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THE SHERMAN LAW 
 
 Where It Has Failed 
 Why It Has Failed 
 
 and a 
 Constructive Suggestion 
 
 An address before the Economic Club 
 of Philadelphia, Pa., May 22, 1915 
 
 By 
 
 TO THE READER: 
 
 SIR: Here is a sequel to the two articles by Mr. George W. 
 Peridns, "The Outlook for Prosperity" and "The New 
 South and the New World," which have attracted wide at- 
 tention among the business men of the United States. The present 
 article contains Mr. Perkins' concrete proposal with regard to 
 possibly the most important business issue of the day, that of 
 anti-trust legislation. 
 
 Will you be good enough to read this article carefully and write 
 us your opinion about it? In case you desire what you write to 
 be considered confidential, we shall so treat it; otherwise we shall 
 feel free to use it for publication. 
 
 THE EDITORS, 
 
 The Market World, 
 
 80 Wall Street, New York City. 
 
THE SHERMAN LAW 
 
 Where It Has Failed 
 Why It Has Failed 
 
 and a 
 Constructive Suggestion 
 
 Of 
 
 
 An address before the Economic Club 
 of Philadelphia, Pa., May 22, 1915 
 
 By 
 GEORGE W. PERKINS 
 
 Reprinted from 
 
 The Market World 
 
 New York 
 
FOREWORD. 
 
 Early in February of this year Mr. George W. Perkins 
 delivered an address before The Economic Club of New 
 York on "The Outlook for Prosperity." This address was 
 published in "The Market World," and attracted so much 
 attention that it was later republished in pamphlet form and 
 distributed throughout the country with a request that read- 
 ers of the pamphlet send us their comments upon Mr. Per- 
 kins' diagnosis of the American business situation. 
 
 On March 22 we made the following comment editorially 
 upon the results obtained through the distribution of this 
 pamphlet : 
 
 "We have simply been amazed at the number and the 
 character of the responses we have received. They have 
 come in by the hundreds, from business men and students of 
 business living in every State of the Union and engaged in 
 the most various pursuits. Bankers, lawyers, doctors, clergy- 
 men, heads of great railroad and industrial corporations, 
 merchants, manufacturers, college professors, farmers, all 
 these and more have sent us their expressions of opinion, in 
 a great number of cases evidently prepared with extreme 
 care and at great length. 
 
 We went on to say that we should issue a supplement 
 containing the best of these letters. After a careful survey 
 of the material, however, it presently appeared that a sup- 
 plement which should convey even a fair summary of the 
 letters received would be too voluminous to be undertaken. 
 There was, moreover, a further fact to be taken into account. 
 A considerable number of our correspondents, while con- 
 curring in the views expressed by Mr. Perkins, were anxious 
 to have a more specific statement of remedies far the exist- 
 ing situation. Happily, Mr. Perkins has been willing to 
 meet this suggestion, and the present clear and concrete 
 discussion of the application of the Sherman Act, possibly 
 the most pressing of present day business issues, is the 
 result. We commend it to the attention of all persons, irre- 
 spective of party, who are willing to think the problem 
 through. 
 
 THE EDITORS, 
 
 The Market World, 
 
 80 Wall Street, New York City. 
 
THE SHERMAN LAW 
 
 WHERE IT HAS FAILED : WHY IT HAS FAILED : 
 AND A CONSTRUCTIVE SUGGESTION 
 
 By George W. Perkins 
 
 DOUBTLESS we will all agree that at the time the 
 Sherman Law was passed there was crying need 
 for legislation against the evils that were rapidly 
 developing in the American business world, and that there 
 was ground for the apprehension of the people regarding 
 the far-reaching harmful effects of those evil tendencies. 
 
 Business men were acquiring power to an extent that 
 had previously been unknown, and in many instances they 
 were using that power for their own personal profit and 
 aggrandizement and to the detriment and injury of their 
 fellowmen. They were practicing secretive business meth- 
 ods, beating down competitors, and forcing them to choose 
 between bankruptcy or entering a combination on terms 
 which were very unfair. This was clearly the tendency of 
 the times, and legislation to check and prevent it was im- 
 perative. 
 
 A Bad Means to a Good End. 
 
 With this most desirable end in view, the Sherman Law 
 was passed in 1890. The object of the legislators was com- 
 mendable ; the results attained have been lamentable, for 
 no intelligent, thoughtful man can look back over the inter- 
 vening twenty-five years and conscientiously say that the 
 law that was passed was the kind of a law that should have 
 been enacted to achieve the reforms so greatly needed. 
 
