains of free and natural 
 foreign exchange.^ 
 
 1 Our Progress Came From Free Trade. — The factories of New Eng- 
 land would have been small local concerns without free access to the other 
 states. The same would have been true of our fields of wheat and cotton. 
 The region west of the Alleghanies, with higher wages, higher interest and 
 less experience, soon outstripped in production the Eastern States, against 
 whose old industries it had no tariff, and whose goods came to it with 
 cheaper and cheaper freights. Richer resources were the reason. America 
 would have passed Europe in the same way without protection ; and Europe 
 would have been far ahead of her present position. Free trade is just as
 
 The Arguments for Protection. 353 
 
 Only for Gain do People Turn From Home Exchange. 
 
 " Whenever our citizens are rich enough to employ 
 these great resources, my hope is that they will be rich 
 enough to consume their products themselves." ^ Might 
 not the reason of this hope apply somewhat to Ohio, or 
 at least to the wide area of the South since it began to 
 manufacture ? Since clearly it is gain that leads the 
 different sections of our country to trade with one 
 another, is it anything else that would lead them under 
 lower tariffs to trade with Europe ? And as America 
 had from the start those kinds of manufacture necessary 
 for war, with diversified industry springing up every- 
 where as needed, has not the effect of protection, in 
 unnaturally hastening a development already rapid, been 
 outweighed by its reduction of the people's income of 
 commodities in every line where protection protects ? 
 
 The World's Greatest Buyers. — The claim that our 
 76,000,000 people are equal to half the world in buying 
 capacity, affects the case only by enabling them to pros- 
 per in spite of their losses by protection. No less are 
 they equal to half the world in producing capacity, for 
 each must first produce everything he has to buy with. 
 
 true in practice as in theory. Thiers was a logical protectionist when he 
 objected to railroad building in France. So was Carey when he hoped our 
 communication with Europe might be cut off. Absence of outside trade 
 keeps a mountain district near barbarism. Cheaper transportation, every- 
 where desired, which has caused modem civilization by making trade 
 easier and freer, tends to overcome tariff obstructions. This is a reason 
 why higher and higher protection is demanded. (Shearman. ) 
 
 1 T. B. Reed, speech in Congress, Feb. 1894. 
 
 Home Consumption of All Products would not now be mentioned by 
 protectionists as desirable, since the recent trebling of American exports 
 of manufactures. As explained at the close of the last chapter, it would 
 prevent profitable exchange, even if we produced every article cheaper 
 than any other nation. 
 
 23
 
 354 ^^^^ Plain Facts as to the Tariff. 
 
 Other nations consume less because their overworked 
 resources yield less. Their labor is the same as ours 
 when put to work on our resources. Anybody except a 
 Chinaman is an American laborer who happens to be 
 working in the United States. Is it not unfortunate that 
 our people did not confine their work to the many things 
 they can do best, and allow the foreigner to do for us 
 the few things he can do best ? 
 
 The Great Speech of the Champion Protectionist quoted 
 might be further questioned, though its support of 
 assertion by reason was unusual. As the heavy work 
 of the pioneer was done under " free trade tariffs," or 
 with a fraction of the people protected — the country 
 settled, and resources developed for the mightiest war 
 of all history — could our thirty -one millions of nature 
 conquerors in i860, a year of great low tariff pros- 
 perity, with their unequalled shipping and railroads, and 
 with their steady inflow of foreign labor and capital, have 
 been expected to achieve less without protection than 
 our subsequent progress ? Was it not greater to build 
 up our industrial system originally than to reap a later 
 success that was already assured ? 
 
 Wages Being the Same, is Not Something Wrong? — 
 And have not our inventors chiefly produced things 
 unprotected — railroad and electrical appliances, farm 
 machinery, printing presses, sewing machines, and type- 
 writers ? If our protected industries have made product- 
 cheapening inventions, and are at home here, why can 
 they not, like the unprotected, offer as many or more 
 goods for a dollar than the foreign competitor? Those 
 producers who can do this, whether they have a tariff" 
 duty or not, are unprotected if by means of a trust they 
 do not habitually sell cheaper abroad than at home.
 
 The Argianents for Protection. 355 
 
 Wages being the same to both these classes of home 
 producers, does not the fact that the smaller class, after 
 many years of protection, are still unable to give as much 
 value as the foreigner, prove that there is something 
 wrong with their industries in America ? And is not the 
 same indicated by many failures of woolen factories, 
 highly protected, against rapid growth and few failures in 
 the shoe industry, under a tariff inoperative ? (Atkinson.)
 
 CHAPTER XIII. 
 
 PROTECTION AND WAGES. 
 
 The Good Effect of Manufacturing on Prices of Farm 
 Products, and on wages, is not involved here if with our 
 varied resources, and our enterprising people, manufac- 
 turing would have come without the tariff The good 
 effect of manufacturing is chiefly in teaching people to 
 know more, to produce more, and to require the higher 
 grade of living they are able to maintain. They then 
 receive high wages because they earn them ; and if they 
 went where wages are lowest, they would earn and get 
 more pay than the average there. A large manufactur- 
 ing population has little or no effect on the price of a 
 farm product heavily exported, like wheat, whose local 
 price, aside from slight variations of local demand, is 
 that of Liverpool, less the expense of taking it to that 
 city ; nor on hay or potatoes, not largely exported, but 
 shipped from state to state ; nor on ordinary garden prod- 
 ucts where easily produced or shipped in, these being as 
 cheap at Detroit as in villages far removed from factories. 
 The high price of farm products in New England is due 
 to factories only through the pressure of large popula- 
 tion on poor land. Price for all of a farm product bought 
 must be high enough to keep in business the grower of 
 that part of the necessary supply which is produced at 
 greatest cost. If all the people and factories of New 
 England were moved to fertile Kansas, enough more 
 people would grow vegetables there to bring down their 
 
 356
 
 Protection and Wages. 357 
 
 price to about the present level. In farming in Kansas, 
 a business more people can easily enter, profits can- 
 not remain above the average in other occupations for 
 the farmer's grade of capacity. Without protection, the 
 growth of population, capital, and intelligence, with in- 
 creasing wants, which is accompanied by growth of towns 
 and of variety in occupation, affords naturally all the 
 local markets that can bring net benefit to the farmer. 
 In two-thirds of our large country, to pretend to create 
 manufacturing centers of local demand much better than 
 would have come anyhow, would require state or county 
 tariffs, which if successful would deprive New England 
 factories of their markets. Costs in transportation, and 
 in middlemen's profits, we have in home trade nearly as 
 much as in foreign. 
 
 As to Raising Land Values also, the claims of protec- 
 tionists must now be given up. There are over a thou- 
 sand farms for sale in New England, " often in the most 
 fortunate locations, most of which can be bought for 
 much less than the value of the buildings. Many have 
 wood enough to pay for them." ' A Massachusetts 
 report showed a similar condition ten years ago. The 
 case is different in Oklahoma, where there will be no 
 factories of importance for many years. The former 
 value of New England land, due to location near market, 
 has been taken away by cheap transportation, which has 
 given value to the more fertile land of Oklahoma. 
 
 Protection's Chief Recommendation. — When in an indus- 
 try started by protection, competition among home pro- 
 ducers lowers the price of its commodity to the foreign 
 level, neither price nor wages are then affected by the 
 tariff. The home producers make no use of the tariff 
 
 ^ New England Magazine, August, 1 901.
 
 358 The Plain Facts as to the Tariff. 
 
 unless they add at least a part of it to their selling price. 
 With prices as low, and qualities as good, as those of 
 their foreign competitors, they could hold the home 
 market without the tariff's help, depending on their 
 closer acquaintance and on the foreigner's disadvantage 
 of freight. Why then should they still cling to the 
 tariff, if they intended to keep their price as low as the 
 foreign, and their goods as desirable ? This possible 
 effect of a tariff duty, to build up a valuable industry 
 until its selling price falls to the price abroad, is protec- 
 tion's chief recommendation. If the period of infancy 
 were not too long, and the duty were then given up 
 without too much opposition, there could be little objec- 
 tion to protection. Help from the people through a 
 higher price would then be asked no longer than seemed 
 reasonable and necessary. 
 
 Wages as Dependent upon Prices. — The much-talked- 
 of benefit of protection in keeping up wages must there- 
 fore be confined to those industries in which the duty is 
 yet added to selling price, enlarging income to divide 
 with wage workers. This benefit would be only tem- 
 porary if home competition under protection lowered 
 price so quickly and so generally as one might infer 
 from protective arguments. Turning from these incon- 
 sistencies, with which protective claims are filled, we will 
 suppose that it was truly to pay higher wages that the 
 heavy duties justly levied to raise revenue for the Civil 
 War were afterward raised higher and higher, especially 
 by the McKinley law of 1890, stopping imports alto- 
 gether in many cases. Let us then inquire how it is that 
 the tariff can keep up wages. 
 
 Large Product and High Wages Always the Rule in 
 America. — First, why have wages always been high in
 
 Protection and Wages. 359 
 
 America, compared with other countries ? Because in 
 our large and varied resources there have always been 
 opportunities to get from labor a valuable product. 
 Governor Winthrop, of Massachusetts, wrote in 1645 : 
 " Our servants will still desire freedom to plant for them- 
 selves, and not stay but for verie great wages." A New 
 York official wrote in 1723 : " Every one is able to pro- 
 cure a piece of land, and is therefore fond to set up for 
 himself rather than work for hire. This makes labor 
 continue very dear, a common laborer usually earning 
 three shillings by the day. ... It is hard to make any 
 commodity of manufacture profitable which can be 
 raised in Europe." ^ While money wages up to fifty 
 years ago were low compared with those of to-day, 
 working people were plentifully supplied with common 
 commodities, and they would not leave the farm unless 
 factory wages gave them a living at least as good. The 
 difference between their supplies, and those of laborers 
 in Europe, was as great perhaps as it is to-day. 
 
 Before Our Tariff Was Thought of, therefore, while 
 British tariffs were even designed to keep down colonial 
 manufacturing, American labor brought much because 
 on our free and fertile land it produced much ; and as 
 indicated in the above quotation, it was hired only where 
 its product was worth its cost. 
 
 The Later Rise of Wages. — Second, has the later rise 
 of wages been due in any part to the tariff? Doubtless 
 the first cotton factory started by the tariff in each com- 
 munity made servant girls and laborers scarce, and tended 
 to raise their wages ; but this effect must have been slight 
 after the demand brought workers from other places, and 
 was perhaps unnoticed at a distance from factory towns. 
 
 1 Bullock, 28.
 
 360 T]ie Plain Facts as to the Tariff. 
 
 The protected cotton and woolen factories, concentrated 
 in a few districts and always hiring cheap help, could not 
 have affected wages over the country at large. The pro- 
 tected iron industries likewise, small up to i860, were 
 concentrated in a few districts, and on the cruder forms 
 employed mostly cheap labor. All the people employed 
 by these new industries previously worked at something 
 else, and the extra money wages necessary to attract 
 them were doubtless not large — not enough to balance 
 the loss of real wages all over the country by the tariff 
 addition to prices of consumable commodities.^ 
 
 1 Wages Have Risen in All Countries where product to consume has 
 been increased by use of machinery, by spread of intelligence, and by ex- 
 change for cheap supplies from abroad. During the last sixty years wages 
 in France and England have doubled, the one under protection, the other 
 under free trade, though France has kept well behind in the living of wage 
 workers, under high protective prices. Protection has checked rise of 
 wages, seriously in Europe, measured in money or in goods (p. 363). Prob- 
 ably the greatest of all causes for the rise of wages was the rapid develop- 
 ment of the Western States, almost wholly with unprotected industries. 
 This took the surplus labor from other states and countries and gave com- 
 mercial lands cheap food ; while the needs of new Western railroads, and 
 of prosperous settlers, increased both American and European demand for 
 labor in manufacturing. 
 
 By the Aldrich Report of 1891, to the Senate, giving results of an 
 elaborate investigation, wages in gold (not depreciated paper) of 22 Amer- 
 ican industries, counting the rate in i860 as loo, averaged 82 in 1840, 91 
 in 1850, 137 in 1870, 143 in 1880, and 168 in 1890. In the fifty years, 
 therefore, money wages doubled ; but living being cheaper in 1890, the 
 report showed by ample figures that real wages, in commodities consumed, 
 increased nearly i3oper cent. (Levasseur, 286, 412.) Since 1898 wages 
 have risen materially in many industries, even above the high rates of 1892, 
 partly by working fewer hours for the same daily pay ; but to a large extent 
 there may be a fall when the high tide of business subsides, and employ- 
 ment will be less regular. Spahr (first chapter) and Shearman (page 
 635) criticise the Aldrich report, saying that it is not true of many occu- 
 pations. U. S. Labor Bulletin No. 18 shows a decline of wages in eight 
 trades between 1 881 and 1898. But the general trend is probably shown 
 fairly well in the Aldrich report. There are many cases in which weekly
 
 Protection and Wages. 361 
 
 EigM-Ninths of Our Workers Unprotected. — But the 
 main objection to the assertion (it is only an assertion — 
 never reasoned) that the tariff has raised American wages, 
 is the fact that among 9 equally good and desired workers 
 the wages secured by 8 fix the wages of the remaining i. 
 His must come to their rate ; theirs is not lowered or 
 raised to conform to his. It is sheer absurdity to suppose 
 that the wages of i can add from 25 to 100 per cent to 
 the wages of the Z? This proportion of i to 8 is that of 
 protected workers in America to those in unprotected 
 industries. The latter include such as railroad men and 
 house builders, whose work must be done in this country 
 (their product cannot be shipped in), and producers of 
 farm machinery and various things on which no other 
 country has ever been able to compete with America. 
 From the census of 1880 these unprotected workers have 
 been estimated to number then i 5,400,000, not including 
 half the farmers and farm hands in Maine, New Hamp- 
 shire, Vermont, and New York, as possibly protected by 
 
 wages have not risen since 1880, but in some of these the day has been 
 shortened from 10 to 9 hours. 
 
 ' How Much Higher Than Wages in England ? — Wages are higher 
 in America than in England by varying degrees. London printers get 38 
 shillings a week (;^9.25), against ^18 paid to printers in Chicago, working 
 time now about 54 hours in each city. The difference is similarly large in 
 a number of skilled trades. But English farm hands get fully as high 
 wages as are paid in the Southern States, and many other laborers and 
 factory workers earn nearly as much money per hour or per year as the 
 same grades earn in America. Printers in the smaller American cities, at 
 ^7 to $\2 per week, probably receive far less than double the wages of 
 printers in the smaller British cities. Moreover, it is well known that 
 highly paid men in America, to hold their positions, must work faster and 
 do more than British workmen. A New England manufacturer in Russia 
 found by experience that ten men there were required to do the work of 
 five in America. (Levasseur, 333.) Professor Roscher, of Leipsic, told 
 Dr. Spahr of men who had returned to Germany to escape the fast work 
 of America.
 
 362 The Plain Facts as to the Tariff. 
 
 the tariff from Canadian competition. Against this host 
 the protected workers were found to number only 1,990,- 
 000, including the many thousands employed by steel 
 mills, locomotive works, and other protected concerns 
 that are now able to compete with the world without a 
 tariff.i 
 
 Yet May K"ot the Tariff Have Increased Demand for 
 Labor and raised wages somewhat, not only by providing 
 new kinds of employment, but also by making a need 
 for new buildings and railroads, and indirectly for vari- 
 ous materials ? Yes, a new tariff causes many factories 
 to be built suddenly ; but this employment for the build- 
 ing trades is temporary, while the capital and labor are 
 used to duplicate foreign plants already sufficient to sup- 
 ply the world's demand. Presumably this capital, and 
 the labor both of builders and of operatives, are diverted 
 from other production needed at a price high enough 
 without a tariff — yielding natural values to the full amount 
 of the higher price. New factories built under other con- 
 ditions are demanded to increase or improve supply. 
 Needless duplication of plants, at home or abroad, to re- 
 duce plants elsewhere to idleness, is a waste of society's 
 capital. Benefits enjoyed from society's capital abroad, 
 in good supplies at low prices, are just as real as if they 
 originated with society at home. The purpose of capital 
 is to increase supplies and lower their prices. At best, 
 people are none too well supplied with useful things. 
 
 Proper Industries Come When They are Needed. — Be- 
 sides, as those industries suited to the country and people 
 have always come anyhow in America when the need for 
 them appeared, the new buildings and railroads required 
 by them would have come too. The process being nat- 
 
 ' Bullock, 360.
 
 Protection and Wages. 363 
 
 ural, labor and capital would not have turned from an 
 old industry until the new was needed more. Hastening 
 the change by a tariff, taxes consumers with a higher 
 price, and wastes our heritage by using it from year to 
 year with a smaller return in natural or unprotected value. 
 The wealth-producing power of present labor and capital 
 is a more important part of that heritage than raw ma- 
 terials to be forced into development by protection. 
 Unused materials will usually keep, and become valuable 
 in time ; but every day in which labor and capital are 
 spent for a less return, when a greater is in reach, brings 
 a loss never to be recovered. People know what they 
 are doing when they pay a man $6.00 for a week's work 
 instead of buying well timbered land in the north woods 
 at the same price per acre. At most, protection can 
 only cause an industry to come sooner — too often, no 
 doubt, with abortive results. It creates no means of 
 permanent self-support. These were fixed by nature, in 
 soil, mines, and forests. Therefore, demand for labor, and 
 higher general wages, either in money or in goods en- 
 joyed, have not been caused by protection to any per- 
 manent or healthy extent. But in the aggregate it 
 diminishes employment, as well as the buying power of 
 money wages. Where the tariff enables a trust to keep 
 up prices by limiting output, fewer workmen are needed. 
 In every case where the tariff raises the price of an article, 
 its consumption is diminished, and employment also, 
 whether in making the article itself, or in making other 
 goods to be exchanged for it abroad. People imagine 
 that protection makes work and business because its 
 effects in that respect are seen. They do not notice that 
 it causes a largely overbalancing loss, lessening the total 
 and the rate of wages, and also the goods they buy.
 
 364 '^The Plain Facts as to the Tariff. 
 
 Protection Has Weakened Labor Demand by Bringing 
 in Foreigners. — But undoubtedly protection has seriously 
 weakened general labor demand by adding to labor 
 supply — by providing quickly a variety of low grade 
 employment to foreigners who would not otherwise have 
 come. In the protected cotton mills of New England 
 foreign labor has long predominated. The native opera- 
 tives of earlier times, noted for industry and intelligence, 
 left them because the wages were too low, finding better 
 pay in other work. Many of the Irish who took their 
 places found in time better wages also, giving way to 
 French Canadians, and later a still lower grade of Arme- 
 nians and Greeks have come to work in the mills. For- 
 eign laborers — Hungarians, Poles, and Italians — have 
 come (or have been brought) in largest numbers to the 
 protected iron and coal industries of Pennsylvania, al- 
 most completely foreignizing large communities, in lan- 
 guage, religion, and customs — a depressing change to 
 Americans there.^ Undoubtedly, fewer of these lower 
 grades of workmen would have come at all if protection 
 had not given a hot-house growth to the industries that 
 welcomed them, and that could not have hired such cheap 
 labor among native Americans, 
 
 The Contract Labor Law of 1885, against hiring per- 
 sons abroad, was enacted to prevent employers from 
 lowering wages by bringing in an over-supply of laborers 
 from Europe. But there is no need to send after them. 
 New York is probably a better place than any city in 
 Europe to hire cheap labor. In 1901 the Italian immi- 
 grants numbered 136,000, the Austro-Hungarians 113,- 
 
 ^ The Forum, Sept. 1892. Out of each 1, 000 immigrants that came 
 between 1890 and I901, no less than 801 have settled in Pennsylvania and 
 the Northeast.
 
 Protection and Wages. 365 
 
 000, and the Russians 85,000, with only 21,000 Ger- 
 mans. The tarifir has not protected working people 
 from the wage-lowering competition of a flood of immi- 
 grants, to say nothing of the change for the worse in the 
 country's population. But the main fact is yet to be 
 told. From 1864 to 1884 a law of Congress was in 
 force that gave importers of immigrants a lien on their 
 wages and land for money advanced to them, and that 
 enforced contracts made with them abroad. Great num- 
 bers of people were thus brought to America. Henry 
 Carey pointed to increase of immigration as a benefit of 
 protection.^ 
 
 The American Employer Can Get Cheap European Labor 
 if he wants it. These immigrants arriving at New York 
 are all out of work, if the contract law is obeyed, though 
 men who should know say it is largely evaded, and could 
 probably be hired at first for the same wages they received 
 at home. Before the enactment of this contract law they 
 would gladly have come over in ship-loads at their home 
 wages (and doubtless did so come) if their passage money 
 had been advanced. Why would they soon demand 
 more pay ? Because their employer is enabled by a pro- 
 tective tariff to sell at a high price, and hence could 
 afford to give more ? No. His profits are unknown to 
 them. They demand and get more because more is paid 
 all around them for their grade of work in unprotected 
 occupations — in building trades, common labor, and 
 house service. 
 
 High Wages Must be Paid in Order to Run at All. — 
 Any manufacturer running at a loss must pay his men 
 as much as they can get from others. If he is rapidly 
 making a fortune he need not pay more. If he does pay 
 
 1 Shearman, 634-
 
 366 TJie Plain Facts as to the Tariff. 
 
 more, it is to get better workers, who also receive more 
 in unprotected industries. Extra pay is given willingly, 
 because they earn it. The fact that he needs a protective 
 addition to selling price is proof that his business is dif- 
 ferent from the kinds of business all around, which make 
 the rate of wages, and yield plenty to pay it. Either he 
 is incompetent to cany on the enterprise, or it is out of 
 place in this country, like a lemon tree under glass in a 
 park. 
 
 But Does Not Protection Help Wages by Maintaining 
 Industries that could not exist without it, and whose 
 capital and labor could not otherwise find equally prof- 
 itable employment ? The best answer is another ques- 
 tion. What business man wants to plead that with our 
 boundless resources, our labor of unequalled efficiency, 
 and our home market of the world's most liberal buyers, 
 he could not make the average American living, and pay 
 the wages that others pay all around him, without a 
 steady gift from the public to be added to his selling 
 price ? Such an industry is a continual source of loss. 
 The additional kind of employment it affords is a trifle 
 compared with the tax on consumers, and with the loss 
 in diversion of capital from self-supporting business, 
 whose products are wanted at a natural price. 
 
 British Wages Higher Under Free Trade Than German 
 Under Protection. — Wages in Europe have long been 
 much higher in free trade Great Britain than in Germany, 
 France, Russia and the other protective countries of the 
 Continent.' British wages have been steadily increasing 
 
 'Robert P. Porter found by careful study in 1883 that American wages 
 were from 60 to loo per cent higher than British, but from 100 to 150 per 
 cent higher than French and German. ( Roberts, 270. ) The same year Mr. 
 Steinway testified before a Senate committee that in his factory in New 
 York he paid piano makers thrice the wages that he paid in his factory at 
 
 i
 
 Protection and Wages. 367 
 
 in late years, and the work day has been almost univer- 
 sally shortened to nine hours, giving the Saturday half 
 holiday, so necessary to preserve Sunday as a day of 
 quiet rest and religious culture, instead of a day of harm- 
 ful carousal. American wages and work conditions are 
 now so little better than the British that our immigration 
 from England has fallen low — less than 10,000 each 
 year since 1896. Even Irish immigration fell from 73,- 
 000 in 1888 to 25,000 in 1898. Wages and work in the 
 protected American cotton mills have not attracted many 
 English operatives.^ 
 
 How it is That Protection Affects the Wage Rate. 
 But neither free trade nor protection affects money wages 
 except by affecting general industry — by building up or 
 checking business, and thus increasing or decreasing 
 income, and the demand for labor. No employer under 
 free trade pays low wages because he does 7iot get a 
 public bounty ; neither does any employer under pro- 
 tection pay high wages because he does get a bounty. 
 With exceptions too few to consider, due to generosity, 
 incompetence, or lax management, each pays just what he 
 has to pay in order to get the willing service of the class 
 of help he wants. To pay more would be to make a 
 
 Hamburg. (Levasseur, 283.) An exhaustive investigation made in 1879 
 by United States consuls showed that American wages were I^ times those 
 of Britain, and twice those of Belgium, but thrice those of France and Ger- 
 many. (Roberts, 274.) 
 
 1 Reason of Differences in Wages. — " American weavers turn out nearly 
 twice as much work per day as their English competitors, and their wage 
 per piece is absolutely a little less." (Spahr, 30.) A similar difference 
 exists between parts of Britain. In Lancashire women weavers, all organ- 
 ized in unions, work with a will, taking four looms each without hesitation, 
 and earn double the wages of women in Glasgow on the same class of work. 
 The latter are inefficient and unorganized, commonly minding only two 
 looms. The best women workers in Glasgow are not in cotton factories. 
 (Sidney Webb, Problems of Industry, 80.)
 
