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diff --git a/21837-8.txt b/21837-8.txt new file mode 100644 index 0000000..c25d02b --- /dev/null +++ b/21837-8.txt @@ -0,0 +1,8196 @@ +Project Gutenberg's Monopolies and the People, by Charles Whiting Baker + +This eBook is for the use of anyone anywhere at no cost and with +almost no restrictions whatsoever. You may copy it, give it away or +re-use it under the terms of the Project Gutenberg License included +with this eBook or online at www.gutenberg.org + + +Title: Monopolies and the People + +Author: Charles Whiting Baker + +Release Date: June 14, 2007 [EBook #21837] + +Language: English + +Character set encoding: ISO-8859-1 + +*** START OF THIS PROJECT GUTENBERG EBOOK MONOPOLIES AND THE PEOPLE *** + + + + +Produced by Audrey Longhurst, LN Yaddanapudi and the Online +Distributed Proofreading Team at https://www.pgdp.net + + + + + + + + + +MONOPOLIES AND THE PEOPLE + +BY CHARLES WHITING BAKER, C. E. +ASSOCIATE EDITOR OF "THE ENGINEERING NEWS" + + +NEW YORK & LONDON +G. P. PUTNAM'S SONS +The Knickerbocker Press +1889 + + +COPYRIGHT BY +G. P. PUTNAM'S SONS +1889 + +The Knickerbocker Press +Electrotyped and Printed by +G. P. Putnam's Sons + + +TO ALL THOSE WHO LOVE TRUTH AND JUSTICE AND EQUITY, WHO +VALUE OUR HERITAGE OF LIBERTY AND PEACEFUL FRATERNITY, +AND WHO ARE WILLING TO UNITE IN UPHOLDING +AND DEFENDING THE COMMONWEALTH--THAT +PRESERVER AND PROTECTOR OF THE RIGHTS +OF THE WHOLE PEOPLE--THE AUTHOR +DEDICATES THIS WORK. + + + + +PREFACE. + + +In the following pages it has been my endeavor to present, first, the +results of a careful and impartial investigation into the present and +prospective status of the monopolies in every industry; and, second, to +discuss in all fairness the questions in regard to these +monopolies--their cause, growth, future prospects, evils, and +remedies--which every thinking man is to-day asking. + +The first part of this task, the presentation of facts with regard to +existing monopolies, may seem to the well informed reader to be +imperfectly done, because of the host of powerful and important +monopolies of every sort that are not so much as mentioned. But I have +deemed it most important that the broad facts concerning monopolies +should be widely known; and I have, therefore, aimed to present these +facts in a readable and concise way, although, in so doing, only a few +of the important monopolies in each industry could be even mentioned. It +is to be hoped that no one will underrate the importance of the problem +of monopoly, or question the conclusions which I have reached, because +of these omissions. To any such readers who may not be satisfied from +the facts hereafter given that monopolies are the salient feature of our +present industrial situation, and, moreover, that they have come to +stay, I would recommend a careful perusal of the financial and trade +journals for a few months. + +Wherever possible I have presented actual statistics bearing on the +question at issue; but as regards trusts, monopolies in trade, mining, +labor, and in fact nearly all monopolies, there are no statistics to be +had. Nor can any be obtained, for it would be absurd for the government +to collect statistics of the operation of that which it pronounces +illegal but makes no effort to punish. + +It may increase the respect of some readers for the conclusions I have +reached, to know that it was a practical acquaintance with monopolies +rather than any study of economic theories which led me to undertake the +present work; that, at the time I undertook it, I was wholly undecided +as to the proper remedies for monopolies, and was quite willing to +believe, if the facts had proved it to me, that they were destined to +work their own cure; and that the rapid growth and increase of +monopolies in very many industries, in the few months since these +chapters were written, have furnished fresh evidence that my conclusions +have not been amiss. + +Finally, I wish to place all emphasis on the fact that all the great +movements toward genuine reform must go hand in hand. The cause of the +people is one cause, and those who work for honest officers in our +government, pure elections, the suppression of crime and pauperism, the +mental and moral elevation of men and women, are striking harder blows +at monopolies than they may realize. But if they desire to hasten the +day of their success, they must bring the great masses of the people to +comprehend that these movements aim at nothing less than their complete +deliverance; and that the reformers who labor so earnestly to make our +government purer and its people nobler, heartily desire also to cure the +evils of monopoly, and to serve the cause of the people in its every +form. + +CHARLES WHITING BAKER. + +TRIBUNE BUILDING, New York City. +June, 1889. + + + + +TABLE OF CONTENTS. + + +I. THE PROBLEM PRESENTED 1 + A new use for the word "Trust," 1 + The people's knowledge of trusts, 2 + Remedies for trusts, 2, 3 + Trusts a species of monopoly, 3 + The problems which monopoly presents, 4 + An impartial investigation necessary, 4 + The question to be discussed from different standpoints, 5 + A scientific method for solving the problem, 5. + +II. TRUSTS AND MONOPOLIES IN MANUFACTURING INDUSTRIES 7 + Definition of a trust, 7 + The