 During these twenty-five years men have continued to 
 
acquire power to an extent little dreamed of when the 
 Sherman Law was passed, and have continued to use it 
 for their own selfish purposes and to the detriment of the 
 public welfare. Evil practices in business have been per- 
 sistently followed that have been most damaging in their 
 effects on the public welfare and most beneficial in their 
 pecuniary reward to a few individuals. All this has been 
 taking place with the Sherman Law on the books. 
 
 That the^Shexman Law-has been a failure from the be- 
 ginning is proved by the events that have occurred since its 
 passage. In the first place, for a number of years it was 
 practically a dead letter. During this time the organization 
 of corporations through consolidations and mergers went on 
 at a rapid rate, and evil practices, and oppressive methods 
 cropped out on every hand, until the country rose up in 
 mass against them. This situation reached a climax in the 
 Roosevelt Administration, when suits were brought against 
 some of our largest industrial organizations. At the same 
 time the Department of Commerce and Labor was estab- 
 lished and given power to investigate our large industrial 
 concerns. President Roosevelt used this department for 
 such investigations and declared his belief that there were 
 good and bad trusts. He said that he proposed to bring 
 suits against what he called "bad trusts," but not against 
 what he termed "good trusts." The Department of Com- 
 merce and Labor pursued its investigations and made vari- 
 ous reports. In many addresses and messages Mr. Roosevelt 
 declared his belief that large industrial corporations had 
 come to stay, but that their affairs must be so administered 
 that they would be a benefit and not a menace to our 
 people. 
 
 What the Republican Party Promised. 
 
 This condition existed in 1908, when Mr. Taft was nomi- 
 nated for the Presidency. The platform on which he was 
 
nominated contained Mr. Roosevelt's views on the trust 
 question, which were expressed in the following plank of 
 the Taft platform : 
 
 "Trusts. The Republican^Party passed the Sher- 
 "man Anti-Trust Law over Democratic opposition and 
 "enforced it after Democratic dereliction. It has been 
 "a wholesome instrument for good in the hands of a 
 "wise and fearless administration. But experience has 
 "shown that its effectiveness can be strengthened and 
 "its real objects better attained by such amendments as 
 "will give to the Federal Government greater supervi- \ 
 <f slbn and control over and secure greater publicity in I 
 "the management of that class of corporations engaged 1 
 "in interstate commerce having power and opportunity I 
 "to effect monopolies.'' 
 
 A few weeks later Mr. Bryan was nominated on the 
 pjatfnrm, the trust plank of which, among other 
 
 things, declared for a policy that would grojiihit the control 
 by a "manufacturing or trading corporation, engaged in 
 interstate commerce," "of more than fifty per cent of the 
 total amount of any product consumed in the United States." 
 The Presidential compaign of 1908 followed, and the 
 widely differing views of the Republican and Democratic 
 Parties on the trust question, as represented by these two 
 planks, were vigorously debated throughout the country. 
 Probably the greatest and most effective speech of that 
 entire campaign was Governor Hughes' speech at Youngs- 
 town, Ohio, wherein he utterly demolished Bryan's 50 per 
 cent theory and pointed out the absolute chaos that would 
 follow in business if any such standards of right and wrong, 
 or efficiency, \vere set up, 
 
 How the Promise Was Broken. 
 
 The planks went to the voters of the country and the 
 Republican plank was adopted by an overwhelming vote . The 
 
Taft Administration entered office; but in place of making 
 any determined, persistent effort to have its plank enacted 
 into law it allowed matters to drift until decisions in the 
 Standard Oil and Tobacco cases were handed down by the 
 Supreme Court. Then Mr. Taft and his associates deliber- 
 ately and completely abandoned the trust plank of their 
 platform by immediately proclaiming that "dissolution is 
 the solution of the trust question." In other words, the 
 Taft Administration deliberately repudiated the plank of its 
 own platform, which had been so overwhelmingly endorsed 
 by the people, and adopted the plank of the Bryan platform, 
 which had been rejected by the people ; and with eagerness 
 and enthusiasm the Taft Administration proceeded to dis- 
 solve the Standard Oil and Tobacco Companies into a large 
 number of small units, telling the people what great benefits 
 would follow therefrom. Every man in this country knows 
 what did follow, viz., largely increased profits to inside 
 stockholders and largely increased prices of commodities to 
 outside consumers. 
 
 In spite of this farcical result the Taft Administration 
 brought many other dissolution suits, notably against the 
 Steel Corporation and the Harvester Company. Business 
 conditions became more and more demoralized and business 
 men became more and more uncertain as to what they could 
 or could not do. Gradually capital became timid and retir- 
 ing, and for four years we have seen a period of semi- 
 stagnation in business development in this country. Gentle- 
 men, this is directly traceable to the Taft Administration 
 and wholly chargeable to its utter failure to keep the pledge 
 it made to thfe people in the trust plank of its 1908 platform. 
 Had it kept its own pledge, instead of keeping the pledge of 
 the Bryan platform, the business atmosphere would have 
 been cleared of all doubt and business would have known 
 along just what lines it could proceed. In addition, the 
 people would have been protected from the evils from which 
 
they were and still are suffering, by a law that would have 
 given "to the Federal Government greater supervision and 
 control over and secured greater publicity in the manage- 
 ment of that class of corporations engaged in interstate 
 commerce having power and opportunity to effect mo- 
 nopolies." 
 