 368 The Plain Facts as to the Tariff. 
 
 gift. That free trader must have been a theorist indeed, 
 and hard pressed, who fetched an idea as far as that of 
 the protectionist who said our employers are moved to 
 pay high wages because their own workmen are their 
 best customers. Such might be the case with an 
 employer paying wages with goods he could not sell, 
 or with one paying in truck from a company store.^ 
 
 No Possible Escape from Low Wages When Product 
 Must be Small. — European wages, like the American, 
 are fixed by something a good deal stronger and harder 
 to change than a tariff law. Wages cannot rise above 
 the point at which they leave just enough profit to keep 
 the marginal employer contentedly in business (the 
 employer furnishing that portion of the demanded sup- 
 ply which is produced at highest cost). Going above 
 this point, that employer's industry stops. Besides this 
 profit, out of the gross income from sales must be paid 
 enough interest to induce one to save and invest capital 
 (or as much interest as others would pay), and also as 
 much rent as others would pay for the land used. After 
 these three shares are estimated by the employer before- 
 hand, with all costs of material, fuel, etc., the balance 
 expected may all be taken in wages if the workers press 
 these upward to the highest point this marginal employer 
 will bear. Therefore, 
 
 It is the Net Income from Product That Fixes Wages 
 beyond possibility of upward change. Now British and 
 
 ' High Wages to Enlarge the Market. — High wages in one trade are 
 an advantage to employers in other trades, making better demand for their 
 goods ; but as a rule not enough of one trade's market is among its own 
 men to be noticeably affected by their increased buying with higher wages. 
 Enlightened self-interest leads an employer to consent to pay his men well 
 for the sake of their contentment and better work, not in order to enlarge 
 his market, any further than in cheerful consent to do his necessary part 
 toward sustaining the beneficent conditions that all enjoy.
 
 Protection ajtd Wages. 369 
 
 German manufacturers must pay the costs of bringing 
 cotton from America, and must take at any time, for all 
 their goods of a particular grade then offered, the export 
 price in Asia and South America made low by the 
 poverty of the buyers and by the large supply of goods 
 offered there.^ This competitive price fixes their net 
 income, and that income fixes wages. 
 
 What Europeans Can Do to Raise Wages. — After Euro- 
 peans have brought from every continent the raw ma- 
 terials to which their capital and labor will add most 
 value, and after they have shipped these finished prod- 
 ucts to the world markets in which they will bring most 
 value in exchange, they have done all they can do to 
 make net income. And after reducing their profit to the 
 lowest rate for which they care to incur the risks of 
 business, they have done all they can do for wages. 
 Then they can only strive, as they do now, to improve 
 the situation — by seeking cheaper raw materials in dis- 
 tant lands, by introducing their goods into new markets 
 where they will trade for more, by embarking in new 
 industries at home and abroad, by inventing machinery 
 to do work at less cost per unit of product, and by edu- 
 cating their workmen to turn out a larger product with 
 the same effort. For the wage workers there is at home 
 
 ' How Far Price Falls. — But in their competition to make more sales 
 producers do not go so far in enlarging product and lowering price as to 
 put their usual profit rate below the average in other open industries requir- 
 ing no greater managing skill. Going below that average would cause 
 some marginal employers to change over to other business, and stopping 
 their output would give higher prices and higher profits to producers re- 
 maining. Lowering profit rate by enlarging product and reducing price in 
 order to sell it all, tends usually to raise instead of lower wages, because 
 more employees are then needed ; though if carried to the point of over- 
 production, wages fall from closing of factories caused by failures or by ac- 
 cumulation of unsold goods. 
 24
 
 370 Tlie Plain Facts as to the Tariff. 
 
 no unoccupied land. The Continental mountain sides, 
 marshes, and sand wastes by the sea, are cultivated down 
 the scale until but a pittance of product is the laborer's 
 reward. Men must take the wages offered, or emigrate 
 to other lands. ^ 
 
 America Will Not View all This Struggle Distantly, with 
 a self-satisfied feeling of superiority, after her population 
 has approached nearer to the English density of 600 per- 
 sons to the square mile. Product and net income to 
 divide with wage workers are larger in America, because 
 it is not yet necessary for her people to work sterile soil 
 and poor mines, to bear the expense of bringing lumber, 
 coal, cotton, grain, and food products from other lands, 
 nor to turn from a home market, rendered weak by the 
 
 ^By Moving They Might Put Wages High. — A closely unionized 
 trade, so highly skilled that outsiders could not enter it, with every man pre- 
 pared to leave the country, might demand and get high wages, which 
 would close out marginal employers, whose capital would enter more prof- 
 itable industries or go abroad. AH occupations, from the lowest paid up- 
 ward, might thus raise wages, leaving only the most profitable industries 
 running, and diminishing population, so that each man would have a 
 larger share of natural resources. But of course such organization and in- 
 dependence are impossible among workers, who besides might not all be 
 able to do better in other lands. 
 
 The Burden of Militarism, which in Europe takes for army life i out 
 of every 25 men, against I out of every 200 in America, provides employ- 
 ment and makes men scarce ; but the larger the army, the fewer the work- 
 ers, the smaller the annual product out of which soldiers and all must live, 
 and the larger the share taken in taxes. Protection makes employment 
 with similar results, rendering total product less valuable than it would be 
 with unaided choice of occupations. The military spirit also turns able 
 men into the army who in America would be leaders of industry. Edward 
 Atkinson (Indus. Com., XIII.) estimates that taxation takes 33^ per 
 cent of total annual product in Italy, 15 to 18 in France, 10 in Germany, 
 8 in Great Britain, and 3 in the United States ; also that in annual prod- 
 uct per head, the United States exceeds Great Britain by 15 to 20 per 
 cent, France by 25 to 30 per cent, and Gennany by 40 to 50 per cent. 
 With these two great causes of difference in our favor, it is not strange that 
 our wages are double those of Germany,
 
 Protection and Wages. 371 
 
 poverty of a crowded people, and by high proportion of 
 makers to buyers in every line, to search the world over 
 for chances to sell.' 
 
 But Steadily America is Approaching European Con- 
 ditions. — Every day, seven days in a week, the year 
 around, on an average, nearly 1,400 foreigners land on 
 these shores (487,918 in 1901). Most of them are alien 
 and often hostile to the principles that made this country 
 great. In 1901, of those over 14 years old, 271^ per 
 cent were illiterate. Every day each person's share of 
 land and raw materials to work on grows less. Steadily 
 minerals are sought deeper, and timber obtained inland 
 from rivers at greater expense. Every year a man leav- 
 ing low wages to take up a farm must content himself 
 with land no one would choose the year before. Hence, 
 lower and lower drops the point in wages from which a 
 man will turn to vacant land. When invention and im- 
 provement in production fail to keep pace with inroads 
 on resources, then the fall of wages will begin. 
 
 Foreign Goods or Foreign Men 1 — Foreign labor 
 
 1 Thickly-Settled Rhode Island has now 407 persons to the square 
 mile. Massachusetts has 349 ; New Jersey, 250 ; Connecticut, 1 87 ; New 
 York, 152; Pennsylvania, 140 ; Maryland, 120 ; Ohio, 102; Arkansas, 
 24 ; Maine, 23 ; and Wyoming not quite i. 
 
 Poverty of Buyers Makes a Market Weak because, in order to avoid 
 accumulation of unsold stocks, the one uniform price for all of a product 
 offered at any time and place must be low enough to enable the poorest to 
 buy whose consumption is depended upon as a part of the market. High 
 proportion of makers to buyers in reach, bringing profit down to the lowest 
 rate men will stay in business to get, is usually the case in an old country, 
 where time and absence of change has filled every occupation, dividing 
 sales at the low profit among as many competitors as can find passable sup- 
 port. Low wages per item and low profit, lower prices by turning out a 
 large product with a given capital. The price a given demand fixes for a 
 given supply would be the same if the goods had been picked up without 
 any cost of production.
 
 3/2 The Plain Facts as to the Tariff. 
 
 brought in goods adds to our wealth by their excess of 
 value here over our goods traded for them, and saves 
 our resources by the material used in that excess. For- 
 eign labor coming in men adds to our wealth from our 
 resources only, and hastens the day of diminishing returns 
 from land and mines. On no piece of land decently 
 farmed will doubling the labor and fertilizer double the 
 product. On land well farmed additions of labor bring 
 a return smaller and smaller. Wages in Australia and 
 New Zealand are about as high as ours, because for each 
 worker resources are plentiful. In England soil fertility 
 averages above ours, the food market is much better, and 
 labor is about as efficient, at least when it comes here. 
 Farm wages are lower because of crowded population, 
 raising land values and rent, and preventing farming on 
 a large scale by machinery.^ In a new country the 
 
 'Why Europeans Cannot Get a Better Living. — Rent takes so 
 much of the English farmer's gross income (being as high as $8 an acre 
 per year for good land) that paying higher wages would not leave enough 
 to keep him in business. If the government dispossessed the landlords, 
 and divided the land equally among all, rent would soon exist as before. 
 A person receiving a poor allotment would pay rent to another in order to 
 get the use of his better allotment. It would be the same if ownership re- 
 mained with the government. A tenant does not care who gets the rent 
 he pays ; what he wants is the use of the land. If the government rented 
 to one person cheaply, another would offer more. Many people to support 
 give land high value, and high rent. From this there is no escape, except 
 by going to where land is cheap, or by making low rent land better, 
 which improvement might soon raise its rent accordingly. And when to 
 feed all the people it is necessary to bring food from a great distance, 
 and to cultivate poor land, the price for all of a food product offered 
 must be high enough to keep in business those farmers depended upon 
 whose labor and capital bring the smallest product. This fact makes high 
 prices for consumable supplies, which, with the low money wages neces- 
 sitated by the small net income brought by labor to the employer, reduces 
 the common people's living to a scanty allowance. Factory men whose work 
 is easily learned cannot get much more than farm hands, because the latter
 
 Protection and Wages. 373 
 
 chance to start in production with improved methods, 
 free from tyranny of custom, balances largely an old 
 country's advantage in established business. 
 
 The Pauper Labor, Neither of Europe Nor of China, 
 can harm us so long as it stays out of our country. 
 While yet at home, it can only reach us with goods 
 worth more to us than the price asked. The most skill- 
 ful foreign labor likewise, working with best machinery 
 and best materials, is only kept by protection from bene- 
 fiting us with good values, and from getting at the same 
 time extra value for itself. That is the effect of a tariff 
 that makes scarcer the products of a few of our people 
 unfortunately started in the wrong business. 
 
 Do We Want Work or Goods ? — Against the reciprocity 
 treaty with France it is argued ^ that we send her chiefly 
 crude products of the soil, while she sends us articles 
 manufactured to a high degree. Here again is the idea 
 that we want work, not its products. This is called pro- 
 tecting labor, a phrase spoken by protectionists as often 
 as possible. Why invent machinery and save labor every 
 way we can ? The work we save, in getting a foreign 
 product by exchange with less labor than making it here 
 would require, reduces its money cost, and leaves its 
 buyers more money to spend for home goods in which 
 our labor produces more value. Our law requiring that 
 a foreign book, to be copyrighted in this country, must 
 be put in type and printed here, benefits printers so far 
 as that is done ; but this, with the tariff on completed 
 volumes imported, adds largely to the book's price, 
 which probably lessens sales of other books, and causes 
 
 too -would then learn factory work. Factory wages are kept down also 
 by the conditions described is the preceding pages. 
 'E. J. Gibson, The Forum, Dec. 1901.
 
 374 ^^^^ Plain Facts as to the Tatnff. 
 
 many to go without it whom it would benefit. Similarly, 
 prohibiting use of type-setting machines would raise price 
 of newspapers, or reduce their size, and probably employ 
 fewer people.* 
 
 Wages Per Day or Hour Do Not Measure the Cost of 
 Labor Per Yard or ton of product. An American manu- 
 facturer paying $2 per day may turn out his product at 
 a lower cost per yard for labor than his European com- 
 petitor paying $ i per day. The high tariffs of Germany 
 and Russia have long been levied to protect their work- 
 men, with their low pay and long days, from competition 
 with the low-priced goods produced under the high pay 
 and short days of Great Britain. As a rule, the lower the 
 
 1 Filling the Country Willi People to Consume Products at 
 
 home was an old argument not mentioned now, though it is about as 
 sound as some others. A foreigner arriving produces more to be sold than 
 he gets to buy with, or else he could not earn his wages. His excess of pro- 
 duction is desirable, increasing goods to divide ; but not from the standpoint 
 of the average protectionist, who desires, not plenty of goods, but a lack of 
 them, which he thinks causes demand, but which really makes people un- 
 able to demand. It is better for America to increase wages in Europe by 
 accepting good trades, than by drawing the people over here to hasten 
 the day when our conditions for getting a living may be but little better 
 than theirs. The movement toward filling the country with people, and 
 using up its resources, is added to when protective duties so high as to pro- 
 hibit imports force foreign manufacturers to start branches in America in 
 order to do business here. Competition from them is not then avoided. 
 
 Counting an Abie-Bodied Immigrant as Having a Money Value, 
 and as being an addition to America's wealth — say $500, as the cost of 
 bringing him up — was common twenty years ago, when immigrants were 
 greatly desired by our undeveloped regions. (Roberts, 228. ) Immigration 
 added to rapid rise of land values, building of railroads, and increase of all 
 business and profits — so far as not balanced by the enormous wastes of hasty 
 and speculative development. But it is probable that in a period of only 
 one century, from 1850, a larger net addition would have been made to the 
 desirable wealth and well-being of America, and possibly of the world, if 
 our immigration had been but half as great. To a large extent the re- 
 sources of a state, as of a forest, may be so developed as to yield the most, 
 or wastefully rushed through with in a few years.
 
 Protection and Wages. 375 
 
 wages and the longer the day, the less is the work done, 
 and the poorer its quality. Russia pays the lowest 
 wages in Europe, and has to conquer Chinese territory 
 to force the people with a tariff to buy her manufactures. 
 Great Britain pays the highest wages in Europe, and 
 asks only an open door (an equal right with others) in 
 order to sell her goods in China or anywhere else. 
 
 Do Our Best Manufacturers Want Cheap Labor? — 
 Whether an employer wants well paid or poorly paid 
 labor can be studied here at home, without looking 
 abroad. Anybody knows that the leading shops in any 
 industry, especially Avhere quality counts, pay the highest 
 wages, besides using the best machinery. They could 
 get cheaper labor if they wanted it. The force of 
 second-grade men employed at low wages by a strug- 
 gling concern would be glad to work at the same pay 
 for an employer in the front rank, and able to pay them 
 promptly. But he could not use them on skilled work 
 if they served for nothing. They would soon spoil his 
 machinery, and lower the reputation of his goods. Any 
 one can always get worse help by paying less, down to 
 the grade of children, dullards, and numskulls ; and 
 better help by paying more, up to the grade of experts 
 and geniuses. 
 
 Would They Trade Theirs for That of Europe ? — The 
 many and great industries that have grown up here on 
 merit, whose products sell abroad against any competi- 
 tion, are evidently at home in America, not depending 
 upon a protective hot-house. Their highly paid labor 
 they do not care to exchange for the poorly paid labor 
 of Europe. It is the unequalled efficiency of their labor 
 (developed by the encouragement of high wages) which, 
 with their unequalled machinery and raw materials, en-
 
 376 The Plain Facts as to the Tariff. 
 
 ables them to capture the markets of the world. Good 
 pay is a cause of large product in drawing out the best 
 effort of men who know they must produce enough to 
 earn it ; but perhaps it is more truly a result, arising from 
 division of a product sufficient to yield each a large share. 
 The objection of protected manufacturers to making 
 known their labor cost per unit of product indicates that 
 it is low, despite high wages.^ 
 
 1 Hadley, 436. 
 
 The Proper Protection, if possible to determine the amount to allow a 
 desired industry that could not live without it, though there is little pretence 
 to keep duties so low, would be a duty just high enough to balance greater 
 aggregate cost of labor and materials, and to yield the marginal employer 
 the average rate of profit. A higher duty would protect the producer 
 against inflow of goods at sacrifice prices in dull times abroad, but at all 
 other times it might subject the consumer to risk of overcharge. The for- 
 eigner is no more likely to have a surplus to dump than our need at times 
 is likely to exceed home supply. Just now (February, 1902) foreign steel 
 rails for Florida are being bought at a price raised by the duty %^ above the 
 home rate. The home output is sold ahead for six months. Various 
 forms of steel are being bought abroad at a similar loss in cases of urgent 
 need, and many buyers are going without. This condition is expected to 
 continue during most of the year. By such shortage in supply of materials, 
 home industry is injured. 
 
 Labor Per Unit of Product Higher in England. — Measured by 
 amount of work done, some important kinds of labor cost much more in 
 England than in America, owing partly to old regulations of British trade 
 unions and partly to use of old machinery. This fact, and its blighting 
 effect on trade, were brought out forcibly in November, 1900, by a London 
 correspondent of the New York Sun, and in the North American Review 
 of August, 1 901, by Benjamin Taylor; also in Scribticr's for March and 
 Popular Science Monthly for April, 1 902. The following is a clipping from 
 a press dispatch of May 12, 1 901 : " Louis Gassier has come over to pave 
 the way for a delegation of British workmen of the engineering trade, who 
 will visit this country six or eight weeks. The reason of their visit is to see 
 how American workmen perform a day's work. Mr. Gassier said : ' British 
 workmen have suddenly awakened to the fact that Germany and this 
 country are getting the best of them in trade competition. Engineers have 
 visited this country, but in spite of this, we are not getting the same results.' " 
 Mr. Alfred Moseley is arranging to bring on a visit to America, in the fall of
 
 Protection and Wages. 377 
 
 Their Consuming More Proves That Our Workmen 
 Produce More. — Real wages in commodities enjoyed, 
 much larger in America than in Europe, prove con- 
 clusively that American workmen produce more goods. 
 All we consume our workmen produce, either the article 
 itself or another article traded for it abroad. Every 
 workman, however large his pay, produces more value 
 for his employer than he gets in wages. He will not 
 long be hired at a loss.^ 
 
 Are European Profits High Because Wages are Low ? 
 In comparing European wages with American, the protec- 
 tionist assumes that amount of work done is about equal. 
 If the European workman at low wages does not get 
 his full share of all he earns, what becomes of the differ- 
 ence ? If it fell to his employer in high profits, Europe's 
 many years of savings would have been invested in new 
 
 1902, delegates from workmen's unions in five-sixths of Britain's great in- 
 dustries. 
 
 Are Highest Paid Workers Best ? — Some experienced employers, es- 
 pecially farmers, will object to the statement that the highest paid men are 
 the best workers. It is true that a man in the habit of asking most may also 
 be most given to saving himself from doing too much. But after it has become 
 known that he is not a desirable worker, the price he can get will become 
 settled at about the proper point. He is better at selling his labor than at 
 doing it. On the contrary, another may be good at work but poor at busi- 
 ness, doing habitually as much as others better paid. The high wages re- 
 ferred to above are those willingly paid to men by whom they are well earned. 
 
 • How Much More We Produce. — Chief Geographer Henry Gannett, 
 in The Forum of May, 1902, says that in the United States the average for 
 each man at work in farming is now a yearly product of $900 in value, and 
 a cultivated area of 44 acres ; in France, $588 and 13 acres ; in Germany, 
 $510 and 8 acres ; and that in gross value of product per worker in manu- 
 facturing, including value of materials used, the average is 51,900 per year 
 in the United States, I650 in France, $485 in England and ;S5450 in Ger- 
 many. Our larger resources give not only more land and cheaper mate- 
 rials, but permit wider use of machinery and better methods, bring us 
 picked men from other lands, and encourage enterprise, both with large 
 product and with a rich home market.
 
 3/8 Tlic Plain Facts as to the Tariff, 
 
 industries at home, and we should not now have the 
 ;^2,ooo,ooo,ooo of foreign capital invested in this country, 
 nearly all from the start in unprotected industries ; nor 
 would our capitalists, now that our country has accumu- 
 lated more wealth than we have acceptable business 
 openings for, have invested nearly ;^ 100,000,000 last year 
 in British consols at an interest of only 2^ per cent. 
 It is in America where capital's share of the product has 
 long been heretofore the largest in the world, in high 
 interest, and where it is still the largest in high profits. 
 The scanty living of European workmen, therefore, 
 where rent is not an important item to their employer, 
 comes nearer to being all they produce than is the case 
 with the large living of our workmen. If the low wages 
 of Europe gave the employer the large share implied 
 in protective argument, our capitalists would rush to 
 Europe as people rushed to California in 1849. Loca- 
 tion in America would not be necessary for our many 
 industries that sell abroad. 
 
 Why Do Not Our Industries Move South, Where Labor 
 is Cheap? — United States Labor Bulletin No. 29 shows 
 farm wages by the year, with board, to average ;^8.05 per 
 month in North Carolina, against ^18.38 in Iowa. Here 
 the higher is 128 per cent above the lower, while pro- 
 tectionists themselves estimate American wages at only 
 about 60 per cent above the British.^ If low wages are 
 an advantage to the employer, why do not Southern 
 farmers, occupying nearly half our tillable land, drive 
 Iowa farmers out of business ? Why do not the latter 
 move to the South, land there being cheap, settlers 
 welcome, and the journey short ? Why do not people 
 take up land and start towns near by in the South, where 
 
 » Roberts, 275.
 
 Protection and Wages. 379 
 
 labor is cheap, instead of going to the far Northwest, 
 where labor has the highest wages in the world ? South- 
 ern labor is cheap in factories too, as well as on farms ; 
 and there is as much protection in the South as in the 
 North. 
 
 After all, What is the Protectionist's Whole Claim as to 
 wages but balderdash ? It was worked up in later times, 
 doubtless because industries had grown too old and strong 
 to claim protection as infants. The earlier writers for 
 protection advanced better reasons, intending it to be 
 temporary, to start industries. Whether arising from 
 resources or skill, difference in net product above rent 
 makes difference in wages between Europe and America, 
 just the same as between North Carolina and Iowa. 
 As a rule, the employer's profit is least where wages 
 are lowest, as in the most backward districts of Europe ; 
 and greatest where wages are highest, as in Montana. 
 
 America Could Not Export a Dollar's Worth of Any- 
 thing at full profit if low cost of production depended on 
 low hourly wages. India and Egypt would produce the 
 cotton, Russia the wheat, and the rest of Europe the 
 manufactures. In these lands wages average less than 
 half the American — in some cases less than a quarter 
 (Atkinson). The purpose of protection, it is said, is to 
 preserve opportunity, and keep our civilization on its 
 higher plane. Illinois might as well ask protection 
 against the Alabama black belt. The workers of India 
 and Russia produce, above rent and taxes, barely enough 
 to keep themselves alive, letting alone the supply of 
 other markets (Shearman). If Professor Gunton is cor- 
 rect in saying that New Englanders taking their ma- 
 chinery South get their cotton spun much cheaper, and 
 if such gain is to be depended upon, what is to keep the
 
 380 TJie Plain Facts as to the Tariff. 
 
 world's factories from drifting to India to use ten-cent 
 labor ? But the industrial centers have no fear of such 
 a change. With machinery, upon which the world's 
 production now depends, cheap labor does not answer 
 for a fine product. In Bombay cotton mills it takes 
 three to five people to do the work of one in Massa- 
 chusetts (Atkinson).^ Our workers, the strong, do not 
 need protection against the weak. There is more reason 
 for protecting the latter, as in Russia, against better paid 
 labor elsewhere ; though in Russia, where protection aids 
 one, it taxes a hundred. 
 
 Mr. Reed's Idea of Increasing Wages. — In Mr. Reed's 
 idea that increasing wages would enable the people of 
 our home market — so highly prized and so carefully 
 guarded — to take all our products as they increased in 
 quantity, he assumed that such would be possible, with- 
 out explaining the process. His was a vain hope. 
 Where profit is already as low as the employer will stay 
 in business to get, and rent and interest are not to be 
 lowered, wages can rise only by increase of product 
 value, either by rise of demand and price, or by produc- 
 tion of more goods at the same total cost as before. To 
 make price rise, without decreasing the supply, there 
 must be additional buyers, at home or abroad, or pre- 
 vious buyers must increase their demand. But as higher 
 profit from higher price is usually temporary, from influx 
 of capital into new production, wages rise, both in money 
 and in goods consumed, from larger product at the same 
 
 ' Also, if lowering our tariff on trust-made goods now exported would 
 bring international trusts, which would locate factories where wages are 
 lowest, why did our Singer Sewing Machine Co. build its great plant at 
 Glasgow, and our Hoe Printing Press Co. build at London, when they 
 could have shipped their machines into free-trade Britain from Continental 
 countries paying half her wages ?
 
 Protection and Wages. 381 
 
 total cost. Now as one improving industry may enlarge 
 product, while all other industries may not, their money 
 income remaining unchanged, how could the people of 
 the latter take the added product of the one, unless it 
 were all given them for the same money they paid for it 
 before, or unless they curtailed their use of other prod- 
 ucts, or relaxed habits of saving ? Setting aside sav- 
 ing as unimportant, or as more likely to increase than 
 diminish, how could money wages then rise in the one 
 without leaving other producers' products unsold, not to 
 be worked off except by taking a less total of money 
 than before ? 
 