first trusts and their successors, 8 + Description of the organization of the linseed-oil trust + by one of its founders, 9 + The action of trust-makers perfectly natural, 14 + Actual effect of trusts upon the public, 15 + Profits of the linseed-oil trust, 16 + Decreased market for goods controlled by trusts, 17 + Control of the labor market by trusts, 17 + The causes which have produced trusts, 18 + Production on a large scale the most economical, 20 + The Standard Oil Trust's defence of its work, 21 + Its profits, and the cause of its low prices, 22 + Industries in which trusts have been formed, 23 + Andrew Carnegie's views of trusts, 24 + The trust at once a benefit and a curse, 25. + +III. MONOPOLIES OF MINERAL WEALTH 26 + Mining, the first monopolized industry, 26 + Monopolies in iron-ore production, 27 + Monopolies in other metals, 28 + The French Copper Syndicate, 29 + The effect of its action on consumers of copper, 31 + Profits of the richest copper mines, 32 + Anthracite-coal production, 33 + The anthracite-coal pool, 34 + Coal monopolies in the West and South, 36 + Monopolies in petroleum and natural gas, 40 + Other monopolies of this class, 41. + +IV. MONOPOLIES OF TRANSPORTATION AND COMMUNICATION 42 + Transportation only a necessity in modern times, 42 + The importance of railway traffic, 43 + Railway transportation a vital necessity, 43 + Shipping points where competition exists very few, 44 + Consolidation and its benefits, 45 + Intensity of competition in railway traffic on trunk lines, 47 + Its inevitable effect, 48 + The necessity of pools or traffic agreements, 49 + Their history, 50 + The Interstate Commerce law, 51 + The effect of stimulating competition, 52 + The evils charged to railway monopolies, 52 + Evils due to wasteful competition, 53 + Monopolies in other forms of transportation, 54 + Monopolies on natural highways, 56 + Monopolies of bridges, 56 + The telegraph monopoly, 56. + +V. MUNICIPAL MONOPOLIES 59 + City dwellers dependent upon monopolies, 59 + Suburban passenger traffic, 59 + Street-railway monopolies, 60 + Water-supply monopolies, 61 + Competition and monopoly in gas supply, 62 + T. M. Cooley on municipal monopolies, 64 + Prices, cost, and profits of gas supply, 64 + Monopolies in electric lighting and in telegraph, telephone, + and messenger service, 66 + Other monopolies beneath city pavements, 67 + Monopolies in railway terminals, 68 + Monopoly in real estate, 69. + +VI. MONOPOLIES IN TRADE 71 + Absolute control not essential to a monopoly, 71 + History of trade monopolies, 72 + Monopolies in country retail trade, 73 + In city retail trade, 74 + In wholesale trade, 75 + Co-operation of trusts and trade monopolies, 75 + Monopolies in the grocery trade, 76 + Monopolies in meat, 77 + A general view, 78 + Monopolies among purchasers, 78 + "Corners" and monopolies, 80 + Commercial exchanges and speculation, 82 + Warehouse monopolies, 82 + Insurance monopolies, 83 + Trade monopolies artificial, 84 + Their unjust acts, 85 + +VII. MONOPOLIES DEPENDING ON THE GOVERNMENT 87 + Government monopolies in ancient times, 87 + Government monopolies established for the benefit of the + people, 88 + Copyrights, 88 + Patents, 89 + Evils arising from the patent system, 90 + Monopolies based on patents, 91 + The Bell telephone monopoly, 92 + Government subsidies, 94 + Relation of the tariff to monopolies, 95 + Origin of the protective tariff, 96 + The tariff a secondary cause of trusts, 98 + Reductions in the tariff as a remedy for trusts, 99 + Monopolies carried on directly by Government, 100. + +VIII. MONOPOLIES IN THE LABOR MARKET 102 + Classes of labor considered, 102 + Monopolies of capital and monopolies of labor compared, 103 + Locomotive engineers' strike on the Chicago, Burlington, and + Quincy Railway, 105 + Effect of labor monopolies upon the people, 105 + The history of labor, 107 + The first trade-unions, 108 + Laws against them, 109 + Labor organizations from the laborer's standpoint, 110 + "An injury to one the concern of all," 110 + Preserving the self-respect of the laborer, 111 + Repeal of unjust laws, 113 + A defence for the action of labor monopolies, 114 + The underlying cause of labor monopolies, 116 + Limits to the power of labor monopolies, 118. + +IX. MONOPOLIES AND COMPETITION IN OTHER INDUSTRIES 119 + Occupations of the people, 119 + Proportion of the people in any way benefited by monopolies 120 + Proportion deriving the principal profits from monopolies, 122 + Monopolies in the professions, 123 + Monopolies among the servant classes, 124 + Agricultural industry, 125 + Can monopolies be established there? 