 The Democratic Attempt 
 
 The Wilson Administration then came into power. It 
 evidently f elf ,"as the Republicans did in 1908, that the Sher- 
 man Law was not satisfactory and that it must tackle the 
 trust question, and so it passed the Clayton Bill, which 
 should more properly be called the muddle bill, as in my 
 judgment it will simply add to the present confusion. It 
 also passed the Federal Trade Commission Law, which is a 
 very poor law with a very good name. The idea of estab- 
 lishing a Federal Trade Commission is excellent but under 
 this law the Commission will find itself powerless to do the 
 things that are necessary. However commendable may be 
 the intentions of the gentlemen on the Commission, between 
 the Sherman Law and the Clayton Bill they will find them- 
 selves " 'twixt the devil and the deep sea." Again it seems 
 to me that our lawmakers have failed to accurately diagnose 
 the situation. They, as Democrats, seemed to realize in 1914, 
 as did the Republicans in their platform of 1908, that some- 
 thing was wrong or lacking in the Sherman Law ; but, either 
 through ignorance or lack of courage or for a poorer reason, 
 our Democratic friends have failed to meet the issue squarely 
 and settle it intelligently and in keeping with modern eco- 
 nomic and moral requirements. 
 
 In the meantime, while the Clayton Bill was being de- 
 bated in Congress and enacted into law, we had two trust 
 case decisions by two Courts of equal rank and only ex- 
 ceeded in power by the Supreme Court itself. I refer to the 
 Harvester decision and the Keystone Watch Case decision. 
 
The Bewildering Course of the Courts. 
 
 In the Government suit to dissolve the International 
 Harvester Company the United States District Court for 
 the District of Minnesota a short time ago, by a divided 
 vote, handed down a decision dissolving that company on 
 the ground that it had acquired too large a percentage of the 
 business in which it was engaged; yet all the judges who 
 joined in the decision gave the company a clean bill of 
 health as to its conduct and even went so far as to -criticize 
 the Government for charging that the company had im- 
 properly conducted its business. 
 
 Its exact language on this point is as follows : 
 
 "It is but just, however, to say and to make it plain 
 "that in the main the business conduct of the company 
 "towards its competitors and the public has been hon- 
 "orable, clean and fair. And in this connection it 
 "should also be said that specific charges of miscon- 
 "duct were made in the Government's petition which 
 "found no warrant whatever in the proof. These were 
 "of such a character and there was so much of them, 
 "apparently without foundation, that the case is excep- 
 tional in that particular." 
 
 Again, only a few weeks ago, the United States District 
 Court for the Eastern District of Pennsylvania, a court of 
 precisely the same standing and power as the court that de- 
 cided against the Harvester Company, handed down a 
 unanimous decision refusing to dissolve the Keystone 
 Watch Case Company because it had acquired a large per- 
 centage of the business in which it was engaged; yet all 
 the judges agreed that the Watch Case Company had been 
 guilty of a few improper practices, but that these could and 
 should be reached by governmental injunction and not by 
 governmental dissolution. 
 
 Here we have two Courts of precisely the same power 
 and jurisdiction handing down decisions under the Sherman 
 
 8 
 
Law that are exactly opposite in character. Since these de- 
 cisions both cases have been carried to the Supreme 
 Court. When the Harvester case was before the Circuit 
 Court it was argued by a Republican Attorney General, who 
 laid great stress on the fact that the company had been 
 guilty of all sorts of improper, immoral practices. As I 
 have shown, the Government was practically thrown out of 
 court on all these charges. The present Democratic Attor- 
 ney General, in arguing the case before the Supreme Court, 
 admitted that the Harvester Company had been honorably 
 managed and conducted, but set up the contention that the 
 company is illegal under the Sherman Law because of the 
 manner in which it was organized, and the resultant large 
 percentage of business it has ; that if it had grown naturally 
 from a single small company to its present pre-eminence it 
 would have been legal, but that, as it was formed through 
 the consolidation of several companies doing similar lines 
 of business, it was illegal. 
 
