HE TRUSTS ILLIAM MILLER COLLIER VUI'/Z2ZIT{ G: CALIFORNL A^.T LOS ANGELES tf THE GIFT OF ! MAY TREAT MORRISON ; IX MHMORY OF ; ALEXANDER F MORRTSON The Trusts what can we Do with Them? What can they Do for Us? BY William Miller Collier New York State Civil Service Commissioner ; Author of "Collier on IJankruptcy," etc. New York. The Baker and Taylor Company 5 and 7 East Sixteenth Street Copyright, 1900, by THE BAKER AND TAYLOR COMPANY ROBERT DRUMMOND, PRINTER, NEW YORK C '' PREFACE The prohlom of the trusts is a momentous one, and yet it is unqualifiedly a new problem. The oldest of them (the Standard Oil Company) is eighteen years of age, but the great majority of these gigantic combinations have been established since 1897. Furthermore, those of most recent creation seem animated by somewhat different pur- poses than their prototype; and they present new problems or new phases of old problems. There cannot be any doubt that the trusts are filled with great dangers to our industrial, social, and political system. To say that these dangers are "awful" is no misuse of tlie word. The great advantages of mammoth business organizations should not be overlooked. Such organiza- tions arc necessities in the present condition of American industries. They seem to be the only effective agencies whereby we can develop our much needed foreign markets, whereby we can dispose of our surplus products, and thus give constant employment to our workers and toilers. Much of our anti-trust legislation has overlooked this fact. There is. indeed, a danger that in our atteni])ts to stop monopolies we ]nay cripple our ])roductive energies and stifle enterprise and ])ring our country into a condition of industrial degra- dation and into bankruptcy. To obtain, however, the most that can be obtained from trusts, to achieve the highest (Icgi'i'c of success that can come fnun the use of trusts, it :< absolutelv necessarv that we u'uard against their l)eco!ii- in IV Preface in^ monopolies. The greatest, the speediest, and the most ellieient remedy, the one that should be first employed, unquestionably is publicity; but it may be doubted if that is entirely sufficient, either theoretically or practically. Anti-trust laws Avhich forbid monopolies, which endeavor to prevent all combinations that restrain all competition, which fix the punishment that shall be meted out to those who violate their provisions, which denounce as illegal and criminal all combinations that are formed for the purpose of raising prices or that actually do raise prices, these laws are demanded not only by existing conditions, but by prin- ciples of right and justice. Anti-trust laws that aim to kill the great " octopi "" that have readied out and gathered in all of the establishments in certain industries, not because of any economic superiority in these giant combinations, but because they are fed and pampered and nourished and sustained by special privileges, anti-trust laws that aim to kill these "' octopi " by the abolition of these special privileges, appeal not only to our sense of fairness, but to our common sense. They are likely to be most effective remedies. Their enactment and enforcement will in all probability kill many of the trusts and will surely do away with most of our trust evils. Similar laws requiring pub- licity of all those affairs of our giant corporations, which affect the public, and laws forbidding over-capitalization and also forbidding unfair " cut-throat " competition, give })]olni^e of speedy and lasting relief. Care must be taken, however, that we do not " kill the goose that lays the golden egg."' Care must be taken that, in ridding our barn of rats, we do not cause the barn to be burned. 'I'he book wliich is here presented to the public is in the nature of a study. It is our belief that the anti-trust legislation wliich lias been enacted up to the present time, namely, that form of legislation which, in terms, has for- Preface v bidden any and every coniI)iiiation of competitors, however great or small might be ihe combination; and wliicli has forbidden every restraint upon competition, however reason- able or unreasonable such restraint might be, and however direct or indirect a result of the combination it might be, this anti-trust legislation is ill-advised and is likely to Ije injurious. It clouds and obscures the real danger and the real evil. "We must restrict and restrain and curb and limit; and there are some things which we must prohibit and prevent and make criminal and penal; but it is abso- lutely necessary that we know when to prohibit and when to limit; wheii to prevent and when to restrict. In our first chapters we have endeavored to show the phenomenon of trusts, the existence and the mighty growtli of industrial combinations, their various forms, and the economic and legal dilferences between them, their re- spective rights and liabilities before the law. We have sought in succeeding chapters to show the extent to which gigantic organizations of industry are an outgrowth of the conditions of modern competition, and have tried to set forth, fairly but fully, the great wastes of competition, and the great advantages as well as tbe disadvantges of the trust system. We have defined monopoly, not only as the term has l)een used for centuries in Ihiglish jurisdiction, ])ut as it lias been modified by modern industrial condi- tions. We have endeavored to show the awful evils and dangers of monopoly, of that absolute or sole power of sale of any article, the complete and dominant control of anv industry, wbich is properly called monopoly, re- gardless whetlier it is the result of a special and ex- clusive legal right conferred by the sovereign or whether it is a power incidental to gigantic size. The effect of potential eom]ietition its strength, its weak- ness its limitations is fully considered. Subsequent vi Preface chapters treat of the effect of trusts upon the wage-earners, especially those who are banded together in labor unions: also of the relation of trusts to displaced labor, and to the farmers. While there is unquestionably an underlying and an unceasing tendency towards larger and larger industrial organizations, we attempt to show in the chapter on "Trusts and Special Privileges " that in very many, if not in a majority, of the cases, trusts are the results of special priv- ileges. The evils of over-capitalization form the subject of another chapter. The relations of the tariif and of expan- sion to trusts are also exhaustively discussed. That im- l)ortant phase of the question, the social phase, which is so often overlooked, has been considered in a chapter en- titled " The Man and the Dollar," with special reference to AVm. J. Bryan's famous speech at the Chicago Trust Con- ference. The scope and extent of legislative powers over trusts, the constitutional limitations and restrictions, are also reviewed. The momentous questions arising out of trusts, notwith- standing their comparative newness, have so far been the subject of denunciation rather than of consideration. There has been action rather than consideration, and legis- lation rather than discussion. So great are the dangers, on tlie one hand, of no action, and, on the other hand, of rash and improper action, that we feel that the proper charac- ter of a book upon the subject, at this time, should be that of a study or an inquiry, rather than a dogmatic treatise. The spirit of observation and of investigation is the spirit in which we can best approach the immense task of solving the trust problem. In that spirit we have endeavored to write this study of the great question of the day, the great question of the age. Wii. MiLLEPi Colli F.R. At'iu-rx, X. Y., July 4th, 1900. TABLE OF CONTENTS CHAPTEE PAGE I. The Day of Great Things 1 yll. What is a Trust? 21 III. The Mother of Trusts , ... 35 IV. The Wastes of Competition 54 V. What is Monopoly? 88 /VI. Prices and Potential Competition 103 VII. Trusts and the Wage-Earner 131 VIII. Trusts and Displaced Labor 156 IX. Trusts and the Farmer 173 X. Trusts and Special Privileges 190 XI. Promotion, Over-Capitalization, and Publicity, or Wind, Water, and Light 208 XII. Whose Fault is It? 233 XIII. Trusts and Expansion 260 XIV. The Man and the Dollar 277 XV. Legislative Powers over Trusts 287 XVI. The Remedy for the Evils 299 APPENDICES. A. The Federal Anti-trust Law (Sherman Act) . . .331 B. Analysis of Amendments Proposed to Same .... 334 C. Sections of New York Anti-monopoly Law .... 335 D. List op Anti-Trust Laws 337 THE TRUSTS. CHAPTEE I. THE DAY OF GKEAT THINGS. Great accomplishments arc the results of great forces marshalled into great organizations. It is the day of great things, great aims and great ambitions, great forces and great mechanisms, great undertakings and great accom- })lishments, great opportunities and great achievements, great men and great organizations. The greatness of to- day is, however, the greatness, not so much of creation as of combination, not so much of construction as of con- centration. The century that is closing has been marvelous in its material devclojiment and in its industrial progress. What we have done is greater than the deeds of the ages that have preceded, because we have combined our efforts and have worked more and more in unison, if not in per- fect harmony. What we sliall do in the future is likely to dwarf even tlie mighty achievements of the present cen- tury, because our energies are more concentrated, our forces are better combined, our interests more nearly harmonized. The tendency of tlie age towards great organizations manit'i'sts itself especially in those spheres of activity in which we can acconi{)lish results only by some form of co- operation, politics autl economies, government and in- 2 The Trusts (lustry. Tlie centuries, that ; a^e gone witnessed many niighly nation?; emjxirc.s: that' spread over the whole known world. But ,sinc-e despotism- has been moditied into limited monarehitis or given place to republics, since repre- sentative and popular governments have come into ex- istence, the nations of the world have never been larger or more powerful than to-day. We who are living have seen many struggling, discori.^ant, wrangling states coalesce into mighty nations. Within forty years Italian unity has become an accomplished result after centuries of strife. AVe have hardly laid aside the school books in which we studied about the twenty or more petty kingdoms, duchies, principalities and free cities that now form the invincible German Empire. English colonies are scattered over the entire globe. Some of them reach up into the frozen Arctic; others lie in the vast Pacific in the southern hemi- sphere, antipodal to the mother country; some of them are in Europe, some in America, some in Africa, some in Asia and many others are islands of the sea. All of them enjoy to-day a greater independence and freedom than they ever had before; and yet the movement towards imperial federation of English colonies is growing irresistibly. Our own great civil war, with its bloody and costly strife, dur- ing which the doctrine of State rights and the heresy that this union was a perishable and destructible temporary federation were burned up in the fire of battle, was one of the strongest jjroofs that the tendency towards centraliza- tion and combination in government can not be overcome. ]>ut the (Striking fact of the history of the century lias been the tendency towards industrial consolidation. Business organizations are mammoth in size; business un- dertakings are gigantic in their scope; business manage- jnent is of infinite detail. The cause of all this is that business opportunities have so mightily increased in size The Day of Great Things 3 and number, 'i'he great improvements in the means of travel and transportation and communication have revohi- tionized every kind of business, liiiihvays are trans-con- tinental; the world is girt with cables; telegraphs and telephones permit such immediate conmmnication that the exchange of thought and idea is almost as quick and al- most as subtle as mind reading. Steamship lines run from port to port with the regularity of a river-ferry service. The nations of the world are brought into closer contact; the products of each zone are exchanged in every other zone; the wants of the Oriental are supplied from the mills and factories of Europe and America, and in exchange the Caucasian seeks the wealth of Cathay. China is carved into spheres of influence by European nations; Africa is parcelled out into European provinces. Every great power, including even the United States, has now its colony or province or annexed territory in the tropics or in the opposite hemisphere. Raw material is with ease brought from one quarter of the globe to another and returning ships take back the manufactured article. Trade is no longer merely local. The market, to-day, for every factory and every mill, is the world. Two generations ago it was confined to a locality that was circumscribed by the circle whose radius was the stage route. CJreat are the oppor- tunities and possibilities of the age, great, amazingly, enormously great is the value of the commerce and manu- factures of to-day. Yet before us and ahead of us is the commerce and the stimulated production and the incalcu- able riches that will come when China, India, the Philip- pines, and the other countries of the Orient, with their hundreds of millions of inhabitants and their wealth of re- sources, shall have become consumers of the comforts of civilization and producers of its material needs. If great business organizations have been necessary in the past to 4 The Trusts accomplish economical production and to create and dis- tribute wealth among the nations, shall we not need, in the future, even greater organizations? " Canst thou pull out Leviathan with a hook?" Industrial history is the record of industrial combina- tion. Two centuries ago the business of manufacturing and the business of commerce were all done by individuals; but business was conducted within the smallest and most circumscribed limits. The product was small; labor was manual, or, if mechanical, it was rudimentary in its sim- plicity. The market was local; cost of production was great and prices were high. Inventive genius gradually produced new machines; the power of steam was applied to their propulsion. But machines could be used advan- tageously and profitably only by a division of labor and by individual specialization. This necessitated bringing to- gether into one enterprise large numbers of wage-earners. The total expense of carrying on a business became so great that individuals singly and alone could not assume it, but two or more individuals by uniting their capital and skill made it possible for larger business enterprises to be con- ducted, and the partnership became the form of indus- trial combination. Xaturally only a few persons could advantageously be embraced in any one partnership. It was not a good means of combining or concentrating very large amounts of capital. As machinery became more com- plex, as it Ijccame necessary more and more to subdivide labor and to specialize, and to bring together into one factory or mill an increasingly larger number of laborers to produce, and to organize into one force a larger number of persons to sell and market, it became necessary to enlist the capital of so many persons that not all of them could have actual oversiglit and management. An industrial organization in which the capital of many could be com- The Day of Great Things 5 bincd, but in which the liabiUty of those not in actual control could be limited, Avas the natural result of these conditions and tlie corporation soon became the usual form of combination in business enterprises. To-day the cor- porate form is rapidly displacing the individual and the partnership. Individualism in business, absolute indi- vidualism, that individualism which produces by the toil of any one man everything which that one needs, exists only in the state of lowest savagery, if even there. It is equally true that individualistic production, in the broader but more usual sense of production by persons unassoci- ated in corporate form, is becoming rarer and rarer. Not only is the business of the world done by corporations, but the corporations are daily consolidating and combining. Capitalization is becoming larger and larger. Millions and liundreds of millions of dollars of capital are brought to- gether in one centralized organization; thousands and tens of thousands of men are subject to one management. The year 1898 saw over $900,000,000 concentrated in mighty industrial combinations. The first two months of 1899 saw business corporations formed whose capitaliza- tion was $1,100,000,000. It did not continue throughout 1899 at that rate, but the month of March, 1900, has seen the formation of one single combination of the steel and allied industries inwhich Andrew Carnegie and his partners are interested, whose capitalization, the capitalization of one corporation, is $200,000,000, a sum that is not an excessive, but rather a modest capitalization of its earning capacity, which, in net profits, for the ensuing year is esti- mated at $10,000,000, or twenty per cent upon the capitali- zation. The progress froin individual to partnership ownership was slow and stendy. The transition in no manner affected the social or political organization of the community; its 6 The Trusts effects were almost wholly economic. In nearly all these cases there remained individual control and individual lia- bility. The change from the partnership and individual to the corporate formation has been, from the start, criti- cised, resisted and opposed, but its advance has been rapid and continuous, and, notwithstanding many apparent evils, beneficent. The past thirty years have seen corpora- tions grow and increase greatly in size. But the tendency for great corporations to merge into still greater corpora- tions U}iiil nearly all the productive forces in any one in- dustry have hee?i amalgamated into one great body has been a comparatively recent movement and has come with sud- denness and without preparation. In a list of trusts and combinations appearing in an article by Byron W. Holt in The Review of Beviews for June, 1899, there are contained about one hundred and twenty corporations, the capital of none of which is less than ten millions. About one half of these were formed in 1899. There are comparatively few in the whole list that have been formed more than five years; and of these the majority have been reformed and reorganized within that period. In 1899, The Journal of Commerce in its year-book published a list of three hundred and fifty-three trusts and combinations in existence in ]\rarch of that year. These trusts Avere then capitalized as follows: common stock, $4,247,918,921; preferred, $870,- 075,200; bonded indebtedness, $714,388,661; total. $5,- 832,882,843, or an average of nearly $17,000,000 for all of the three hundred and fifty-three combinations. These, it is to be borne in mind, are nearly all corporate com- binations. In them are included only a very few of the combinations which are merely agreements to raise prices, to control ])ro(lnction, io ado]it rules to regulate trade, or to enable members to protect themselves from encroachments upon their business. An eminent authority has stated that The Day of Great Things 7 it is probable that of great incorporations which woukl popularly be called trusts, there were by July 1, 1899, more than live hundred in the United States, with an aggregate nominal capitalization of from six to eight billions of dol- hirs (.$G,0()U,OUO,OUU to $8,0()(),000,000); and besides these there were about live hundred combinations and pools which were not corporate in form. We here give a list of the most important industrial corporations existing July 1, 1899, with the amount of their capitalization, bonded in- debtedness, date of formation, and place of incorporation. Only those having a total capitalization of at least ten mil- lions of dollars are mentioned. (For list see pages 8-13.) More and more does the tendency for industries to com- bine into great corporations manifest itself. Our list shows those in existence July 1, 1899, but during that year, according to Tlie Commercial and Financial Chronicle, there were formed corporations having a total capitaliza- tion of $3,51 "-3,280,000, made up as follows: common $2,285,555,000, preferred $899,775,000, bonded indebted- ness $326,950,000. One thousand millions of this were probably included in the list of The Journal of Commerce above mentioned as brought down to March, 1899. If so, the balance or $2,512,280,000 should be added to the $5,- 832,882,812, in order to bring the list down to January 1, 1900, making the total about $8,350,000,000 at that time. As already mentioned, the present year 1900 has, in March, seen the incorporation of the Carnegie Company, one cor])oration, at $200,000,000. Quite equal to the aggregate of all the wealth that is represented by the ca})italization of these gigantic indus- trial corporations, is that which is combined or pooled by virtue of mutual agreements, sometimes written, some- times verbally expressed, and sometimes only implied. Such are the combinations of the anthracite coal miners, The Trusts .0 .0 . .00 00 00 .00 0.0 .0 . .00 00 .00 0.0 .0 . .00 00 00 .00 jo" ' Ci ' Oi 'OO in o'o" 'o-o 10 oj "00 'OC 00 coo "OO cj ; - ; oir; rllO T-IO 010 T-l rH CO -10 (N t- CO t- CO "^[".^ . .f crtso- : ctj oc .0000000 . ,0 000 00000 oc .0000000 . .0 000 00000 o c . 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The very lai' attempted, 'idiis is true of those whose onlv aim is jtrice (ixing. In thtve iliere is still the maiiitenance of a numbei- of S(>parate plants, the same old expenses of sales- men, of advertising, and of di.-t rihiil ion over the whole held from each and every ]>oint of production. Sometimes, howc\('r, the associations go farther than merely to fix prices. 1'lu\v attempt to cut olf some of these wastes occasioned by competition. Tlius tlie enormous ex]Hms( of soliciting a fi'eiglit trrdbc which niav, bv .-uch soliciting, 1:)C diverted i'roiu oiie railroad to another, but 28 The Trusts which cannot be increased in aggregate amount, and which is sure to be eventually carried at a loss if the warfare of competition begins, caused railroads to form pools, and to agree on what amount of freight should be apportioned to the several lines constituting the poo.1, and to endeavor to send the freight in that way and in that proportion, and to pay each line its agreed share, even if the traffic did not follow the prescribed route. Eates were thus maintained and j)rolits secured. The roads were able to make great savings in this way. The anthracite coal companies (for nearly the whole anthracite coal mining business is now in the control of seven railways which run through the ter- ritory where the mines are situated), to cite another ex- ample, have formed a pool, and each month they agree on selling prices, regulate and limit the production, deter- mine the proportion to be mined by each company, estab- lish or substantially determine prices to be maintained by tlie local dealers, and fix uniform rates of wages and regulations for mines. In these ways they make some savings, but the principal effect is to maintain prices. Other combinations save some of the expense of competi- tion by parcelling out the market so as to make it unneces- sary for each one to maintain a separate establishment therein. Armour, Swift, Hammond, and Morris, the " Big Four ' of the Chicago meat packers, are popularly sup- posed to have an understanding v/hereby they do not inter- fere with each other in certain localities and markets. The price to be paid for cattle or charged for meat ])y all of them is fixed each day, although tliere is no known ex- press agreement and certainly no formal coml}ination be- tween then). But their "friendly agreement,'^ their "un- derstanding Ijctween gcntlemeu,"' or whatever it l)e, is able to exercise a most cfreclive control on the cattle and meat industry of the whole continent. They conduct their What is a Trust ? 29 business individually, but act in unison in many matters. Independent butcliers have been practically annihilated. It is not known that either the anthracite coal pool or the "Big Four"' in ihe meat business have any express agreement; but sometimes the understanding, or the resolutions ot " combines," as to })rices, production, and wages, are formulated in writing and made a written agree- ment. Not infrequently penalties are imposed, or an as- sessment upon each person is made and afterwards it is re- distributed to those who do not violate the agreement. The agreements of most of the wholesalers' associations as to minimum prices to retailers are written ones ; while the many combinatioijS in the iron industry and among the manufacturers of steel rails liave regularly imposed penalties, and the Standard Envelope Co. of Spring- field, Mass., was an example of a condjination which as- sessed the members according to the amount of their pro- duction and afterwards rc-distributed the fund among those who strictly adhered to the agreement. Whether the agreements of these various combinations arc written or expressed, invariably every effort is made to keep them secret. The public never accpiires knowledge concerning them until some memljer violates the agreement, and the fact conies to light in the revelation tliat is sure to result. For years the insurance companies have had pools or agree- ments as to ])rciniuiiis; and combinations existed among the manufacturers oi' steel rails, nails, cheuiical products, and steel beams, long before tlie public was aware of the fact. The three generic type? of combinations, then, are : First, combinations. ])0()ls. and a>sociations based simply upon agreements nuule by ])orsons who still continue as individual owners, and which generally affect prices, but sometimes alfect output and nun hods and scope of business; 30 The Trusts second, trusts proper, in whicli the owners of the several properties transfer their respective interests to several per- sons in trust to manage them as one property for the com- mon benefit of the several owners according to their pro- portionate interest; third, great corporations whicli absorb, amalgamate, and unify into one gigantic company various small concerns, not infrequently nearly all of those en- gaged in one industry. Legally, each of these types of combination differ more or less in form and rights and liabilities from the others. Economically, the corpora- tions and trusts proper form one group that in which there is a unity of management and control while the several business concerns which form mere " agreement " combinations continue more or less distinct industrially as well as legally. The different types are mentioned above in their chronological order. Of ''' agreement '' combina- tions we even now have many, but there is probably no existing trust in the proper sense of the word. The cor- poration the large corporation that absorbs all the old concerns that were formerly competitors is the latest phase of combination. It is ihe form that is to-day most popular with those seeking to combine, not only because of its industrial advantages and its financial conveniences, but chiefly because it is doubtful if it is illegal, while trusts and combinations are. It is tbe form that is attracting the attention of the public, Ijecause of its enormous size; and it is universally regarded as presenting grave dangers to industry, to society, and to ]il)erty. Xeither the great consolidated cor])orations nor the in- numerable combinations IjusimI on agreements are trusts using that term with legal strictness much as the people may so stylo them. Still as "a rose by another name may smell as sweet" these consolidiited corporations and the pools, assuciali: first, that they are gigantic industrial organizations; second, that tliey are unions of ])ro(lucers who were for- merly competitors. Whether or not they can wholly anni- hilate competition is the great ([uestion. Time alone can answer it; upon, that answer (lejieiuls tlu^ solution of the whole trust problem. But wliether we view trusts as in- dustrial organizations that arc simply gigantic, or as com- binations that have absorbed or will absorb all the produc- tive agencies of anv one industry and that have killed or o 6 The Trusts will kill competition in that industry, it is unquestionable that their origin is traceable to competition. Competition is, in a sense, the mother of trusts, despite the fact that Mr. Havemeyer of the Sugar Trust, has, in a moment of bitterness, charged that the tariff is the maternal parent of this brood of ill-repute, and notwithstanding the further fact that many, who have noticed the succor given to trusts by railroad discrimination, jDatent laws, and corporate and other special 2)rivileges, have mistaken wet-nurses of trusts for the real mother. Competition between rival producers and distributers plain, old-fashioned competition tends to build up larger and larger enterprises, and ultimately to leave only one or, at most, a few great producers in the field. There are in- deed exceptions to this rule counter tendencies but the proposition in the main is correct and will rarely, if ever, be questioned. The purpose of factories and mills is to manufacture. The unceasing cry of the consumer is for cheaper commodi- ties. The community, it is true, has other interests than money-making, than obtaining goods at low prices, than getting as much as possible in return for a little. Social and political questions complicate themselves with economic problems. Still, in considering an economic situation like that occasioned by trusts, the first question to be answered is: " How can the most of those commodities which gratify our desires be produced by the least expenditure of en- ergy?" The question of distribution follows: " How can these things, when produced, be enjoyed by the persons who produced them, in proportion as they participated in the work of production?" In the final answer it will be found that the widest distribution means the largest pro- duction; the fullest production, in general, means the fair- est distribution. The Mother of Trusts 37 It is the rule rather than the exception that trusts pro- duce more cheaj)ly than the indivi(kial producers whom they displace^ aiul therefore they can make the cost to the consumer less than tlieir individual competitors can. The cost of an article to tlie consumer its ordinary retail sell- ing price depends not only upon the expense of making, but of marketing it. '^^Fhe great industrial combinations cheapen their ])roduct not only by lessening the cost of making luit infinitely more by saving expenses in market- ing. The best established fact in industrial history is that concentration of ca])ital in productive industry has ever meant increased eiiicieiicy in producing wealth, a cheap- ening of products. It is concentrated wealth that has made possible our great factories, our great railroads, and all the great iiidustrial agencies which have done so much to create and cheajien weahh and to give to us the comforts and. conveniences of modern civilized life. Those nations that have encouraged the concentration of capital are the most prosperous; while the greatest cheapening of products has l)een in the industries in which concentration is possi- ble. The exhaustive study into prices made a few years ago l)y the V. S. Senate Committee showed that within a generation the prices of the uiost important manufactured articles (those ]U'oduced in industries in whicli coml)ina- tion and centralization are ]n-actieable) had greatly de- creased, but tlie ])riees of the ])ro(luets of agriculture (in which. c;:pital cannot ])v ;idvantageously concentrated) had iner(>ase(L Tlu> specialization of labor, the introduction of machinery, the combination of etfort, the concentrati(ui and consolidation of cjijiital, ha\(^ ahvays in the ])ast been un- inistakabh' signs of cheajier and moi'e abundant production. These things cain(> fi'oni the (h'liiaud for cheaper commodi- ties. Tlu'V remained, for a time, because thev served the 38 The Trusts coramnnity bettor. They remained till displaced by greater specialization, newer machinery, further concentra- tion, larger consolidations. The demand for lower prices first led to the division of labor. Men ceased to endeavor to supply all their wants, because they found that by each one doing that for which he was best fitted they could produce a greater aggregate and an increasing variety, and by exchange each could get more things for the same expenditure of energy, that is, get them cheaper. The extreme specialization that we see to-day in professional, as well as industrial life, is but a further division of labor; and the end is not yet. Ths purpose of it, the result of it, is to produce at a less cost, to render services more cheaply. The division of labor made possible the invention of maciiinery, which is only another answer to the demand for cheaper commodities. But the greater the division of labor the more necessary it becomes that men should co-operate, and the adoption of machinery usually necessitates tlie bringing together of a large num- ber of men into one enterprise. There are, it is true, ex- ceptions to this rule. Invention is sometimes a centrifugal force. It is not always centripetal. It occasionally decen- tralizes rather than centralizes. Thus not infrequently machinery is invented tliat makes l)ut a part of some article and tluit cannot be used profital)ly by each producer of tlie article, and the result is that a new industry springs up for tlK- manufacture of this part. This tends to detach from the old Imsiness what may be called a branch of it, and to make two business industries where fornKM-ly there was but one. But usually concentration of capital is required to purchase now machinery that is invented, and the concen- tration of more capital is required to run it jn'ofitably. A little caj)ital willi machinery, like a little lerning, "is a dang(,'rons thing. "' but macdiinery with suilicient capital has The Mother of Trusts 39 always meant choa])er production tlian \va? possible })y the means that it di- (]i vision of hibor. tlie more the necessity of co-operation and (jrneralh/, a/lhouf/Ii not (ihrai/s, the p'realer the necessity that a larger number of men be brou<4-ht lop'cther in one enter- jirise. I'liis means o-reater concentration of capital, larger combination of industry. A more abundant and cheaper product has T)een the gen- eral result of all past industrial cond)ination. This has ])ecn the iiniforni e(Hir long as business l)y yielding profits madio it advantageous so to do. livery labor-saving machine and every invention and improvement has refpiired iiew capital, and the im])ortant inventions have required tiie ca])ital of many persons in union : but the ])roduct has b(^en cheap- ened. It not o!ily has cost h^ss. l)ut it has sold for less. From the monunii in industrial hi-tory when men heiran to exchange their ])rnducts, the inov(MmMit towards concentra- fion of efiVrt and coitdiinal ion of capital ha- been pro- gres-;iv(\ The advanci^ has Ixmmt in a geometrical ratio. It is duQ lo that instiiu-t in human nature which lies at the foundation of (H'onomics which is the l)asic ])rinci]de of ex(diange. namely, fn ;j;cl as much as pos-ible in return for as little as |)Oisii)h'. Tt is due to the fact that big producnn'S are generallv cheap ]>r()ducers. !N"ot oidy does industrial history show that great business organizations have b(^en cheap producers, but in the vcrv nature of things the cheap is the big. the cheapest is sure 40 The Trusts eventually to become the biggest, and the biggest has a tendency to become and to continue the cheapest. Every one wants to get goods cheap. The person or organization of persons who will sell most cheaply will be tlie one patron- ized. He who sells most cheaply, sells the most; he naturally tends to become the biggest trader, lie who can- not sell as cheaply as his competitors is bound, in time, to lose his trade and to be forced out of business, unless he discovers some new way of cheapening his wares. If he is forced out of business, the usual result is that the big com- petitor, Avho is generally the cheap seller, gets his trade and becomes a bigger competitor, with a bigger trade; and it is also generally true that by the failure of the weaker competitor, and his own consequent increase in trade, the large competitor becomes, to a certain degi'ee, a still cheaper seller; for, with coinparatively few exceptions, large undertakings can be conducted at a less cost, in pro- portion to the business transacted, than can small ones; and, further, the same percentage of profit from a large enterprise as from a small one may enable the owner of the large one to make enough to live in comfort and affluence, while the owner of the small one may obtain so little that he may, perhaps, lack life's necessities. The larger the business transacted, the smaller the percentage of profit necessary to its success. Competition is impossible without competitors; yet if there is a struggle of com])etition among a given number, eventually one must prevail. But it will be asked: "Is it not a fact in industrial history that there arc always new competitors sin'inging u])? '' It is. New competitors will s])ring up; but. as a rule, the new competitors are larger com])etit()rs than tliose tliat have been vanquished. Tf not so at first, tlu'y soon become so. Com])etition generally is a process of constant, steady cliniii^'itiiui. Tlie winner in the The Moihcr of Trusts 4I >tni,i:-u-lL' will 1)(.' lie who gives the most for the money. This per-i u will lie the liisi to SfU his ])roduct and, in so far as he caji >-u;){)]y the entire demand, ihe others will havi no n!arl:et and mu^t go out of business. Assuming that a small jiroducer (-(luld hy some laljor-sa\-ing machine produce mure chcai)iy. ii would be only a short time before he would have hi.- compclilor's trade and become the large producer. But with the increased trade that would come as a result of tlie cheaper production by this new machinery, there wotild also come increased ca])ital, either accumulated prolits, boiTOwed cajntal, or associated capital. It would come because it would be an ab.-olute necessity to cai'ry- ing (111 the increa-ed ti'ude; it would come also as a I'esuit of the busiiie-.-. A^ M)iiii a> the little pi'uducer, w!ii) got C(ni- irn] of the l;!bM!'--a\i!ig itincliiiie or pi-oce^s, became the Lirge prodiieei', his ])osiiioii would uiupiestionably be st!!.!';ier u!u; his ability lo produc-e clieajtly would be in- creased. ^ !n the .struggle of competition it is always the weakest th;it is trodden under foot, and it is genei'ally the smallest ii^at is rlie weake.-t. The process is continuous and cumu- ;;'t:ve. 'I'lie little goes down before t:)e large, and liie large ri.-es above and. upon tl;e lirtle. Thi.- is not the restilt of t!'U.~ts. It is tlu' re>idl of competition. It i.- not the result oi' ti'u-is. but it i> the cause of ti'u>ts. The uiiderlying eaiiM' is that irre.-istible foi'ee thai lu!s nm'er yet ceased and jirobabiv nevei' will, iJir (li'iinnnl fur rlicnp production. ]>:irge ]n'0(iiiction i> usually cheap jiroduction. The large' con.itietitoi' h,-is an ad\'antage in the struggle. He is moi'e apt to win tiian i,- his sniall ;ind weak competitor. It i.- (iiily i;n exemplilieai ion (if nature"- cruel law. the survival of the I'liiot: ;i;id of ibo' i)itiK>s ecoiioniie law: "To him til, it r,a;li .-hall be given, and from him tb,;;i jiath nor shall be taken e\en liiai wiueli he hatli "; and of iluil dogma of 42 The Trusts social despair, " The destruction of the poor is liis poverty." Thank God that there are exceptions! Yet we can make no progress without recognizing the stubborn, though cruel, facts. Why are the largest producers usually the cheapest? Be- cause they can Avith their great capital obtain the most im- proved machinery, bring together the largest force, secure the best talent, spend the greatest sums in experimentation, utilize waste products, develop new markets, weather the storms of financial panics, oifer the most favorable terms to purchasers, transact the largest business (and therefore be content with a smaller percentage of jorofit). As a re- sult of all these things they produce and profitably sell at a small amount per unit of product. The business enter- prises thus equipped are reasonably sure in the struggle of competition to overcome their weaker competitors. The natural law of political economy is for the large to become larger, because the large is usually the cheap. Our old time competitive system leads naturally up to huge indus- trial enterprises. Bigger and increasingly bigger, then, is the usual, normal, and natural tendency of industrial enter- prises. Its cause is the demand for the cheaper and the increasingly cheaper; its result is cheapness, which itself results in greater bigness, and this again causes further cheapness. Bigness, cheapness, greater bigness, further cheapness, this has been, is now, and always will be the normal tendency and movement of economic and industrial progress. Competition, then, unrestrained and left to its natural course, tends finally, but tends normally, towards the ex- tinction of the small and weak, and towards tlie survival only of tlie large and strong. Cireat industrial organiza- tions are the logical, incvitable,and ultimate results of com- petition. The formation of trusts, whose avowed purpose The Mother of Trusts 43 is to save competitors fi-oni tlcfcat in the war of oompcti- tioii, as will be seen later, is vei'V often only a sliort cut to this goal, it is tlie throwing up of the s})onge in the early rounds ol' the light before the knock-out blow conies, oil condition that the conijielitor who is nearly " winded'' shall receiNc a part of thu gate UKUiey. It is a fad ot coininon eveiw-day knowledge that under our present condition of industi'v, as soon as one man is known to be engaged in a money-making business, great ntimbers of others engage in it, lured by the prospect of immense jjrofits. There is a iiell-mell rush to start in that business. Ivtcli aims to supi)ly the whole nuirket. Each introduces machines, processes, and methods of organ- iza.tion designed to cheajien the ])ro(luct so as to l)e able to undersell his competitors. I'he lower tlic price, tlie greater is the necessity of a large out])ut in order to reap an ade- quate aggregate profit. The larger the output, the more it is necessary to reduce tlie ])rice in order to sell the product. The farther this proceeds the more aggravated the situation becomes. Competition is first active, then intense, then bitter, then destructive, finally self-destructive. In the end we are confronted with over-])roduction and shut- downs; cut prices and sacrifiee sales; de])rcssion, stagnation, and bankruj^cy. Wlien this excessive com]>etition. like a fever, has run its fi;ll course those who liave been able to surviv(\, combine, f(U'mal!y or informally, tacitly or openly, to regulate the production, in order to make it com- mensurate with the (hunand and to obtain prices that will yield at Ica-t fair jtrofit. Trusts, and the great corpora- tions commonly cabed trusts, are forms of combination for this ]nir])ose. "' fjow prices " is the popular cry. Trusts are the means \]>0i] to comply with the request. Trusts are inevitalilc because the deiii;;!vl of the consuming public for lower prices is an insatiable appetite. It is sure to 44 'jl'Iic Trusts gnaw away profits, until a time comes when for a season, at least, it no longer pays some of the producers to produce. To avoid seemingly impending ruin they unite witlr their competitors, and a trust is formed to escape destruction in a warfare which others have largely urged on. Competitors figlit for marlvcts like dogs wlrich the consumers set on with cries of ^ sic 'em." Not infrequently the contest ends for the combatants lik^ the famous Killvcnny cat tight, when of tlie fighters " there Avas naught left but the tips of their tails and the bits of their nails." We do not say that all trusts are organized solely to esca])e the evils of undue com])etilion, or that in every case prolits have l^een wliolly wiped out; bul what- ever other motives may have existed, the clianee to obtain tlie benefits of clieaper ])roduction, better regulation of out- put to demand, and fair prices, has been ;; most powerful motive in the formation of trusts. ^lanv trusts have been formed for purposes of stock manipulation, but frequently the cause has been excessive competition. It has been, " Trust or Bust." There has always been a tendency for industrial organ- izations to increase in size. It is more marked to-day, iiecause invention and discovery have enhu'ged the field of business, strengthened tlie competitors, and intensified the competition. The vastly imi)roved means of travel, com- munication, and trans]~ortation tend to build up trusts, since they tend to increase competition. When the market was limited by the circle whose radius was the stage route, competition was bounded by that circle. Outside of it, a maker, although his cost of ])roduction was greater, could nevertheless find a market and could sell his goods. The great expense of transportation by tliese primitive methods, when added to ilie cost of produrtion, often made if neces- sary for the cheap producer to charge in the relatively dis- The Mother of Trusts 45 tant market a price in excess of that cliargcd by some pro- ducer i]i that remote locality whose cost of actual produc- tion was much greater. Pnit tran.>])oriatio]i has now be- come so imu-h im]'rovecl that each ])roducer is the active competitor of all others. When shoes were made by hand and the stage was tlie means oi transjjortation and com- munication, my local shoe coblder couhl. charge me much nu^re than a cobhler in Syracuse, twenty-five miles away, because it would have cost me much to go to Syracuse to be litted, and it would have been quite an expense to get the shoes from Syracuse, even if I did not have to go there to he fitted, 'bo-day if my cobl)ler were to charge over- much, I could buy from many stores in my own city of Auburn, X. Y., shoes nuide at l.ynn, Mass., or Brockton, ^lass., or at numy other places luuulreds of luiles away. Fifty years ago my local cobbler had hardly a competitor. To-day he competes with all the great shoe factories throughout the entire count it. To-day, to tell the truth, my local cobl)ler is out of business, that is, he is no longer in Ijiisiness as a cobblei'. The factory-made shoes were better and (.'heaper. and we took our trade from him. Ihit the cobbler has now a place in the shoe factory where he p.udves moi'c money than he did years ago wiien he ])egged on his own last. TIu^ weak and struggling are no longer to any extent beyond tlu' re.tch of c-ompi-'tition. Although ini[)ro\'ed trans])0i'tation has int-reased compe- tition, it has, neveriheless, expanded o])|)oriunities. The prize is {)roporlionately gi'eat. t'oniraels for nuiterial of the value of miHions are to-day iu)t uncommon. Trans- actions involving the amount of a king's ransom are as fre- ([tumt now as wovo those amounting to hundreds of dol- l:;rs in years gone by. Vv'hile 1 ;un writing this, the even- ing j;ai)er has been laid on my de.-k (A[)i'il llth, 1!)(M)), and 1 read that the -New W:vk Ceiitr.il IJaiUvay ha> ju>t given 46 The Trusts to the Carnegie Co. a contract for 35,000 tons of steel raih, amounting in value to $1,190,000. The business needs and opportunities of the present day are many times greater than before the days of railroad transportation, telegraph and telephone communication, steam power and international travel. Business methods have to keep pace. Concentration of capital is inevitable; combination of effort is absolutely necessary. The competitors for these great trade opportunities must be immensely large and powerful. Great industrial corporations are the latest business mech- anisms for doing the great business of the world. They are formed because they can do the work. To-day America is reaching out for the foreign market. She is winning it. Americans built the Atbara bridge in Egypt. The Cramp Shipbuilding Co. is turning out cruisers for Eussia and also for Japan; their value is millions. Pittsburgh iron and steel manufacturers have taken stupendous contracts in China, Japan, Europe, Australia, and Africa. But every nation is a competitor for tliis foreign trade. The market for every producer is tlie vrorld. Every man may strive to obtain it, but the victory is to tiie strong. Xapoleon uttered a his- toric truth when he said : '" (jod fights on the side of the strongest liattalions." In tlie migbty struggle for the world's industrial and commercial supremacy which has already l^egun, that nation will win whose industries are marshaled into mighty Ijut perfectly organized phalanxes, capaljle of undertnking gigantic industrial tasks and ac- complishing tliem successfully. The little concerns must quail before tlie call to perform such commercial duties. Comj)etiti(/iK lu-re, gives the jirize to the strong and large. CouUl any ((inccrn with less ca])ital than one of the great industrial coinbinai ions, have taken and filled a six million dollar order foi- a railway in Ifussia, as lias been dcme? Could any small concei'n, aTiything less than a trust, fill The Mother of Trusts 47 this order? The great industrial organizations have come into l)eiiig Uu-gcly because tliey were necessary to do the enormous business that exists. Prof. J. \V. Jenks of Cor- nell rniversily, one of tiie most reliable and trustworthy sources of information as to trusts, is authority for the statement tliat the head of one of the greatest industrial combinations had assured him that his concern would bring in $500,000 in profits from iheir foreign trade. l\gmy establishments do not build up such trades. Fur- thermore, not only do these gigantic business corporations alone seem able to deal with the immense trade opportuni- ties when tliey are presented, not only are they the only competitors who can handle these big deals, hut competi- tion prevents any but big concerns from building up sucli a foreign trade. It is manifest that it will not pay to attempt to work up an export trade unless it is a large one. It costs a great sum of money to introduce an article into a foreign market. Only a gigantic business enterprise can successfully develop such a market. Again, the contest for the markets of tlie world means tlie most intt-nse competition between the wage-earners of the nations, that has ever been known. It is the hardest struggle into which American industry has ever entered. A])out every nation to which we export has clieaper labor, and in order that we may be able to produce cheaply enough to compete with jn'oducers employing this cheap labor, it is nec^essary that the most economical and labor-saving methods as well as machines be employed. Enormous capi- tal is necessary, and enormous capital, well organized, can overcome the comiietiiion of cheap labor. Take for in- stance the Standard Oil Co. and its foreign market. This great com{)anv lias deveUjpt'd a foreign trade which brings into tliis countrv. t';'i-h and evei'v year, $()0,000,000 in golfl. Who will uhimatelv obtain the markets of the world? 4o The Trusts AVhat is ir tliat will finally dotcrniino tlie question? Is it merely governmental control? Is ir governmental do- minion? These may have their influence, hut in the long run the determining factin' is tlie price. It is true that trade follows the flag, hut the greater truth is tliat trade follows the price, and the flag is cliieily a protection to the trade. All the industrial countries of the globe, those of Europe, America, as well as Japan, are to-day cijmpeting for the markets of tlie ^vorld. The I'nited States can win that trade and hold it, for manufactured goods, only hy offering those goods at as low a ])rice as tlieir luiropean and Asiatic competitors. Against tlie cheaper laO')r of for- eign competitors, the Fnitod States can ol)tain r.nd hold liie markets of the world for manufactured goods. Uy adojuing labor-saving macliinery and by availing themselves n(_)t only of every ])eriection of equi}>ine!U and of process, but also of all th.o [perfections of organization. This is ])ossil)le only tltrough centralization of irulustry and aggregation of capital. Our raw materials. aUhou.gli jiroduced l)y indi- vidual efforts, will generally flud a market: but it is most significant that of all our ex])orts of manufaclured good<, eighty prr cent are beiu;.'; lo-diiy rroduced hy great indus- trial organizations, wbicli are. in fact. know]i as trusts. I;"i Europe, esix^ciallv in England and Germany, we find, to-dav, great as-ociated cajiital in b;;sines- enterprises. Those nations will beat us in tlie struggle of competition, unless we use every method and eve^w means that tend to ch.eapcn our product withonr der-rci^-i'i:^ 'hv wages of emplovef'S. The foreign market is absolutely nece-.-ary to American industry and iirosjierity. The productive capncitv of ihe labor-savina' iini)le!nen{s and neu'binery of the I'nited States more th.an equals to-day tliai of a poiiulalion of IdO.ono.dOO not using labor-saving devices. It is this ab.-')lute need of a foreign market in wliich to The Mother of Trusts 49 (1i>|ms(> of our ?in'j)Iu> jiformcls, and the intensity of the fi)rcig-n compotilioi!. thai \\a\o led to tlicpe porfcction.s of in(!ii>lrial o]\nanizations from tlie standpoint of produc- tion. the urt'al ousiness eor])oration.s of to-day. ^\'e will be most foolisli if we fail to perceive clearly the cause and me:; us of our industrial success. Our competi- tors, wlio ji^dously watch our every movement, have noticed how wc suc(,-red. aiul are atteni})tinii: to light u.- with the i^anR' instruments. The following from The Neic York JlrraJil of May '^-^ 1 !()(), is worthy of the most serious con- siderati(m hy vwvy ])ers()n who is interested in the pros- ]H'rity of the Aiiicrica.n manufacturer, th(> American wago- eainer, and every one whose success or welfare or prosperity is in any way connected with theirs: ger:^[.\x txdx'stries under trust control. SC.MUKI.Y AX niCOllTAXT rr.ODI'CT XOT IlEGULATED HY A COMIilXATIOX. Syn(licato> and trusts aro obtaining control of almost all l.MiM'.clics of iiulustry in (leniiany. In an arlidc on in(iu>trial and connnorcial conditions in (Jer- TiMiiy. })}- (oii-ul-tii'iu'ral Erank U. Mason, prpjnired for the forth- coiiiinu- \dhniH' of i;('l;ition:i of the I'nitcd Slates. Mr. Mason ' In llic report of this series for 1S!)7 tlie remark was made that cs nil iitciilinl iiiid ((iiiililinu (if (Irniiiniii'.^ pi-rfcct or(j< IkkI been '^I'lKlicnh fl in nil r.rtriil jirnhiilil 1/ II iikiioirii in mil/ other coiDitri/. ' Wduit \\a- tiuf thfu i- still more true to-day. The two hun- dred trusts and -yndicates uhieh were in existence in (Jerniuny at the he^'iniiitiLr of ISH'J ayc iner(Msiii<.r jn number day by day, until thci-c is M'aiccly a ~inL;le importaiU product of manufacture of whicli I lie output, priif. auil conditions of sale are not governed liy a coiiibiiiat ion or uieh-istandiiig lictwcen producers. '"One can srarccly ojicu a (U'rman newspaper without finding a paragrajih annoutLcing a new eoniidnation of this kind, or an 50 The Trusts (iriicle pointing fo the recent notable mulliplicati^n of syndicated industries in Enuland and the L'nited States as an example of what Germany should do for self -protection." Xot only has the tendency to centralization^ consolida- tion^ and combination been caused in part by the increase in the intensity of competition due to the invention of labor-saving, cheap-producing machinery and to improved means of transportation, travel, and communication, it has been furthered by other inventions wiiich have increased competitive forces by enabling men to exercise manage- ment over greater organizations and supervision over wider fields. Tlie talent for management has developed with each increase in the size of organizations, and it has been aided and fostered by labor-saving inventions and discover- ies. The stenographer and typewriter, the teleplione (local and long-distance), the telegraph, rapid transit, and myriads of other facilities, have enormously multiplied the capacity of managers to dispatch business, and have enrd;k;l tliem to m;in:!ge and supervise more and greater things. Tlie tnodern means for transacting business ]ia'\e made possiljle the consolidation of a muhitude and a magnitude of business interests under one management, wliich hfty years ago wotild have been physic-ally impossi- Ide. Competition is liercer to-day because each coni2)etitor has a])plianees and methods tliat give to liini increased (a])acity and power and ability. Would these means ever have been invented or discovered if they were tiot to be (,'in])loyed for their natural ends? Com])elition, which by tiu' way is nothing but the I'eflex of that jiopular demand for (liea})er goods, wliich is as ((as('l('>s and as irresistible as the force of gravitalion, has dictated not onlv the size of industrial enterj)i'ises. the d(^grec of c.'nli'alizat ion. and the extent of eondjinal inn of elfort. but the manner and form. l''or a lows ilwiv all The Mother of Trusts 51 enterprises were under indiviihial owncrsliip, hut when greater eoncontration became necessary, ii could he seeuretl only Ijy a union of capital and etl'ort and skilL For a century the })ailnership i'orni ot co-operation ])rcvailc(L ^J"\v() or more jnen jf)ined toge-ther; l)ut there reinained individual liahiliiy on the ])art of each for all tlie dehls and liabilities of the partnership, regardless as to which ])ei'son. in i'act, luade the contract or incui'iH^d the liability. Each ])artner was liable for the whole amount of the debts ot the ])artnership, and however small a ])Oi'tion of his capital might have been actually invested in the l)usiness, his entire fortune, whether in that business or in another, Avas liable to Ije taken from him in paymeiit of the dehts of the firm. This rule of law as to the liability of ])artners naturally re})i'essed and restricted the formation of })art- nerships, and prevented the concentration of wealth and combination of eil'ort. The natural limitations of human endeavor, and the impossihility for many men to work together harmoniously and advantageously in joint man- agement and control, were a further restriction upon and an impediuient to the success of ])artn( ;'-lii])s. The old proverb, '" Too many cooks spoil the 1)roth,'* has had innumtM'able exemplilieat i(Uis in i)ai'tm'r