126 + A proposed farmers' trust, 127 + The Grange and the Farmers' Alliance, 128 + Killing the competition of oleomargarine, 129 + Monopolies among agricultural laborers, 130 + Proportion of the people benefited and proportion injured by + monopolies, 130 + Monopolies in the use of capital impossible, 131. + +X. THE THEORY OF UNIVERSAL COMPETITION 133 + The general effect of monopolies, 133 + Two sorts of remedies suggested, 134 + Study of the laws of competition necessary, 135 + The growth of civilized society outlined, 136 + The interdependence of modern society, 137 + The theory of civilized industry, 137 + Supply and demand and the unequal rewards of men's + industry, 138 + The theoretical perfection of our social system, 141 + "Competition the life of trade," 142 + The orthodox school of political economy, 143. + +XI. THE LAWS OF MODERN COMPETITION 145 + Competition defined, 145 + Competition in corn-raising, 146 + In paper-making, 147 + In railway traffic, 149 + The laws governing competition deduced, 150 + Monopoly defined, 155 + Natural agents in production, 156 + Different classes of competition, 157 + The three salient causes of monopoly, 159 + The proper remedy for monopoly, 160. + +XII. THE EVILS DUE TO MONOPOLY AND INTENSE COMPETITION 162 + The theoretical perfection of human industry, 162 + Over-production not a fault of production, 163 + The ideal distribution of wealth, 164 + The law of supply and demand, 165 + Evils due to monopoly: the congestion of wealth, 166 + How great fortunes are made, 168 + Monopolized industries and speculation, 169 + How monopolies reduce the income of small capitalists, 170 + Monopolies the cause of over-production, 171 + Monopolies and poverty, 173 + The Church and the laboring classes, 173 + Intemperance, 174 + Reforms must go hand in hand, 174 + How monopolies keep men in idleness, 175 + The waste of competition, 176 + Waste due to parallel railway lines, 177 + The waste of competition and financial crises, 178 + Wasteful competition in other industries, 179 + Waste by strikes of labor monopolies, 180 + False remedies for the disease, 181. + +XIII. AMELIORATING INFLUENCES 183 + Two classes of palliatives to the evils of monopoly, 183 + Reduction in price to increase demand, 184 + The influence of Christianity, 185 + Its promise as a remedy, 186 + A social system based on nobler attributes than selfishness, 187 + The tendency of modern society, 188 + The possibilities of altruism, 189 + Direct and indirect charities, 189 + The benevolent spirit in business enterprises, 190 + The proper attitude of the Church toward monopolies, 191 + The fraternal spirit opposed to competition, 192 + Monopolists to be judged charitably, 193 + Unjust judgment of labor monopolies, 194 + Enmity toward monopolists no cure for monopoly, 195. + +XIV. REMEDIES FOR THE EVILS OF MONOPOLY 196 + Schemes for bettering society, 196 + The doctrine of individualism, 197 + The doctrine of societism, 198 + The defects of each when unmodified by the other, 199 + Societism a necessary accompaniment of civilization, 200 + The interdependence of mankind, 201 + Does societism threaten liberty? 201 + Government for the benefit of the whole people, 202 + The dangers of government action to aid special classes, 202 + Remedies for monopoly: the creation of new competitors, 204 + Its practical result, 205 + Remedies by prohibiting consolidations, 205 + Their inevitable effect, 206 + Government the only agent to prevent monopoly, 207 + Why direct action by the government is impossible, 208 + Indirect action and its probable results, 208 + The Interstate Commerce law as an example, 209 + The proper remedy for monopoly not abolition, but control, 210 + The relative advantages of government and private management + of industry, 211. + +XV. THE SOVEREIGN RIGHTS OF THE PEOPLE AND OF THEIR + REPRESENTATIVE, THE GOVERNMENT 213 + Questions brought up by the preceding conclusion, 213 + The rights of property holders, 214 + Property in the products of labor an inherent right, 215 + Property in natural agents and public franchises a matter of + expediency, 216 + Eminent domain over natural agents still held by the public, 217 + The laws of competition applicable to determine when this + right should be exercised, 220 + Absolutely perfect equity impossible, 221 + Does private ownership of land work injustice? 222 + Fundamental difficulties in dealing with monopolies not + dependent on natural agents, 223 + Why a remedy for their evils is essential, 224 + The basis of the people's authority over these monopolies, 225 + Government regulation with private management the only + feasible plan, 225. + +XVI. PRACTICAL PLANS FOR THE CONTROL OF MONOPOLIES 227 + Economists should unite on the principles already propounded, 227 + Practical details a matter of opinion, 227 + A plan for the equitable and permanent adjustment of the + railway problem, 228 + The ownership and operation of the railways, 229 + Their securities as investments and for use in connection + with the currency, 230 + Readjustment of outstanding securities, 231 + Lending the government's credit to private corporations, 232 + How rates of fare and freight should be fixed, 233 + How the incentive to economy is retained, 234 + How to avoid strikes, 237 + Principles to be observed in establishing government control + of monopolies, 238 + Plans for the control of mineral monopolies, 238 + State ownership with private operation, 239 + Plans for controlling municipal monopolies, 240 + The control of other monopolies, 244 + The dangers of special legislation, 244 + Government control of manufacturing enterprises not feasible, 245 + Taking trusts within the pale of the law, 247 + Enforcing publicity, 247 + Enforcing non-discrimination, 248 + Direct action to prevent extortion by the monopoly, 251 + Potential competition to prevent extortion, 252 + Reform of corporation laws, 254 + The contrast between this plan for controlling trusts and + existing law, 255 + Reductions in the tariff as a remedy for trusts, 256 + Plans for the control of labor monopolies, 257 + Strikes an injury to labor, 258 + Removal of other monopolies as a cure, 258 + What shall fix the rate of wages? 