 The following astonishing situation has developed in the 
 suit, viz., the judges of the Circuit Court said that during 
 the first two or three years of the existence of the Har- 
 vester Company there were certain improper practices, but 
 that these were inherited from the small companies and 
 eradicated by the large company as soon as possible. Yet 
 this same Court, by a divided vote, decreed that the Har- 
 vester Company should be dissolved. The present Democratic 
 Attorney General asks the Supreme Court to do the same 
 thing; therefore, both the Circuit Court and the Attorney 
 General are, in effect, asking that the Harvester business be 
 returned to the conditions under which it was conducted by 
 the small companies, which companies the Court itself says 
 were guilty of immoral practices. Do the Circuit Court 
 and the Democratic Attorney General mean to take the 
 position that a number of small competing companies doing 
 an immoral business would be complying with the Sherman 
 
Law, while a large co-operative company, doing an admit- 
 tedly moral business, would be violating the Sherman Law? 
 Such a position would put our legal friends on record as 
 believing that the interest and welfare of our people are 
 more dependent upon a vindication of legal technicalities 
 than upon moral actualities and economic necessities. 
 
 What Is Certain About the Sherman Law. 
 The only certainty about the Sherman Law seems to 
 be the absolute uncertainty that surrounds its interpretation ; 
 but if the law means what the Taft and Wilson Administra- 
 tions tell us it means, then it stands for a strict mainten- 
 ance of old-fashioned, ruthless, competitive methods in busi- 
 ness, with all their well known abuses and evils, and 
 squarely against modern co-operative methods. If this be 
 true, then the law is out of tune with the times in which we 
 live, is morally and economically unsound, and cannot endure. 
 
 The Disease Wrongly Diagnosed. 
 
 I believe I am correct in saying that we have at last 
 reached a point where the Sherman Law, as it stands, is 
 not satisfactory to the business world whose improper activi- 
 ties it was supposed to curb, nor to the great mass of the 
 people in whose interest and for whose protection it was 
 enacted. The question arises as to why this is so, and I 
 believe the answer is found in the fact that the men who 
 drew the law failed to diagnose the disease correctly and 
 therefore prescribed the wrong medicine. They saw the 
 results of the disease, but they failed to understand the cause 
 of the disease. They saw individuals and small groups of 
 men suddenly acquiring vast and unheard-of power in the 
 business world, and they knew that such vast power had 
 never before been acquired. They knew that these men 
 were using their power for personal gain and public detri- 
 ment. They seemed to think that there had been suddenly 
 created a different type of man than had ever lived be- 
 
 10 
 
fore, a sort of superman endowed with qualities that 
 made it possible for him to do these extraordinary things 
 in business that were so profitable to him and so detri- 
 mental to his fellowmen. They saw him building up vast 
 business machines that reached out in every direction. They 
 saw him, through these machines, oppressing his competi- 
 tor, maltreating his labor, imposing on his consumers, and 
 they sought to strike at it all by passing a law that they 
 thought would make it impossible for him to create these 
 large machines. 
 
 Steam and Electricity Change the Fundamentals of 
 Business. 
 
 Xow, as I have said, these men failed utterly to under- 
 stand the cause of the new disease, for the cause did not lie 
 in the fact that a superman had suddenly been created, a 
 man with greater ability than any man had ever had before ; 
 the cause lay in the fact that our ordinary, every-day busi- 
 ness man, the same type that existed twenty-five or fifty 
 years before, had suddenly been given by our inventors de- 
 vices and machinery with which to do business that, in 
 themselves, centralized business activities and made vast 
 business concerns and undertakings possible for the first 
 time since the world began. Steam and electricity in their 
 many forms are what have made the corporation, what have 
 made centralization in industry possible and inevitable. The 
 Sherman Law has been utterly unable to prevent this evo- 
 lution ; and centralization and consolidation have forged 
 ahead in all forms of business life in spite of the Sherman 
 Law, because that law did not and could not strike at the 
 causes that were bringing about this wonderful transforma- 
 tion in business methods and opportunities. 
 
 If the men who passed the Sherman Law had properly 
 diagnosed the situation and had realized the great new 
 causes that were at that time manifesting themselves in the 
 
 II 
 
business world, they would have known that the Sherman 
 Law, as passed, could not possibly accomplish the results 
 desired, for the following reasons: 
 
 First : Because with steam and electricity it was inevit- 
 able that we should have large business units; 
 
 Second: Because with large business units, men, still 
 being human and selfish, would abuse the power that large 
 business units gave them ; 
 
 Third : Because the only way to protect the people from 
 the evils that were developing was to permit the organiza- 
 tion of large business units, since they were inevitable, but 
 to supervise and regulate the acts and conduct of the men 
 who manage them through some power broader and stronger 
 than the units themselves, doing this in such a way as to 
 preserve for the people the advantages to be had from doing 
 business on a large scale and at the same time to protect 
 the people from, the. evils arising from large power in the 
 hands of unscrupulous men. 
 