  • y competition the pri^fit is ;:!'adi!a!ly le>sened. 'I'lie producer and the distributer are allowed to bite oil! less and less. The con- sinner rejiiiees. I'lien the proiit soon vani.-hcs entirely. Just as the (i(>tnaiid for low prices and tlie competition that caters lo it. o-cl tlie ])roducer or the distributer to the ])oint of pi'oducin,^^ or distributinf;' without a 2)roiit, he icy. dust at the moment wlien he has o-dtten li'aiui^d to live on nothiufr, he dies, as a busi- ness man; he vanishes as a competitive force. Here is tlie consumer's \i('i()ry; hut where is the consumer's gain? The compi'tit imi, al least a part of it, has died with the comjietiior who fell a victim. Is not the consumer hoist Avith his own ])etard? If we turn from the paral)le to the judicial dictum, we find the sanu- truth dechired. In, Kellogi;- r^;. Larkin^ 3 I'inney loO, the court said: '"1 apinclioiKJ ilial. it is not iruo tlmt eompolition i^; the life of tr,ii)nKlonce of this eomury. 1 !>(!ii\"c nni\'i'r>al oh-crxalion \. ill r.tlc.-t that in the last (juarter oi' a. ceiitui'y comjietition in Iradr has caused more individnal tlis- 1 re-s i;i:in the want of compft it ion. Indeed, by reducing jtrices belovr or raising- liieiii aliove value (as the nature of the trade per- iiiittiMii couipt'tit ion lias done iiiore to mono]iolize trade, or t(j siuaii'e exclnsi\(' a'haiitau-es in it. than has been don.e by contract. Itivalrv in trade \vill deslrov itself, and rival trade-men seek to 58 The Trusts remove each other, rarely resorting to contract unless they find it the cheapest mode of putting an end to the strife." As a matter of fact the consumer is frequently injured by excessive competition. He is benefited, however, by everything that reduces the cost of the article to the pro- ducer, unless the reduction in cost comes from the degrada- tion of labor; for this makes it possible, at least, for the consumer to get it at a reduced price; and further, the industrial history of the world proves that reduced cost always ends and results in reduced prices. There is no posi- tive evidence that this latter fact will be changed under the system of industry in which trusts predominate. But of prices we will treat later. Is there any fixed point beyond which there is no econ- omy in consolidation? The wastes of competition mani- fest themselves in production as well as in distribution. Is there any natural limit to the working of the general rule that large organizations produce more cheaply than small ones? ]Much depends on what is meant by produc- tion. Prof. Henry C. Adams of the University of ]\Iichi- gan, in an address before the Chicago Trust Conference in September, 1899, argued that there was such a natural limit. Let us quote him: " It is conimon to say that increase in the size of a manu- facturing phmt permits tlie production of commodities at less cost than would otherwise be the case. There is undoubtedly some trTith in this statement. The development of machinery lias gone liand in hand with the growtli of factories, and as a re- sult tlic jiroduct is furnished at a clieapened rate. ]3ut there is a limit to the ap])lication of tliis rule. Every manufacturing in- dustry, con-i.Icred from the point of view of production, has at any particular lime a size which may be regarded as its normal size of maximum cfllcicncy. This normal size of maximum efll- ciency is determined by the extent to which division of labor and the use of macliinery can ))e aj)f)lied. To increase sucli an in- dustry by one-Iialf would not result in a decrease of tlie cost of The Wastes of Competition 59 mamifacluro, for it would occasion a less cfTcctive application of tiic {)iinciplc of (li\ision of labor. Wliile, tliercf(jrc, it is true that the concentration of capital an(l.lal)or under a single direction is followed by economy up to a cciiain point, it is not true that com- bination and concenlnition beyond that point tend to reduce the cost of jn'oductidM. Jlc who accepts this >tatenient of the case must conclude that manufacturing combinations (I say nothing of other forms) contribute nothing to the reduction of the cost of manufacture beyond what would be contributed shouki each of the industries continue its independent competitive existence. This is a curt answer to a profound question, ])ut it is believed to rest upon sound analysis and to lead to the conclusion that the motive for a trust organization of manufacturing industries is not found in a desire to bcnetit the public by the reduction of cost." it niusl always Ijo Ijoriie in mind, as pointed out in an earlier chapter, that tlie limits of managing capacity, and of prnfiiahle {jroduction, are heing constantly expanded by such inventions and discoveries as the typewriter, tele- phone, cash-registers, and by improved means of transpor- tation and communication. Talent and skill in business management are being constantly fostered and developed by and with the constant increase in the size of business organizations. Any attempt to set arbitrary limits to this size, any statement that up to a certain point and no fnrlher, an organization is a cheap prodiu'ing agency, is to declare that progress has come to a standstill, that in- ventive genius is dead, that the ca])acity of human de- velo]mi('nt !< exhausted. I'liere may l)e numerous reasons fe.< by irusts l)ccaiise they result ill a cliL'a])er {)rice to them. Second. A seeoiul economic atlvantage of trusts is their ability to sell in large quantities, with a smaller selling force and at a smaller percentage of expense. Conse- quently, they can, if they will, sell more cheaply. The question whether they do, in fact, sell at a lower price, the vital question of trusts, will be considered in fol- lowing chapters. But there are many who seeing all the hardship that is caused by the displacement of labor, by the discharge of large numbers of commercial travelers whose services are no longer needed, by the elimination of a great number of jobbers and middlemen, and seeing all the suffering and inconvenience and financial loss sus- tained by them, consider this ability of trusts to sell with a smaller selling force as a great objection to trusts and one of its worst evils. The matter can be referred to here only briefly; fuller consideration will come later. But if it is folly to dis])ense with the now useless selling force, and with the jobbers and middlemen who are no longer needed; if it is to the advantage of the community that these people be kept at work although the same work could be done without ihcm, why would it not be wise to insist that evei'v wholesaler and every mauufacturcr and every jobber should double his force of commercial trav- elers and >h(nild estal)lish twice as many selling agencies, and why shoiild not a larger number of men be drafted, if necessary, and compelled to go to work as retailers? The answer is that us(.le^s labor and toil are ex'iienses and bur- dens not ahuie to tliose who primarily pay for them, Imt eventually to all tin* community. We will never know- inglv expend twice the energy that is necessarv to do a given amount of work. We will not jtay for that which 64 Tiie Trusts ^ve can ,irGt foi- nothini;^; wc will not part with our jorop- eny for that which wc know is of no value to us. Third. Another important economic advantage of trusts is that the several plants of the organization heing situated in ditfcrcnt ^.ctions of the country, the demand of r.r.y one locality can be supjdied from a plant in tliat vicinity, thtis saving enormous expense in transportation. Fourth. The necessity of a very large p'ortion of the ad- vertising, whicli is now so lieav}' an expense of business, can be saved by trusts. Reverting to the last three points, let us consider a few facts of daily observation witii reference to the amount of the expense incurretl in the em])loyment of commercial travelers, and in advertising, and in transportation. Tens of thousands of commercial travelers are emfiloyed, who are paid large salaries, besides their expenses in traveling and social treating. Their work is not so nnich to introduce new goods or to educate ]K'ople in. taste or style, as to solicit trade, to entice it away from competitors and to their employers. Millions of dolLirs are s])ent annttully in this country in advertising. Some of it is useful inforjna- tion, but the mo.--t of it is merely to call the con.-umers' atieniion to the business of one of several com])etil()rs, to influence him to trade there instead of eisewlu're. lUit v,ii;'t of the expeiise of trans[)ortationy 'hhe market to-day is universal; Jiien sell their ])roducts in all sections of the country, in all ([uarters of the globe, ^';l.^tly im])rove(l means nl' ti'ansuorta.tiou lijive wijicd out old maj'ket limits, hrciglit i-ates lia.ve been niarvelously idu'apeneil; still freiglit is one (d' the heavy expenses coniu'cted with nter- cantile bu.-ines>. It is needlessly and wastefully so, be- cause di>; ribut iou is not made from ap])ropi"ia((' or (-"H- vcnient centers. 'J'he enm'mous gross freight earnin;'s of ou!' r-;iirnads, to Viliich must be added the vast sums re- The Wastes of Competition 65 ceivod by owners of sleainboats, canal boats^ and stages, show thill ihc cost oi' what we eat and wear and consume is greatly increased by the expense ot transportation. ;Muc1i ot tins is needless. Trusts save a great deal of this "waste. With mills in all sections of the country, the local demand can usual 1\' be supplied from local centers of dis- triljution. The factory of New J'higland need not send its jjroducts to the far West or to tlie South, to compete with the sanu^ products nuule there. '" Coals need not be carried from 2se\vcasi!e to Carlisle." Fifth. Tliere can be the greatest specialization in manu- facturing. A })lant which is peculiarly well adapted for the prodiiction of a particular brand or style or quality, can be used for that purpos(\ The very Ijest special machinery can be profitably enijdoyed in it, and all the hands em- ployed can s])ecialj/.e in this branch of the business. The fiest equipped plants nuiy be run to their full capacity. Others which are needed, may, by means of the enormous capital ])ossesse(l l)y the trust, l)e put in good working order. Those which are not needed may be closed. ^lany are continuously lamenting this closing up of industries, this throwing men out. of employment, this Idighting of the business ]>ros])ects of nourishing towns ami villages; but it the trust does not arbitrarily restrict the output, and if It is aide with fewer plants and less men to produce all that is needi'd. why should it continue thi> extravagant and costly [)roducti(m that is incidental to running many snudl [ilant>? If the closing of these unnetMlcd factories is so great an injury, why not reap the full measure of Ijenofit of the op])Osite policy, niid insi-t that the number of fac- tories in existence be, at lea.-t, (l(.)ubled? 'i'liis sliuiiing-down of factories ami mills ])y trusts is (.ondemncd as oiu' of ;l;c greatest evils of th(^ new system, but it .should not be forgotten that under the competitive i 66 The Trusts system, mills and factories and stores are constantly being closed, because unable to compete successfully. The real evil of this practice of trusts in closing factories is not the closing of the factory so much as it is the prac- tice of sometimes paying these people for periods of inac- tivity; and the more common practice of buying the plant in order to overcome its competition when it is known that it cannot be a cheap and profitable producer. Sixth. A great advantage that the trust has in doing business, springs from the very fact that its plants are not all located in one place. Xo catastrophe can be conceived which will interrupt the en Lire business or completely suspend its operations. If a Hood or a fire compels one plant to shut down, the business may be continued in other plants. Seventh. While individual concerns which engage in the bitter struggle of competition not infrequently become so exhausted and their resources so depleted that they are unable to test or adopt new inventions or processes, the abundant capital which trusts are able to enlist en- ables them to carry on eoustaut experimentation and to adopt the latest and most improved methods and means. It may be urged that if they have sole possession of a field of iiulustry, if they have a monopoly, they will have no incentive to experiment with new metliods or adopt new machines. But they have no legal monopoly, no ex- clusive legal right, and while their strength ami their established trade give to them an enormous advan- tage over their com])etitors, they have no exclus- ive power to sell, exce])t so long as they can sell most cheaply, aud tliis they cau do only when they can ])roduce and distribute most cheaply. Despite all the incentive^ that the intensity of competition gives to sepa- rate individual producers to adopt the most improvi'd ma- The Wastes of Competition 67 chincr}- and the best processes, so as to survive in the tremendous siruti^^uh' of eom])etition, it is a fact that tlic inadequacy of tlieir capital, tlie very bankruptcy occasioned by tlieir competitive struggle, lias frequently prevented their doing that which alone could keep them alive. Wlien the International Paper Co. was foi'med, it was most bit- terly assailed by the newspapers of the country. In an address presented by the American Xewspaper Publishers' Association to the Anglo-American Joint High Commis- sioners, and signed by the owners of 157 newspapers, an arraignment of this trust was made. Whatever may be said as to the sufficiency of tliis charge against trusts, it is, at least, evidence from^ persons in no way favorable to trusts, and demonstrates our proposition that competitive pro- ducers are often unable when acting alone to adopt im- proved methods and nuichinery, which tliey could if con- solidated. In reading the paragraphs of this address, which are quoted below, it should be borne in mind that the paper trust embraced companies which were fairly representative of the trade. "While it was a combination of the weak and struggling, il must have been a union of companies of financial standing nearly equal to the average of all tlioso engaged in the business, for it took in at first twenty-five and afterwards thirty of th(^ juil]) and pai)er mills of the country, having an aggregnle ]iroductiin of about eighty per cent of the total I'iroduct of news paper. The para- graphs in the protest of tlie American Xewspaper Pub- lishers' Association, which are pregnant with significance, are the following. tlu> italics being our own: "Excessive and iiiuirnpor prices were paid for many mills that wore IfX'atpd on exhaust ed watercourses and that were tributary to denuded timber tracts; for milN that at periods of the year have an insufllcient supply of water or arc under water: for mill^ 68 The Trusts that are inferior and worthless in machinery, equipment, and con- struction; for mills that must pay excessive rental for water power; for mills that do not own or control woodlands; for mills that have neither pulp-grinding attachments nor sulpliite aux- iliaries. " Five of the paper mills obtain their power at a total annual cost of $196,000. Two others are run by steam, which makes competition impossible, and five others have insufficient power. Four owned no woodlands and ten of the mills had no sulphite auxiliaries. Xinety-eiyht paper-making machines were comprised in the plant of these niiUs, l)ut only forty-eight of the tnachines were of recent date or desiraile pattern. Xut one of the mills in all the combination possessed all of the six essentials of the cheapest and most successful manufacture." It i> not only true that in the struggle of competition, the independent producers have been unable to afford the latest and most improved appliances and methods, but, when combined, they not only could afford them, but did, in fact, test and adopt them. One frequently reads or hears denials of this statement. It is therefore proper to quote so eminent and disinterested an authority as Ernst Von Halle, who in his book, Trustfi or Industrial Comhina- tion.^ in flip Unifed States, has said: " "We find continual pfTorts at further advance, by the applica- tion of the newest machinery and of new labour-saving processes, and this as rapidly as is consistent with the amortization of the means of production on hand. For example, the American Sugar Tiffining Company has built a new refineiy. furnished with the iiewest technical improvements, to serve only as a safeguard in the case of a suddenly increased demand, or of stoppages in other fnctorios. The Cotton Oil Company has a great experimental sta- tion of its own. The Whiskey Trust has introduced quite a num- ber of inventions to improve the quality of its product. " By all new inventions the whole business is benefited at the same time, while the rrreat number of plants gives a chance to 7nak(> local cxpei-in^eTits with now processes of manufacture. "In this direction, none of the adversaries have been able suc- cessfully t-o accuse the trusts of negligence; on the contrary, The Wastes of Competition 69 since the bop;inniiipf. <'Oriipl aggrega- tion, 'riius the bencdl of any invention or process will be more sprcilily and more generally realized. Eighth. The enormous capital of trusts enables them to spend large sums of money in the development and ex- tension of trade in foreign countries. Jt is necessary here only to make mention of this great economic advantage, inasmuch as it lias been discussed more fully in the ])re- vi(nis chapter on the "^lother of Trusts," ami will also be considered in the cha})ter on '"Trusts and t]xpansion."" Xinth. One of the great econrunic advantages of trusts is their conservative iniluence in the matter of credits. 'Ih'usts tt'ud to li-sin rost by dimini>hing bad debts, ^[r. Bryan has criticised this coir-iTvatism in granting credits. tie has, in fact, ilecliired it to lu' one of th(> evils of trusts, and has reiireseiited tlie I'etailer as being the victim of a somewhat nnu'cilcss wholesaler, lie lias said: " The trust 70 The Trusts can not only fix the price of what it sells, but it can fix the terms ujtoii which it sells. You can pay cash, or if tliere is a discount, it is just so much discount, and you have to trust to the manager's ijcnerosily as to what is fair, when he is on tlie one side and you on the other." Without for the present considering the point as to whether the trust can actually and arbitrarily fix prices or even terms of sale, we believe that it will be generally conceded that one of the evils of the present competitive system is that which yiv. Bryan has chosen to refer to as '* generosity " in the extension of credit. The cause of nine-tenths of the bankruptcies and failures is tlie abuse of credit. It is not onl}' an evi-l to the nuin who is forced to give the credit in order to obtain the trade, but in the intensity of com- petition among sellers there is such an undue extension of credit, that not infrequently goods are practically forced on the retailer. He is virtually compelled against his own better jutlgnient to over-stock. The inevitable result is a large pereentago of bad debts, a percentage which is kept down only by the maintenance by the large business liouses of expensive collection departments. The consumer is tlie Atlas who bears upon his shoulders the whole com- mercial world. The sum total of bad debts and uncollecti- ble accounts, as well as the expenses which the extension of credit necessitates, the interest, the cost of book- keeping and of maintaining collection departments, all fall u})on him. When com[)etition is restricted, the eager- :ne>s to .-cll is limited to sales to those whose solvency is uiupiestioned. 'J'enth. The greatest advantage of trusts is the regula- tion of pi'oduction. Handling a very large portion of the ])ro(l;ict of ail industry, its managers can obtain approxi- mately aecural(,' infonnatioii as to tlie market and its needs, and as to the demand for the article which thevmake. With The Wastes of Competition 71 a full kno\vlefl,2;c of the capacity of their own factories and of those of their competitors, if atiy, they can adjust their output to correspond witli the demand. They can avoid the necessity of carryin-;- lar^-e stocl is not a single industry in which th(^ evil of over-jiroduction does not exist to-day. Those in which it was first most acutely felt were the first to form trusts. I'rior to the formation of the Standard Oil Company, the market was so glutted that not infre- quently tlie oil was allowed to run to was!(> in creeks and brooks. The wliisky industry has long ])een able to supply more than the dema.ud. Soon after the close of the civil 72 The Trusts Avar, tlio produclivc capacity of American distilleriGS was three times that of the consumptive power of the country, and prices were so depi'essed that occasioiialJy alcohol was oilered on the market at less then the amount of tlie tax. In 18?0, to correct the evils of over-production, ]iearly all of the distilleries north of the Ohio Iiiver entered into an agreement to produce only to the extent of two-ntths of their capacity. In 1S8(S, the export trade having greatly fallen off (because the foreign })roduction had increased), the capacity of the distilleries was tour times as great as the domestic consumption. In 1881, the luiiform price was helow the cost of production as it had been several times previous thereto, and a pool was foi'med for the express purpose of ex])Oi'ting whisky even at a lo.-s so as to turn the product into ready money. The loss was ap- portioned among the dilferent distilh'ries, wliich were rcg- ularl}^ assessed for the ]mr])Ose. When the first A^hisky trust was formed, it closed sixty-eight out of eighty distil- leries, Ijut with the remaining twelve it was able to furnish the same output as 1)efore and soon to increase it largely. It should also be borne in mind that the capacity of the plants owned by the sugar trust is four times the domestic demand; and that the cotton-oil t)'ust was able, as soon as formed, to close many of its j)re-ses. It is always more satisfactory to cite an exam])le whicli has come under per- sonal observation. In the city of Aubuivn, X. Y., within the past week (:\Iay 21, 190(1), there has lately occurred a shut-down in a shoe-factory which is the ])rincipal one in the tov,n and one of the leading ones in th(> country. The statemcMit of the company sliows that this is bu.i one of the thousands of similar cases which can b(,' attriljuted to over-production. Here are some significant paragraphs from it: The Wastes of Competition 73 " statistics show that the shoe factories of this country, when running full, can produce as many shoes in seven months as we consume in a year. The general business of the country has been exceptionally good the past year or more, with tlie result that the factories have run full, and there has been a large over-produc- tion of boots and shoes, leaving large stocks in tiie hands of both jobbers and retailers. These conditions make it very difficult to obtain orders ahead, as the dealers, knowing the conditions and understanding fully that prices of leather are governed by sup- ply and demand, feel that prices may be less, later on, and so are holding otr and trying to dispose of stocks on hand, which seems wise for them to do. Dealers, willing to buy at all, are demand- ing and receiving concessions from manufacturers. Prices of leatlier so far remain fairly firm, so there is cjuite a risk for the manufacturer to buy leather at present prices and cut into goods for fall delivery when prices by that time may be much less. " We finished cutting spring orders some time ago, ;!nd iiave since been running on fall orders, the bills for which are dated fall, to be paid at dates agreed u[>on after that time. Reports sliow tliat most shoe factories during the past six weeks have been running eitlier one-quarter to one-lialf their capacity, or are comj)letely shut down. \\"e have always taken great pride in giv- ing our lielp steady \\ork, and often make sacrifices to do so, which they know notliing of. Wiiile we were considering the advisability, yesterday, of ordering more slock to keep running, the report came to the office that some of tlie employes ^\ere dis- satisfied, and we concluded if they did not appreciate the condi- tions of trade and v.hat we were ti-yiiig to do for (hern, we would close down for a time, as other slioe manufacturers are doing, particularly as what fall orders we have booked are from one- quarter to half the size only that the same parties have usually given." The evils of nvcT-prnductirm aro nor measured by tlie fall in price which the rnanufacturei' has to endure. l)ur more hy the ennrnious loss that fall^ n]ion the laborer who is thrown out of eniploytnent, and cvcti rn(U'e by the resulr- in,i{ sta,Lnialion ihat pervades ;dl h";ui;-iie.^ of industry and which causes flnanci d jianics and 'ms-n:',-s depression, those periods, so trying lo the ,-ouls ol mw., whicdi during 74 The Trusts the last half century have been occurring with increasing frequency in America. Unless these evils can be combated and overthrown, unless our production can be regulated and restricted to our effective, healthful demand, or unless outlets can be found for our surplus products, instead of being a prosperous country and a happy and contentei people, we will become a most wretched and miserable na- tion, and discontent, envy, and sedition will be rife. It would be grossly unfair, however, to refer to the power of trusts to regulate production or to correct the evils of over-production by the development of foreign markets, without conceding that the power to prevent over-produc- tion implies, to a great degree, at least, the power arbi- trarily to restrict production, at least temporarily, and thereby to raise prices unduly. This is but one phase of the great monopolistic element, which is more or less inci- dental, if not more or less inherent in trusts. But this point will be considered later. We have this year, in the spring oi ]!)00, had either a most striking example of the abuse of this power of trusts over production, or else con- clusive proof that even trusts that have succeeded in getting control of an entire industry, may be hardly more able to foresee the demands of the future than small separate concerns. The American Steel and Wire Co., within two months after a statement by the head of the company to the effect that the active demand, which, for many months, had characterized the market, was certain to continue, sud- denly closed about a dozen of its plants and threw out of employment four thousand of its employees. This may have been done arbitrarily for the purpose of depressing the value of the stock of the company. If it was an actual necessity, it is hardly possible to believe that the managers of the company possess perfect business foresight. The closing of these works would hardly seem, however, to have The Wastes of Competition 75 been for the purpose of so limiting production as to create an artificial demand in excess of supply, for the purpose of raising prices, because with the closing down of the works mentioned, the company did very greatly reduce its prices for the purpose of marketing its surplus stock. Eleventh. Trusts work great economies by their ability to utilize waste, and to turn it into valuable by-products. The Standard Oil Co. in tliis way has built up enormous industries subsidiary to its main business of refining petroleum. Ernst Von Halle states that there are more than three hundred by-products in the domain of this com- pany, which have yielded most valuable materials to numer- ous otiier industries. Thirty of these are commercial products in which there are large dealings. '^rwelt'th. "We have alluded to the conservative power in business which trusts exercise by restricting credits. They present another financial advantage. They broaden the field of investment. It would be useless to deny that under the loose corporation laws that exist in most of our states, under the lax methods of inspection and control, and because of the shameless dishonesty which 30 often characterizes corporate management in this country, investment in stocks and particularly in " industrial '* stocks, is hazardous. Yet when an aroused public con- science, when an enlightened commercial policy, shall de- mand that corporate methods be honest, that corporate management sliall l)e faithful, tliat the acts and deeds of corporations in so far as they affect the public shall he public, and when fraud ami misrepresentation in connection with cor])orate enterprises are punished as certainly and as severely as when they occur in individual dealings, and wlien those who are entrusted with the properties of great corporations are hehl liable as trustees thereof, then, not only will the masses, who now deposit their accumulated 76 The Trusts gains in savings banks, receiving the minimum of interest, find fields of investment which will he safe and secure and profitable, but business will receive the impetus that comes from new capital, and industry will have a further stimulus. Thirteenth. Even under the present lax conditions of our corporate methods, and notwithstanding the slight incen- tive to invest in trust stocks, trusts are able to float thei? bonds at a lower rate of interest than that at which their constituent companies were able to borrow money before the consolidation. They are also able to obtain, by the sale of their stock, an ample working capital. In this way, again, they are a conservative force. Their bonds run for a long period of years and mature at a fixed date. This saves t];em from that great danger of independent manu- facture, namely, the calling in by banks, in times of busi- ness depression, of their loans to thein. The honestly man- aged and conservatively financed trust ought to have a less hazardous and perilous career than most manufacturing establishments in the past have had. Fourteenth. Trusts, being relieved from tlie bitter strug- gles of competition, are able to raise and maintain llie stand- ard of quality. It must be conceded that the ability to raise it, implies the ability to lower it. This is one of the many phases of the monojjolistic element which it is charged that trusts possess. But if, for the purpose of ar- gument, we admit tliat trusts may demand to a great extent whatever price they wish to impose, we are tlien obliged to concede that some of the pressure that causes adultera- tion is largely removed; for, on this theory, whatever they add to the cost of production in furnishing a pure article, they can recouy) in the price. It is, at least, ])k'asant to as- certain, as the result of investigation, that the articles which are made by tl)e trusts that have been longest ia business have been greatly improved in quality. Xotwith- The Wastes of Competition '^'j standing some charges to the contrary, which have been made by ^Ir. Henry D. Lloyd in hi.< book entitled ]Yeallh Against Co)ninoiiireaIl/i, it is the general experience of those who, for the last thirty years, have used kerosene, that to-day its quality is better than ever before; that there is less danger of ex])losion, and that there is now scarcely a perceptible disagreeable odor. Ernst Von Halle asserts that the whiskey trust has done much to improve the qual- ity of its product; and consumers throughout the countr}', although they may denounce the sugar trust, will almost universally admit that the quality of the article has been bettered. Fifteenth. By no means least of the benefits of trusts, in fact, one of tlic greatest advantages of tliis system as conij)ared with that which ])revails under competition, is the opportunity for comparative accounting and compara- tive athninistration. Tliis is of immense benefit, not only to the trust, but to the consuming public. How often when one struggling competitor sees another apparently succeeding and prosiJcring. he says to himself, "I womle.- how he does it? AVliat i- the secret of his success?'' I: is evident to him that his successful rival has secured some advantages, but the latter, if a shrewd business man, keeps tlunn to himseir. if all tlie competitors were banded to- getlier in a tiaist tlu'v would compart' notes, and if one was found t(.) ])os>ess a 1)etter machine than the others, it would ])0 ])rocured by all. If another was found to have a cheaper ju'ocess than the otlici'-. it would be ado])ted by the wliole trust, li the organization of a tldrd was considered more ])crfect than that of the others, all the factories and plants forming the trust would have an organization modelled after it. All the meinljers of tlie trust would be the gain- ers, but those chietly benetited would be the jmblic. So much for the economic advanta^jes of trusts. So ^^ The Trusts much for the savings of the enormous wastes of competi- tion, which trusts can bring about. But what of the economic disadvantages of trusts? Perhaps tlie most im- portant of those which suggest themselves as inherent in these organizations is the loss of individual initiative and a possible smothering of individual incentive. The trust is largely impersonal. It loses much of the good-will that its constituent members formerly had. There are many who fear that it will not be a beneficial form of industrial or- ganization, because they think its officers and servants will not work so faithfully and energetically for the proprietors who live far away and with whom they never come in con- tact, as they would for a master under whose eye they worked. There is an even more widespread belief that trusts are crushing out individuality, that they tend to close the door of opportunity, and that inasmuch as fewer men can be heads of enterprises and independent proprie- tors, there will be no incentive to them to do their best. It is felt that since the hope of securing an interest as owner of a plant is gone, ambition has gone with it. It is claimed that, inasmuch as from the manager down to the cheapest laborer, all of the persons who are actively indenti- fied with the work of the trust are employees, therefore there is no longer the same spirit animating them. We believe these dangers have been greatly magnified. Con- ceding that comparatively few men will now obtain a pro- prietary interest, we believe that the prizes of business life are larger than they ever were, and business op])ortunities are greater. The larger and the more perfect the organ- ization, the greater the incentive and the surer the promo- tion of the capable. Take, for instance, great railways, our largest and most ])erfect organizations. Is there not there an ample stimulus to energy; is tliere not an abundance of opportunities to act as incentive for the ambitious? Are The Wastes of Competition 79 there not example? innumera])le of men who have entered in the lower grades, and have worked themselves up to high offices and to positions even in tlie directorates? The modern trusts offer innumerable opportunities for advance- ment and the greatest of prizes for which to struggle. As in all our previous industrial history, they will he won by those who are most competent. '' Jle will bear the palm who deserves it." We have had, as the result of the organ- ization of the great Carnegie Company, a marked instance of the possibilities still open to young men. ("harles Schwab was chosen president of this gigantic corporation. He is a young man who has worked his way up. The secret of his success has not been " pull," but " push." This attainment of this high place is not the result of accident, but of faithful working during business hours and of special study and extra work when away from the mill and factory. This instance is, indeed, exceptional, but still there need be no fear that ambition will ])e stifled as long as there is opportunity for advancement. Trusts are a form of organization that in its very nature is a scheme of or- derly and regular and graded promotion of the etticient. A century's experience with business under corporate con- ditions should dispel all fears that the servants and em- ployees and officers of those who adopt this form of busi- ness organization will ])rove indiPi'orcMit to the interests of their emjdoyers. There are no em])loyees more faithful than those of the business corporations which have been so common during the last thirty years. There is no reason to fear that the servants, officers, and employees of the greater corporations known as trusts will be less devoted to the interests of their employers. A second evil of trusts is one that is financial, rather than economic; incidental and temixirary, rather than inherent and permanent. It is the likelihood of rash and wild 8o The Trusts speculation in trust stocks, tending to produce a feverisli excitement in Inisiness. But this is an evil which can be corrected by the exercise of control over corporations. There are many other evils that have, in the past, re- sulted from trusts. They are the occasional instances of extortionate prices, of unduly restricted production, of diminished wages, of depressed prices for raw materials. Besides the.-e there is the possible deterioration of the quality of the product, and the danger of political corrup- tion and domination. All of these are phases of the great question of nioiio])oly as an element of trusts, which will be considered in subsequent chapters. To sum u]), if we consider the two elements of making and mai'keting which together fix the price of an article to tlie consumer, there can be no question as to the wonderful economy of the trust form of indus- try. Some of the largest manufacturers in their respective lines in the Ignited States have been quoted as saying that the consumer often pays to the retailer twice what Avould be the cost of the article and a fair profit to the manufacturer. The great savings of the trust, which we have enumerated, make this statement seem not at all improbable. It is not diiucult to believe that if tliat system could be perfected, many commodities could be sold for about one-half their present niarket price. Are instances of the savings by consolidation necessary? If so, suppose we take at first that much-cited, much-condemned trust, the earliest, and tlio strongest, th.e Standard Oil C'omjiany, the trust that has been criticised so much Ijut which lias never yet claimed to be the '"'Slandered'' Oil Com])any. Can the Standard Oil Conq^any produce more cheaply, or are it? ])rofits due wliolly to de])ressing the })rico of crude oil, or to rai]rr)nd discriminations in its favor, or to new inventions which would have been adopted had The Wastes of Competition 8i tlicre remained a great niimljer of small competitors and Avhieh would have produced the same savings when used by the many? How does the Standard Oil Company tend in any way to really reduce the cost of production? "When this trust was Ijuing investigated Ijefore the House Committee on ]\Ianufactures, in the summer of 1888, the following statement was made by its counsel, in his argu- ment: " The Standard Oil Trust offers to prove by various witnesses, including Messrs. T'lagler and Kockefeller, that the disastrous condition of the refining business and tlie numerous failures of refiners prior to 1875 arose from imperfect methods of refining, want of co-operation among refiners, the prevalence of specuhi- tive methods in the purcliase and sale of both crude and refined petroleum, sudden and great reductions in prices of crude, and excessive rates of freight; that these disasters led to co-o})eration and association among the refiners, and tliat such association and co-operation, resulting eventually in the Standard Oil Trust, have enabled the I'cfiners so co-oj)('rating to reduce the price of petro- leum products and thus benefit tlie public to a very marked de- gree and that tliis has been accomplished: " I. By cheapening transportation, both local and to seaboard, tlirough perfecting and extending the pipe line system, by con- structing and supplying cars with which oil can be shipped in bulk at less cost than in packages, and tlie cost of packages also be saved; by building tanks for the storage of oil in bulk; by purchasing and perfecting terniinal facilities for receiving, handling, and rc-sliipping oils; by j)urch:ising or building steam- tugs and lighters for seaboard ov ri\er scr\icc, and by building wliarves, docks, and ware-houses for home and foreign shipments. " 2. That by uniting the knowledge, experience, and skill, and by building manufactories on a more perfect and extensive scale, with approved machinery and appliances, they have been enabled to and do manufacture a better (piality of illuminating oil at less cost, the actual cost of manufacturing having been thereby re- duced about tit) per cent. " .3. Tliat by tlie same methods, the cost of manufacture in bar- rels, tin cans, and wooden cases has been reduced from 30 to GO {ler cent. 82 The Trusts " 4. That as a result of these savings in cost, the price of re- fined oils has been reduced, since co-operation began, about 9 cents per gallon, after making allowance for reduction in the price of crude oil, amounting to a saving to the public of about $100,- 000,000 per annum." The amount of some of the other of these savings in this year, 1900, may be easily estimated. In 1872 it cost $1.50 to transport a barrel of oil from the wells to New York. To-day it costs only about fifty cents. The annual produc- tion of the company is about 35,000,000 barrels. In 1872 the barrels cost $3.35 each; to-day they cost not over $1.25. Of course, by no means all of the oil is transported in bar- rels, but the saving to the company each year is many mil- lions. The expense of the tin cans used by the company has been cut in two; thereby they save many millions each year. It lias also reduced the cost of the wooden kegs used by it, so that it annually saves about $1,500,000. In the manufacture of many of its by-products, such as naphtha, lubricating oil, parafFme, wax, etc., the trust is compelled to use large quantities of sulphuric acid. It makes its own sulphuric acid now, and instead of being obliged to pay for it one and one-fourth cents per pound, it is able to produce it for eight cents a hundred pouiuls. As shown in the chapter on Prices and Potential Comj)cti- tion, the decrease in the price of kerosene between 1872- 1898 is so great that when applied to the annual consump- tion for the latter year the saving to the jiublic js about $100,000,000. But perhaps more conclusive than the statements of what the Stantlard Oil Company would prove, or than the figures just mentioned, is the inference that every one must draw from the enormous dividends paid by the concern. In 1872 none of the oil refiners were making money. About that time the Htandard Oil Companies of Ohio and Penn- The Wastes of Competition 8 J sylvania formed an alliance with two other large refineries, the Pratt Co. and the Atlantic Refining Co. In 188;:^ the Standard Oil Trust was formed. In 188T, five years later, its capital was $1)0,000,000, largely water, hut its profits, according to the report of a Xew York legislative commit- tee appointed to investigate, were $"^0,0()0,000. Could tlie trust have made such })rofits if there were not economies in making and marketing occasioned by the consolidation, in- asmuch as the separate companies in keen competition had none of them prospered? It should also be noted that the price of oil had decreased, not only the price of crude but also refined, and the difference per gallon between the cost of crude and refined, i.e., the cost of refining and trans- })orting to the seaboard, was 1-1. o2 cents in 18T2, when the alliance was formed; and in 1887, the year the profits were $20,000,000, the difference was 5.16 cents. Can this mean anything else than cheaper production? If so, we must concede to the Standard Oil Trust what has never yet been conceded, that they have lowered prices even more than the decrease in cost of production. To-day (April 2o, 1900) the Standard Oil Company is capitalized for about $100,000,000. It is still largely water, notwithstanding the fact that water and oil are not supposed to mingle, and yet so greal are its ])rofits, caused by the savings of the consolidation, that its stock is worth 500 in the open mar- ket. Yet oil has gone down still further in price. In 1807 the diiference between crude and refined (the cost of refining and transporting to seal)oard) was 4.01. Is not this cumulative evidence tlint the consolidation can pro- duce chea])lv, while warring competitors could not? In the three years, 18!)(!. 1807, 1808, the Standard Oil Company's dividends aggregated ninety-four ])er cent of its capitaliza- tion or $91,115,000. The market value of its stock to-day is between $500,000,000 and $0'00,000,000. 84 The Trusts Let us now look at the savings in cost of service, by con- solidation of telegrai)h companies. Prior to 18G6, our tele- graj^hic service was done through a number of small local companies. To send a message across the country it was necessary for it to pass through the hands of not less than a half dozen com})anies. In 18GG they were all consoli- dated into the Western Union Telegraph Co. At this point, inasmuch as we are now engaged simply in studying the question whether or not consolidation gives cheaper cost of service or production, it is perhaps unnecessary to give particular study to prices or rates, but it is helpful for ns to do so in order to see if profits come from reduced cost or higher charges. George Gunton lias collected some valuable statistics in an article written by him for TJie Polifical Science Quarierhj for September, 1888, but in- cluded by him in a book issued this year (1900). "We quote from it: "rates for sending TEX WORDS FROM NEW YORK: I80G 1SS8 To Chicago $2.20 $0.40 " St. Louis 2.55 .40 " .St. Paul 2.25 .50 " Cincinnati l.iti) .40 " New Orleans :i.25 .60 " Galveston , . 5.50 .75 " Minneapolis 2.t0 .60 " Buffalo 75 .25 " Washington, D. C 75 .25 " San Francisco 7.45 1.00 " Oregon 10.20 1.00 " State of Washington 12.00 1.00 Moreover, in ISOS. when ihis country sent only G.404,.'3t)5 mes- sages, it cost llie coiupany. on an average. ().'i.4 cents per message; and, in order lo 111:1 ke a jn'olil on tlie capital invested, tlie a\'erage price charged to the coiiiiuuiiity was .'sl.l)47 ]er message, leaving 41.3 cents jiroiit i)cr iiiessagc lii 1887, when the company serit The Wastes of Competition 85 47,;?n4,530 nic?:*agos, tlio averafro cost per mcssap^e was 23 cents; and the av(>rage toll to the coniiminity was reduced to 30.4 cents per message, leaving only 7.4 cents profit per message. It will thus be seen that during the twenty years of this monopoly the average cost of messages to the community, to all ])oints. has been reduced 74.3 cents per message, or over 70 per cent; and that the profits have been reduced 33 cents per message. In other words, the total cost of the service to the community to-day is 10.9 cents per mes- sage less tlian the profits alone were before the organization of this company." The cheapening of tlie cost oC transportation as a result of combination and consolidrttion is equally worthy of at- tention. In his address before the Chicago Conference on Trusts in September, .1899, Mr. H. T. Xewcomb, of the T". 8. Census Oflice, said: " The decline in railway ch.arges in the United States has been continuous and e\tensi\e. The average rate per ton of freight carried one mile, measuri'd in gold, bus declined from nearly two cents in ISt'u to less than eight mills in 1S!)8, the last year cov- ered by the rejiorts of the st^itistician to the Interstate; Commerce Commission. The jiriee. of wheat at the jiort of New Yoi'k dur- ing 1807 would pay f(ir the Irtinspoitatinn of but 2.S4 bushei- ol wheat, from Chicago to New York at the rates of tlnit year; in 18!)7 the ])i-ice, though consi(!er:(bly lower than in ISO?, wouhl pay for moving six buslu^ls. In other words, the decline in the railway rat^' fi'om Chicago to New \'ork \\ as twice as gi-eat as the decline in the jirice of wheat. The decline in ])asseiiger rates from 1S71 to 1S08 amounts api)arently to 2') ])er cent; but, unlike that in freight rates. i> iKit >ii-eeptible of satisfactory statistical presentation. The >ubstantial identify of tlie service necessary to permit the use of the statistical method, has not, however, been preserved. The dollar tliat purclia>es transportation in a modern train, i)rovided with automatic eoui)!ers and air brakes, traversing at sixty miles |iei' hour, a track coiujioscd of I'essemer steel rails weighing 100 pounds to the yard, and guarded by block signaling apparatus, purchase- \astly moic than did the dollar ])aid for ]iei-siinal f rainportatiou a few decades ago. won though the dis- tance ti-averseii b(> but little greater at pre-enl. Th(> public has preferred to ha\'e improved acionniiotlafions and better service 86 The Trusts rallicr tlian very much lower charges, and, as usual in America, lias had its way. The same rise in the standard of living that has given the American farmer his top-buggy, his piano in the parlor, his Sunday suit, and Brussels carpet, has given him the luxurious coaches and well-ballasted roadbeds, the safety and the speed of modern passenger-service. But has the competition of rival routes produced these reduc- tions in rates and improvements in the quality of service? I think not. Such competition has caused numerous extravagant expenses; it has made railway business unnecessarily costly, and some one must have paid the bills. Let us examine some of these expenses, though it is not easy to secure authentic statistics, and those available serve to suggest only the possible aggregates. The In- terstate Commerce CJommission has reported that nine roads paid out an aggregate sum of more than one million dollars in a single year as commissions for securing competitive passenger business, and it is known that as much as $20.70 has been paid to secure a single second-class passenger from this city to San Francisco. The multitude of outside agencies and traveling agents maintained solely for the purpose of securing business for their respective lines that might otherwise traverse those of their competitors in- volves an expenditure so gi'eat, even during periods of comparative harmony, that it has been deemed necessary to restrict their num- ber by contract. An agreement in force for a considerable time limited to eight the number of agencies that might be main- tained in New York City by each of the nine roads competing for westward bound traffic from that city. As it is a fact of ordinary observation that such agencies always cluster in particular regions and around particular corners, it is obvious that a system of joint agencies would afford the public equal accommodation at lower cost. " During the periods of unbridled competition, popularly known as ' rate wars,' each participating carrier sends its freight and passenger agents to every important city in the country at a total expense for rents, clerk hire, advertising, etc., that must be enormous. Four roads operating westward from ('liicago are known to have expended $],2H.'5,585 for outside agencies and ad- vertising in a single year, during which rates were fairly main- tained, vhilo (luring an equal jjcriod one road terminating at Xew York City expended $871,291 for similar purposes." The Wastes of Competition Sy Unquestionably trusts can, as a rule, produce more cliea})]y than small concerns. Unquestionably they can, as a rule, undersell small competitors. Unquestionably they can, as a rule, give the consumer the same or better goods at lower prices. What the saving by tliis method would aggregate can neither be accurately computed nor even approximately estimated. But it cannot be doubted that annually countless millions are spent in useless adver- tising, in paying unneeded commercial travelers, in need- less transportation, in the insurance and care and storage of superfluous stocks, in making good the losses of bad debts, in paying for the increased expense of poorly equipped plants, and in divers other ways. By no means all of the expenditure for these purposes is a waste, but very much of it is. A large part of it is saved by the methods of trusts. Cheaper commodities to the consumer are certainly made possible. But does he get them? Does the producer pocket all this saving, or does the community get some of it? The community asks: " AVill not the trust producer having the sole supply, or the practical con- trol, of this particular commodity easily persuade himself that the saving is of his own creation, and that therefore he is entitled to all of it as increased profit? Will he not, indeed, eventually possess a monopoly, having, by reason of his very ability to undersell, driven out all competitors; and Avill he not, then, instead of reducing the price in accordance with the reduced cost, raise the price to an extortionate point? " CHAPTER V. WHAT IS MONOPOLY? A TRUST is a gigantic industrial enterprise, but it is more than that. One should never lose sight of the fact that it is a union of producers who were formerly competitors, and that frequently it is a consolidation of all or nearly all those who, prior to the formation of the trust, "were competitors. He who sees in trusts only big enterprises, is as blind as would be he who, standing on the edge of Vesuvius's crater when the volcano was in eruption, would see it only as a big hole; or as would be one who, swimming in the ocean, might be attacked by a sbark, and would see it only as a big fish. The manner in which trusts obtain their size and in which they will probably use it, is quite as important as the size itself. The wastes of competition are, as we have seen, one of the causes of trusts, as well as of all other increases in the size of industrial organizations; yet a trust attains its size not by waiting for competition to slowly kill off the weak competitors, but by anticipating and forestalling this ex- tinction. Competition is the cause, but the paradoxical result is an attempt to stop competition. Trusts are com- binations of competitive producers for the purpose of end- ing competition between them; and tlie result is generallv a territory of greater or less extent in which tliere is no active competition whatever. Tliis al)olition of active com- petition between existing competitors is not infrequently What is Monopoly ? 89 called monopoly, a word tliat is an epitome of favoritism, partiality, greed, extortion, and oppression. There can be no salisfaetory talk until one knows what he is talking about; jio useful discussion until the terms which arc to be used are clearly understood, and the words which are to l)e emiiloyed are accurately defined. The word "monopoly" will be used millions of times in the discus- sion of trusts. It will bo the summarized indictment ot those who think trusts evil and only evil. It will be tho substitute for evidence and proof the " So, there now," of those wliosc convictions are stronger than the arguments which they advance. What is monopoly? It is necessary to know, for in the coming presidential campaign it will be repeatedly laid down as axiomatic that trusts are monopo- lies. From time immemorial English and American courts have passed judgments against monopolies, and the consti- tutions of our states as well as the spirit and genius of our people have dechired them repugnant to free institutions. What, then, is this odious thing? Monopoly, etymologi- cally, means /he sole (power of) selling. A monopoly in any commodity exists, in reality, only when one person or association of persons has the exclusive aJ)iiiti/, pnver, or leqal rigid to sell that commodily. Jf any one else has tho power and ability as well as the right- to sell it, no monopoly exists, cv(m it' only one ])ers(.)n docs in fact engage in its sale. Mouopohj is sole poicrr: iiunuipohj is e.rrlusinn. The dustv tomes of the law are tilled with decisions and rulings concerning monojjoly, from the time ot Coke to this day; but in these decisions, at l(\l^t down to within very recent years, '"monopoly'" has had even a narrower meaning than that above given. It may fairly be said that the legal meaning of the word, as commonly used by judges and courts, was for centuries "' the S'llc legal rigid Id sell a ecr- 90 The Trusts iain commodUy, or in a certain locality. '' The law concern- ing monopolies and restraint of competition has been thus summarized in the American and English Encyclopedia of Law; and in the same work it is declared that an agree- ment between two parties to prevent competition between themselves, and which leaves each party in its respective territory open to the free competition of all other corpora- tions or individuals who may choose to engage in the busi- ness, is not a monopoly. (Am. & Eng. Encyc. of Law, 1st Ed., Tit., Monopoly.) This doctrine has been slightly modified in recent cases, as will be seen later. The mon- opolies that the courts had to consider for several hun- dred years down to within the past century were exclu- sive rights granted to one person or a few persons in that which was before, a common right. They were special and exclusive privileges in trade bestowed by the king or other sovereign power, giving to the favored person the sole right of trading, and absolutely denying that right to others, restraining the latter of the commercial freedom and lib- erty they had before enjoyed and hindering them in their lawful trade. The disability of the latter was a legal dis- ability, created not naturally but arbitrarily, enforced not by economic laws but by the powers of tyranny. Such monopolies are, indeed, repugnant to free institutions. They arc truly violations of personal liberty. English juris- prudence dealt for centuries with this kind of monopoly, and it sliould never be forgotten that its decisions concern- ing 7iionopolies apply only to this class of trade restrictions. Xot until the closing ([uarter of tlie nineteenth century was industry so centralized that, without any grant of exclusive right l)y the sovereign, any one field of it was so com- pletely in the possession and control of any one person or cor])oratif)ii, tliat it seemed as if there was a real ina])ility to undertake successfully to compete in it. The decisions, Wluil is Monopoly ? 91 therefore, on monopoly rendered in these earlier days are not controlling. They may be to some extent analogous, but they are not strictly applicable. What has been con- demned in tliese decisions by the courts for several cen- turies, therefore, is another thing than that which is now, popularly called monopoly. It is not the '' trust " that has been, in these early decisions, declared repugnant to the institutions of a free people, and inconsistent with li])crty; nor is it anything, however great its power, that has aecjuircd its })0\ver only in the bitter struggle of com- petition and without the denial to others of equal rights. "W'e cannot cause the dissolution of trusts or the punish- ment of their ollicers by citing tliese old judicial decisions C()ne:'rniug " moiu)p()lies," which were legally different, al- though doubtless laws and decisions against contracts in restraint of tratie and unlawful coiid)inations and conspira- cies, are precedents to be followx^d. On tlie other hand, sini])ly because trusts are not mon- opolies, according to old-established legal definitions, one should not take it for granted that they contain no evils; or that, for that reason, they luive not the sole power of sale over the commodities they ]iroduce, with a power to fix prices at will and to control production arbitrarily. They may or may not have this power. The mere fact l!;;it they are not legal '"' mono]iolies,"' as the term was used fur ecTituries. does not d(>termine tluit question. The sover(>ign may not give a person an errJuf^ivc right to sell, but if om' in any way acquires the r.rrhr^ire power to sell, otlu'rs will 1)1' injured fullyasmuch as if the sovereign recog- nized in him an r.ri-hi.iirc rigid which was granted might he infringed upon. The changed in- dustrial conditions of the nineteenth century have brought 92 The Trusts it a])Out that not infrequently combinations of men and great corporations have been able apparently to secure all the means of production and distribution in a certain in- dustry, and to have apparently the sole power of selling or producing; and our legal conceptions and Judicial defini- tions of monopoly are rapidly adjusting themselves to that condition, real or supposed, which may, perhaps, be best described as '^'^ practical monopoly." Thus .Judge Barrett, of the Supreme Court of Xew York, in the case of The People vs. The Xorth Eiver Sugar Refining Company, de- clared that monopoly is '' any combination, the tendency of which is to prevent competition in its hivad and general sense, and to control, and thus, at icill, enhance prices to the detriment of the public Xor need it be permanent or complete. It is enough that it may be either temporarily or partially successful. The cjuestion in the end' is, 'Does it inevitably tend to public injury?''' This was the definition of monopoly which Judge Barrett gave in the Sugar Trust case^, as being appli- cable to the industrial condition created by that trust which, he said, " can close every refinery at will, close some and open others, limit the prices of raw materials (thus jeopardizing, and in a considerable degree controlling, its production), artificially limit the production of refined sugar, enhance the price to enrich themselves and their associates at the public expense, and depress the price when necessary to crush out and impoverish a foolhardy rival." Tn ilie ease of Richardson vs. Buhl the Supreme Court of Michigan said: ''All combinations among persons or cor- poraliiniy fnr the purpose of raising or contrnlling lite prices of merrliau'lisf or niiy of (lie nereysaries af life, are vio- 7ioj/ulies atid itilolcrnble, and o'lf/hl to receive IJir condem- nation iif all couvls.'' Cliici' Ju-tice Fuller in deliver- ing the opinion of the Supreme Court in the Sugar case What is Monopoly? 93 (the Knight case), said: "All Ihe authorities agree that in order to vitiate a contract or combination, it is not essen- tial that it shall he a complete monopoly; it is sufficient if it reallij lends to (hat end and to deprive the public of the advantages irhich follow free competition.''^ Xot only Jo the opinions of tlie judges of our courts rec- ognize that under our modern industrial conditions we may, without the grant to certain persons of exclusive privileges by the sovereign power, be made, nevertheless, the victims of a grinding and merciless and extortionate monopoly, but the popular comprehension of this fact, or the popular fear, has caused statutory definitions of mon- opoly to be laid down along the same lines. Monopoly, whether it be the result of exclusive privileges granted by the sovereign, or simply the sole power of pro- duction and selling, which comes from the possession of all the existing agencies for cheap production and distribution, is the curse of industry and the bane of liberty. In earlier chapters we have shown the evils and wastes of competi- tion. Xo painter can portray in colors that are sufficiently lurid the wretchedness and misery and poverty that often result from excessive competi- tion. Xo tongue is eloquent enough to describe the evils tliat frequently result from this system of industry, with its tendency to develoj) the selfish characteristics of human nature aiul to produce heartlessness and indifference to- wards the welfare of others. Xo stati:^tieian or economist can compute or measure the enormous waste and destruction occasioned by competition. But worse than competition is monopoly, the paralysis of industry and the death of liberty. ^lonopoly i< the sole ])ower to sell, the complete lack of effective competition. Witli all its faults and evils and wastes of excessive com]X'titi(Ui,it is competition, never- t!ielc;-s, which is the ij^real incentive to tlie creation of 94 The Trusts wealth and the stimulus to all our progress. It is compe- tition between sellers that has quickened invention and skill and given to us lahor-saving machines and processes. It is competition that urges improvement in the quality of the products; it is competition that stimulates production to supply the enlarged demand; it is largely competition that has increased the employment of labor, raised wages and improved the condition oi the laboring classes. Ex- cessive competition is the fever that burns and kills; but complete lack of competition monopoly is rigor mortis. In earlier chapters we have pointed out, and in succeed- ing chapters we will continue to point out, numerous ways in which the modern trusts that are formed for the pur- pose of controlling competition between those who enter into them, are of economic value; many ways in which they are, or may be, of great benefit to consumers, as well as to producers; many ways in v-hich they may be of advan- tage to the wage earners. We will show how the hosts that will be displaced from positions and employment by these improved methods of organization will, or may, in time, find new situations; and how opportunities of employment will become more numerous, and the production of wealth more abundant. But there is one essential element to the real- ization of all these beneficent results; that essential is the lowering of prices in proportion to the cheapening of the cost of production. If by means of new discoveries or new processes or new methods of organization, five hundred men can do the work that formerly required a thousand, and i the cost of the article is reduced, the community will re- ceive no advantage unless the price be reduced accordinglv. What cares the consumer how much the cost of production is? His concern is tlie selling price the cost to him. I! with the displacement of labor and the cheapening of the product there be a lowering of the price, there will be a What is Monopoly ? 95 consequent increase in consuniplion. At least some of the five Imndred displaced laborers will find new employ- ment in the ell'ort to supply the increased demand. The rest will in time, doubtless, find employment in other in- dustries. The community will have the cheaper and more abundant product; the wage-earner will obtain more con- stant work and remunerative wages. But if the cost of the product be cheapened and the five hundred laborers are dis])laced and the price be not reduced proportionately, there will be no increase in the consumption, but a con- stantly growing decrease; for the general body of consum- ers will have no incentive to increase their consumption of the product, and. the five hundred displaced laborers, and all those dependent upon them being now without wages, without money and without the price, arc removed from the ranks of consumers. The demand for the product has not only failed to increase, but has begun to decrease. The lessening of the demand means the discharge of more labor- ers, who, without employTnent and without means to pur- chase, still further decrease the army of consumers. The increasing number of unemployed and the relatively small amount of work mean an inevitable reduction of the wages of those who are retained, and a furtlier decrease in the demand or purchasing power of the community. The de- crease in the demand for the manufactured article means a decrease in the demand for the raw material from which the manufactured article is made, and this moans lower prices to farmers and planters, lack of employment for farm-hands, less demand for agTicultural implements, and the closing of factories in whicli these implements are made. The inevitable result is more men out of employ- ment, wages again loworod. a fTirthor decrease in the de- mand. lesscTiing of ])roduction, lack of purchasing power on tlio lavi of the community, depression, stagnation, and 96 The Trusts fnially bankniplcy, miser}', want, and despair. The only cor- rective, tlie only revivifying influence is a lowering of prices in accordance with the cheapening of the production. We have already referred to the action of the American Steel and Wii'e Company, which, in the spring of 1900, suddenly shut down twelve of its mills and threw out of employment 4,000 of its laborers. This was done less than two months after the head of the concern had uttered roseate predictions as to the condition of the company and as to the great demand for the goods manufactured by it. The reason given for this shut-dow^n w'as over-production. The course that followed a very proper one was the re- duction of prices, some twenty-five and some thirty-three per cent. Tliere was a widespread belief that the action was taken for the purpose of depressing the market value of the stocks of the company, yet subsequent events seem to establish the fact that the reason given was the true one; that, if there have been, at any time, any improper statements made by the trust officials, they were made when they represented that the prospects of the company were flourishing. Months before this action was taken by the American Steel and Tire Company that shrewd old popu- list, cx-Congressman Jerry Simpson, who has been the butt of ridicule of Eastern economists as well as of Wall Street ])lungers, predicted this very action on the part of the wire inist. On February 14, 1900, at the Anti-Trust Confer- ence held in Chicago, Jerry Simpson said: " Take, for example, articles of common consumption, particu> larly in the \\'eslern States barbed wire and Avire nails (these are the products of the American Steel and Wire Company). The enormous advance in jirice is causing a rapid decline in con- sumption; tlie factories and the storcliouses of jobbers and re- tailers are filling with supi)lies. Tt is reported that in the Eastern States farmers are returning to the primitive rail fences. Hence we shall liea.r of tlie wholesale discharge of men employed by the What is Monopoly ? 97 trust; and tlioy being without work and without money to buy tlie products of tlie farm, will thus allVet tlie farmers injuriously, and so on througli the wliole gamut of industrial activity. It is, therefore, more than probable that before many months elapse the parrot cry, ' over-production,' \\ ill be heard in the land, while the gaunt wolf of poverty sits upon hundreds of thousands of thresholds." With what wonderful quickness Jerry Simpson's proph- ecy has been fulfilled! The truth, then, is that if trusts are run as monopolies instead of being economically an advantage to the public, they will occasion a frequent recurrence of the evils of com- petition. High prices will cause that which is called over- production, namely, an excess of production over the de- mand at the prices quoted, and we will also have shut-downs and low wages, men out of employment, and all other forms of industrial wretchedness. These evils will come whenever trusts are run upon the monopolistic principle and when- ever prices are put up or kept up above the point of fair profit. But a lowering of prices always causes an increased de- mand and an enlarged output, which in turn mean more employment for labor, which itself results in higher wages, which again means an increased purchasing power on the part of the wage-earners, and a further denumd, and a still greater abundance of production, as well as a larger market for raw materials, higher prices for farm products, an in- creased need of agricultural im])lements, a larger demand for farm labor, higher wages, and a further enlargement of the consuming and purchasing powers of the farmers and planters and farm Uiborers for manufactured {)roducts; and so on, in one endless chain of plenty and prosperity. Thus, wliatever ti^nds to lower prices, provided it is the result of chea])er production, of lal)or-saving. and not of arbitrary wage-reduclion or arbitrary depression of prices 98 The Trusts of raw materials, means the industrial welfare of all classes, producers and consumers, employers and employees, manu- facturers and farmers, old and young, rich as well as poor. It is apparent that there can be no beneficial lowering of prices unless there is a cheapening of the cost of pro- duction. It has been shown how trusts can, generally, produce much more cheaply than individual competitive producers. Low prices cannot exist unless there is cheap production. The cheapest production makes possible the lowest price. The cheapest production, provided it is not the result of the degradation of human labor, and if fol- lowered by the lowest price, means the greatest prosperity. The proper policy, then, to pursue with, reference to trusts is to endeavor to obtain all their economic advantages and yet, by all means, to guard against monopoly. If the monopolistic element can be wholly eliminated from them, they may become one of the greatest industrial boons in the world's history; if they are, in practice, monopolies, even though not essentially so, they are the greatest curse that has fallen upon the race since it was condemned to eat its bread in the sweat of its face. If it is not possible to have trusts "without monopolies, trusts must be de- stroyed, or else industry will be ruined and liberty over- thrown. Human nature is unable to exercise unrestrained power with fairness. Such power is sure to be abused and to Ije applied tyrannically. The power over industry is the greatest of all powers. If you can control a man's liveli- liood, you control his life. If you control his opportuni- ties for work, you control all his energies and faculties. If you control those things, you control all his liberties; he will not long retain liberty of tiiouglit or liberty of conscience. If the trusts of to-day are really monopolies if tliey are in eifect inonopolies then have we lost our What is Monopoly? 