259 + Cooperative ownership, 260 + Fraternal benevolence most needed here, 261 + A definite relation between monopolies and the people, 262 + Conclusion, 263. + + + + +MONOPOLIES AND THE PEOPLE + + + + +I. + +THE PROBLEM PRESENTED. + + +The word "trust," standing for one of the noblest faculties of the +heart, has always held an honorable place in our language. It is one of +the strange occurrences by which languages become indelible records of +great facts in the history of the world, that this word has recently +acquired a new meaning, which, to the popular ear at least, is as +hateful as the old meaning is pleasant and gratifying. + +Some future generation may yet be interested in searching out the fact +that back in the nineteenth century the word "trust" was used to signify +an obnoxious combination to restrict competition among those engaged in +the same business; and that it was so called because the various members +of the combination entrusted the control of their projects and business +to some of their number selected as trustees. We of the present day, +however, are vitally interested in a question far more important to us +than the examination of a curiosity of philology. We are all of us +directly affected to-day by the operation of trusts; in some cases so +that we feel the effect and rebel under it; in other cases, so that we +are unconscious of their influence and pay little heed to their working. + +It is but a few months since public attention was directed to the +subject of trusts; but, thanks to the widespread educational influence +of the political campaign, at the present day the great proportion of +the voters of the country have at least heard of the existence of +trusts, and have probably some idea of their working and their effect +upon the public at large. They have been pointed out as a great and +growing evil; and few speakers or writers have ventured to defend them +farther than to claim that their evil effects were exaggerated, and +predict their early disappearance through natural causes; but while +remedy after remedy has been suggested for the evil so generally +acknowledged, none seems to have met with widespread and hearty +approval, and practically the only effect thus far of the popular +agitation has been to warn the trust makers and trust owners that the +public is awakening to the results of their work and is likely to call +them to account. + +The truth is, as we shall see later, that it is a difficult matter to +apply an effective remedy of any sort to the trusts by legislation, +without running counter to many established precedents of law and +custom, and without serious interference with what are generally +regarded as inalienable rights. Yet we are making the attempt. Already +legislative and congressional committees have made their tours of +investigation, and bills have been introduced in the legislatures of +many of the States, and in Congress, looking to the restriction or +abolition of trust monopolies. + +It is the wise surgeon, however, who, before he takes the knife to cut +out a troublesome growth, carefully diagnoses its origin and cause, +determines whether it is purely local, or whether it springs from the +general state of the whole body, and whether it is the herald of an +organic disease or merely the result of repressed energies or +wrongly-trained organs. So we, in our treatment of the body politic, +will do well to examine most carefully the actual nature of the diseases +which we seek to cure, and discern, if we can, the causes which have +brought them on and tend to perpetuate them. If we can discover these, +we shall, perhaps, be able to cure permanently by removing the ultimate +cause. At any rate, our remedies will be apt to reach the disease far +more effectually than if they were sought out in a haphazard way. + +The crudest thinker, at the first attempt to increase his knowledge of +the general nature of trusts, discovers that the problem has a close +connection with others which have long puzzled workers for the public +good. Trusts ally themselves at once in his mind with monopolies, in +whichever form he is most familiar with them, and are apt to be classed +at once, without further consideration, as simply a new device for the +oppression of the laborer by the capitalist. But the man of judicious +and candid mind is not content with any such conclusion; he finds at +once, indeed, that a trust is a combination to suppress competition +among producers of manufactured goods, and he calls to mind the fact +that other combinations to suppress competition exist in various other +lines of industry. Surely when the governing motives are so similar, the +proper remedies, if remedies are needed, cannot be greatly unlike. And +though, taking the country as a whole, trusts have occupied more +attention lately than any other form of monopoly, the problem of +railroad monopoly is still all-absorbing in the West; in every city +there is clamor against the burdens of taxation levied by gas, +electric-light, street-railway, and kindred monopolies; while strikes in +every industry testify to the