 By Shipping the Extra Product Over the World the ad- 
 dition is least noticed, there is least fall of price of the 
 one commodity, and least fall in the other things it dis- 
 places. What is taken from price then increases real 
 wages or income everywhere, with more of the com- 
 modity for the same money. What remains in price per 
 pound or yard out of the reduction of its cost, may be 
 divided between profits and money wages in the one in- 
 dustry ; and by increasing their skill, to produce more 
 and to raise themselves above others who might take 
 their places, the workers may retain their extra wages, 
 while the employer's extra profit must soon give way 
 before the influx of new capital. Such a beneficent proc- 
 ess has continually been going on in the world's indus- 
 trial progress of the last eighty years — since the English 
 labor movement of 1820 and later. 
 
 This Theory is None the Less True Because it is Beauti- 
 ful. — The Almighty knew better how to adjust the forces 
 of industry than do manufacturers with themselves to look 
 out for. He was even wiser than " the whole race " ^ of 
 
 1 Mr. Reed's speech.
 
 382 TJie Plain Facts as to the Tariff. 
 
 protectionists, who in trade restriction are only the de- 
 scendants of the people who made laws fixing wages and 
 prices, prohibiting an outsider from coming into a town 
 to work, and forcing a manufacturer, whether he so de- 
 sired or not, to sell his goods through retailers. Such 
 laws were in force in England until near the end of the 
 eighteenth century. 
 
 Like Other Cases of Meddling With Nature, trying to 
 make the home market take all the product not only 
 fails to relieve, but aggravates the trouble of changing 
 from one industry to another. Protection, by shutting 
 out foreign commodities for which the excess product 
 mentioned above might be traded at a profit, raising its 
 home price, — may force the weaker producers out of the 
 one improving industry, leaving their labor idle, and thus 
 lessen its rise of money wages ; for price falls most when 
 extra quantity must be marketed at home. Undoubtedly, 
 the inability of Europeans to buy more of our farm prod- 
 ucts, because of our refusal to take their goods in ex- 
 change, has been largely the cause of twenty-five years of 
 
 Depression in American Agriculture. — It is improved 
 farming that has hurt the farmer. Our farm workers, in- 
 cluding employers, have only doubled since 1850, while 
 wheat product has increased six times, and the product 
 of hay, meat, poultry, and butter from 20 to 100 times. ^ 
 A politician dwells on increases to glorify protection, 
 assuming that it has been the cause of growth ; but an 
 investigator does not prattle in figures without regard to 
 what they mean. 
 
 The Tenfold Growth of City Population in the United 
 States since 1850 explains a rural growth but little more 
 than twofold. The drift from country to city is well 
 
 ^ Mc dure' s Magazine, Sept. 1 901.
 
 Protection and Wages. 383 
 
 known. Country population is smaller in many coun- 
 ties than it was twenty or even thirty years ago. Many 
 thousands have given up farming, because large total 
 product, due to improved machinery and transportation, 
 made prices too low. Their going to the city has not 
 helped money wages nor profits there, neither has their 
 increase there of manufactured goods, nor the low price 
 of farm products, added to the country's real wages in 
 commodities so much as if natural inflow and outflow of 
 good trades had been allowed. Low price of farm prod- 
 ucts has reduced the buying capacity (for these manu- 
 factures) of the agricultural class, about 8,000,000 work- 
 ers in 1890, out of a total of 22,000,000 workers ; and 
 the flocking of people to the cities, though prevented by 
 labor unions from lowering wages per hour, has, during 
 much of the time, divided up the days of work into small 
 shares, making employment irregular, and earnings per 
 year very low. Progress consists largely of releasing 
 people from growing food to produce other things, with 
 which average comfort may be increased ; but when the 
 process is natural, with a chance to spread a surplus over 
 the world, it need not crowd out farmers so fast as to 
 hold them in prolonged depression. 
 
 Is it a Benefit to Us to Weaken Other Nations ? — The 
 fact that our refusal to take goods has weakened foreign- 
 ers too — giving the European worker less food for his 
 earnings, and the European employer less money to 
 divide in wages — would probably not be rejoiced over 
 by protectionists now as they have done in the past.^ 
 That was the doctrine of Cain. His hand was against 
 every man, and every man's hand was against him. The 
 same policy has been followed ever since by savages. 
 
 iHadley, 444.
 
 384 The Plain Facts as to the Tariff. 
 
 They are not troubled about free trade, having nothing 
 to exchange.^ 
 
 "As Wages Fall Profits Rise " is a true doctrine when 
 applied to the vital matter, namely, wages per yard or 
 ton of product. Such a fall of wages is the essence of 
 progress, benefiting the employer first in higher profit, 
 then his workmen in more money per hour, and then 
 every person as a consumer in falling price. The ease 
 of deceiving workingmen and farmers with shibboleths 
 as to high wages and high prices has long given protec- 
 tion demagogic success. Constant reassertion has suf- 
 ficed, without giving these claims a shred of support in 
 fact. It is useless to talk about money wages,^ which 
 depend on net income from product, when the employer 
 is prevented by law from buying his materials where 
 they are cheapest and selling his goods where they are 
 dearest ; or to talk of high prices to the farmer, when 
 his price-making surplus must be shoved abroad on to 
 people whose means of payment are shut out by the 
 tariff. It is worse still to dwell admiringly on our 
 
 ' This Idea Carried to Ridiculous Extremes. — In late years not a few 
 have said America should have protection because Great Britain desires us 
 to have free trade. This idea was carried to extremes in former centuries.^ 
 France and England, in mutual hatred, each fearing to lose a trade balance 
 of gold, and each desiring to weaken the other, had raised duties until in 
 1776 the lowest rate was about 75 per cent. Adam Smith wrote : " Re- 
 straints have put an end to almost all fair commerce between the two 
 nations, and smugglers are now the principal importers." There was no 
 lack of effect. Each nation harmed the other as intended, with as much 
 harm to itself thrown in extra. At times in England trade with France 
 was absolutely prohibited. Some German and Austrian statesmen desire 
 to follow now a somewhat similar policy against the United States. Fortu- 
 nately our President and Congress will be too sensible to be drawn in. 
 
 2 What Can be Done Through the Standard of Living ?— Work- 
 men's demand (Mr. Reed's speech) for higher wages is a minor force, 
 whatever the standard of living they would like to set for themselves. 
 Those with money on hand, and well able to support a demand, do not
 
 Protection and Wages. 385 
 
 people's desire to raise their standard of living — on the 
 tasteful silks of the workingman's wife — when protec- 
 tion can protect only by making things scarce. 
 
 live up to their income, and hence are not directly impelled by their stand- 
 ard, but by the opportunity to get more money, to be used to raise the 
 standard eventually. The vital factors are those which make the oppor- 
 tunity. To prevent an employer from trying to take profit out of wages, a 
 high standard of living and of saving among workmen is important, caus- 
 ing them to resist by striking, moving, or working discontentedly and in- 
 efficiently. But to push wages upward, workmen's demand has simply 
 the effect to get their full share, which is changed by other forces, and 
 which they may already be receiving. These other forces, aside from the 
 necessary rates of interest, rent and profit, are ( I ) the cheapening of pro- 
 duction as described above, and (2) the intensity to which the least de- 
 sired or price-fixing portion of the product is wanted — explained above in 
 rise of price from increased demand. Enlarged and cheapened production 
 is the great essential to rise of wages. An intelligent workman's desire 
 and effort for more and more to enjoy, are necessary conditions provided 
 by nature, the same as life and sunshine. The struggle is to get things ; 
 quickening the rate of using them up is easy. Desire for more is of little 
 help to the German's wages until he comes to America, where other condi- 
 tions afford the means for gratifying it. 
 
 More Money and Shorter Work Day. — If Professor Gunton and oth- 
 ers who teach that the standard of living makes the rate of wages (instead 
 of the more natural view that the rate of wages makes the standard of liv- 
 ing) could induce all laborers to demand at once a raise of fifty per cent, 
 and at the same time to increase likewise each line of their buying for con- 
 sumption, rise of all prices from increased demand might reimburse each 
 employer for his extra payment of wages, if currency were provided for the 
 added need of money, and if high prices did not curtail too far the buying 
 of other classes. But would people have any more goods? If they could 
 at once put into effect improvements by which every laborer added fifty per 
 cent to his product, then the standard of living would be raised in fact. 
 Rise of wages per hour by shortening the work day, for all employers in 
 a trade, might be borne by them if higher price did not curtail use of their 
 goods. If the shorter day applied to all trades, unless men worked faster 
 or chronic idlers kept busy, all kinds of goods would be scarcer. Because 
 industries improve at different times, and in differing degrees, real and 
 money wages rise in the slow and irregular way illustrated above in the 
 text. The only standard of living with which to raise wages (when already 
 as high as profit will bear ) is that of constant striving to reach that work, 
 
 25
 
 386 The Plain Facts as to the Tariff. 
 
 and that skill, in which one's powers will bring largest return. A worker 
 thus makes the extra product he gets in higher pay. 
 
 Does Our Labor Get Its Full Share ? — Professor Patten (pages 64-70) 
 assumes that when free traders show high wages to be due to the efficiency 
 of the American workman, not to protection, they mean that when he gets 
 double the pay of the European he himself is doubly as efficient — that is, 
 if working in Europe he would turn out double the product of workmen 
 there. On this assumption it is argued that each of our workmen, under 
 free trade (as most of them now are), would earn all the difference by his 
 own exertion — would get no more pay per unit of force and skill than if he 
 were in Europe ; and hence would get no benefit from our richer mines, 
 soil, and forests, the advantage of which in enlarging product would fall to 
 undeserving landholders and capitalists. The answer to this is that nobody 
 imagines the American workman could do in Europe double the work of 
 the average man there. Men from various European nations keep up at 
 once in America with the usual speed of work here. So far as not encour- 
 aged to greater effort by higher pay, the difference in wages comes from 
 use of our belter machinery and cheaper raw materials. A fann hand 
 leaving %\2 a month in the Pennsylvania mountains works no harder on the 
 rich prairies of Nebraska for $20. It is protection that has given, by means 
 of higher prices the wage worker and all others must pay, great profits to 
 a few lumbermen and mine owners and also to some favored manufacturers, 
 but which in this broad land cannot give monopoly gain to owners of farms. 
 The ingenuity that characterizes Professor Patten's book, inasmuch as it 
 may be taken as the best effort of an acute mind, only settles further the 
 hopeless unsoundness of protection.
 
 CHAPTER XIV. 
 
 PROTECTION AND RECENT PROSPERITY. 
 
 Good Men Believe in Protection. — It is not uncommon 
 for men of good mind and motive to believe in doctrines 
 that are wholly wrong. Conscientious men in the past, 
 from Saul of Tarsus downward, took part in cruel relig- 
 ious persecutions, and many noble characters fought for 
 American slavery. For similar reasons good men be- 
 lieve in protection, though of course it is not evil to an 
 equal degree. To them it is the orthodox behef in which 
 they have grown up. Some perhaps have never studied 
 the question to find the truth — only to defend their side. 
 Loyalty has prevented them from seeing aught but its 
 apparently strong points. It is natural that a certain 
 able thinker, who "is perhaps the only thorough-going 
 protectionist among the first-rate economists," ^ is a pro- 
 fessor in Pennsylvania. Preachers in the South just 
 before the war were all slavery men. No other kind of 
 preachers could have hved there. Neither have any 
 economists but those who advocate protection been wel- 
 comed by the prevailing opinion of Pennsylvania. 
 
 Yet Would We Who Criticise do Better in Their 
 Places ? — Many good people will agree with Mayor Tom 
 L. Johnson of Cleveland, who said in Congress that there 
 he would oppose protection, but that in his steel manu- 
 facture he would gain from protection all he could. 
 
 ^ New England Magazine, Nov. 1899. The inference is not that he 
 chooses protection for the sake of his position, but that he was appointed 
 partly for the sake of his protective belief. 
 
 387
 
 3 88 TJie Plain Facts as to the Tariff. 
 
 Whether or not protection is given manufacturers in ex- 
 change for political support, a person might be consid- 
 ered over-conscientious who hesitated to take full advan- 
 tage of it, whatever the loss it caused to a public grant- 
 ing it with eyes open. It is not robbery when maintained 
 as it is by representatives of a majority of the people,* 
 
 ^ Many Things Allowable in Protective Argument. — Henry Carey, 
 a noted American economist of fifty years ago, became so enamored as a 
 manufacturer with protection, and worked up reasons for it with such ob- 
 vious effort, that later economists have regarded his doctrines with a feeling 
 akin to amusement. The lectures delivered at Harvard in 1885 by Pro- 
 fessor R. E. Thompson, of the University of Pennsylvania, though com- 
 mended as fair and able, are similar to the ordinary political speech — open 
 to fatal objection in nearly every argument, and depending in many cases 
 upon surface plausibility. Blaine's reply to Gladstone, published in the 
 North Atne7-ican Reviezv, of January, 1890, and circulated as a masterpiece 
 in the campaign of 1896, consists largely of what must be called sheer 
 quibbling, and makes sweeping assertions that are absurd to a student of the 
 subject. Coming from our foremost statesman of the time, doubtless being 
 required of him by party exigencies, it indicates that all things are allow- 
 able in politics. 
 
 Is Protection Scientific? — In Lalor's Cyclopedia of Political Econ- 
 omy the editor inserted after the article on protection an apologetic note, 
 stating that while there might be said to be among economists a consensus 
 of opinion on protection and free trade, and that his cyclopedia might be 
 expected to contain only such matter as was scientific, the article on protec- 
 tion, though at variance with the rest of the book, was inserted because the 
 subject was one of popular controversy. His reason for explanation would 
 seem good if the article as a whole is similar to its closing sentence — " The 
 marvel is that a doctrine so preposterous [as free trade] should have found 
 lodgment in any intelligent mind." An example of the ease with which 
 protectionists find reasons is the following sentence from the article in the 
 Encyclopedia of Social Reforms: "In 1875 a more protective tariff was 
 enacted, and prosperity returned." This is perhaps the only case in which 
 the better times of 1879 are connected with the slight changes of tariff four 
 years earlier. 
 
 Where could be found more unmitigated sophistry than in the two follow- 
 ing quotations from the article on protection in Johnson's Cyclopedia: 
 " Protection appeals to men on the side of their duties, free trade on that of 
 their interests." " Free trade teaches a person to look out for self as a 
 buyer, and tells the laboring classes to shift for themselves." The duty
 
 Protection and Recent Prosperity. 389 
 
 An Example of Men's Unthinking Acceptance of Doc- 
 trines long adhered to was given in The Independent of 
 December 6, 1900, in an article by Hon. John W. Fos- 
 ter, formerly Secretary of State, and the eminent diplo- 
 matist who represented China in her peace negotiations 
 with Japan. He mentions the reciprocity treaty with 
 Hawaii as having been " quite satisfactory in its results," 
 giving the United States an almost complete monopoly 
 of Hawaii's trade, and finally resulting in peaceful an- 
 nexation. In this, if annexation is not counted as a 
 consideration, he seems to assume that any kind of trade 
 or industry is desirable, without much regard to the cost 
 of getting it — to the net profit or loss in the end. 
 
 Duties Remitted Were a Gift to Hawaiians. — Now 
 what are the specific facts of American trade with Ha- 
 waii? By admitting Hawaiian sugar free of duty from 
 1876 to 1890 the United States gave outright to the 
 sugar producers of those islands, chiefly Americans, $^l,- 
 898,978. The total of all duties remitted, up to 1893, 
 was 1^54,834,703. The Hawaiian value of all goods ad- 
 mitted free was only ;^i 15,329,915. Though probably 
 not intended to work thus, this remission of duties could 
 have had no other effect. The Hawaiian sugar, being 
 only a part of the quantity demanded (one-eleventh in 
 1 891) other sugar had to be imported into the United 
 States ; and as the latter, by reason of the duty upon it, 
 was marketed under most unfavorable conditions, its nec- 
 essarily high price became the price of all. This is an 
 economic law of price. By asking less for their sugar 
 
 must be that of smothering one's own convictions, and loyally swallowing 
 what the party finds it expedient to administer. The command to shift is 
 that workers, and employers too, are told to choose from the good things 
 of the whole world, without having the fruit of a single tree forbidden.
 
 390 Tlie Plain Facts as to the Tariff. 
 
 than the market price, made high by the tariff against 
 other producers, the Hawaiians would simply have made 
 a gift of this difference to the buyer. If the govern- 
 ment had collected all of the ;^43,898,978 in revenue, 
 consumers of sugar would have paid no more than they 
 did. 
 
 Americans Paid $43,000,000 and Received $10,000,000. 
 As the total of all exports from the United States into 
 Hawaii for the fourteen years ending with 1890 aggre- 
 gated only ;^4i,673,33i, it is easy to form an estimate 
 of America's gains from the Hawaiian trade mentioned 
 as gratifying. At a profit of 25 per cent on shipment 
 valuation, and included in it, to the owners of these 
 exports when thus valued (the exporting profit is con- 
 sidered in the note below), the people of the United 
 States obtained from the Hawaiians by trade the net sum 
 of ^10,418,333, while paying to them ,^^43, 898, 978, be- 
 sides their profit on sugar at the net price other foreign 
 producers realized, and not considering the ;^ 11,000,000 
 of duties remitted on other articles. For this net loss 
 of ;^33,ooo,ooo there was no return unless it is supposed 
 the Hawaiians could not have produced sugar without 
 it, and that sugar producers elsewhere would not have 
 made up Hawaii's small fraction of the world's product 
 without raising price. To the shipping value of the 
 staple American goods exported, the stimulus given to 
 Hawaiian demand by remission of duties cannot be sup- 
 posed to have added perceptibly. And so far as the 
 producers of these goods could have obtained profit 
 from them, or from the capital and labor in them, by 
 selling in Hawaii without reciprocity, and by selling else- 
 where, even the ^10,418,333 must be reduced as not due 
 to the Hawaiian treaty. This was a remarkable case of
 
 Protectio7i and Recent Prosperity. 391 
 
 one-sided trade. A strong feeling of nationality would 
 be required to prevent any people from desiring annexa- 
 tion after such an experience — ended by the tariff law 
 of 1 890, which admitted all raw sugar free of duty, and 
 gave a bounty to sugar production at home.^ 
 
 It is Only for the Net Profit That Legitimate Trade 
 Exists. — Money received below the profit point is no 
 better than the same amount of money previously paid 
 out for the article sold. To a person, trade without 
 profit is not healthful exercise, but generally ruinous — 
 wasting his time, wearing out his capital, and weakening 
 
 ^ Employment Bought for People by the Government. — The figures 
 given here are taken from a report of S. G. Brock, chief statistician under 
 President Harrison, dated Feb. 20, 1 893. In a Senate report of 1893-94 
 a profit to the United States from Hawaiian trade was shown by counting 
 freights both ways to American vessels, commissions to agents, merchants' 
 profits on imports and exports, interest on capital, increased value of 
 American property in Hawaii, etc. To count these as a benefit of the re- 
 mission of duties, it must be supposed the labor and capital would other- 
 wise have been idle. Surely they might have found some way of getting 
 a living from our illimitable resources, in the world's demand for products, 
 without having employment bought for them by the government, at an 
 average annual cost of $3,000,000. 
 
 Protectionists Now More Ready to Compromise. — Yet Mr. Foster, 
 in the following words quoted, shows plainly the trend of thought among 
 protectionists toward some free trade ideas : " In fact it has come to be a 
 necessity to find new and enlarged markets for our agricultural and manu- 
 factured products. We cannot maintain our present industrial prosperity 
 without them. Our protective tariff system has so stimulated overproduc- 
 tion that we are dependent upon foreign consumption for a large part of the 
 output of our farms and factories." But it is to prevent agricultural over- 
 production that protection has long been advocated, with the claim that it 
 keeps men employed in manufacturing who otherwise would have to follow 
 farming. Undoubtedly it does cause overproduction in manufacturing, less 
 perhaps by increase of quantity produced, through its artificial stimulus, 
 than by narrowing the field in which foreigners are able and willing to 
 buy. In justice to Mr. Foster it must also be stated that his indorsement 
 of protection was incidental and inferential. The purpose of his article 
 was to recommend freer trade through reciprocity.
 
 392 T]ie PI am Facts as to the Tariff. 
 
 his self-confidence and business ability. Among indi- 
 viduals over-anxiety to make sales is ground for sus- 
 picion that quality is poor and profit high. A seller of 
 solid values does not need to give free an armful of 
 crockery with a pound of baking powder.^ 
 
 Does Protection Make Good Times, and Tariff Reform 
 Hard Times ? — Similar unthinking acceptance of doctrines 
 considered orthodox gave rise to the common habit of 
 attributing all business depression to low tariff for reve- 
 nue, and all growth and prosperity to high tariff for pro- 
 tection. It is much easier for people to give way to the 
 tariff hocus-pocus, blindly believing that every change 
 downward makes hard times, and every change upward 
 makes good times, than to endure the close thought 
 necessary to understand the truth. 
 
 Each of the Important American Panics — namely, 
 those of 1837, 1857, 1873 and 1893 — was chiefly 
 caused by disorders in the money circulation.^ But the 
 fact that manufacturers in 1893 did curtail their opera- 
 tions for fear of tariff reduction by the Cleveland admin- 
 istration, is no credit to protection. That the prospect 
 of even a slight reduction of duties disorders business for 
 a time, shows that protection is depended upon to add to 
 
 ' Nor does it seem sound that with the tariff the American people should 
 continue to expose themselves to levies of tribute by the trusts, in order 
 that industries may be made strong to invade foreign markets. Any in- 
 dustry that meets foreign competition by selling goods abroad acts suspi- 
 ciously when it still clings to its protection. If its values at home are always 
 fully equal to those it sells abroad, it ought not to fear foreign competition 
 in its home market. 
 
 * There was depression at or near these times in other countries also, 
 especially England, caused by reaction from previous excess in speculating 
 and producing. The depression of 1893 was worst in Australia, failure 
 coming then to about half of that country's banking capital. The impor- 
 tant waves of prosperity and depression generally affect most of the com- 
 mercial world.
 
 Protection and Recent Prosperity. 393 
 
 selling price, inconsistently with the claim that under 
 protection industries grow and lower price from home 
 competition. An old industry to which protection is 
 still necessary is either out of place in America, or has 
 not made good use of its opportunity, under the people's 
 gift allowance, to reach self-support. 
 
 For the Common Claim that Protection Made America 
 Great, no one would attempt to give definite reasons to 
 an audience of thinking men, familiar with the subject 
 and disposed to regard it critically. The people who 
 came to America would have developed great wealth 
 from our resources under any kind of a government that 
 afforded reasonable security to life and property. En- 
 couraged by unprecedented net product, they would have 
 'gone forward undaunted under an annual tax of ten dol- 
 lars per head to offer sacrifices to heathen gods. This, 
 if unavoidable, they would have borne without a murmur, 
 as they bear floods and droughts. Three times that tax 
 they would have borne cheerfully if hidden from view by 
 being added to prices, through a tariff supposed to make 
 business.^ 
 
 •Troubles are Light to People Agreeably Occupied. — Evils and 
 troubles are a matter of little consequence to people who are unconscious 
 of them, especially when made unconscious by absorption in agreeable pur- 
 suits. No doubt the Spartans, delighting in war, were happy in their 
 monstrous system of brushing aside family ties for their one purpose of 
 training up soldiers. Similarly, the Germans of to-day, in their intense 
 zeal for the Fatherland, bear cheerfully taxation and government inter- 
 meddling that would be unendurable if they had ever lived under a more 
 liberal system. Every stranger in a town is known and watched by the 
 police, every workman is known and enrolled, and even a servant girl 
 changing her place of employment is liable to be called to account by some 
 representative of the government. The ardently patriotic French, as was 
 brought out in the Dreyfus trial, cheerfully bear likewise the waste of 
 enough time watching, reporting on, and guarding one another to increase 
 materially their annual product of wealth.
 
 394 1^^^ Plain Facts as to the Tariff. 
 
 Rich Resources and Strong People. — Such mines, for- 
 ests, and soil as we have in America would have been 
 turned into wealth in the last forty years if at the begin- 
 ning of that short period we had had no government at 
 all, and a population of roaming savages. Local vigi- 
 lance committees of adventurers, as in the early days of 
 California, would have enforced justice at first, and then 
 foreign nations would have protected their settlers as in 
 Africa. Enterprising people and rich resources of nature 
 are what make wealth. Reliable government is neces- 
 sary very soon, and wise taxation is important, so im- 
 posed as to retard business the least, and not to build up 
 monopolies ; but the best system of trade encouragement 
 possible on earth could not develop wealth and civiliza- 
 tion from a dull people in a poor land. And to prevent 
 increase of wealth among a thrifty people in a rich land 
 would require governmental or other conditions that were 
 bad indeed. 
 
 The Amount of Insincerity That Good People Will Bear 
 in politics is astonishing, when compared with the truth- 
 fulness required in business.^ From the highest to the 
 lowest this insincerity is expected for party expediency, 
 suggesting strange ideas of the fairness and intelli- 
 
 ' Why We Have Passed Great Britain. — Leading statesmen have 
 long been in the habit of attributing to protection our passing ahead of 
 Great Britain in growth and wealth, instead of to our dozen new states to 
 be developed, all teeming with resources, and to our half century's inflow 
 of men and capital from abroad, against Great Britain's steady outflow of 
 these elements of progress. The London Spectator said about thirty years 
 ago : *' Sooner or later we have no doubt at all that America, with her vast 
 natural resources, both in fuel and land, will far outrun us in the race of 
 commercial and manufacturing enterprise." Great Britain's falling behind 
 America will be about the same as Connecticut's falling behind Illinois. 
 With our resources and our people, to have done much less than we have 
 done would have been discreditable. Age is usually a disadvantage. In 
 this country to call a place an old town suggests a dead town.
 