99 liberties; tlien in ]ilac(' of rour million slaves, tliere are eiglit}' million. Are we to luive a nation of white slaves? The })eriineiit inijuiry, the real lui'ning point, the crux of the whole trust problem, is: Arc trusts monopolies? Do trusts have this exclusive power of sale over products? Can they arbitrarily fix prices? If so, that ])ower must be over- ruled. There are many who insi-t that trusts arc nothing but great industrial organizations, differing from e;irlier organizations only in being larger. These men, anumg them Geo. Gunton, argue that trusts do not aljolish com- petition but intensify it. They assert that combination has not in the past destroyed competition; that it has seemed to do so, but, that, in fact, each death of competi- tion has witnessed a revival of stronger and more keen com- petition. They point to the cotton industry as an example. At one time all cloth was woven ])y hand-loom. Power- looms were invented; they could be used profitably only in factories where the specialization and division of labor could be secured to a greater extent. They necessitated greater comlhnation of capital. They manufactured more cheaply and they drove out the workers of the hand-looms; but there soon sprang up competing ])Ower-loom factories whose com])etition was more widespread and more keen than those of hand-loom weavers. Small factories under individual owners were succeeded by lai'ger factories under corporate control, 'j'he more it was ])ossil)le to c-entralize and condiine, tlie greater were the centralization and coni- bination; but the fewer tlu^ com])etiiors. the more fierce was the C(n]ipetition and the lower was the })rice of the nuinufactured ai'tiele. All indusiries sliow larger and larger, but relatively fewer i\nt\ fewer concerns. It will ho conceded by nearly all tliat the fewer and tlie larger the competitors, tlu' keener the eompelition. It is a battle between giants. '" J^ut,"' say the inillions who are now loo The Trusts studyinn: trusts, ' is not the battle of the giants for su- preinaey? Is it not in every case a figlit to tlie finish? When tlie war of competition is over, is not one of the competitors eitlier killed or subdued? Is he not destroyed or annexed? In any case is there not one less? And are not things tending inevitably and rapidly to a condition when, in every industry, there will be either only one es- tablishment, or else one establishment so great that it will dominate the whole industry and have a practical monop- oly?" We have already clearly shown that under the com- 2)etitive system the demand for cheaper production tends to make the cheapest the biggest, and tends ruth- lessly to destroy the enterprises that are not the cheapest. The ultimate survival of none but the cheapest is the irresistible movement of competition. Monopoly is thus the goal of competition; or as ^Iv. Henry D. Lloyd, the author of Wcdllh Ai/ainst ('(niimoniveaJth, has so sen- tentiously expressed it: '' Mowipahj is husiiicss at the end of its jnurnci/.'' The peculiarity of a trust is its attempt to consolidate all competitors. This, indeed, seems most clearly to distinguish trusts from all other large concentra- tions of ca])ital. There appears, indeed, to be a diiference in character rather than in size, viz.: that trtists are not merely great enterprises for the purpose of securing economical and chea]> jiroduction and distrilmtion, but ' ()(-to[)i ' iliat ('ndea\()r to reach out and gather in all industries in order to kill alt com])etition and to control all the iinaiisiM' [)!'oducnon in those industries,a!id to obtain /;/// p(),->c>-i(.n. when po^^-iblc, of alt the sources of raw materials ;ind all the chea]i means of distribution. It is this att('rii[)t- at ni'mopolv. and the a])parent success of the movement, thai liiakes liu- v.'orld to-day ap])rehensive. It i:- not to ]ji- womlLTcd that the people tremble in the pres- What is Monopoly ? loi cncc of the power of trusts. It docs appear, often, as if they had a Jii()ii()[)()!\', as if we were utterly at their inerey, as if they eould iiiiduly raisa cr depress prices and unduly limit })rodueti()ii and <;iv'' us .ui} '[>icV^y (,l product they choose. J5ei'ore ruuuiiiL; Icoia iliis overshadowing phantom let us see to what extent any trust yet formed has acquired sole power or full control. In Chapter I, concern ini;- the si/.e of trusts, we have mcnticincd the extent of tlic (-ontrol of various trusts over certain fields of industry. Tlie most striking fact is that, with few exceptions, each trust controls the large majority of the plants in its industry; Init it is somewhat significant that no trust has for any length of time had full control of any held of industry. The American Sugar Kellning ('om])any. hetter known as tlic Sngar Trust, many years ago, was said to control ninety-eight per cent of the sugar trade, a proportion of it that was certainly suiiicient to dominate the entii'e business and to enable it absolutely to control ])roduction and arbitrarily to fix prices, if any trust has such power. In 18!)8, two great refineries, one belong- ing to tlie Dosehers and the othei' to Arbuckle IJrotliers, went into o))eration and the competition has certainly been keen enough since that time. The Standard Oil C(un])any is ])0]uilai'ly supposed to lia\"e. or to liave had, a complete monopoly of ih.e refining (^f petrolcTim. but it is -tated on good authority that there nre to-ilay at least one hundred refineries nof under the conti'ol of tlie Stand- ard Oil ('onii)any. Attention has \)vvu called in Chapter i to the gigantic eon.-olidat iun- or trusts in the steel busi- ness, but it is >igni [leant that tliere ai'C at le.ist three of them of enorninu> eapitalizat ion. The several toljacco trusts mentioned in Chajitei' 1 are. in reality, only bra.nch.es of one trust; l)ut this month (.'ur.i'. IDOO) l)ids fair to see the launching of a ju'ojeeteil er.niipany. capitalized at $3U,- I02 The Trusts 000,000, which will be a lona fide and powerful competi- tor. . , . : . .' Monopoly, the sole power _to sell, is the power to fix prices. Lee i}\q sole pou'ex.to sell be permanent, let the thing over which the power exists be a necessity, and it is as certain that a price greatly in excess of the cost of pro- duction will be charged as it is that human nature is selfish and that in making an exchange each person will get all that he lawfully can. If the monopoly be not permanent, if the article aft'ected by it be not an absolute necessity, the tendency to charge an undue price will vary in propor- tion to the ability of the consumer to wait till the time when others can produce and sell the article, to the ability of competition to spring tip quickly, and to the possibility of procuring some article as a substitute. If trusts are monopolies they are absolutely certain to raise prices. Let us, therefore, consider the power of trusts over prices, for our investigations in that subject will help us to answer the question: Are Trusts Monopolies? CHAPTER VI. PRICES AND POTENTIAL COMPETITION. If prices arc not to be put up, wliat is to keep them down as trusts spring up and continue? Trusts are formed to destroy competition. When active competition is de- stroyed, when you have cut this string on your hitherto captive balloon of prices, will it not soar higher and higher? Trusts are not, never have been and never can become complete, permanent, absolute and oppressive monop- olies. They cannot for any great length of time chiirge exorbitant prices. lUit what is the force that will tend to keep trust prices from becoming unduly high? What is to save us from the dangers of extortion by trusts? Is it the mercy of capitalists? Is it possible that sympathetic motives cause their bosoms to heave and swell like the ocean? Xot at all. The trust owners are the heads of busi- ness concerns. They arc engaged in them not as philan- thropists, or as managers of charitable aid societies. They may lie i)hilaiUlir()]ne and charitable, but they believe these things should be divorced from business. John D. Rocke- feller has given millions to the cause of education, but, ])r()bably he would ]iot make any claim that the Standard Oil Company was run for the good it could do, and prob- ably he would not consider it a bright idea to try so to run it. The trust problem would (juickly settle itself if business motives did not nrevail. Trusts would soon s:o to ^ o 103 I04 The Trusts the region of faded hopes. No, the relief of the people from extortion by trusts and from excessive prices, will not come from the unselfishness of trust directors, but if it comes at all, it will come either from their selfishness, or from the people rising in their might and asserting their power. It will not be because the hearts of trust magnates are bleeding for the people, but because they fear that, financially, they will be bled if they attempt to charge an unduly high price. Self-interest is a corrective and a remedial agency for monopoly. Self-interest seeks the greatest profit; but the greatest aggregate profit is not ob- tained by asking the highest price, nor even generally by asking a high price. A significant drop in the price of one trust jiroduct has recently occurred. Much has been said about the increase in prices of the products of the American Steel and Wire Co., such as wire nails, etc. In the month of April of tliis year, prices on those goods were reduced between $18 and $23 per ton or about $1 per keg on nails, a cut of from 25 to 33 per cent. The cause was said to be over-production. In other words, at the high price tlie trust was unable to sell all its products. It could make more money at the lower price. Doubtless w(! lurvo for a time been overcharged by this trust, but sucli extortionate prices cannot Ije maintained, and we sincerely believe that a few ox])eriences of this kind will teacli even trust magnates in general that low prices mean large aggregate profits. Jligli prices do not pay because they breed competition. A trust may liave succeeded in acquiring control of an industry, in abolisliing or destroying its competitors, in liaving a y)raclical monopoly, that is, in liaving all the trade, all the factories, and all the men experienced in the manufacture. Yet it cannot raise its prices very much without giving lirth to new competition, losing a part. Prices and Potential Competition 105 if not all, of its trade, and rendering its factories and ])usiness less valuable. There is at least one thing in which there is no monopoly, and that is trusts themselves. x\ny set of capitalists can form them; and there is capital in abundance, idle ca])ital in abundance. Tlie lessening rate of interest proves this. One of tlie great questions of the present day that is forcing itself upon the minds of civil- ized people, is where o])enings are to be found for the profitable investment of saved np wealth, that is, of pro- ductive capital. For over twenty years there has been a diminishing return upon all classes of investments, and the prices of ilrst-class securities have been constantly getting higher. The interest rate has been lowered; government bonds that yield but two or three per cent sell above par; loans upon bonds and mortgages of sufTicient security can be obtained with ease at four per cent; banks are troubled wilh a ])leth()ra of money. Capital is always on the lookout for investments. It is the most intrusive thing in tlio world. It is the most mobile. It is a thing without a country. It is not bothered much by distance or frontiers. It is international. The " Great West '' of our own country was built up largely by England's capital; so was Australia. The Boer war is the result of English development of South Africa. United States financiers have lately loaned $-2r),000,000 to Eussia. All the nations of l'hiro])e have acciuired spheres of influ- ence in China and colonies in Africa, into which their capital will flow. I^ninvested capital seeks investment. Invested capital dreads competition. Its most elTcctual, its only pernuiiu'ntly ell'ectual, v/ay of hindering competi- tion is in keeping down tlio prices of its product. There is then a great latent competition, a potential conipefilinn, a competition which is sure to spring up if prices become extortionate. Trusts Jiave not io6 The Trusts stifled competition; they may stop it among the per- sons who form the trusts; they may, indeed, gather into one union all the productive agencies of a certain industry exi,^ting at one time, but they cannot monopolize the vast capital of the world or the people's irrepressible and illimitable energ}'. Existing trusts have been greatly affected by this poten- tial competition. At the annual meeting of the Glucose Sugar Refining Compan}', which was organized in xVugust, 1897, and which is capitalized for about $37,000,000, and which controls nearly all the glucose sugar refineries of the country, its president said: " There is not at this time a bushel of corn being ground by any concern except those of our company. We do not intend to pursue the policy of making spectacular profits in the beginning, and dwindling at the end. We are in business for a long pull. For instance, on a ten-year run we might have raised prices, made $5,000,000 the first year, $2,500,000 the next, $1,000,000 the next, and down to notliing at the end of ten years. It is better business to be moderate and earn $2,000,000 a year for ten years, which would be $20,000,000 in profit, against the loss of $10,000,000 the other way. We did for a short time make the mistake in the beginning of putting the price too high, but it did not last long. If we had maintained that policy, we would have sixteen or seven- teen competitors against one as it is now." Ex-Speaker Eeed, in a recent article on monopolies, among other things, said: " A good many years ago a wise old manager in my district told me the secret of success. I said to him : * You are the only man who makes these things. You can demand your own price.' Said ho, ' 1 am trying every minute to make these goods chcaj)cr and sell them clicapcr.' 'Why so?' '1 am the only man,' he re- plied, ' in tliis l)usiness and I want to stay so. If I raise the price, I would liavo a boom, hut I would lose a business. In the long run Ijusiness is belter than boom.'" Tlie Standard Oil Company may be cited as the typical trust. It is the oldest and possibly the most pov/erful. It Prices and Potential Competition 107 has had some, }mt relatively little, competition. IIow has potential eompetition aU'eeted it? What has been, the tendency of the prices of the Standard Oil Company? The following table shows the price of the crude oil at the \vclls, and of the refined in Xew York for export, also the difference between the crude and the refined, that is, tlic cost for refining for each year from 18T0 to l-SiiT: AVKKAGE ANNUAL PRICE PER GALLOX IX CENTS OF REFIXED AND CRUDE PETROLEUM. Ypar Crude at Refine V^^' cent. The production of oil has increased from 9500 bar- rels in 1859 to 35,l(i5,990 barrels in 1897." ''J'he annual consumption of oil is ahout a hillion gallons, and a saving ol two cents on the gallon, which is about the decrease in i)rice Ijctwcen 1883 and 18!)8, the era of the formal Trust, would l)e $-30,0()0,0(K) for the year 1898 alone. If we C()m[)are tluit year with the year 18T1, when the alliance was made Ijetween the J'ratt Go. and the At- lantic lieflning Go. and the Standard Oil Gompanies of Ohio and l*enn>ylvania, we find a reduction of sixteen cents in the price, which would maku a saving or difference of .$lGO,OUO,()tH) on the out])ut and product for the year iSiiS alone. Whether, indeed, even at these prices, the I lo The Trusts Standard Oil Co. is not receiving an undue profit and charging an undue price, may be a question; but it is rather a difference of opinion as to what constitutes a fair profit than it is a question of fact. If in explanation it be said, on the other hand, that the Standard Oil Company has some active competition, then we are forced to tlie conclu- sion that, if this great gigantic industry cannot become a monopoly, no other industrial trust can. If the feeble active competition which the Standard Oil Trust has had, is not the cause of lowered prices, then we must ascribe it to that great latent potential competition, that fear of active competition, which keeps prices witliin the limits of reasonable profits, just as the fear of death deters the would-be murderer from carrying out his villainous de- signs. However powerful trusts may be, if they raise prices beyond the point of fair profits, sooner or later (and the higher tlie prices, the sooner) they will meet with competi- tion. Weak competitors may go down before them, but there is one thing at least which trusts cannot monopolize, and that is trusts themselves. Others can obtain the capi- tal, if there is a fair measure of profit in its investment, and can form a rival trust. AVhy is it that that gigantic trust, the American Sugar Company, with its capitaliza- tion of nearly $75,000,000, has had such strong competi- tion with the Arbuckles and the Doschers? That competi- tion certainly would not have arisen had there not been a belief that in the business there was an enormous profit. ]t pro])ably would never have come into being had not the Sugar Company for many years paid enormous dividends ui)i)n its ])r()fnse]y watered stock, seven per cent ujion its jii'd'crrod and twelve per cent upon its common. There is, indeed, every j-eason to believe that the competition was the result of an excessive price on the part of the Prices and Potential Competition 1 1 1 Sugar Trust. That eompotition came into being in 1898. The table of prices for that year sliow that the difference between tlie prices of raw and refined sugar, that is, the charge for refining it, was .730 of a cent per pound, but the year before tlie competition began it was .946 of a cent per pound, a difference of .21(5 of a cent per pound. This may seem too ti-i fling for consideration and an overcharge so small as to Ije unn.oticeable, in no sense an extortion. It is true that the burden imposed by it upon any one indi- vidual would be so trilling as to hardly call forth a com- ])laint, but the aggregate amount on the sugar trade of the country would be so great as to tem])t capital immediately to invest in that industry if it were certain those prices would be maintained. One-tenth of a cent per pound on the sugar consumed in tlie United States would mean almost $3,500,000 per annum, and .216 of a cent would mean practically $T,000,000 per year. If the Sugar 'J'rust were charging this small sum in excess of a fair profit, would it not call forth competition, and is it not proper to infer that that was at least one of the reasons that did call forth the competition it has met with? It shoald be noticed that in the year 1896, with raw sugar higher in price than in 1897, the difference between the cost of the raw and the selling price of the refined was .908 of a cent per pound: in 189-"), it was .882 of a cent, and in 1891, .880 of a cent, the raw in the la^t two years being, however, at a lower price. In other words, for sev- eral years prior to the Arbuckle and Doseher com])etition, the charge for refining had steadily increased, and com- ])(^iition resulted. "We have seen that tlie cheapest producer naturally be- comes the biggest producer if j'rn^ oivJ fair frade exists. Theoref icnlly. ihe clicaiiest sellci- is bcunid ultimately to Ijecome the sole seller, a ni'iiiMpolist. If Sjiecial priv- 1 1 2 The Trusts ilexes are refused and fair competition is compelled, mon- o])oly can be acquired onl}' by the lowering of prices. Un- der such conditions of no special privileges, what are the means of the continuance of the monopoly of the cheap- est, and how long will it continue? Bourke Cochran, in a memorable address on trusts, has answered this question substantially as follows: " Only so long as it continues to produce and to sell most cheaply, and so long as it does, it is a blessing to the consumer and a stimulus to industry." The eloquent orator was most careful to point out and make clear iliat this was true only where competition was free and Wiiere no competitor had special privileges. If to this he had added thai to ensure this ^'mitation to monopoly, it was necessary not only that competition should be free, but that it should be fair, that tlie powerful and highly capitalized should not sell their goods for less than cost in one or even in all localities in order merely to undersell his weaker competitor, knowing that the competition would soon work the ruin of his rival while he, the powerful com- petitor, could stand it either because of his ability to make a profit on sales in some locality where this ruinous price was not charged, or because of his greater capital enabling him to stand the loss longer, if this had been added to the other pn/visofi of Bourke Cochran, it would undoubt- edly be true that a monopoly not based on or propped up by special privileges can be ])ermanently maintained only in ease it is economically superior, that is, in case it produces and sells at the cheapest rate. Tlie experience of the last ton years with trusts, as they actually exist, amply and conclusively proves this. Under present conditions, if combinations are to continue and to meet witJi success, it must be by better and cheaper service to tlie conmnniity. Competition can be permanently st()])])ed only by coniinuously selling or serving at a rate i^rices and l^oLciuial Conii)eLltion 113 or price lower tliaii otlu'r? ran ad'onl to sell. Even special ])riYileges and i'avtrs only delay the time when competition shall assert itself, J'or the people will rise and sweep away the privile<,'-es as soon as ihey realize their existence. If any trust, for any appreeialjle leni,4h of time, exacts an un- due or even a liberal ])roht, new capital will be invested in that industi'y,another trust will be formed,and competition will operate with a i^'reater iii tensity than was possible on a smaller scale. The trusts that have continued for any length of time are those which have conducted their busi- ness on the theory of moderate margins of profit, relying upon a large output produced chea|)ly as a result of all the savings that can be obtained by the use of large capital intelligently admin istej'cd, and knowing that in this way they could oljtain a greater aggregate profit. The only trusts that have succeeded or that can succeed are those thus managed. The failure of innumerable trusts, '^'cor- ners,'' and '^ combines" conclusively proves this. It will ]je insisted that the prices of nearly everything controlled by tru>ts have advanced, in recent years, to a large extent; that sugar and oil, at tlie most, are only ex- ce])tioiis, and doubtful ones at that. Byron \V. Holt of the New England Ereo Trade League, has said: "Out of four hundred trusts whicli T liavo onuineratod, I do not believe tliat ten ha\'e lowered prices. In fact. I know of none, c.\"cej)t one or two, and tliese have depreciated tlie (juality of their product. In one such case the prices are hchl so lii;^li that there are heavy iiiijxirts of coinj)etini^ floods, alt!iou<^'li tluTO is a duty on them of nearly TOO jier cent. In nine cases o\it of ten trusts liave raised j)rices often more than .11) ])er cent. That mui-h of the pnsDit /(sc ill prii-i's is due to ijcncrdi cconoinic foiiditioiis is l,r(>h(ihlj/ tnir. On the other liand. it is just as true tluit, had there been no taritf duties, the rise in prices would neither have been so i^'encral nor m> ,^i'eat." The wisdom or follv of the free trade suu-^-estion will 1 14 The Trusts be considered later. At present the fact of importance is the increase of prices, and also the admission, contained in the words that are italicized. In considering the recent increase in prices, one should not overlook the admission made hy Mr. Holt, "that much of the present rise in prices is due to general economic con- ditions is probably true." The prices of sugar and oil are those entitled to the greatest consideration because extend- ing over a longer period of trust control. We should be very cautious in making general deductions from the prices of other products which have within the past six or seven years come under trust control, because tlie majority of our trusts, as was seen in Cliapter I, have been formed since the great financial panic of 1893. They have been the accompaniment of the revival of industry since that time. The panic of 1893 witnessed a complete collapse of prices. It was absolutely impossible to obtain for any- thing its reasonable value as measured by cost of produc- tion. This fact, although of almost universal knowledge, is lost sight of by the majority of people in considering the prices of articles produced by trusts. The prices of most articles made by trusts have advanced enormously since 1893, but it is absolutely unfair and incorrect to at- tribute the advance to industrial combination. The rise of prices is chiefly the result of the universal demand, and it lias been as great, if not greater, in lines where no com- binations existed. For example, it is said that up to a year ago ])ig tin had advanced seventy-five per conl; steel rails, ninety-four per cent; steel ])lates, one hundred and twenty-seven per cent; refined bar iron, eighty-two per cent; and yet at that tiuK! there were no trusts in these industries. Tbere arc, ])L'rhnps, some products the prices of wliich have ])ceii unduly raised and maintained, but in these cases, if any exist, it is believed that uj^on investigation it will be Prices and l^otcntial Competition 115 found that the trusts liavo hoen able to obtain these prices Ijy reason of special privileges, sucli as prohibitive rather than protective tarilfs, or by reasoTT of possessing patents upon lal)or-s;n;iig machines, or by \::-tue of unjust dis- crinii.uations in their favor by railways and other agencies of trans] )ortat ion, or by detaining the ownership of natural monopolies. The important point for us to consider, at this stage of our study of the question, is that there is no ]n-oof that the mere aggregation of capital into gigantic trusts or cond)inations has resulted permanenilij in prices that are higher than would be properly occasioned by the increased demand consequent upon the revival of industry. If this point can be established, it is of great importance, bt'cause the evils of trusts, so far as prices are concerned, will then be sliown to be either merely temporary, or else not inherent in trusts themselves but the result of special ])riveleges and oi' the ])ractice of unfair methods of coin- ])etition; and tlie remedy for these evils, which will natu- rally suggest itself as being perfectly efficient and wholly sufficient, will be the abolition of all s})ecial privileges and the prohilntion of unfair methods. It is not inappropriate here to make brief mention of the prices of tin plate. Tin ]date promises to be an issue in the campaign against trusts as imjiortant as it has 1)cen in the campaign for a protec- tive tarilf. Tlie American Tin Plate Company wdll be cited as tlie tyiiieal trust, and much will be said of its extortions and of its mono])olistic ])owers. The im]n*ession has been general that this tin plate trust das unduly advanced the prices of its jU'iMlucts and has extorted large sums of money from tlie Anjeriean ])ublic, l)y whose lil)eral policy it has been fostered and ilevelo|)ed. In a subsequent chapter, in wliich the efi'eet of tlie tarilf u])on the trusts is set forth, we will give some study to this industry and its jiriees. But it is sufficient now to say: first, that it is by no means 1 1 6 The Trusts certain that even the tin plate trust has extortionately or unduly raised its prices; and, secondly, that assuming that it has, its power to do so is due, perhaps, in part, to an excessive tarifi; which keeps out foreign competitors, and in part to its having made a contract with the producers of tin plate mills and machinery w^hereby for a consider- able period of time no one else can obtain the necessary machinery to conduct the enterprise. If that is true, it is so clearly a contract in restraint of trade, so manifestly a conspiracy against the public, so plain and bald an attempt to monopolize, that it should be punished as a crime, and every means should be taken to prevent such a company from carrying on business. That kind of a trust cannot be crushed too quickly or too effectually. We have pointed out that potential competition is one of the remedies a partial remedy against extortionate prices. We have shown how invested capital w'ill shrink from calling into active competition the latent competi- tion of uninvested wealth. It is unqualifiedly true that no monopoly that exacts high prices can permanently exist against potential competition, provided there are no special privileges given to the monopoly and provided there is fair competition, but the great difficulty is that potential com- petition cannot prevent for all the time a considerable amount of extortion. The time that is required to enable the potential competitor to establish a business and becoma an active competitor may be a period of extortion by the mono})oly. Potential competition may tend to keep prices down; but, although it is doubtless a remedy for any ])r()l()nged and continued extortion, it is quite as certain tliat it cannot ])revent occasional higli prices. As men often ignoi-o or forgot wliat is their self-interest, they may, and, doubtless, not infrequently do, raise prices consider- ably higlier thun tliat which will afford a fair profit; and Prices and Potential Competition 117 it is possible that in some instances tliey have kept prices for a loD,!,^ time slightly higher than the j)rices that repre- sent fair profits, and at times have raised them ahno.-t to the point of extortion. We cannot wholly rely on the self-interest of men to keep them from doing that which is ojiposed to their hest interests; for seltishness and greed often overcome one's sense of self-interest, and selfishness and greed are short- sighted. iSelf-interest is opposed to intemperance and to dissipation and to everything that is immoderate; but how many men we liiul burning the candle of life at both ends. Xor can we count on self-interest saving us from Inisiness follies. Self-interest sliould teach, every man to treat his horses gently and kindly, to care for them and to protect them; but self-interest so frecjuently fails in this that we have to liave societies for jirevention of cruelty to animals. Self-interest should teach the parent to l)e kind to his child and to educate aiul to train liim for future usefulness; but we have to have societies for the jn-evention of cruelty to children and laws which authorize us sometimes to take the child away from the parent. Self-intert'st should teach us, as a state, to hus])and our resources; hut we have seen our timber lands denuded of their trees, and as a result many of our streams, which were once navigable, are now running shallow. That " honesty is the best ])olicy " is an old adage; but men forget this maxim concci-ning self-interest, and our prisons are lilled with thieves and Inirglars and em- bezzlers. Self-interest is. indeed, a powerful intluence in affecting nieirs conduct, but the weakness of it is that too often our selfishness makes us blind to our real self-interest, rx-eiiuse of this, trii.-ls have not infrequently been guilty of tenu)orai'v exactions, pending the establishment of a coiu- iietiiive industry which, because of its nuignitude, will take a lonu- time to get under wav. 1 1 8 The Trusts "We have recently had a most striking example, according to the reports of our daily papers. In the issue of tho Xew York Herald for March 20, 1900, it is stated editori- ally that Congress is anxious to build a number of warships, but that the price of armor plate has been so unduly ad- vanced and is at such an extortionate figure that many of the members of Congress are unwilling to pay the price asked by the monopoly that has control of the industry. The editorial states the alternative thus: There is only one thing for Congress to do pay the price asked, or fail to build the warships. It cannot obtain the armor else- where. If it were to establish an armor making plant of its own, it could not get it running for two years. ^Ye 7nust have battleships without delay, therefore we must pay the price. Another instance of the temporary monopoly which a trust may have a monopoly which, while it continues, may be most merciless is the American Ice Co. This company, having bought out the Knickerbocker Ice Co. and the Consolidated Ice Co., that is, having bought about 90,000 shares of the stock of each company, there being but 100,000 shares in each, and having made con- tracts with all owners of artificial ice plants in the vicinity of Xew York City to take all their surplus, and having obtained all the available supply which could under ordi- nary circumstances be brought to the Xew York market, and having also o])tained special docking privileges of an almost exclusive character, proceeded to put up the price of ice far in excess of any increase in the cost of harvesting it, resulting from the sliort crop on the Xorth Eiver. Tlie price was raised one hundred per cent; that is, from tiiir'y to sixty cents per Imndred. The facts connected with this transaction are of great importance, for they show that we cannot wliolly rely on what is truly for the self-interest of the trust to protect us from extortion; that the trust can Prices and Potctuial Competition iig aclually for a time be an extortionate monopoly; and yet that publicity is sure, eventually, to break down the most powerful monopolies. The raising of the price of ice by the American Ice Co. occurred early in May. As has been said, the price was doubled an extortionate exaction, 'i'liere seemed at first no possibility of elsewhere obtaining a supply of ice and no means of obtaining a reduction oi price; but the institution, by Attorncy-deneral Davics, of legal proceedings to procure the dissolution of the trust, and the commencement of criminal actions against its or- ganizers, and a general publicity of the alTairs of the com- pany in the daily press, and the starting of a few competi- tive ice producing plants, have caused a reduction in the price to about the former level. On the 22d of May, The Xeir Yorl- World editorially said: ' The sun of publicity will soon melt the ice trust." On the first day of June, The liochcsfer Democrat and Chronicle stated: " The ice trust in New York has dropped prices to forty cents a hundred (this from sixty cents; last ye;;r's price, thirty cents) and is makintr an effort to fjet back its old customers. ^lost of tliem have made contracts with independent concerns and tiie ]iuni>hn;ent of greed {)romi:^es to be speedy."' IJiit what inconveniences the people of the metropolis had to suffer before the price was reduced, and what meth- ods were ado])ted to suppress the weak competitors that ni'Oie, mav l)e gathered from xhc following extract from The Xeir York Herald of dune (!th. Though a long quo- tation, it is well worth reading, for it sets forth the facts of ilie fight against the ice trust, which make the case in many respects a typical one. This article is really an epit- nme of trust methods, and it also shows fairly well both tiie strength and the limit of monopoly powers: I20 The Trusts "ICE TRICES BEING IIAilMERED DOWN. INROADS OF JXDErKNI>I<:NT DKALEJ5S FORCING AMERICAN COM- TANY TO J)ESI'EKATK MEASURES TO DEFEAT THEM, DiXOY COMI'ANIES MAKING BIG CUTS. FORTY, FJFTY AND SIXTY-iaVE (;ENTS CHARGED IN THE SAME APARTAIENT HOUSE, BY THE SAME ICEMAN, TOO, ATTORNEY-GENERAL AND C:ONT];OLIVER DETERMINED NOT TO BE LED INTO ERRO]i. It now appears tliat the American Ice Company has troubles other than tliose of a Icf^al nature. While it has l)een fighting the attenipts to make public its stock book, independent dealers have been getting such a foothold tliroughout a large section of the city that the American Ice (^onipany has been compelled to cut the sixty-cent price to meet the opposition. The situation is uiii()ue. The American Ice Company has kept several of tiie small concerns that v.ere taken into the fold busy in meeting Uw. outside icemen. Tliese small companies run their old wagcms and deny ccmnection with the American Ice Company, but in reality handle its ice. It is the constant endeavor of these icemen to get customeis away from tlie few independent dealers. This has been done wherever necessary by deeply cutting rates. Ajiparently this method of doing business is not confined to any one ])'irt of the city. Wlierevcr the indei)endent icemen have ob- tained customers the American Ic(^ C()ni])aiiy has met the re- duced j)rices. The sixty-cent rate has been rigidly maintained at all of the Ainerican Ice Company's oUices, and nobody has got cheaper ice wlio lias not worked to get it. As a consequence, tbere is many an afiartTucnt building in Ilailem and on llie w(>st side wliere the families on all the dilbn'erit lloors arc paying dilferent prices for ice. In some instances, too, the variations are considerable. PRICES VARY IN SAME HOUSE. In fino house fliat was visited yesterday the family on the first floor piiid forty cents, the family on the next floor sixty-five cents Prices and Potential Competition i2t and the family on the top floor fifty cents. The two extremes were cliarged by the same iceman. 'J'his rate-cutlinp, altogether irregular, has given rise to several rumors that the American Jce Company, fearing the public wrath, was lowering its sixty-cent rate. There is evidently no other foun- dation for tlie news, since all the regular ollices of tlie American Ice Company (juote ice at retail to families at sixty cents or sixty-five cents if there is any good excuse for such a charge. Any one wjio cares to get ice cheap has but to patronize one of the independent dealers and the American Ice Company will, through one of its decoy companies, meet the cut. This is not in all cases easy to do, for the independent companic.i arc so rushed with business sin-cc the agitation began that they cannot get tcagons to haul the ice that is ordered. It has been a bonanza for the outside concerns. Half a dozen of the smaller independent dealers are now planning to manufacture ice for them- selves, and will without doubt make money out of the venture if the American Ice Company does not lose lieart and do away with the sixty-cent price. One dealer in West Seventeenth Street is making preparations to manufacture two hundred and fifty tons of ice daily. GETTING ICE IX NEW JERSEY. Pending the construction of ice-making plants the independent dealers are buying ice in Jersey City and carrying it a^^ross the ferries in tlieir own wagons. There are two companies in Jersey City that sell ice shipped in from ice houses on lakes and ponds in Pennsylvania. The ice comes over the Tennsylvania Kailrocul. and this led some of the dealers to suspect that the railroad com- p;;ny \\as really fathering the scheme. At the docks controlled by the American Ice Company the price (wholesale) charged outside icemen in New York is $7 a ton, or thirty-flve cent--^ a hundred pounds. These d^)cks arc practically all in the city, for hut two indcpoid* nt dealers, seemingly, have facilities on u'ha)Tes. One of these concerns, ^lontgomery's, is on the Nortii Ki\('r. and the other, Solomon's, is on the East Kiver. Instead of buying in New ^'ork, the outside icemen cross tlie river to Jersey City at 1 (/clock in the morning and buy ice there. Tiny peg ^'^ a ton inshod of .r". but when tlie ferriage is add d and :iii allo-.'.anc(> is made for the dri-.er's time and for melting, tlie (n>t of tlie ice runs up to ^L-l'i a !un. With this Jersey ice the i22 The Trusts independent dealers have already forced the American Ice Com- pany to cut its sixty-cent rate in almost every street in the city.'' Two days later the prevailing rate was forty cents; a week later it was reported to be thirty cents. Doubtless the reduction was due both to the legal proceedings instituted against the trust, and also to the fear of competition next season as a result of the publicity given to the trust's profits. Potential competition is also an imperfect remedy, be- cause, when called into activity, it so frequently is the struggle of the weak against the strong. The competitors are not on a level footing, and the contest, besides being unequal, is unscrupulously conducted. There is competition and competition; first, that compe- tition which seeks to attract purchasers by better goods and lower prices, but at prices that mean fair profits and a continuance in business; and, second, that competition which lowers prices below the fair profit mark, and the purpose of which is not to secure custom for the one so lowering the price, but to drive it away from a competitor. The one form of competition is healthful rivalry; the other is a war of extermination. One is the life of business; the other its death-blow. Competition favors the strongest competitors. The big usually survive. It is the survival of the biggest rather than the fittest that frequently results from competition as it is practiced. " Cut-throat " com- petition is, in no sense, a practice peculiar to trusts. But when employed by trusts it is a menace to the public, for the great trusts have the power to withstand the effects of competition longer than their small rivals. In so far as this is the result of their ability to produce or market more clieaply, whieli is frequently, if not generally, the case, we c,;nnot find fault with tlie c()mi)etition, for the community wants cheapened jiroduction, j)rovided it is not secured by Prices and Potential Competition 123 a degradation o the working classes; and the community \vants lower prices, provided they are not inconsistent wilh fair profits. Jhii eoiirpetitors do not confine themselves within these limits. They arc merciless in their methods, rrize-lighters do not hit below the belt, hut the methods of business comi)etitors are usually more brutal than prize- fighting. With business competitors, it is war to tlu? death. Trusts are prohably no worse than individual cojnjjctitors in this respect; but their powers are greater, and the result of acts done hy them is more injurious tlum when done b_y fecl)le individuals. In an earlier chapter we showed that competition was the mother of trusts. Trusts are ])orn of comi)etition, conceived for the ])urpose of killing competition; and vet they use competition as a method of exterminating coni- petiiors. ''Jdns paradox calls to mind the story of the min- ister who once preached two sermons as a candidate for a certain church which was without a pastor. ]lis morning discourse was from the passage: '"Ye are of your father, the devil.'' His evening text was: ""' Children, obey your parents." When it comes to the struggle of getting husi- ness or killing off a rival in trade, the methods of the trust relleet credit upon its mother, cut-throat competition. A good deal depends upon whether tlie new com])etilor is amnluT giant trust or a struggling individual enterprise. If it is a case of rival trust, there may l)e keen and intense competition; but if it is a case of the trust against the weak and struggling individual producer, tlu're will be the rankest of unfair methods. 'Wlu'ii Trust meets Trust, '' then comes the tug of war;"' but wluMi the Trust meets an individual com])etitor, then the Trust conducts itself like a tliug of the slums. Small com])eiitiv(> concerns will sju'ing u]) more quickly than will great ones. Oftentinu's the results of careful in- 124 The Trusts dividual attention to a small business will ofiset the ad- vantages of (,Teater capital managed by agents and sub- ordinates. Such new small concerns can succeed against extortionate prices, and sometimes even where prices are at the fair profit mark. But what do they meet with from trusts? Cut-tliroat competition. What is the action of trusts in such cases with regard to prices? It is a lowering of tliem in the particular locality where the small hand of competition has arisen, lowering them below the fair profit mark, lowering them sometimes below actual cost of production, lowering them at any rate to a point where the small competitors will eventually be driven from busi- ness. Why? Because they have dared to compete. For Avhat purpose? In order to kill the competition and restore the old prices, or even to exact eventually, higher prices that will compensate for the enforced decrease that was made to kill competition. The community is inter- ested in, yes,isl)enefited Ijy low prices: but it is injured by sacrifice sales, by " slaughters," by cut-throat competition. Sales at a loss soon al)sorb the limited capital of the weak competitor, but the loss of the trust on this fractional por- tion of^ its business is more than made up by its extortionate prices in other localities. Sometimes the trust reduces its price below cost in all localities. It is the party with the largest purse that can stand this cut-throat competition the longest, and that party is always the trust. The kind of competition just outlined is in its nature, at ]ca>t, cons])iracy. It is tlie use of one's property not directly for one's own benefit, but for the injury of another. It violates the spirit, if not the letter, of the law against conspirafv. There should lie no doubt as to whether or not it (loos. If doubt exists, statutes should be enacted so as t'i expi'ess in no ambiguous terms their )iri)hibition of sucli competition. It should Ije declared criminal so tlmt Prices and Potential Competition 125 the strong arm of the state could punish the wrong. Leave a struggling coni})etit<)r to his i-emody for damages for the injury done him, and, even supposing that he has a remedy, the expense of enforcing it, and the dilliculty of showing the amount of the damages, nuikes any real relief imi)ossi- ble. Th(! selling by an incor])oratetl com})any of goods ot a certain quantity and of a certain quality or cost of pro- duction in one locality at a lower or diifereiil price or on dilferent terms or conditions than are llxed for them in any other place (dilference in cost of transportation and rent and selling local differences being allowed foi) should be made criminal, unless a hoiia fide competitor actu- ally sells at this or a lower price in the same or substan- tially the same quantities. These great corporations are cre- ated by the state. Their rights to do business are derived from the })eople. They are supposed to serve all the peo])le alike. They are incorporated because they are su})posed to be of service to the people at large. They are subject to limitations by the popular will. Such regulations as sug- gested are consistent with the theory of corporations and the purposes of their formation. If trusts were forbiddeu by law to sell their product at any ])oint for a less price (difference in transportation and rent and other local con- siderations being allowed) than they sell it at all other ]Kjints if when they reduce the ])rice to kill one small competitor they were obliged to reduce it wherever they liad competitors, this cut-throat eom]ietition method of ex- terminating rivals, the sole ])ur]jose of which is to obtain a monopoly and the ])ower of extortion, would be one that would be far less fre(|UiMUly em])loyed. Akin to the metliod of selling bi'lcjw co>i in one locality in order t(j exterminate the rivals of the trusts, is the jiractice of the great trusts, that make many artieles or many styles of the same article, to refuse to sell anv of the-e jinieles to the retailer unle.-s 126 The Trusts he will agree to buy exclusively from them. The effect of such an arrangement is to destroy the trade of the feeble competitor who makes but one article or one style. Such lias been the method employed by the tobacco trust. If these great corporations whose powers are derived from the people and who are given the right of incorporation by the people only ])eeause it is believed that indirect benefits of great value will accrue to the people, were compelled by law to sell their products to any person tendering them the price, just as common carriers are bound to serve all at the same rate, if such a statute could ])e enacted and en- forced, potential competition would be a far more power- ful force. The great weakness of potential competition is, how- ever, that it is an uneconomic remedy. Potential competi- tion is worthless if it is never to become active competition; but in scarcely an industry has a trust been formed where the ])roductive agencies the factories and mills merged into the trust did not liave a capacity in excess of the con- suming power of the public; and neai'ly all of our trusts, as has been noted, have absorbed all or nearly all of those ju'oductive agencies. If tliey unduly raise prices, al- though comjjetition will doubtless eventually appear, yet it is absolutely certain that the potential competitor will lie-jtate a very long time before entering into active com- ]i'.'liti(.)n. for he knows that there is no need of new fac- loi'ics; and that the demand of tlie public will not sustain both the new factory and the ohl factory; and that in the *onipclilivc sti'uggle eitlu'i' the now competitor or the trust \i\\ tail, or else the trust will absorb the new competitor ind form a new combination, and then })lace tlu^ ])rice iiigh jiouLfii .-o ;i^ to recoup the loss due to the previous struggle <;f com j)ct it idii. This know]edg(_' of tlie ]iotciitial comjjeti- tor that tlu/re is really not room for a new esiabli-limoiit in Prices and Potential Competition 127 tlie industry is also kno\vled<2;e possessed ])y the trust man- agers; and knowing that, tlicy realize that even although they raise their ])rices somewhat above the fair profit mark, yet there is a very jjowerful restraint upon the establish- ment of new competition, entirely independent of the re- straint that springs from the would-be competitors knowl- edge that, if he enters the struggle, he will be met with cut- throat competition by the powerful trust, and independent, too, of the would-be competitor's knowledge that even if cut-throat competition is not attempted, yet the trust will, when competition asserts itself, at least, reduce its extor- tionate prices to the level of fair profits. The mere aggre- gation of capital, even although that aggregation possesses all of the productive agencies in any one industry and even although those productive agencies are more than able to satisfy the public demand, probably does not in itself con- stitute a mon()])oly. It is not the aggregation that stops the establishment of new competitive enterprises, but the fact that the total capacity is in excess of the demand. The existence of a number of productive agencies having a ca])acity in excess of the demand is always a restraint upon competition. If they are separately and individually con- trolled, the restraint upon competition is ]Trobal)ly fuUy as mucli as if they were all combined into one trust. Indeed, ex])erienco goes to show that persons would rather start new establishments in industries in whicli tliero are trusts, if tliey couhl be sure that the trust would not resort to ''cut-throat" or unfair com])etition, for })rices would be more a])t to be ke])t stable. I^ut tlie vital fact remains that, whenever in a givt'n industry the ])roductive forces have a capacity in excess of tlie demand, the establishment of new competitive concerns is not only unneeded, but there is a restraint upon it. (iranting that this is as true when the various mills and factories of the industry are separately 128 The Trusts owned and managed as when they are comhined and con- solidated, the further momentous fact remains that, in ease of a consolidation, under such circumstances, of all the factories and mills in operation, there is the possibility, by reason of the union, of the exercise of monopolistic powers, Ijccause active competition has been restrained and, new competitive establishments being unneeded in order to supply the demand, potential competition is, therefore, a Aveak corrective force. When the sugar trust was known to have in its refineries a capacity four times as great as the consumption, is it to be w^ondered that people long hestitated about starting competing refineries, even al- though the sugar company for many years paid twelve per cent dividends upon its common stock and seven per cent upon its preferred, and although it was known to be capi- talized for much more than its cost? Supposing the whisky trust had extortionately advanced its prices, would it not liave been business folly for a person to establish a new dis- tillery, when the whisky trust had been able to close almost six-sevenths of its distilleries and yet had been able to fur- nish with the twelve that it continued to operate the same output as before had been actually produced by the entife eiglity that it owned? Is it not because the would-be com- petitor fuily realizes that the Carnegie Company and the other great steel companies control mills and plants that can easily supply the average demand of the public, that so little competition springs up in that ])usiness, notwith- standing it is asserted upon good autliority tliat the Car- negie Company, with its plants costing not more than $25,- 00(),()0(), ^^]]] inake from $2r),000,Oo6 to $1(),()00,00{) net profit in Hiis one year? Is not one reason that the Standard Oil Ccirnpany has so little competition, not- withstanding its dividends amount to tliirty or forty mil- li(ms of dollars each year upon a watered capitalization of Prices and Potential Competition 129 one hundred millions, the fact that the Standard Oil Com- ])any has ample facilities for supplying the whole country and the export trade with oil? Yet, while there is this resti'aint ui")on competition, causetl by the existence of more plants than are needed, it is a fact established by exj)erience that sooner or later there will be men with enough daring, enough courage, and enough ho])efulne.-s to start new competing establishments. As longaswealth keeps on increasing t'lis isbound to occur, because men will put their money into some enterprise and. they will put it into that whicli seems to yield the greatcs.; profits. For a time they may be restrained from putting it into enterprises which trusts appear to have monopolized, but eventually they will do so; and the higher the price charged by the trust the more speedy will be the relief of competition. But the State, through its legislature, has a right and, in fact, owes it as a duty to itself to stop even tem})orary monopoly; and if the only practical means of doing so is to forbid such aggregations of capital as will absorb all the productive agencies of any industry, then that means should be adojited. This is the only justification for anti-trust statutes which aim to abol- ish and not to regulate coml)ination. l^ossibly in view of the fact that coin[)etition is l)ound to spring uj), and that j)crha])s in the long run we may be gainers, it is unwise to go so far as to al)olish trusts. lUit the evils of even a tem- porary mono])oly are so great that the ^[ucstion is worthy of ])rofoun(l study. \l\ indeed, ti'u>ts that merge into one organiz;uion all the ])roduciive agencies and secure the means of su])plying ihe entire demand, tlu'reby restrain and hamper and I'l'pi'cs- the establi.-hnient of new enterprises, then it is pos.-iMc il'.at even ]'ub]icity will not b(> a ])erfect renuMJy: ih:U. uhilc ii nuiy ultiniati'ly c;ill coni])etition into existence, it ciUinol ilo so to eorreel ortsent evils, ahhouirh 130 The Trusts our experience so far would indicate that publicity was a speedier and more effective remedy than an appeal to tho courts to enforce anti-trust laws. If aggregations of all the productive agencies, having the power to supply the entire demand, and for that reason dissuading men from entering new competitive enterprises, can acquire tem- porary monopoly, then the prohibition of over-capitaliza- tion and of dishonest corporate methods, and the imposi- tion of taxation, and the fullest publicity, while they may save us from a vast majority of the evils of trusts, will not save us from undergoing for a time, at least, its monopo- listic evils. It is this restraint of competition which arises whenever it becomes known that existing productive agen- cies are sufficient to supply the demand, and which enables one aggregation of all those agencies to be a monopoly for a time, at least, it is this restraint which is a justification of laws against such all-absorbing combinations. It is this which makes it right for us to treat such trusts as monopo- lies, and to require their dissolution, and also to demand the punishment of their organizers and managers. It is this wliicli is the ])asis of the Xew York statute against combinations and monopolies. CHAPTER VII. TRUSTS AXD THE ^^'AGE-EARNER. Next to the accusation that they unduly and extortion- ately raise prices, tlio strongest charge in the indictment against trusts is tliat they luive the ])ower to reduce wages, and that when their supremacy is obtained they will ex- ercMse this power. It is said that when a trust has obtained complete control of an industry, all the men engaged in ihat industry will be utterly at its mercy; that there will be no competitive demand for their services by others in that industry, for there will bo no others; that in just the degree that they have become s})ecially skilled in that trade or industry, they will find it dilheult to turn their energies into other channels; that they must therefore take the vrages which the trust will ])ay, or starve, worse thaii that, see their de))endcnts starve; that they will be white slaves. It is further said strikes will lose their elfecti ve]u\-s, unless universal, because the shut-down of oiu^ or two of a large nunitjcr of factories will be of little injury to a trust, since it can und(Uibtedly in its other factories produce enough to satisfy the market. One thing must he conceded. Combinations of capital must; ])(' oll'-st't by combinations of workingmen. If we are to hav(> tru-is of national scope. labor unions of na- tional sco[)o arc ncci'ssary; and sui'h unions should be en- couraged rather than discouraged. If all over this country a combination, of ca})ilalists is to have the power or the 131 132 The Trusts legal right, speaking either as a combination of persons or as one corporate entity, by a single notice to reduce wages, the wage-earners should have an equal right to combine to demand higher wages, and to refuse to work, and to urge and induce their fellow workmen to refrain from working, unless those wages are paid. This may be common-law conspiracy but it is common sense. The necessities of those dependent upon wages demand tlie ex- istence of such organizations, and necessity knows no law. If capitalists form national trusts, let the labor unions, too, become national if possible. Then let them act together as a unit in fixing fair wages for the whole territory. There are those who claim that the larger the concern, the greater the damage by reason of a shut down, and the greater the demoralization of the organization by rea- son of a suspension of work; that a strike or anything causing an interruption of business is as disastrous to a large enterprise as to a small one, if, indeed, not more so; that strikes are sure to bring into activity that which trusts dread more than any other thing, namely, competi- tion; that they furnish the opportunity for building up a rival business; and that for these reasons among others, trusts are more apt to grant the reasonable demands of labor than are mere individual industries. "We do not believe that it is true that strikes will be as effective against large trusts as against individual competitors. The latter know for a certainty that a strike means that their com- petitors will surpass them; while the trust, if it controls all the plants of the industry, has only the fear of a possible competition, whicli can in few cases become established and active during the continuance of the strike. In facl, the very existence of tlie strike will deter competition, be- cause it leads men to believe that profits must be small if good wages cannot be paid. But trusts arc by no means Trusts and the Wage-earner 133 wholly free from the innucnccs of strikes, and tlioy are, furthermore, in a ])osition where they can more easily alTord to jiay iiigh wages than can competitive concerns. It is to their interest to get along harmoniously with their employees, and they are so far ahle to recoup what they pay out as wages that the probahility is that trusts will raise wages and add the increase to the selling price rather than run the risk of a strike. To the extent that competition is diminished, an em- ployer is better ahle to pay high wages. With active com- petition he is compelled to sell his goods at extremely low prices. It is well known that in many lines of business, this selling price hardly affords a profit; therefore wages must necessarily bo kept at the lowest level. If a com- jictitor, a weak, struggling competitor, hardly able to keep in the struggle, cuts down his employees' wages so that he may if possil)lo eke out a profit, in time the stronger competilor will follow suit. Competition between pro- ducers means a constant attempt to get cheaper labor and material. The employer, if heartless, can do much to re- duce wages. The excessive competition that wipes out profits is the competition that wipes out the fund for the payment of fair wages. The consolidations that can effect economics of production, tliat can yield profits Avithout extortionate prices, can give good wages and permanent employment. J>ut independently of their ai)ility to pay better wages because of tlicir ability to produce more chea})Iy. if all the factories in a given industry are com- bined in a trust, the wages can bo raised to a proper point. It sini})Iy adds to the cost of jirotluction and this is added to the selling jirice. Jt comes out of the consumer, not out of the pi'oduccr. If not all. but nearly all of the fac- t(>rics in any industry arc absorbed in one trust, it makes it much easier f^u" a union to deal with the owners of 134 The Trusts offending factories, and much easier for the owners of in- dependent factories voluntarily to raise wages, because they know that the great trust will also pay good wages. Assuming that a trust is a monopoly and can fix prices as it chooses, it can afford to pay the highest wages, for they will bo added to the other elements of cost and recovered in the selling price. The highest rate will under such circumstances be apt to be ])aid l)ecause, assuming the trust desired to raise prices unduly, it would want to make high wages the penance or pretext for its exactions. As far as the trust aU'ects wages, we firmly believe that the most likely result is that its owners will form an allianco with their employees, pay them increased wages so as to secure their good-will, add it to the cost of production, and increase the price so as to get for themselves a larger and perhaps an undue profit, but will at first give to the con- .