strength of those who would shut out +competition from the labor market. These and similar social and +industrial problems are quite as important as the problem of trusts, and +their solution is becoming every day more urgent and necessary. If we +neglect them too long, or carelessly adopt some unsuitable or unjust +remedy, who knows the price we may pay for our folly in blood and +treasure? + +The problem before us, then, as we see it from our present standpoint, +is the problem of monopoly. What is it? Whence comes it? What are its +effects? And, most important of all, what ought we to do about it? +Surely questions whose correct answer is of such importance to the +welfare of each person and to the very existence of society demand the +careful consideration of every thinking man. + +Let us then take up this problem and give it the fairest and most candid +investigation possible. In order to do this, let us remember that _the +truth_ is the object of our search, and that it will be necessary, if +the conclusions from our investigation are to be of value, that we +divest ourselves, so far as possible, of all preconceived opinions +founded, perhaps unconsciously, on the statements or evidence of +incompetent authorities, and also of all prejudices. Let us, in +searching for facts and principles, examine with impartiality the +evidence and arguments which each side presents, and judge with candor +between them. + +The author wishes to make an earnest personal request to the reader who +is minded to follow the discussion through the following pages, that he +will in good faith attempt to do this thing: that he will lay aside for +the present his opinions already formed, as the author himself has +conscientiously aimed to do while pursuing this investigation, and give +a fair hearing to both sides of the question. A complicated machine can +only be understood when it is viewed from different standpoints. So, +here, in order to find the truth, we must examine trusts from the +standpoint of the trust maker as well as from that of the consumer; and +trade unions, from the standpoint of their members as well as from the +ground of employers and of the public at large. We shall indeed meet +much error by this method of study, but is it not proverbial that there +are two sides to every question? It will be our task to study these +opposing views and sift from them the truths for which we seek. + +In taking up now the problem before us, let us adopt the true scientific +method for its solution. We must first find out as fully as possible the +actual facts with regard to monopolies of every sort and the competition +which monopoly replaces. Next, by discussing and comparing the evidence +obtained, we may be able to discover the natural laws by which +competition and monopoly are controlled; and finally, with our knowledge +of these, we will try to discover both the source of the evils which vex +us and the proper methods for ameliorating, curing, or preventing them, +whichever may be found possible. + +Such is the outline of the investigation before us, which it may as well +be said here could easily be extended and amplified to fill many +volumes. The author has preferred to prepare the present volume without +such amplification, believing that the busy men of affairs, to whom a +practical knowledge of the subjects herein treated is most essential, +have, as a rule, no leisure for the extended study which the volumes +into which the present one might easily be expanded would require. He +trusts, however, that brevity will not be found wholly incompatible with +thoroughness; and that the fact that much which might have properly been +included in the book is omitted, will not be taken as a necessary +indication that the conclusions arrived at are without value. + + + + +II. + +TRUSTS AND MONOPOLIES IN MANUFACTURING INDUSTRIES. + + +In common use the word "trust" is at present rather loosely used to +denote any combination formed for the purpose of restricting or killing +competition. Properly speaking, however, a trust is a combination to +restrain competition among producers, formed by placing the various +producing properties (mills, factories, etc.) in the hands of a board of +trustees, who are empowered to direct the operations of production and +sale, as if the properties were all under a single ownership and +management. + +The novel characteristic of the trust is not the fact that it is a +monopoly, but that it is a monopoly formed by combining several +competitors according to a new plan. The process of placing property in +the hands of trustees is familiar to every business man. In the +formation of a trust the different firms or companies who have been +competing with each other in the production and sale of goods agree to +place the management of all their several properties in the hands of a +board of trustees. The powers of this board and its relation to the +owners of the various properties are ingeniously devised to evade the +common law, which declares that contracts in restraint of competition +are against public policy, and illegal. + +The first of the modern trusts was the Standard Oil Trust, which was a +combination formed among several of the refiners of crude petroleum in +the States of Pennsylvania and Ohio in the year 1869. The