 Protection and Recent Prosperity. 395 
 
 gence of those addressed. A candidate of lofty mind 
 and character was applauded day after day by visiting 
 clubs, when he spoke of the depression of 1893-97 as if 
 it had all been caused by Cleveland's election and the 
 small reduction of duties under the Wilson law of 1894. 
 For party expediency, even when addressing intelligent 
 business men, it was proper to leave unmentioned the 
 deeper causes that would inevitably have brought hard 
 times if the tariff question had not arisen. Among these 
 causes were the threatened drop from the gold standard to 
 a silver standard worth half as much ; the reaction from 
 the excessive building and speculative activity of 1887- 
 92 ; and a decrease in total value of grain products, by 
 reason of reduced crops and lower prices, from ^1,659,- 
 000,000 in 1891, to ;^ 1, 2 3 2, 000, 000 in 1892, and ^1,041, - 
 000,000 in 1893. Immediately after the election of 
 1892, as much was known as later of the tariff revision 
 probable in 1894 ; but business did not decline until con- 
 tinued gold shipments in the earlier months of 1 893 
 shook confidence in the currency and brought on the 
 May bank failures. 
 
 To Show the Truth or to Hide It?— The striking 
 difference between the political discussion, intended 
 chiefly to hide the truth, and an inquiry after the real 
 causes of the panic, whatever they were, may be seen 
 by comparing the one-sided campaign circulars with 
 the masterly article in the Review of Reviews of Novem- 
 ber, 1899, written by Hon. Thomas L. James, now a 
 leading bank president of New York, who won a 
 high reputation as Postmaster-General under President 
 Garfield. He simply mentioned the expected tariff re- 
 vision as one of the many causes of the panic, each of 
 which he set forth in detail.
 
 396 TJie Plain Facts as to the Tariff. 
 
 What Caused the Good Times Since 1897? — With a 
 similar effort to attribute all good to protection, some 
 political speakers have talked of the good times since 
 1897 as if they were caused by the Dingley tariff law. 
 These good times could not have been prevented if every 
 vestige of protection had been suddenly swept from the 
 statute book, and needed revenue raised by duties on tea, 
 coffee, and other things not produced in the United 
 States.^ The causes of present good times were many 
 and potent. 
 
 1 Such Would Be a " Tariff for Revenue Only." — This term would 
 also include low duties on any article, though incidentally protective in 
 raising its price, if the purpose were revenue, not protection. A revenue 
 tariff has been the kind always contended for by the so-called free trade 
 party in America. Absolute free trade is impracticable by reason of the 
 need for revenue. No other form of taxation is so light on the people, so 
 unnoticed and so easy to collect, as a low duty on commodities not pro- 
 duced at home. Then every dollar paid by the people, through the addi- 
 tion of the tariff duty to selling price, goes to the government, there being 
 no home producers to add the duty to their price also. 
 
 Revenue Duties on Tea and Sugar. — When not enough suitable 
 revenue commodities used chiefly by the rich are imported for taxation 
 needs, the duty must be levied on such commodities as tea, as our govern- 
 ment did in 1898 for war expenses. There being no protection involved, 
 this duty was quickly settled without controversy. Though its rate was 
 only 10 cents a pound, it raised $15,000,000 during its first two years. 
 No poor man ought to complain of his share of such a tax, especially when 
 temporary, in view of the blessings of government he enjoys, with little 
 other necessary payment of taxes that yields so much in proportion to the 
 burden. 
 
 British Duties are almost wholly for revenue alone. In some cases 
 they are made protective to British industry by being fixed higher on a 
 commodity, as tobacco, when finely manufactured than when imported in 
 cruder fonns. (Stebbins, 30.) But the aim has been to remove the pro- 
 tection from home producers of a dutiable article by imposing on them an 
 equal excise tax, like our stamp tax on liquors. The system of the British 
 has been spoken of as having been cleared of " every vestige of protection." 
 (Taussig, P. S. Quarterly, 1894, 606. ) Their duties are levied chiefly on 
 tobacco and fine liquors, classed as luxurious or injurious, and on tea and 
 coffee. In 1901 they put a duty on sugar, to raise revenue for the Boer
 
 Protection and Recent Prosperity. 397 
 
 1. The Danger of a Drop to the Silver Standard had 
 
 been removed by Mr. McKinley's election, and by the 
 increase of the world's gold production from 202 millions 
 of dollars in 1896 to 236 in 1897 and 286 in 1898. 
 Previously its production had been nearly stationary. 
 Increase of gold encouraged large building and indus- 
 trial investments, promising gradually rising prices for 
 the future. 
 
 2. People Resumed Their Previous Rate of Buying. — 
 During the hard times people bought lightly, earning 
 little and saving to pay debts, and using up the clothing 
 and furniture they had ; while manufacturers and mer- 
 chants kept their stocks low, on account of the weak 
 demand. This depletion of dealers' stocks, and of con- 
 sumers' supplies, made a steady demand for new goods 
 when confidence was restored, and when many people 
 resumed their usual rate of buying. Factories of every 
 kind were started, and many new ones erected, supply- 
 ing previously idle men with wages, whose increased 
 spending added further to demand for goods, and for 
 labor to make them. 
 
 3. Population Increased About Five Millions during the 
 four and a half years of hard times. At Edward Atkin- 
 son's estimate, on the census of 1880, of ten billion 
 dollars' worth of goods consumed yearly by fifty million 
 people, the increase of population required at the end of 
 1897 a full billion dollars' worth of supplies more than 
 were required per year in 1892. During these five years 
 there was little increase of factories and dwelling houses, 
 
 war. Until late years, with no home product except a little from Louis- 
 iana, ours was a revenue duty on sugar. Our present sugar duties are dis- 
 cussed in the next chapter. The new Porto Rican revenue tariff is working 
 very successfully, supporting the government mainly with duties and ex- 
 cises on injurious and luxurious consumption. [Public Opinion, 1902, p. 8. )
 
 398 TJic PI am Facts as to the Tariff. 
 
 nothing to compare with the increase of people ; and 
 scarcely any increase of railroad equipment. 
 
 4, By Reason of Crop Failure in Europe, raising prices 
 here, and of unusually large crops to acreage in Amer- 
 ica, the total value of grain and cotton rose from 1,195 
 millions in 1895 to 1,264 i" 1896, 1,440 in 1897, and 
 1,476 in 1898; giving to farmers each year a large 
 excess of money to pay off debts, and to spend for com- 
 modities, and giving the railroads all the freight business 
 they could handle. Their need for additional equipment 
 crowded with orders the car and locomotive works, these 
 in turn the mills making bar and sheet steel, and these 
 the furnaces and mines. 
 
 5. The Business Prosperity of Europe and Her Colonies, 
 beginning a year or more before that of America, and 
 caused partly by inflow of South African gold, gave our 
 manufacturers a new demand from abroad, foreign mills 
 being unable to supply all their customers promptly, a 
 condition caused largely by the long strike of British 
 machinists in 1897. American exports of manufactures 
 rose from 183 millions in 1895 to 228, 277, 291, 340 and 
 434 respectively, in the five years next following. This 
 foreign prosperity has therefore added immensely to 
 American trade, our total exports rising from 883 millions 
 in 1896 to 1,050, 1,231, 1,227, 1,394, and 1,487 in the 
 years following. The fact that foreigners wanted to buy, 
 had more to do with our trade than that we could pro- 
 duce to sell. But our help to their trade fell off, our 
 imports changing from 779 millions in 1896 to 764, 616, 
 697, and 849 in the years following. Instead of the 
 Dingley law causing the increase in exports of manufac- 
 tures, the increase under the Wilson law after June 30, 
 1896, and also for the previous year, was in each case
 
 Protection a7id Recent Prosperity. 399 
 
 three times that of the next year, mainly under the Ding- 
 ley law, and equal to that of 1899. For the year to June 
 30, 1 90 1, there was a decline of 21 millions, and for the 
 calendar year of nearly 50 millions. In total exports of 
 all kinds, it was only for 1895 that there was a decline 
 under the Wilson law (85 millions regained next year); 
 while they fell off 183 millions in the year to June 30, 
 1893, under the McKinley law, against an increase of 168 
 millions in the year to June 30, 1897, under the Wilson 
 law.^ 
 
 6. The Spanish War in 1898 Gave an Impetus to Indus- 
 trial Activity that had already started. The original ^50,- 
 000,000 appropriation, and the 1^250,000,000 loan, were 
 spent largely for ships and supplies that would not have 
 been bought if there had been no war. The chartering 
 of ships and purchase of supplies for the Philippine war 
 have continued up to the present time. The addition of 
 fifty or sixty thousand men (three times as many for a 
 while in 1898) to the old regular army, removed that 
 number of strong men from work at home, thus making 
 places for an equal number of the unemployed, and con- 
 tributing to the rise in wages. The Boer war in South 
 Africa has also increased American exports', especially 
 
 ' Lowering Our Tariff May Not at Once Induce Foreigners to Buy, 
 
 nor raising it drive their buyers away. They buy when they want goods. 
 Just now the Germans might not at once enlarge their buying of us if we 
 lowered our tariff greatly. In dull times anywhere producers and retailers 
 try in vain to increase sales by lowering price almost to cost. In Gunton^ s 
 Magazine for December, 1 901, the editor argues against reciprocity by 
 showing that under the McKinley treaties after 1892 our sales fell off, 
 while they have increased largely under the Dingley high tariff of 1897. 
 As he truly says, reciprocity in the past has increased our imports most ; 
 but it is just as true that our buying eventually leads and enables foreigners 
 to buy of us as it is that a tariff shutting out their goods completely would 
 soon destroy our export trade. This was the main idea of Mr. McKinley' s 
 last speech.
 
 400 The Plain Facts as to the Tariff. 
 
 horses and army food, and at first raised British wages, 
 though its length and heavy cost have now become 
 serious to British taxpayers, checking enterprise and 
 personal consumption. 
 
 7. Business Would Have Improved Without Special 
 Causes. — The earlier movement toward a return to nor- 
 mal buying and normal consumption, without regard to 
 the cause of the movement (whether it came from studied 
 surveys of the situation, or simply from chance desires 
 to buy goods) tended naturally toward a complete rees- 
 tabHshment of normal conditions of trade. By 1897, 
 after four years of depression, during which the earth 
 yielded its products as before, and people had their usual 
 wants, the removal of the silver scare would doubtless 
 have led gradually to fair prosperity if there had been 
 no other specially favorable causes. 
 
 What Remains for the Tariff to Have Caused? — With 
 all these causes of business activity and high profits — 
 demand for products of one industry extending to the 
 others making its machines and materials, and so on 
 over the field — it is not surprising that American in- 
 dustry has recently enjoyed prosperity unprecedented. 
 When put forward as one of its causes, most of which 
 came by chance so far as America is concerned, the 
 slight tariff changes of 1897 appear ridiculous. 
 
 The Duty on Wool. — The duty of 1 1 cents a pound 
 placed upon free wool raised prices and benefited wool 
 growers. But the value of the wool product to the 
 producers in 1898, not over ;^5o,ooo,ooo, against a total 
 of nearly $2,000,000,000 for grain, cotton, hay, tobacco, 
 and potatoes, would indicate that a very small portion 
 of the people's buying is done with proceeds of wool. 
 In Ohio, which comes first in wool, the Qgg product is
 
 Pfotcction and Recent Prosperity. 401 
 
 said to be worth more. Perhaps the duty on wool is a 
 cause of the depression in woolen manufacturing, con- 
 tinuing through the good times, and often mentioned in 
 Dun's trade reports. A leading statesman in 1894, 
 speaking in Michigan, made a happy hit by saying wool 
 was then within 9 cents of being free. In 1901 it was 
 down to 1 1 cents a pound, despite the general good times. 
 
 On Lumber and Hides. — The duty oi $2 per 1,000 
 feet on lumber, admitted free under the Wilson law, has 
 probably given employment to no additional Americans, 
 nor increased their wages, in the world-wide demand for 
 building materials. More probably, it was partly the 
 cause of the excessive prices that checked building in 
 1 899, and that retarded a rise of wages in building trades. 
 The 1 5 per cent duty on raw hides, previously free for 
 twenty-five years, added materially to the income of very 
 few, except the great cattle raisers and meat packers, 
 who had all the purchasing power they could use. This, 
 and the increase of the duty on leather from lo to 20 
 per cent, probably benefited stock raisers, butchers, and 
 tanners less than it harmed manufacturers of leather 
 products. 
 
 Tin-Plate, Salt, and Soda Ash. — The increase of the 
 tin-plate duty from a cent and a fifth to a cent and a 
 half per pound gave the trust a trifle more leverage, but 
 the American product was fast displacing the foreign 
 before 1897 under the lower duty. The home product 
 more than doubled between 1895 and 1897, and imports 
 fell off by more than half The duty of 8 cents per 100 
 pounds on free salt could not have helped business much. 
 The value of all imported was only ;^745,743 in 1896 
 (;^62 5,863 in 1900). The duty of three-eighths of a cent 
 per pound on soda ash is said to have given employ- 
 26
 
 402 TJie Plain Facts as to the Tariff. 
 
 ment to several thousand men in New York state and 
 Michigan. 
 
 No Other Item of Change "Worth Mentioning could 
 probably be pointed out. On a few other important 
 commodities the duty was raised, but it was highly pro- 
 tective before. Very likely far less than one-fiftieth of 
 the population received direct benefits in purchasing 
 power from the tariff changes of 1897. These, and in- 
 direct benefits, from increased buying by wool growers 
 and others favored, must have been overbalanced by the 
 harm to manufacturers and their men of having to pay 
 more for materials — wool, lumber, and leather ; and by 
 the effect of the tariff's raise of prices to weaken pur- 
 chasing power among the great unprotected majority.^ A 
 carpet manufacturer was recently reported to have said 
 that a profitable export trade, which now is entirely 
 beyond his reach, might be utilized if coarse wools were 
 admitted free of duty, giving him as cheap materials as 
 his foreign competitors. 
 
 A Poor Opinion of American Skill. — It seems an unjust 
 estimate of America's industrial skill and business capac- 
 ity, as stated repeatedly — with her world-surpassing 
 machinery equipment, home market, and variety of re- 
 sources — to doubt the success of any proper industry, 
 
 ' How Protection Lessens Employment. — Dun^s Review of April 
 26, 1902, stated that, urgent buying of steel products abroad by many Amer- 
 icans having raised foreign prices, the duty and the freight made steel thus 
 obtained very expensive ; and that it was feared some construction enter- 
 prises in this country would be abandoned. But undoubtedly, because of 
 high prices for materials, construction and production to a total many times 
 larger were never undertaken. In this way, in a series of years, the high 
 tarift prevents much more employment than it makes, and hence lessens 
 the people's stock of useful things. The same effects are also caused, 
 under high protective prices, by the people's buying and consuming less in 
 many lines.
 
 Protection and Recent Prosperity. 403 
 
 with high, low, or no protection, in the unprecedented 
 demand prevaiHng during the last four years on every 
 continent. If other nations had been less busy, our 
 tariff barrier might have been of more use. 
 
 It was Settling That the Tarijff Needed. — The fact is 
 that what the tariff needed in 1 897 was settling. It was 
 already, though called free trade in the loose language 
 of politics, a highly protective law compared with the 
 tariff of 1862.' If its protective features had been left 
 untouched as fixed in 1894, and needed revenue raised 
 by duties on such commodities as tea and coffee, who 
 can doubt that a settling of the question by reenacting the 
 old law, changed in name from Wilson to Dingley, 
 v/ould have affected business more favorably than it 
 was ? If the trouble with Spain had come a year ear- 
 lier, the tariff question might have been dropped with- 
 out action, to turn attention to the war. If so, the law 
 then in force having been enacted by the tariff reform 
 party, though largely amended by protectionists, trou- 
 
 1 Average Rate of Different Tariffs. — Under the Wilson tariff of 1894 
 the average rate collected in 1895 on all dutiable imports was 4I.75 per 
 cent of their value abroad. Under the so-called free trade tariff of 1857 
 this rate fell lowest in 1861, to 18.84 P^r cent. It was 32.62 per cent in 
 1862 under the Morrill tariff, which, though enacted mainly for revenue, as 
 shown by the discussion over it in Congress, is regarded as having estab- 
 lished the protective policy. The highest average under the Walker 
 revenue tariff of 1846 was 27.38 per cent in 1852. Under the war tariffs 
 this average rose highest in 1869, to 48.69 per cent. In 1830 it was 
 61.69 per cent. It rose highest of all in 1813, to 69.03 per cent, but fell 
 to 6.84 per cent in 1815, wholly by changes in quantities of goods imported. 
 (Roberts, 127.) Under the Morrison tariff of 1883 this average rose high- 
 est in 1887, to 47.10 percent; under the McKinley law of 1890 to 
 50.06 per cent in 1S94; and under the Dingley law of 1897 to 50.21 per 
 cent in 1899. Specific duties, being a fixed sum per pound or yard, are 
 simpler to collect than ad valorem duties of a percentage on value. But 
 specific duties are desired by protected interests because as price falls the 
 duty with them becomes higher and higher.
 
 404 TJie Plain Facts as to the Tariff. 
 
 blesome agitation of this question might have ceased 
 for a long time. 
 
 Future Uncertainty Checks Enterprise. — A business 
 capable of self-support can prosper without special favor, 
 but ordinarily it cannot without certainty as to the gov- 
 ernment's policy. For this reason an approaching change 
 of the tariff, either upward or downward in rates, causes 
 business men to delay extensive building or buying, un- 
 til the proposed change has been completed, and its 
 effects have been seen in prices and trade. Despite the 
 great promises made in 1896 of what higher protection 
 would do for industry, and despite the removal of the 
 silver danger, manufacturers seemed as much afraid of 
 tariff revision upward in 1897 as they were afraid of its 
 revision downward in 1893. Thirteen months after Mr. 
 McKinley's election, with two seasons of large crops 
 here and of shortage abroad, a prominent protectionist 
 of Jackson said : " Well, confidence [in money] has re- 
 turned, if prosperity hasn't." There was not much im- 
 provement of industry until the close of 1897. After 
 reduction or removal of its protective duty, settling the 
 agitation, an industry will adjust itself to its new condi- 
 tions, though undesired and protested against, and pro- 
 ceed at once to make the best of them, while before the 
 settlement it must wait to see which course to take, 
 avoiding future contracts as far as practicable.
 
 CHAPTER XV. 
 
 THE TARIFF QUESTION AS IT STANDS TO-DAY. 
 
 Tariff Eeformers Desire to Avoid Crippling^ Industries. — 
 
 Though recognizing that free trade is the ideal condition, 
 permitting exchange of every producer's product for 
 whichever of the world's commodities will be most val- 
 uable here, and giving equal rights to all, with special 
 privileges to none, — American economists and tariff 
 reformers, as a rule, desire to reduce and remove the 
 protective duties gradually, that the industries so long 
 favored may have time to adjust themselves to unaided 
 or less aided self-support. 
 
 Will Unsound Claims be Candidly Given Up ? — Perhaps 
 it is not now expecting too much of self-seeking human 
 nature, to hope that protected interests, to some extent 
 at least, will candidly give up palpably unsound claims 
 and excuses, and in a spirit of compromise honestly make 
 the best of tariff reform, instead of tending petulantly to 
 discredit it by suspending work and making a show of 
 hard times. As stated before, an old industry's con- 
 tinued need of protection, the claim as to higher wages 
 being untenable, shows that it is out of place in this 
 country, or has not made good use of its tariff favor to 
 reach self-support. 
 
 We May Long Sustain Losses from Protection, reaping 
 from unwise sowing in the past. " At least five per cent 
 of the labor force of the country, certainly not more than 
 ten per cent, is now engaged in enterprises which could 
 
 405
 
 4o6 TJie Plain Facts as to the Tariff. 
 
 not continue to exist if protection should be removed 
 entirely." ^ Perhaps the most important of these are in 
 woolen and silk manufacturing. In cotton manufactur- 
 ing, and the iron industries, strong concerns would be little 
 harmed (many of them benefited), but weak concerns, 
 unable to produce at low cost, would doubtless be closed. 
 
 To Avoid the Shock of Destroying a Business, these 
 weaker industries must be carried a long time on the 
 tariff tax. If the public had never started them with pro- 
 tection, it would not now have them on its hands. 
 Those producers are blameless who had no part in se- 
 curing enactment of the protective duties upon which 
 they depend. In a settled movement toward practical 
 free trade, or low duties, persons in these industries 
 might gradually give them up if self-support seemed out 
 of reach. Only by being carried can an unfit business 
 survive. It is out of place, like an ox upon the sea. 
 
 How Could Displaced Men Find Work ? — If all protec- 
 tion were removed suddenly, this five or ten per cent of 
 American labor and capital would eventually find em- 
 ployment in our resources, and wages would then 
 continue as before, soon to be gradually raised — in goods 
 enjoyed, by removal of the private tax from prices ; in 
 money also, from free trade's effect to increase the em- 
 ployer's net income, with cheaper materials and wider 
 markets. In a period of weak demand for goods, sus- 
 pension of these industries, causing an over-supply of 
 labor, would quickly lower wages in some lines, and 
 might add seriously to the depression. But if the change 
 were made in a time of brisk demand, the labor released, 
 if able to move quickly, might at once find work without 
 fall of wages, as do men thrown out by improved ma- 
 
 1 Bullock, 1897, page 365.
 
 Tlic Tariff Question as it Stands To-Day. 407 
 
 chinery, and as do the many thousands of men disbanded 
 at the close of a war. Besides, as explained on page 323, 
 opening our market would raise foreign price, until in- 
 crease of their capacity enabled foreign producers to 
 supply us at the low price previously charged. Hence, 
 price here would not fall at once by the full amount of 
 the duty removed. With goods we are prepared to pro- 
 duce unaided, removal of the duty might so increase 
 sales as not only to give consumers the maximum enjoy- 
 ment, but also to give producers, at home and abroad, 
 an equal price yielding to each of ours a total profit 
 greater than that under the artificial price before. 
 
 The TariflF Question Has Begun to Settle Itself. — Fortu- 
 nately, the tariff question has at last made a start toward 
 settling itself Some claims of protectionists must neces- 
 sarily be abandoned now, since the recent rise of our 
 leading protected industries to a position of world su- 
 premacy, with admitted need of foreign markets, and with 
 labor cost per unit of product notoriously lower than in 
 England. Thomas B. Reed, one of the ablest protec- 
 tionists, said in 1894: "Tariff duties become a dead 
 letter when we are able to compete with the outside 
 world." Moreover, national revenue needs to be 
 lessened, in view of an unprecedented surplus in the 
 treasury. Prudent statesmen of the party in power have 
 desired to reduce appropriations, not because the country 
 could not easily raise if necessary double its present 
 national revenue, but because unwise expenditure is 
 corrupting, affording opportunity of gain to people by 
 whose influence the expenditure may be brought about. 
 A full treasury is a source of continual temptation. 
 Coming from compulsory taxes, it is not the same evi- 
 dence of success that it is in a private business, whose
 
 4o8 The Plam Facts as to the Tanff. 
 
 gains come from voluntary custom. Now, perhaps as 
 never before, is a time for tariff reform on a large scale. 
 Those who oppose it will have no trouble in finding 
 ways to get rid of the surplus money in the treasury.^ 
 
 The First Encouraging Evidence of Increasing Fair- 
 mindedness among those in protected industries was in 
 the meeting at Detroit in June, 1901, of the National 
 Association of Manufacturers, representing many mill- 
 ions of capital, employing hundreds of thousands of 
 men, and composed perhaps chiefly of life-long protec- 
 tionists. Tariff revision was the subject that received 
 most attention. Reciprocity was discussed with decided 
 favor, a movement being started for a national reciprocity 
 convention. Repeal was urged of the tariff clause that 
 required the imposition of the higher duty on Russia's 
 partly refined sugar, which caused her to retaliate with a 
 prohibitory duty on some of our iron manufactures.^ 
 
 1 " When Receipts Are Gaining on expenditures at the rate of $1^,- 
 000,000 in three months, there is but one proper fixed pohcy to pursue, 
 and that is a policy of tax reduction." — Chicago Record- Herald. The 
 Secretary of the Treasury estimates that the government income, for the 
 year ending June 30, 1902, will exceed expenditures by ;^loo,ooo,ooo. 
 Surplus cash in the treasury, November I, 1901, reached 5i75,ooo,oco 
 over and above the ^150,000,000 gold reserve held to redeem paper money. 
 Total gold in the treasury March I, 1902, was $544,596,900, the largest 
 amount of gold ever gathered together at any place in the world. 
 
 2 Tariff Reform Resolutions of the Manufacturers' Association. — 
 
 The resolutions of the convention were as follows : 
 
 Whereas, Recent events have brought forward the question of tariff 
 revision ; and 
 
 Whereas, The subject is one of vital interest to the members of this 
 association, and intimately connected with the most important purpose of 
 the association, to facilitate the expansion of American trade and commerce 
 at home and abroad ; therefore. 
 