-umers no share in the great economies that the combina- tion effects. This is practically what has been done by the numerous "Trade Alliances" formed in England by Mr. E. J. Smith of Birmingham. In his alliances, em- ployers agree with their workmen to employ only union men. They guarantee never to lower the wages then ex- isting. They promise to give them a portion of any in- crease in the selling price not occasioned by an advance in the ])ricc of raw material. This system does not, in itself, occasion any economies of production or management as do trusts; but if higher prices can be obtained, the work- men get a share of the increase. Higher prices are ren- dered ])ossible only by securing the co-operation of all union wnrlaiicn of the trade and bv bovcotting tliose not in the alliance. Wage-earners slu)uld not, liowever, always be satisfied witli mere increases in wages which are added to the price. If wages are increased iifty per cent and the price increased Trusts and the Wage-earner 135 fifty per cent, in the long run the wage-earner may lose. Uranting that trust invners would continue the course of increasing wages and adding to the i)ricc, they cannot ])er- manently do so. ^>uch a course is likely in the lapse of time to hreak down of its own weight. Jn the end it may prove ruin(nis to the trusts and to their employees as well as to the people at large. It will surely ])roduce a decrease in demand, a lessening of production, the shut down of many factories, a loss of employment, a lowering of wages, strikes and every form of industrial sulfering and social derangement. The raise of wages which is most beneficial to wage-earners is that which is an increase in proportion to the final cost or selling price. It is l)y no means con- tended that all increases of wages "which are added to the price are in the long run of no benefit to wage-earners, or economically improper. There arc thousands of instances Avhere competition has so reduced profits that wages have been cut and goods have been sold at less than a fair profit. In all these cases wages should be raised and the increase added to the price. What we do claim is that an extortionate price, even though there be an increase of wages included in it, is not only harmful to the people, but may prove so to the wage-earners themselves. The two things which interest the workingman, Iiowcver much he may think he is interested only in the one, arc: first, an actual increase of wages; secoufl, a price fixed by the manu- facturer on the product, wliicli shall not be so excessive as to lessen the demand. It is further to l)e l)orno in mind that a blow to labor in one industry is bound to affect labor in all industries; a harm to om> cla-s extcMids to all classes, producers and consumers, wage-earners ami capitalists. Suppose the jirice of lumber or df building hardware is unduly increased; wluit happens? Le-s lumber sawed and planed and worked I ;6 The Trusts 3 lip; fewer logs cut and transported; but more than this, fewer houses and stores built. There is less work not on'ly for the lunil)ermen and the loggers and the sellers of lum- ber, but for the carpenters and builders, the architects, the masons and helpers, the painters and plumbers. If men are out of employment in all these industries, do you think even those who are kept at work can obtain union -ivages? Some of these unemjjloyed will seek work in other occupations, and this will tend to lower wages in these oc- cupations. But the evil will not end here. There will be less activity in the real estate market. With fewer build- ings there will be higher rents, and higher rents mean higher taxes. Every storekeeper, every marketman, every shopkeeper, every place of amusement, every institution of education, every organization for charity or for promot- ing religion, everything that needs money will find fewer customers, fewer patrons, fewer supporters, fewer benefac- tors; and will want fewer persons in its employ. That trusts have raised the wages of their employees is almost universally conceded. A\'hile some contend that the increase has not been proportionate to the increase in prices, yet that there has been an actual increase is almost universally admitted. Before the Chicago Trust Confer- ence, Governor Atkinson of West A'irginia, in speaking of the claim put forward by trusts that they pay the highest rates of wages to their employees, said of this claim: "I tliink it is absolutely true. Trusts pay big wages because they emjilfty none but high-grade men and women, which they can alTord {<> do."' ]^)cfV)ro the same Conference every effort was made to o])lain ilie opinions ol labor leaders. It is niost significant that Sainui'l (loiii])ers, llie President of tlie American Federal ion of Laljor, s|)eaking from tlie standpoint of the lalx)ring men, ar^'ued not so much for the abolition of Trusts and the Wage-earner 137 trusts, as for the national organization and federation of labor. Like most students of llie question of trusts, he was appreliensive of tlieir ])o\ver, but he did not g'O so far as to urge the complete anniliilation of that which under control or regulation may perhaps be the means of Ameri- can industrial supremacy, and of raising American wages, and of ensuring the consequent prosperity of American workingmen and therefore of a large portion of Ainerican citizens. That he was of the opinion that the increase in the size of industrial combinations was not a menace to labor provided labor also organized, is evident from this remark: " 1'liere is no tenderer or more vulnerable spot in the anatomy of trusts than their dividend-paying,' function; there is no power on eartli other than the trach' unions which wields so potent a weapon to penetrate, disrupt, and, if necessary, crumble tlie whole fabric.'' On tlie same occasion ^I. M. Garland, ex-President of the Amalgamated Association of Iron and Steel Workers, said: "The position of the worlcer nuiy become easier as tlie opera- tion of the trust proceeds; the example is set and the necessity widened for every man in their emph>y to unite in common or- ganization. The farmer, mechanic, hiborer and business man alike will feel its effects for jjfood or evil. . . . The ri<.'ht of work- men, in conference, to be heard throuj.di their own selection of representatives as to the rate of w iiLres and as to the hours which tlie condition of trade warrants will become a fact, and the farce meeting now so often employed by cajiiial as a prelude to the lockout in order to eiilisi public sympathy, will dical( s and agreeiuenf were presented by our reproeulatives and conferences were arrangeti 1 38 The Trusts promptly. An advance in wages, ranging from ten to twenty-five per eent in ditlerent departments, was secured, and further ad- vances in wages seem assured by reason of advance in prices of material and product, which is one of our agreements. A numher of p]ani8 that liaxl been operating as non-union and at unfair wages, icere unionized by the icage rates being applied to them since they became a part of the trusts. I would not be under- stood to infer that there would not have been an advance in wages if the trust movement had not been on, nor do we think the price of material would have been less, for we note that in branches where trusts do not control, the greater rate of advance has occurred in material. That in tliis country a trust, or the trusts, could long maintain an unnatural or inordinate price for a material or a product is a remote contingency, for not alone would that cause other capital interested in the consumption of the product to com- bine on as large a scale and to become their competitor, but the fact remains that there is not an article produced in these modern times, but there are, or can be, adopted several substitutes for it, and the cost, as a rule, will not vary enough to permit any very great or long-lasting extremity to our needs." At the same Conference, David Eoss, Secretary of the Illinois Bureau of Labor Statistics, said: " Men who profess to betray great apprehension for the rights and liberties of the people cannot truthfully contend that these various transformations (the consolidation of industrial enter- prises) have operated to abridge any of their privileges. On the contrary, there has been a steady and substantial forward move- ment. It has been further demonstrated that with each succeed- ing change there has come, not only a reduction in the cost of life's necessities, but also an increase in the wages of human labor, with other improved conditions of employment. It would seem tliat our latest form of industrial organizations will prove no ex- ception to the rule, so far as toil's compensation is concerned, as wages in the skilled and unskilled occupations have recently ad- vanced fully 25 per cent. This upward movement in wages has not been entirely confined to products manufactured by the trusts. In a few lines of industry prices have been advanced considerably beyond the increase in wages not on account of any trust in- fluence but due to the inability of manufacturers to fill orders, Trusts and the Wage-earner 139 many of tlipm for foreign markets. When productive capacity is more fully developed {>riees will again decline, but, under the new system, not so as to seriously impair prolits or afl'ect wages. . . . Cireat organizations have been formed for carrying on the gro \ ing business of tlie country. During tliis period the wages of Vvorkingmeu liave been increased and the hours of labor shortened. The iipplication of sound principles in governmental affairs has aided iii placing increased comforts within the reach of every \sageworker in the land. . . . " The oil and railroad interests of the country have been singu- larly free from labor disturbances. As a matter of recent history, our most serioiis conflicts have been with interests that neglected to federate. Labor leaders will agree that better terms of employ- ment can. as a rule, be obtained from large than from small em- j)loycrs. Why, tlien, should we fear tlie results of consolidation? It is the part of reason to encourage a tendency that will make possible higher wages, lower prices, and less hours of labor." Moreover it is claimed lliat trusts not only tend to pay hi;jher wages, but that they give .steadier employment. Uncertainty of eni])loyment is as baneful an injury as low wages. Indeed, it may be much worse. Tlie great damage done to a plant by shutting down always makes manufac- turers endeavor to tind an average rate of production that will enable them to supply the total demand and keep running constantly. The larger the proportion of the trade enjoyed by any one concern, the better it is able to foresee the demand, and to produce enough to supply it, witliout. however, over-producing. This is unqualifiedly true and there can ])e no question that trusts should, and geiierally do, give steadier employment than competi- tive producers. The rule has, liowover, many exceptions where unscrupulous managers of great corporations, in order to manijuilate stocks for ])urely speculative pur- poses, eitlier over-produce, or arbitrarily close factories in the face of an active demand. Tliere are manv, indeed, who claim that the greater the concentration of capital 140 The Trusts and the larger the plant, the more injurious is a suspension. Tliey point to the fact that not only does the suspension damage the plant, but what is infinitely worse, it demor- alizes the force engaged in managing and selling. They argue that since this force is usually well acquainted with the particular business in which it has been engaged, since it is located in so many places, since it is an organization so difficult satisfactorily to replace, a trust will do every- thing possible to retain it even when shut down; that the expense of retaining it is so great that every effort will be made to continue the business and employ these men profitably rather than pay them for idleness or lose them because unable to keep them busy; that the profit- able employment of the managing and selling force neces- sitates continuous running of factories and permanent work for wage-earners. , There is, at least, a grain of truth in this; and coupled with the superior knowledge of the great trusts as to pros- pective demand and trade, it renders it likely that under trusts workmen will have more constant employment than under a system of industry where there are many competi- tors whose factories have a capacity in excess of the de- mand, and whose knowledge of conditions does not enable them to correctly estimate the demand and to keep their factories running steadily. It is a very significant fact in connection with wages and their relation to the increase in size of industrial enter- prises that, as industry has tended to specialize, as the di- vision of labor has gone on and men have more and more become skilled in doing well some one piece of work that was in itself but a fractional ]iart of an entire thing, co- operation and consolidation have become necessary: the crijTiliiTKMl efforts of the workers have produced a large output, there has been a greater abundance and variety Trusts and the Wage-earner 141 of commodities, ami laborers have gotten a larger share. Prices oJ' the necessaries and comforts of life have lessened; }'et wages have increased. They have increased not only in actual amount, hut al.-o in i)ure'hasing power. In the face of the ineciualities of wealth iliat exist to-day and of the ])()verty and sulfering that are not infrequent, the fore- going statenieni may seem untrue, hut it is the conclusion ]-eachc(l hy those who have made most exhaustive study of the wage ([Ut'stion. '^riiat it should he so, follows from natural and ecoTiomic laws, and is in accord with moral lav>"s. l\y specialization, hy adoption of lahor-saving ma- chinery or improved processes or even of more perfect or- ganization, the laboring man is enahled to produce more cheaply. In the luiture of things cheap production ulti- nuitely necessitates low prices atid higher wages. ]t is easily seen how prices must he lowered. If they were not, the increased product could iiot he sold. It nuiy not so easily he seen that higher wages are also a necessary result of cheap production, hut they are. '^^Fhc chea])ening of products, that is, the lowering of the price, means an in- crease in their consum])t ion, eidarged jjroduction, more employment for lahor, higlicr wages. Kven if it he granted tliat the increase in consumpti(Ui is not exactly in pro- jiortion to the c!iea])ening, that is. even although cutting ihe price of a particular article in two does not double the consumption or double the demand for labor, the increase is, ncvci'thclos. very great, and sales and total profits are much increased. Morco\t'r as prochu'titui increases, the em- ])l()yer obtains move money. His capital is augmented. Some (d' it max be consunu'(l or wasted, hut an increasinsf amonnt l)econies jiroductive capital seeking investment. A< this amount accumulates it starts new industries and develops resourc("s theretofore undeveloped; and the result is an increased ilemand tor workers and hi'dier wa^es. 142 The Trusts A typical illustration of the cheapening of a product while there was an increase in work and wages, as a result of concentration and combination and enlargement of the en- terprise, is the cotton industry. The following paragraph quoted from Geo. Gunton by A. Leo AVeil in his excellent ])aper before the Chicago Trust Conference, summarizes some statistics collected by CJunton. " If it is true that the concentration of capital tends to diminish the cost of production and intensify competition, it follows that prices will fall or wages will rise, or botli, in proportion as large enterprises supplant small ones. And this is what all industrial history shows has taken place. Take for example the cotton in- dustry in this country. In 1831 there were 801 cotton manu- facturing establishments vvitli an average capital of $50,702 each. . . . The ratio of consumption of cotton cloth to population was 5.!)0 pounds to one (that is, 5.90 pounds to each inhabitant), and the price of cotton cloth seventeen cents per yard. In 1880 the number of establishments had fallen to 756. The average amount of capital invested in establishments had risen from $50,702 to $275,503: . . . the ratio of consumption of cotton cloth to the population was 13.91 pounds to one. and the price of cotton clotli A\ as seven cents per yard, and wages were eiglity j)er cent higher. Comparing 1880 with 1831, the ca])ital invested per spindle was over one-third less, the number of spindles operated liy each laborer nearly three times as large, the pi-oduct per spindle one- fourth greater, the product (in quantity) per dollar invested twice as large, the product per laborer employed nearly four times as great, the price of cotton cloth sixty ])er cent less, wages eighty j)(T cent higher, and the consumption of cotton cloth ])er capita of tlie jjopulation over one hundred per cent greater. These are the results of the process of consolidation into large capitals, extend- ing over half a century. What is true of this industr}- is ecjually true of all industries in pro])ortion as the concentration of caj)ital has increased." But while those figures show that from an enlarged product tliere come, as a result, cheaper goods, lower jjrices and higher wages, and wliile undoubtedly this cheap- Trusts and the Wage-earner 143 ening of product could have hcon occasioned only l)y con- solidation and by dn increase in tlie size of factories, yet have we sutlicient j)roof to establish the jtroposition that a consolidation of all the cotton mills would liave neces- sarily resulted in the same way? The hgures are of great importance and deserve the most careful study; hut in drawing inferences we should not forget that despite the consolidation of cotton factories and their increase in capitalization, there were in 1880, seven hundred and hfty- six competitive factories. The concentration of ca})ital in the cotton industiy nuide possible a chea])er cost; but there was active com]ietition, in this case at least, to oc- casion lower prices. It must be remembered that the cheapening of the price of numufactured articles means chea])er goods for the pro- ducers themselves, in so far as they are consumers of those goods. If the cheapening he generally extended to all classes of nu^nufactTirtnl goods (and this, as a rule, has oc- curred), an actually smaller amount of wages may have an increased purchasing power and therefore be relatively an increase of wages. Specialization is either a new division of human labor, or the adoption of new and improved ma- chinery. In whatever way it manifests itself, it a!w:'ys means more abun(hnit ])roduction. Xearly all products tend to grow chea])er. l)ecause inventive taleTit is continu- ally being exhibited in so many industries. Those which have the least tendency to grow cheaper are those in the production of whieli there is the least possibility of a divi- sion of lal)or and the least opportunity to use machinery and to concentrate and combine, viz., agricultural prod- ucts. Indeed, there has been, of late, a tendency for prices of agricultural products to increase. The report of the IT. S. Senate Committee which investigated prices and wages from ISGd to 1891, and which considered two hun- 144 ^^^^ Trusts dred common products, manufactured as well as agricul- tural, found that wages had increased G8 per cent. The prices of one hundred and forty manufactured articles had fallen from 6 to 40 per cent. Fifty-eight articles had in- creased in price. The net decrease was 4 per cent. With one or two exceptions all of the fifty-eight products, the prices of which had increased, were agricultural or raw material products in which concentration of capital and the use of machinery had l)een very sliglit. By moans of con- solidation, tlien, and concentration, vrages had increased not only actually and absolutely in money (GS ])er cent), but more than that in their ])urchasing power. In considering the iio.-sibility of an increase or decrease in wages, one should ]iever lose sight of the fundamental fact that the source of wages, the fund from which they are payable, is the product turned out by the labor that is to be ])aid. "We do not mean to say that there is an absolutely fixed wage-fund. That is an exploded fiction of political economy. Wages may be increased by compelling employers to take a smaller share of profits, and allotting to the wage-earner a larger share. The economics of the wage question cannot 1)0 separated from social problems. American workingmen get better wages than European nations kirgely l)ecause they demand them. American public sentiment will not tolerate any degradation of American workmen. Thu- w( pass laws regulating child and female labor; and providing for factory inspection and control. ]>abor unions can do an amazing amount to in- crease wages liy raising the social standards of the masses. Workingmen are like everyone else in that the more they get, the more they want. If Ave once have worn good clothes, we want always to have good clothes to wear; if we have accustomed ourselves to a certain degree of civili- zation, we will never give it up, if we can help it. Every Trusts and the Wage-earner 145 material comfort the workingman has, creates a desire for other comforts. Every jjrivileije tliat he acquires is an in- centive to demand a furtlier privik'ge, and if lie uses it proi)erly, it is a warrant for so doing. People to-day talk about the '' uppishness '' of domestic servant girls and the demands of labor unions. These demands may in individ- ual cases be unreasonable, but all our strikes and labor troubles are the growing pains of an enlarging liberty and a moving civilization. AVell may we lament the day when the workers do not want more of the world's comforts and more of its privileges. Wages increase because laborers are determined to have a share in the world's prosperity. They demand not the right of existence, but the right as men to live, and to live as men, a life of industry, but also a life of refinement, of comfort, and of happiness; a plenty and a variety to eat, clothing suitable, sufficient and of good style; leisure for recreation; opportunity for edu- cation. Wages may, indeed, be increased by compelling the em- ployers to accept a smaller amount of profit, but the most certain and sure method of increasing wages is to increase the product, for then there is a greater fund from which compensation can be drawn, and whatever tends to increase the product, whetlier it be a machine, a process, or a form of business organization, tends lo increase wages, if a l)i)(ly of laborers make a thousand pairs of shoes a day and receive a certain rate of wages from theii- employer, they in etfect receive a ])ortion of th(> shoes which they make. If, by means of a better organization, they can double that product, while undoubtedly the amoutit of tlieir wages cannot be doubled in dollars and eents, because of the lower ])rice that shoes will bring, yet it is certain that those wages will be greatly increasecL If under the first con- dition they receive one-third of the product m shoes, or 146 The Trusts its equivalent, the employer can equally as well afford to give them one-third of the product under the new sys- tem of organization; that is, twice as many shoes. The laborer in the shoe factory can have twice as much to offer as he had before. The increase in the number of shoes made by him and which must be sold will make an increase in the productions of many other persons. It will cause the use of more hides, make necessary the raising of more cattle, give employment to more tanners and leather merchants, and renewed activity to all the mantt- facturers of subsidiary parts of shoes, such as shoe pegs, shoe thread, shoe buttons, and dozens of other articles that enter into the manufacture of shoes. Thus all these people will have the means of getting more shoes, but they will want hundreds of other articles besides shoes, and in pro- portion as their means to give something in exchange have increased, their desires or demands or consumptive powers will have increased, and these consttmptive powers will mean increased activity in every otlier industry, and increased production. The product will be divided eventually among the producers. The laborer in the shoe factory will not need twice as many shoes, but he will be able to exchange these shoes for a greater amouiit of sugar and coffee and flour and other food products, and for more clothing, and for a greater numlior of means of amusement and enter- tainment and education, than lie would have obtained had he and his fellow workers continued, under the original method of organization, to have made only the thousand pairs of shoes. The conclusion of the whole matter, then, is tliis, what- ever increases the amount of product is sure eventually lo increase the fund fi'om which wages can be ])aid: and, without an exception, history sliows that in the distribution of the fund, the wage-earners have continuously received Trusts and the Wagc-carncr 147 a larger and larger proportion, l-lvery invention, every dis- covery, every [)rocess, every niaehine, every method of or- ganization whieli eheapens the pi-odud, stiuudates the de- mand for it and inereases the amount of work and raises wages. The truth that stioutd never t)C forejotten t)i/ the ivage- earner is that tlie amount of tiis wages ivltt depend not so inurli upon the nunit>er of eniptoi/ers, as upon the amount of work there is for him to do. If there arc hundreds of competitors and their processes of production are c.vpensire, then there will be comparativeti] tittle icorl-. If there are onh/ a feiv competitors, hut if those few can produce cheaply, the anihunt of work will increase and wages will rise. We must never lose siglit of the fact that the increase in tlie denumd which gives more employment and higher wages is due not to cheap production, hut to lower prices. C'hea]j ])roduction, economical production, always tends to dis])lace labor and to throw it out of employment. Jt is lower ])rices, lower relative prices, alone that can in- crease the demand and stimulate production and in this way give new employment and keep up wages. Again we are impressed with the momentous, yes, awful danger of trusts, if, notwithstanding their ])ower of chea]) produc- tion, they atttacles in the way of fair competition, of prohibit- 148 The Trusts ing the unfair trust methods of " cut-throat " competition in certain localities while over-charging in others, of abolishing all special privileges to trusts, of crushing out every trust that is a ^^raetical monopoly, should never be forgotten by the wage-earners. On the other hand, to abolish entirely every large in- dustrial organization would be to re-open the flood gates of excessive comj)etition and to expose ourselves again to all its evils. It would ])e to go back to expensive methods of production, which would lessen the demand and the out- put, diminish the amount of labor required, close up many factories and mills, cause others to work half-time, neces- sitate paring down wages, and ])roduce one continued era of depression, until the sane and sensible method of adopt- ing all cheap means of ])roduction and distribution was adopted. It would reduce tlie United States to the indus- trial condition of Spain and Turkey and all countries where labor-saving machinery and methods are not adopt- ed. To-day we are in competition with European coun- tries that have cheap labor, and with Asiatic countries, not- ably Japan, that have still cheaper laljor. Unless we adopt all the labor-saving machinery, all the newest and most improved processes, and also the most perfect labor-saving and clieap-producing methods of organization, we shall lose our foreign trade. It is only l)y these means, which Avill enable tlie thousands of American workmen, who receive good wages, to turn out as miicli as the larger nu]nl.)er of European or Asiatic laborers whose aggregate wages are the same, that we can hope to obtain a foreign market. Granting tliat we could 1)y a tariff retain the home market, unless we adojjt the eht'a])est means of production we are industrially nnd conimorcially ruined, because the capacity of our f;u-tnric> i> fur in excess of our consumptive powers. It is absolutely necessary that we stifle every trust that is Trusts and the Wage-earner 149 a monopoly, 1)ii( tlic abolitioTi of every prcat industrial corporation would st'eni to l)e a bad ])oliey. Jie.u-ulation, rather than destruction, of corporations, is what the wage- earner needs. Particularly is it to the interest of the wage- earner to encourage tl'.e enactment of statutes that will require t)r j)roni()te publicity of the alfairs of corporations, the fullest {niblicity that can be had without revealing matters of ])rivate business. J.et the world know that profits are uiululy high and competition will eventually, in all likelihood, assert itself. Prices will be lowered and production increased with the increased demand. Let the world know that prices arc high, but that wages are low or the hours or conditions of labor excessive, and the evils will at once be corrected. If that great moral force, wliich, in an age of selfishness and of laxity of morals, is still ;:n irresistible force, does not assert its power, either in ilfi- cient factory legislation, in laws for arbitration, and in oth r statutes; or else in that silent but effective way of social ostracism, which even in business is powerful; or in that form of business boycotting that refuses to buy of those who would degrade labor; if that great moral force does not assert its powt'r, competition, at least, will spring up and give to labor greater employment and remunerative and fair wages. Evil loves darkness, and in the world of wickedness the ignorance of the intended victim is the power of the villain. Let wage-earners, then, see that that same pul)licity which they them>elves court is required of trusts. The dangers that the laboring man apprehends, and his fear that there is a pos-ibility of the lowering of wages bv trusts, are not, however, eon lined to his belief that the trust is a monopolistic power that can ai'bitrarily reduce wages, lie al.-o f(>ars thai the eeonomies of the trust per- mitting and even necessitating the discharge of many labor- 150 The Trusts or< in every industry, mean that there will be great num- bers of unemployed, and that this will mean a lowering cf wages. In the chapter on Displaced Labor we will con- sider this point at greater length; but it has been impossi- ble to treat of the subject of the arbitrary power of trusts to reduce wages, without touching upon it. Incidental to the question of wages, and of vital interest to the workingmen in considering laws affecting trusts and combinations, is the fact that the trust method of or- ganization of capital has the same purpose and is based on the same principle as labor unions themselves. The trust is formed to escape the evils of undue competi- tion; the union is organized because the American laborer does not want to be compelled to sell his labor at the price of the cheap pauper labor of Europe, or of the '' yellow labor '' of the Orient, or even at the price of the laborer who is willing to toil for wages that merely give sustenance and which do not permit him to enjoy any of the comforts of American civilization. The labor union is a labor trust by the common law, and by the decisions of many of our courts it has been declared illegal as a combination in restraint of trade. As a matter of fact, the laws designed to prevent trusts have, as a rule, been ap- ])lied and enforced only against labor organizations; but a growing public sentiment is compelled to admit that only by elTective organization and by united action can the laboring man raise himself up to his proper place in the conmninity. If workmen were forbidden to organize, if each one was obliged individually to agree with the em- ployer as to the hours of work or rates of wages, the work- men of tlio cnuiUrv would become practically slaves. Their nece.-.-iiic- would compel ihem to accept whatever was of- fered a> wagf.'s. Such a condition of affairs wordd not only be di;ba:-ii)g to the workmen, but to all society. We can- Trusts and the Wage-earner 151 nor al)(1li^l^ labor unions by statute. ^Fodcrn enliirbton- luent would never permit such an attempt. It reeo^i^'nizes unions as necessities. If necessities, they must be allowed to become eireetive. They must be permitted to become equally powerful with the employers. If the latter com- bine and consolidate and a of decisions based upon princi- ])les of ])ublic policy. In recent years, however, cert;iin distinc- tions have been attempted by stiitutc law, which we will notice later. A leading case, State cv. Stewart, speaks in common of 154 ^^^ Trusts labor and capital as follows: 'The principle upon which the cases, both English and American, proceed, is that every man has the right to employ his talent, industry and capital as he pleases, free from the dictation of others; and if two or more persons com- bine to coerce his choice in this behalf, it is criminal conspiracy. The labor and skill of the workman, be it of high or low degree, the plant of the manufacturer, the equipment of the farmer, the investments of commerce, are all in equal sense property. If men by overt acts of violence destroy either, they are guilty of crime.' Mr. Tiedman, in his text-book on Commercial Paper, says: 'All combinations of capitiilists, or of workmen, for the purpose of in- fluencing trade in their special favor by raising or reducing prices, are so far illegal that agreements to combine cannot be enforced by the courts.' In the case of Doremus vs. Hennessy, recently de- cided by the Illinois Supreme Court, tliis general language was used: ' Xo persons, individually or by combination, have the right to directly or indirectly interfere with or disturb another in his lawful business or occupation, or to threaten to do so for the sake of compelling him to do some act, which, in his judgment, his own interest does not require.' Those decisions, with many others, in- dicate that in tlie field of industry, capital and labor are partners of equal importance, endowed with the same privileges and sub- ject to the same restrictions." However much we may regret the recognition of these principles of law, and however much they may be opposed to a growing and eniiglitened sympathetic public senti- ment, the experience of the laboring men in the case of the strike of the American Railway Union, conducted by luiirone V. Del3s, should show that the proper course of ]u-()ce(lurc is for the workmen not to urge the adoption of laws against combinations until, indeed, some distinc- tion is recognized between combinations of labor and com- l>inati()ns of capital; and it is doubtful whether any such distinction in principle exists. In his able paper Mr. Tuttle says that althnugli thirty states have passed anti-trust laws, so far neither ('ai)ital nor labor has been affected, for the rea?^on tliat there has l)ecn no earnest effort to enforce Trusts and the Wage-earner 155 tliom; but he show?, upon an examination of the statutes of these several states, that all of them, if given a natural construction consistent with their terms, would be as op- pressive to labor as to capital; and this is equally as true of the old law of Texas (188!)) and the law of Kansas, as of llie anli-trust laws of ^Missouri, Xebraska, Xew Mexico, ].,ouisiaiia, Xew York, Indiana, Georgia, Arkansas, or any other state. In some of the anti-trust laws, as in those of Illinois, Arkansas, Georgia, and Indiana, labor unions are specifi- cally excluded from their operation, but a decision of the I'nitcd States Circuit Court in the north division of Texas in 181)7, decided that the Texas anti-trust law of 1880 was unconstitutional as class legislation, because among other things it excepted from its provisions, restric- tions of competition in agricultural products or live stock while in the hands of the producer or raiser. Consistency would seem to require a construction to the effect that an excm])tion of labor unions from the provisions of the statute was also class legislation and therefore void. "We do not wish to be understood as maintaining that tlicrc is no distinction between labor unions and trusts, for we til ink there is one of vital importance. Both are formed because of tlie desire to eliminate a detrimental cnmpotition; but they (litfor in tliis important respect, that tb(^ labor uni(m admits to its membership all the workers in a ]iailicular industry; none tiave s]ieeia! privileges; and it has Ix^on well said tliat the union represents the move- ment o[' tb.e ninss of tlie people for economic justice and social advantage". P)Ut the wago-earnor must never forget that in the eve of the law, and aceordintr to the declara- tions of manv of tiie courts, th(T(' is no distinction between combinations of labor and combinations of capital. CHAPTER VIII. TRUSTS AND DISPLACED LABOR. The man who makes two blades of grass grow where one formerly grew has been declared a world's benefactor. Much greater, then, ought to be the encomium pronounced upon the person who, by perfecting a tool, inventing a ma- chine, or organizing industry, causes one man in a given time and with a given amount of labor to do the work which formerly required two men; for the community at large can have, as the result, twice as much of that product, or else it can have something else that one of the two men can produce. To the community, the saving es- pecially when considered only abstractly seems an advan- tage. " Why," says it, " should two men be paid when one can do the work?" Sometimes there is another thought which comes to the community: " Is it really a good thing for us, the community, that the second man should lose his employment?" "He is out of employ- ment, and it seems as if he never could again get work." In time the community learns that all the displaced em- ployees have found employment again, either in the same industry or in some other; and the community sees that it is, in fact, good; that it is inevitable. The thought that comes second, if at all, to the community, is, however, the first thought of the displaced employee; namely, the hard- ship suffered by him. This displacement of labor is the inevitable incident of labor-saving machinery and labor- 156 Trusts and Displaced Labor 157 saving organizations. It is the absolutely necessary ac- companiment of industrial progress. There is no advance without someone or something being displaced in the move- ment. This is as true of industrial progress as of physical. The more rapid the progress the more sudden the displace- ment. The extent of the displacement is, indeed, the real measure of the progress the saving, the benefit. The dis placement of labor is one of the most pitiable of all the at- tendant evils of industrial progress because it is generally the most skilled that are displaced. The more one has specialized, the more it is likely a machine will be invented to do his work, and the more it is difficult for him to find work in some other industry. Every labor-saving device, whether it has been an inven- tion of machinery or a betterment in organization, has been fiercely opposed by those who were about to be displaced. The history of industrial progress is a record of hostility and opposition to improvements, inventions and innova- tions. Manual labor has always been the enemy of the new machine. Arkwright and Hargreaves and Crompton were mobbed by the hand-weavers, and in the latter half of the eighteenth century mobs went through England breaking down power-machines. The introduction of nearly every new machine has been fiercely resisted and loudly lamented. One need not wonder at the opposition of the laborers. No man loves that which takes the bread out of his mouth and the mouths of those whom he loves and whom he must feed; and this is what the machine appears to do, and for a time does do. But it would be better for the laboring man if he formulated, in some way, his claim upon the community for the loss he has suffered, and made a reasonable demand that the com- munity, out of the great saving accruing to it and to the introducer of the machine, would pay something to the 158 The Trusts skilled laborer whose skill has been rendered useless, and t the faithful employee for whom there is no longer work. It might be possible for the community by some plan to assuage in some degree the suffering occasioned to the in- dividual by these new methods. The community ought not to overlook the great wrong done to the displaced. They are the victims over whom the chariot of progress ruthlessly rides the victims of industrial campaigns. Wo pension our soldiers in war. Can we pension the injured veterans of industry? Xo scheme has ever been devised to compensate workmen displaced by machinery or by im- proved methods of organization; probably no scheme can be devised; but this much is certain: the most senseless proposition would be to prevent the introduction of im- proved machinery or better organization. It would be infinitely cheaper for society to pension displaced em- ployees to pay them for all their lives the wages they have been receiving, for this, at the most, would only delay prog- ress one generation. Perhaps there is no other course than for the displaced laborer to adapt himself as readily as pos- sible to the new condition. Perhaps there is no way of re- lieving the hardship of the displaced man. But, however practicable or impracticable any scheme of relief, the march of progress cannot be stopped. Labor-saving devices and labor-saving organizations will be adopted because tbcy are a benefit to the community aud eventually to all classes and industries; because they are the greatest good for the greatest number, and finally the greatest good to all. Trusts do, indeed, close many factories and mills, and throw, temporarily at least, many men out of employ- ment. Tlioy would not be clieaj) producers if they did not. Tiiey are labor-saving organizations. Their real econo- mies grow out of the fact that tiie same work, by means of great centralization, can be done by fewer men. Little Trusts and Displaced Labor 159 shops which cannot produce cheaply are necessarily closed, either because they cannot compete against the trust, or because if absorbed by it they cannot be run economically and profitably. The men who were employed in them are for this reason no longer needed and are therefore dis- charged. Thus when the cotton-oil trust was founded, it closed more than a dozen small old-fashioned mills. The whisky trust, immediately after its formation, closed sixty- eight of its eighty distilleries, but with its remaining twelve it was able to furnish the same output as before, and soon to increase it largely. The sugar trust, it is said by Ernst Von Halle, can supply the entire market with the product of one-fourth of the plants which it has absorbed. To oppose the closing up of these unnecessary plants would be the height of folly. If the community had a right, directly or indirectly, to compel the whisky trust to keep on running the sixty-eight distilleries that it closed, in order that the men who were employed in them might not be thrown out of work, and in order that the towns and cities in which they were situated might not lose business industries, why not insist that the whisky trust should increase its distilleries from eighty to three hundred or to five hundred, in order to give more work, and more industries to more towns? The truth is that the industries that were closed were unnecded; that the services of the men w1io were discharged were not required. The further truth, which is the important truth, is that every cent that is paid for these unnecessary services, or to maintain these unneeded plants, is a burden which is finally borne by the consumer. Its voluntary continuance would be folly. To eoni]iel its continuance would be a crime. \Yhen one laments the closing of factories and mills 1)y trusts, he should, however, never lose sight of the fact that under the competitive system men are very frequently i6o The Trusts being thrown out of work. Factories and mills are con- stantly being closed. Commercial travelers are every now and then losing their places. If the reports of the com- mercial agencies, which show that eighty per cent of busi- ness men fail at some time or other during their business careers are correct, then it is certain that at some time or other a large portion of the factories and mills of the coun- try are closed and a majority of the employees are thrown out of work. It is the belief of disinterested students and observers that without the formation of trusts, the small and weak industrial establishments would have been forced by com- petition to have suspended, and that even a greater num- ber of plants would have been closed, and a larger number of men thrown out of employment. Absorption by the trust has enabled the trust with its various economies to save the proprietors from ruin, if not to give employment to all the Avorkmen. Ernst Yon Halle states, as his opinion, that even if no whisky trust had been formed, the natural conditions of production, such as the price of real estate, of wages and of grain, and the rates of transportation, w^ould have given to the distilleries situated in Peoria, 111., such an advantage that most of the distilleries in other places would in the course of time have been obliged by the force of competition to go out of business; that the sugar refineries of Havemcyer and Spreckels were so much better equipped than those of their competitors, and their owners had the possession of so many valuable patents, and by reason of them and by reason of pos- sessing great capital and experience, were enabled to pro- duce so much more cheaply than their competitors thai they were bound in the course of time to acquire nearly all the trade, and their competitors in all probability were destined to bankruptcy and failure; that long before the Trusts and Displaced Labor i6i Carnegie Co. was formed in this year, 1900, Mr. Carnegie, by reason of his capital and ability, was so much stronger than all his competitors that they, for their own protection and preservation, entered into pools with him; that,if it be urged that the terms and conditions of these pools were oppres- sive to the smaller concerns in them, it is but additional proof that the owners of these smaller concerns were so afraid of bankruptcy and ruin that, even upon unfair terms, they were willing to enter the pools in order to be able to continue business at all. One class of persons greatly affected by trusts is that known as " commercial travelers." Competition among sellers for many years mightily increased the number of commercial travelers. The more intense that competition becomes, the greater is the need of the services of this class to " drum " up trade, to exhibit the " line carried," to customers. The commercial travelers are among the most active, aggressive, and public-spirited of Ameri- can business men. The success of competing estab- lishments depends very largely upon these represent- atives. They make the fortune of many a mercantile house. Each one has his " trade," a good will which' is most valuable. Naturally, commercial travelers, are not, as a rule, low-priced men. Their salaries and their expenses constitute a very large percentage of the cost of business; they are one of the largest items that go to make up the cost price to the retailers. As soon as all the com- peting industries are formed into one combination there is no longer the necessity to solicit trade to the same extent, and the commercial traveler becomes needless. He is dropped. To just the extent that the trust can dispense with his services does it effect a saving. The greater the number of men whose services are dispensed with, the larger the saving. Mr. P. E. Dowe, president of the Commercial 1 62 The Trusts Travelers' Xational League, has strongly arrayed liiraself against trusts. He shows how co:iiinercial travelers have lost their places owing to trusts. In a speech at the Chi- cago Trust Conference in September, 1899, he spoke as follows : " There have been thirty-five thousand commercial travelers thrown out of employment, mostly traveling salesmen, but in part city salesmen who come under the title of commercial travelers; for the man who picks up his gripsack and drums city trade, or invites customers to his headquarters to inspect his samples, is a commercial salesman, or a commercial traveler, by a slight elas- ticity in the use of the name. A city salesman is eligible to membership in any of the commercial travelers' associations. The majority of city commercial salesmen make out-of-town trips occa- sionally, sometimes short distance, sometimes long distance jour- neys. I neglected to note in previous arguments this subclassifica- tion; it is unimportant, however, as the city men are but a small proportion of the whole number affected. " I stated in Washington in June last that twenty-five thou- sand were reduced in salaries. Could add to-day a thousand to these figures. I was in error when I anticipated, on the 16th of June, that thousands more of the commercial travelers would be dispensed with on July 1st; for, from reasons best known to the trust ofTicials, expected wholesale discharges did not take place. I have heard from less than one hundred discharged on that date, but have lx.'en notified of many cases of reduced salary. Ileduc- tion in salaries was not exclusively with trusts; many of the ' outsiders,' owing to the pressure of unfair competition and loss of trade, were obliged to make reductions. " The salesmen who lost positions, owing to the trusts, were all good men; being of the energetic and progressive character jjro- vcrbiiil to the American. They could not be discovered as tramp- ing llic streets wearing signs of distress. Nearly every one of them had some money saved; some found positions as travelers for other hduses; some went into other pursuits; some had farms, and 1 know of more than forty instances where former drummerr. are doing farm work; and some are still looking for positions." ^Ir. Duwe's statements contain some significant admis- Trusts and Displaced Labor i6 o sions; and it may be questioned in fact, by the most emi- nent authority it has been ({uesiioned whether his figures are reliable. They have been obtained, as he himself ad- nuts, largely by means of correspondence and verbal re- ports, sometimes direct and sometimes round-about. They are really little more than rumors. They seem t(j be about as erroneous as were his anticipations of the IGth of June. But conceding that thirty-live thousand commercial travel- ers have lost their places, what is the conclusion that is to be drawn? It is that trust methods have at least saved the salaries and expenses of thirty-five thousand commer- cial travelers; that to that extent production has been made cheaper and lower prices rendered possible, while the en- ergy and force that are characteristic of these commercial travelers can now be directed into some u-(;ful channel through which they can render needed services to the world. It is unquestionable that trusts displace labor. If they did not render some services useless, they would have no advantage. But trusts would not have a suilicient reason for being, even if they could dispense with lal)or, if the displaced laborers were to remain permanently idle. Xo calamity would be greater than to liave tht'se thirty- five thousand alert, ])rogressive, active Am_M-icans reduced to id'cness. But they will not remain idle. They will ob- tain situations. It may ])e difliculi foi' tliem to do so at once. In many cases the new ]io-ilioiis may not l)e to their liking: but somewhere or other, in the great field of industry, there will be ocPU])ations and work for them. And, however little all their experience and skill as com- mercial travelers will be availed of. doubtless, in general, the community will be ])etter served by their efforts in these new ])laces of enijiloynient tlian in the useless service of soliciting trade for producers who have com- 164 The Trusts bined. Wherever machinery has been introduced, it has at first displaced employees and afterwards has so cheapened the product and increased the demand, that in that same industry there has been need of an increase in the number of employees. The result will not be different in the case of labor-saving and labor-displacing organizations. The cheapening of a product not only increases the demand for that product, but is sure to build up many kindred enter- prises, and in time to benefit every industry. One of the most conspicuous examples of this is the trade of printing. Few machines are so nearly human in the operations they perform, so automatic, as the modern printing press which takes a roll of paper, prints it on both sides, cuts it int5 proper lengths, folds it and turns it out ready for mailing or delivery. Hardly any machine has displaced so much labor. One modem printing press will do more work to- day than five thousand men could have done on hand presses a century ago. But the press has reduced the cost of printing newspapers proportionately. Even with the increased amount of news that they furnish, gathered with amazing promptness from all quarters of the globe at great expense, they furnish papers of far greater contents, at a fraction of the cost of the old news-letter. But the increase of their circulation, and the amount and value of their advertising space, have more than kept pace with the re- duction in price. More printers have employment than did when old-fashioned presses were used, or would in case old-fashioned presses were used to-day. But not only are there more printers, employment is given to hundreds of thousands of editors, reporters, contributors, newsboys and advertisement writers; and the businesses of manufactur- ing presses, founding type, making printer's ink, manufac- turing paper, etc., have given employment to hundreds of thousands more. Trusts and Displaced Labor 165 This whole question of displaced labor is but one phase of the question of trusts and wages, and many things stated in the preceding chapter are answers to that question. Particularly should reference be made to the figures and statements concerning the increase in the number of persons eiiiployed in the cotton trade. It is a fact of common knowledge that in this industry there has been constant improvement of machinery, and that the adoption of this new machinery has constantly displaced labor; but an examination of the figures relating to the cotton industries shows that in sixty years there has been a great increase, not only in the amount of capital invested in the industry and in the product obtained, but also in the amount of employment and in the wages paid, while the price is only one-third or one-fourth of what it was in 1830. Perhaps our groat means of transportation, the railway, has done more to displace labor than any other modern in- stitution. It has dis])laced all the stage coaches with their drivers. It has resulted in the closing of most of the road houses and country inns with their proprietors and their hostlers and their servants. It has wholly displaced the canal packet; it has made unnecessary the building of stage coaches and in scores of ways has displaced labor; but it has given employment to hundreds where tens have been discharged. Take the groat Pennsylvania railway sys- tem as an example. To-day it employs over one hundred thousand men. Half a million people are dependent upon these one hundred thousand. It is a statement which few will care to contradict, that the employees of the railway are to-day better paid, and that they work under more favorable conditions than did the men whom the railway has displaced. The stage-eoacli builder is practically out of business; but how vastly greater an industry is that of 1 66 The Trusts building railway cars. How infinitely larger is the number of men employed in this industry than the number that was employed in stage-coach building. Think of the other gigantic industries that have been built up by the railways; think for a moment how railways have brought forth and l)ni]t up the great steel industry, by their demand for rails and bridge materials and structural steel and locomotives. There can be no question that the number of people en- gaged in transportation now vastly exceeds the number of those engaged in the same business in the days of the stage coach, even considering and making allowance for the vast increase in the population. It may be said that railway companies are not industrial trusts. Well, then, take the Standard Oil Company, Sta- tistics showing the number of men engaged in that indus- try when the trust was formed and the number now en- gaged are not at hand; but to-day the Standard Oil Com- pany, although it makes at least $25,000,000 a year, pays out $125,000,000; that is, its annual volume of trade is $150,000,000, of which $25,000,000 are profits. These $125,000,000 go partly in payment of crude oil, but chiefly in payment of wages and the countless expenses of business. The Standard Oil Company has developed a foreign trade whicli brings in $60,000,000 a year. It is conceded even by its opponents that its employees receive higli wages. A study of the United States census returns for 1880 and 181)0 will show that the increase in the demand for labor in those industries in which labor-saving machinery has been aflopted lias not been confined to the Standard Oil Com- pany, tln^ I r;iii.-;;ortation business and thecotton trade. They are tyjiic;;!. not exceptional. Take the following figures, selected fr 05 I .J eS 2,885 5,503 1254 .$4221168 437 1,708: 111,152 139,333' 4,662 9.264 2,365 5,5:)7; 9,678 19,954 7,722 13,922 5,435 12,799 1,204 389 386 315 3161 245 1 358 286 ,501 285 525 476 428 385 344 465 354 423 52,087| 78,667 417 j I 592 3,667; 366 1361 90! 113i 69; 99^ 1071 68 138 66.1 34.9 23.3 35.8 21.8 40.4 29.8 23.7 48.4 547l 130 31.1 485 119 32.5 2,910, 17,116 431 456 5,210 12,064 343 484 i i i 1.934' 18,672; 436; 640 1,036 3,3; 9 413, 58,478 1,209; 31,3371 .074 6,301 1.072 165,227 2.830 50,913 443 476 265 302 503, 817 522 635 367i 434 291' 386 25 5.8 141:41.1 204146.7 33' 7.4 37 13.9 314, 62.4 113 21.6 67:18.2 95 32.6 2,474! 11,779 527. 644' 117 3,151| 7,095; 472| 584, 112 4,459, 7,917 383' 503 120 22 2 23^7 31.3 Stati.-ties thu,- iin to cnrrnborato the testimony of experi- ence and observation, and to confirm the proposition which abstract roasoiiiiiu- demonstrates, tliat, .crenerally, in tlie course of time, the individual who has been displaced hy labor-saving maebines or organizations^ finds a new place, 1 68 The Trusts frequently in the same old occupation. It is only by the displacement of labor that labor itself can make any prog- ress. The ability to produce the same amount with less labor means cheaper production. Cheaper production means increased consumption, so that gradually the num- ber of persons employed in the industry tends to increase. The more we cheapen our product, the more we can en- large our market, foreign as well as domestic, and give work to our citizens. We cannot obtain a large market except we either pay less to our labor or adopt that which will ren- der it more productive. We can render it more productive only by longer hours against which we protest or else by introducing labor-saving machines or adopting labor-saving organizations. Either of the latter will displace labor, but at once the community will get cheaper commodities, and in time the worker will get more work and higher wages. Where is labor most poorly paid? Where there is the least machinery", the most antiquated processes, the most im- perfect organization of labor. This is as true of nations as of separate individual concerns. In the long run, in- dustr}', well organized and well regulated, will be able to give more employment and more continuous emplo}'ment. If the people of the United States do not want men thrown out of employment, they should adopt every labor-saving machine and organization, so as to produce cheaply and get the markets of the world. The introduction of machinery or improved organization will, however, permanently displace labor and irretriev- ably injure not only the men displaced, but the community also, and ultimately the introducer of the machine himself, or the man who perfects the organization, if prices are not lowered. For if the labor product be not cheapened, if the price be not lowered, there will not only be nothing tending to increase the consumption, but the idle laborers Trusts and Displaced Labor 169 \vill cease to be consumers. They can no longer take their projjortion of the goods nianui'acturetJ with the machine; they will not he al)Ie to he purcliasers of other products. There will be a glut of labor. Men who are starving will work for starvation wages. X(jt only will their own wages be low, hut wages of everyone will he depressed. The con- sumptive power will be reduced, more laborers will be turned out of work, ])rofits will diminish, manufacturers will fail, and with each downward step, disaster and de- struction will gather momentum. Prices cannot perma- nently be kept u]); but while they arc and short-sighted selfishness is sure occasionally to put them uj) all the evils mentioned will occur. Will manufacturers voluntarily reduce these prices as th.ey introduce lal)or-saving machines, and ado])t labor- saving organizations, or will they contend that tliey, and noi tiie community, are entitled to all the saving? We have seen in an earlier cliapter that cheap production even- tually results in a lov/er price. Competition in the past has compelled a reduction in the price when there has been a reduction in the cost. When one manufacturer has adopted a machine, if unpatented, some other manufac- turer has also soon adojited it, and the competition has reduced the price. As human nature exists it can hardly be doul)ted that if one of many manufacturers got hold of a machine that was labor-saving and cheap-producing, he would i-('ta.in all of tlie saving he could. Wlicre persons by a patent obt.iin exclusive control of a machine, they invariably do this as far as tiiey can ])roritably. But even patents expire; and. furt hernioi'c, if there were no competi- tion, self-interest would t(^ a certain degree restrain those possessing a cheap-jiroducing machine or organizatioii from exacting an ext'^'ttinuate [irice. They would reduce it just to the point u'liijix- ilicy could make tlie go-eatest prolii: I 70 The Trusts not that their anxiety would be to give a low price, but to get a great profit. A street-car line that charges tive cents will, in any ordinary American city, make vastly more than one that charges ten cents. The former will probably pay large dividends; the latter is very sure to go into bank- ruptcy. It is true that many owners may not comprehend their real and ti'ue self-interesi, and may charge high prices to get great ])roflts in cases where low prices would give even greater profits; but, in the main, tlie managers of these properties know even better tlian others the price that will yield the greatest profit, and whatever they think that will be, that they fix. In case there is no competition and no satisfactory substitute and the commodity or the sersdce is a necessity, the price that will pay the greatest profit is not the price that will pay the fair profit. What w'e cannot get along without, we will pay the price for, eve.a though it is unduly high. There are some things in which consumption will not be diminished even by high prices, because we must have them regardless of high prices. But fortunately for the world nearly everything that is the sub- ject of barter and sale has a more or less satisfactory sub- stitute. It is because of this fact that cheap production Avill invariably result ultimately in lower prices, even though all the agencies of production be in the hands of the greedy and the grasping; because as long as there is any possi1)le sul)stitute, there will always be an opportunit}*, i)y lowering the ])rice. to cause people to refrain from using the substitute. If there be no substitute, but if the article bo not an absolute necessity, the lower price will win some custom and trade wliich the high price drives away. There is tlius always a force tending to make the cheap producer lessen h. i> prices and reach out for new markets and a larger trade. This results in giving more emj)loynient and in raising wages, further, if the producer's profits by a new machine tliat ])r(jduces clieaj)ly, are raised, he acquires Trusts and Displaced Labor 171 roducts are exchanged, no matter how much the latter may be consolidated. The laborer in mills and factories can with comparative ease combine with his frllow laborers; because, the factories and mills being situated in centers of population, the laboring men can meet without inconvenience. In fact, they are 173 1 74 The Trusts closely associated in their daily work. But the farmers are not only millions in number^ but are scattered all over the country. Union is practically impossible. The great num- ber of those who follow the pursuits of agriculture consti- tutes so large a proportion of American population tliat tlie effect of the trusts upon the farmer becomes a matter of vital importance to all the people as well as to the farmer himself. In one other respect the farmer has a peculiar right to consider the effect of trusts upon his business. lie is the producer of the raw material, and there is a greater differ- ence between his interests and the interests of the sugar refiner, for example, than there is between the interests of the sugar refiner and those of the oil refiner, or between the interests of the sugar refiner and- those of the starch re- finer, or between the interests of the sugar refiner and those of the laborer in the sugar refinery. It cannot be questioned that the farmer looks vvith great apprehension at the growth of trusts. As these great organizations more and more get the control of the industries in which he is especially engaged, he finds himself having but one buyer for many of his raw materials. There is no longer competition among buyers. It is a case of one buyer, one bid and one price, and that price, the farmer thinks is fixed, not according to the value of the product, but according to his own needs and necessities. If his necessities are such that he must make the sale (and usually he cannot afford to long hold back his product), then he must take the amount offered him. The farmer sees no hope; and it would be very foolish to deny that he has cause for alarm. Let us, however, carefully investigate the condiiion of the farmer under trusts. '^Fhe majority of the products of American farms are food products. "Wheat is the staple. Trusts and the Farmer 1 75 ]5eef, pork, mutton and lamb are other important prod- uct?;. Corn, rye, rice, potatoes, beans and Ijarley are also among the chief articles raised. Ik'sides the.