original +combination grew out of the control of certain important patents +connected with the process of refining. It pursued its course for a +number of years without attracting much attention outside of the centre +of its operations; but of late years so much has been published in +regard to it that the very word "Standard" has come to be almost a +synonym for monopoly. It is probable that certain branches of the iron +and steel trade were the next to be combined by means of a trust, but as +these were arrangements between private firms, not much information as +to the time of their origin has reached the public. The second great +trust to attract general public attention was the American Cotton Oil +Trust, in which some of the same men who have so successfully engineered +the Standard Oil combination are heavily interested. These two great +trusts, the Cotton Oil and the Standard, have attracted widespread +attention, and, to a certain extent, the public has become familiar with +their organization and plan of operation; but popular feeling on the +subject was not fully aroused until 1887, when the newspapers of the +country made generally known the fact that the trust principle of +combination was being rapidly adopted by the manufacturers of a large +number of important lines of goods. The effect which these monopolies +were believed to have upon the public welfare was pointed out by writers +and speakers, and Congress and the State Legislatures were besought to +investigate these combinations and seek to suppress them. Meanwhile it +seems to be true that the popular agitation has had no effect in +lessening the number of trusts, or checking their formation and growth; +and they continue to increase and to gather their profits, while the +public impotently wonders what it is going to do about it. Let us be +careful, however, to make no assumption that the trust is injurious to +the public at large. That is a matter which is before us for +investigation. + +It is safe to assume that the reader is somewhat familiar with the +general charges which have been brought against the trusts; but even if +this side of the story has not been heard, it is not unfair to look at +them first from the standpoint of the men who make and manage them. In +order to do this, suppose we select some particular trust which will +serve as a type, and imagine that some frank, candid manufacturer, who +is a member of this trust, comes before us to give an account of its +formation and operations. This man comes, we suppose, not as an +unwilling informant, or as one on trial. He is frank, honest, and +plain-spoken. He talks as man to man, and gives us, not the specious +argument of an eloquent pleader in defence of trusts, but just that view +of his trust and its work that his own conscience impels him to take. +Certainly, then, he deserves an impartial hearing. + + A number of years ago the principal manufacturers of linseed oil in + the United States formed an association. It was started largely for + social ends, and was very successful. Business men are generally + most interested in their own plans and operations; and those who + are familiar with the same topics and have similar interests and + purposes are apt to make agreeable companions for each other. We + discussed many points connected with the management of our business + at the meetings, and by interchanging with each other our views + and experiences with different devices, methods of management, + etc., we were able to get much valuable information, as well as + social pleasure, from meeting one another. + + Now within the past few years things have been going from bad to + worse with the manufacturers of linseed oil. The long and short of + it all was that the margin between the cost of the raw seed and + running our mills, and what we could get for the oil cake and the + linseed oil in the market, has grown exceedingly narrow. It's hard + to tell just what has caused it. They say over-production; but what + has caused the over-production? One thing that may have had + something to do with it is the new mills they have been putting up + in the Northwest. Many of the Eastern mills used to get large + quantities of seed from Iowa; but they are building cities out + there now, as well as raising flax-seed, and when they were booming + some of those cities they would raise heavy bonuses in aid of new + enterprises. Among these were some great linseed oil mills, which + have loaded up the market pretty heavily of late years; so that not + only has the price sagged down, but we have all had to work to get + rid of our stocks. The firms which had the best mills and + machinery, and were in a position to get their seed reasonably and + put their goods on the market with least expense for + transportation, etc., have been making a small profit over and + above their expenses. But some of the works which had to bring + their seed a long way, and which haven't quite as good machinery as + can be had now, were in a bad way. There were some of the oldest + houses in the trade among them, too, and with fine men at their + head. It was too bad to have them go under. They tried to cut down + expenses, but strikes and trouble with their men prevented their + saving much in that way. Then there was one item of