 Resolved, That the National Association of Manufacturers affirm that the 
 following principles should govern all legislation : 
 
 First, That the object of tariff legislation should be to furnish adequate 
 protection to such products only as require it, without providing the oppor- 
 tunity for monopoly abuses.
 
 TJic Tariff Question as it Stands To- Day. 409 
 
 Honor Should Not be Withheld from These Gentlemen ^ 
 because it is for their own gain, in making a market for 
 their goods abroad, that they are now recommending 
 tariff revision. If it did not eventually pay in money to 
 
 Second, That the tariff on goods whose cost of production is higher in 
 the United States than in foreign countries should be at least what is neces- 
 sary to compensate domestic industries for the higher cost of production. 
 
 ^" One of the Great Movements of the Age." — Under this heading 
 the Detroit Fi-ee Press said editorially, in part, of these manufacturers : 
 
 " As they change the party is changing. In the South the President spoke 
 openly for more liberal trade relations. Such men as Representative Bab- 
 cock have denounced in unmeasured terms the flagrant abuses of protection 
 that make our people pay more for domestic products than they are sold for 
 abroad, and propose to carry the fight into the next session of Congress. 
 He stands by the proposition that protection has become robbery, and that 
 the tariff is the mother of trusts. He is the target for malignant abuse by 
 the old and case-hardened organs of the party, but the thinking and pro- 
 gressive Republican and independent papers are with him. The manufac- 
 turers are also with him in the principle that he advocates, the chief con- 
 tention being as to details. A point has been reached where it is to be 
 decided whether we shall protect foreign buyers and consumers, and pay 
 dearly for the privilege. To such a controversy there can be but one out- 
 come, and the manufacturers are ranged on the side of the winners." 
 
 Press Comments. — The following are extracts from some of the pro- 
 gressive Republican papers referred to : 
 
 "Aggressive tariff worshippers cannot too soon conclude that tariff re- 
 vision is inevitable, and that the people will not tolerate monopoly abuse 
 under the guise of protection." — Chicago Evening Post. 
 
 " Unless the party does this [enters at once upon a campaign of educa- 
 tion] the rising tide will sweep away not only protection, but also the other 
 Republican policies with it." — Chicago Inter-Ocean. 
 
 "The most sagacious minds in the Republican party foresee that changes 
 must be made." — New York Covunercial Advertiser. 
 
 " In declaring for free trade with Canada, the Duluth Chamber of Com- 
 merce doubtless voices the prevailing sentiment along the border on both 
 sides." — Boston Transcript. 
 
 "Our antiquated and outrageously restrictive navigation laws." — Balti- 
 more A7nei ican. 
 
 Strong Growth of the Tariff Reform Movement, since the above 
 comments were made, is to be noted now (May, 1902). Apparently it is 
 destined this time to become in fact one of the great movements of the age. 
 Growth of industry is bringing around toward free trade the ruling in- 
 dustrial class. General acquiescence in the present tariff, doubtful last 
 fall, is now clearly untrue. Editors of the leading periodicals, who usu- 
 ally consider the tariff question on its scientific merits, are practically
 
 410 The Plain Facts as to the Tariff. 
 
 be fair and honest, justice and considerateness among 
 men would have little chance. A moral reason of right 
 seldom prevails in society until reenforced by an eco- 
 nomic reason of gain. This is in accord with men's 
 nature, and it is useless to censure them for it. Tariff 
 reformers will agree with these manufacturers that a duty 
 must be allowed for the present to those industries un- 
 able to live without it, though it is to be regretted that 
 they ever were started. Unlike the other 90 or 95 per 
 
 unanimous in favoring reform. Party papers too are falling into line, per- 
 ceiving that tariff reform is not only right but expedient. Notable in this 
 respect are the New York Tribune and the Chicago Tribune, second to 
 none in influence among Republican journals. At no other time in thirty 
 years has tariff reform attained an approach to its present hold upon the 
 Republican party. Some of this party's leading statesmen are quoted 
 further on. 
 
 Nearly a Hundred Chambers of Commerce and other associations, 
 from Maine to Oregon, including both manufacturers and merchants, have 
 declared for tariff concessions to Canada. By reason of a need for cheaper 
 raw materials, this sentiment in New England prevails almost unanimously 
 in both parties. Apparently, New England desires reciprocity more ear- 
 nestly than does Canada herself. (^Public Opinion, April lo. ) Nothing 
 but assertion and vituperation (F. A. Walker) has been offered by pro- 
 tectionists to explain why we should welcome free trade with Canada as a 
 state of our union, but should regard it as perilous to us under Canada's 
 present relations ; nor to explain why free trade would not be as good 
 among nations as among our states — large and small, near and distant, 
 similar and dissimilar. Free trade with Canada might be similar to our 
 present free trade with Porto Rico. We now buy of the latter three times 
 as much as before the late war, and sell her five times as much. A number 
 of trade associations sent delegations to the President in November, to urge 
 reciprocity or tariff reduction, in order to increase our foreign sales. Of 58 
 leading concerns making machine tools, questioned by the American 
 Machinist in March, only 2 said they needed a tariff duty ; 34 said they 
 needed no duty at all ; 38 said the tariff restricts our foreign sales of 
 machinery ; 42 (against 3) said we should modify or abolish protection on 
 machine tools ; 38 indorsed reciprocity. The general sentiment of replies 
 was that what the machinery trade needs is markets, not protection ; that 
 the need of it having been outgrown, it is now beginning to injure our trade 
 abroad. {^The Nation, April 10, 1902.)
 
 The Tariff Question as it Stattds To-Day. 411 
 
 cent of our industries, their labor is employed on com- 
 modities not naturally worth their cost, the people's con- 
 tribution making up the deficiency. But bearing uncon- 
 sciously this steady contribution through the tariff is less 
 harmful to the country than a shock to business would 
 be, caused by sudden or injudicious removal of tariff 
 duties. 
 
 But Reciprocity Must Injure Some Home Industries — 
 take away some of their business — in order to be effective. 
 Tariff reduction, to secure a like favor from a foreign 
 nation on other commodities, cannot be confined to indus- 
 tries already meeting prices abroad, and able to hold the 
 home market without protection. On these reduction 
 might give the foreigner no benefit — might not increase 
 his sales. The object is to permit him to increase his 
 sales here, in order to induce him to permit us to increase 
 our sales there. But when reciprocity takes protection 
 from an industry not yet self-sustaining, and not fast 
 becoming able to reduce price to the foreign level, a cry 
 arises that the weak are being sacrificed for the strong. 
 The answer is that chronic weakness in this case is a 
 reason for not surviving. Industry exists to serve soci- 
 ety, not to be helped by it.^ 
 
 'There is No Need to Have Weak Industries. — They are weak 
 because larger product value in many stronger ones raises wages and other 
 expenses. In these stronger ones is the place to operate. In them a manu- 
 facturer and his employees, when their minds have been cleared from the 
 fog of protective ideas instilled into them, can have the satisfaction of 
 knowing that they are not partly supported by public contributions ; that to 
 the full amount of its selling price their product adds to the nation's wealth. 
 When in the price of a dollar article forty cents comes from the tariff, its 
 production adds to the country's wealth but sixty cents (making no de- 
 duction for material used). The forty cents is taxed from the products of 
 other producers. They get so much less in quantity for their dollar ; and 
 the same amount, which the protected industry fails to produce, by reason 
 of its being out of place, is thrown into the sea. (D. A. Wells.)
 
 4 1 2 TJie Plain Facts as to the Tariff. 
 
 To Restrict Reciprocity to Nothingness was the aim of 
 the reciprocity convention held by the Manufacturers' 
 Association in November, 1901. Manufacturers specially 
 benefited by and depending upon protection, always 
 more united and aggressive than the interests desiring 
 the less direct benefits of freer trade, obtained control of 
 the convention, and resolved that reciprocity should be 
 confined to cases in which it will harm no home industry. 
 This means no reciprocity at all. The free list already 
 includes perhaps eveiy commodity not produced at 
 home ; while, as stated before, a tariff reduction that does 
 not take sales from the home producer, and give them to 
 the foreigner offering lower prices here,' will not induce 
 
 Work from Broken Windows and Burnt Houses. — If the protected 
 industry is not, by reason of its aid, fast reaching self-support, the employ- 
 ment and business it makes are not greatly different from that of broken 
 windows and burnt houses — leaving consumers so much less to spend for 
 other products affording equal or more employment. The case is the same 
 with employment and business arising from war. A navy somewhat en- 
 larged may be a good thing, deterring others from attacking us and not 
 leading us to pick quarrels with them ; but the shipbuilder not getting 
 the contract for a battleship does not lose the amount of its four millions 
 cost, nor even the million or half million profit ; for with his plant he may 
 make as much from other work now crowding to be done. A workman 
 likewise does not lose the wages to be afforded by a possible new industry 
 not started with protection. His time is left for other work which the ex- 
 istence of society requires to be done. People with wealth, to get good 
 from it, must spend or invest it in some way that makes business. A 
 dollar wasted in carousing, with no return, makes no more business directly 
 than if paid out forsolidest value, which may enable the possessor to patron- 
 ize others continually afterwards. It is viciously unsound to justify public 
 expenditure by saying that the money makes trade, and benefits the people 
 among whom it is spent. The same is true of the lavish use of money by 
 a gambler or bank robber, and of the expenses of sickness and death. 
 
 • A few writers even wish that we had a duty on coffee, to be removed 
 in a reciprocity bargain. Some of the present duties were put very high 
 in 1897 for this purpose. The object is the same in Switzerland's proposed 
 addition of 600 articles to her protected list.
 
 TJic Tariff Question as it Stands To-Day . 4 1 3 
 
 another nation to lower its tariff and allow us increased 
 sales there. The fact that the benefits of protection are 
 so direct and certain for the favored industries, is evi- 
 dence that something is wrong. In free and natural 
 business the seller does not thus enjoy regularly sure 
 advantages not possessed in equal measure by the buyer. 
 Dividing Home Territory with the Foreigner. — Cases 
 have been found in which to divide the American market 
 with the foreigner, and still leave most of it securely 
 in possession of home producers. Shutting out Nova 
 Scotia coal taxes New England permanently for our 
 home coal producers and for the railroads carrying their 
 product. No improvement of mining under protection 
 could be expected to overcome the freight here necessi- 
 tated by distance. The case is the same with salt, freight 
 on which to our seaboard territory is much lower on the 
 foreign article than on the domestic from Michigan and 
 central New York. Foreign salt has come in as ballast 
 for ships, free of freight charges. Domestic salt could not 
 be sold in some districts under free trade. The duty 
 here is a permanent tax for the salt trust and the rail- 
 roads. The original and sometimes proper purpose of 
 protection, to enable a new industry to stand alone, does 
 not apply in these cases. With some other protected 
 articles, similar conditions probably exist. The raw 
 materials required in manufacturing will naturally be 
 freed first from price-raising protection. They were 
 always to be free by logical protective systems, because 
 a duty on them hinders industry to benefit the monopo- 
 listic owners of limited natural supply. 
 
 A New Burden, to be Borne for Generations to come, 
 the American people seem now in danger of having
 
 414 The Plain Facts as to the Tariff. 
 
 settled upon them. It is not agreeable to throw cold 
 water in this way upon the rising expectations of the 
 Hawaiians and Porto Ricans, nor of the beet sugar pro- 
 ducers in a number of our states. But what else will 
 the truth permit ? However gratifying the new hope 
 given to farmers in the profits of beet growing, afforded 
 by the dozens of sugar factories now springing up, have 
 we really a field for beet sugar production, whatever the 
 fitness of our soil and the extent of our consumption, 
 when the industry claims to be unable to exist without a 
 full tariff duty that now nearly doubles the price, and 
 when Europe is flooding the world with sugar we might 
 enjoy if we would at unheard-of cheapness ? Under 
 these conditions is it sugar production that yields the 
 profits, or is it the consumer's contribution collected 
 through the tariff addition to price? What industry 
 would not be profitable if a producer paying out ;^i.oo to 
 make an article selling naturally at 75 cents could have 
 his loss overbalanced by a gift of 50 cents from taxation ?^ 
 
 • $62,000,000 to the Treasury, $36,000,000 into Private Pockets. — 
 
 Our tariff on sugar, though highly protective to home producers, yields 
 large revenue — ^62,680,260 in 1901 on sugar and molasses, the bulk of 
 our sugar being imported. The duty on raw sugar averages about 1.68 
 cents a pound, according to quality. The duty on refined is 1.95 cents. 
 The excess of the latter is called the differential. In addition to it an extra 
 sum is levied to equal the export bounty paid by the European countries 
 from which refined sugar comes. This extra sum, a little over ^ of a cent, 
 is called the countervailing duty. These two items account for the enor- 
 mous profits of the sugar trust, 12 per cent on common stock deemed to 
 consist largely of water. 
 
 According to an October report of Willett & Gray, sugar statisticians 
 of New York, of our total estimated consumption in 1901 of 2,360,585 
 tons, 1,000,000 at the most was expected to be produced in home territory 
 — 350,000 tons in Louisiana, 350,000 in Hawaii, 150,000 in Porto Rico, 
 and 150,000 in American beet sugar factories. On this home product, 
 Willett & Gray estimate that $36,000,000 is paid to private producers, their 
 price being increased to the full amount of the duty, averaging $36 per
 
 TJic Tariff Question as it Stands To-Day. 4 1 5 
 
 Home Production of Sugar Adds to the Trouble. — The 
 tariff addition to price, by which Hawaiians were enabled 
 to collect ;^3 3,000,000 from American consumers during 
 the fourteen years of reciprocity previous to 1 890 (page 
 389), now applies not only to the sugar product of Lou- 
 isiana and of annexed Hawaii, but also to that of an- 
 nexed Porto Rico, to the increasing product of home 
 producers from beets, and will apply to nearly a million 
 tons a year from Cuba, so far as we save that island from 
 ruin with a reciprocity reduction for her alone, instead of 
 a general reduction of duty for producers in any land. 
 The home product itemized in the accompanying note, 
 with a nearly equal product from Cuba, would leave less 
 than a half million tons to pay full duty into the treas- 
 ury, though the high price of this would become the price 
 of all. Private pockets might then receive fifty millions 
 or more per year from consumers of a necessary com- 
 modity. Our home product's effect to increase supply, 
 and lower the world's price, would be equalled by 
 enlarged output from the sugar countries if we bought 
 of them instead of producing. 
 
 Will Increase of the Home Product Become a Remedy 
 for such a tax for priv^ate benefit ? Not until this in- 
 crease passes our increase of consumption, an increase 
 now reaching about 150,000 tons a year, and supplies 
 our market as abundantly as all sugar producing coun- 
 tries would supply us if we admitted sugar free of duty. 
 To expect such a result seems visionary. Our beet 
 sugar producers will scarcely surpass in improvements 
 
 ton. As the government does not now need the revenue, if protection 
 could be taken from both refiners and producers, the American people 
 ■would save about ^90,000,000 per year on their present consumption, 
 which at the lower price would then largely increase among the poorer 
 classes.
 
 4i6 TJic Plain Facts as to the Tariff. 
 
 the French and Germans, by whose long appHcation of 
 science the beet sugar industry has been created. High 
 protection for many years has given Louisiana and 
 Hawaii a chance to do all they are capable of doing in 
 the line of progress. Porto Rico is not larger than four 
 ordinary counties, and improvement of sugar production 
 in Cuba may at least be balanced by improvement in the 
 rest of the tropical world. Home competition under pro- 
 tection, therefore, will hardly lower price of sugar in this 
 country to the natural level abroad. 
 
 Importing Must Continue. — But home and Cuban pro- 
 duction do not promise even to relieve us of the necessity 
 of importing. So long as this continues the full duty is 
 added to price of the total we consume. After some 
 success in the industry for nearly ten years, our beet 
 sugar output was only 77,000 tons in 1900. Its increase 
 to 185,000 tons in 1901 (from 31 up to 42 factories, and 9 
 more being built — Michigan coming first) about equalled 
 our increase of consumption. But if the business needs 
 the tariff duty so largely as is claimed, capital will scarcely 
 be invested in it so rapidly after the exposure of its arti- 
 ficial nature by the contest in Congress. By conserva- 
 tive estimates Cuba's output is not expected to pass soon 
 1,250,000 tons. Pretty certainly it will not pass that 
 quantity unless increased by a trust gaining from reci- 
 procity with us. Hence there is little prospect of relief 
 from paying the full tariff duty into private pockets, while 
 what growth of home production may come will simply 
 give private pockets more and the treasury Icss.^ 
 
 A Bounty on Home Produced Sugar, such as the two 
 cents a pound paid under the McKinley law of 1890, 
 
 ' C. A. Crampton, one of the government's experts in the sugar industry, 
 shows in The Forum, Nov. 1901, the improbabihty of our being supplied 
 without large importations,
 
 TJic Tariff Question as it Stands To-Day. 4 1 7 
 
 would be preferable to tariff protection, viewing both from 
 the standpoint of the public good. Perhaps our settled 
 policy of granting protection to all industries needing it 
 gives present beet sugar producers a moral right to favor 
 of some kind.* With a bounty limited at the start to five 
 or ten years, builders of sugar factories would know 
 what public help they were to have. Even without a 
 limit of years, they would know that a bounty paid 
 directly from the people's taxes in the treasury would 
 not be permitted to continue long in this country, 
 though it would be no more truly a public gift than the 
 present less noticeable addition to price through the 
 tariff A bounty is usually more objectionable than a 
 tariff duty, because a duty is paid by the consumers of 
 the protected article, not by the public in general ; but 
 with sugar the consumers include everybody. Under 
 the power of Congress to make laws for our island pos- 
 sessions different from its laws for the states, a sugar 
 
 'Protection as a Vested Right. — But the Michigan Supreme Court in 
 1900, in declaring unconstitutional, because not for a public purpose, 
 the state sugar bounty of one cent a pound, said in substance that consid- 
 ering the bounty law a contract with investors in sugar factories would 
 make legislative lobbying too profitable for the public good. Any scheme 
 worked through the legislature would then be binding on the state. 
 
 It is said that to benefit /tw the American people will not agree that 
 one shall be robbed of what he has. ( The Forum, Reciprocity, Dec. 
 1901.) This assumes that the tariff gift is a vested right, which might be 
 true with men induced by it to put money into new enterprises, were it not 
 for their knowledge then that the tariff is liable to be revised at any time, 
 is objected to by many people, and is always subject to the discretion of 
 Congress as to whether continuance of any protective duty is desirable to 
 the public. Protection, especially among self-governing people, subjects 
 business to the uncertainty of politics. Of course, as stated before, after 
 permitting an industry to grow up under protection, justice requires that the 
 aid be removed gradually. The difficulty of removing it is perhaps the 
 main objection to starting it. This is one of the vested rights with which 
 Europe has long been burdened. 
 
 27
 
 4 1 8 The Plain Facts as to the Tariff. 
 
 bounty could be confined to the cane producers in Louisi- 
 ana, and the beet producers in Michigan, Cahfornia, and 
 other states. It would seem that this country has con- 
 ferred enough special benefits on those citizens who so suc- 
 cessfijlly exploited Hawaii. Admission of all raw sugar 
 free of duty, as from 1890 to 1894, would be sufficient 
 for Cuba and Porto Rico, which of all countries are sup- 
 posed to be fitted to produce cane sugar without artificial 
 aid ; while removal of the duty on refined sugar is the 
 only effective way to save to the people the many millions 
 of monopoly profit levied by the sugar trust,^ 
 
 > Safer to Give Cuba Free Trade than Statehood. — With all our 
 foreign islands, and with Cuba, it would seem better for this country to 
 hold them off at a little distance, under free trade or liberal tariffs, than 
 ever to admit them as states with anything like their present population. 
 Political pressure for their admission, to secure free trade, or for other rea- 
 sons, may need to be guarded against. A constitutional amendment, taking 
 from Congress the power to make states of these or other annexed regions, 
 is advocated by some thoughtful men. Admission of such blocks of for- 
 eigners to indestructible statehood, taken with our steady inflow of European 
 immigrants rearing large families, would soon place in a minority in the 
 nation, as now in the large cities, the native people who formerly consti- 
 tuted the Americans, and who made ours so desirable a government under 
 which to settle. 
 
 Immigrants in 1902 are expected to number nearly 600,000, chiefly 
 men, soon to be voters, the vast majority of them from Italy and southeastern 
 Europe, and nearly all of them going to cities. New York city's foreign 
 born have increased 307,317 in ten years, 98 per cent of them from 
 southern and eastern Europe. In one week of May, 1902, there were 
 landed at New York 29,519 immigrants. In four months 30,000 more 
 came than ever before in the same period. Not many years at this rate 
 will be necessary, from pressure on the means of subsistence, to lower 
 wages and living toward the European level. If improvement of produc- 
 tion prevents a fall, inflow of people will prevent or check a rise. More- 
 over, it should have been mentioned in connection with the tariff and wages 
 (pages 360-73) that the class of foreigners now coming canno't be unionized 
 for years. It was partly for this reason that the same races were brought 
 in great numbers to Pennsylvania. ( The Outlook, article on coal workers, 
 May 24, 1902.) The educational test just adopted by the House would 
 have shut out last year a quarter of those older than fourteen years.
 
 TJic Tariff Question as it Stands To-Day. 419 
 
 Self-Supporting Home Production of Sugar from beets 
 is a consummation devoutly to be wished for farmers in 
 many districts needing more profitable crops, though this 
 is now less true than it was, the world-wide good times 
 of the last four years having raised farm prices, and 
 farmers having better adapted themselves to changed 
 conditions. It may be true that the beet sugar industry 
 can prosper without long continued assistance from the 
 public. That it needs, or will soon need, no artificial 
 help at all, is the inference from a circular of 1899 from 
 Messrs. Oxnard and Cutting, who are at the head of the 
 beet sugar industry west of the Missouri, and of the beet 
 sugar trust. In this circular they said they had nothing 
 to fear from free trade in sugar, with Cuba and with all 
 the world. ^ If we are to have a beet sugar industry, it 
 
 ^ Can Beet Growing Stand Alone, or is it Undesirable ?— Long ex- 
 tracts from this circular were published in 7'he Outlook of Jan. 1 8, 1902. 
 But as it was issued to sell stock in sugar factories, especially welcome is 
 the confirmatory evidence of General Manager Cutler, of the Utah Sugar 
 Co., who says (N. Y, Tribune, Jan. 23) that reducing the duty to Cubans 
 25 per cent will not lower price ; that the beet industry is now growing too 
 fast to be checked by moderate tariff concessions ; and that in ten years 
 it will bear absolute free trade in sugar. Taking off 25 per cent of the 
 duty, or all of it, will not lower price. So long as our demand requires from 
 abroad more than Cuba can supply, our price must be high enough to bring 
 in sugar from other lands paying the full duty. On the other hand, there 
 is evidence that the beet industry is not worth building up, which is also 
 a reason for lowering the duty to Cubans. Mr. Oxnard has said he has never 
 been able to induce farmers to supply over half the beets wanted. The 
 America7i Cultivator says beets have not proved more profitable than other 
 crops now grown. They are a more suitable crop for Europe, where the 
 cheap labor of women and children is used. The manufacturers have been 
 joined by few farmers in lobbying against reduction of duty to the Cubans. 
 It is said the whole movement against this reduction was worked up by a 
 few men, following the example of promoters. Such was said to be the 
 case with the oleomargarine bill (page 251), now a law. It seems certain 
 that the farmers as a class are far less anxious to be helped in the sugar matter 
 than politicians and sugar capitalists are to render the help, and thus gam
 
 42 o The Plain Facts as to the Tariff. 
 
 is to be hoped this was a correct statement of the case. 
 Such an industry, built up in many states by protective 
 duties it could not do without, and especially if prized by 
 farmers, for whom the tariff has done so little, — would 
 be able to hold its protection indefinitely into the future, 
 and might thus become a permanent burden on the 
 country. 
 
 Our Duty Toward Cuba. — Beginning before the open- 
 ing of Congress in 1901, those under responsibility in 
 the matter — President Roosevelt, Secretary Root, and 
 Governor Wood — have been urging an immediate reci- 
 procity reduction of our tariff against the sugar and to- 
 bacco of Cuba, whose people, our wards, are exposed to 
 imminent bankruptcy and disorder. Being subject to an 
 average duty of 1.68 cents a pound in New York, raw 
 sugar at Cuban ports has lately sold as low as i. 71 J/2 
 cents, from which the inland Cuban freight must be de- 
 ducted, bringing the net price to av^erage growers below 
 cost of production.^ It is feared that a reduction of our 
 tariff for Cubans of less than 35 to 50 per cent will not 
 be sufficient to save them from ruinous disaster. With 
 this concession from us, they could meet the world price 
 of raw sugar, fixed by the market of Hamburg, where 
 the largest quantity is sold. 
 
 A Crisis in the World's Sugar Industry. — Cuba's sugar 
 can find sale in the United States alone, from which she 
 properly asks some consideration. Great Britain, the 
 only other important sugar market not supplied at 
 home, buys from the Continental countries at prices 
 
 an end for themselves. Many farmers realize that the Cubans, if placed on 
 their feet, would buy of us additional farm products amounting to several 
 times more than any probable decline to be caused in beet growing. 
 