-e, tliere is an increasing cultivation of fruits and \egetaljles and garden products. All these ])roducts re([uire comparatively little manufacture in order that tliey may hi' put upon the market in the form required for linal consumption. Wheat and the other cereals, indeed, have to be ground into Hour or meal, and this may properly be considered a manufac- turing operation. The slaughtering of cattle may also bo considered manufacturing, although it is an extension of the meaning of the word to include this industry under that term. This one thing, iiowever, is to be noticed with reference to the food ])roducts already mentioned, and thai is that not only do a great many of tlieiii reach th.e cnji- suiner in a condition little changed from their raw state, l)ut that the chief exceptions, namely, wheat and the cereals, are clianged into tlour at so many mills scattered over so wide an expanse of the country and riMpiiring com- paratively so small an amount of capital that, notwithstand- ing condjinations of millers may be formed, the {)0ssibility of monopolizing the milling industry is comparatively re- mote. Further a verv lai'ge ])ortion of the wheat that is raised in the country finds a foreign market not as tlottr, but as wheat. Trusts, then, that is, great industrial com- binations, are not likclv to inonopolize the purchase of wheat. The ])rice of wheat, for aught that trusts which are directly engaged in the mark(ning of wheat or tlie mak- ing of Ibuir, can do. will de])end u|)on the demand; and if great milling combinations can alToct economies in grind- ing the wheat inio flour so as to l)e able to reduce the price, they will undfuibtedly be able to stimulate and in- crease domestic consumiitioTi of Hour. This domestic eon- sumption of all food product-, whether they are consumed 1 76 The Trusts in the raw or in the manufactured state, i? sure to be in- creased if the millions whose incomes are derived from profits or wages in manufacturing industries are increased in number, or if they have their profits or wages increased. Hence, whatever Avill tend to build up the prospcity of the manufacturer and the wage-earner will benefit the fanner. If trusts, by means of their economies, can cause the manu- facturing Irusiness of the country to Ijc prosperous; if they can give constant employment at remunerative wages to an increased number of men: if they can, by developing foreign markets, bring into this country vast wealth from foreign countries, tlien will there be an increased home demand and higher prices for American food products. It may be said that combinations have, as a matter of fact, depressed the price of farm products. The '' Big Four ' beef combine may be cited, and attention may be called to tlie fact, so often proclaimed, that along many lines of railway there is Imt one set of buyers for many of our staples, and that prices are depressed. AYhatever truth there may be in the charges that these coml)inations actually dominate the market for cattle and for grain and that they arbitrarily lower prices, it will, we believe, upon examination l)e found that it is not so inuch their possession of vast capital that gives them thereby exclusive control over the trade and prevents competition, as it is a connection, secret and illicit, with those natural mon- opolies, the railways; or the possession of special privileges, unlawfully and improperly obtained, at the terminals of tho different transportation lines. These, indeed, are monopolistic powers that are in no sense essential to trusts. If low prices exist to-flay for wheat or for beef or for any otluT of our staple prnrlucts, tliev are caused not by trusts, but by unlawful conspiracies between the railway inter- ests and the big dealers in these products, evils that are Trusts and ihe Farmer // in no way essential to the trust form of organization, but evils whieh are as unlawful and criminal as robbery or arson or any other felony, and which should be punished in the same way. The railway sliould never be confounded with the trust. J^oth are gigantic consolidations of capital; but one in its very nature i.^ a monopoly having many sovereign j)Owers, such as the right of eminent domain, con- ferred upon ii. and having a right of way or the owner- sliip of a strip of land and of terminal facilities, which from the very nature of the ownership of property is exclusive, and which in the case of the railway is monopolistic. The trust, strictly speaking, is a great industrial consolidation, engaged in manufacturing, mining, milling, or selling. It lias no element of legal or natural monopoly in it, except as it acquires possession of a public utility or of products, such as minerals, that are limited in amount, or as it obtains a legal monopoly, such as a ])atent right. The mining of an- thracite coal, copper, gold, silver, or possibly the right to furnish gas, water, steam-heat or electricity in a city, owing to the limited space in the streets through which the pipes and conduits must be laid, is monopolistic in its nature; but the control of that whicli nuiy be and is con- stantly being })roduced and which can be produced with- out limit, as can nearly every manufactured article, can never become a permanent m()n(jpoly. If we listen care- fully to the statements of those v/ho know why the price of wheat is kej)t down, if wt' analyze the reasons given by them, we are forced to the conclusion admitting all their statements to be true that the comljinations which, to- day, are .-aid to have killed competition among buyers of our staple products, are not industrial trusts, but con- spiracies l)etween favoreil dealers and railway managers who have gr()s>ly violated their duties as common carriers and who have favoi'ed certain dealer.- and di-criminated 1 yS The Trusts against others. Perhaps no more detailed statement of the condition of the grain grower and the absence of any- thing like competitive buying of grain^ has been given to the public than that made about a year ago by Mr. S. II. Greeley of Illinois, a prominent member of the Xational Grain Growers' Association. We quote from him: " An evil from which no relief is possible seems to be an absurdity in this age of progress and discovery, but the producers and shippers of grain iu the great Mississippi Valley are to-day in the grasp of a number of so skillfully managed combinations, created by secret rates and special privileges granted them by rail- roads, that the briglitest mind cannot suggest a practical remedy." "... ^Merchants no longer buy and sell grain in Chicago, but their places have been usurped by the recipients of cut rates and special privileges, who have become as necessary an adjunct of the modern railroad, tapping the grain belt, as the general freight office. It is their business to see that the railroad favoring them gets its share of the grain tonnage, and wliere a merchant paying the tariff' rates of freight would lose money, this specially favored class grows rich; they handle all the grain that they are physically capable of caring for on the particular line of railroad of which they are the favored dealers. "The eff'ect of this condition has been disastrous in many ways: " 1. Competition lias been destroyed to a great extent, and the business of handling grain in Chicago markets has (by force of special favors from railroads) concentrated in the hands of several large concerns, who do not bid against each other, but are known to agree on prices each day for gr;iiu in territory where their bids are liable to reach the same sellers. " Without advantages of aljility or capital over the merchants whom they have driven from tlie field, these concerns, through emj)loyees and agents, carry on a traffic, not in grain, but in freight, switcliing and elevator charges; incidentally the grain i~ transp(irt('(l, but if tarilf rates and fixed charges were paid it would show a loss. " 2. \'alu(s suDer far more than would be conceded even by a majority of the grain growers. Unnatural conditions constantly surround the iiioveiiiciit of grain: if the business of a railrcjad lags, grain is forced to move by that railroad through its favored Trusts and the Farmer i 79 shipper, by a cut rato, tlius (.Toatiiig a fictitious supply at a time when the demand is mea^'er, and the result is a decline in values by reason of excessive otferings, while had the grain been per- mitted to remain at the country points until the demand justified its shipment, the depression in values would have been avoided and the demand would have been all the more urgent by reason of tlie grain not being in sight. ' Another condition which tends to depress values is the piling up of vast stocks of grain in the warehouses of Chicago and by every trick and device preventing the moving of these stocks so long as they can be sold for future delivery at a profit. Tlie public and private elevators of Chicago have passed into the hands of the concerns specially favored by the railroads; several of them lease the terminal elevators of the railroads. The result has been that the public warehouse system of Chicago has been pros- tituted to the extent that the public no longer can handle gi-ain through them, and what were once the depots for tlie public's grain are absolutely the storehouses of the railroad's favored dealer to the exclusion of all other persons. It is to tlu^ advantiige of this favored class that low prices should jirevail, so that they can fill their vast warehouses (aggregating almost 40,000.000 bushels' capacity) with cheap grain, sell it for future delivery at a premium, buying back and selling for a still more deferred de- livery as often as market conditions v.ill permit. When it ceases to pay tribute as a speculative cominodity, they then proceed to sell it in eastern and foreign markets, and liaving driven out of business all other grain shi{)])ers by their methods, they merchan- dise the grain themselves; but no matter how urgent the con- sumptive demand, so long as speculative sales j)ay best, consumers (annot get supplies from the vast stores held in Chicago." Practically all the great railroads ta])ping the grain belt are in tlie grain business: the details of their arrangements are, of course, secrets, but it requires very little investigation to satisfy the most skejitical tliat they each have one. two or three con- cerns handling the hulk of grain on their lines, to wliom the pub- lished tarifTs are simply a guide as to what the puf)lic have to pay; the public sonn discover that the favored shipper can do business with an entire disregard of fixed charges and still pros- per. One railroad president admitted at a public investigation that his company had organized a corporation for the purpose of carrying on a grain business at all points on their line, that it i8o The Trusts was necessary to do so to protect their interests, as their com- petitors had arrangements with shippers that were practically pre- venting the competition of the ordinary shipper." It would be most unfortunate if, in the study of a new form of industrial organization, we were unable to distin- guish between those things which are inherent elements of trusts and those things which are but abuses of their powers. It would be still more unfortunate if we should confound trusts which are merely industrial organizations engaged in manufacturing or trading or mining, and hav- ing, under fair trade conditions, no monopolistic powers whatever, with railways, which are in tlieir nature essen- tially monopolistic. It would be equally unfortunate if we should fail to distinguish trusts which are vast indus- trial organizations with power, by reason of concentration of capital, to effect great economies in production and dis- tribution, from mere combinations of separate producers and distributers who agree to raise prices or to decrease out- put, but whose business methods are a continuation of old time methods of separate individual production and distribution, and whose sole purpose is to obtain higlier prices without effecting any savings. Eailroad discrimina- tion in favor of a trust is by no means proof that trusts can not exist without railroad discrimination, or even that it is ])racticed in favor only of trusts. It does not even bring up the question as to the advantages or disadvantages, or Ijonefits or evils of trusts. It merely suggests certain evils iu the management of what, in its nature, is a monopoly, namely, a railroad, over whicli, tlierefore, the people have and should exercise final and supreme control. If the " Big Four '' of the beef combine or the Standard Oil Com- pany or great warehousing interests, or tlie anthracite coal companies or the whisky trust, or any other trust or any person whatsoever, receive from railroads, rates that dis- Trusts and the Farmer i8i criminate in their favor and afrain^t their competitors as unquestionahly some of tlie trusts and many other busi- ness concerns (including many {)rivato ones) have re- ceived then the step that should be taken is, such statu- tory prohibitions and regulations, such penalties, the re- quirement of such publicity of rates, such management and control of railways, if needed, that discrimination will be impossible. But it would be as foolish to prohibit trusts for these reasons as it would be to enact a law against the employment of clerks or salesmen in stores, because many clerks and salesmen liavo stolen moneys of their em- ployers. The farmer's most etlicacious remedy, then, is not tlie destruction of that which will foster manufactur- ing and mining and milling, but, in the language of J. C. ITanley, of the National Farmers" Alliance and the Indus- trial Union of America. " the protection of the American prain markets from railroad and warehouse monopol}' and the encouragement of local and ter- minal competition." Abolish these railway discriminations and these terrain il monopolies, and the price of wheat and of cattle and of nearly every other staple product of American agriculture will be governed by the law of supply and demand. At the Chicago Trust Conference, J. G. Schonfarber, of the Executive Committee of the Order of Knights of Labor, delivered an address distinguishing the combinations which profit by franchises and special ])rivileges, and which thereby have monopolistic powers, from the great indus- trial trusts wliich profit solely by combination of capital. Willi reference to the evils of railroad discrimination, he said : " \\'ith absolute equality over tlie railways of the country, so that every butcher could ship a car of cattle just as cheap as the beef trust, the beef trust could not hold the monopoly of the beef iS2 The Trusts trade; with a like condition every owner of coal lands could reach the coal market on the same terms as the monopolistic combina- tion of coal owners, and this is true in regard to nearly every in- dustry monopolized by trusts. Their control of the means of access to the markets or their connection with tliose who do con- trol these means of access is tlie principal source of their power." AVliether or not he is right in his statement that the ))cei' combine or the coal combine woukl lose its power ii' there was no discrimination in its i'avor^ we cannot say; but there can hardly be a doubt that, with equal rights of transportation to all, there would be no undue depression of the prices of raw materials. If the farmer does secure the abolition of railroad discrimination, so that there can be at least fair competi- tion, and so that only the economically superior competitor can succeed, are there any other ways in which the farmer can be benefited? Does he not, indeed, need some other ]ncans to obtain prices which will be remunerative to him? It is stated that the records of the Agricultural Depart- ment show that the average cost per pound of raising cotton is six and two-tenths cents, while the average market price for a number of years has been between four and one- half and five cents. The American crop amounts to 3,500,- 000,000 pounds per year. The loss of national wealth can be easily com])nted. Further, it is a notorious fact that for many years the cost of wheat production has, as a rule, been in excess of the market price. The remedies for tliese evils are: first, protection of the American market from wareliouse and terminal monopoly, and the abolition of all discriminations tending to favor a few buyers at the expense of the many and enabling a few to monopolize the trade: soconilly, an increase of the domestic demand, that is, the fleinand oi the manufacturers and the merchants and wag(-(arne^^ of the Fast and Xorth, who arc not them- selves gr(nvers of wlieat and cotton. We have shown how Trusts and the Farmer 183 \hv>c two roniodies will work. IJut tjio third remedy is the enlaru-ctiicnr ;ind exii'n.-ioii of the foreign market. To-day the uhe.it .tzrowcr nf .Vmcrica ha.s pi'aeli- eally hut one rcreiuti markfi, iiaiiudy, Mii^-land. whieh is also our .ui'cal l'orei,irii market for raw eoltoii. Wa can to-day produce twice the amount of wheat or meat or tt'xtile fabrics that we need. We now [irodiice in round nuiid)ers oOO, 0(10,1)00 bushels of wheat, per annum: of that we consume 100,000,000 busliels ami export about 100,- 000,000. The price is lart^ely atl'ected by the Liverpool market. But let the American farmer obtain another for- ei,irn market in addition to the one he now has and the price of wheat will increase enormously. Any af,''cncv that Avill create competition and give us another market will stimulate the ]irices which competitors will estal)lish in order to >ectire the food products which they must have. The possibilities for the American wheat grower in the develo])ment of the Oriental market for American wheat are truly wondrous. It has l)een estimated that if ths 400,000,000 of ])eople in the Orient were to consume but half a peck of whe;it per ca])ita, or an amount that is only about l-40th of the average consumed by Americans, we could market each year r)0,(Or),000 busliels of wlicat. What an elTect this would have on increasing the ])rice of wheat! -T. ('. Henley lia.s com])uted that the establishment of this market would rai-(^ the ])rice of wheat fifteen or twenty cents a l)U.-]!cl for our cmtire croji, whether sent to Europe or the Orient or consumed at hom'\ making an annual in- crease of between .-eve]ity-flve and one hundred million dollars ($: .^.Ooo.ooo and ;<1 00.000.000). T^esid(>s food [product--, tlu^ farmer raises many other croiis. A> ;i rule, tlie-e whitdi are not food products mtist (TO throui;'!) manv processes of manufacture before they ar':" readv for the rni:il consumer. Cotton is the greatest of 184 The Trusts American products of this kind. One thing is universally true of all these raw materials, and that is tiiis, the extern of the demand for them depends upon the extent of the market for the manufactured article. I.ct tiiere ho a very slight demand for manufactured cotton products, and the price of raw cotton wilt be veiy low. Jx't there be an in- creasing demand for the manufactured article and there will he a rise in market price for cotton in the bale. What- ever, then, tends to enlarge our markets, tends to increase the sum paid to the producer of the raw materials. If trusts, by producing more (hea})ly than others, or by de- veloping valuable foreigji markets, can increase their sale^, they will increase the demand for the jiroducts of Ameri- can farms. Instead of de])ressing the price, they will stimu- late an increased production and increase the price. p]ven the Standard Oil Company, by bringing into this coun- try each year $()(), 000, 000 of foreign gold in payment for oil that is sold abroad, aids the American farmer; for whatever tends to increase the wealth of the country, in- creases its purchasing power. We have alluded already to the remark made by Prof. Jenks, of Cornell University, that a leader of one of the great trusts had tokl him that in one year they had received $500,000 as profits from foreign trade, and that every particle of the raw material had been produced in America, and that the increased trade stimulated the production of the raw material and kept up the price and gave employment to more men than Iiad been thrown out of employment ]\v the combination. One of the best and most dispassionate books ever written on tlie trust is that written by Ernst Von Halle in 1890. Commenting at that time upon the charge that trusts de- pressed tiio price of raw materials, lie said: "It cannot he denied thnt the prife's of raw materialp have in Eome instances been depressed. The United States Leather Com- Trusts and the Farmer 185 paiiy, wliirh ooiitroLs all tlie solc-loathor tanneries of the country, :i.s far south as Texas, succceih'd in re(iucinr^ prices immediately after its appearance in tlie markets of Cliicago and Kansas City. It niaintiiins a purchasing agent in Chicago. Jn the face of the ring of packers it does not st'cm to have violently changed the dynamics of supply and demand, but only to have readjusted them. The American Tobacco Company is said to have depressed the purchasing jirice of cigarette tobacco in the leaf by several })er cent immediately after it began business. But we also observe a tendency in the opposite direction. With the increase of the cotton oil production, the price of cottonseed, which the trust had at first somewhat depressed, rose much above the former level. The trusts urge in their defence that in consequence of their ell'orts to increase consumption, the producers are given the oppor- tunity to dispose of much more raw material, and that thus, in the end, they will enjoy an increase of total profits, even where prices are reduced."' To-day America ha?; ini])arallele(l opportunities to ac- (piire a market in tlie Orient. Tlie diplomatic tact and firmness of the present Secretary of State of the United Slates have achieved for us the "open door" to the mar- kets of Cliina. We are assured equal trading privileges with the " most favored nations."' Xo class is nujre vitally interested in this great achievement than the cotton grow- ers. Xo section will he ])rospcred more hy it than the South, for China, with its ;5.')0,00(),0()0 peo])le, ])resents an illimitahle market for American, cotton. Since this cotton i> in till' manufactured form, the devehjpment of the Chinese market means prosperity and success for the cot- ton mills of Xew England, as well as for the cotton grower of the South. In the chapter on Trusts and l-'xpansion, fuller consideration will he given to the great possihilities for America in trade with the Orient. ^Moreover the fanner has interests in the effect of trusts other than those tliat pertain to him as a producer. Much as he mav produce, the number or amount of things that 1 86 The Trusts he consiiniG?, is very great. He has a few products to dis- pose of; but as the years go by, the number and variety of tlie things that he obtains in exchange for them increase, for his wants enhirge with the progress of civilization. He, by no means, raises, even, all of his food. His coffee and tea and spices and generally his sugar and molasses and many other things that he eats and drinks, are purchased rather tlian produced by him. It is only in the most primitive and remote and backward of agricultural communities that the housewife now spins or weaves as a part of the home life; for homespun clotliing, even if the domestic labor is not considered at all in ascertaining cost, is rarely as cheap as that which can be produced in mills and factories and obtained in the form of ready made clothing. Further the farmer finds his great expense not in that which he eats and drinks, nor in that which he wears; but in the cost of tools and implements and utensils, of wagons and reapers and mowers and plows, of drills and drags and cultivators, and also in the numerous articles which are needed to furnish the house of the American farmer and nuike it a typical American home. The farmer is vitally interested, then, like all the other classes of the community, in everything that means a cheapening of the cost of production and a lowering of the price. The great industrial combinations, we have seen, are able to cheapen ])rodnction; and we have shown that it is impossible for them permanently to charge more than a fair price, or to oljiain more than a fair profit over the cheapened cost of j)roduetion. AVhile the farmer does not want to see the ])rice of the ])roducts which he sells diminished one farth- ing, yet he lias not the slightest objection to seeing all those things which he buys, reduced in price, fifty or even seven- ty-five ])(:v cent. This is just what the farmer has seen as as a result of industrial combination in the last half cen- Trusts and the Farmer 187 tury. In the case of many products, he has seen it occur within shorter periods. We have already referred in pre- ceding chapters to the Ignited States Senate Committee's report on prices from 18(iU to ISiH. This committee in- vestigated about two hundred common articles, manufac- tured articles as well as raw materials. Fifty-eight products of agriculture, in wliich little centralization of capital and little combination of effort were possible, showed in- creases in prices, varying from thii'ty to one hitndred per cent; while the prices of one hundred and forty groups of manufactured products, in the making of which labor- displacing machinery had largely been introduced, fell from sixty to forty ])er cent, and some as much as seventy })er cent, notwithstanding there had been a large increase (sixty-eight ])cr cent) in wages. It would be folly to deny that there is danger in trusts to the farmer. The popular fear is that the prices of the articles manufactured from his raw materials will be unduly raised. The demand is ever for low prices. The manu- facturer who first yields to that demand obtains the en- hirged trade. The trust by selling at low prices can in- crease its output. I'here is, indeed, a constant effort on the part of the trust, if it seelcs to enlarge its output, to cheapen the cost of articles which it produces and sells, by obtaining its raw materials as well as its labor at the lowest prices. By so doing it can obtain large profits without rais- ing prices. Extortionate profits can in this way longer bo foncealed from the public. But the ultimate discovery of these extortionate profits is sure to arouse competition, and with comjietitiiui will come higher prices for raw materials and lower jirices for the manufaetured goods. That is one side of the picture On ih.o i'\]]-r r^ide. tlie trusts are bet- ter able to give fjiir ]ii'i(H'S to ilie producer of the raw ma- terials in just the proportion that the trusts control the 1 88 The Trusts price, in just the proportion that the trusts control the market. They can afford to pay high wages for labor and good prices for raw materials, if they have that practical monopoly of the market which so many attribute to them; because they can recoup the increased cost by an increase in price. The real and important truth is this: the cheap- est producer and seller will get the trade. The nation or individual that produces with the least waste will win in the struggle for the world's industrial supremacy. The demand for cheap goods will require the use of nearly every means of lessening cost. The producer or the nation of producers that does not adopt every labor-saving ma- chine and also every labor-saving organization, so as to make labor productive and so as to sa\'e waste, can sell its goods in competition with others, only by depressing the price of its raw materials or the wages paid to its em- ployees. It will not l)e difficult to do this, because if the producers of raw materials do not sell them at the depressed price they will be unable to sell them at all. On the other hand, the producer who saves every waste in distribution and production will be able to sell so cheaply that he will build up a big trade and have greater need for raw materi- als and therefore will pay more to get them. The conclu- sion of the whole matter is this: those avIio unite in great industrial organizations to produce are, by their savings in production and in distribution, generally able to obtain a fair profit even while maintaining low prices for their jiroducts, and while paying increased wages and the same or higher prices for raw materials; but all those who pro- duce by the extravagant methods that tend to excessive competition are sure ultimately to lose this trade and to fail to continue as competitive liidders for the raw ma- terial of tlic farinor. The farmer, indeed, has much at stake: but the tru2 Trusts and the Farmer 189 policy for him would seem to be to encourage the growth of home industries, thereby increasing the home market for his products; to support every policy, industrial or political, that will enlarge the foreign market, either that which will cause a demand for his raw products in their raw condition or that which will foster an increased demand for American manufactured articles, thereby bringing into the country increased wealth for expenditure in the pur- chase of American products, all of which have their ulti- mate source in the American farm; and finally the farmer will consider but one of the two sides of his interests if he regards himself solely as a producer and forgets that his own wants and needs are largely supplied by the American manufacturer, miner, and miller, and that everything which tends to cheapen and lower the prices of the products of these industries, enables the farmer to obtain more of the necessities and comforts of life in exchange for his own agricultural products. CHAPTER X. TRUSTS AND SPECIAL PRIVILEGES. So far in our discussion of trusts and their causes, ad- vantages, and evils, we have considered almost wholly the trust which is the natural combination of producers who have found the struggle of competition so ruinous that, in order to avail themselves of the economies that come from consolidation and to avoid the enormous wastes of compe- tition, they have united their interests. AYe have, perhaps, considered, not the typical trust, but the exceptional and the possible the ideal trust. Our reason for doing so has not been any desire to build up theories of legislation based upon hypotheses, but to present the question of the bene- fits and the injuries of trusts, even Avhen they are formed for purely industrial purposes, and when their methods and practices are only those which are incidental to the conditions of modern business life. It must be admitted, we believe, by the unprejudiced, that even the trust that is bereft of special privileges and managed with absolute honesty and with perfect fidelity to the interests of all concerned in it, and conducted in conformity with the letter of every existing statute and solely for the pur- pose of making money like any other business industry, presents possibilities of industrial as well as social and po- litical injury to the country. The evils as well as the ad- vantages of these trusts ideal trusts, if you jjlease to call them so we liave already considered. We believe that, 190 Trusts and Special Privileges 191 while they may for limited jU'riods be [larmtul and even noxious, yet in the long run, when riglitly formed and hoii- estly managed, even although those in control are actuated only by self-interest and a desire for gain, they will become, on the whole, great means for tlie cheaper production and more generous distribution of all material comforts, and mighty agencies in advancing civilization and in elevating mankind to a higher })osition; that competition is sure to prevent any permanent monopolistic evils in them, and that upon any temporary monopolistic evils we may properly, in fact, should adopt stringent restrictions, in case our future experience proves to us that legislative remedies will be more speedy or more effective than economic remedies. We are charged with being idealistic, visionary and theo- retical in considering trusts in the way that we have. A\'e are told that trusts are not prompted, as a matter of fact, by considerations of more economic production or cheaper distribution; tliat they are not, in reality, the result of competition; that they are not formed, as a rule, in order to save their organizero from impending bankruptcy and ruin; that experience shows that they do not grow in size and acquire their enormous strength, because of their powers as cheap producers and distributers; but that they are ordinarily organizations for the purpose of plundering the ])eople; that they are institutions of huma7T. greed and avaric'c; that they are nourished and supjiorted and built up by favoriti>m and fraud; that they are tlie creations of special privileges; and that, if it were not for these privi- leges, in a free figlit and a fair field tliese great organiza- tions would be defeated in the struggle of competition by the smaller enierprises whicli are under the direct per- sonal management of their owners. The s]iecial [irivileges which it is generally said are tlio cause of the growth of trusts are railroad discrimination, 192 The Trusts certain tariff rates which happen to be excessive rather than protective, unfair taxation and the free granting of public franchises. We believe that very nearly all of the trusts owe not only their strength but their formation to privileges of the kinds mentioned, which are, indeed, rob- beries of the public at large for the purpose of rewarding the favored few. Eailroad discrimination in favor of one person and against another is an act that cannot be denounced in terms too strong. If there is in the Avhole category of mis- deeds any one affecting only property rights, which is more heinous and villainous, more mean and contemptible in its methods, more pernicious in its results, than railroad discrimination, we do not know it. xA.rson, when life is not endangered, does nothing but destroy some property; but arson is quick in execution, and against its damages every cautious man is insured. The burglar and the thief may rob us of our property, yet they can, at the most, take but little. But the railroad which discriminates in favor of one shipper, stealthily, although gradually, takes from all others the profits of their business and the value of their property. It not only aids in the stealing of prop- erty; but with a malice that is almost intolerable to con- sider, its victim is lured on to constantly endeavor to acquire more property, to build up his business, to over- come the unseen advantage in the industrial march which liis competitor has, and thus to keep on in a struggle throughout which the victim hopes and strives against in- exorable fate. Kailroad discrimination is a contem])tible criine, because it is stealing from those who are the support and tbe maintenance of railways; because it is the })lunder- ing of tbose who have given to railways their enormous powders and their very right to existence; because, further- more, it is an act absolutely in violation of the implied Trusts and Special Privileges 193 agreement of the railways to serve all alike. A book to which frequent reference will be made during the discus- sion of the trust ([uestion, is that whicli was written by Henry D. Lloyd "" Wealth Against C amnion wealth.'^ To many, " Weallk Against CommoniveaWi,'" with all its liar- rowing tletails of fraud and favoritism, of oppression and crime, may seem like an indictment or arraignment of in- dustrial combinations; but it is in no sense such a docu- ment. A careful reading of it will show that it does not even purport to be an indictment against combinations themselves, for in one of the very early chapters, the uni- versal and natural tendency to combination and concentra- tion is summed up in that expressive phrase of Mr. Lloyd: " Monopoly is business at the end of its journey." But ' Wealth Against Commomvealth'' is a specific indictment, replete with charges and counts, apparently substan- tiated by evidence, showing railroad discrimination, unfair competition, and the practice of methods of corruption, by bribery, intimidation, and improper influence, in order either to obtain the possession of public utilities, or else to induce public officials to refrain from enforcing statutes enacted for the purpose of protecting the public from crim- inal acts. The great crime the special sin which "Wealth Against ConinionicealtJi'' exposes to the public gaze is rail- road discrimination. Li an age when men produce but a few of the things which they consume, and when that which one produces is of little value to him, except ac- cording to his ability to exchange it protitably for some- thing else, things are worth not what they cost, but what they will bring upon sale or in exchange. Deny one access to the nuirket and you render valueless his product. The highway and the railway and every other channel of trans- portation are the a\enues along which ilow all the wealth of commerce. ^Market value is the onlv value that con- 194 The Trusts cerns the merchant and manufacturer. He who has the cheapest means of reaching the market has wealth assured him. He who is ^^revented from reaching the market on equal terms is being constantly robbed. It is said, " There is no royal road to learning." By that is meant there is no easy way to acquire knowledge. But the royal road to wealth is the railroad that discriminates in one's favor and against one's competitors. Eailroad discrimination, how- ever, is by no means an inherent evil of industrial trusts. It is rather an evil of the railway system. There seems not the slightest reason to doubt that numerous trusts have received more favorable rates than their competitors; that they were built up and sustained in this way. It by no means follows, however, that all trusts have received such favors, nor that railways have discriminated in favor of trusts only. Railway discrimination has been, and is to- day unquestionably being practiced; but large individual shippers are quite as apt to be the beneficiaries of this crime as the larger trusts. Whoever is the beneficiary, is the beneficiary of a fraud and a crime. Railway discrim- ination is certainly practiced occasionally, and probably frequently, in favor of trusts; but the sensible and pro])er course is to enact and enforce such laws, to create sucli supervisory pul)lic officials, and to enact such penalties, that railways will either be prevented from this criminal ])ractice or that their own interests will Ije opposed to it. Abr)lir almost a century of discussion and legis- lation upon this question, and after experiments with high protective tariff's and with low tariff's im])osed only fcr the purpose of raising revenue, have decided that their prosperity and welfare are fostered by the maintenance of the higher standard of living that characterizes America, and by the holding out of incentives to the estal)lisli- ment of factories and to the building up of industries; and 196 The Trusts the great majority of them, while willing to concede that conditions are fast changing, and that cheaper capital and inventive talent are making us a nation of such abundant producers that our greatest need is a foreign market, and that our tariff schedules must from time to time be changed and our policy in the future somewhat altered, still believe from experience that the protective policy is one not to be lightly or rashly cast aside. AVe cannot forget the de- pression and stagnation of business life and the paralysis that fell upon industry only a few years ago as thj result of the persistent effort to remove our tariff duties. But the American people are not in favor of the tariff that fosters monopoly. ^Ye will not abolish a tariff merely be- cause the industries that have sprung up under it, in an excess of competition, may have, at some time, re- duced the price of their product below the sum that is rep- resented by the cost of production in Europe plus our tariff. Such a reduction in the price is prima facie evidence that the tariff on that article ought to be reduced; but it is not conclusive, any more than the price at a '' slaughter "' sale is evidence of fair market value. If, because of excessive competition, the selling price is less than that which will afford a reasonable profit to the manufacturer after paying American wages to his employees, and if afterwards a com- bination of these manufacturers restores the price only to the fair profit mark, we do not intend to abolish the tariff, which alone enables them to obtain this profit and to pay these wages. But, on the other hand, if the tariff is being used to permit manufacturers to charge a price one cent in excess of a fair profit after paying American wages, it is 1)oing used not to build up American industry, but to foster a monopoly. Its effect is not to aid the American workingmen, but to plunder the American peo- ple. Sucli a tariff is a monstrous robbery, and none will be Trusts and Special Privileges 197 quicker to lower it or to abolish it, if need be, than those who I'or years liave voted for taritl's that wdl be a protection to our nianul'actui'ers and a safeguard for American work- men ami a cause of prosperity to the whole American peo- ple. The subject of the tariff and the trusts is so im- portant that it will be considered in a later chapter, but this much may properly be said here, while we are con- sidering the elfects of special })rivileges upon trusts: if the tariit is building up monopolistic trusts which are charging the American people prices that yield undue profits and it is possible that a number of trusts are thus built up and sustained then one way to tear down the trusts is to reduce or abolish this tarilf. To prohibit trusts tiiemselves for this reason would be to imitate the Dutch- man who, to rid his barn of the rats, burned it. But if ym abolish the tariff only in those cases Avhere trusts are using it to exact exorbitant prices, beyond the fair profit mark even after paying American wages, not only will you prol)ably kill many trusts, but if any are left, you will know that, in so far as the tariff is concerned, they are winning on their merits, because economically superior. Again it is said that trusts derive their strength and power from their possession of pid)lic utilities, for instance that the Standard Oil Com})any owes much of its strength to its ao((uiring the pi})e lines, which are in reality a means of transportation akin to the railway; and that myriads of corporations, such as telephone, tc'legraph, electric light, and gas companies, and scores of others, owe all thoir strength to the ])()ssessi()n of franchises in the public streets of cities and villages and in rural highways, and to rights of way acquired l)y an exercise of the right of eminent domain, and to other ])ul)lic utilities. As to this there is not a partick' of doubt. Thousands of companies are mon- opolies l)et-ause possessing these utilities. But the ques- 198 The Trusts tion of public franchises and public utilities should never be confounded with industrial trusts. The existence of trusts, as a class of industrial organizations, should no more be made to depend upon things done by them by virtue of their possession and control of puldic franchises, than should the existence of an individual be made to depend ujjon things done by him by virtue of a patent right held In' him in an invention. Public utilities belong to the pub- lic. Public franchises are public property. If under our existing political and social and industrial system, our mu- nicipalities and state or national governments cannot suc- cessfully manage these properties, it by no means follows that they should treat them as worthless property. Public franchises should never be given away. At the most, they should be temporarily granted to the person or corporation who will pay to the people the most for their use, and who will guarantee to the people the most efficient service. In every grant or lease of them there should always be a reser- vation of the control of the public. Public franchises are generally in their very nature monopolies. He who ac- Cjuires them knows that competition, even if possible, is impracticable. Their possession does, indeed, give one the power to exact a price for the service to be rendered, which is based not upon tlie cost of tbe service, but upon the fact that it can ])e rendered by only one, or, at the most, by a very limited number. If the industrial trusts owe their power and strength to the possession of public utilities and public franchises as doubtless some do the evil lies not so much in tbe trusts themselves as in the people who liave .-(luandered their valuable assets, the people who, beeau-e of some fancied ultimate, indirect Ijenefit to the ])eople, have, lik(; Hsau, sold their birthright for a mess of ])Ottage. Tlie n'luedy is for the ])eople to come again into their own: to hold all that tliey still retain in the way of Trusts and Special Privileges 199 v;ilua])lo franchises:; and, as time goes on, to ro-acquire ,-nch of iluMM a> can lionorably he re-taken; to ini{)Ose fair and C(|uitahle taxation upon these valuahle pro[)erty rights, just as other ]iroi)erty is taxed and just as (iovernrr ]\oose- v(dt and the State Tax Coniniissioners of New York are striviiig to do in tliat state, through their strenuous and gaUant elforts to enforce tlio provisions of the Fran- chise Tax Law whicli was introduced l)y Senator John Ford. Furthermore, every effort shouhl be matle to exact and rcMpiire of every corporation rendering public service, a fulfillment of every agreement and obligation, express, implied, or assumed. Re-gain these public utilities and tax these public franchises, and require the fulfillment of cor- poration obligations, and y(ni will scotch the snaky trust, as well as destroy thousands of local monopolies. Akin to the possession of ])ublic franchises, is the posses- sion of products which exist only in limiLed quantities, such as most of our metals and minerals. This is the pos- session of a natural monopoly. Some of our most exacting monopolies are based upon the control of practically the entire quantity of these products. The anthracite coal pool is an instance. All of the anthracite coal of the T'nited States is found in a comparatively small area, and to-day it is nearly all in the practical possession of the seven great railway comjianies which traverse the coal fields. The output of coal, its price, and nearly every detail connected with the mining, the transjiortation, or the selling of it, is determined each month at a meeting of the chief sales agents. About the only limit, to-day, u[)on the existence of what would otherwise be a pitiless and mercilesi monopoly in coal, is the enormous amount of ])ituminous or soft coal which is scattered all over the country. Rut comjianies are in existence, and others are being formed, which are of)taining possession of vast areas 200 The Trusts of our bituminous coal fields, or the means of transporta- tion from them; also of our richest copper mines; also of the richest deposits of iron ore. If our industrial trusts are able to obtain possession of coal and the metals and minerals which are found in limited quantities, the mon- opolistic powers which they have are due partly to their great wealth, but chiefly to their possession of these natural monopolies. If by limitation of capital and in that way only we can save ourselves from monopoly, then let us by all means limit the capital, for monopoly is a curse in every way. But the danger suggests even deeper thoughts, and causes one to wonder if, perhaps, the proper step to rem- edy the evil might not be to limit the extent of the power of acquiring these natural monopolies. Many of the consti- tutions of our states, even those of some of our most con- servative eastern states, for a long time contained clauses which reserved to the state the ownership of all gold mines. We do not know whether Pennsylvania has such a clause in her constitution, although Xew York for a long time did, but if Pennsylvania has, it would be far more sensible for her to have a clause reserving to herself the ownership and control of her coal mines, because they not only lie at the foundation of all her great industries, but furnish to the country, one of life's necessities, the means of heating our homes and places of business. But, of course, this would be socialistic. It should, lioMTever, be borne in mind that in the case of the anthracite coal, thj monopoly has been acquired by companies in league with the railway companies traversing the coal fields. If com- mon carriers, chartered and incorporated for the purpose of carrying, and for that purpose only, could ))e restricted to tiie exercise of these functions and to the ]:)erformance of these duties; if, furthermore, discrimination by them in favor of certain miners could be prevented, the practical Trusts and Special Privileges 201 difficulty would largely bo solved. We would find that our coal, our metals, and our minerals are so widely scattered that attempts to monopolize them would be far more diffi- cult; perhaps, impracticable. Xot a few of our trusts owe their strength and power and existence to the posv^ession of valuable patent rights. Patents are legal monopolies, made so by law and pro- tected by all the force and power of law. The great ma- jority of the people of this countr}' firnily believe in the wisdom of encouraging inventive talent, ])y holding out the reward of the exclusive right for a limited period to make, use, sell, and vend a newly invented article, ^lost of us believe that the great industrial progress of this nation is due to the labor-saving inventions which a generous system of patent law has called forth. But if our trusts are being built up upon patents if by hook and crook they are being perpetuated long beyond the period of seventeen years, which a patent is supposed to run as a number of our most oppressive trusts are, then the sensible remedy is a change in our patent laws rather than any attempt to stop that which, if changes in the patent laws were made, would, ))erbaps, stop themselves. Modify tlie patent laws and you will wipe out many of the most exacting trusts in the world and shear others of their power, without lessening the incentive to the poor but ingenious inventor. There is another phase of the question of trusts and special privileges which should not be overlooked. It is the political rather than the industrial phase. The great special privileges which may be obtained by corporations or by persons of great wealth are temptations to them to use every means to obtain them. The prize is great and cupidity is sorely tempted. It is not strange that in order to obtain these privileges, to secure high tariffs, to induce railroad officials to offer secret rebates or cut rates or special 202 The Trusts favors, to persuade aldermen and the members of common councils to grant franchises in public streets or to enter into valuable contracts for services to the public, and to influence legislators to vest persons with peculiar powers and privileges, men should yield to the temptation to pay out large sums of money directly or indirectly as bribes. The best remedy is for public sentiment to set itself against granting to any person or set of persons special privileges of any kind. Charters of incorporation should be granted under general and not special statutes. Public franchises should be leased or temporarily granted only after competi- tive bidding. Tariffs should be determined and fixed in accordance v/ith government statistics as to cost of produc- tion, cost of living, wages, etc., both at home and abroad. Furthermore, bribery should be punished with the severest penalties, and, above all, the moral tone of the people should be '^levated and purified, so that bribery and corruption might never find even an apologist. But bribe givers are by no means limited to trust agents or their officers. In *' Wealth Agcmist Commonweallh" there are many chapters which seek to prove bribery by the Standard Oil Compan3^ Two instances come to mind, one an alleged attempt to bribe oil inspectors to approve oil which fell below the standard fixed as the flash point; the other an attempt to bribe certain city officials to oppose municipal ownersliip of a natural gas plant. But in my lifetime 1 have more than once heard of small local milk dealers not great, greedy consolidated corporations who owned hardly more than one horse each and a milk wagon and a few cans and a few cows, who attcmjitcd to brilie local milk inspectors to approve milk that was below the standard of purity; and it will be admitted that there are instances innumer- able in wliich private individuals have offered petty In-ibes to aldermen, members of common councils, and legislators. Trusts and Special Privileges 203 To abolish all trusts, l)ccause of any attempt which oilicers of the Standard Oil Company might have made to bribe oil inspectors, would be as foolish as it would be to decree that henceforth milk should not be peddled through a city street by milk peddlers, but should be sold only at farms, because some milk peddler has bribed the milk inspector. ^Yho, in fact, is the worst sinner the bribe giver or ihe bribe taker? If the legislator sometimes has been tempted to accei't a bribe, is it not well known that not infrequently the legislator holds up good measures in order to secure a bribe as a consideration for withdrawing his opposition? If the Standard Oil Company, or any other company, has, in- deed, bribed a pul)lic olFicial, and if for that reason trusts should bo abolished, why should not public oflicials be abolished? Common sense suggests that briljery and the bribe giver and the bribe taker should be punished, but not that industry should be stifled. By all means, let us stop this granting of special privi- leges, this prodigal giving away of franchises, this surren- der of public utilities, this pampering, now and then, of over-fed industries with tariffs that are excessive ratlier than protective, this iniquitous railway discrimination, this cat- ering to the few out of the store-house of the public. Let us stop this business of favoritism. If we do, trusts by the score perhaps by the hundred will tumble down like a child's house of cards. Let us also prevent over-capitaliza- tion and corporate mismanagement let us take away all the chance of the insiders rnbl)ing tlie outsider--, of the majority betraying the interests and wrecking the property of the minority. Let us call '"cut-throat" competition, what it is, ''conspiracy;" and punisli it accordinglv; and l"t us also make ]nib]ic all those atTairs of corporations which affect tlie public. If tlien there is any trust left, it probably will be an institution of economic superioritv, 204 The Trusts able, at least, to produce and distribute more cheaply than any one else. Does the person who would abolish all trusts by one universal flat, by one sweeping prohibition of all C(jmbinations of competitors, think that the steps just pro- posed are likely to be insufficient or ineffective, or that they are half-hearted, shrinking attacks on trusts? AVe ask him, then, in the first place, to answer candidly: " How many trusts can you think of that would be apt to remain if all the remedies suggested above were adopted and ap- plied? Would not, in your opinion, a very large number of the trusts be abolished? Would not the majority of trust evils be suppressed?" Are such remedies inef- fective? Let us ask you again: "Do you think any remedy absolute prohibition, government license, or anything else will be effective if trusts are not shorn of these special privileges, if they are not compelled to submit to greater publicity, if corporate management is not required to bo faithful, if the strong and powerful in the struggle of competition arc not compelled to fight fair? I lave your laws, national or state, which have absolutely forbidden trusts, which have declared trust owners crimi- nals, and have threatened them with heavy fines and long imprisonment, have these been effective? How many loss trusts are there since 1890 ten years ago when you passe \ the Federal statute, the Sherman act, forbidding them? Four years ngo twenty-two states had placed trusts under tlie ban. Fine and imprisonment, and practical out- lawry, were the penalties, yet nine-tenths of the trusts have boon formed since then. Your laws have not been success- ful. Was it because they were not in harmony with eco- nomic laws, because they were not in step with the prGgre.*s of the world, liooause they " did protest too much." because you did not ronlize that you could not SKCce-sfnlly wrestle with the giant tz-usts as long as you kept feeding thpin on Trusts and Special Privileges 205 special privileges?" Do you think you can count the num- l)er of slaughtered, if you really and truly and earnestly try these methods of extermination? Are the remedies half- hearted, or timorous attacks? Ti-y them and sec. Plenty of people have beaten drums and blown trumpets and put through laws, forever and utterly abolishing trusts, but they did not abolish. Trusts are very little more afraid of those laws than they would be if you should cry,"BoohI"at them. But if you intend to enlist in the tight against special privi- leges in all its forms, you do not want to be chicken-livered; and it is no ninety days' campaign, and no picnic war. Are t" proposed remedies a shrinking method of attack? Well, take away all the special privileges, all tlie chances for over-capitalization, all corporate mismanagement, all unfair competition, and, while there may be some evils left, yet the trust problem will shrink to such small proportions that we can dispose of the rest of it under the order of un- finished business. It is often said that the trusts are so hig that they have obtained control of the railways and other means of trans- portation, of the public franchises and utilities, and of the patent?; and that the tarilTs are made by them and for iliem; and that in competition with them the struggling com- petitor is stricken down })y a giant's hand. Is not the true statement that the trusts are so big hecausc they have obtained control of the railways and other means of trans- portation, the pul)lic ti'anchises. ])ubli(' utilities, etc.? Rail- way discrimination liegan before trusts. The Standard Oil Company, the tlrst of the trusts and, according to ifenry I). Lloyd, the successor of the South Improvement Com- pany which inad(^ a deal with the railways whereby its oil was to be carricil at about half the rate charged its rivals, tlie diiference to be given to the South Improvement Com- jiany, came inte) being after this manifestly unfair agree- 2o6 The Trusts ment, and not before. If it is, indeed, the successor of the South Improvement Company, one can have little doubt after reading the reports of courts, investigating com- mittees, and the Interstate Commerce Commission, that it came not only after this iniquitous agreement, but as a re- sult of it or of an agreement, express or understood, of sim- ilar purport. Of course these things are more or less re- ciprocal. All concerns seek the privilege, but the big con- cern is more apt to get it; the privilege results in work- ing up the big concern, the trust. The appetite does, indeed, grow upon what it feeds. However, if there is any uncertainty as to which comes first, the trust or the privi- lege, this much is certain, destroy the privilege and you destroy the trust based uj)on it. The remedies proposed are natural. They tend not to- wards socialism, but away from it. They straighten things out and clear away obstacles and ieave a clear track for some good, free, liealthy individualism. They do not whimper of paternalism, they do not savor of governmental interference. They are good remedies because they seek to reach first causes. They are potent remedies not only for the economic evils, but also for the political evils of trusts. Tlie special privik'gcs which it is possible to secure t(?mpt the trusts to bribe, quite as often and quite as much as trusts tiy l)ril)ery tempt legislatures to create and bring into b(;ing some new form of privilege. '^^riie remedies here })roposcd are also sim[)lc, economic nnd [iractical. 'i'licy restore things where they were, where flicy were meant to be, and where they c)ught to be. Tlwy leave I he fight of competition to go on upon its merits, '^riiey stoj) f;ike (()ntest>. '^Ihey leave trusts free to foiTU and free to act, if Ihey form naturally and act pi'operly, and in aeeordiuice with su(di laws as may be enacted for their I'eguliiliou and (control. 'J'hey leave the United Trusts and Special Privileges 207 States free to adopt the greatest and most perfect industrial organizations, to use in its contest for the world's industrial supremacy; and, on the (jthor hand, free to regulate, control, restrict, or, if found necessary, to abolish; but they also leave each and every citizen of the United States, poor as well as rich, a fair field and a free fighting chance and the fullest oppor- tunity by his own individual efforts to win for himself suc- cess, prosperity and wealth. They can certainly accomplish an immense amount in correcting trust evils. If they are not sullicient, they do not prevent the use of suptjle- mentary remedies; and they are equally sure to add to their potency. CHAPTER XL PROMOTION, OVER-CAPITALIZATION, AND PUBLICITY, OR WIND, WATER, AND LIGHT. Under normal economic conditions comparatively few individual enterprises would amalgamate except when such, a step would result in greatly increased economy in con- ducting business. Owing to the natural preference of every one to be at the head of his own business concern, people generally are not desirous of sinking their individu- ality in grefit corporations. The business which has been built up by a man, is often prized by him because it is a thing of his own creation. The business that is handed down from father to son, and to the son's son, is an heir- loom with which men do not like to part. With the excep- tion of the few who for personal reasons desire to retire from active business, sales of " going " and successful busi- ness enterprises, especially of a manufacturing character, are comparatively few. Unless paid a sum in excess of its fair worth, it is usually when a person becomes con- vinced that, because of excessive competition, he is abso- lutely sure to fail in business, that he will consolidate witli others, hoping in the union of the weak to find strenirtli. If only ordinary business considerations pre- vailed, if there were not other insidious influences at work, we should find that trusts and combinations and consolida- tions ^^I'vo the symptoms of liad times, and the signs of financial distress, and we should expect to see them most 20S Over-Capitalization and Publicity 209 frequently formed during periods of business depression. It is undoubtedly true that the early combinations were brought into existence by such conditions, and that, even to-day, many of the trusts are combinations of capital on the defensive which have adopted this method of organiza- tion a5 a means of salvation from impending ruin and bankruptcy. But the facility and ease with which shares of stock are bought and sold upon our stock exchanges,andthe immense possibilities of acquiring riches rapidly, especially by those who, having control of corporate companies, are fully acquainted with their financial condition, resources and possibilities, and even more especially by those who, being in control of these great companies, are willing for the sake of gain unscrupulously to manipulate the affairs of the companies entrusted to their care, these things have brought it about that as an actual fact, the great ma- jority of trusts that are to-day formed, are organized ap- parently for purposes of manipulation rather than manu- facturing. It is significant that most of our trusts now in existence wore fornuHl in the recent years of unparalleled prosperity, instead of in the years of adversity. They seem to be a result of good times and Ijuoyaney and confidence, although ]io.-sibly they are reciprocally a cause of such conditions. Jt can hardly l)e claimed that tliov are the result of the old years of depression beginning with IS'lo, notwithstand- ing the trying times of tliat })anic clearly showed business men the awful cost of the wasteful methods of competition and the savings of eo-operation and combination. It is doubtless true that few of the trusts, to-day, are formed withmit the organizers being jiarily influenced by the pos- sibilities of more economical {u-oduction and distribution which the new form of organization oll'ers, yet it is even more certain thai a verv laruv number of the trust orr^ran- 2 10 The Trusts izers are actuated by other motives, by the opportunities of unloading their over-valued properties on innocent in- vestors, by possibilities of stock manipulation and, in many cases, by the apparent ability to obtain, at least tempora- rily, a monopoly, all of these motives leading to methods and practices which are unscrupulous, if not criminal, and which result in swindHng the investing public, in betray- ing and defrauding the minority stockholders, in impair- ing public confidence, in unsettling the financial condition of the country, and in attempts to obtain undue profits and to exact extortionate prices. The great evil of trusts to-day the great source of their evil is trust promo- tion, and the ways and means that it adopts and the prac- tices that it occasions. Trust promotion is a new industry that has sprung up in recent years. The combinations that are to-day made })y business men are by no means always prom^pted by the business men themselves. They are suggested, inspired, nourished, and fostered, as a rule, by men who have no connection whatever with the business enterprises, by the trust promoters. The profits of trust promoters have in many cases been almost fabulous. It was at one time ru- mored that the promioters of the American Steel and Wire Company received $15,000,000 in stock for their services in organizing that company. While this was very likely an exaggeration, it is a fact that in Xovember, 1898, one Oerritt JI. Ten Broeck of St. Louis, sued John W. Gates and p]ll)ert 11. Gary for $1,875,000 cash, the amount which ho claimed he would have received for ])romoting this company had he not been displaced by others; and yet 'J'en J^jTDeck was to get but one-half the profits. It has also b(;eii widely reported that one of tlie most successful of the irrcate.