expense which + they had to increase instead of cutting down: that was the cost of + marketing. Competition was so fierce, that, in order to keep up + their trade, they had to spend more on salaries of expensive + salesmen, and in advertising and pushing their goods, than they + would dream of ordinarily. + + It seemed too bad to cut each other's throats in that way, for that + was what it amounted to, and when the association met,--or what was + left of it, for the business rivalries had grown so bitter that + many of the former personal friendships between the members had + become strained and one after the other had dropped out,--the + situation was discussed by the few members who met together. It + was discussed earnestly, too, by men who felt an interest in what + they said, because unless some remedy could be devised, they had + got to sit still and watch the savings of a lifetime slip through + their fingers. One thing was very clear to all. Though competition + was as sharp as any one could possibly wish, the public was not + getting such a wonderful benefit after all. Prices were not so very + much lower for oil, nor higher for seed. It was the selling expense + which had run up to a ruinous figure; and on one point all the + members were unanimous,--that if all the firms in the trade could + only work together in harmony in marketing their goods, they could + save enough in salesmen's salaries, etc., to make a great + difference in the profit-and-loss account without affecting the + selling prices in the market one penny. + + Another very important matter, which we had to handle pretty + tenderly in our discussions, was that of adulteration. I must + confess that a good many firms in the trade, who used to be above + any thing of the sort, have been marketing some goods in the past + few years which were not exactly the "pure linseed oil" which they + were labelled. It's a mean business--adulteration,--but not many of + our customers ever test their purchases. The one thing they are apt + to look at is price, for they are buying to sell again; and when + rivals are selling a cheaper oil that seems just as good until it + is laid on as the pure linseed that you are obliged to ask a higher + price for, the temptation to meet them at their own game, rather + than lose your old customers, is a very strong one. Certainly, when + competition took this form, it hurt the public even more than it + hurt us. When people wish to buy pure linseed oil they ought to + have some prospect of getting it, instead of getting an adulterated + mixture of various substances; but at the rate competition was + running, there seemed to be small prospect that there would be any + really pure linseed oil put on the market in a short time. We have + often discussed the possibility of stopping these adulterations, + but it was a hard matter to cure by mere mutual agreement. How do I + know what my competitor in a city a hundred miles away, does with + the vats in his cellar after working hours, even if he has solemnly + agreed not to adulterate his goods? For I must confess that there + are a few men in our trade who are as tricky as horse jockeys. + + Quite a number of improvements have been patented in linseed oil + machinery in the past twenty years. Nothing wonderful, but things + that effect little economies in the manufacture. We could have done + without them; but when a few firms took them up, of course the rest + had to follow suit, or fall behind in the race of competition. We + have had to pay a heavy royalty on some of these machines, and it + has been rather galling to count out our hard-earned dollars to the + company which has bought up most of the patents, and is making 100 + per cent. a year on what it paid for them, with no risk, and + without doing a stroke of work. Now if we manufacturers could work + in harmony, we could make this company come down from their high + horse, and they would have to ask a reasonable price for their + machines. But we could do more than this. It stands to reason that + a good many improvements will be made in our machinery in the + future. We don't object to paying a fair price to any inventor who + will work out these new ideas for us; but it does seem unjust for + him to go and sell them to some outside company for a song, and + have that company bleed the users of the improvement for every + ounce they will stand. Now, by working together, we can refuse to + pay royalties on any thing new which comes up; but require, + instead, that any new patent in our line be submitted to a + committee, who will examine and test it; and if they find it to be + of value, will purchase it for the use of all members of the + association. + + Some of the members thought this was as far as we ought to go. They + were opposed to "trusts" on principle. But the great majority saw + so clearly where we could continue to better ourselves that they + became enthusiastic over it. + + Some speculators, in years of short crops, have occasionally tried + to "corner" flax-seed in a small way. We could refuse to buy except + directly from the growers, and that branch of speculation would be + a thing of the past. We have sent out some pretty sharp men as + buyers, and sometimes they have bought flax-seed in some of the + backwoods districts