 * The average price of our sugar, at the foreign port of shipment, was 
 3.28 cents in 1890, 2.01 in 1897, and 2.28 in 1901.
 
 The Tanff Question as it Stands To-Day. 42 1 
 
 below cost. The German beet sugar producers, pro- 
 tected by a tariff, keeping up price at home by Hmiting 
 supply through their trust, and receiving from their gov- 
 ernment a bounty on what they export, are able to sell 
 abroad at fully a half cent a pound below their cost of 
 production.* The same bounty system prevails in the 
 other countries of Continental Europe. One result of 
 over-stimulation is that the world's product of sugar is 
 increasing too fast for present markets, causing an accu- 
 mulation of a vast unsold stock. Another result is that 
 Europe has a protected and bounty-fed sugar industry 
 on her hands. 
 
 The Effects of European Sugar Bounties. — To save its 
 sugar producers from ruin, one nation cannot withdraw 
 its protection and bounties unless the other nations do so 
 too. As capitalists kept on entering the sugar industry 
 so long as its profits were higher than those in other 
 business, the surplus exported to Great Britain and other 
 open markets increased, until the price there received, 
 with the export bounty added, yielded only the bare profit 
 necessary to continue the shipments — the ordinary profit 
 of other industries. The bounty paid by the German 
 government from its people's taxes, to encourage expor- 
 tation of sugar, is therefore handed over in lower price 
 to the British, to induce them to buy more and more. 
 Thus does nature mock those who try to outwit her.^ 
 
 • E. F. Atkins, N. A. Review, Dec. 1901. 
 
 ' Ship Subsidies Would Work the Same Way on routes served also 
 by foreign ships competing with ours, which routes would include all the 
 important ones. Foreign ships would take the lowest living rates, and ours 
 would either charge the same rates and pocket the bounty, or would divide it 
 with the freight payer, who, in the case of exports, two-thirds of our busi- 
 ness, would be the foreign buyer. Or more likely, rates would be kept up 
 by means of pooling, and the foreign ships allowed their full share of busi- 
 ness, the subsidy falling to our ships as extra profit. Since capital became
 
 422 The Plain Facts as to the Tariff. 
 
 To such unnatural conditions, flagrantly unjust to home 
 consumers and taxpayers, and not permanently good 
 for the favored producers, does protection lead, when 
 not held firmly in check by a government that wisely 
 considers its people as a whole.^ 
 
 Are We Too to Have a Sugar Industry on Our Hands, 
 to be supported for many years by public contributions 
 through the tariff? This question is now pressing for an 
 answer. It was the smallness of the Louisiana sugar 
 product that saved the public at first, permitting nearly 
 
 plentiful all railroads have been built without aid that promise a living 
 business. Bonuses add to the waste of capital in useless roads. (See 
 The Outlook, May lo, 1902, on Canada's loss in railway bonuses. ) 
 
 ' Sugar Bounties Cost European Taxpayers $25,000,000 in the 
 year I Sg 5. [F. S. (?«<7r/f/-A', 1897, p. 95. ) Since then the payment has 
 greatly increased, France alone paying $18,560,000 in I900, to 339 
 manufacturers, employing 42,812 men. For every employee, therefore, 
 the manufacturers received about i?430, nearly double the wages of such 
 labor in France ; though by reason of excess of cost over selling price, 
 profits were probably not high. The bounties paid by France, Ger- 
 many, and Austria, on sugar exported, range from 27 to 38 cents per 
 100 pounds. Bounties have so increased the output that producers are in 
 distress. The other nations had to follow Germany in paying bounties, to 
 give their producers equal chances. Duties and taxes on a fine grade of 
 sugar make its price in Paris 103 francs per loo pounds, against 34^ francs 
 in London. The countervailing duties against bounty-fed sugar, which a 
 party in England urge their government to levy to save British West Indian 
 colonies from ruin, would, M. Guyot says, " wipe out the sugar industry of 
 the Continent." This perhaps is an over-statement. If in 1843 ^^^ 
 French government had bought and abolished the sugar industry, as it was 
 then about to do, it would have saved much intrigue, and many hundreds of 
 millions to French consumers and taxpayers. (Yves (juyot, A^. A. Review, 
 Jan. 1902. ) As Professor Sumner says, these countries have the industry, 
 but other lands have the sugar. Germany's sugar output (395 factories) 
 increased 200,000 tons in 1901, to a total of 1,979,118 tons of raw, but her 
 consumption fell off 78,000 tons. Our consul writes that in Berlin the 
 people must pay three times the London price for the same German sugar. 
 The poor in France and Germany can buy very little. Protection is capa- 
 ble of incredible absurdities. 
 
 To Abolish Sugar Bounties, direct and indirect, on September I,
 
 The Tanff Question as it Stands To- Day. 423 
 
 all the tax to go into the treasury. Then the tax began 
 to pass to the private pockets of Hawaiians, and lately to 
 the Porto Ricans ; while now some of it is about to pass 
 by reciprocity to the Cubans. Will the many capitalists 
 eager to make beet sugar press their claims for protec- 
 tion unless they know they can soon do without it? 
 For farmers, chiefly unprotected hitherto, protection to 
 beet growing cannot easily be denied. With their sup- 
 port the beet sugar capitalists can probably secure such 
 protection as will build up a great industry, even though 
 it will never be fitted to bear free trade in sugar from 
 Cuba and Europe. 
 
 Will Our People Bear Imposition Indefinitely ? — But 
 will the American people, in the twentieth century, bear 
 permanently, for private pockets, such a tax on consump- 
 tion necessary every meal at every table ? It seems 
 doubtful. They, and most other civilized people, have 
 borne a good deal from protection in times past, as from 
 many other harmful infringements of liberty ; but appar- 
 ently they are coming to understand it too well to per- 
 mit another large industry to be fastened upon them, 
 that cannot soon live without public aid. If the produc- 
 tion of beet sugar is such an industry, men investing 
 capital in it take a risk if they expect the people to con- 
 tinue providing for them in the future. But if it is an 
 industry quickly to become capable of unaided self-sup- 
 port in this country, it is to be welcomed, while those 
 
 1903, a plan was at last agreed to by the Continental nations, after some 
 years of frequent negotiations, in a conference at Brussels in February, 
 1902. It will probably be ratified by each nation and carried into effect. 
 Agreement was arrived at under pressure of an imminent yielding by Great 
 Britain of countervailing duties to aid her West Indian colonies. She 
 pledged in the conference not to adopt such duties before the time at 
 which the bounties are to be abolished.
 
 424 The Plain Facts as to the Tariff. 
 
 who establish it are to be commended, and to be accorded 
 willingly the moderate measure of strictly temporary 
 protection necessary to avoid an abrupt break in a policy 
 long pursued. Protection by direct bounty would be the 
 cheapest and most safely controlled. 
 
 A Good Turning Point in Protection. — The sugar in- 
 dustry, long and absurdly burdened the world over with 
 all manner of artificial restrictions, would be a good point 
 from which to turn more decidedly away from the hope- 
 lessly unsound ideas of centuries past. Though humanity 
 is now supplied as never before with this inestimable 
 comfort, it is a source of trouble in many countries. 
 Sugar production is languishing in tropical lands, a con- 
 dition caused by the unnatural favors that have brought 
 it into similar depression in Europe. In few important 
 countries except Great Britain is sugar freely enjoyed at 
 a natural price. Its annual consumption by the British, 
 with their low wages, is nearly twenty pounds per head 
 greater than that of the Americans, largely in the form 
 of jams providing market for fruits (not to be made here 
 because sugar is too costly). If the incubus of govern- 
 mental restriction could be shuffled off everywhere, a 
 rapid growth in consumption of sugar, adding largely to 
 human enjoyment, would probably give all producers of 
 it a living price. America has an opportunity to help 
 forward such a beneficent movement in sugar, by keeping 
 out of the quagmire of governmental aid, in which the 
 Continental nations are now floundering. 
 
 Are Not Circumstances Coming to the Rescue? — The 
 zealous action, during the session of 190 1—2, of the few 
 Congressmen and others working for the beet sugar in- 
 terests, the latter being led by Mr. Oxnard, who rented 
 a house in Washington to obtain vantage ground in the
 
 The Tariff Question as it Stands To- Day. 425 
 
 contest, has been called fanatical, and by a leading writer 
 not given to use of epithets. By resisting totally reci- 
 procity for Cuba, these men apparently have not only 
 repudiated our generally admitted duty to help our 
 wards, but have also overlooked the tendency of their 
 action to bring annexation of Cuba, and hence complete 
 free trade with her ; and have overlooked too that re- 
 duction of the tariff for Cuba's crop cannot lower prices 
 for our home beet sugar, a fact that makes theirs, for near 
 results, a useless crusade. But these have simply been 
 true to the principle of protection. To help Cuba they 
 have proposed that we first raise the duty and then re- 
 duce it for her, that duties collected we pay back to her, or 
 that we give bounties to her planters — anything to with- 
 hold possibility of lower prices for our sugar consumers.^ 
 They say it would be violating the protective principle 
 to expose the infant beet sugar industry, a farming 
 interest at that, by an act which favors the sugar trust 
 (the duty on refined sugar being unchanged) as the main 
 buyer of Cuban sugar, and its leaders or their associates 
 as owners of Cuban plantations or previous buyers of 
 
 ^ Pay Bounties Out of the Treasury but Save Protection.— The pro 
 
 posal of sugar manufacturers, that we leave the duty as it is, and pay back 
 to Cuba 40 per cent of duties we collect on imports from her, involves 
 charity almost unmixed. It gives our consumers little prospect of cheaper 
 sugar from increase of Cuban supply, and would not be likely to enlarge 
 Cuban ability to buy our goods unless the Cuban government continued the 
 charity and distributed among the planters the duty returned by us. To 
 such assurance are favored producers brought by protection. Still worse 
 was the late statement of a steel magnate, that the trust would look out for 
 the manufacturing, but in order that no markets be lost it looked to Con- 
 gress for protection (what else but cash subsidies?) for shipping to carry its 
 products. This is a claim for aid from the public treasury by a trust earn- 
 ing net profits of over 5 100,000,000 a year, making the cheapest and best 
 ship materials in the world, and sometimes selling its rails abroad JSll a 
 ton lower than its price at home. {^Public Opinion, 1902, p. 262.)
 
 426 TJie Plain Facts as to the Tariff. 
 
 the present crop ; also, that whatever our duty toward 
 Cubans, it cannot abrogate our duty toward our own 
 infant industries. They were met half way by the House 
 party leaders, who dreaded letting the tariff skeleton out 
 of the closet, and whose hurried proposal of the enacted 
 repeal of ;$7 3, 000,000 of war revenue internal taxes was 
 believed to have been prompted by a desire to make 
 Cuban reciprocity impracticable. 
 
 Defeat of Cuban Reciprocity a Fortunate Event. — In 
 this uncompromising spirit of the beet sugar party, how- 
 ever, there is a probability that the wrath of man will 
 here work out better results than could have been hoped 
 for without it. They have emphasized the true inward- 
 ness of protection, which is to favor a hundred if a 
 million must suffer in consequence. Also, by uniting 
 with Mr. Babcock and his tariff reform Republicans, sup- 
 ported by the Democrats in a body, the beet sugar Con- 
 gressmen were instrumental in attaching to the House 
 leaders' paltry 20 per cent reduction bill for Cuba 
 (April, 1902) an amendment repealing both the differen- 
 tial and the countervailing duties on refined sugar. As 
 the bill thus amended, passing the House by 247 to 52 
 (in a spirited revolt against the party leaders' plan to 
 save the tariff), cannot pass the Senate, the beet sugar 
 men defeated Cuban reciprocity for the present. But 
 at the same time they unwillingly struck a heavy blow 
 at the protective system, by revealing the extent of tariff 
 reform sentiment among Republican Congressmen, the 
 pos.sibilities of united action by Democrats, and the utter 
 idleness of all complaints of the sugar trust, whose 
 power for evil (leaving its power for good) can at any 
 time be wiped out by simple repeal of both the duties on 
 refined sugar. This enthusiastic vote against the sugar
 
 The Tariff Question as it Stands To-Day. 427 
 
 trust shows what may be possible also with the tariff 
 duty of the steel trust. Tariff revision has been has- 
 tened, and its chances have been broadened. 
 
 Would Involve a Gift Out of the Treasury. — Reci- 
 procity with Cuba would be less one-sided against us 
 than was the case of Hawaii (page 389). Collector 
 Bliss of Havana estimates that Cuba's ^66,000,000 of 
 imports in 1901, of which our decreasing share was but 
 ;^28, 000,000, would reach after two years, under Cuban 
 prosperity, ^150,000,000 per annum, of which 85 per 
 cent would come from us under the preferential duties 
 she offers in exchange for a reduction of our duties on 
 her sugar and tobacco. Yet the amount deducted from 
 our duties would be nearly the same as a gift out of the 
 treasury, as help to the Cubans, and as a premium to 
 them for buying of us. There is another way to help 
 and sell to them. If their crop of sugar, 800,000 tons in 
 1 90 1, could be made to approach the extreme estimate 
 of 2,500,000 tons, and hence supply all our future im- 
 porting demand, price to our consumers, under reci- 
 procity, would not be lowered naturally. Those debt- 
 ridden people, and their lands, would soon fall under 
 control of our capitalists, who would unite, limit produc- 
 tion, and reap the usual monopoly profits from such 
 tariff favors. Seventeen American corporations owned 
 sugar lands in Cuba before 1898, ten of which filed war 
 claims aggregating ^9,669,000. Our capitalists are now 
 fast taking possession of business openings there. The 
 tobacco trust has lately secured 85 per cent of Cuba's 
 tobacco and cigar industry. Reciprocity might bring 
 excellent results in some cases, enlarging market for ex- 
 ports, and while not lowering price to consumers, might 
 so increase imports, under a rate reduced, not removed,
 
 428 TJic Plain Facts as to the Tariff. 
 
 as to increase total duties collected. But putting a com- 
 modity on the free list is far better where that will bring 
 the same result in opening a market for exports. Among 
 men of capacity, in private business, an attempt to hold 
 one another's custom, by exchanging cuts in prices, 
 would not continue. Lowest prices and best qualities 
 need no such help. Removing all duties on sugar, 
 allowing the beet men a bounty as in 1890, would confine 
 the giving to a few at home, lower prices to consumers, 
 break the mastery of the trust, and establish natural 
 prosperity in Cuba (especially when European sugar 
 bounties are abolished in 1903). The goods the Cubans 
 buy — farm products, machinery, and cheap cotton fabrics 
 — our producers sell against the world. From our 
 presence in Cuba as buyers of her products, which we 
 need more than does any other country, our farmers and 
 manufacturers would get her trade without having the 
 government to buy it in reciprocity.^ In sugar at least 
 there is now a chance to get free from the protective 
 web. Putting it on the free Hst, as under the McKinley 
 law of 1 890, keeping the duties in the pockets of our own 
 people, would so increase our consumption of Cuba's 
 sugar, and promote her trade, that she could easily wait, 
 
 "Latin America and Reciprocity. — Prince A. de Yturbide {N. A. 
 Reziew, February, 1 902), speaking for Latin America, and aiming to show 
 that a Pan American union is impossible, says that where a country de- 
 serves preferential tariff favor (offers best values) she does not need it ; that 
 if there were a country so important as a customer to Latin America that she 
 should thus be favored, she certainly could not be the power that asked it ; 
 that " now, in the face of these circumstances, we of Latin America are 
 asked to do all our trading in the United States, and practically to close 
 our markets to the rest of the world." If this writer is representative, our 
 neighbors to the south would seem sufficiently level-headed to retain inde- 
 pendence. Free admission of a number of South American products would 
 give our manufacturers cheap raw materials, sell their goods in return, and 
 establish ship lines with business, not with subsidies.
 
 The Tariff Question as it Stands To-Day. 429 
 
 without special help, until the abolition of European 
 bounties relieved her from their depressing effect. 
 
 Cannot These Capitalists Produce Sugar in Cuba, as 
 suggested by Robert P. Porter, instead of trying to force 
 a beet industry upon unwilling people ? He says that 
 at the same wages for labor, sugar would cost the pro- 
 ducer two cents a pound in Cuba against three cents 
 in Louisiana. Congressman Broussard says profits in 
 Cuba are larger than in Louisiana at half the latter's 
 price. If a tariff against Cuba is needed by our sugar 
 producers, her resources for the crop are best, and 
 we can gain by sending her other things for sugar as 
 New England gains by trading for bread and meat in 
 the West. Besides the practical certainty that a reci- 
 procity allowance to Cuba would soon fall to our own 
 trust capitalists, as in Hawaii, certain other things are 
 significant. First, a beet sugar industry resting on pro- 
 tection or bounties would either remain small, from high 
 cost of production, or be drawn by high artificial profits 
 into a trust, to prevent the excessive competition that 
 arises in such cases (page 180), and to develop strength, 
 not to meet foreign prices, but to hold on to its tariff ad- 
 vantage. A beet sugar trust is already in the field, as is 
 indicated by the power of the lobby. If there were not 
 the cane sugar trust would buy the beet sugar factories. 
 It has been doing so, and is said to own now 60 
 per cent of them. Second, farmers. will never get any 
 more pay for beets than is necessary to keep them from 
 turning to other crops. From necessity for large cap- 
 ital, beet sugar factories, especially when protected, will 
 be monopoly buyers of beets (page 14), from separation 
 in location, or from acting in agreement. At home, as in 
 Hawaii and Cuba, the rich prize of a public bounty will
 
 43 o ^/^^ Plain Facts as to the Tariff. 
 
 not be permitted by the shrewd to fall to scattered farm- 
 ers. The safety of the latter, in selling price as in buy- 
 ing, is access to the world's buyers (not to be combined) 
 by our acceptance of the world's goods in exchange. 
 Third, if Cuba is to buy ;^i 50,000,000 worth of our prod- 
 ucts, we must take about that quantity of hers. Her 
 staple product, sugar, is not wanted in Europe. Those 
 who fear our capitalists will go to Cuba to use cheap 
 labor {Gunton's for February) must remember that unless 
 ours or some other capitalists enable the Cubans to turn 
 out products, and for our markets, Cubans cannot make 
 employment for our well paid labor at home by buying 
 our goods. We must not only let the Cubans live, but 
 must make them prosper, if they are to benefit our home 
 labor with work, to say nothing of cheaper sugar for 
 every one of us. Fourth, an important reason for the 
 eagerness of capitalists to make beet sugar is probably 
 the chance to get monopoly profits by pleading the pop- 
 ular case of the farmer, who like the workingman can 
 be made useful in other ways than following his occupa- 
 tion. Evidently, the solution of the whole difficulty is 
 to grant a bounty to home producers of sugar. It will 
 enable them to prove whether the beet movement is not 
 forced and unnatural. How little their industry is 
 needed is shown by the note below.^ 
 
 * A Glut of Sugar. — Experts have estimated the beet sugar crop of 
 Europe, for 190I, at 6,710,000 tons, of which 1,800,000 tons are a surplus 
 above the consumption that Europe usually supplies. There probably 
 never has been a more unfavorable time to start sugar production in the 
 United States. It would be producing something already offered at prices 
 ruinously low to Europe, but at an unprecedented bargain to us, if the 
 blind of protection would permit us to seize it. 
 
 What Else Can We Import So Profitably? — As foreigners will 
 never drain off their gold to buy our products, however cheap and good, 
 we must soon contrive to accept a large increase of imports or have our
 
 The Tariff Question as it Stands To-Day . 43 1 
 
 Tariff Reform This Session of Congress is improbable. 
 Reciprocity for Cuba was delayed or defeated as ex- 
 plained above. The reciprocity treaties left over from 
 last year, whose ratification was recommended by Presi- 
 dents McKinley and Roosevelt, are believed to haye no 
 chance in the Senate. Protected interests, evidently 
 fearing to expose the monstrosities of the tariff to scru- 
 tiny, have been seeking to spread the feeling that to 
 touch it is dangerous — that it has a sacred or myste- 
 rious connection with prosperity. These reciprocity trea- 
 ties, negotiated several years ago by John A. Kasson 
 with France, Argentina, Ecuador, and various West 
 Indian colonies, embody concessions about as small as 
 could be offered. They are to continue only five years, 
 and in no case, by the Dingley law, can the reduction of 
 duty exceed 20 per cent, with admission to our free list 
 of natural products not produced in this country.^ 
 
 flow of exports choked off, stagnating or depressing many of our exporting 
 industries. In what dozen other commodities besides sugar could we im- 
 port so many tens of millions in value, harm home industrj' so little, benefit 
 so many consumers, including the poorer classes, help so much our wards 
 the Cubans and Filipinos, and open to our pent up products such promising 
 markets as those of Germany, France, Austria, and Russia, perhaps soon 
 to be more tightly closed by retaliatory duties ? They are poor, and need 
 the sugar industry — cannot buy of us without it. We are rich, and have 
 abundant resources for other products, which, unlike it, are worth here 
 more than they cost to produce, enabling labor and capital to earn the living 
 they receive. If our people now insist on building up an artificial sugar in- 
 dustry, there will be no need to look back in history for incredibly foolish 
 acts by nations, led at will by selfish interests. 
 
 1 These Reciprocity Reductions Are Too Slight to secure material 
 benefit to us, writes Jacob Schoenhof, a well known tariff expert, in The 
 Forum, of January, 1902. He shows that our importations of protected 
 fabrics consist of fine woolens, silks, gloves, laces, and hosiery, which are 
 not produced in this country at all ; that our tariff duties, often passing 
 100 per cent, are in many cases several times higher than those of France 
 and Germany ; and that our per capita use of wool has fallen from 8.2 
 pounds six years ago to 4^ pounds, the smallest among civilized peoples.
 
 432 TJie Plain Facts as to the Tariff. 
 
 Reform of the Tariff by Its Friends, the Republican 
 party, despite outspoken advocacy of such reform, at 
 least in reciprocity, by many of the party's ablest men 
 and leading newspapers, will therefore be impossible, to 
 the slightest extent, until a majority of the Senate, 
 whose ratification the reciprocity treaties await, or until 
 the House, in new legislation, can look beyond the 
 clamorous protected interests by which they are beset.' 
 But from such delay, if continued, tariff reform will only 
 gather power, to rise again as it did in the Democratic 
 victories of 1884, 1890, and 1892. To those who gave 
 it force in these years are now joined many additional 
 manufacturers with whom a need for foreign markets has 
 arisen, and many additional supporters among the com- 
 mercial classes of the Northeast. The farming class also^ 
 and the general public, it may be asserted, understand 
 
 There are cases where our duties reach 289 and 379 per cent. The high 
 duties in most of the important cases prohibit importation of goods to be 
 obtained otherwise. In denying that the duty is added to price, a clinch- 
 ing argument is that when the duty on steel rails was $z% a ton their total 
 price here fell below that sum. It is not mentioned that foreign rails 
 were not then imported at all. The 379 per cent referred to, it is need- 
 less to say, is not added to price. Some such innocent claims are made 
 by Congressmen in The Independent of May 29, 1902. Shearman (page 
 633) quotes from noted protectionists a long list of arguments in couples 
 that are squarely contradictory. The reason is evident why their witness 
 agreed not together. Perhaps it was unconsciously that with protection's 
 gains they were suborned. 
 
 1 The First Republican House Passed the Lowest Tariff, that of 
 1857, lowering the Walker revenue tariff of 1846. When the tariff was 
 slightly lowered in 1870 Republicans "like Garfield and John Sherman 
 repeatedly declared themselves to be seeking free trade along the road of 
 protection." (Schoenhof. ) The slight reduction of the tariff in 1883 
 was made with Republican cooperation. Then, as at present, revision was 
 desired by the West, and by some Eastern manufacturers needing cheaper 
 raw materials. But the reduction then, instead of settling the question, was 
 followed by Cleveland's election on a tariff reform platform, and by the 
 strong but unsuccessful effort of l888 to lower the tariff by the Mills bill.
 
 The Tariff Question as it Stands To-Day, 433 
 
 now more clearly the unscrupulous use made of the tariff 
 by some trusts, the ability of leading protected industries 
 to meet unaided any foreign competition, and the heedless 
 selfishness with which protected producers stand together, 
 and resort to all kinds of bargaining and log-rolling.^ 
 
 Forces Making for TariflF Reform. — Congressmen Dick, 
 Babcock, and Littlefield said they could not face their con- 
 stituents if they were to vote tariff favors to Cubans with- 
 out voting some to Americans also. Mr. Littlefield, cor- 
 roborated by one of Boston's largest manufacturers, said 
 that for American steel sold in England at 95 cents per 
 100 pounds our shipbuilders must pay $1.65. Among 
 the House leaders General Grosvenor has admitted that 
 tariff revision is inevitable ; and Speaker Henderson has 
 written — "That there could be, wisely, revision of cer- 
 tain parts of the tariff laws, no sane man will attempt 
 to deny."^ Governor Cummins of Iowa, in different 
 speeches, says Western Republicans want direct reduc- 
 
 * Claiming All the Duty, No Matter How High. — Protected interests 
 are opposing the reciprocity treaty with France for a reduction of lo per 
 cent in the duty on imitation jewelry, when the duty remaining is 57 per 
 cent ; for a reduction of 7 per cent from a duty of 65 per cent on perfumery; 
 and for reductions that leave duties on hosiery of from 51 to 71 per cent. 
 Fruit growers object to the treaty reducing by a fifth the duty of one cent a 
 pound on Jamaica oranges and lemons. Though the evident effort is to 
 stave off, at all hazards, a revision of the tariff, such presumption on the 
 public must have the effect to hasten it. Oranges at 20 to 50 cents a dozen 
 are beyond the means of most people. Who can estimate the benefit of 
 being allowed to use liberally these luscious fruits, practically necessary in 
 sickness ? It is hard to believe that our orange regions are so poor in re- 
 sources as not to afford the growers a living without this tax on the public. 
 If so, it is still harder to believe that the countiy would not be better off if 
 we had no orange industry at all. The growers in a right mood would not 
 ask the nation to make their living for them to enable them to buy other 
 people's goods. They must have been drawn in by a system that offers 
 protection to all, that it may have support from many voters. 
 