-t trust promoters ha> within tlie y)ast two years, or thereabouts, received between $30,000,000 and Over-Capitalization and Publicity 211 $-10,000,000 in stocks for his work in orf Trusts u-hich May Beroiv.c Over-Capitalization and Publicity 217 Dangers"'; there occur these pregnant paragraphs (italics are ours): "Excessive Capitalization. The first tendency which may be regarded as dangerous is excessive capitalization. "The results of excessive capitalization are threefold: I. The Impairment of Public Confidence. In order to protect the finan- cial reputation and standing of the country, everything relating to finances and financial institutions should be above suspicion either of mistake in judgment or conscious error. " The country with securities that wildly fluctuate, that are affected by every breath of suspicion or suggestion, is somewhat in the same shape as a ship at sea with a loose and rolling cargo throwing itself from side to side in the hold of the vessel. To the man who thinks, from a financial standpoint, the situation pre- sents a grave question. The root of the trouble is the alarm, panic and fear ichich is produced from a lack of knowledge and from want of positive information as to hoxc high or how low these securities ought to go, based upon a public demonstration of the corporate fraction. It is the tcant of publicity, the resulting inability to form an opinion, and want of judgment a^ to sound values, that causes the panic and creates the ruin. " II. Improper Dividend Payments. l corporation that is ex- cessively capitalized, in order to keep in the race, must provide for the payment of at least minimum dividends, and that too upon a stock which by no means represents the actual value of the property, and often the estimated earning power of the company is based upon the earning power in prosperous times and with no allowances for times of lesser prosperity. In such a situation, therefore, a board of honest and well-meaning directors are faced with a difficulty; they miLst either pay their dividends to ap- proximately the same amount as their neighbors more fortunately situated, or they must permit their stock to become depreciated in the market as a result of failure to pay dividends. The ten- dency of an attempt to pay dividends ujion this excessive capitali- zation is to pay dividends in excess of tlie actual earning power, and out of capital account. "One way in whicli this is said to have been done is by the con- version of the capita! into dividends, a process which in the end is sure to wreck the company, decreasing as it does its earnintr power eacli year in proj)ortion to the amount thus withdrawn. The 2i8 The Trusts tendency is to supply the gap thus made in the capital of the com- pany by forcing on the books the capital account with property taken from elsewhere. In such a case the tendency again is to conceal from the stockholders the real state of affairs. "III. Effect on Prices and Wages The third effect of excessive capitalization and the attempt to pay dividends upon such capital- ization is a tendency to create artificial earnings vpon an artificial capital, both by artificially raising the price of the article produced, and by the depreciation of the iragcs paid. The result to the pub- lic, from an economic standpoint, is objectionable." Corporate management in the United States has been so frequently and so notoriously corrupt and dishonest and traitorous and villainous, and yet so infrequently punished and so rarely even rebuked or condemned, that there are not a few persons who, knowing the hazards of the owner- ship of corporate stocks feel but little sympathy with those who arc deceived or defrauded in transactions relating to such property. To a great degree, ownership of corporate stocks, whether it be ownership of the scrip for investment purposes, or purchases upon margin, is considered by many as little better than " stock gambling." The practi- cally utter want of any voice in the direction of the busi- ness by the small stockholder, his generally complete lack of any definite knowledge of the manner in which his busi- ness interests in great corporations arc being managed, make the actual value of one's property in such companies, a mere matter of guess. The small investor who buys such property, to a great extent " buys a pig in a bag." Wlien he sells one stock to l)uy another, he is doing little else than repeating the school boy's favorite method of specu- lative exchange, "trading jack-knives witliout sight and witliout seeing."' Xot only has the small stockholder no accurate knowledge, but time and time again the olficers in char^'o of his property have; misled him, eitlier with absclutelv false statements or with statements that natu- Over-Capitalization and Publicity 219 rally cause him to draw conclusions and inferences that were incorrect. Hundreds of times, lie has seen the man- agers of his property absolutely mismanapreciate its value. ])uring the spring of 1900 the press of the country has been fdlcd with charges that an officer of the American Steel and Wire Company has purposely misled the public concerning the condition of that great trust; that the business of the company has been managed in such a way as to depress the market price of the stocks of the com- pany, and that men have been needlessly thrown out of work and factories unnecessarily closed, for the purpose of giving the public the impression that the affairs of the company were not in a prosperous condition. Even if in this particular case these charges of misrepresentation and mismanagement arc untrue, as perhaps is the fact, yet it is only an instance of the possibility of mismanagement by corporation officers and of the impairment of puhlic con- fidence in the present methods of cor]iorate control and management. The Third Avenue Kailroad, one of the great systems of surface street cars in the metropolis, has lately been forced into bankruptcy apparently through the mismanagement and dishonesty and criminal conduct of its ofTicers. The annals of American finance are fdlcd with similar instances. A remedy that would he most pofent. for nil the evils of corporation mismanagement, would he to refuse to limit the liabiliiv of ofTicers and diri'C'fors. Tt is necessnrv in the case? of great corporations to limit the general liability of stockhcdders \n the ])ar value of the stock owned bv them. Tliis is Ix'cause of the absolute impossibility of all the stockholders taking an active ])art in the mannublic who arc invited to take shares in business organiza- tions. In the next place, tliis would enable us to see just what the public have a right to expect in the way of service and taxation.'' 224 The Trusts It is a rare tribute to the practicability of Governor Eoosevelt's suggestions which he endeavored to have em- bodied in suitable legislation, that the present Democratic Comptroller of the city of New York, Mr. Bird S. Coler, at present the most conspicuous candidate for the Demo- cratic nomination for Governor during the coming cam- paign, has now thrown the weight of his influence toward a solution of the trust problem, substantially the same as that recommended by the Governor in his message. It is most fortunate that that element in both parties which stands for conservatism in business matters, but for vigor- ous purity in politics, is in such substantial accord. All men will agree with Mr. Coler in his statement that the state being the power which authorizes the corporation to do business under a special charter or grant of privilege, should stand ready to protect the individual in his rights, and that a knowledge of the corporation's business by the public is necessary for the proper protection of the public. Just as the state, that is. New York State, has long exercised the right to inspect the business and standing of life and fire insurance companies, just as the National Government inspects and examines banks, so now should the state demand of all corporations created by it or permitted by it to do business within its limits, such publicity as shall enable the people to ascertain whether or not the corporate powers and privileges are being used to oppress the people. This government inspection of corporations is the plan of dealing with trusts that Mr. Coler advocates, and is the plan which he has urged the Democrats of every Ftate to favor in the platforms to be adopted by them at their conventions during the ensuing year. The State of New York may deem itself peculiarly fortunate that '^^^. Coler should so far endorse tlie views which in his annual message Governor Eoosevclt had expressed, and that a Over-Capitalization and Publicity 225 possible, if not probable, Democratic candidate for the governorship, should urge the same kind of statutory en- actments, for it gives promise of united action and of a continuous plan of campaign, regardless of any political somersaults that may occasion a change of party admin- istration. ]\It. Colers public statement concerning trusts was made on or about May 1, 1900. How much in har- mony with him Governor Eoosevelt is, can l^e seen by the following utterance of the Governor made in January of that year: " Where a trust becomes a monopoly the state has an immediate right to interfere. Care should be taken not to stifle enterprise or disclose any facts of a busine^ that are essentially private; but the state for the protection of the public should exercise the right to inspect, to examine thoroughly all the workings of a great cor- poration just as is now done with banks, and whenever the inter- ests of the public demand it, it should publish the results of its examination. Then, if there are inordinate profits, competition or public sentiment will give the public the benefit of lowered prices, and if not, the power of taxation remains. It is, therefore, evident that publicity is the one sure and adequate remedy which we can now invoke. There may be other remedies, but what these others are can only be found out by publicity, as the result of investiga- tion. The first requisite is knowledge, full and complete." It is to be hoped that Comptroller Coler will succeed in persuading the Democrats of Xew York, as well as of all the otber states in the union, to adopt his anti-trust plank and endorse tlie legislation suggested by Governor Roose- velt and himself, for if all parties can unite in advocating such legislation, it is unquestionable that a great deal can be done to abolish the evils attendant upon trusts. What degree of publicity shall be required beyond state inspection is a question as to which there will be a variance of opinion. Everyone is willing to concede that there are many private matters as to which trusts and corporations 226 The Trusts should not be asked because important business secrets would be divulged. The publicity that is required of one corporation must be required from all corporations simi- larly situated. It is contended by m.^ny that that pub- licity as to any matter concerning a corporation which is acceptable to every stockholder is sufficient publicity to answer all the requirements of the community. We are inclined to believe that this proposition is true, although perhaps the bondholders should be entitled to the same information. It tends to make absolutely public all mat- ters relating to the very large corporations, while it leaves the affairs of the small corporations known only to the few connected with them. If a corporation has but five stock- holders, ordinarily it will be a corporation of small capital- ization and, at any rate, one which afreets the people in very few respects. A corporation with that number of stock- holders will not be one whose securities are dealt in upon the stock exchange. It will not appeal to the investing public for financial assistance. It will not try to float bonds or to list its stock. Ordinarily, it will have no dominant control over any industry. Ordinarily, it will have a great number of competitors, and will be in no sense a monopoly. On the otlier hand, if a corporation has a thousand or more stockholders, as do all our greaf" industrial trusts, and if every one of these thousand stock- holders have full and accurate information as to the af- fairs of the company, the public will have the same knoT\-l- edge, because of the absolute im])0ssibility of a thousand men kee])ing those inattcrs secret. It has been well said: '^ rublicity to all of the stockholders is ])ractical]y publicity to llic wr)rl(], and the public need not be alarmed about a lack of jiuhlicity in any corporation where every essential fact concerning its inception, organization, nianagenient, and all'airs is known to axicrx r^tockholder." What objec- Over-Capitalization and Publicity 227 tion can there be to a statute giving to every stockholder the right to expect information concerning the property of which he is one of the owners? It is often said that the corporation is merely a form of })rivate business organ- ization, and that the public has no right to know these private business matters; but it should be borne in mind that the })ublicity here contended for is publicity only to stockholders themselves. " But," say the objectors, " pub- licity to all stockholders of a great corporation is publicity to the whole world and, in fact, it is your desire to get information for the whole world that leads you to seek to compel the atfairs of the corporation to be made known to all of its stockholders." '* The plan proposed by you," they say, '' will permit any intrusive and inquisitive person, by buying a few shares of stock, to expose the affairs of the cor])oration against the wishes of the great majority of its stockholders." The re])ly that immediately occurs is that if great corporations are unwilling that every stock- liolder should have full informati(m concerning the affairs of the company in which tlicy ]],>]{] stock, then they should not ask the pul)lic to take stock in it. If a man with $100 interest in a trust is not entiiled to knowledge as to the way in which this $100 worth of his property is lieing man- aged, corporations sliould not seek to induce people to in- vest $11)0. If iucli a sum is too small an interest, then let th(^ ]'iar value of the shares 1)0 greater, say $1,000 instead of $10(i, or, what is tlie same thing, sell to no person less tlian t('n--iiart> lots. Perhajis a requirement that a person owning .**;10.000 woriii of stock, or that a group of persons owning in the agirre^'ate $2o,'i00 worth of stock, should be granted explicit information ujion reasonable demand, would answer all practical purposes in the case of our very great coi-poration? quite as well n= a requirement that every single stockholder should have this privilege. 2 28 The Trusts Whatever the nature and the degree of the puljlicity that is required, it must, in order to cope Avith the evils ot trusts, embrace a system of state inspection after the man- ner of our bank examinations, as recommended by Gov- ernor Eoosevelt and Comptroller Coler. Furthermore, the state and the nation must supplement this publicity by detailed statistics which will state for each great trust the cost of production; 2)rices, both wholesale and retail, for the articles made by these trusts; rates of wages; output and capacity; comparative quality; number of hands em- ployed; extent of competition, both foreign and domestic, together with such other information as may have a bear- ing upon the question. It may be said that past experience with trusts docs not augur well for the success of any movement to make them reveal the desired information. But there has been found little difTiculty in enforcing the laws for the inspection of banks and insurance companies, and the inoney power (U these great financial institutions is hardly less than that of the trust, and their business secrets are matters that should be quite as jealously guarded. It is unquestionably true that pulilicity will largely rem- f'dy the evil of over-capitalization, but possddy it will not yircjve to })e a complete cure. If insufTlcicnt, direct legislaiiftn against the evil should be tried. There can be no question that over-capitalization gives ri~e to many (:vi]s; and that in no way is it of any material benefit, either economi- cally or financially. If a corporation were formed u]!on a liasis of a stock issue, representing only the actual value of its property, certainly no harm could be done. Sucli a basis, as has been well said by llie Journal of Commrrcr, " would sprve ;ill the purpose? of llie in.nnufnflurcrs vho romhiTie to avprt compel it ion imd 1o sorMiro Ihc ofouomics of sinplfi manage- ment, rather tlian to Fell to the jiuhlic titles to surplus profits that Over-Capitalization and Publicity 229 \vill 1)0 earned in (lie future if trade eontinues to prosper and com- petition can t)e restrained.'' " It is iinpossihle." tliis paper says, "to resist, the (()n\i(tits arc very much ovcr- eapitalizt'd. and if this lie the ease, the value of the common stock is based upon conditions that may ehanj^e rapidly, and that can hardly he expected to prove [lermanent. A curtailment of earnings would lower the value of stocks which are extensively used as col- lateral for loans, and this is one of the dangers of trust finance as it is practiced." 'J'lie interests of the pii])lic are too much at stake to per- mit corporations to nia.^([iiera(le around under a capital- ization of tens of millions, wlien their actual assets are but small fractions of these sums. The people at large cannot afford to accept the statements of interested specu- lators as to the value of their properties, which they ask the peo])]e to take stock in. The state in its sovereign capacity cannot alTord to give a charter or a certificate of incorporation to a- conntany ca[)italized at $10,000,000 which ca]Mia]izatioii. in itself, in the minds of many, is a certificate of valuation hy the state unless the state has taken every means to prcvem the issue of stock except for actual cash or in exchange for property which is taken at its fair value as dclerinined hy coni])etent and disinterested pariit'S, oi" l)y state olllcials acting in a judicial or quasi- judicial capacity. Tliere is an J-higlish law concerning the is-ue of stock in jiayint'Ut of services and property which AnuM'ican stales might co])y to their advantage. That l;iw i)rovi(les that all stock which is issued shall he held stth- ject to [laymciit, in full, in c;;s}i in tlic hands of whomso- ever it may he. unless before the issiu' and allotment there- of, a conti'act shall be filed in the registered office of the coni])any. which I'oniract shall djscdose in detail the con- sideration in tile way of Sv-rvices or property for whiidi the stock shall he ir--ucd in licu of crish. and that, iit the eveitt of sucdi iilinu' of sindi conifact. that >{nv]i can be issued for 230 The Trusts property or services rendered to the amount of the par value of this stock. "When all that can be done by direct legislation to pre- vent over-capitalization is done, we will still feel the need of publicity, because dishonest officers of great corpora- tions, even though every share of their stock shall have been issued for actual cash, have infinite ways of plundering the public if allowed to act secretly and under cover. One of the serious evils associated with corporate man- agement to-day is the speculation by officials and directors of companies in the stock of their own corporations. It is unnecessary to enlarge upon the evil? of such a practice. It would be pernicious, even if this speculation were con- fined to the .})urchase of the stocks of the company with a view to their subseqtient increase in value, for constant speculation even of this character would mean an interfer- ence with the discharge of the proper duties of the officers, and there would always be a temptation for the speculating official to conceal from other stockholders information con- cerning the true value of their property. The temptation would be so strong that unquestionably there would be not only lack of information, but misinformation and the cir- culation of all sorts of reports for the purpose of depress- ing the market price of the stocks. But speculation on this side of the market would have at least one redeeming feature, and that is that the oflicials would actually be trying to improve the value of the property entrusted to them. Stock speculation, however, qtiite as frequently takes the form of " short sales," that is, agreements to sell, at a certain price, that winch one does not possess with the ('X])ectation of purchasing it later at a lower price, and thcrcljy fulfilling the selling contract. The temptation in s])eoulati(in of this character is to do everything that is ]>ossiljle to '|(]e|)ress the value of the property which has Over-Capitalization and Publicity 231 been sold and whicli one must l)uy to make good the de- livery. It may be impracticable to frame any statute that will actually stop this practice, but it is an evil, the in- jurious elTect of which cannot be overestimated, and one Avhich should be prevented at any cost. Here, again, pub- licity appears to be the most cflectivc remedy, because when all stockholders have that same degree of knowledge concerning the affairs of the company which the speculat- ing officer has, then will his ability to influence the market and to deceive intending purchasers or sellers be ended. It is to be borne in mind that the publicity that is re- quired is not only honest information by the officers of cor- porations which are already founded, but complete specific and detailed statements by j)romoters and all others who engage in organizing and establishing trusts. Publicity may not be a complete cure, but it will be a remedy not only for the evils of over-capitalization, but for all the evils and dangers of trusts. If publicity is ob- tained, prices cannot long be kept unduly high, dividends cannot be swelled by extortion, stocks cannot be made to appear as having an earning power greater or less than what they actually have, for competition will be sure to sot in. If there is publicity, the stockholders, little as well as big, will have exact knowledge of the conditions of their property; and mismanagement by officers and directors, and the betrayal of the trusts reposed in them, will be rare, rublicity is the best remedy to try, for it will tend to sto]i the evils of corporate mismanagement, whether onnectcd with comjianies that are fairly capital- ized or tliD.^o thai are over-cat>italiz('d. With ]icrfoct pub- licity, there would possibly l)e little evil in over-capital- iz;iii(ui itself. If we know tiu^ real and true earning power of the stork, its real dividtMid-jiaying ability, a market ]H-;eo will be fixed fnr it ba~ed ilicreupon; but without such 232 The Trusts knowledge the price may be greatly more or even greatly less than it is worth. The insiders are the ones who profit; the public the ones who suffer. One great need of the day, then, is publicity of the affairs of corporations. Another is more strict control over corporation methods. We should enact and enforce statutes that will prevent the evils and dangers of corpor- ate mismanagement and which will provide the most strin- gent penalties for the dishonest practices of which corpor- ation officers are so frequently guilty. The people must rouse themselves from the lethargy into which they ha"ve sunk. Instead of looking indifferently upon the losses sus- tained by a person through the rascality of the officers of corporations in which he is interested, and instead of regarding him merely as a party who has been " burned/' the people must realize that all classes, from the rich in- vestor to the laborer with a few dollars in the savings bank, are vitally interested in the attainment of a higher stand- ard of honesty in dealing with corporate property. The wrecking of public corporations, with a resultant Inss to thousands of innocent and deluded stockholders, should be treated as a crime deserving the severest punishment. CHAPTER XII. WHOSE FAULT IS IT? It would be most unfortunatte if a problem so momen- tous and so complex as that produced by trusts, should become a question of partisan politics. It is so great that it needs all the wisdom, all tlie patience, all the calmness, all the conservatism, and all the courage of all the people. Yet, just as trusts have of late been so inconsiderately de- nounced, it is becoming more and more the fashion for eacli party to lay the evil of trusts at the door of the other. The Democrats say that trusts are the outgrowth of Ro- pul>lican policy; the Republicans charge that the Demo- crats have absolutely refused to unite with them in elFec- tive legislation against trusts, or in an attempt to get the V. S. Constitution amended so as to give Congress com- ji'ete and amph.' power. 'Jlie l)t.'iiioci':it> ai'e very fond of denouncing the Re- publicans as the friends ol; trusts. The latter are declared by them to be the allies of great wealth. Their policy of aiding, by means of a protective tariff, in the building up of Amerit^nii manufacturing, and the consequent develop- nuMit of American resources, which has done so much to nuike tlii> nation wealthy and this people prosperous^ has been denounced as "the motlier of trusts.*' Th(,^ thief who is being pursued througli the city streets is very apt to ]>oini to some one ahead of him and begin a pursuit of that person, with loud cries of "stop thief." 233 234 The Trusts The Democratic denunciation of the Eepiiblican party as the party of trusts, is the greatest of all " stop thief " cries. They are quite as guilty as Eepublicans in the wickedness of trusts. The truth is that the Democrats as a party and as individuals arc no more and no less censurable on the trust question than the Eepublicans. Trust owners, or- ganizers, and promoters are no more confined to the Ee- publican party than are butchers, or steel workers, or bakers. Unquestionably, many trust organizers arc Ee- publicans, but there is an equal number of Democrats like- wise interested. Governor Atkinson, in his address at the Chicago Trust Conference, very frankly said that trusts are not confined to any one political party. His words were: " I find about as many Democrats in trusts in the United States as Ee- publicans, and I find at least two of the mammoth trusts of this country are, in a sense, Democratic trusts.'^ If trusts are corrupt and degenerate, the Democrats are as deep in the mud as the Eepublicans are in tlie mire. Per- haps the greatest of the Xapoleons of finance now engaged in the business of consolidating and combhiing is a former Democratic Secretary of the Xavy. Xot a month passes that the press reports do not mention his connection with some great trust. This spring has witnessed the absorption by the Metropolitan Street Eailway Company of Xew York City of the Third Avenue system, its only rival. All the surface railways of that city Xew York City proper are now under the control of this one cor- poration of Avhich this ex-Secretary of the Xavy is the lend- ing financial genius. The Standard Oil Company is con- sidered the greatest of trusts. It is the one accused of tlic most evil practices. It has even been chaiged with interfer- ing in pr)linfs. The most specific charge was tlie one which alles-cd that tliroudi its intluence a certain Demo- Whose Fault is it ? 235 crat of Ohio, ^ras elected United States Senator. Ex- Governor I'lower, cx-Seeretary of State Olney, and hosts of others whom the Democratic jjarty has honored and en- trusted witli oflice, have heen active in promoting or man- aging trusts and consolidations. This is perhaps no re- flection on these successful gentlemen in the eyes of any person, except in the eyes of those who denounce trusts. Very likely trusts should be denounced, but people in denouncing should bear in mind the scriptural injunction as to pulling motes out of their brother's eye while beams are in their own eyes. ])uring the last two months that have just passed (April- May, 1900) two trusts have been very much before the pu])lic, the American Steel and Wire Company and the American Ice Company. The head of the former has been accused of circulating misleading reports concerning the condition of his company and its business prospects, and of arbitrarily closing many of the mills of the company to make it appear that there had l)een an over-production and thereby to dejiress the price of stock. It is only fair to say that he has been acquitted. This man is a Republican. The American Ice Company, the other trust that is in the public eye at present, has as near a complete monopoly, in a certain locality, of one of the greatest of life's necessities, as anv trust ever secured. Taking advantage of docking facilities which it has been able to acquire and which were of an exc]\isive character, and of its pr).5session of nearly the entire supply of ice avnilablo for Xew York Citv. and of all of the important ice-making establish- ments, it has (loul)le(l the j^rice of ice. an extortionate increase, vielding to tlie trust inordinate profits. Of all monopolies this is the most Tner(Mles~. It lays its burden most henvilv on the poor, the sick, and tho youn::. The fcvcr-strickcn patient is dealt the heaviest blow, but even 236 The Trusts the strong and well, find health and life, in the warm ?nin- mer days, endangered by food and drink that are tainted because of lack of ice to preserve its wholesomeness. Trusts have often been characterized as " octopi,"" but the Ameri- can Ice Company is the most vampire-like sucker of human blood that has ever been incorporated. In its organization, as well as in its methods, it exemplifies the worst evils of trusts; for banded together in this company, with others, are several whose oilicial duties make them the guardians of the people's interest. It is freely charged, and to this day it has never been denied, that many officials of New York City are stockliolders, and that it is the exceptional privileges which their influence has given to the trust th -i, with other ])owers, make it so monopolistic. It is charged that persons connected with the Municipal Assembly or the Commo7i Council of Xew York are stockholders, and yet at one time the practical method of immediate relief seemed to be the establishment l)y the mtinicipal government of the city of Xevr York of city plants for manufacturing ice. It is charged -and not denied- that many of the judges of Xew York City are or have been stnekholders of tlic American Ice Company, and yet not only is that com- pany to-day lieing arraigned before the people as a merci- less corporation, but criminal proceedings are pending in the inferior courts which may or, at least, might have come before these judges for trial or review. Furthermore, prr-ccc'lings are pending before the Attomey-Ceneral of tlio Stale, preparatory to an action to procure a dissolution of tlip corporation. Should such an action be instituted, it nii,ts ihan Democrats, the licpublicans have not been particularly favorable towards trusts in their olbcial party stateinents, tlieir ])latforms. The Neiv Yurh World Almanac for 1 !)<)(), gives the following })lanks from plat- forms adopted at Eepubliean State Conventions held in 1899, in so far as they relate to trusts: lowii To maintain the welfare of the people is the object of all poverniiients. Industry and coininercf^ shniild be left free to pursue their inetlnul according to the natural laws of the world, but when the business agj^repit ions known as trusts prove hurtful to tlie peojih; they must be restrained by National laws, and if need be, abolislied. Kentucky. \\"e pled^re the ]\epul)lican jjarty of Kentucky to the enactment of all >ucli laws as may be necessary to prevent trusts, pools, comliinations or other oi'i^'ani/ations from combininn; to depreciate below its real value or to enhance tlie cost of any artich\ or to reduce the projier emoluments of labor. Maryland. We stron^rly favor laws to successfully suppress trusts and all t'oinbinat ions uliieh cr(Mi1(> monoiioly. It \nin Ihr licpiihJicdn jxirtji irliiili jinssrd tJir FnUnil luir (i(iainst trusts and which is nilnrcinij it so fur (ts statrs' riijlils jimnit. Massachusetts. The Jlcpublican party of Massachusetts is un- 238 The Trusts qiialifiedly opposed to trusts and monopoly, and the capitalization of fictitious and speculative valuations, and reiterates its declara- tion in the platform of 1894 against stock-watering in all forms, and points to tlie existing legislation,. and especially to the anti- stock-watering laics of that year passed hy a Republican legisla- ture and signed by a Republican governor, as proof of its progress, sincerity, ivisdom and courage upon this issue. It believes that similar laws enacted by all the states in connection with the Fed- eral Trust law already passed by a Kepublican Congress would put an end to the danger from tlie growth of greiit combinations and trusts. Nebraska. The Republican party now, as always, opposes trusts and combinations having for tlieir purpose the stilling of competi- tion and arbitrarily controlling production or fixing prices, but we also recognize that legitimate business interests, fairly capitalized and honestly managed, have built up our industries at home, given the largest employment to labor at tlie liighest wage, and have enabled us to successfully compete Vi ith foreign countries in the markets of tlie world. Ohio. We commend the action of the Seventy-third General Assembly of Ohio in passing the stringent law now on our statute hooks, prohibiting the organization of trusts, and we denounce such unlawful combinations as inimical to the interests of tlie people. The platforms adopted this year of 1900, show that both parties are alike unfavorable to trusts. There is liardl)'' a single state in which during the present year both noliti- ca] parties have not denounced trusts. Tlie declaration of the Republican party in its Xational platform adopted at Philadelphia, on June 20th, is as follows: We recognize the necessity and propriety of the honest co-opera- tion of cajiital to meet new business conditions and especially to extend our ra])i(lly increasing foreign trade, but we condenm all (on>j)iracic> and comljinations intended to restrict business, to create monopolies, to limit production, or to control jiriccs, and favor such legislation as will efl'ectively restrain and prevent all such abuses, protect ami fironiote competiticm and secure the rights of jirodueers, lalxjrers and all wlio are engaged in industry and com- mereo. Whose Fault is it ? 239 Republicans show as little real friendship for trusts as do the Democrats. Their platforms do manifest a willing- ness to study into the new jjroblems occasioned by them. They do show a disposition not to rush headlong on ^ course that may prove harmful, but they manifest quite as nuu-li of a desire to remedy existing evils as do the Demo- cr:;ts, and iliey are able to show legislation of a practical chai'acter It is still questionable just what sort of legislation should be enacted. The abundance of laws against trusts passed by any ])arty, does not conclusively prove that that party has conferred a service on tlie people. Yet Republican leg- islatures have been (juit(> as prolific in trust legislation as have tlie Democratic. The so-called "anti-trust act" of the I'Uited States, being the act passed in 189U, entitled " An Act to I'rotect Tratle and Commerce against Unlaw- ful Restraint and ]\li)nopoly/' was introduced by, and its passage due to, tliat life-long Republican, John Sherman, and it is known by his name. ]jut the Republicans have not been content witli tlie Sherman Act. The present ses- sion of Congress has seen them diligently trying to do sometliing whicli would ])e an efficient remedy. They have pro])osed an amendment to the Constitution giving to the Federal government al)solute power over corporations, tru-ts. and Ciunbines. even to tlie extent of destroying them; and hnve introduced a bill of the most drastic character ameiiding the existing Sherman Act. It is use- less here to consith^r whether the ]n-o]v>-ed law is wise or not, but tliis mucli can be truthfully said: it is no more drastic, vet quite as drastic, as the denunci;itions of trusts in Democratic platforms. In. the Judiciary Conmiittee, the Democrats have vot(Ml solidly against this proposed amendment to the Constitution, on the ground that it is an invasion of state rights: and more recently every 240 The Trusts Democratic member of the House, except five, has voted against this prq^osed amendment. As it required a two- thirds vote, it was killed. Every well-informed person knows that if the remedy against trusts is to be found in legislation, it must be in Federal legislation. It is abso- lutely impossible to procure uniformity of legislation in all, or even in very many, of the forty-five states of the Union, and if one state permits the creation of great cor- porate trusts within its bounds, then under the various clauses of the United States Constitution as to interstate commerce being regulated only by Congress, and as to the rights of persons to life, liberty, and property being in- violable by state legislatures, and under that comity which has always existed between states, notwithstanding the fact that states may possibly have tlie right to impose upon corporations created by other states the same restrictions which they place upon their own corporations before al- lowing them to maintain offices or acquire domiciles within their borders, the states, nevertheless, cannot effectively prevent these corporations created by other states from doing business with the citizens of each and even' state. Trust legislation, to be effective, must be ISTational. Not only do the political relations of the states towards each other and towards tlie Union, as established by the Con- stitution, necessitate this, but the growing intimacv of interstate business relations requires it. One^s trade and market arc now in no way 1)ounded or limited l)y state lines, and the laws aifecting business organizations should ])e a? extensive in tlieir jurisdiction as our domestic trade. If state laws cannot reach every person and corporation tliat ]ia< a riglit to trade in that state, wo must have Xational laws. If tlie Democracy is so attached to the tlieory of state rights as to vote against giving to the Federal government, power over the trusts which to-day Whose Fault is it? 24I spread over the whole country and which do business in all .sections, they sacrifice the })ractical to the theoretical, and show the ntter incai)acity of tlreir party to deal with new and vital questions of momentous importance. No Ioniser need the |)arty which fears to rnnient power to deal with trusts, prate of its anti- trust notions, or seek to make it an issue of Xational poli- tics. "State riijjlits " is a tlieory which every invention that facilitates trans]:)ortation and travel tends to shatter. He who lets it stand in the way of edicient remedies for actual evils, is a " mister man-afraid-of-a-shadow." In an article in The Xorth American Rcvieiv for Septem- Irm-, is;)!), on the Legal As})ects of Trusts, Jos. S. Auer- Lacli says: ' Xeitlier political ])arty olFers any prolectioii (to trusts). Each apparently would out-do the other in its bid for pviblic support. New York, if shouting less, is about as active as Texas. Democrats logislatf and Republican governors sign; Republicans legislate and Democratic governors sign."' The facts of the case certainly do not justify the Demo- crats calling the Kepuhlican party, the party of trusts. The evils of trusts, as has been particularly pointed out hy Bourke Cochran, are largely the evils of cor])orations. M'hich are the states that to-day are most lax in their con- ti'ol of cor})orations? Fnder tlie laws of which states do the great trusts st'ck incorporat ion ? Democratic New Jersey ami Democratic I)elawar(\ Mr. ]')ryan, at the Chicago Trust Coufei'iMUH', altempttMl to ])an-y a thrust on this ])oiut, intruded into his address hy a ()uery from the gal- lery, with the remark that .New Jersey and Dehtware were not Denuicratic in IS'.Ui. lUit until ISi).") New Jersey had liad hut one IJepuhlican (iovernoi-. and that was in "war times."" It was thi^ most rock-rihhed Democratic state in the Xorth. This fact is of interest in connection with the 242 The Trusts following from a recent able address by Edward Quinton Keasby, a well-known Xew Jersey lawyer, upoii the cor- poration laws of that state and upon trusts: " The first fact to be noted in the inquiry into the policy of Xew Jersey with regard to corporations is that there is nothing of much <-onsequence that is new in her existing laics. The large companies lately incorporated were organized under a general law which, in its substantial features, has been in force ever since ISJfG, and which has been unchanged in any very important particulars during the last twenty-five years. "... A general act, as I have said, was passed in 1S46, and the power to grant special charters was abolislied in 1S75, and in that year a revision of all the general acts concerning corporations was made and permission was given to any persons to form corporations for any lawful business or purpose whatsoever. The provisions of that act were suhstantially the same as those of the earlier statutes, and these pi-ovisions have remained substantially unchanged until the present day." Democrats who assail trusts ought not to charge their existence up to Hepublieans. Reference has been made in a former chapter to the laxity of the laws of Delaware. Ovor-capitalization is the chief cause of tlie great trusts. It encourages " promoters," gives to them a cliance to make enormous fortunes, but is an irresistible temptation to wholesale frauds. If the worst of the trusts are to be C stroyed, if the worst that is in trusts is to be eliminated, the laws of Xew Jersey and Delaware ought to be amended. Of late it has been frequently charged that tlie Repub- lican jjarty is responsible for trusts because it has advo- cated a protective tariff, and the tariff, it is said, sluits out foreign goods which might compete with trusts and destroy their )io\ver. "S\v. Ilavemeyor, the sngar king, has testified before a Senate Comniittee that '" the tariff is the mother of trusts."' The assertion coniiiig from (me whos(; efforts to secure protection, when the Wilson tariff bill was passed, Whose Fault is it ? 243 caused such a commotion, seems incongruous; and it is im- possible to resist the conclusion that 'Mr. llavemeyer has a grud,ije against the tariff l)ecause it makes him pay too much for raw sugar, or because the shoe pinches in some other s])ot. Mr. llavemeyer undoubtedly feels that his ])o\verful trust could stand free trade in refined sugar bet- ter than some of his weak competitors, and he probably has little objection to free trade in raw sugar, since it would tend to give a death-blow to the beet-sugar industry. It should not be forgotten that even if some of the trusts have taken advantage of the tariff, the Kepublican party is not to be blamed therefor. A great majority of the very large trusts have been formed within three years. There has not yet been ample time to see whether trusts are taking advantage oC the tariff, or, if that is the case, to enact legislation to correct the abuse. The tariff ])lank of the Kepublican platform, 189(5, correctly said of the tariff that " in its reasonable application, it is just, fair and impartial, equally opposed to forciijn coiifral iind (lonnstic monopoly, to sectional dis- criiiiiiiation ajid individual favoritism." It also declarcil: '"We re- new and cinpliasize our allofjiance to tlie policy of protection as the bulwark of American industrial inde])endence and the founda- tion of American develo])ment and j)rosperity. Tliis true American j)oIi(y taxes forei^ni products and encourafjes liome industry; it ])uts tlie burden of revenue on f(jrci<,ni (,'oods; it secures the Ameri- can markid. for the American j)roducer: it upliolds tlie American standard of wa^es for the American workiiirrman : it puts the factory by the side of tlie farm and malcc^ the American farmer //.s'.v dcjirndvnt on forcujn dimand ami jiriir ; it diffuses general thrift and founds the streiiLrth uf all on tlie strength of each." Xot only lias the Ee]niblican party in its ]datform de- clared against any tariff which was creative of monopolies, but some of its most eminent numiliers have spoken em- pliatically in tlu,' same strain. J(diu Sherman, the former 244 The Trusts Republican Secretary of the Treasury, and for years Ke- puLlican Senator from Ohio, has used the following lan- guage: " Tlie primary object of a protective tariff is to provide for the fullest competition by individuals and corporations in domestic production. If such individuals or corporations combine to advance the price of the domestic product and to prevent the free result of open and fair competition, I would without a moment's hesitation reduce the duties of foreign goods competing with them, in order to break down the combination. Whenever this free competition is evaded or avoided by combination of individuals or corporations, the duty should be reduced and foreign competition promptly in- vited." Charles Foster, Eepublican ex-Covernor of Ohio and ex-Secretary of the Treasury, has declared himself as fol- lows: '' While I have always been, and am yet, a thorough believer in the protective policy, I regard the appropriation of the tariff to enhance the price of any product of the country, as a misuse of the purpose intended. When any trust shall avail itself of a tax upon imports to enhance the price of the product, then the tax should be modified or wholly removed." The tariff lias, perhaps, indirectly been the cause of trusts. It lias stimulated the building of factories and mills in various industries. It has made a profit reason- ably certain, so far as foi'eign competition goes; but, as in every business, far more com])etitors have .sprung up than were needed to supply the market. Over-production has ensued. Profits have Ijccn lost, plants have proven poor investmenis, and, to save tliciiiselves from bankruptcy, manufactnrers have formed trusts. It is the fierceness of hr)nie com]xjtition tliat has cnnsfd ilie trusts. J^ut to say that the tariff has been in this way responsible for trusts is like saying iliat food is responsible for apo[)l('xy and goub. since it is usually the hearty eater who is affected Whose Fault is it ? 245 witli these diseases. Tlie trouble is not in the foocl, but in over-calintr. il is not always in the tariil". It is fre- quently in excessive eonipctition. It is said, however, that the tariff is the defense and prop of trusts, if not their cause; that Ijy shuttin^tr out the for- ei,un product it makes it all the easier for the American trust to monopolize the article and to maintain high prices. It is c!!ar<:^ed that an iniquitous tariff is the sup- ]>ort of tlu> trusts, and ^Mr. Lawson Purdy, of the New York 'L'ariif I*eforui Lea^rue, asserts that of the more tlian four hundred trusts enumerated in The Commercial Year Bool', more than two-thirds are directly affected by the tariff and that there are \cv\ few of them that do not get some tarift assistaiU'C directly or indirectly. It is unquestionably true that the existeiu'o of the taritf tends to shut out foreign (umpetition aud to (uuible the home producer for a time to charge high prices, that is, higher than those of Euro- ])ean. countries, with their ])oor]y paid labor; but in a country so great as ours, and with capital so abundant, iliorc is always a prol)ability of vast internal competition, in-riviilpj llie tariff i.< mainiained. If the tarilf is abolished anil if froreign producers can, in fact, produce so as to sell I'.ore clieaply. then there is little hope of the s]U'inging i'!i of lunv (himcstic competition. I'he lucans which the liiritf rct'oi'incr would employ for the purpose of i-educing ;)ricus, wiiiiM iiPMii the destruction ot' American industries. That there liave l)i>en abu>es of the taritf by some of our jirnieeted ii.idiK-'.ries >(HMns ((iiite certain. It is a well- known fad that foi' many years various lines of manufac- lureil good,- have at times heen sold for export abroad at jDwcr prices than at home. Taritf reformers, like Lawson Ihiidy and !\vrnii W. Holt, have made \\\\> .-latement and iiave citi"! numerous in,-tanee.- as ]iroof of the charge. I'hat our export })rices have oecasionally been lower 246 The Trusts than domestic prices, was admitted in a recent address by Samuel Adams Kobinson, of the American Protective Tarill; League, but his explanation is, that this course was exceptional; that it occurred in the four years of depres- sion following the free trade triumph of 1893, when Amer- ican manufacturers were compelled to sacrifice profits to a considerable extent in order to find a foreign outlet for their surplus products; that these years, during the admin- istration of President Cleveland and the agitation attend- ant upon the repeal of the AIcKinley law and the passage of the Wilson tariff bill, so unsettled American business affairs that the period became one of national over-produc- tion and under-consumption; that the purchasing and con- suming power of the nation, as a result of the stagnation of business, became greatly diminished, and, in conse- quence, manufacturers and other producers were compelled to reduce prices below the point of fair profits in order to obtain ready money, and in this way only were they able to keep their plants in operation and their labor employed. Goods were marketed abroad, so Mr. Kobinson concedes, at figures which left little or no margin of profit, and some- times at an actual loss. But it is contended that now, with prosperity at hand, export prices arc " much nearer on a parity with domestic prices;'' and the following rea- sons are given for the allowance by manufacturers of greater discounts on goods sold for export than on those sold to domestic consumers, viz., '' spot cash payment for export goods, whereas in domestic trade long credits are the rule and spot cash tlie exception; and the ad(]ition;il fact tlint in marketing his product through the exjjon trade, tlie manufacturer is at no expense for advcrti.-ing, maintenance of agencies and other ittms tliat add to the cost of distrilnition, amounting in t!ie aggregate t') ful'y Whose Fault is it ? 247 t'ho difference between tlic export prices and domestic prices." Such is Mr. Kobinson's argument. While occasionally there nuiy he special circumstances and exce])tional conditioiis which justify American manu- facturers in these discrepancies in prices, and while it is true that after a given quantity has been manufactured a surplus may be made and sold at a lower rate, yet the pre- sumption must always be that when American goods arc sliijiped in largo quantities abroad, and sold for less than in the home market, the producer is gouging the Ameri- can peo])le; and that the tariff is not a necessity to the maintenance of such a 1)usiness, but that it may be a means of robbery and extortion. This presumption becomes con- clusive when any American ])roduct is thus uniformly sold abroad. For the head of any industry which has been fosicred by an American protective tariff thus to rob the American people is the case of a dog biting the hand that feed> it. It is the people and not the manufacturers in such cases that need protection. The continuance of the tariff u]ion an article sold abroad cheaper than at home can be justified only by the clearest evidence, brought out afior the fullest and fair(>st investigation, establishin'.r he- voiid a shadow of a doubt that such sales are unusual and exceptional; and that the ability t(^ undersell jiroducers niiii other coniju'tilors in the forcM'im markets is due to icinporary market conditions. Althougli, in all cases where domestic ]iroducers have built up a foreign trad(\ and have uniff)rmly sold in a for- eic'n mai'kiM at a le^s rate than in tlie home market, they have conclnsively demonstrated tlieir indeiiendonce of the tnriff. and tlie taritf should therefore 1n^ removed or low- ered, vet to ndvor;it(^ free trade or a general reduction of larilV duties on all ]n-oducts. or upon the majority of our im]iorts, as a cure for trust evils, would be the height of 248 The Trusts folly. It would be a remedy illogical in principle, and it would be worse than criminal, because it would bo to ignore all the lessons of experience. The remedy for trust oppression is not to be found in the death of competition. But if the tariff is removed so that foreign competition may be potent, the foreign competition -vnll crush out domestic enterprises, if, indeed, the foreigner is the cheap producer and can sell at a lower price, as the would-be destroyer of the trusts and the tariff contends. The evil of the trust is that it so limits competition as to become apparently, if not in reality, a monopoly. The effect of the tariff, it is true, is to shut out foreign competition. But a century of experience has proven to the people of the United States that, while the tariff limits foreign com- petition, it has built up and fostered domestic competition. The trusts may strive to kill that competition; but our ex- perience with them proves that they can not permanently do this. It is not possi])le for them for any length of time to destroy even American competition, so great is the amount of uninvested American capital, so limitless the energy and enterprise of its citizens. The only thing that has ever yet been able to kill American competition has been tlie low tariffs wliicli pcrmitiod (he product of the cheap and degraded labor of Europe to displace the product of American factories. Any movement to kill trusts by the adoption of general free trade can succeed only by stifling American industry. It would kill not only our frreat consolidated enterprises, but all our individual ones. Whatever may be the tlioorefical advantages of free trade, the practical experience of tlie American people has, to say the least, made them reluctant to try it. To fijiht (rusts with freo trade is to conduct a cam])aif:n with (he smokeless factory chimney as the chief weapon; and whatever nation makes that attempt, or whatever party advocates such a Whose Fault is it ? 249 contest, is sure to go down in defeat. We Americans pride ourselves upon being a practical people. We fancy we know a good thing when we see it; we are content to let well enough alone. Like the burnt child, we dread the fire. The great panic of 1893, the utter depression of business, the stagnation of industry, the wretchedness and misery that followed all the uncertainty that was occa- sioned by President Cleveland's attempts to change our tariff policy, are too fresh in our recollection to induce us again to undergo that experience. The present prosperity of the country with our factories and mills all running, many of them overtime; with our exports increasing; with our credit unquestioned; with the gold of the w^orld flowing into our country is something that we do not lightly care to throw away. As we look back over a century of national development and industrial progress, we see periods of re- curring panics and find that they were always forerun l)y attempts to abolish that system of tariff which aimed to protect and foster industry as well as to raise revenue. We see that every attempt to reduce the tarilT to a purely revenue basis resulted in larger importations of foreign goods, in diminishing production of American articles, in the suspension of industries, in labor unemployed, in the reduction of wages, in the loss of business confidence, in an outflowing of the wealth of the country, in a decrease in the revenues of the government, and uniformly and without exception in lessening the consuming powers of the })eoplc. But whenever tliere has been a tariff large enough to represent the difference between the American standard of living for the American workmen and the de- graded standard of the labor of foreign countries, we have witnessed a revival and activity of American industry; and American workingnicn have ])0(^n ])rofltably em})loved at good wages, enabling tliem to enjoy the comforts of Ameri- 250 The Trusts can civilization and to become self-respecting, independent citizens. The government revenues in these times have always exceeded the expenditures, money has flowed into the countr}', the prosperity of the manufacturer and wage- earner has stimulated the demand for the raw materials of the country, and the wealth created by diversified industry has brought prosperity and happiness to the whole people; and, further, the tariff has always resulted in stimulating so many industries that an active domestic competition has arisen, and in the end American prices have been reduced below those of foreign competitors. In the campaign against trusts very much will be said against thj tin-plate trust. To what extent, if at all, this trust is extortionate in its present prices, and to Avhat ex- tent the tariff is the cause of it, are questions, tlie answers to whicL involve such a study of market prices that they do not fall within the scope of this work. If the tin- plate trust is charging an extortionate price that is, a price which will yield more than a fair profit after paying good American wages then let the tariff on its products be lowered or even abolished. But merely because the price of tin-plate has been greatly advanced during the last year and a half, we should not rush headlong to the con- clusion that it is due to the tariff. George Gunton, in a paper published in Guntorvs Magazine for March, 1899, in speaking of trusts that were short-sighted enough to take advantage of temporary opportunities to tax the public by increased prices, said of the tin-plate trust (italics are ours): "The tin-plato trust is ono of these ofrensivo examples. Tliis is an industry \\iuc)i jiraelically could not have existed in this country hut, for the Ie;xi>Iative aid of the ])ubli<'. Tntil the tarilf a very hiirh on(\ at. first was ])laced upon foi-eiirn tin. the tin- jilate industry liad no exitcs. It. luis l)e(>u Whose Fault is it? 251 born and nnrtiir(Kl by the protoetivc aid tho public has piven it. Its very pxistcncc! is duo to the j^ood will and political good sense of the United SUites. 'J'lie tin-plate trust is one of the 'fool ex- amples ' of using the trust organization to ])ut up the price. Of course it would be unwise for the public to hamper a really help- ful industrial movement because speculative ' grabbers ' get tem- porary jMissession; nor should a few mistakes of this kind be per- mitted t^) be used elFcctively against the protective tariff as a gen- eral policy. Nevertheless it would be perfectly safe and tlie part of good policy for Congress to pass a law empowering and instruct- ing the Secretary of the Treasury to withdraw the protective duty from all product,s the prices of which are raised by trust organiza- tions. In slwrt, the moment a trust organization raises the price of a product enjoying any degree of protective duty, it should thenceforth be put upon the free list and hccomc subject at on<'e to world competition. If the organizers of trusts in any line have not economic sense and jmblic spirit enough to refrain from using their concentrated power to tax tlie public by increasing prices, the pub- lic should at once withdraw any protective advantage it lias given to that industry. The primary object of protection is to make it possible to stimulate the development of domestic industries : but when industries have become established and proceed to take advan- tage of this protection for monop trust liad heen largely misrepresented and, after carefully considerinir, in this second article, tho rise in the price of tin-])lal(> ami also tlu> iiu'rease in wages durino; {]io same period and tlu^ advaTict^ in the jirices in the raw materials entering into tin-plate_, he came to this con- clusion; 252 The Trusts " strictly speaking, then, the rise in wages and raw material in the manufacture of tin-plate has been slightly more, or at least fully equal to, the increase in the price since the trust was or- ganized. ITie increased economies of the trust probably amount to more than this. They have probably converted what was a loss to some, no profit to many, and a small profit to only a few into a more liberal profit for all, and it may fairly be expected that the trust will share this undivided profit with the community before long in a further reduction of prices. We are glad, however, to be able to believe that whatever increased profit the trust is now mak- ing it is not getting it out of the rise of price. " It is worth noting in this connection ihat the price of tin-plate, with the increase of 11 per cent in wages, is still (May, 1899) $1.10 a box less than it was when we relied on foreign supply for all our tin-plate under free importation. What has really been accom- plished is this: the tin-plate industry has been transferred to this country; whatever profits there are, now go to American invest- ors; the wages expended in that industry are distributed to American laborers; these wages have been increased since the trust was organized 11 per cent: the producers are undoubtedly making a good profit, and still the product is sold to American consumers at $1.10 a box, or 22 per cent less than before the tariflT was adopted and the trust organized." If upon investigation (and certainly the rise of the price of tin-plate dcinands investigation), it should be found that the price of tin-plate has been unduly raised; if, as has been asserted by some, the tin-plate trust, through subsidiary companies, controls the manufacture of the raw materials that enter into it, and the increase in the prices of those materials is only an indirect way of concealing the inordinate profits of the trust itself, tlien the tariff on tin-plate should be removed at once. There is, and there can bo. no question about tliis. Kopublicans will vote " aye "' on such a j)ro])osition as readily as Democrats. BuL those who are truly anxious to remedy those evils of trusts, namely, tlio Lick of competition and the imposition of high prices, rather than to procure Whose Fault is it ? 253 the adoption by the people of their theories as to free trade, should never forget that the tariif on tin-plate caused the establishment in the United States between the time of the passage of the McKinley bill in 1891, and 1898, of forty tin-plate plants, in which there were two hundred and eighty tin-plate mills, and that the price ot foreign tin-plate when it was on the free list just prior to the passage of the McKinley bill in 1891, was $5.10 per box, Avhile the highest price that has ever been charged by the American trust has been $4.80 per box. Moreover, when it is said that the combination prevents the establishment of new tin-plate mills, let it not be forgotten that the trust, if it is a monopoly, has acquired it by other means than the tariff. Let us quote Byron W. Holt, of the Xew England Free Trade League, who cites the tin-plate trust as the typical trust that is fostered by the tariff: " To make certain that they would be able to put and hold prices up to the Dinglcy duty limit, they clinched their trust, it is said, hy itiakiug a five-year contract icith the producers of tin-plate milU, which practically prevents others from startir.jr in business during this period. They also, through their relations witli the chief steel- bar producing companies, obtained such control of this principal raw material that even if an outsider could obtain a mill he would still be unable to produce tin plates for lack of raw materials." It would thus ap])car that somctliing besides the tariif is to blame even in this case. Bui we have no hesitation in saving that whalever mnij have been the weans emploiied, if the tin.