 A Constructive Suggestion. 
 
 Had a correct diagnosis been made, the framers of the 
 Sherman Law 7 would have drafted a very different law, and 
 in my judgment it would then have been and to-day should 
 be along the following general lines: 
 
 First : The establishment by the Federal Government of 
 a competent business court, board or commission, with 
 power to create interstate and international industrial cor- 
 porations ; 
 
 Second: Requiring that any group of men desiring to 
 organize a business concern, intending to do business in our 
 various States and in foreign countries, go to this court in 
 Washington and obtain a charter; 
 
 Third : Requiring that before the granting of any such 
 charter the business court or commission should be con- 
 vinced that the proposed business undertaking was to be 
 
 12 
 
conducted in the public interest and that it was not to re- 
 strain trade or acquire private monopoly ; 
 
 Fourth: Requiring full publicity as to the operations of 
 the company, for the information of the business court 
 that, as the company proceeded with its business, the court 
 might be sure that it was not improperly restraining trade 
 or acquiring monopoly ; and for the protection of the public, 
 whose money and labor were to be employed and whose 
 consumers were to be served ; 
 
 Fifth : Requiring that capitalization be honest and legiti- 
 mate and represent a proper value for every dollar issued 
 in securities; 
 
 Sixth : Requiring that violation of the law or the rules 
 and regulations of the court be punishable with imprison- 
 ment of individuals, exactly as is the case with National 
 banks, whose officers, when guilty of wrong-doing, are pun- 
 ished without disturbing the activities of the bank. There 
 should be no more thought of dissolving a large properly 
 conducted interstate and international business, in which 
 many thousands of people are interested as stockholders, 
 employes and customers, than of dissolving a threat National 
 bank because an officer has done something wrong. Such 
 a step should be the very last one resorted to. Bad prac- 
 tices should be reached and eradicated either by indicting 
 individuals or by injunction. 
 
 Evils Remedied by Such a Law. 
 
 Had such a law as this been passed, with stringent regu- 
 lations against private monopoly and with power given to 
 such a court to see to it that large corporations did not 
 use their power to restrain trade but did use it to develop 
 trade, business would have prospered far more and the peo- 
 ple would have been protected far more. 
 
 For example : Undoubtedly one of the greatest evils 
 from which the people of this country have suffered since 
 
 13 
 
the Sherman Law was passed has been the stock watering 
 and stock jobbing operations that have been carried on in 
 the organizing and financing of corporations. The Sher- 
 man Law never has protected and the Clayton Bill does not 
 now protect the people against this great evil. 
 
 The people have also suffered from secretive, blind-pool 
 methods, made possible through a lack of proper and bona 
 fide publicity as to how corporations were conducting their 
 business. A few insiders have had inside information, but 
 the stockholders, the employes and the public have had little 
 or no information, or else very often incorrect or misleading 
 information. Nothing in the Sherman Law has in any way 
 protected the public from all these serious and costly 
 evils. 
 
 Constructive, Not Destructive, Action Required. 
 
 There is a vast difference between restraint of trade and 
 expansion of trade, and this difference varies according to 
 the nature of the business. It is utterly impossible to define 
 it in any one law so that it will cover all forms of business. 
 We can never properly handle this important question ex- 
 cept through a permanent court or commission that will 
 have broad powers and discretion in the matter. As it 
 stands to-day, no business man, no lawyer, no judge, no 
 court has been able to define it ; and if the Supreme Court in 
 the important industrial cases now coming before it is able 
 to define it in those particular cases, the rulings will not 
 necessarily apply to other concerns doing business under 
 different conditions and in entirely different lines of 
 trade. 
 
 Furthermore, it is of the utmost importance in this 
 matter of restraint of trade that a company should know 
 what it can do and what it cannot do, before it starts in 
 business. It should not be required to start in business and 
 then go through the various courts up to the Supreme 
 
Court, and spend from two to ten years and large sums of 
 money in order to find out whether it is a legal or an illegal 
 concern. 
 
 The Rule of Reasonableness. 
 
 As regards the question of monopoly, the situation is 
 just as serious. Our lawyers and our courts and a vast num- 
 ber of our people have of late years been sadly confusing 
 pre-eminence with monopoly. A concern may be pre-emi- 
 nent in its line of trade without being monopolistic. For 
 instance, Corporation A may have but a comparatively small 
 percentage of the business in a given line of trade, and yet 
 through patents, secretive methods and lack of publicity 
 regarding its affairs, may actually exert a more dominating 
 influence in its trade than Corporation B, which does a much 
 larger business but has no patents and is open-handed as to 
 its methods and practices full publicity as to its conduct. 
 Although a concern may have a very large percentage of the 
 business in a given line of manufacture, it surely cannot be 
 accused of having a monopoly provided it has no patents 
 and no control of raw material or any other advantage that 
 cannot be immediately obtained by any one else in the 
 business or who desires to enter the business. Again, a con- 
 cern that has only a moderate percentage of, say, all the coal 
 in the country, might easily, under certain forms of organ- 
 ization and directed by a certain kind of men, actually exer- 
 cise all the powers and practice all the abuses that go with 
 private monopoly. 
 