 * The Nation, March 27, 1902. 
 28
 
 434 ^/^^ Plain Facts as to the Tariff. 
 
 tion or reciprocity by which protected goods, especially 
 those of trusts, are actually reached ; that they will 
 not endure paying higher prices at home than American 
 manufacturers charge abroad, while Europe retaliates by 
 shutting out American farm products and agricultural 
 machinery/ Mr. Kasson says we are at the parting of 
 the ways, and must lower our tariff barriers or provoke 
 retaliation. President Roosevelt is believed to have 
 chosen Governor Shaw as Secretary of the Treasury be- 
 cause of his able advocacy of mutual concessions in 
 foreign trade. The various bills lately introduced in 
 Congress, but suppressed in committee, for removing 
 duties on cattle, beef, steel, lumber, etc., would almost 
 certainly be favored by a large majority of the people if 
 a popular vote could now be taken. ^ The growth of our 
 industries, and the necessity of receiving the goods of 
 foreigners in order to sell to them, have produced a 
 marked change ^ in Republican sentiment on the tariff 
 since 1888. That year the emphasis was on protecting 
 the home market against the perils of increased foreign 
 trade. As late as 1894 Mr. Reed hoped we should be 
 
 '" Threatened retaliation has no terror for the Eastern manufacturer. 
 He knows it will strike only the farmers of the West." (Adlai Stevenson.) 
 But many manufacturers of metal goods along the coast desire free trade in 
 the crude and partially manufactured iron that is their raw material. Paint 
 makers say the tariff on chemicals prevents their meeting competition abroad. 
 Producers everywhere that are well able to meet prices are realizing that wc 
 must accept more goods in exchange. 
 
 '^ Ready for Free Trade in Foodstuffs. — " To really strike these trusts 
 a serious blow, the club used must be the tariff. A special message from 
 President Roosevelt urging the repeal of all tariffs on foodstuffs would 
 just now go to a Congress will disposed to act upon the suggestion. With 
 the tariffs abolished, the beef and all other foodstuff trusts would almost 
 instantly disappear." — Baltimore American (Republican). 
 
 ' Senator Beveridge, in the main address of the Indiana Republican 
 convention, said protection exists for business, not business for protection ;
 
 The Tariff Question as it Stands To-Day. 43 5 
 
 able to consume all our products at home. Now the 
 emphasis is on finding outlets for the surplus. 
 
 that " as it ceases to aid and begins to fetter the nation's industry, our tariff 
 must be modified, but the change must be made with knowledge, cau- 
 tion, and judgment." {The Outlook, May 3, 1902.) The Massachusetts 
 Republicans declared for " wise, discriminating, and business-like reciproc- 
 ity," as " not inconsistent with an adequate measure of protection to Ameri- 
 can industries." 
 
 American Capital Going to England. — Robert P. Porter, President 
 McKinley's special expert to study tariff conditions in our Spanish depend- 
 encies, Superintendent of the Census of 1890, and a leading protectionist 
 and newspaper correspondent in England twenty years ago (Roberts, 270) 
 — says that because free trade England has the lowest freight rates every- 
 where, and is the best place to distribute from, the American Westinghouse 
 Company is building there a plant to employ 6,000 men, and an American 
 type-setting machine company (the Linotype) a similar great plant ; and 
 that our steel trust could easily move to England, use Cuban ore without 
 duty, and ship every where to good advantage. He writes : "The remedy? 
 Extend American trade so our products will be distributed from here as 
 conveniently as they can be from there. That is one of the objects of reci- 
 procity. The colossal industrial combinations are playing havoc with the 
 accepted theories of political economy." 
 
 Warnings of Retaliation. — Frederic Emory, Chief of the United 
 States Bm-eau of Foreign Commerce, wrote as follows for the World' s 
 Work of January, 1902 : *' American industries are establishing plants in 
 England in order to obtain the benefit of minimum tariff rates from Euro- 
 pean countries which, in the absence of reciprocal agreements, may con- 
 tinue to enforce the maximum rates against the United States, if they do 
 not make them still higher. The same thing is being done in Germany and 
 Belgium by some of our capitalists. ... If we make no concessions we 
 may ultimately find ourselves face to face with impassable barriers raised by 
 European nations against our manufactured goods." Mr. Emory said also 
 in the same article : "The position of isolation and exclusiveness, now that 
 we are producing more than we can consume, would inevitably mean reple- 
 tion, stagnation, and finally decay." 
 
 George E. Roberts, Director of the Mint, says the " recent expansion of 
 our exports is based on elements of superiority that will endure, but that 
 superiority will avail little unless our relations with other peoples are those 
 of comity and reciprocity. . . . The policy of doing our own work com- 
 pletely . . . will sacrifice our advantages." {^Public Opinion, 1902, p, 
 40. ) All persons named above, except Mr. Stevenson, are Republicans, 
 and all are men of ability.
 
 436 TJie Plain Facts as to the Tariff. 
 
 John Charlton, in The Forum of January, and The Independent of 
 March 20, says the drift of opinion in Canada is toward resisting the United 
 States by giving tariff rebates to other lands admitting free Canada's natural 
 products. He says Canada's tariff, less than half ours in percentage, ad- 
 mitted from us in 190I ^56,000,000 of imports on its free list, while we ad- 
 mitted free from her only gold dust and nuggets ; that Canada (exports to 
 us in 1901 only (^43, 000,000, against ^108,000,000 of imports from us), 
 buys from us 63 per cent of all her imports, being our third largest cus- 
 tomer, and our first for manufactures (^63,000,000 in 1900) ; and that 
 by a large majority Canadians have made up their minds to meet us, if we 
 make no change in their favor, with the same kind of a tariff that we 
 enforce toward them. In late years Canada has been drawn far into pro- 
 tection. She even has a system of bounties for steel making, as Germany 
 has. 
 
 A German authority, in xkitWorld^ s Work of May, 1902, says the main 
 purpose in the proposed change of the German tariff (averaging 13 per cent 
 against our 51 per cent) is either to force us to admit German goods more 
 liberally, or to cut down our sales to Germany, which for four years have 
 been double her sales to us. He says the new bill raises the German aver- 
 age to 18 per cent, but 50 to 60 per cent on some American products. 
 Our exports to Germany, now nearly ^200,000,000 a year, were only ^40,- 
 000,000 twenty years ago, while our imports from her have increased very 
 little in fifteen years. Emperor William, in a recent private conversation, 
 favored " a blockade against American competition." 
 
 Our Own Guns Turned Against Us. — Great Britain, in her ;?i,ioo,- 
 000,000 excess of imports in 1900, can well bear paying out of her capital 
 (so much dreaded by protectionists) in the way now involved. It is re- 
 placed with other kinds of capital far better — steel products and improved 
 machinery Americans sell cheaply abroad, the world's best factories built 
 in Europe by Americans, and such investments as C. T. Yerkes' $75,000,- 
 000 put into new underground railways in London. All our immense sales 
 of machinery and materials to foreigners have improved their capital, and 
 in future competition will be our own guns turned against us. To a large 
 extent, when the rush is over, they will again prefer their own makes. 
 The last report of the British Egyptian governor said that "the contracts 
 placed in the United States have been disappointing ; none were placed 
 there in 1901." Loud complaint of the American invasion has doubtless 
 been due, not to despair, but to a knowledge that by waking up the for- 
 eigners could meet it. They must do so, or they cannot keep on buying of 
 us. Loss to British shipping by sale of the White Star and other lines to 
 the American-controlled trust may be overbalanced by tremendous prices 
 paid, and largely in cash, not simply in trust stock. When the close of the 
 Boer war (ended May 31) releases nearly 2,000,000 tons of shipping from
 
 The Tanff Question as it Stands To-Day. 43 7 
 
 army carrying, it is expected by some experts that ocean freights, already 
 falling, will drop low, and prove the world's recent shipbuilding to have 
 been overdone. (^The Nation, May 15, 1902.) (The shipping trust has 
 served America well by killing the ship subsidy bill. This trust and its 
 railroads, though by pooling with the German lines rates are to be raised, 
 cannot oppress our people if Congress strengthens the Inter-State Law 
 with the vigor President Roosevelt is showing in restraining the Big Six 
 meat trust, including Cudahy and Schwarzchild, aided by an unprecedented 
 boycott, which has so lessened consumption as to leave thousands of the 
 meat trust's men unemployed.) 
 
 America as a Peacemaker is the title of an inspiring article by Frederic 
 Emory in the World'' s Work for May. The present internationalization of 
 industry (investment of large capital where advantages are best, without 
 regard to national boundaries) has the salutary effect, Mr. Emory shows, 
 of making peace specially desirable to great financial interests having strong 
 influence over government policies. By investments abroad, estimated as 
 high as $450,000,000 a year, Americans are becoming closely interested in 
 maintaining European peace and prosperity — in letting her people live for 
 the sake of their trade. The outcome may be her regeneration by us, 
 lifted up for the task by our natural endowment in this land of promise. 
 An example of our teaching was the recent raising, by American contractors 
 paying high wages, of British bricklaying, on the Westinghouse plant, from 
 400 to 1,800 per day. The result of this movement will be immeasurable 
 benefit to humanity, in waking up stagnant lands, and in removing from 
 enlightened peoples protective ideas inherited from the warring ages of the 
 past. It is undoubtedly true that nothing so makes for world prosperity, 
 peace, civilization, and Christianity, as does freedom of trade. ( Page 301. ) 
 
 Not a Hostile Invasion. — That America's advance in the foreign 
 field is the opposite of an invasion is now coming to be understood. The 
 British, since learning that their ships taken over by the Morgan trust are 
 not to be put under the American flag, perceive that the movement will 
 accrue to their advantage, being a step in "the advent of a great new 
 factor in world politics, which is destined ere long to become the control- 
 ling influence." (N. Y. Times,) The London Spectator sees in it com- 
 mercial cooperation, a source of closer relations. Albert Shaw says the 
 shipping combine " is destined to increase decidedly the intimacy between 
 England and America, as respects investments, trade, and relations in 
 general." A writer in Gunton's for May says present dependence on 
 commerce for food and raw materials must make for peace. J. D. Whelp- 
 ley says in the June North American that our control of Europe's supply 
 of food and materials gives us greater power than that of navies, and will 
 do more for peace than treaties. But to withhold England's food would 
 harm her little more than it would harm our producers, who have and can
 
 438 The Plain Facts as to the Tariff. 
 
 The Best Service to be Rendered Their Party by Re- 
 publicans, it now seems, is by outspoken opinion to 
 release their representatives in Washington from the toils 
 of insatiate clamorers for protection, who are concerned, 
 not about their party or their country, but about their 
 own private gains. The elections of the last twenty 
 years have clearly revealed the presence in this country 
 of a considerable class, including both Republicans and 
 Democrats, who actually hold their party responsible 
 for its action or non-action, and rebuke it by voting 
 against it when it proves unfaithful to its trust. Though 
 stigmatized as bolters and mugwumps, they, together 
 with the independents, are really the saving remnant, 
 which with any party prevents the tyranny of a majority, 
 held together in excesses by false notions of party fealty, 
 from approaching in badness the tyranny of a despot or 
 an oligarchy. The selling of Joseph by his envious 
 brethren would not have taken place if the mugwump 
 Reuben had been present at the time. By reason of 
 the recently divided condition of the Democratic party, 
 owing to its split on the silver question, the Republican 
 party has been in danger of being drawn to self-in- 
 juring extremes in granting and continuing protection. 
 By its own fair-minded voters, therefore, it must be re- 
 strained if it is to keep within the paths of justice 
 and safety. 
 
 get no other market. Her money and ships would get a large share of the 
 world's supply, and bring with high prices enlarged new crops in a few 
 months. 
 
 But America's European investments are probably overestimated. 
 New York has lately borrowed millions repeatedly in Europe. Sale of 
 drafts on these sums has barely kept exchange below the point of gold 
 shipments. Our export balance for the year to June 30 will show a falling 
 off of about a quarter.
 
 The Tariff Question as it Stands To-Day. 439 
 
 The Tariff to be the Issue in Approaching Elections. — 
 
 By the enactment of the single gold standard law of 
 1900, and by an increase of the world's annual gold 
 product which Professor Shaler believes will soon raise 
 it to double its volume in 1896, and later almost to the 
 point of loss from excess/ the silver question has been 
 settled — for all time it is to be hoped. War questions, 
 always serviceable to draw attention from domestic evils 
 requiring remedies, are gradually disappearing from the 
 Congressional program. If our protected interests will 
 allow the Cubans a chance, they and the Filipinos will 
 soon be well started toward settled industry and peace. 
 The Isthmian Canal project, whatever the delays, is 
 probably supported by too large a majority in both 
 parties to occupy much time in Congress. Therefore 
 the tariff question, with the crying need for reduction of 
 revenue, for extending our markets in other lands, and 
 for correcting the abuses of monopolistic trusts, cannot 
 long be held in the background. Almost certainly it 
 will be the main issue in the Congressional election next 
 fall — one of the off-year elections in which it has re- 
 peatedly been the force behind a tidal wave of victory for 
 the opposition party. 
 
 To Reform the Tariff in Good Times would seem to 
 be highly desirable. While no change is advocated that 
 would seriously harm as a whole any industry having a 
 reasonable right to exist to its present extent, yet to 
 bear any uncertain change at all, or to receive any shock, 
 however slight, a time of strength is to be chosen for 
 the delicate organism of business. In the present period 
 of prices and profits naturally high from brisk demand, 
 industries would feel but lightly the adverse effects of 
 
 ^ International Alonthly, Burlington, Vt. , November, 1 901.
 
 440 The Plain Facts as to the Tariff. 
 
 moderate changes in the tariff, and could adjust them- 
 selves to new conditions with the minimum loss ; while 
 there would be time for the benefits of tariff reduction to 
 appear, in cheaper and better raw materials for manufac- 
 turers, in enlarged consumption of goods slightly low- 
 ered in price, and in wider sale of our products to for- 
 eigners whose means of payment we would then accept. 
 Undoubtedly, with currency dangers out of the way, 
 and with stock speculation somewhat spent in its force 
 for evil, the tariff might now be thoroughly reformed 
 by its friends, who would not be distrusted like its ene- 
 mies ; the industrial body be relieved of a stimulated 
 condition essentially diseased ; the stinted living of many 
 millions materially increased through lower prices ; and 
 the good times extended without break much farther 
 into the future than would be the case otherwise. But 
 the pessimistic mood of hard times is decidedly unfavor- 
 able for a change of the tariff. Then, for slight reason, 
 people make matters worse, by closing factories, ceasing 
 to build, and stinting their personal consumption. A 
 change then tends to cause the maximum harm, with 
 greatest delay of the good effects, and longest continu- 
 ance of the depression. 
 
 Keformed the Tariff will be, Sooner or Later, and pretty 
 thoroughly, whatever the tactics adopted for delaying 
 action, and for holding on to every jot and tittle of pro- 
 tection. To expect less would be to give up faith in the 
 American people's capacity for progress. There is rea- 
 son for believing that a majority of them cannot be fooled 
 all the time. Never was a more complete deception 
 fastened on a nation, than this principle of protection as 
 now taught and applied. The preceding chapters expose 
 its sophistry. It is not the fault of the forces of tariff
 
 TJie Tariff Question as it Stands To-Day. 441 
 
 reform that something has to be done. Not by them was 
 the industrial body brought into a condition requiring a 
 surgical operation. If their counsel had been followed, 
 our industrial growth would have been natural and 
 healthy, and there is no reason to believe that it would 
 have lacked variety or volume. Those who most ably ad- 
 vocated protection in the earlier decades, notably the 
 German Frederick List and Henry Clay, excepted raw 
 materials, and expressly taught that it was to be a tempo- 
 rary method of industrial education for a nation not yet in 
 the front rank of civilization. If zve are not now in the 
 front rank, who are? And when are we to be ready for be- 
 ginning tariff reform in earnest, if not now, with the 
 world standing dazed before the mighty achievements of 
 our unequalled people amid unequalled resources ? ^ 
 
 We Cannot Leave Well Enough Alone, as the protected 
 interests urge, with the eagerness of direct personal gain. 
 We are not running things by ourselves. So long as 
 
 1 Control of the Trusts Will Aid in Reform of the Tariff, in addition 
 to the first fruits of preserving the all-important force of competition. Pro- 
 fessor Clark has pointed out that independent producers, if protected from 
 the clubs of the trust by his plan (Chapter VI.) will so increase product 
 and lower price at home that the trust cannot hope for monopoly profit 
 through the tariff. Enlarged sales abroad will then become its chief means 
 of adding to gains ; and its own tariff duty, so far as made useless by price- 
 lowering home competition, it will readily give up, to induce foreigners to 
 lower their retaliatory tariffs, and to induce home producers of other goods 
 to submit to the tariff reductions necessary for opening foreign markets. 
 Then, having no longer that portion of the duty by which it had exacted 
 monopoly gains, the trust may have no desire to drive out competitors. 
 The people also, if protected by independents from trust extortion, will pre- 
 fer tariff reduction of the gradual kind, which preserves the industry and 
 gives all independents a chance, instead of the heavy and risky reduction 
 necessary by itself to take away monopoly power. (Clark, 47. ) We shall 
 then have the advantage of all that centralized capital can achieve toward 
 improving and cheapening goods, and toward dominating the world's 
 markets ; though capital in other lands will soon be centralized likewise.
 
 442 The Plain Facts as to the Tariff, 
 
 abnormal and unjust conditions remain in society, the 
 silent forces of nature keep on grinding, until by and 
 by trouble breaks out. Harder times are now coming 
 (some even fear a crash from trust speculation), and 
 largely because of easily removable wrongs of protection. 
 From a man earning $1.25 a day, and losing a quarter 
 of his time, we cannot take many dollars in higher prices 
 of living (true in practically every case where protection 
 protects), without keeping him and his family too poor 
 to be most useful to his country and its business, and too 
 dull or discontented to promote what is good in govern- 
 ment and in society. Though the dinner-pail be full, 
 men made in the image of God cannot live from it alone. 
 We cannot prevent our people from gaining by accepting 
 a foreigner's goods, without damming back our own sur- 
 plus on people thereby depressed, and rendered unable 
 to buy the goods of our other producers. We can enjoy 
 reading the magazine articles showing how many millions 
 we shall save when this or that new industry written up 
 supplies all our demand ; but we cannot thus cease buy- 
 ing of foreigners without causing them to cease buy- 
 ing an equal amount of us, and from our profitable 
 industries that need no tariff contribution. We cannot 
 permit favored interests to enjoy unfair gains from year 
 to year without making scheming and trickery enticingly 
 profitable, and spreading the effort to get from the ranks 
 of the plundered into those of the plundering.^ A man, 
 or a society, is not doing well enough unless each is 
 
 ^Unjust Gains Corrupt a People. — An explanation of the flagrant 
 corruption (see Chapter V.) in Pennsylvania in 1901 was given by " A 
 Pennsylvania Quaker " in an article in the Atlantic Monthly of January, 
 1902. He says that vast industries making use of legislative favor were 
 " drawn by irresistible allurements to give a mercenary tone to public life. 
 . . . So it has come to pass that the coal and iron of the hills, and their
 
 TJie Tariff Question as it Stands To- Day. 443 
 
 striving for all the good justly and properly within reach. 
 Contentment and resignation are not virtues under evil 
 conditions that can be improved. The facts that other 
 nations fare worse, and that we can put up with less than 
 the most in reach, are not to be listened to by people 
 knowing their rights and possibilities. Many a man 
 does well, and enjoys life, who has lost an arm. Nature 
 has given us bountiful blessings, but we are unworthy if 
 we fail to get and to use them all. 
 
 It is Because the Tariff Question is in Politics that it 
 has been characterized by so much insincerity. In busi- 
 ness this would not be tolerated. There deception is 
 quickly resented. Candid honesty has not been the best 
 policy in politics, because the mass of the people, the 
 educated perhaps not less than the ignorant, will usually 
 consent to the taking of liberties with the truth for the 
 sake of party advantage. 
 
 The Whole Matter of Human Welfare is a Question of 
 Knowledge, and of wise use of it. Very slowly has ex- 
 perience taught and improved the race. Harsh censure 
 must be withheld from the ruling classes that have 
 gained from unjust conditions, and have attempted to 
 beat back the march of progress. Others in their places 
 would doubtless have done likewise. Very naturally to 
 them, whatever is, is right. The protected landlords 
 under the English corn laws, which starved the people 
 by raising price of food, piously taught that God intended 
 many to live in poverty. Southern planters quieted con- 
 inevitable connection with legislation, have been the undoing of political 
 morality." Such will ever be the result of exploiting the people for private 
 gain. There is too much money in protection for human nature ever to 
 withstand its temptations. " Forty years of tariff hypocrisy and deceptioo 
 have taught us that a wise man, before starting an important enterprise, 
 secures a favoring law or franchise." (H. W. Seymour, Chicago.)
 
 / }/)/{ The Plain Facts as to the Tariff. 
 
 science by the thought that the blacks were born to 
 serve, and that without slavery cotton could not be 
 raised. Americans now benefited by protection allay 
 inward suspicion of its unsoundness by the thought that 
 they have always had it, and that it is necessary for 
 diversified industry. The civilization, Christianity, and 
 certain support possessed by negroes because of their 
 slavery, were put forward as benefits for the same reason 
 that America's wealth and growth are all claimed as 
 results of protection. Under the heaHng effect of time, 
 those who oppose progress are soon benefited by it as 
 much as those who carry it forward. 
 
 The People Too Easily Deceived. — And the people in 
 general are little less to blame. Their obvious readiness 
 to be deceived suggests deception to those gaining from 
 it, and relieves them from some of the guilt. Not many 
 have had thoughts of censure toward P. T. Barnum be- 
 cause it was from profitable experience that he knew the 
 truth of his famous dictum about the American people. 
 So few persons, from the best educated downward, make 
 a worthy attempt to know economics, that unsoundness 
 in a tempting policy is a weak bar against its adoption. 
 
 All Classes in Fault. — Perhaps the scheming of capital- 
 ists for subsidies and protection is no worse in evil effects 
 than the dependence of wage workers upon favoring laws 
 hoped for, instead of on industry, frugality, and general 
 self-help. The old methods of proper self-advancement 
 seem destined to prevail always, being fixed in nature. The 
 purpose of patriotic interest in government is to help it, 
 not to get direct personal gain. Its benefits, as nearly as 
 possible, should fall impartially upon all, like the air and 
 the sunshine. The voting public must make the govern- 
 ment what it ought to be, or bear the consequences.
 
 TJie Tariff Question as it Stands To- Day. 445 
 
 The Principles of Getting a Living, and the public 
 duties they impose, are doubtless as easy to discover 
 and follow as they could be without weakening mind and 
 character. Men could not ask for a system of nature more 
 favorable to them. One reason why the laws of society 
 are so difficult to discern is the longsuffering of nature — 
 the delay with which their violation is punished. The 
 conditions of existence are evidently fitted for the high- 
 est average of human welfare. The natural laws of 
 economics eventually force men to be just for the sake 
 of their own gain. If people were as ready to perform 
 duties as to clamor for rights, a comparatively perfect 
 society would not seem unattainable. The rights of each 
 depend upon performance of duty by all. 
 
 Yet Now, as Never Before, There is Reason to Take 
 Courage. — Willing acknowledgment of duty is clearly 
 becoming more common. There is promise in the in- 
 creasing admission by both labor and capital that friendly 
 bargaining — mutual recognition of rights and duties 
 that can never be brushed aside among Americans — is 
 the proper method of settling their differences. There is 
 promise also in the loosening of party fetters, in the 
 growing practice of voting in obedience to conscience 
 instead of to committees. A time of vastly greater peace 
 and unity seems to be approaching. In important be- 
 ginnings it seems to have arrived. Knowledge and 
 agreement are the first requisites for removing evils in 
 society — for realizing the greatest good of the greatest 
 number. By one person at a time, opening his mind to 
 truth, the number of those who know and agree will 
 increase. Economic knowledge is the kind specially 
 required. To contribute to its spread, this book is 
 written.
 
 INDEX. 
 