-])late trust has a monopoly, aiul if it is holding prices uj) above the fair profit mark, tlie mono])oly t^hould be killed. If domestic competition has been in any n-aij strangled and cannot be revived, tlien, f(n'eign competition should be courted in this ])articnlar enterprise. While fiu-eign competition may be a nu'ans for killing an American mon(q)oly, is it sure to kill trusts? If the 2 54 The Trusts protective tarifl were removed and we initiated the policy of free trade, would trusts be dissolved? Would the vari- ous business enterprises which now form them, return to the old methods of individual production and distribution, to unrestricted competition and to price-cutting among tliemselves? Would not the result be as follows? In so far as American industries, by reason of the higher wages of American labor, or the newness of their enterprise, were unable to produce as cheaply as their foreign competitors, would not the incentive to the establishment in this coun- try of new competitive enterprises be removed? Would not all the existing establishments in those industries, finding under free trade a keener competition, be more than ever compelled to combine and consolidate and form trusts in order to save themselves, if possible, from ruin? Would domestic competition be left in those industries in which foreigners could, in fact, produce more cheaply? Would there remain the possibility of any domestic com- petition in those industries? There certainly would not. AVhat would be the effect of the foreign competition? The Jieads of tlie existing domestic enterprises, which would necessarily be amalgamated into an American trust, would make a fight for life, a struggle to keep afloat, and rather tlian go into Ijankruptcy they would adopt every resource that would enable them to escape the ruin. Two ways of meeting the foreign competition would at once suggest ihomselves, and would be immediately adopted, the re- duction of wages and the reduction of tbe ])rice paid for raw materials. On the part of the employers aiul pro- ducers th(.To would 1)0 absolute inability to pay bigh wages and bigli prices for raw materials, and on the part of the wage-fiirncr and the fanner tliero would be no means of obtaining high, wages and high prices. It would be low wages or no work; it would be low prices for raw materials Whose Fault is it? 255 or no market. Wage-earners could not look for other employers in those industries, because free trade with na- tions that were cheaper producers would be an obstacle to the establishment of new enterprises in that industry. The American farmer would then find that he had but one buyer, one buyer now and no })rospects of more buyers in the future, one buyer, and even he could ]je a buyer only so long as he could buy most chea])ly. On the other hand, if a tarilf were maintained which recognized the dif- ference between the cost of production under American conditions of labor and under foreign conditions, there would always be, not only the possibility, but the probabil- ity and the ultimate certainty of the establishment of new factories and new mills in those various industries. The very possibility, even if it never developed into the actual- ity, would always tend to raise wages and to keep up the ])rices of raw materials, while, furthermore, the manufac- turer being sure of the great and valuable American home nuirket, couUl di>])ose of at least a part of his product at a ])rofit which would enaljle him to recoup the amount paid in higli wages and good prices for raw materials The ])rotective tarilT can never be abolished to the advantage of the American ]M'0])le uidil American labor has become as chea]) in ])r(nluctiv(! power as that of the degraded labor of 1-hirope. A\'e are willing to C(mcede that the difference ill the cost of labor is by no means clearly s]iown by the dilTcrence in wages. The greater productive power of the American laliorcr may make liim much clu^aper at two dol- lars per dav than tlie fhiglisliman at four shillinirs (i?>1.00), or the .la]i at ilie ccpiivakMit of fifty cents: ])ut we are sat- isfied tliat notwitlistandinir American manufacturers em- ployim: American labor and usimr American machinery, can overcome mucli of the advantage whicli llie emnlover of foreign labor has. vet the standard of living of the Amcri- 256 The Trusts can workingman is and must be kept so much higher than that of the cheaper labor of Europe and the degraded labor of the Orient^ that the American labor is more expensive, and that a protective tariff is essential to the maintenance of the standard of civilization which the masses of this country to-day enjoy, and which, pray God, they may never lower. Let ug further consider the effect of free trade on trusts. When we have abolished the protective tariff for the purpose of killing trusts, have we succeeded? Very likely we have prevented the creation of new establishments in these industries in the United States, and without doubt the existing ones have combined together to save them- selves from extermination. Possibly, they will be crushed out by foreign competition; if so, the American trust is crushed, but American industry also is crushed. More likely, as has been intimated, in the desperate struggle for life, wages and the price of raw materials Avill be reduced to the level paid in foreign countries. But there is one other possibility or probability, and that is international trusts. AVe already have them in many industries, and when competition becomes so fierce that American in- dustry enters upon its death struggle, we will undoubtedly have more of them. AVhat would be the effect of inter- national trusts upon American industry? Whenever such trusts were formed they would locate their machinerv and capital where they could produce most cheaply. All their capital and moving machinery would be removed to the country where there could be the cheapest production. Usually that would be the country where labor is most poorly paid. It would hardly be America. The standard of living is too high here to permit of extremely low wages. American labor is more intelligent and inventive and productive than that of other countries; but, though Whose Fault is it? 257 machines arc invented largely by Americans, their use can be taught to the cheap laborers of Europe, and the still cheaper laborers of Japan and the other countries of the Orient. The capital to furnish the machines will go where it can find the labor that is cheapest per amount of product, unless, by moving, it is barred out of a valuable market. It is the easiest thing in the world to take the capital abroad; it is very easy to move the machinery; it is difBcult to move the laborers, especially from a place where there prevails a high standard of civilization to one where they must accept a lower standard. To secure the American market to tlie American manufacturer, it is still necessary as to very many products, to impose a tariff. Abolish it, have free trade, and if you have international trusts (it is to be remembered there are already some, and increased competition with foreign countries because of free trade moans more), many American industries will be closed and hundreds of thousands of laborers will be thrown out of employment. The cheapest seller Avill com- mand the market, unless barred out by a tariff or embargo. The American market is the best in the world. But with- out a tariff the Japanese are more likely to possess the American market than the Americans. In considering the effect of the tariff on trusts, it is to be noted that free trade countries, too, have their trusts, and, further, that the greatest of all American trusts, the Standard Oil ("omjiany, is not aided by the tariff. To aboli.-h the tariff upon any article, then, merely be- cause it is largely produced by a trust would be an act of folly. To abolish the tarilf, because a trust has been formed, might in tiuu^ result in destr(\ving tlu^ domestic trust, for even if the prices charged by this trust were not in excess of a fair ])i'()flt l)ut were greater than the j)rices of for- eign goods, as they would undo\ibtedly be, the industry 258 The Trusts itself would ultimately be destroyed by the abolition of the taritf. But to abolish the tariff on any article at any time when the Am-erican producers of it are charging a price be- yond the fair profit mark after paying American wages, whether those producers be combined or incorporated as a trust or working separately^ is right and proper and neces- sary. It would be a potent remedy against extortionate prices. Furthermore, it would be consistent with the theory of protection, which is that a tarih' upon importa- tions of foreign products will foster domestic production, encourage the establishment of a number of factories which will compete with each other, and which will gradually perfect their machinery and methods, until not unlikely they will be able to produce as cheaply as their foreign competitors. The tariff never was intended so far a^ its protective features are concerned to bo more than equal to the difference between the cost of production in foreign countries and the cost of production in the United States. It was intended only to give to home manufacturers an 0])portunity to meet the competition of foreign manufac- turers. A fact pregnant with significance concerning the tariff and our industries, is the remarkable growth of our ex- ports of manufactured goods in recent years. During the ten months ending with iVpril, 1899, the United States ex- ported about two hundred and seventy-six million dollars' wortli of manufactured goods, eighteen per cent more than in the corresponding ten months of 1897 and 1898. Tliis amount consideral)ly exceeded the amount of our imports of manufactured goods and it covered a wide range of products. It must Ije conceded, we believe, either that we can produce those products more chea])ly tlian our foreign competitors, or else tliat this great ainriunt of American products was sold to the foreigners at a less rate Whose Fault is it ? 259 than was charged to Americans. Xo duty on these prod- ucts would appear to be necessary for ])rotective purposes; and it is equally difficult to see how any revenue could be derived from articles which we could sell so cheaply that we export them instead of import them. If American exports of manufactured articles for the year ending June 1, 1900, aggregate $130,000,000, as has l)een estimated, then there must be many articles which we can manufacture cheaper than foreigners, and to re- tain a tariff upon them is to expose Americans to extor- tion. If such products are sold in foreign countries below cost, Americans pay the amount of the loss. As the cost of production decreases, the rate of tariff should be lessened accordingly. If it is not, a trust may be formed and the price, for a time at least, kept up almost to the point which will represent the cost at which the goods produced in the foreign country can be laid down on our shores. Trusts have undoubtedly been formed to obtain high tariffs and to combine local competitors for the purpose of exacting as high a price as can be asked with foreign competitors barred out. The tariff probably does assist some trusts which desire to mainiaiji high prices and to monopolize a certain product. The tariff when so used sliould be abolished, h is, however, the extort ioiiafe ])rire that calls for such action, not the mere fact of industrial combina- tion. AVhen free trade is proposed as a general panacea for trust evils, to l)e aj)plied to products which can not be pro- duced as clicaply in this country as in foreign countries, we s4iould not hesitate to refuse to adopt the scheme. Free trade is more likely to produce panic than to be a panacea. CHAPTER XIII. TRUSTS AND EXPANSIOX. It is a fact noted hj historians of political events that whenever a great crisis in human affairs has occurred, there has sprung up a great master of men. Every great epochal movement in the world's history has brought forth its leader, the man with peculiar qualifications for the solu- tion of the new problems and the discharge of the ne\T duties. The annals of America are replete with instances. In the trying times of the Revolution, when patience and firmness and self-restraint were so requisite, there was found one man who possessed these qualities in a pre-emi- nent degree; AVasliington was born of tlie times, God-given and God-directed. Later when the country went through the greater strife of the Rebellion, when the perpetuity of the Union was at stake, the needs of the hour found in Lincoln the only man possessing the forbearance, the en- durance, tlie charity, and the utter lack of malice which alone could hold together the N^orth with all its varving views. Industrial history is quite as full of instances of a Providential care for the wants of mankind as is politi- cal history. Whenever human needs have required some new product, whenever the visible supply of old products has become completely exhausted or so diminished as to be unable lo sup[)ly the demand, oitlicr new quantities of tliose products have been unexpectedly discovered, or a substi- tute has been found in abundance. When the whaling 260 Trusts and Expansion 261 industry liad passed into decline and tlio supply of sperm oil for purposes of illumination was rapidly becoming ex- hausted, kerosene in almost superabundance was discov- ered. When our country was being denuded of its forests, and the use of wooti as fuel had become almost impossible, great beds of anthracite coal were discovered. When tlu^ invention of the steam engine revolutionized the industrial world and unfolded vast possibilities in the manufacture of all the commodities that nuikc our modern civilized life what it is, there at once arose the necessity for an enormous su])])ly of soft coal; and, forthwith, beds of soft coal of vast extent were discovered, amply sufficient to supply the denumd. When electricity began to be a]i- plied in a multitude of industries, a great need was felt for copper; and unknown copper mines of great productiv- ity were discovered. We attribute these provisions for all our new wants, as they spring up, to an over-ruling I'rovidence, to destiny, or to that talent of invention and discovery which is the child of necessity, according as wc consider the matter fi'om a religious, a historic, or a scien- tific stand])oint. '^Fhis same Providential care for human needs is seen not alone in the birth of leaders for great crises and in the sup])lying of products necessitated by iu>w inventions that have given l)irth to increased desires, but also in the broader field of ])oliiical develo])ment and commercial extension. Connnercial freedom began in Eng- land in the fourteenth and llfteenth centuries. Prior to that time the sole impiu'tant industry of the country was agriculture, limited and fett(U'e(l l)y the feudal system. In the latter part of the fifteenth century, when commer- cial life, fo-tered by the new commercial freedom, began to manifr-st itself, a new world was discovered furnishing a field for tlie exi'rcise of commercial activity. The mo-t sirikimr fact in the financial historv of the 262 The Trusts day is the growing surplus of capital. One of the great problems which confront people is where to find fields for the profitable employment of saved-up wealth. For at least a quarter of a century there has been a diminishing return from investments; and the prices of first-class securi- ties have been constantly increasing. The matter is of moment not only to the great capitalist, who, perhaps, can be left to take care of himself, but also to the widow and orphan dependent upon the savings of the deceased husband and father; and it is of equal interest to the wage- earner, who works and toils in youth and early manhood in the hope of laying up something for the inevitable rainy day and for the time of old age and decrepitude. The most striking fact in the industrial history of the day, a fact which is, indeed, but another phase of the fact of a surplus of capital which has been observed in the financial world, is that the productive powers of the civilized nations are now far in excess of their own powers of consumption. Xew inventions and improved methods in industry have made the material advance of the last one hundred years conspicuous among all the centuries. At the close of this century we find that with their machines and their perfected business organizations, the industrial nations of the world possess a power of production which is much greater than tlie effective demand. It is only lately that this has become true of the United States. Un- til recently we have been a borrowing nation, and a nation of importers of manufactured articles. But American re- sources developed by American enterprise, managed with American thrift, have ])Iaced us in a position where, within a year, we liave loaned .$^^r),U0O,()00 to Kussia, and are ra]ii(!lyb(.'c:()iiiing a creditor nation. American ingenuity and inventive talent liave ])rought it about tliat, notwitlistand- ing that we are the greatest of agricultural nations, and Trusts and l^xpansion 26 J notwitlistandin;; that wc oat and drink and wear and con- siin:c more per caj)ita than any other nation of the world, and n()t\vith>tandin,ir that our home market of eicfhtv mil- lions of purcliasers is the riclicst in the world, and notwith- standing- that our manufacturing industries are even now only in their infancy, these industri(\s are capable of sup- plying the demands of at least one hundred and sixtv mil- lions of peo])le. We can manufacture twice as much as we can consume, or to ])ut it in a light which will show the danger of tlic situation, half of our factories and mills can supply all that we can consume, while the other half re- main idle; half of those employed in manttfacturing can make all that wc need, while the other half remain unem- ployed. The evil consequences of over-production have been alternate periods of feverish activity and. stagnant de]iression: first, employment over time; next, a shut- down. Business has been irregular and spasmodic: com- petition has followed, keen, intense, hitter, destruciivo, and finally sclf-destrtictive. There is but one alternative for us: either lessened production, diminished emnlovment and lower wages, ruin, and bankruptcy, or else new markets and larger outlets for our surplus products. The formation of trusts is one of the means adopted to remedy these evils, l^xpansion of territory. extiMision of commerce, is the other remedy, a remedy supplemental and, possibly, alternative, l-'.itlier our whole industrial svs- tem is likelv to be revolutionized at once, or else the evil dny must be put o\]' by the civilized manufacturing nations of tlie world turning their snr])]us capital into new fields and using it in tlu^ development of the decad(>nt and un- d(>velo]ied countrii'- of the (Orient and the tropics. The pndilem of over-production. the problem of trusts. is momentous. It cannot b(> solved in an instant. "We ne^d time for study, for ob.^ervation, for consideration, and for 264 The Trusts experimentation, but all the time while Ave are ptudvin I'luropean countries, es|)eciallv in the last (piarter of a century, have been jnishing forward in a race with eacli other to acquire colonies or spheres of in- fluence, with whicli they could estal)lish relations of com- mercial intimacy. Africa has been carved up. Germanv, France, and Great Britain, each has its slice. The last named is sure to annex more closely the Transvaal and the Orange Freo State. France is pushing her sway over the Soudan. She already lias Algiei'sand M;ida;:a;-(-ar. (nrmany is not interfering in these scheme.-, luit she is sure to de- 266 The Trusts niand a quid pro quo. Italy is tn'ing to obtain a foot- liold ill Abyssinia. In Asia and Oceanica, too, the Euro- pean powers are colonizing. Great Britain, for over a cen- tury, has had the fertile and populous peninsula of Ilin- doostan, and has gradually extended her conquests and acquisitions. A large part of China has been mapped out into spheres of influence by Eussia, Italy, France, and Ger- many, and though the Mongol empire retains nominal sovereignty, real proprietorship over these spheres seems to bo in the several European nations. Eussia has de- veloped her vast Siberian territory, has acquired an almost dominant influence in northern China, has virtually appropriated some of its best ports and a large portion of its territory. Japan has taken Formosa and would have seized much of China or Korea, had not Eussia intervened. England's colonial possessions are verv many times larger than the mother countrv'. By all the Euro- pean nations an attempt has been made to find new markets and new fields of enterprise, more work for the toiler, more sales for the merchant. One of the recent consular reports gives some idea of the extent of the colonial possessions of European states. It shows that Great Britain, outside of the United Kingdom itself, possesses 16,662, 0?3 square miles of territory, hav- ing a population of 322,000,000; France, outside of the mother country, 2,505,000 miles, Avith a population of nearly 50,000,000; Germany, 1,615,500 miles, with a popu- lation of 7,450,000; Holland, 783,000 miles, with a popu- lation of 34,210,000: Portugal, 809,900 miles, with a population of 10,200,000. AVliat these nations are doing in tlic way of the development of their colonies may be inferred from their railway projects. Eussia is building a Trans-Si1)crian railway almost five thousand miles in length and Ijringing the Czar's empire into close touch Trusts and Expansion 267 with Japnn and China. A branch of the South Siberian raih'oad has been extended to the border of Afghanistan, opening up to Kussia the riches of Persia and giving her a path towards India. France is about to build a railway across the Sahara Desert from Algiers and Tunis to Tim- buctoo and the Soudan. Cecil Rhodes' dream of a railway from Cairo to the Cape of (lood Hope is a project that will hardly be long deferred after the termination of the war with the South African republics. The United States has reached a position where it is ol)liged to participate in the struggle for foreign m.arlvcts, and to find new channels into which to turn its surplus capital. These are our great economic needs to-day. Will Providence, or destiny, or human ingenuity whatever you wish to call it show us the way in tliis time of need? It would seem, indeed, as if an over-ruling Providence had, within two years, pointed out to us the way of supplying to ourselves the means. American policy, American tradi- tion, and American interests for almost a century and a cjuarter liave kept us from acquiring territory l)eyond the continent; hut at the close of the nineteenth century, when our interests demanded a wider sphere of activity and enlarged markets, although tliis tradition and old-time policy hold us l)ack and the timid and hesitating endeavor to restrain tlie movemeni of expansion that has never stop])ed since tlie time when ilie tliirtoen original colonies formed themselves into a nation at this time, that over- ruling Providence, that evolution, tliat destiny which is always apparent in the affairs of men. manifests itself, and the need is met. Tlu^ blowing up of the liattleship Elaine in Havana harbor, and the prolongation of a cruel and merciless war of extermination against a weak people at the very threshold of our country, involved us in a contest with Spain, the result n\' wliicli was tlial without premedi- 268 The Trusts tation or design, unexpectedly, if not reluctantly, rich, fertile, and populous islands in the Orient came into our possession and control. The paih of duty, the path of destiny, has been suddenly opened for us in the East. For our over-production and our surplus capital we have sud- denly found a relief, even though, perhaps, temporary. We want constant work for our toilers, not half time; fair prices for our products, not sacrifice sales; we produce more than we can consume; we need markets; suddenly oppor- tunities are given us to acquire markets, and on terms as favorable as those offered to any nation in the world. True, we could always sell our goods wherever men were willing to buy, but trade, to a great extent, follows the flag. It is largely influenced by political connections; it is frequently barred or hindered by arbitrary laws enacted in defiance of economic laws. We could never have persuaded ourselves to attempt to take possession either of the Philippines or of Porto Pico, had they not come into our power as the result of a war which never would have been waged had not humanity sounded the tocsin, jjut now. when those islands have come into our power, when their pacification and their government, for a time at least, fall as duties upon us, when we see that perforce and involuntarily we have be- come implanted in them, traditions and old-time policies are questioned and quizzed in the light of the facts of to- day. Just what we shall do with these new island posses- sions, just what form of government they shall have, to what extent they shall have complete self-government or j-iarticipate in federal legislation with and over us, are ques- tions not yet settled. But the American people, as self- confidont. as self-reliant, as courageous, and as tenacious as cvfr, demand tho retention and pacification of the islands ihat liave Ijecome theirs. That, at least, is the policy of Trusts and Expansion 269 the Republican ])arty. He who would give them up would be guilty of a desertion more base than that of the heart- less mother wlio leaves her eliild on some one else's door- step. The De'iuoerac-y would leave the Philippines to an- archy. The Rf[)ublicans would pacify them and develop their resouri'i\s. The Pliilippines are themselves a vent for the industrial ])ressure that trtists are designed to shut off. They have ten millions of inhabitants. Although their wants are now of the simplest kind, lh(>y will increase with civiliza- tion. Their tro])ical fruits, their grasses, their other pro- ducts, find a natural market here. On the other hand, as they advance in civilization they will furnish a great market for our manufactured articles, especially cotton goods. We of file rnited States need the Philippines and Porto liico, ]i()t only as markets for our surplus ])roducts, but as fields for the em|)loymenf of our saved-up capital. We need the former, not only because of their intrinsic worth to us, but because they are the key by which we can unlock the door to China's markets. The commercial value of the Philippines to America has been carefully estimated liy Hon. John Barrett, former Ignited States minister to Siam, who, during his leaves of absenee from his ])ost. has traveled over nearly all the countries of the Orient, and has made a careful study of commercial conditions and i)ossibilities. His o]nnion is that of one of exceptional information, and the greatest weight and (^(nisideration should be given to the following statement in an articde by him on the Philii)])in(^ situation, published in Tlie Ri'vieir nf Rci-it'ir.-i for July, 1S99: ' Jiulaiiiir frniii comparalixp data aftpr lookinfr lit what lia=- }>een dniie by tho Dutcli in -lava, by tlip I'.rilish in P.iirmah and in tlie Malay Peninsula, and oven by the French in Indo-China, the 270 The Trusts United States should develop a foreign trade in the Philippine Islands within the next fifteen years of over $100,000,000." That the benefits of the development of trade with the Orient will be in no sense sectional; that they will not only furnish a relief to our manufacturers who stand so much in need of new markets, but that they will benefit the American farmer and increase the market price of his products, is also the testimony of ]\fr. Barrett. We quote from an article, in Tlie North American Beview of August, 1899, written by him: " The Far East, particularly China, affords markets which should arouse the interest of all sections of the United States, and make the country stand unanimously for a firm foreign policy. The West and East and the North and South are equally concerned in maintaining the freedom of trade and preserving our treaty rights throughout China. Were it merely a sectional issue, there might be a grave question as to tlie advisability of taking a strong posi- tion as to the future of the empire. China and other Asiatic countries want all the Hour and timber, and a goodly portion of other kinds of food and raw prodticts, which California, Oregon, Washington and neighboring Western States can stipply; they want the manufactured cotton and raw cotton of the South in in- creasing quantities, and the time may come when this Pacific- Asiatic demand will take up the surplus supply of the South's great staple; they want the manufacttired cotton, iron, steel and miscellaneous products of tlie North and East, together with un- limited quantities of petroletnn: they want corresponding manu- factured products of the central West, and there is no reason why there should not be developed among the Asiatic millions a demand for the central West's great staple, maize (or Indian meal), such as has been created for flour. I draw no fancy picture, but simply express my honest opinion after five years" careful study of the field which I am discussing. " The question of protecting sticli market appeals to capitalist and laboring man alike. It offers tlie former an opportunity for the investment of his capital, and it increases the emjiloyment and wages of the latter by ])roviding a greater demand. . . . The farmers of tlie West and South can unite with the laboring men Trusts and Expansion 271 of the Xorth and East in supporting the shippers, manufacturers and exporters in developing a strong Asiatic policy. Were the door of China closed against us to-morrow, it would mean that lahor and capital alike would suifer immeasurable harm. Tliey should, there- fore, see that it is never closed. "... If the great northern provinces of China now require ST.OOO.OOO worth of our cottons, there is no valid reason why they should not in ten years from now consume $2().()()(,000 worth. A few years ago, !?3,(M)(),0()0 represented the value of the trade. When we consider that the cotton mills of New England and the South are supplying this demand in Manchuria, and that they have even been kept running when other mills have been closed, there is every reason why those two sections should join together in insisting tiiat tlu^ open door shall ahsays apply to ^Manchuria. " American exports to the Far East to-day approximate $'40,- ()00,(K)0, if the actual value of everything which leaves our shores is counted; but, basing our estimates on reasonable grounds, there is no reason why they should not ex])and in the near future to $1.')().UO(.0()0, and our total exchange reach $.300,000,000. Few peo- jile appreciate the enormous business that is now done up and down the Pacific Asiatic coast, it amounts to $1,000,000,000, gold, per (inniiin, and re])resents 500,000,000 people. Of this, the imjiorts are over half. Certainly it is logical to hold that the United States should be able to supply at least a third of the products now im- ported from foreign lands. China's trade ainounts to .$250,000,000, with a po])ulation of o50,000.000 people. If her wants ever expand in any such degree as those of Japan and other countries which have awakened from their Asiatic lethargy, her foreign trade should reach, on a conservative estimate. $500,000,000. Were the same ratio of population to trade, or one to two, which exists in all other countries of Asia, ])rogressive and retrogressive, applied to China, her future foreign exchange could he estimated at $700,000.000. " Similar testimony is that given hy Mr. James S. Fearon in an article in Thr Fonnn L'dr .January, 1900: " There has been no more remarkalile expansion of any depart- ment of our commerce than has t^^ken ]>lace. of late years, in our exports of cotton cloth to China \i;d yet, it is jierfectly true, as the members of the Lyons Comir.ercial Commission concluded aft^r a tour througli the interior of the counlrv. that ' foreign trade luis merely scratched the surface of the possibilities of China. The -/ ^ The Trusts great majority of the Chinese are familiar neither with foreigners nor foreign j^roducts.' " In an earlier chapter on the Trusts and the Farmer, we have shown the estimates of J. C. Hanley, of the National Farmers" Alliance of America, as to the immense value, in dollars and cents, of the demand of the Orient for wheat and cotton; and his conclusion that this demand would increase the market price of American wheat at least fif- teen or twenty cents per bushel. It will be argued by the opponents of expansion that annexation or political connection is in no sense necessary to the ac([uirement of a foreign market. It will be said that the trade follows the price and does not follow tlie flag. AVhetlier or not this is true, it is certain that the flag is necessary to protect tlie trade, and tlie history of colonization shows that the benefit of the larger market usually falls to that country whose ca])ital is employed in the development of the market, especially if it is that coun- try which, by reason of the exercise of political control, maintains the order and government which alone is the guarantee of the security of the investment. This subject has been carefully considered by Mr. 0. P. Austin, chief of the United States Bureau of Statistics, and he has collated those significant facts. In the year 189T, Great Britain supplied forty-one per cent of the products imported by her colonies, but she was able to supply only fourteen per cent of the importations of countries having no political connection with her. Even to tlie United States, a coun- try with wliich she has direct means of communica- tion, and the people of which speak the same lan- guage and have many interests in cummon with hor t-iiixens, she supplied" less tlian twenty-two j)er cent. Franco supplied licr colonies witli sixty-two ];>er cent of tlieir impcjrts, ])ut she supplied only 9.33 per Trusts and Expansion 273 cent of the imports of oilier countries. It is to be borne in mind, furthermore, that in the case of Great Britain there were, at the time mentioned, no discriminations in the tariir hiws of her colonies in favor of the products of the mother country as against countries that were the com- petitors of Great Britain. Great Britain, in the year 1897, found in her colonies a market for nearly $400,000,000 worth of goods, all of a kind for which the i)roducers and manufacturers of the United States are earnestly seeking a market. Her exports to her colonies were forty per cent greater in the year 1897 than were the total exports of manufactured products to the entire world from the United States in that year. Great Britain's ex])orts to her col- onies constitute over a third (34.4 per cent) of her entire exports. But commerce has another side than exporta- tion. There can be no commerce without exchange; no exports unless thcTC are some imports. In 1897 Great Britain took fifty-seven per cent of the exports from her own colonies, whik' fi'om countries not a part of the Brit- ish world she took but twenty-one per cent of their exports. Our own experience in the case of the Hawaiian Islands amply proves how political connection stimulates trade. Tlie following article, clipped from The Auburn (X. Y.) Daily Advertiser of Juno !), 1900, shows, at once, the ip.crease of our trade with these islands of the Pacific lately nnnexctl by us; also the meagreiiess of our trade with coun- tiies of much largei' })o[)ulation with whom we have no political connect inn: "Sen;)tor I.odjrt' callrd attention to the fact that the trade be- tween the rnited Stali'^ and the Tiauaiian Islands has increased from $1 1.500, OUO in isn:) to .>r:;'.:5,;!(iO.()(IO in 181)!). and cites it as an illusti'atinn of what may hai>p('n with I'orto l\ico and the I'liilip- pines. 'These (-oUinies,' he -ays, "will ahs(irh much of our surplus manufactures and ajirfiiullnral products, fur they must draw their iloiu' and their provision- and most of their manufactured merelian- 2 74 The Trusts dise from this country. Our trade last year with the Hawaiian Isl- ands,' he says, ' was greater than with the whole of the Australasian colonies with their 5^000,000 of people. It exceeds by more than $3,000,000 our trade with the entire continent of Africa; it is 150 per cent greater than our trade with all the Central American states; it is equal to 30 per cent of our trade with the whole of Canada; 50 per cent greater than our trade with all the British West Indies; half as large as our trade with Brazil; 500 per cent greater than our trade with Venezuela, and conies within $(),000,000 of being as laVge as our trade with the entire empire of China.' " It should not be forgotten, in considering this matter of imports from colonies, especially when those colonies are tropical or Oriental, that the development of their re- sources is largely by means of the capital of the home country, and the prosperity of the colonies is shared in by those who invest their money in them. British statisti- cians have estimated that at least $2,000,000,000 of English capital have been invested in her colonies. If so, they have furnished an outlet for the use of the surplus capital of the United Kingdom and the profits on the export trade of the colonies go to swell the wealth of the citizens of the home country as well as to give prosperity to the in- habitants of the colonies themselves. The limits and the purposes of this article do not permit any consideration of the great benefits to the colonies themselves by the development of their resources by means of the capital of the colonizing country. We have been considering colon- ization and expansion only in so far as they affect the ques- tion of trusts. Let us summarize. Territorial expansion seems to aid in the acquirement of foreign markets. Foreign markets are absolutely necessary to America and to all the industrial nations of tlie world. Without those markets the ])eople of these countries are the victims of over-pro- duction. L'nlcss tliey ac(iuire new outlets of tra(U', tliey Trusts and Expansion 275 must dimiui.-li ))roduclioii, le^^sen the eiii|jloymont of labor, lower \vas(' coun- tries which have not yet attained their industrial develop- ment. He, then, who would relieve the present evils of over-production in the United States should favor tiiat policy which tends most surely to give us the foreign mar- ket, lie who wouhl abolish the trust, in so fai' as it attempts to restrict production and to lessen the oppor- tunities for work, he who would abolish the trust as an evil agency, should sustain those in charge of the affairs of the state who are endeavoring to give to the American worker the opportunity to supply the increasing wants of those to whom American civilization may be borno. But when this is done it will be found that those trusts which are only gi'cat industrial organizations of enormous capital and ]iowor, the trusts which arc the cheapest and most efficient means of jiroduction and distribution, will be necessary to tlu^ (l('velo])in('nt of tlu'^ trade in tlie newly ac- quired market. Enormous capital is essential, and only the well-organized trust will ]^ossess the nutans and the facilities. We have alluded in earlier chapters to the great 276 The Trusts foreign market worked up by the Standard Oil Company, which now brings $60,000,000 a year into this country; and to the enormous orders for rails for railways in Eussia and China which have been recently given to the great steel con- cerns of the country; also to the fact that eighty per cent of our exports of manufactured goods are said to be products of industrial organizations so great that we popularly call them trusts; also to the recognition by our German com- petitors of the fact that it is our large and perfect organiza- tions that are winning for us industrial supremacy. The rapidity of our strides may be Judged from the following article, clipped from The Rocliesier (X. Y.) Democrat and Clironide of June ], 1900: OCR ENORMOrS KXPORT TRADE. " It is estimated that during the year "\\ hich will end June 30th, this country has exported of tlie products of its factories to the value of about $4.30,000,000. Taking this record in connection with our agricultural exports, it shows an extraordinary degree of pros- perity, exceeding that ever enjoyed by unj- other nation. The total foreign commerce of the United States for the current year will amount to over .$2,300,000,000. Of that it is estimated that $1,400,000,000 will represent our exports to other countries. That is an average of a little over $3,835,010 a day for tiie entire year. Uncle Sam, it will be seen, is winding up the century with the l)iggest department store trade on earth." The conclusion of the whole matter is this: The indus- trial salvation of the country the only escape from the evils of over-production which trusts are formed to cor- rect the welfare and prosperity and lience the happiness of all classes^ is the acquirement of foreign markets; but in the development of those markets and in the exploitation of the newly acquired fields of enterprise, gigantic indus- trial org-anizations are the most efficient instruments. CHAPTER XIV. THE MAX AND THE DOLLAR. William ,T. Bryan, in an addro?? dcHvorcd at the Chi- cago Trust Conference in September, 1(S99, declared him- self as favorin_ryan sees in trusts. "Willi the strongest desire to do hijn perfect justice and with an equal yearning to 277 2/8 The Trusts throw not even the weight of one single individuars influ- ence in favor of any policy which can be of injury to the lowest or the poorest or the most humble, let us, howeveij present a few thoughts upon the subject of the effect of the aggregation of wealth upon the welfare of the toilers and wage-earners and those who are popularly called the middle classes and the masses. It may sound base and sordid and worldly to declare that the amount of a nation's wealth the abundance of those commodities which have become the comforts and conveni- ences of modern life is a fair measure of its progress; tliat the nation, and as a rule the individual, that is very ])oor, that is obliged to work incessantly to eke out an existence, is largely prevented from attaining the highest standard of human development. This statement is made Avith a full recognition of the vast numbers who, though poor in this world's goods, are rich in all the elements that constitute a true and nol)le character; and in full view of the fact that great wealth is often corroding and debasing, and that it Ijy no means necessarily brings in its train, culture or education or refinement or character. Still, wealth is one of the hand-maids of civilization.' It is wealth that makes leisure possible; and it is leisure, or at least that form of leisure, which gives us opportunity for study and travel and social intercourse and recreation, that fosters refinement and culture. The man who has to work all the time except the few brief hours when he sleeps and eats merely that he may gain strength and rest so as to work again, leads a sordid life. The highest type of man can never be evolved from one so oppressed until his earnings his wealth have given him more leisure. Kdwin Markbam's '' Man With the Hoe" is the poet's pic- ture of man rlegradefl to tlio level of the brute because of the lack of leisure and of opportunity to elevate himself The Man and the Dollar 279 to his rightful position of "man created in the image of Hod," of man whose place is but a little lower than the angels. Wo err very greatly, then, if we ignore the real value of weak 11 as a cultivating, refining, elevating, and uplifting force. The true ])olicy of the statesman, who would assist the mass of men, is to enable them to obtain wealth. Lin- cnln".< aphorism, which Bryan ([uotes with approval, ''place the man before the dollar," is not correctly inter])reted if it ins])ires a course that prevents the honest ac({uirement of wealth or creates hostility among those who co-o[)erate in its production. The highest statcsmanshi}) is to pro- cure the adoption of such policies as will put the dollar in the hands of the man and let him use it for his ad- vancement and betterment. Place the man before the dollar, hut {)ut the mait within rt'ach of the dollar. I'lace the man above the dollar, but in the sen-e that the man may stand u})on the dollar to rise higlier in the world. The real question, then, is, " Js the aggregation of wealtli in great cor])()rations a lifnelit or an injury to the mas'ses? "" We have shown how ]\Ir. Bryan sees only evil in trusts, but there are very many men of great ability who cannot help feeling that his views are short-sighted: that he has not looked either hack into the ]iast, or far into the future; that he has not read aright the lessons of industrial history; that he has not clearly foreseen all the jiossihlc dangers of the industrial future. The limits of this hook do not permii as thorough a con- sideration of this sul)ject as might seem desirahle, hut in the chapters that have preceded, the matter has of neces- sity boon incidentally t'Uiched uprm. AVe can h re do little more than to sninmarize some of \h,o neints already made. The significant fact of industrial history is that combina- tion of capital and concentrati(Mi of elTort have always 28o The Trusts meant a more abundant production of wealth. Individu- alhm, absolute individualism, is the lowest type of sav- agery. We can, with the utmost ditliculty, conceive of a condition in which each person wholly supplies his own wants; but as we advance to what may be called industrial history, we observe tbat phenomenon which is known as the division of labor; that system of industry in which a man no longer attempts to make all the things which he needs, or even all of any one thing which he needs, but in which special talent and special aptitude manifest them- selves and train themselves in the inaking of a part of some thing, wliich it is found can be made more successfully by that person than by others. This has necessitated exchange among men and it has rendered possible the application of machinery, which in turn has been found to be able to pro- duce certain articles or parts of articles in even greater abundance. Just in so far as the division of labor and specialization proceed, co-operation, consolidation, and combination become necessary. The result is that wealth the things that men need to eat and to drink and to wear and to consume, all become very al)undant. Xot only does production mightily increase, but there is a more general distribution. This is not only the fact of history, but this is the necessary result, from the nature of things; for the increased product can be disposed of only by clioapening it. The cheapening of tlie product is sure to increase the de- mand; the demand for the product causes a demand for la])or. and in proportion to tlie amount of work to be done tlie wages of the workers are increased. As long as there is competition, and tlie probability of competition, this must 1)0 the result. "NFr. I'rvan declares that lie sees in industrial combina- tion, tlv discliarge of the worker. To otliors it >eerns tbat unless these agencies of production and distribution, which The Man and the Dollar 281 save all iinnecc. stockholder with one share felt certain that he would have his fair ])n) rata of tbe earnings. The man with a hundred dollars to-day places them in the savings bank and gets three or four ])cr cent interest; but when tlu'se small sums have been agiiregated into one great sum in the savings bank, along comes the railway company and sells to the bank its bonds (for savings banks are now 284 The Trusts allowed in many states to invest in railway bonds), borrows the money at tour or live ])or cent, and with it earns a greater sum. \\c repeat, it is by no means certain that corporations do have the effect of centralizing wealth. The stock books of many of our great railway corporations show that the average holdings are becoming smaller. It is almost impossible to tell whether this is the result of the investment of the savings of persons of limited means, or whether it comes from a more general distribution by large capitalists of their holdings in stocks. There is one fact, however, which is pregnant with sig- nificance. It is that rates of interest as well as dividends are decreasing, while wages are increasing and hours of labor are shortening. Furthermore, the prices of those products which are made by business enterprises in which concentration of wealth is possible, are decreasing. It is only in the case of agricultural products, where concen- tration is impossible, that we see a general increase. As the capital of the wealthy increases, it brings them a con- stantly decreasing income. Its increment is invested in enterprises for enlarged production of articles, the prices of which are constantly lessening, but which give more and more employment, and therefore tend to increase tlic wages of the toiler. Industrial combination docs not moan industrial slavery; it means industrial freedom. T]i(> cui])loyecs in large fac- tories invariably are less subject to tlie will and the wish of tlieir employers than is the man who works in tlie siore or file shop where he has but few co-workers. Another truth whicli is indisputa])]e is tliat the wage-earner who is most free from the dictation of his emjiloyer, is tlic man who is employed by the person whose business is ]irosper- ous, wliose orders for goods are numerous, whose factory and mill are running to their full capacity, whose profits The Man and the Dollar 285 are large; while, on the otlier liand, the person who is produeing at no profit, who has no orders ahead, who has need of no new employees, and who ean hardly find woik for those then in his enijiloy, ean afford to he, and fre- quently is, an absolute despot. It has been well said: "The great need of society to- day is not individualism in the production of wealth, but individualism in citizenship."' The great lesson of history is that if men would accom])lish the greatest results, they must work together. Socialism and individualism are not altogether antagonistic; they are complementary. What the working people want to-day what they need, and what they wish, and what they are clamoring for is for more time for social and intellectual advancement, and less time for physical toil. They ask for eight hours for work and eight hours for rest and eight hours for recreation and education and tlie request is a proper one. When it is granted the chimes of history may well ring out, for they will ring in a new era in civilization. What the laboring man wants is steady em])loyment, higher wages, and a fair ])roportion of leisure. He is much more apt to get them when his em])loyer has cut off every waste in his methods of ])roduction and distrilmtion. The freedom and liberty of the workingman de]iend not on the fact that he works for wages, 1)ut upon the amount of his wages, and tliat depends upon the amount of work that is to be done. The workingman never can prosper unhss his employer pros- pers. The more prosperous the business of the employer, sooner or latiT tlu' more ]iros]ierou-; will be the employee. It is said that trusts are corrujiting our political life. Th;it is liirii't'ly due io tlu^ snecial ])rivileges that we hold out before tlicm. Abolisli tluun: take away the tempta- tion to corruption, and corruption will cease. It is said that the industrial combinations of the day are n political 286 The Trusts menace because they produce inequality of wealth and that a democratic government cannot exist if there is not a reasonable equality of fortune among men; but we believe we have shown satisfactorily that the aggregation of pro- ductive wealth tends to lessen the inequalities rather than to increase them. The danger arising from wealth is not in the aggregation of wealth in industrial combinations, in productive enterprises, but in the withdrawal of wealth into channels that are unproductive. It lies in the extrava- gance of the rich, in the vast sums that are put into arti- cles that cannot themselves be productive of new wealth. In conclusion, we repeat, the true policy is to adopt that system of industry which will place the man iiot only hrfore the dollar, hut within reach of it. The wisest statesmanship will he to put the man above the dollar by enahliny hiin to obtain it and to use it to rise superior to his present condition. CHAPTEE XV. LEGISLATIVE POWERS OVER TRUSTS. Befoee we can with any advantage consider the question of what Icgishilive remedies we can seek for the evils of trusts, it will be necessary to consider the scope wliich, under the Constitution, national laws upon the subject can have, and also the limitations upon state statutes. It will also be wise to give some consideration to the results of statutes which have already been enacted. The anti- trust laws, both those which have been enacted and those which have been proposed, involve grave constitutional questions. Inasmuch as these laws are comparativelv new and inasmuch as few of them have been passed upon by the courts of last resort, many of these (juestions can not be said to ])e authoritatively answered; still tliei'c are pre- cedents which foreshadow the final decisions of tlie courts whenever cases shall come before them in wliicb consti- tutional ])r()visions shall be a]i[)lied to anti-trust laws; and there have ])een a few decisions l)y the Supreme ('(Uirt of the Tnited Slates toucliing these laws themselves. The Federal legislation upon the subject of trusts con- sists of an act passed in LS9(), which is known by the name of Senator dolin Sherman, who was active^ in st'curing its passage. We give that act com])lete in A})])eiulix A. In two recent cases, ont^ known as the Trans-Alissouri case, and the other as the Joint Tratlic case, the Sherman act was held to apply to railway pools, that is, to combina- 287 288 The Trusts tions of railway companies for the purpose of maintain- ing rates^ even when the rates to be maintained were not unreasonable in amount. But the matter of practical in- terest now is its applicability to industrial combinations known as trusts, for the suppression of which it was de- signed. We quote from a recent article in The North American Review for September, 1899, entitled " Legal Aspects of Trusts," written by Mr. Joseph S. Auerbach, a well-known corporation lawyer of Xew York City. The following paragraphs taken from his article and embodying two or three extracts from the decision of the T'nited States Supreme Court in the Knight case, often called the Sugar Trust case, and decided a few years ago, show the limit of the power of Congress to deal with industrial com- binations, and also refer to the limit upon the powers of states to deal with interstate commerce. From them it will be seen that Congress has no constitutional powder to stop industrial combinations that are engaged in manufacturing, even though they are monopolies. It can only prevent them from directly restraining interstate commerce: " Congress has such po\ver only as has been specially conferred upon it by the Constitution, and the authority for the (Sherman) Act is found in tlie provision of the Constitution, that Congress shall have power ' to regulate commerce with foreign nations and among the several states and the Indian tribes.' " This provision of the Constitution, however, confers upon Con- gress the sole authority to legislate upon questions affecting such commerce, and all attempts on the part of tlie states to defeat thia exclusive right vested in Congress, whether by imposing discrimi- nating taxes, or taxes upon goods in original packages, or by a tax uj)on the agencies employed in carrying on tliat commerce, have been condemned by the Supreme Court of the United States. " Any attempt also on the part of the states to bring under their control or regulation any article the suhject of trade or commerce, except where Congress lias first conferred upon the state that ri"ht of control or regulation, has been likewise condemned. LegislaLive Powers over Trusts 289 Even where such riglit of eontrol or regulation has been authorized by Congress, it has been conlined by the Supreme Court to those eases which come within tlie proper exercise of the police power of the state. " The Act of Congress quoted above (tlie Sherman Act) has been repeatedly construed by the Supreme Court of the United States in eases which have excited general interest. It was sought to apply the Act to tlie case of a corporation seeking, as alleged by the Government, to acquire a monopoly of the manufacture of sugar, which might be, and which in all probabilty would be, the subject of trade or commerce; and the corporation conceded that it was attempting through the acts complained of to exercise a greater control of the business in which it was engaged. The Court de- clined to regard the Act as applicable to this state of facts. "The Court said, Chief Justice Fuller writing the opinion: " ' Tlie fact (lidt (tn article is manufactured for export to another state does uot of itxclf make it an article of interstate eommerce, and the intent of the manufacturer does not determine the time when the article or product passes from the control of the state and belongs to Congress.' ' And the Court used these still more important words: ""Contracts, combinations or conspiracies to control domestic entcr])rise in manufacture, agriculture, mining, production in all its forms, or to raise or lower prices or wages might unquestionably tend to restrain external as well as domestic trade, but the re- straint would be an indirect result, however inevitable and what- ever its extent, and such result would not necessarily determine the object of the contract, combination or conspiracy. " ' Nevertheless, it does not follo^r tJiat an attempt to monopolize or the actual motujpoly of the manufacture, was an attempt, whether (.rcciitonj or consum)natcd. to monopolize commerce, even though ill order to dispose of the product the instrumentality of commerce was necessaril;./ inroked.' " So that tlie Supreme Court, as stated above, has limited the objects of the (Sherman) Act to matters clearly and unmistakably relating to interstat<' commerce, and has declined to permit the states to interfere with any jiroduet or article the subject of inter- state commerce, <'xcei)t where, as pointed otit above. Congress had authorized tlie state to exercise over such article or product its police power of rcgukition and control similar to that exercised as to like articles produced within its ov, n territory." 290 The Trusts It would seem as if the Sherman law was a complete and full exercise of the right of Congress to legislate upon the subject of trusts, and as if nothing further could be done until the Constitution of the United States was amended so as to give Congress further power. The only additional legislation on the part of Congress, under the present con- stitutional provisions, would be additional penalties and new methods of procedure. This is what the House of Representatives, during the session now drawing to a close (June 5, 1900), has been trying to bring about. A bill was introduced by one of the Republican Congi-essmen and favorably reported by the Judiciary Committee of the House and early in June passed by the House, amending the Sherman law in certain particulars. Only one vote was recorded against the measure. But the changes which were made were, as has been said, principally matters of procedure and increased penalties. They covered no new causes. [See Appendix B.] Let us now consider the scope of state laws designed to regulate or suppress trusts. In the first place. Congress has exclusive right to legislate concerning interstate com- merce. None of the states have any right to interfere with interstate commerce or with the objects of interstate commerce, unless Congress specifically delegates them the power to do so. It is necessary to keep thorougldy in mind this limitation upon state authority because it practically prevents any efi^ectual legislation on the part of states for the suppression and control of trusts. To give an example of this limitation, it may be said that at one time the legislature of the State of Pennsylvania passed an act proliihiiing the manufactur(> and sale of oleomargarine within that state, and tlie Supreme Court of the United States lield tliat that law was not in violation of the pro- visions of the United States Constitution prohibiting states Legislative Powers over Trusts 291 from passing any law that would deprive one of life, lib- erty, or pro])erty. But when it was attempted to ap{)ly the same act to shut out oleomargarine which was sent into Pennsylvania from another state, the Court said: "The Powell case" (the first case decided) "did not and could not involve the rights of an importer under the coninierce clause. The right of a state to enact laws in relation to the administration of its internal ali'airs is one thing, and the right of a state to pre- vent the introduction within its limits of an article of commerce is another and a totally ditlerent thing. Legislation which has its effect wholly within the state and upon products manufactured and sold therein, might be held valid as not in violation of any provision of the Federal Constitution when at Ihc saiiic time leyis- lation directed toicard prohihitiny the importation within the state of the same article manufactured outside of its limits might he regarded as illegal, because in violation of the rights of citi::cns of other states arising under the commerce clause of that instru- ment." The importance of this is that, when applied to trusts, it practically means that although shut out from obtaining a domicile or establishing themselves in a state, they may, nevertheless, ship their goods into it if they can ol)tain a legal domicile in any other state. Corporations are crea- tures of the state in which they are incorporated, and the state which incorporates them may impose upon them at the time of their creation such conditions as it deems proper. But when states undertake to deal with corpora- tions chartered by other states, although tliey may (h^iy them the right to ac(juire a domicile witliin their territory or to settle within their limits to do business, yet it seems they have no more power to interfere with interstate com- merce and to ])rohil)it a trust establislied and located in an- other state from shi])|)ing goods into its territory, than they have to interfere witli interstate commerce wlien con- ducted by ])rivate persons. ^Ir. Auerhach's statement of the law on this subject is so clear, and is made by so 292 The Trusts eminent an authority, that we quote again from the article by him: " It has been held in a series of cases by the Supreme Court that each state shall be the judge of the conditions under which for- eign corporations shall be admitted to do business within its ter- ritory, and that discriminating provisions of a state in favor of its own corporations as against foreign corporations are not in conflict with the clause of the Constitution of the United States which de- clares that ' the citizens of each state shall be entitled to all the privileges and immunities of citizens in the several states.' "It has been held, hotcevcr, that when the question involved is one of interstate trade or commerce, a foreign corporation standi vpon the same footing as an individual. " Every state, therefore, has a liberty, and almost a license, in determining what class of corporations shall be admitted to its ter- ritory, and the conditions under which they are to be admitted, save only that it shall do nothing wliich in eii'ect regulates trade or commerce carried on by a foreign corporation. It can determine that a foreign corporation shall not have a legal status there, but it has no right to restrict, embarrass, interfere with, or have any regulation over a foreign corporation selling its goods through solicitors or representatives, or otherwise carrying on interstate trade or commerce within its territory. "Exclusion is not feasible; it is a mere academic right on the part of the states, for the exclusion cannot be absolute, since the foreign corporation can cross the border of the state, and, as a trading corporation, exercise the rights of an individual to the ex- tent of disposing of its product by solicitors, or canvassers, and where the product or article dealt in requires skill in its installa- tion, may actually instal and set up the article disposed of. . . . " Corporations, therefore, domiciled in New Jersey and trading elsewhere have nothing to fear and no favors to ask of any hostile state. Such state may say that they shall not be domiciled there, that they shall not own real estate there except on its own terms. The state may exclude the corporations altogether from a domicile, but it may go no further. These corporations may come and go from one end of the land to the other to carrv on interstate com- merce, and no state barriers or regulations shall affect them. There are no state lines for the individual or corporation carrying on that conmierce." Legislative Powers over Trusts 293 It is therefore seen that however wise and conservative the laws of Xew York State or of any other one state may he, however much they may exact pul)lieity, however much they may prevent over-capitalization, however much they may provide against corporate mismana<^ement, and how- ever much they may require that corporations shall sub- mit to ollicial inspection, yet there is nothing that will prevent corporations organized in Xew Jersey, Delaware, Arizo7ia, Illinois, Plorida, or any other state in the Union whose laws may be most lax, from shipping their goods into and from selling them in Xew York or in any state of the Union. D()\d)tless the State of Xew York could pre- vent these foreign corporations from acquiring a domicile, from establishing or maintaining factories within its bor- ders, but could not prevent them from carrying on inter- state commerce with its citizens. It could not tax their agents; it could not shut otit their goods; it could not tax their goods while in transit, and oven if it should deny to a foreign corporation the right to sue in the state courts to recover the price of the goods, the foreign corporation could pursue its remedies in the Federal courts. There are also many restrictions ujwn the rights of state legislatures to pass laws relating to trusts and com- binaiious, even when the ])rovisions of the laws are ex- presslv limited to existing corporations cliartered by that particular >tnt(\ or when limited to citizens of the state itself. Tiuvc restriction? are imposed by the fourteenth anu'udment to the Tnited States Constitution, which de- clares that no state sliall dejn'ive any person of life, lib- ertv, or ])ro])crty without due process of law. The Supreme Court has declared that the riglit to liberty means more than fn>e(loni from iiU'arc(^rat ion. ami the right to pro])erty UK'ans more than not havini: it destro\ed or demolished. 