 A Practicable Plan. 
 
 Our people should not and will not stand for restraint of 
 trade; they should not and will not stand for private mo- 
 nopoly; but what constitutes restraint of trade and what 
 constitutes private monopoly cannot be written down spe- 
 cifically in any law in such a way as to be applicable to 
 each and every business concern in each and every line of 
 
 15 
 

 trade. This cannot possibly be done through legislation, and 
 the Supreme Court cannot possibly do it by interpretation. 
 Here is where the rule of reason should be applied, and it is 
 necessary to have it applied by some Federal body before 
 a corporation is organized, and not by the Supreme Court 
 after the corporation is organized and after years of litiga- 
 tion. It must be applied by a court, a board or a commission 
 created by Federal authority and having very broad powers 
 powers that can be exercised along both permissive and 
 prohibitive lines; powers that will permit the application 
 of the rule of reason to what is restraint of trade 
 and what is monopoly, what is destructive competition and 
 what is constructive co-operation. It seems to me, there- 
 fore, that the only sane and common sense plan under which 
 our government can operate, with freedom to business and 
 with protection to the people, is the one which I have just 
 outlined. 
 
 Even though the question of restraint of trade or monop- 
 oly were not involved in any way, some such plan should 
 be adopted, for the following all-sufficient reason : When a 
 group of men seek to do a large business they require more 
 than their own capital ; they require more capital than they 
 can obtain locally from people whom they know and who 
 know them. They therefore seek capital from investors 
 throughout our country and throughout the world, people 
 whom they do not know and never see, people who have to 
 take everything on faith. This is also largely true of the 
 labor they employ and the customers they serve. This be- 
 ing so, such men become in a very real sense public servants 
 and business trustees. They occupy much the same position 
 towards investors that bankers do. Investors in large in- 
 dustrial enterprises deposit their money with the man- 
 agers of such enterprises for safe-keeping and interest 
 returns, just as they do with banks. Banks are required to 
 make complete public exhibits of their condition and they 
 
 16 
 
are controlled by the Federal Government. This is done 
 for the protection of the people for whose money they are 
 custodians. Our large industrial units should be chartered 
 and then regulated by the Federal Government in the same 
 manner and for precisely the same reason. 
 
 As some of you may know, I have been advocating this 
 plan for many years. I first publicly spoke for it and urged 
 it in an address at Columbia College seven years ago last 
 February. Every development from that day to this has, 
 in my judgment, shown the futility of any other course. 
 
 Federal, Not State, Control Required. 
 
 To-day a company wishing to do a great interstate busi- 
 ness gets its charter from some one of our States. If it 
 does not like the Seven Sisters of Xew Jersey it goes to 
 Delaware; if it does not like the laws of Delaware it goes 
 somewhere else. Wherever it goes, after it gets its char- 
 ter, the State pays little or no attention to how it does its 
 business. Xo State is powerful enough or has jurisdiction 
 broad enough to follow the ramifications of one of these 
 great companies. Xeither is its jurisdiction wide enough to 
 be helpful to one of those great companies when the com- 
 pany wishes to go abroad and get concessions for business. 
 A Federal Incorporation Law,- would be beneficial to our 
 industrial companies not only through making it unneces- 
 sary for them to comply with forty-eight conflicting State 
 laws, but in helping them in the development of foreign 
 trade ; and it would be helpful to our people because the 
 Federal Government would possess authority broad enough 
 to properly regulate and control the operations of such 
 companies and require publicity so full and complete as in 
 itself to be a guarantee against improper business practices. 
 
 There is one great good that has come out of the Sher- n 
 man Law and that is the agitation it has caused, the agita- 
 tion on the question of what is moral or immoral in business. 
 