 ADAMS, C. F., page 59 
 ■il Adams, H. C, 60, 106, 136, 248 
 Advertising, not a waste, 170 
 Aldrich report on wages, 360 
 Anti-trust laws, 4, 9, 131, 154, 185 
 Atkinson, Edward, 277, 355, 370, 
 
 379, 380, 397 
 Austin, O. P., 279, 285, 287 
 
 "DALANCE of trade, 240, 256, 278, 
 ■^ 285, 305, 384, 430, 436 
 Babcock, J. W., 409, 426, 433 
 Beetsugar.lS, 62, 112, 135, 414-431 
 Bemis, E. W., 79, 124, 132 
 Blaine, J. G., 307, 388 
 Bok, E. W., 231 
 
 Bonuses to railroads, 40, 60, 83, 422 
 Bowen, Francis, 334-349 
 Bounties to industry, 119, 241, 274, 
 
 297, 300, 314, 416-431 
 
 Boycotting trust goods, 113, 135,437 
 
 Brooks, J. G., 113, 214 
 
 Bullock, C. J., 13, 106, 114, 118, 
 123, 136, 180, 183, 215, 259, 260, 
 288, 308, 318, 359, 360, 406 
 
 CANADA, railroads, 82, 83, 422 ; 
 telegraphs, 89 ; succession taxes, 
 210; trade of, 287 ; trade with 
 United States, 302, 325 , 346-35 1 , 
 362, 410, 436 
 
 Cleveland, Grover, 122, 392, 395, 
 
 432 
 Clews, Henry, 27, 215 
 Clubbing of competitors by trusts, 1 2, 
 
 35, 134, 144, 149, 175, 214, 218, 
 
 236, 267 
 Coal monopoly, 130 
 Cobden, Richard, 302, 328 
 Collier, W. M., 5, 26, 129, 132, 139, 
 
 142, 193 
 Colonies, trade with, 241, 260, 299, 
 
 322, 418 
 Commons, J. R., 95, 235 
 Competition, as the life of trade, 17. 
 
 32, 145, 147, 203, 211, 214, 221, 
 
 225, 234 ; excessive, 20, 34, 176- 
 
 179, 184 ; not feared, 20, 22, 269 ; 
 
 with railroads, 46, 53, 190, 204 ; 
 
 under protection, 245, 267, 326, 
 
 348, 358, 374, 416 
 Concentration of capital, 18, 21, 160, 
 
 167, 173, 208-236 
 Consumption of wealth, 1 71, 246, 
 
 251, 275, 293, 299, 304, 314, 323, 
 
 333, 339, 377, 397, 420-442 
 Corporation laws, 125, 136-159, 215 
 Cox, Harold, 284 
 Crosby, E. H., 236 
 Cuba, 159, 305, 343, 415-431, 439 
 
 FkABNEY, W. D., 60, 79 
 
 Capital invested in United States by ^ Department stores, 22, 178, 231 
 foreigners, 278, 354, 378, 394 ; in 
 other lands by Americans and Eu- 
 ropeans, 280-289, 378, 435-437 
 
 Capitalization of trusts, 5, 6, 25, 147 
 
 Carey, Henry, 353, 365, 388 
 
 Carnegie, Andrew, 7, 221, 222, 231 
 
 China, 306, 311, 328, 375 
 
 Clark, J. B., 117, 132, 144, 155, 
 187, 2i8, 236, 441 
 
 Depression of business, 26, 28, 122, 
 
 168, 183, 212, 291, 303, 392, 
 
 404, 440, 442 
 Dill, J. B., 139 
 Dingley tariff law, 254, 307, 396, 
 
 398, 400, 403, 431 
 Discrimination in freight rates, 4, 
 
 35, 61, 71, Ii6, 122, 144, 191. 
 
 197, 236 
 
 447
 
 448 
 
 Index. 
 
 Diversity of industry, 241, 323, 333, 
 
 340 
 Dixon, r. H., 76, 207 
 Donald, Robert, 116 
 
 EDUCATION, to preserve liber- 
 ties, 104, 128, 143, 151, 159, 
 205, 215, 232, 246 ; to increase 
 production, 241, 244, 249, 270- 
 272, ZZZ, 336-338, 343, 356, 
 369 
 Ely, R. T., 20, 43, 46, 102, 108, 
 123, 124, 129, 142, 177, 210, 
 218, 234, 301 
 England, see Great Britain 
 Exports, and the trusts, 19, 1 14, 165 ; 
 of different countries, 287 
 
 PARMERS and the trusts, 5, 14, 
 
 177 
 Farming and protection, 274, 279, 
 
 322, 324, 334, 340, 356, 372, 
 
 382, 419-431 
 Feudalism, 159, 212, 236, 240 
 Flint, C. R., 20, 27, 277 
 Foster, J. W., 389-391 
 Free list in tariffs, 242, 412, 428 
 France, 20, 43, 49, 116, 211, 307, 
 
 432 ; trade of, 224, 286, 303 ; 
 
 protection in, 297, 302, 320, 360, 
 
 384 ; taxation in, 248, 339, 393 ; 
 
 sugar bounties, 422 
 Franchises to corporations, 40, 92, 
 
 96, 102 
 
 GERMANY, 119, 129, 210, 271, 
 285; trusts in, 29, 116, 134, 
 162, 268, 421 ; railroads, 49, 
 55 ; depression in, 29, 182, 292, 
 304 ; protection in, 274, 297, 
 302, 306, 314, 320, 338, 393, 
 436; trade of, 287, 311, 346, 
 376 ; wages in, 366, 374, 385 ; 
 sugar bounties, 300, 314, 421- 
 424 ; trade with United States, 
 436 
 
 Ghent, W. J., 159, 334 
 
 Giddings, F. H., 185 
 
 Giffen, R., 231 
 
 Gold, as affecting prices, 189 ; in- 
 crease of, 239, 289, 397, 438 ; 
 
 shipments of, 256, 278, 281, 288, 
 290-293, 316, 395, 438 
 
 Good will in business, 8, 23, 28 
 
 Government, control of railroads, 
 44, 67, 79, 125, 195, 201 ; own- 
 ership of railroads, 49, 56, 67, 
 82-84, 108 ; control of industry, 
 136, 149, 211, 213-215, 441 ; 
 ownership of mines, 128, 129 
 
 Great Britain, trusts in, 29, 1 16, 
 139, 175, 219; railroads, 50, 82, 
 203 ; telegraphs, 87 ; municipal 
 ownership, 107, 236 ; income 
 taxes, 210; rents, 273-275; 
 growth of industry, 161, 275, 284, 
 319, 394, 436 ; shipping and sub- 
 sidies, 283, 295, 308, 320 ; pro- 
 tection in, 240, 260, 273, 299, 
 301, 327, 345, 347, 382 ; free 
 trade in, 117, 186-188, 275, 285, 
 298, 352, 360, 374, 380, 396, 
 435 ; use of London Exchange, 
 282, 308 ; excess of imports, 283, 
 287, 436 ; trade with United 
 States, 294-297, 303-305, 435- 
 437 ; trade taken by United States, 
 295, 3", 328, 376; wages, 161, 
 361, 366, 367, 374-378 ; policy to- 
 ward sugar trade, 299, 420-424 
 
 Gunton, George, 163, 319, 379, 385, 
 399 
 
 TTADLEY, A. T., 40, 49, 50, 52, 
 
 Aa 54, 63, 64, 66, 67, 75, 77, 82, 86, 
 
 105, 126-128, 182, 183, 190- 
 
 194, 198, 209, 213, 244, 266, 
 
 268, 302, 303,320-325, 376, Z'^Z 
 
 Hall, F. S., 188 
 Hamilton, Alexander, 260 
 Havemeyer, H. O. , 21, 112 
 Hawaii, 389, 4 15-43 1 
 Hill, J. J., II, 194 
 Holt, B. W., 5 
 Hudson, J. F., 36, 66 
 
 IMMIGRATION, 279, 327, 364- 
 
 ^ 367, 371, 418 
 
 Industrial Commission, 7, 11, 47, 54, 
 60, 73, 74, 83, 84, 97, 109, 113, 
 120, 121, 135, 138, 149, 151, 159, 
 210, 319, 370
 
 Index. 
 
 449 
 
 Infant industries, 243, 332, 358 
 Ingram, J. K., 240, 320, 338 
 Interest, as affecting shipments of 
 
 gold, 256, 283 ; payment of, 
 
 between nations, 279, 286, 289 
 International trusts, 117, 380 
 Inter-State Commerce Law, 72, 
 
 123-125, 150, 152, 159, 190, 196, 
 
 201, 437 
 Ireland, as affected by protection, 
 
 261, 275, 285, 297 
 Italy, 248, 286 
 
 JAPAN, 256, 286, 306, 343 
 
 J Jefferson, Thomas, 271 
 
 Jenks, J. W., 10, 14, 25, 26, 31, 1 16, 
 
 119, 123, 142, 149, 152, 155, 156, 
 
 161, 170, 225 
 Jevons, W. S., 318 
 Johnson, Emory R., 78, 125 
 Johnson, Joseph F., 308 
 Johnson, Tom L., 96, 97, 387 
 
 TZNAPP, M. A., 123, 124, 198 
 
 LABOR, demand for, as affected 
 by trusts, 19, 175, 222 ; by ma- 
 chinery, 229-231, 373-376; by 
 the tariff, 360-386, 398, 402, 
 430 ; division of, 45, 65, 226, 
 307 ; efficiency of, 354, 375-377. 
 386 ; protection of workers by 
 law, 234 
 Laissez fah-e, 270 
 Levasseur, Emile, 188, 259, 337, 
 
 360, 361, 367 
 List, Frederick, 338, 440 
 Littlefield, C. E., 433 
 Lloyd, H. D., 134 
 
 ■"Vf ACHINERY, in cheapening 
 ■'■'-*■ product, 164, 273, 360, 385 ; 
 
 cannot be too efficient, 229 
 Macrosty, H. W., 129 
 Manufactures, American exports of, 
 
 276, 29s, 314, 398 
 Manufacturing, American colonial, 
 
 260, 359 ; later growth of, 263- 
 
 268 ; effect of on intelligence, 229, 
 
 320, 334-337> 345 
 
 Market, how affected by protection, 
 
 122, 159, 245, 255, 275-277, 294, 
 
 299. 314-318, 330, 357, 368, 371, 
 
 381, 391, 427-442 
 
 Marshall, Alfred, 32, 183, 229 
 
 McKinley, William, 138, 305, 307, 
 
 397, 399. 404, 431 
 
 McKinley tariff law, 307, 358, 399, 
 403, 416 
 
 Meade, E. S., 188, 219 
 
 Meat trust, 14, 123, 159, 193, 236, 
 252, 437 
 
 Mercantile doctrine, 239 
 
 Mill, J. S., 331, 345 
 
 Money, control of by trusts, 235 ; 
 inflation of, 290, 385, 392 ; in 
 foreign trade, 239, 241, 253-257, 
 282, 290, 308, 316 
 
 Monopoly, profits, 8, 27, 30, 102, 
 113, 128, 215, 325 ; methods, 12, 
 30, 36. 175 ; kinds of, 13, 17, 33, 
 38, 160, 214; in raw materials, 
 14, 128, 150, 155, 235 ; effect on 
 price, 29, 224, 346 ; how far pos- 
 sible, 218; new laws for, 131, 149, 
 152-154 ; how regarded by courts, 
 132, 147 ; effect on society, 31, 35, 
 159, 220, 235 ; from protection, 
 302, 325, 386, 413, 427-429 
 
 Morals, as affected by trusts, 9, 20, 
 21, 25, 181, 442 
 
 Morgan, J. P., 6, 24, 33, 130, 194, 
 195, 203, 209, 295, 437 
 
 NAVIGATION laws, 241, 319, 
 
 ^ 321, 409 
 
 Nettleton, A. B., 5, 21, 23, 146, 
 
 148 
 Newcomb, H. T., 65, 74, 97, 124, 
 
 125, 153, 197, 199. 203. 206 
 New Zealand, 212, 372 
 Northern Securities Co., 11, 141, 
 
 215 
 
 pvLEOMARGARINE law, 159, 
 
 ^ 251, 419 
 
 Open door for trade, 299, 306 
 
 PANICS, see Depression 
 Paper trust, 130, 325 
 Parsons, Frank, 54, 85, 87, 109, III
 
 450 
 
 Index. 
 
 Party fealty, 94, 247, 305, 389, 438 
 Passes, given by railroads, 75 
 Patents, 37, 43, 141, 174 
 Patten, S. N., 327, 333, 340-343. 
 
 350, 386 
 Pooling, 124, 144, 147, 153, 183, 
 
 191, 202, 218, 221, 422 
 
 Population, as lowering wages, 231, 
 
 370, 374-377, 418 
 Porter, R. P., 366, 429, 435 
 Price, how affected by large pur- 
 chases, 167 ; by monopoly, 12, 
 14, 19,23, 29, 160, 175, 224; 
 by protection, 252-256, 274, 291- 
 297, 314-339, 347-356, 369-380, 
 389, 402, 415-432 ; lower abroad 
 than at home, 1 13, 154, 162-165, 
 
 327, 376, 425, 433 
 
 Primaries, direct, 95 
 
 Promoters, 6, 23, 157 
 
 Publicity in corporations, 9, 36, 125, 
 137-139, 148, 152-157, 235 
 
 Public opinion, responsible for con- 
 ditions, 94, 126, 143, 159, 200, 
 213-216, 444 
 
 RAILROAD passenger rates, 46, 
 68, 79, 191 ; speed, 50 ; freight 
 rates, 51, 71, 79, 191, 198, 201- 
 205 ; mileage and cost, 52 ; con- 
 solidation of, 194, 202 
 Rebates, 35, 132, 201 
 Reciprocity, 241, 298, 299, 302, 
 305, 346, 373, 389-391, 399, 
 408-437 
 Reed, T. B., 348-353, 380-384, 
 
 407, 434 
 
 Referendum, 94 
 
 Reform, of city government, 96, 
 102 ; of corporation and railroad 
 laws, 135-159, 189-207, 441 ; of 
 tariff, 122, 158, 246, 276, 294, 
 305, 405-408, 426, 431-442 
 
 Rent, 325, 326, 372 
 
 Retaliatory tariffs, 298, 301, 306, 
 384, 408, 434-436 
 
 Revenue, tariffs for, 241, 396 
 
 Roberts, E. H., 248, 261, 293, 
 314, 315, 317, 318, 324, 331, 
 339, 347, 366, 367, 374, 378, 403, 
 435 
 
 Rockefeller, J. D., 33, 137, 194, 
 215, 236 
 
 Rogers, J. E. T., 275, 345 
 
 Roosevelt, Theodore, 137, 138, 156, 
 201, 306, 420, 431, 434, 437 
 
 Russia, 303, 309, 361, 379 ; pro- 
 tection in, 288, 298, 302, 306, 339, 
 346, 374, 408 
 
 OCHOENHOF, Jacob, 252, 431-2 
 ^ Schwab, C. M., 21, 114, 222, 
 
 234 
 Seligman, E. R. A., 82, 85, 109 
 
 Shaler, N. S., 439 
 
 Shaw, Albert, 222, 437 
 
 Shearman, T. G., 323, 353, 360, 
 
 365, 379, 432 
 Shipbuilding, 165, 259, 263, 289, 
 
 293, 308 
 Ship subsidies, 159, 280, 308, 320, 
 
 421, 425, 428, 437 
 Shipping, and ocean freights, 279, 
 
 286, 295, 308, 320, 436 
 Shipping trust, 203, 235, 436-437 
 Sidgwick, Henry, 13 
 Silver question, 122, 395-397, 439; 
 
 exports of silver, 278 
 Slater, Samuel, 263 
 Smith, Adam, 270, 273, 274, 302, 
 
 320, 384 
 Smuggling, 24O, 384 
 Socialism, 106, 164, 177, 185, 203, 
 
 211, 213, 233 
 Spahr, C. B., 130, 222, 249, 360, 
 
 361, 367 
 Standard of living, and wages, 
 
 384 
 Standard Oil Co., i, 9, 13, 14, 17, 
 
 18, 35, 41, 123, 160, i66, 209, 
 
 214, 235, 258 
 Stebbins, G. B., 252, 347, 396 
 Steel rails and protection, 268, 317- 
 
 319, 376, 425, 432 
 Steel trust, see United States Steel 
 
 Corporation 
 Stimson, F. J., 133, 186 
 Stocks of trusts as investments, 19, 
 
 27, 223-225 ; American stocks 
 
 held in Europe, 280, 289 
 Strikes, 176, 186-188 
 Subsidies, see Ship Subsidies
 
 Index. 
 
 451 
 
 Sugar trust, 13, 20, 73, 112, 124, 
 
 13s, 161, 180, 414-431 
 Sugar, production of, tariff and 
 
 bounties, 112, 135, 389, 396, 
 
 414-431 
 Sumner, W. G., 236, 268, IZZ, 334, 
 
 422 
 Switzerland, 119, 287, 307, 412 
 
 TARIFF, in Part I., 112, 121, 155- 
 159, 161, 167, 188, 219, 235 
 
 Taussig, r. W., 113, 396 
 
 Taxation, of franchises, 96, 154 ; 
 of earnings, 105 ; of monopolies, 
 137, 142 ; of mineral and timber 
 land, 235 
 
 Taxes, income and inheritance, 210, 
 236 ; who pays the tariff tax, 246, 
 346 ; tax burden in different lands, 
 
 248, 339, .370 
 Taylor, Benjamin, 376 
 Telegraphs and telephones, 41, 85 
 Thompson, R. E., 388 
 Tin-plate trust, 26, 36, 113, 175, 
 
 180, 401 
 Trademarks, 43, 1 20, 252 
 Trade unions, 5, 159, 175, 185-8, 
 
 223, 370, 376, 381, 383. 445 
 Transportation, effect on trade, 45, 
 
 64, 65, 204, 303, 316, 329, 353, 
 
 357.413, 435 
 Traveling salesmen, 169, 173, 182, 
 
 257 
 Trusts in Part II., 268, 292, 296, 
 
 325, 327, 347, 350, 380, 392, 409, 
 413, 427-439 
 
 T TNDERWRITERS for trusts, 24 
 
 *^ United States Steel Corporation, 
 
 7, 10, 16, 24, 36, 140, 161, 
 
 188, 219, 234, 236, 425, 435 
 
 V 
 
 ON HALLE, Ernest, 9, 14, 86, 
 130, 133, 146, 181, 217 
 
 WAGES, how affected by trusts, 
 15, 19, 175, 222-224 ; in public 
 service, 1 10 ; in cotton industry, 
 '63, 334 ; rise of, 161, 229, 
 360-364, 380 ; how affected 
 by the tariff, 188, 247, 334, 
 347, 354, 357-386, 402, 406, 
 418 
 Walker, F. A., 410 
 Wanamaker, John, 87, 93, 257, 293 
 War, preparedness for, 241, 306, 
 320 ; effect of on tariffs, 263, 301 ; 
 wastes of, 277, 370, 412 
 Watered stock, 8, 11, 24, 27, 40, 
 
 126, 140, 162, 165 
 Wealth, concentration of, 20, 33, 
 157, 164, 209-211, 215, 232, 
 236 ; philanthropic use of, 225, 
 232, 236 ; waste of, in useless rail- 
 roads and factories, 40, 180, 199, 
 362 ; by protection, 325, 332, 
 362, 366, 390, 411 ; in overpro- 
 duction, 19, 182 ; in railroad com- 
 petition, 191, 198 ; increase of 
 wealth by foreign trade, 242, 253, 
 258, 284, 293, 314 
 Webb, Sidney and Beatrice, 22, 188, 
 
 367 
 Wells, D. A., 411 
 Weyl, W. E., 47 
 Whisky trusts, 25, 175, 182 
 Wilson tariff law, 307, 395, 398, 
 
 399, 401, 403 
 Wright, C. D., 229, 236, 246, 259, 
 261, 262, 264, 265 
 
 yOUNG, J. P., 327, 329, 332
 
 The Control of Trusts 
 
 An Afgoment in Favor of Curbing the Power of Monopoly by a 
 Natural Method. By John Bates Clark, Professor in Columbia 
 University, Author of "The Philosophy of Wealth," "The Distribu- 
 tion of Wealth," etc. Cloth. i2mo. 60 cents wf/. 
 
 It aims to avoid duplicating work that has been done by Professor Jenks, Professor 
 Ely, Professor Von Halle and others. It gives no statistics, no description of the va- 
 rious forms which trusts take in America and elsewhere, and no history of the develop- 
 ment of those organizations in America. The work is argumentative and advocates a 
 particular policy that, while quite conservative, would, as the author maintains, be so 
 effective as, on the one hand, to excite vigorous opposition before it can be adopted by 
 the government, and on the other hand, to meet the popular demand after it shall be 
 adopted. It is a policy that, as is claimed, has the power to insure to American indus- 
 tries a long lead in the fierce international rivalries that are imminent, without surren- 
 dering economic freedom at home or suppressing any class of our own citizens." 
 
 — Financial Review. 
 
 " Professor Clark's little book is the best statement in small compass of the trust 
 problem that we have yet seen. He accepts the trust as an inevitable factor in economic 
 progress and decries the attempt to legislate it out of existence by summary laws. The 
 remedy for the evils that attend the concentration of power and capital in a few hands is 
 to be found in the retention of the principle of competition and the suppression of illegal 
 and predatory methods on the part of the trusts. Regulative rather than drastic legisla- 
 tion is needed." — Public Opinion. 
 
 Monopolies and Trusts 
 
 By Richard T. Ely, Ph.D., LL.D., Director of the School of Eco- 
 nomics and Political Science and Professor of Political Economy at the 
 University of Wisconsin ; President of the American Economic Asso- 
 ciation, lamo. Half Leather. ^1.25 net. 
 
 " A highly valuable contribution to an important subject, . . . the best piece of 
 work that Professor Ely has yet done ... In any case all readers will be impressed by 
 the perfect candor and scientific reserve which characterize the book." 
 
 — Prof. Charles A. Bullock, \nt\ii American Journal 0/ Sociology. 
 
 " Probably no man has a better claim than Professor Ely to speak with authority on 
 the industrial movement." — Tribune, Chicago. 
 
 " Suggestive, explicit, and, in a word, a capital text-book for the student or for the 
 man of business." — Times-Herald, Chicago. 
 
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 66 FIFTH AVENUE NEW YORK
 
 The Economics of Distribution 
 
 By John A. Hobson, author of " The War in South Africa," etc. 
 
 i2mo. Half Leather. ^1.25 net. 
 
 "A welcome addition to the literature of economic theory. By its critical 
 as well as by its constructive work it helps to force readers out of the deep 
 rut in which Ricardian formulas have so long caused economic thought to 
 run." — John B. Clark, in The Political Science Quarterly. 
 
 ' ' His criticism of the modern development of the theory of rent is ex- 
 tremely clever and his own statement of it clear and well reasoned." — 
 T/ie Nation. 
 
 Economic Crises 
 
 By Edavard D. Jones, Ph.D., Asst. Professor of Economics and 
 Commercial Geography, University of Minnesota. 
 
 i2mo. Half Leather. $1.25 net. 
 
 " Perhaps the most interesting and picturesque, if not convincing, con- 
 tribution of English students to the theory of fluctuations in prices relates 
 to the coincident periodicity of sunspots and beautiful harvests, the latter 
 being the efficient cause of low prices and intimately connected with the 
 periodical crises. The entire subject is treated lucidly, carefully and com- 
 prehensively. ' ' — Philadelphia Press. 
 
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 United States 
 
 By Charles J. Bullock, Ph.D., Asst. Professor of Political 
 Economy, Williams College. i2mo. Half Leather. $1.25 «<?/. 
 
 " The work of an original investigator who knows how to popularize. 
 The author is frankly in sympathy with the wealthier classes and the urban 
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 immemorially favored by the poorer classes and the rural districts 
 
 But over against this defect, which will be felt only by believers in bimet- 
 allism or paper money, is to be put the spirited style which is in part due 
 to the strength of the author's sympathies." — The Outlook. 
 
 THE MACMILLAN COMPANY 
 
 66 FIFTH AVENUE NEW YORK
 
 The Anthracite Coal Industry 
 
 A Study of the Economic Conditions and Rela- 
 tions of the Co-operative Forces in the Devel- 
 opment of the Anthracite Coal Industry of 
 Pennsylvania. 
 
 By Peter Roberts, Ph.D., with an introduction by 
 W. G. Sumner, LL.D., Professor of Political and 
 Social Science in Yale University. With Maps, 
 Charts and Diagrams. Cloth. 8vo. ;^3.50 net. 
 
 This important book is, it is believed, the first attempt 
 to cover the great subject of the anthracite coal industry in 
 all of its phases. The author has had quite exceptional ad- 
 vantages for a thorough study of his subject, and his book is 
 both scholarly and practical. Professor Sumner has pointed 
 out in his Introduction that there is no other industry which 
 seems to affect the interest of so many classes of people as 
 the mining of anthracite coal — the staple fuel for household 
 use. The amount of supply, the length of time before it 
 will be exhausted, the methods of working and shipping are 
 all matters of vital interest, not only to the mine owner and 
 capitalist, but to the general public. Perhaps no industry 
 has brought out so many and so various experiments in the 
 organization of labor, improvement of methods, both of 
 raining and transportation, care of the destitute, etc. 
 
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