294 The Trusts It means tlie right to use and enjoy it; to make contracts with reference to it; to hold it or to sell it as one pleases, except in so far as the state may restrict such acts in the exercise of its police powers, that is, in the exercise of its power to restrain one from making such a use of his own property as works an injury to another, or violates the rights of another. It has been strongly argued that the right of contract implies not only the right to compete, but the right to refrain from competing, and the right also to agree with others to refrain from competing; and that it is only when competition is unreasonaMy restrained that it can be forbidden. It must be admitted that there are many decisions of the courts of the State of Xew York, both before and since the passage of its anti-trust act of 1897, which seem to support this contention; and the decisions of the Supreme Court of the United States seem to hold that the acts which are forbidden and punished as restraints upon interstate commerce, are only those acts, contracts, agreements, or combinations whose direct and immcdinle effect is to restrain interstate commerce. The same court has also used language in its decisions which would seem to lay down the doctrine that contracts of private individuals or of private corporations (not quasi- pnblic corporations like railroads, gas companies, water companies, etc.), in order to be punishable as restraints upon trade must be vurennonahh restraints. These dicta would seem to have committed the court to a doctrine which would require them to pronounce any state law that denied (uto the right to make a contract, which only rea- sonal)]i/ restrained competition, as being unconstitutional and void. On the oilier liand, the decisions of llie court have lieen siudi that it can hardly fail to declare all such restraints as are imposed l)y tlie great trusts which absorb all or nearly all the ])roductive agencies in any one in- Lcg-islativ^c Powers over Trusts 295 (liisirv, as beiiisx imroasnnalilo reptraiiits and as creatine n'l 'duopolies. It may not ho amiss to mak(^ l)ri('f mom ion of the num- bor and oharaotor of oxistin^i; stato anti-trust laws. ]\Ir. C"]i:;rlos F. lu^aoh. Sr., in his troatiso on the Lair of Mon- opiiJiex and Iiu/usfrial Tni.^ls puhlisiiod in l unanswered after over a decade of consideration. The question of the honr, tlie question, indeed, of the era, is: '' What is the remedy for tlie evils of trusts? Sliall we abolish trusts entirely? Shall we kill the trusts?"' The popular answer has always been, ' Yes."' The Xational Conp-ress hy passin,!,'- the Sherman act has said, '' Destroy the trusts." The lef::islatures of thirty-one states hv en- actments that are drastic and sweepinc:, declare that trusts must he stamped out. Every member of the House of Representatives, with one exception only, hy voting in favor of the amendments to the Sherman act, making its pen- alties more severe and prescribing a course of procedure more certain to give effect to the law, has said that trusts^ must go. The platforms of all the political parties. Ee- publican. Democratic, Xational-Democratic. Social-Demo- crntic. Topulistic, and Prohibitinriist. ditTer only in the viizor of their exj'tressinns of denunciation of trusts. Like Cato's letters which were never closed without the declara- tion, " C;irthai:(> must be destroyed.'" no political document, whether it be a message of an executive, a speech of a legislative candidate, or the platform of a party organiza- tion, is complete with.out its threat of extinction of trusts. The subj(H-t. indeed, is worthy of prof(nind consideration. Before we attempt to sug,<:est remedies, or to sum up 299 300 The Trusts the remedies already suggested, let us make a resume of our study of trusts, and at the risk of being very peculiar and exceptional, let us consider what are the evils of trusts. First, then, we have seen that we are living in a day of great things. Business opportunities are gigantic, industrial un- dertakings are enormous, commercial projects are vast, and great husiness organizations have hecomc a necessity; since the dawn of industry, there has been a constant ten- dency for them to increase in size. Xext, the present sys- tem of business is characterized by excessive competition: there seems to lie a tendency to carry the struggle of com- petition to such an extent that it hecomes injurious to the consumers as well as ruinous to the competitors themselves. Modern competition is destructive and self-destructive; it has a tendency to end in monopoly itself. Modern com- petition is often unreasonable, and, if it were not for the possibility of unreasonable restraints, agreements for its discontinuance would commend themselves to the public as being highly proper. Consolidation and combination render possible cheaper production and infinitely cheaper dis- tribution; the competitive system is so expensive in its operation that the price we pay for many articles is far in excess of the cost of actual production plus what would be a fair profit, if the best and most perfect methods of organization were adopted. There are gigantic evils re- sulting from the lack of regulation of industry; consoli- dation makes possible a better control, and will enable those adopting this form of organization to sell goods at lower prices. It is only by avoiding all the wastes of excessive com- petition, by availing ourselves of all the savings of com- bination and consolidation, by seizing all the economic ad- vantai''''? of jxrcat industrial organizations, in addition to adopting the latrst and most improved machine? and proc- The Remedy for the Evils 301 esses, that we can lessen the cost of production and lower the prices of our ^<>ods, without cutting down wages and witliout depressing the prices paid for raw materials. We must lower our prices in some way to meet tlie prices made by the intense competition of tlie day, or lose our trade and call down upon ourselves industrial ruin. Perfection of business (jrganization, supplementing perfection of me- chanical equipment, is the only way in which we can win in the international struggle for industrial supremacy, the only way in which we can obtain foreign markets for our })roducts which, in nearly every industry, are in ex- cess of home consumption, the only way in which we can keep our wage-earners constantly employed at remun- erative wages, or increase or even continue the present de- mand for raw materials, the only way in which we can constantly cheapen the cost of our goods and advan- tageously lower prices. To prevent or restrain all com- binations and conscdidatious and concentrations of capital and skill, would be the greatest business folly in the world's history, an act sure to result in bankruptcy, misery, and wretchedness. AVorso than competition, however, is monopoly, the ])aralysis of business, the obstacle to all progress, the bane of liberty. Monopoly, whether it be the result of exclusive ])rivilegcs and legal rights granted by the sovereign or sim- ply that (legToe of control over an industry which enables one ])ei'sn7i or group of persons, at will, to fix ])rices, to det(M'mine jiroduelion, to establish wages or to de])ress the ])riees of raw mat(>rials in any field of industry, is evil and oidy evil. Whatever may be the benefits of trusts or in- dustrial combinations, if, for any length of time, those who f(M'm tlii'm are able to keej) |>rices unduly high, injury to all classes and conditions will result, and only injury. When there arc no legal restrictions and no special priv- 302 The Trusts ilcges^ trusts are not legal monopolies. Neither can they permanently be practical monopolies. Competition is sure to spring up, if undue prices are charged. The constant increase in the wealth of the world causes capital always to look out continuously for opportunities for investment; just as water seeks its lowest level, so capital is sure to invest in the business that gives promise of the greatest profit. The fear of competition, potential competition, is a powerful restraint upon the temptation to cliarge high prices. But trusts for temporary 'periods have the power of heing really and actually oppressive, exacting, and vierci- less manopolies. Such they may be and very frequently are, pending the establishment of new competition. Further- more, the trusts, by using competition as a weapon and by practicing cut-throat competition and by selling at times or in special localities at jjrices far below cost, are able to crush out new competition; and the knowledge of the custom of trusts to use these unscrupulous means is always a deterrent to the establishment of competition. It crushes out active competition, and greatly weakens the force of potential competition. Competition is, moreover, gener- ally an uneconomic remedy for trust evils. In reality, the establishment of a new enterprise for the purpose of lower- ing prices is a waste of national wealth, whenever the ex- isting productive^ agencies have a capacity equal to or in exce.-s of the existing demand; and in nearly all our in- diisirics, there is to-day such a condition. While this con- dition deters coinj)etition, (!ven although the various enter- ])iiscs of the industry are individually controlled and man- aged, and while, perha])s, competition is no more deterred whon all these })roductive industries (with a capacity in excess of the demand) are aggregated into one organization; yet whether the restraint is greater or less, in case of ag- gregation or lack of aggreiration, competition is always an The Remedy for tlie Evils 303 uneconMiuic rciucd}', when tlie capacity of existing agencies exceeils ihe (leiiKUuI; and therefore potential competition is not a wholly wise remedy for the evils of trusts. It is true thai the enterju'ise and hopefulness of business men are such that even uiider the conditions of industry just mentioned, competition in time,' will spring up if prices are high and if then' is the ])0ssibility of ac(iuiring profit. But this generally being wasteful it is the j^art of wisdom not to rely on it wholly as a remedy for high prices, but to pre- vent eondjinatiuns, if possible from acquiring so great a control of any industry as to be practical monopolies. An enlightened self-interesl would keep trust owners from chargiiig extortioJiate prices and thereby inviting their (jwn ultimate destruction by cremating competition. But grei'd and scllishness are ajjt to blind (jne to true self-inter- est; and trust owners are constantly tenqned to raise ])rice5 unduly. Every economic advantage of the trust to tlie ])roducer as well as to the consumer is lost if (and so long as) such a policy is ])ursued. Cheap production is of no advantage, but may be of positive harm, if prices are not lowered. Even though the evils of trusts are only tempo- rary, as is true, tliey are grievous. The underlying evil is the occasional imposition of an extortionate price; the cause of th(> evil is the ])ossession by the trust of all or nearly all the ])roductive agencies in an industry in wliich for a time conip(>tition is rendered inactivt' because new establish- nuiiis in that industry are not nt'cded for productive pur- ])oses. In the train of an extortionate price there follow thr-e evil.-: lessciu'd consumption, diminished production, lack of cmnloynient. lower wages, depressed prices for raw materials, stagnation, and general bankrujitcy. Some of the trusts are nndonbtedly formed for the pur- pose of securiuLT t!ie economic advantages of combination, but a vorv larcre number of them are brought into being 304 The Trusts and are sustained by means of special privileges, sucli as public franchises, railroad discrimination, unequal taxation, and other forms of partiality, which enable the favored parties to crush out the competitors who are not thus fav- ored. Careful students of the trust prohkm believe that a vast majority of the trusts of to-day owe their existence as well as strength, not to their economic superiority, but to their possession of special privileges. These privileges, even if not the cause of tlie trusts, are certainly the cause of a very large portion of trust evils, for in proportion as special privileges are accorded, the favored organizations are re- lieved from the necessity of giving to the community better service and lower prices. Furthermore, it is beyond ques- tion that while the desire of adopting the most economical methods of organization is the motive that actuates a num- ber of the persons entering into trusts, yet nearly all the trusts which have been formed within the last three years liave been the inflations of the " promoter " rather than the combinations of the real producers. Their purpose lias largely been to sell to the investing public the over-capital- ized stock of these corporations; and the result of the over- capitalization has been a tendency to impose high prices for the purpose of accumulating, even though temporarily, dividends which would give an apparent value to the stock in excess of its real value; another result has been to stimulate stock gambling, corporate mismanagement, and improper manipulation of the securities of the company not only by speculators, but also by the officers of the com- panies themselves. This has resulted in those in charge of great trusts not infrequently giving their time and energy to manipulation rather tlian to management. Tt has largely impaired pulilic oonfulenee. Tt has filled the financial condition of the country ^vith much uncertainty. It has so destroyed confidence that panics have resulted. The Remedy for the Evils 305 It is thus seen that \vc have certain evils apparently in- herent in trusts, but that they are temporary. We also have numerous incidental evils. The great remedy may be said to be competition. This is true notwithstanding trusts are formed in order to limit competition; and not- withstanding there are limitations to competition as a rem- edy tor trust evils. But what are the speeitic remedies? Abolish all special privileges; prohibit and absolutely prevent railroad discrimination; lower the tariH', not when- ever we can obtain our goods from abroad at a lower rate, but whenever the prices exacted by any trust or any corpor- ation or any individual are in excess of a fair profit after paying American wages. The establishment of an export trade in any article should be treated as presumptive evi- dence of the lack of need of a tarilf, and the tariff upon such article should be continued only when it has been clearly shown that sales abroad are the result of excep- tional circumstances. If the patent laws are being per- verted from their true purpose, let them be modified. Com- pel corporations to bear their fair proportion of taxation; let the public retain and, in so far as is lawful, retake all public utilities and franchises. Eequire corporations to pay fair taxation upon the franchises possessed by them, as has been done in the State of Xew York under the clianipion.-hip of (Governor I^oosevelt. In fine, withdraw every special |)rivilege and leave tlie way open for a free fight and a fair field. '' i^ut how much can be accomplislied by this nu'thod? '' We answer: " Do this, and trusts will wither away hy the score, if not by the hundred. Do this, and trust evils will nearly all be done away with." It is somewhat peculiar that those peopU\ wlio have been most actively engaged in that form of anti-trust legislation wliich seeks to render inii)ossil)h' all consolidation and combination, who liave been active in framing laws 3o6 The Trusts which, if literally construed, would prevent even such a combination or restraint upon trade as the formation of a partnership, or the purchase by one man of a factory or a store or a farm or any other producing or distributing agency wdiich formerly belonged to another, have, in their denunciations of trusts, almost uniformly declared that the cause, not only of the existence but of the strength of trusts, was special privileges, and yet have not concentrated their energies in efforts to abolish these special privileges, but have dissipated their energies in their attempts to stop all combination, consolidation, and concentration, condi- tions towards which there is a tendency which is universal and apparently irresistible, and which has also been the trend of all industrial and social progress. Thus Hon. Jerry Simpson, the Populist member of Congress from Kansas, who is an advocate and supporter of the Kansas law against trusts, in his address at the Anti-Trust Confer- ence in Chicago, declared: " I do not believe, as some do, that the combinations we call trusts are the results of orderly evolution in business methods. I think I can easily demonstrate that they have their origin in, and grow and fatten upon, special privileges conferred by legislative bodies; and that without these special privileges it would be im- possible for them to exist. If this be true, it would seem that the first and most necessarj' step would be to repeal the laws on which they rest, rather than to enact new laws." Tliat plank is broad enough for bt)th Jerry Simpson and ourselves to stand upon. His remark is one of tlie sensi- ble declarations made in the discussion of trusts. In one of the recent numbers of The North American llcview there appeared an analysis of the Texas anti-trust law by Governor Sayers of that state. He was most in- strumental in the passage of iliis law. He even called a conference of the governors of all the states of the ("nion for the purj)0se of considi-ri ng auti-trust legislation, and The Remedy for the Evils 307 doubtless considered this Texas bill as the acme of per- fection. The most interesting^ tiling- about the article in which the analysis appeared is, that (iflcr i,nving the analysis of the law, and afler pointing out a few of the evils of trusts, Governor Savers discussed the causes of trusts. We quote from his article: "It has been assorted by some who claim themselves qualified to speak upon the subject, that trusts, as operated in tlie United States, are not harmful, but that they are only the outgrowth of an evolution in industrial life that is natural and necessary. On the other hand, it is insisted, and I think rightfully, that they are, in a great measure, if not entirely, due to vicious legislation, to tlio policy of the Federal government in tlie matter of currency and taxation, and to that of the states in the creation of corpora- tions." We think, it must be admitted, that the Texas anti-trust law is a non-si'quitur to the arsjriment advanced by Governor Savers. The weakness of his course in regard to trusts is, that he has not attempted to concentrate his energies to removing that which he declares to be the cause. This is said in no spirit of criticism and with a perfect under- standing that Governor Sayers' official iniluence at that time could be asserted only through state legislation. The point W(> W(nild make is this: that the way to abolish trusts is to remove their causes. If special privileges are the causes of trusts, abrogate those privileges. While we may not all agree as to tlie special privih>g(is that do, in fact, foster trusts, y{M we can all act unitedly in a cam]iaign directed against those things which ar(> conee(U'd]y privileges that have this elTrct, for tln' trusts that can succeed only by the help of special [irivileges are econondcally inferior. The trusts that hav(> tlie s])eeial privileges and yet do not need them, are thieves and robbers. Aft(U- we have strip]ied all competitors of special priv- ileges; after we have created a fair field for them, we must 3o8 The Trusts take steps to see that there is a fair fight. Unfair com- petition, cut-throat competition, that is, the practice of selhng goods helow cost in the locality in which competi- tion springs up while charging a higher price in some other locality, must be declared by law to be a conspiracy and should be punished with severe penalties. The provision of the Texas law concerning this kind of competition is one worthy of adoption by all states. In like manner these great corporations, whose powers are given to them by the state and which are able by reason of these charter powers to obtain such a great control over industries, must be com- pelled to sell to all at the same rates. When so many of them combine together that the establishment of new com- petitive enterprises becomes economically wasteful, then we have the right to treat them as we do common carriers and make them serve all alike. Publicity must be another great co-ordinate remedy. We need it to correct, not only incidental, but inherent evils of trusts; to encourage competition whenever competition is practicable, to expose to us the exact nature of the evils of trusts, to bring out under the glare of public disap- proval those practices which flourish only in darkness and secrecy. "We must liavo full, open, and accurate reports from trusts, upon forms prepared by the government, sworn to by the ofhcers of these corporations. We must also have, in tlie case of gigantic corporations which possess gigantic powers, inspection by public officials just as our banks and insurance companies are subjected to sucli inspection; and further, we must have full tabulated statistical informa- tion. Competition will certainly spring up under such cir- cumstances whether or not the competition is, in fact, needed. TTigh prices will sooner or later cause tlie cstab- lishmeiit of new enterprises: while the fear of new enter- prises always has a ieiulcncy to keep prices down. Wages The Remedy for the Evils 309 can never be reduced to the starvation point, if the condi- tion of both cmplo}'er and employee i.s known. Corrup- tion will llee when secrecy is dispelled. With equality of opportunity, with a fair held and a free fight, there arc comparatively few business men who to-day would not accept the challenge and enter into competition even with great corporations. When they did not it would have to be considered as an admission of the economic superior- ity of the trust. Then let us also enact laws forbidding over-capitalization, permitting the issue of stock only for cash, or for the actual value of property, earning capacity and good-will to 1)0 taken into consideration, but full knowledge of that upon which the value is based, to bo given to the investing public and, if need be, the value of these properties to be passed upon by a commission ap- pointed for the purpose rather than by the directors and officers of tlic company entrusted with its management and under constant temptation to manijnilate its affairs. Pub- licity will prevent most of these evils; it will stop most of the stock mani]n]lation and nearly all of the swindling of the investing public. Let us also pass laws more stringently regulating corporate management, l^et us hold the direct- ors and officers to a greater responsif)ility. It is necessary tliat we limit the liability of stockholders because of the impossibility of tlieir mannging the affairs of the company, but this applies, only in a slight degree, to the boards of directors. They have, to a great deg-rec, the control of these companies. True, many of the affairs must be manacred bv officers cliosen I)y the directors, and acting for them, but it is absurd to limit the liability of these officers, and it is equally absurd to limit the lialiility of the directors as much as one does the lial)ility of rhe stockliolders. The directors of all corporations should be held to at least the same meas- ure of liabilitv that trustees of savings banks and national 3IO The Trusts banks assume. It should be made criminal to declare dividends if unearned; and there are numerous other evil practices in the management of corporations, especiallv of those great corporations known as trusts, which could easily be prevented by prohibitory statutes strictly enforced and by holding the directors and officers personally respon- sible for the corporations' criminal acts in which they par- ticipate. So much for the remedies for the incidental abuses of trusts: Are there other evils? Are the remedies which have been suggested sufficient? We do not say that they are, but we express a firm conviction that if these remedies could be honestly tried, all that would remain of trusts or of trust evils would be relatively insignificant. Abolish special privileges, prevent unfair competition, cut-throat competition, compel corporations to sell to all upon equal terms, give us full publicity, prevent the evils of over- capitalization, make corporate management honest, and competition, we believe, will do the rest. But there are other things which we can do, which theoretically are perfectly proper, which, at times, may be supplementary remedies and, indeed, may be our best remedies if we cannot persuade ourselves to adopt those already mentioned. We can declare the creation of a monopoly to be a crime. We mean now, not a legal mon- opoly but a practical monopoly; that is, the acquirement of such a control over an industry tbat in a certain looalilv and for a length of time, short though it may be, a per- son or combination of persons has power to fix the price of an article of common use. It will be very difficult in a statute extremely diificult to define a monopoly of this kind; and yet it does not follow that it cannot be done. You may search all the law l)0oks that were ever written and vou will find no satisfactorv definition of " fraud."" The The Remedy for the Evils 31 1 court?, t]iou(jh for centuries thcv liavc had to deal with fraud, have never yet undertaken to define it with any accuracy, for tlie reason that, if once defined, some one Avould perpetrate a fraud that would fall outside of the definition. But the courts thousands of times in ever}' year in every state declare contracts void because of fraud; and so, althouirh it may be impossible to frame any satisfac- tory definition of monopoly, that is, of what we may term '"practical monopoly" as distin^ruishcMl from legal monopoly, or exclusive right given by the sovereign, yet our courts have not shown themselves incompetent to dis- cern it or unable to punish it. "Ye shall know them by their fruits " is as ap])licable to monopoly as it was to the men of hypocritical pretensions of whom the words were first spoken. You can ascertain whether a combination is a monopoly by observing what it docs and how it does it. When a great aggregation or combination acquires such a conlrol over industry as has the American Ice Companv, for example; when the people for weeks look in vain for any otlier source from which they may obtain their supply of this necessity of life; when they see the few men who are the oiTiccrs of this trust raising the price from thirty cents to sixty cents a hundred (even though it is for only a month); when they find this com]-any in possession of docking privileges which are so exceptionally convenient and advantageous that they are almost exclusive; when they sec it mercilesslv refusing to sell ice in small quantities to the poor (refusing to sell five-cent pieces until compelled to do so In- tlie force of a righteous public indi.gnation), although having practically the sole supply of ice: when thev recall the fact that this company sold its ice a year ago in most localities for thirty cents a hundred, yet that in another localitv where cornpetition existed, it reduced the price in ton cents a hunrlred so ns to crush out its com- 312 The Trusts petitor; when they observe it leaguing itself with cer- tain officers who have charge of the docks where ice must be unloaded, with other oflicers whose duty it is to make contracts for the purchase of ice for the great municipality in which they have secured all the available supply, with politicians who control, with more than a czar's despotism, the political machinery of Xew York City, with judges, by whom questions as to the legality of the trust or as to the criminality of the acts of its officers would naturally have been brought, when all these facts are brought together, no man in the possession of his senses, no man whose intellect is not clouded by idiocy, no man whose judgment is not obscured by his prejudices; no man who can read human motives from human acts or reason from cause to effect, can doubt for one moment that the purpose of this trust was to secure a monopoly; that for a time it was a grinding, merciless, and oppressive mon- opoly, and that the economies of combination and consoli- dation, either were not the motives for the formation of the company, or else that they were quickly and sliamelessly cast aside. A state which did not, by its laws, forbid and proliibit and make penal such an aggregation of capital manifesting such purposes and directed and controlled by men displaying such motives and conducted in a way so hostile to the people and so injurious to the public inter- est, a state which did not use every means, legislative, executive, and judicial, to crush out such a trust or com- bination, could not be considered as a government that guaranteed and insured to its citizens the blessings of life, liberty, or property. Attorney-General Davies of New York only acted in the discharge of his official obligations when he instituted proceedings to dissolve the American Ice Company, but although ho did only his sworn duty, ho is ontirlerl to praise and irraiitudc and to the loyal sup- The Remedy for the Evils 313 port not only of the people of New York, whose servant he is, but of all who hate monopoly and oppression and exaction and extortion. We may, then, properly prohibit by law, we should, in fact, prohibit by law any combina- tion which acts as a general restraint upon competition, and which is formed for the purpose of raising prices, or which actually does raise prices beyond the fair profit mark. We can best tell whether there is such a restraint by ob- serving results. It would be an economic folly to forbid all combinations; neither should we be alarmed by great aggregations of industry. We have seen their wonderful economic advantages; we have noticed how such consolida- tions and combinations may, if rightfully used, bring not only riches to their promoters, but wealth to the nations; how they may enable us to obtain industrial supremacy; how they may give more constant employment to our laborers; how they may stimulate the demand for our raw materials; how they may lessen the price of manufactured goods; how they may bring us national and industrial prosperity and happiness. It is most difficult to say what combinations are proper and what ones improper, or to lay down any general rules by which one can determine whether a restraint upon competition is a good or an evil, whether it is reasona])le or unreasonable. Almost every case will have to be judged from the circumstances sur- rounding it and the courts will have to determine from all the facts of the case whether it is reasonable or unreason- able. They have done so in cases that have occurred. Thf>y have adjudged many combinations to l)e void be- cause against public policy. It is very doubtful if we can obtain more satisfactory results by legislation. It may be regretted tliat we cannot more detinitely determine and more explicitly declare what combinations are improper, and what restraints upon competition will be tolerated and 314 The Trusts what ones prohibited. It is doubtless this feeling that has caused the enactment of our so-called anti-trust laws. Even the drastic ones adopted in many of our Southern and Western states ought not to be condemned as being in- spired wholly by envy or jealousy. They are probably so sweeping in their provisions, simply because it is desirable, especially in penal statutes, that there be no uncertainty as to what is forbidden. In order that unreasonable restraints upon competition may be punished and because of the doubt as to what is reasonable and what unreasonable, the legislators of many of our states, fearing the evils of monopoly and of a general restraint upon competition, have not infrequently forbidden all restraints of competi- tion. The motive that underlies the statutes has probably been good, btit in the means adopted these legislators have almost always overreached themselves. The difficulty of proving purpose and motive has led them not infrequently to forbid even combinations and agreements that may or do, indirectly as well as directly, incidentally as well as inten- tionally, restrain competition. But when statutes so sweep- ing are enacted, they forbid the contracts which come up in our daily business negotiations and which are innocent in their character. The result is that the courts are com- pelled to construe these laws either as unconstitutional be- cause of being violations of our right to the use of our prop- crtv, or else they are bound to construe them as referring only to unreasonable restraints. ]\[r. David Willcox, a New York lawyer, counsel for various trusts, in an article in The Forum for Septemljcr, 1897, gave many illustrations of the vast number of every-day transactions which were pro- hibited by statutes of this character. We quote from him: "That the-^o jirovisions are not diroefcd cppocially against com- binations, is slidwn by tlio fact that the most ordinary and ous- tomarv contracts or arranircnient.s mmj incidentally restrain or pre- The Remedy for the Evils 315 vent competition, altlioiij^di that may he only remotely, if at all, their object. As instances, may he su}T<,'este(l: All organizations of mechanics enf^aq-ed in the same line of Imsine-s for the ])ur])oso of limitinij the number of perscms enj^'a^'ed in the business, or of maintaininj,' hifjh rates of \vaj,'('s; a covcnatit in a (h-ed restrict- ing the use of real estate"; the formation of a cijrporation to carry on any business upon a lar sl;;l(\s fr(un deprivini: any person of life, lil)- erty, or jiropcriy withotit due process of law. and the right to pro]ierty has boon held l>y thi^ coi;rt> to ho the ri'jht to huy and sdl, and to contract with reference to one's prop- erty, in any way v>hich does not injure another. It would be folly for tlie state, even if constitutional, to endeavor to restrain all com1)inations. or to ])rnhibit cveiy restraint 3i6 The Trusts upon competition; for \ve all know by actual experience and daily observation tbat competition is often excessive. AVe know that time and time again it has been impossi'ule to stop the competition by mere quitting. It is only when all of the competitors would agree to stop that any of them could be induced to desist. To attempt to stop all com- bination would be to ignore all the experience of the past. The attempt would in all probability be futile. For years many of the states have had such laws, but their enforce- ment has been impossible. Trusts are more numerous to- day than ever before. But if we could stop all combina- tion, the success of the attempt would be the death-blow to industry. For the United States to forbid all combina- tions, to forbid even great combinations, would be to throw aside the magnificent opportunity we have to-day of obtain- ing the markets of the world and of winning industrial supremacy among the nations. Such are the remedies we would propose for trust evils. But it is not amiss to discuss here certain remedies sug- gested by others, especially the proposition to restrain com- binations, by limitations upon corporate powers and cor- porate capitalization. The only visible effect of our anti-trust laws up to this time has been to bring about a chan::e in the form of com- binations. We no longer have the trust proper; the " agreement " combine still exists, but the corporation ia the favorite form of combination, because it is much easier for the corporation to pose not as a combination, but as a new legal entity. There are some wlio, observing the great evils that come from the over-capitalized trust, think that our anti-trust laws have made matters worse th;in they were before their passage; that they have not enabled us io escape the old evils, but have piled upon us a host of new ones. AVc are inclined to believe that on tlie whole The Remedy for the Evils 317 the state is in a much more advantageous position by rea- son of having trusts in corporate form. Corporations are artificial creatures of the state, owing their life to it, and ])ecuhar]y subject to limitations by it. We can, if we marslial our resources and gather togetlier our forces, deal eirecii\ely and successfully witli the corporations, even with the great corporations, and with all the problems arising from them. Anti-trust legislation has not been in vain if it has made trusts become corporations, for wo can handle the corporations, if we choose. To enact anti- trust laws in order to compel combines to become corpora- tions, and to be able, in this form, to remedy the evils of trusts is, it must be admitted, much like the practice of a certain doctor who could cure no disease but fits and who, therefore, whenever he was called in to visit a patient, pro- ceeded to throw him into a fit, and then to cure him. If, after all the remedies that have been mentioned have been tried, we find that the trust is still a power for evil, then we can limit the size of corporations; we can prevent thom from consolidating with each other; we can forbid their selling their stocks one to tlie other, or selling their plant, or anything but their product, without an order of the court made for sufficient cause. AVe can demand the full- est puldicity, and can im|)ose upon these creatures of the state such restrictions and limitations as their Creator may deem wise. It has already been urged by economists as well as by statesmen that we should limit not only the size of our great corporations, Imt the })urposes for wliich they may b: formed. Such is the suggestion of Prof. Henry C. Adams, of ^Michigan University, while througliout certain sections of our country there is a popular feeling of ajiproval. .Much of the ojiposition to modern corporatitms is liut a new instance of the recurring opposition to every industrial 3i8 The Trusts advance which manifests itself in the formation of larger business organizations. It is no new thing to ask for the prohibition of tlie increase in the size of industrial organ- iz;itions. Such requests have been frequent throughout industrial history. Xo forward step has ever been taken vvitliout the timid and hesitating and doubtful crying out in alarm. More than one hundred and fifty years ago, w]ien strictly individual ownership and management of property were giving way to tlie partnership form, a great cry went up. People considered it a restraint on trade and in alarm asked what was to become of manly inde- pendence. When the small business corporations began to displace the cumbersome partnerships, timorous people fairly felt the clutch of monopoly, so great was their alarm and fear. There is no question that the transition from the partnership to the corporate form excited as much alarm and as mucli opposition as the phenomenon of trusts does to-day. Adam Smith tried to quiet the popular unrest by attempting to prove that the corporate organization of in- dustry would never be successful or popular, and could never do much harm because it was adapted only to a few simple routine branches of business, and that it never could obtain loyal and efficient service from its employees because in his opinion "people would not work for corpor- ations as they would for themselves." In many sections of the country, to-day, hatred and ani- mosity towards corporations are fostered and engendered. This is remarkably true in those sections wliich, from tlic nature of their resources, are noccs-arily largely agricul- tural, and whicli. therclore, do not permit of combinations of capital to develop them. Forgetful of all the wonderful ])r(iuress of the country due to corporations, unmindful tliat it is the industrial prosperity of the East, built up by corporate wealth, that gives to the West and the South the The Remedy for the Evils 319 nearest and steadiest and ricliest market for their af^^ricul- tnral produuts, and which, throu^di its mills and faetorics, creates the demand for their raw materials, and equally forgetful of the fact that the development of the West and South themselves is due to the inii)r()ved means of trans- I)ortation and eommunieation that arc possihle only when caj)ital is enormously concentrated, and that that develop- ment has also heen furthered hy corporate capital engaged in manufacturing, and resulting in furnishing to the West and South chea[)('r tools, cheaper agricultural implements, chea]ier clothing and chea})cr commodities generally forgetting all these things, in these sections there exists widespread fear of corporations, distrust of their motives and methods, and animosity towards their organizers and directors. Corporations of enormous size are an absolute necessity to-day to do the wnrk oi tlie world. One undertakes the answer of a jierplexiiig ((uestion when he endeavors to say how mueli capital a corporation should be allowed to have. ]->ven within the limits of (me trade or industry it is almost inipussihle to determine the ([uestion satisfactorily. It; would he a danger(nis business ])()liey to fix an arbitrary limit to capitalization to say. for instance, that no cor- ]ioratioii could l)e incor])oraied with a capital exceeding $1 ,- (10(1.(1(1(1 or .^1(1. 0(10. (HMt. In one industry either sum might be iiisutbcient to permit ecom~)mical production, while in another it might enable the coi-poration to ol)tain a mon- opoly. Not, at lea>t, until we have learned that there are evils in the Lnirant ic corponi.t ions wliich cannot l)e other- wisi> avertt^d can we alford to imitate I'rocrustes.the tyrant, who placed all his victims on one bed. stretching tliose who were sliort till they fitti'd it, atid cutting off the legs of tliose who were too lonir. Furthermore, in any one jiar- ticular industrv, it would be most ditlicult, as well as dan- 320 The Trusts gerous, to say what limit should be fixed to capitalization; although, if monopoly can be prevented in no other way, the limitation of capitalization is a practical method of procedure. One set of incorporators may possess such con- nections, have such skill, and meet with such success that it can profitably employ many times the capital that another set can use. The formation of corporations should be regulated by general laws. There are many ob- jections of the gravest character to any attempt to make a special determination as to the amount of capitalization that any corporation or class of corporations shall have. It would be dangerous to attempt to pass upon each sep- arate case. Favoritism, bribery, and every form of corrup- tion are incidental to special legislation. If there is special legislation, or even special adjudication, as to the necessity or wisdom of granting a charter, or as to the amount of capital, there will be abuses and scandals of every sort. The right to incorporate will, then, surely become a special privilege. It will be obtained by the great and the cor- rupt, and denied to the weak; and the ability to incorpo- rate will then become a monopolistic right. Until experience has demonstrated that corporate abuses are beyond practical control, it would seem to be equally unwise to say that capital may clothe itself in corporate form and seek corporate management only when used in certain particular industries or kinds of enterprises. Prof. Adams has suggested that corporations should be created only for purposes of transportation or for the management of enterprises that are in their nature public or quasi- public; that the right to engage in ordinary enterprises and industries which can be carried on by individuals, either singly or associated in other than corporate relations, should be denied to corporations. While this cannot be discussed here with the fullness that so momentous a sug- The Remedy for the Evils 321 gestion by so eminent an authority deserves, it need only be said that such a course would be contrary to a tendency so universal as to be apparently natural and irresistible, and it would appear to bo a retrogression in the industrial march. Hon. Dudley G. Wooten of Texas, the first vice-chair- man of the Chicago Trust Conference, in a most eloquent speech upon that occasion, in which he denounced indus- trial corporations, big and little, and urged that charters should not be granted to them to engage in business enter- prises in which individual effort could work profitably, said: ' It ought to be impossible for corporations to be chartered for any other than a quasl-puhlic purj>ose with a capital authorized beyond a reasonable amount commensurate with the equality be- tween natural and artificial citizenship and industry." In an earlier part of his speech he said of the people of Texas: " We are mainly producers of raw materials and consumers of manufactured products," and then he j)ointed out how Texas felt particularly injured by trusts. ]s not the experience of Texas itself a proof of the economic injury of the policy so eloquently urged by ]\Ir. Wooten? No community can ])ecome rich without labor. The greater the amount of work it puts forth, the more valuable tlu^ product. No state can liecome jirosper- ous without a diversity of industry. A purely agricultural community can never be very rich, but a community that takes its raw ])roducts and ap])lies to tliem the labor neces- sary to perfect ihem for final consumption, adds to the value of what it possesses and increases the wealth that will How into it when the finished product is sold or exchanged for the other material comforts of civilization that it needs. 322 The Trusts Agriculture does not in its immediate operations require vast capital. Individual effort is sufficient, coupled with individual savings or borrowings. Indirectly, however, successful agriculture is indebted to centralized capital for improved machinery and tools. Manufacturing, on the other hand, cannot be carried on successfully except when the capital of many is combined with the labor and the toil of many. Would not Texas, with its vast area and great resources, be a more prosperous community if it en- couraged associations and combinations of capital to build factories in its midst, instead of crippling them? Would not its farmers, by bringing into the state persons who en- gage in other fields of industry, find an increased army of consumers, whose demand for agricultural products would increase the prices which, according to Mr. Wooten, trusts tend to depress? Would not the multiplication of fac- tories give to Texas people an opportunity to buy manu- factured articles more cheaply, and thus offset that alleged tendency of industrial trusts to impose extortionate prices? Favorable corporation laws will not in themselves establi-h industries; but unfavorable ones will surely prevent their establishment and kill those now in existence. Would it not be wiser for Texas to try tliis remedy for trusts? While, in the present stage of the trust problem, any at- tempt to limit either the size or the purposes of corpora- tions seems to !)(' a |)remat'nre and hazardous remedy because of the probable crippling of our productive powers and tbe impairing of our chances of securing markets; while it seems mucli wiser to endeavor to ensure eqiuility of opportunity and fairness in competition, to abolish all special privileges, to have publicity of all matters affecting tlie puljjie, and then let all producers and distributers figlit it out on tbe same line, eaeli one being allowed to bring together and make use of whatever amount of capi- The Remedy for the Evils 323 ial he can profitably employ,- still if it he found after a trial that there are dangers in this course and that monop- oly does exist as a result thereof, then the limitation of the aiuount of capitalization of our great corporations is the quickest and most practical and most certain way of pre- venting them from acquiring a controlling interest in any industry. It is not extremely improbable that we will be forced to limit their acquisition of those properties which are more or less natural monopolies, such as copper, iron, coal, gold, and silver mines. But, at best, the limitation of the capitalization or of the purposes of corporations is a kind of compromise measure. It will possibly save us from some of the evils of monopoly. It will secure to us a part, bur only a small part, of the benefits of combination. We "will save only a few of the wastes of competition. We may obtain nearly all the benefits that relate to mere pro- duction itself, but we are certain to loee most of the econ- omics of distribution. The ])roblem of trusts subbests the possibility of social- ism, or of that modified form of socialism which is called government ownership. The tendency towards concentra- tion is, in the opinion of many, the steady mai'ch towards socialism. Xo one feels more certain of this than t"^;e socialist himself; no (me is more sanguine than he in 'ms obhcrvation of the size and the ]H)wer of trusts. At their possibilities of monojioly he looks complacently, believing that when industry shall have reachiNl the final point of exttc-me centralization ifs managt>ment and ownership wiil be wresteil away from tliose now ]>ossessing it and taken over by the pcoj^le in their colleci i\(^ ca|iacity. Those who en'rrtain these views say that the encouragement of tiie establisinnent of competitive enterjiriscs against existing trusts is not desirable, even to kee]) down prices. They argue that, if a given number of factories, cither run 324 The Trusts separately or by one trust, is enough to supply the de- mand for commodities of that kind, then it is an economic waste to add to this number of factories. They point out that to encourage competition is contradictory to the al- most universal tendency of the present day to combine for the very purpose of saving the loss of undue competition. They show that the encouragement of small competitive enterprises prevents the savings that trusts or combina- tions could otherwise effect, and they claim that in encour- aging the return of competition we are slowly undermining the power of trusts for good, and that we are only a little less foolish than those who so fear the power of trusts that they render them useless as well as harmless by limiting the capitalization of corporations to so small a sum that they cannot acquire enough property to avail themselves of the means and methods of economical production and distribution. These persons reprove us for our failure to appreciate what they consider the true teachings of the universal tendency to restrict competition. They reproach us for our hesitancy in trying that solution of all these vexing problems which they think this universal tendency suggests, and which they deem to be not only correct theoretically, but sufficient practically. That remedy is in so7no form or other socialistic. It implies either govern- ment ownership or management. The reasoning of the advocates of remedies of this kind is plausible, and it can- not be denied that they occasionally fortify their argu- ments with incontrovertible facts. They themselves are in no-wise dismayed by the extent of the task. They look at the number of instances of municipal ownership of waterworks in America, of government ownership of rail- roads and telegraphs in Europe, and ownership by Euro- pean cities of street railways and of gas and electric light properties, and at American laws regulating rates of fare The Remedy for the Evils 325 and freight on raihvays, and find in them precedents, as well as encouraging examples of governmental control and ownership. ])oul)tless certain lines of business, particu- larly transportation not only trunk lines, but city surface pystems and the providing of water, gas, and electricity, and the disposal of sewage and kindred public services, are natural monopolies, and may properly and successfully be assumed by cities and states; but to undertake govern- ment control of those industries in which trusts are formed, namely, manufacturing, mining, and niercantile industries, is to enter upon a task of a very different char- acter. Government ownership of such industries may be called, not improperly, socialism in its advanced stage. It may be that in distant ages that will be the form of busi- ness management, but it surely is one of the ideals to be realized only in the millennium. (Jovernment conlrnj oi corporations is not the same as governiiumt ownership, but it is an approach to it. It is prnbai)ly fortunate that the trusts of to-day are corpora- tions rather than individuals, for being creatures of Law, they are properly subject to restriction by law. It has been seriously suggested that the pro]>er course with regard to industrial coml)ination is to encourage or permit the formation of gigantic corporations which may, if desired by their organizers, obtain all the productive agencies of any one industry; and then to enact laws limiting their profits, or arbitrarily fixing prices. Doubtless it would be possible to enact laws limiting dividends, and perhaps it would be possible to express the laws in such terms as to prevent many evasions, and practically to accomjdish the purpose of the act; namely, to limit ]irices. The ]ienalty for refus- ing to do the work for wliich a ctunpany was incorporated, at prices wliich would proilucc ilio profit arbitrarily fixed, woukl be dissolution. Doubtless a stale or a government 326 The Trusts could with perfect propriety say to a corporation of its creation, at the time of its incorporation, that it should charge only a certain price for a certain service, or that all of its profits above a certain amount should revert to the state. States have been known to do similar things in the case of railroad and gas companies and other quasi-public corporations. But economically it would be the height of folly to do this whenever competition was practicable. There are many objections to a scheme to limit profits. One is that it is manifestly unfair to impose a limit unless a fair profit is practically guaranteed. The vital objection, however, is that a limit to profits means a halt to industrial progress. If a corporation can declare no dividend in excess of a fixed per cent, there is no inducement for it to cheapen its product. There is no incentive to inventive talent. What would be the use of introducing a labor-saving machine if one did not make more money by so doing? To limit dividends would be the worst folly imaginable. It would be less foolish to limit prices; to say to a great monopoly: '' You shall not charge more than tliis sum, but if you introduce labor- saving machines and are thus able to produce more cheaply and to make a greater profit at those prices, you may liavc it." Who is tlicrc, however, wise enough to say what prices shall be charged? Dividends could possibly be lim- ited, with provisions that any savings which were the result of ehoa])cr processes or labor-saving machinery should accrue for limited periods to the persons introducing them, just as ve give temporary monopolies to inventors. But all limitation? on profits are restraints upon progress; the danger from them is that industry may become stagnant and dormant and decadent. Th(> belief in abstaining from intervention in private Ijusiness matters is, moreover, so deep-rooted in Americans The Remedy for the Evils 327 that a propopition to limit the profits of corporations Avould be rehietantly adopted even as a last resort. Un- questionably, in tlie face of the very fact that business is everywhere beintj^ organized into threat combinations for the purpose of killini,'' competition, the people of this coun- tiT prefer still to trust to tiie restraininc; inlUnmce of the active competition that survives and to potential competi- tion, and to enact laws that will place competitors on an equal footinfj, rather than to socialize industry and npsct all tlieir established systeins and notions. Government ownership, or government management or control of ordi- naiy business enterprises by means of price regiilati':n or dividend limitation, is an iridescent dream. It is a matter more of sjteculation than practical st:;ti'smanship. It m;;y he a live issue long before the sun grows cold, hut it is not the matter at hand. It is not the duty that lies before i^s. The practical man of the day the man who suffers the evils of trusts and who seeks remedies still lielieves that relief is to be found in the preservation of competition, and tlie remedies that lie would adopt are remedies that secdc to remove the obstacles to free and fair competition, namely, the abolition of special privileges, the prohibition of unfair competition, the requirement of that open puh- liciiy whieli calls competition into luung. the punishment of all unreasonable rc-^irainfs upon competition, the pre- vention of (^-erything which creates actual monopoly or Avhicli is formed for the puq"ose of raising prices or which actually doo> raise ])ricr>s. All those arc remedies that tiuid to preserve that system of industry which, with all it- wastes and sacrifice-, all its evils and injuries, has neverthe- ](>-s been iiie secrcl of all industrial success and of the world's prosiicrity. The r(^;d need of the dav. the pressing need, is informa- tion publicitv. "We need it, not oulv in order to know 328 The Trusts what to do, but as a remedy in itself. If we can have this publicity we can rely to a great extent upon competition, active as well as potential. We cannot for any great length of time be made the victims of extortion by trusts if their methods are open. We shall net long be charged more than a fair profit if their profits are known. High prices and big profits, if known to the public, will surely bring that competition which, through all history, has saved us, and which is as certain in its operation as natural forces. Cap- ital will as surely be attracted to enterprises known to be profitable as the needle of the compass is sure to be at- tracted to the north. This is so, even although new estab- lishments are not really needed for productive purposes. Knowledge is power to those who seek to ward off monop- oly, but popular ignorance of their profits is the great secret of the trusts' occasional ability to charge undue prices. Publicity by officers and directors and promoters of all our great corporations may not be a complete cure, but it is sure to be one of the most effective remedies for all the evils of trusts. It will unquestionably restrict the creation and establishment of all those trusts whose purposes are to plunder the community and to fleece investors; probably half of the trusts that now exist would never have been formed had there been publicity. It will counteract all the dangerous possible tendencies of the trusts which are honestly organized as means of cheaper and more abundant production, and it will enable them the better to serve their true purpose. It will be a protection to the shareholder and to the investor; it will bo a "body-blow," even if not a doath-blow, to extortionate prices; it will be the stimulus to hi-rher wages and to better prices for raw materials; it Avill ho. the certain preventive of railroad discrimination and of all special favoritism; and the effective eurb upon The Remedy for the Evils 329 every atteiiijit hy corporations to corrupt lo,<]fislatiircs and public ollicial.-. There is liardly an evil either those in- lierent or supposedly inherent iii trusts, or those incidental to them which full and eom})lete publicity will not do much to remedy, even ii' it doe.- not cui-c completely. A step, then, of immediate practical importance, a rem- edy that, in the present liirht, we should emjdoy for trust evils one that permits the continuance of the tiniverftal tendency to consolidation which has so far always brought success to industry and which means cheap production and distribtition, and yet one that holds us hack from tlie social- ism wliicii would strike down iiulividujilism is {hv. remedy of publicity. l)eniosthen':^s. when asked what arc the tlirce j^rcat essentials of oratory, replied, '' First, action; second, action; third, action."' If asked what is the remedy for the .irreat evils, iTidustrial, social and political, which are inherent or incidental to trusts, our answer would be, '' First, public- ity; second, publicity, third, ])ublicity,"' the remedy which is most effective in itself and the remedy wliicli ahnie can suggest the fourth and all others that may be needed. Appendix A Till'] FEDERAL AXTl-TRUST ACT, COMMONLY KNOWN AS THE SHERMAN ACT. 'J'his act is (MUitled, "'An act to protect trade and com- nierce against unlawful unrestraints and monopolies." It was a])proved .July "id. :1. or (-(mspiriU'v. in icst raiiil, of trade or coninierce among tho ~('\i'ral states or with forei^'ii nations, is hereby declared to be illegal. I'lvery person who siiall inak<' any such contract or en- f^'age in any siu-h eoinhination or coiispiracy shall be deemed guilty of a misdemeanor, and. on conxiction thereof, shall be punished by tine not exceeding five thousand doHars. or by imprisonment not exceeding one year, oi- by both said punishments, in the discretion of ttie court. Sfc. 2. K\('ry jierson who shall monojioiize or attempt to mon- opolize, or combine or conspire with any other person or per- sons to monopolize any part of the trade or commerce among the several states or with foreign nations, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by lint* not exceeding ti\e thousand dollars, or by imprisonment not ( xcecding oiu> year, or by both said punisliments, in the discretion of the court. Si:r. ;{. lOvciy contract, combination in form of trust or other- wise, ov cse of creatiiifr. establishing or maintaining a mono])oly within this state, of the manufacture, jjroductiou or sale of any such article or commodity, the fife ]iuisuit in this state of any lawful lju-;ines^. trade or occupation, is or may he restricted or jirevented. is hereby declared t(_ l)e against public policy, illegal and void. Six'. '2. Kvery person or cor})oration, or any oflicer or agent ihcrcof, \s ho .-hall make, or attempt to make, or ent^-r into, any such contract-, agreement, arrangement or combination, or \\ lu), within this stale, shall do any ad pursuant thereto, or in. towai'd or for the con^uuniiation thereof, w lu rcvi'r the same Tuay have been made, is guilty of a misdemeanor, and on conviction thereof 335 336 Appendix C shall, if a natural person, be punished by a fine not exceeding five thousand dollars, or by imprisonment for not longer than one year, or by both such fine and imprisonment; and if a corporation, by a fine of not exceeding five thousand dollars. Sec. 5. Whenever the attorney-general deems it necessary or proper to procure testimony before beginning any action or pro- ceeding under this chapter, he may present to any justice of the supreme court an application in writing for an order directing such persons as the attorney-general may require to appear be- fore a justice of the supreme court, or a referee designated in such order, and answer such relevant and material questions as may be put to them concerning any alleged illegal contract, ar- rangement, agreement or combination in violation of this chapter; if it appears to the satisfaction of the justice of the supreme court, to whom the application for an order is made, that such an application is necessary, then such an order shall be granted. . . . Sec. C. (As amended * in 1899 by the so-called Donnelly Law.) No person shall be excused from answering any ques- tion that may be put to him, or from producing any books, papers or documents, on the ground tliat tlie testimony or evi- dence, documentary or otherwise, required of him may tend to incriminate him; but no person shall be prosecuted in any crimi- nal action or proceeding, or subject to any penalty or forfeiture for or on account of any transaction, matter or thing concern- ing which he may testify or produce evidence, documentary or otherwise, before said justice or referee appointed on order for his examination, or in obedience to the subpoena of the court or referee acting under such order or either of them, or in any such case or proceeding. * It is under the above sections 5 and 6 that proceedings are j)cnding for an examination of the officers of the American Ice Co. before Referee Nussbaum. Before amendment, sec- tion (i jiermitted such examinations as hereinabove provided for, and declared that no evidence which a jjcrson was compelled to give in such proceedings could be used against him in any subse- fjuent criminal prosecution. It was held by the New York courts that this did not sufficiently comply with the constitutional pro- visions against compelling a i)erson to incriminate himself; hence tlie amendment as above, declaring that persons testifying in these ])r(j(eedings sliall liave full immunity from criminal prosecu- tion fur acts as to which their testimony relates. Appendix D LIST OF xiXTI-TRUST LAWS Title. Date of Enactmpnt. The Federal Aiiti-Tnist Act Tiily 2, 1890. Alabama liisurauee Aet February 18, 1897. Arkansas Anti-Trust Act March 16, 1897. California Cattle Trust Act February 27, 1893. Delaware Life Insurance Law February 15, 1891. Florida Lej^islatlon Relatinj^ to Trusts and ^Monopolies for tlie Control of Trade in Cat- tle rune 11, 1897. Ceorj^ia Anti-Monopoly Act December 23, 1896. Illinois Act rrohibitiiifj Fools. Trusts and Combines June 10, 1897. Indiana Anli-Trust Act :March 5, 1807. Iowa Anti-Tool and Trust Law May 6, 1890. Kansas Law Prohibitinp; Trusts ^March 8, 1897. Kentucky Law Proliibiting Fools, Trusts and Consjiiracies :\Iay 20, 1890. Louisiana Law for tlie Froliibition of Trusts and Combinations in Restraint of Trade. .. .Tiily 7. 1892. Maine Anti-Trust Law March 7, 1889. ?tli(lii7-tce. hy THE BAKER & TAYLOR CO., PrnMBHERS, 5 AND 7 East Sixteektu St., New York, BAKER ^ TAYLOR CO: S PUBLICATIONS An Epitome of the English Language of To-day The Students' Standard Dictionary an abridgment of the famous Funk & Wagnalls' Standard Dictionary. Moderate sized, but full, easily handled, low-priced. Contains 923 pages, 60,000 words, 1,225 illustrations. Incomparably the newest and best Dictionary in existence for the every-day use of English-speaking people. 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