 17 
 
This agitation has continued until a higher standard of busi- 
 ness morals has unquestionably arisen in this country dur- 
 ing the last ten years. Men of large business affairs have 
 recognized their responsibility to the public, to their stock- 
 holders, to labor, to consumer. A few of these large con- 
 cerns have even gone so far as to take the public fully into 
 their confidence, publishing complete annual reports and 
 transacting their business in the open and on the square. 
 All this is very good as far as it goes, but we must not for- 
 get that it has been done voluntarily by a comparatively few 
 men who have been far-sighted enough to believe that it 
 was not only right but good business policy. This, how- 
 ever, is not as it should be. It should be done under Federal 
 law and requirement. The people should not be asked to 
 accept it as a favor from a few managers or a few corpora- 
 tions; they should know that they receive it from all man- 
 agers and all corporations as their right, a right provided 
 for them and guaranteed to them by their Federal Govern- 
 ment. Capitalizing companies without stock watering, 
 publishing statements that mean full publicity and honor- 
 able conduct towards competitors and consumers should 
 be required by law and regulation. The people know that 
 they are entitled to all these things, and they believe that 
 legal and administrative machinery should exist that would 
 positively guarantee them. It should not be left to the mere 
 whim or opinion of a certain set of directors or officers who 
 happen to be temporarily in charge of the affairs of a large 
 interstate corporation. 
 
 Business Consolidations Natural, Not Criminal. 
 
 The latest argument among our legal governmental 
 friends is that the Sherman Law does not strike at pre- 
 eminence if such pre-eminence is attained through natural 
 growth; but that it does strike at pre-eminence obtained 
 suddenly through consolidations. 
 
 18 
 
These legal friends unfortunately are not business men. 
 They have not been through the gruelling experience of 
 the changing necessities of the business world, changes that 
 affect business methods throughout the world and which 
 must be met promptly if business is to succeed and people 
 are to prosper. They depend almost wholly on their text- 
 books, on precedents. Their look is naturally backward, 
 while the business man's look must necessarily be for- 
 ward. 
 
 Consolidations came about through natural causes. The 
 so-called trusts have not made the times; the times have 
 made the trusts. A revolution in business methods was 
 wrought when the telephone, the telegraph, the wireless, 
 and steam with all its appliances came into the hands of the 
 business man. Things could then be done in a few moments 
 that could not be done in a month in the past. New oppor- 
 tunities for great undertakings suddenly presented them- 
 selves. Business men had to take advantage of these op- 
 portunities at once if prosperity was to follow. Advantage 
 had to be taken of them if success in international trade was 
 to be ours. There was no time to be lost ; precedents of all 
 kinds had to be abandoned; there was not time to wait for 
 a concern to grow naturally and slowly as it had in the past. 
 Opportunities must be seized when they present themselves. 
 It was the need of the hour, the need forced on American 
 business men through new opportunities, that brought about 
 the method of creating large companies by consolidation 
 rather than by natural growth. This all-important fact 
 seems to have been wholly overlooked by our legal friends. 
 Again I say, the trusts have not made the times; the times 
 have made the trusts. 
 
 The Consolidation Known as the United States. 
 
 The present Attorney General, Mr. Gregory, in his argu- 
 ment before the Supreme Court two or three weeks ago 
 
 19 
 
argued that the International Harvester Company should 
 be ordered dissolved by the Supreme Court solely because 
 it was an organization formed out of several smaller organ- 
 izations in a similar line of business, and that this is what 
 the Sherman Law requires. How fortunate that the Sher- 
 man Law was not in existence when this country of ours 
 was organized! How fortunate that Mr. -Gregory was not 
 the legal adviser of our people at that time, for had such 
 been the case our thirteen original States could never have 
 consolidated into the United States of America. Our coun- 
 try itself was formed through consolidation and has been 
 fostered through absorption. If Mr. Gregory's contention 
 and his interpretation of the Sherman Law are correct, our 
 forefathers were all wrong. They should have allowed the 
 State of Massachusetts to just grow naturally until it had 
 acquired pre-eminence in the governmental affairs of this 
 country; and if this were impossible or too slow a process 
 then we should have had forty-eight separate governments 
 in this country, all competing with one another. 
 
 Churches grow larger through consolidation; schools 
 and universities grow larger through consolidation ; all sorts 
 of small stores have been consolidated into big department 
 stores; telegraph, telephone and railroad companies have 
 not grown naturally they have grown through absorption 
 and consolidation. In short, the enormous opportunities 
 brought by the age of steam and electricity demanded large 
 business units quicker than they could be produced through 
 natural growth, and the only way to produce them was 
 through consolidation. Banks of all kinds have grown 
 larger through consolidation. The new currency bill per- 
 mits National banks to do business outside the United 
 States and our bankers are now making plans to take ad- 
 vantage of this permission. Branches are being opened up 
 in South America ; but are they being opened up by the First 
 National Bank of Podunk, with a capital of $100,000? Cer- 
 
 20 
 
tainly not ; they are being opened up by the biggest banks in 
 the United States, banks that have grown big through con- 
 solidation and reconsolidation. 
 
 The Government Itself Favors Adequate Size. 
 
 And mark this well : The present Administration, in its 
 bill creating the Federal Reserve Board, specifically pro- 
 vides that a banking concern must have a capital and sur- 
 plus of at least $1,000,000 before it may even file an applica- 
 tion with the Federal Reserve Board to do business outside 
 the United States. And mark this well too: The bill con- 
 tains the following clause: "The Federal Reserve Board 
 shall have power to approve or to reject such application if, 
 in its judgment, the amount of capital proposed to be set 
 aside for the conduct of foreign business is inadequate, or if 
 for other reasons the granting of such application is deemed 
 inexpedient." Another part of the bill provides that for- 
 eign business may be done "under such conditions and under 
 such regulations as may be prescribed by said Board." 
 
 We, therefore, now have a condition in this country 
 where large banks, with the approval of the Federal Reserve 
 Board, may go abroad and establish branches, but they must 
 do it under the Federal Board which has the power to 
 regulate and control them ; and it is specifically provided 
 not only that they must have a large capital but that the 
 amount of capital set aside for the conduct of the foreign 
 business must be adequate for such business. Special em- 
 phasis is placed on the fact that, above all things, the capital 
 must not be inadequate, for if, in the opinion of the Board, 
 it is inadequate a foreign branch cannot be established, thus 
 clearly showing that the lawmakers were keenly alive to 
 the necessity for a large capital in order to successfully 
 conduct a foreign banking business. 
 
 How short-sighted and inconsistent for our politicians to / 
 take the position that this method of handling our banking / 
 
 21 
 
business is correct and then refuse to apply the same method 
 to our business operations ! They have given a Federal 
 Reserve Board power to organize and regulate foreign 
 branch banks, but will not, in the matter of business, adopt 
 an equally constructive program; and yet it is infinitely 
 more important that we find an outlet for our crops and 
 manufactured products and find it on a large scale than 
 that we find an outlet for our money on a large scale. 
 
 Consolidation in Business and Our Foreign Commerce. 
 
 The present Administration, of which Mr. Gregory is a 
 part, gives the Federal Reserve Board the power to establish 
 large banks abroad and the sole power to fix the minimum 
 amount of capital that must be employed; and these banks 
 are not required to grow naturally; they can acquire their 
 size by consolidation. When some American business men 
 got together and organized a company to go abroad and com- 
 pete for the farm implement business of the world there was 
 absolutely no law or Federal Board to guide them 
 no Federal body to which these men could go for counsel 
 and permission as to the size of the company to be formed ; 
 and so the only thing these business men could do was to 
 use their own judgment, go ahead and do the best they 
 could. They went ahead and organized such a company, 
 and in ten years developed a foreign business of over $50,- 
 000,000 a year. 
 
 During this time politicians were accusing the company 
 of all sorts of heinous crimes. With the entire co-opera- 
 tion of the company the Bureau of Corporations began an 
 investigation. This was begun during the Roosevelt Admin- 
 istration, but before it was finished during the Taft Admin- 
 istration the company was pounced upon by the Govern- 
 ment and a suit was filed, charging the company with all 
 sorts of immoral and improper conduct. The officers re- 
 peatedly asked the Government to point out wherein the 
 
 22 
 
company was objectionable. They repeatedly visited Wash- 
 ington seeking light, and there was no light. The case 
 dragged itself through the courts and all these charges were 
 wholly disproved and thrown out; and now comes another 
 Attorney General, of a different political party, who, while 
 openly admitting that the company has done nothing wrong 
 and that no one is complaining, prays for the destruction 
 of the company solely on the ground that under the Sher- 
 man Law it was illegally organized. 
 
 Constructive Federal Legislation the Remedy. 
 
 I ask you gentlemen, with all the earnestness I possess, 
 is it not high time that the sober common sense of not only 
 the American business world but the entire American people 
 was aroused on this subject? Is it any wonder that business 
 men are bewildered? It is unthinkable, unbelievable that 
 our people are demanding mere legal form rather than actual 
 moral substance. 
 
 The present condition is intolerable, impossible. Is it 
 not time that we stopped deceiving ourselves, stopped quib- 
 bling about legal technicalities, stopped resorting to make- 
 shifts? 
 
 Why delay any longer? Why not admit that the object 
 of the framers of the Sherman Law in striking at private 
 monopoly and restraint of trade was commendable; that 
 \ve want this principle recognized and maintained in our 
 business life ; but that we want a great deal more which the 
 law as it stands does not and cannot give us. It must, 
 therefore, be repealed, rewritten, or buttressed, not by such 
 makeshifts as the Clayton "Muddle" Bill or the impotent 
 Federal Trade Commission Act, but by a clearly defined 
 piece of constructive legislation that will place the regula- 
 tion and control of great interstate and international indus- 
 trial concerns, and their right to exist, in the hands of our 
 Federal Government. 
 
 23 
 

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