at very low rates. At other times, two buyers + from rival firms have run counter to each other, and paid prices + larger than their employers could really afford. But with our + combination, we cannot only fix uniform prices for seed, but we can + send out only enough buyers to cover the territory; and the work of + buying is reduced to simply inspecting and weighing the seed. + + Now another thing: Of course, not every manufacturer in the + business owns his mills. It is a fact that since the close times of + the past few years the majority of the firms are carrying mortgages + on their mills; and some of them in the West are paying as high as + eight or ten per cent. interest. But with the combined capital of + all the firms in the trade at our back, we can change all that. + Either by a guaranty, or by assuming the obligations, we can bring + the interest charges on every mill in the association down to four + or five per cent. at most. + + We have been paying enormous rates to fire insurance companies. + They are not as familiar with our business as we are ourselves, and + they don't know just how much risk there really is; so they charge + us a rate which they make sure is high enough. We can combine + together and insure ourselves on the mutual plan; and by + stipulating that each firm shall establish and keep up such + precautions against fire as an expert may direct, we can not only + reduce the cost of our insurance to that of our actual losses, but + we can make these a very small amount. + + It may be said that we might have done all these things without + forming any trust to control prices. But the practical fact was + that we could not. There was so much "bad blood" between some of + the different firms in the business, from the rivalry and the sharp + competition for trade, that as long as that was kept up it was + impossible to get them to have any thing to do with each other in a + business way. It was no small task to get these old feuds patched + up; but some of the best and squarest men in the business went + right into the work, and at meetings of the association, and + privately, exerted all their influence to forward this coming + together for mutual aid and protection. They did it + conscientiously, too, I think, believing that it was necessary to + save many of us from financial ruin; and that we were not bound, + under any circumstances, to sacrifice ourselves for the sake of the + public. The trust has been formed, as every one knows, and many of + the things we planned to do have been already accomplished. We have + stopped adulterations on all goods made by members of the trust; + and the improvement in the quality of linseed oil which has been + effected is an important benefit to the public. We are managing all + the works in the trust as if it were all a single property, + controlled by different managers; and the saving in expense, over + the old plan of cut-throat competition, when everybody was striving + to save himself and sink his rivals, is an enormous one. + + One thing which has caused much hue and cry, is the fact that we + have closed half a dozen mills or so. But the matter stood in this + way: these mills were not favorably situated for doing business, + all things considered; and all the mills in the country cannot run + all the time, because there are more mills in existence than are + needed to supply the market. These mills must have been closed + soon, if the trust had not commenced operations, because they could + not be run under the old regime and pay expenses. We knew we could + make the oil at a less cost in our other mills, so we concluded to + buy out the owners of these at a fair price, and shut up the works. + Prices of linseed oil have been raised somewhat, we confess; but we + claim that they had been forced down much too low, by the excessive + competition which has prevailed for a few years past. Of course + some of the most hot-headed and grasping among us, were anxious to + force prices away up, when they once realized that we had an + absolute monopoly of the linseed oil trade of the country; but the + great majority were practically unanimous in a demand for just + prices only, and the adoption of the policy of live and let live; + for trust-makers are not entirely selfish. + + We claim, moreover, that we are breaking no legal or moral law by + this action. We are, for the most part, private parties or + firms--but few corporations,--hence the attempt to abolish trusts + on the ground that the corporations composing trusts have exceeded + the power given by their charters will fail to reach our case. We + have certainly done this: we have killed competition in the linseed + oil trade; but we submit that with so many other interests and + trades organized to protect themselves from outside competition, + and control the prices at which their products are sold to the + public, we were, in self-defence and for our own preservation, + obliged to take this step.[1] + + [1] It should be explained that the above is not given as a + _bona-fide_ statement of facts concerning this especial trust, + but as a vivid description of the organization and plans of a + typical trust, from the standpoint of its owners and managers. + + Probably, too, few or no existing trusts have tried to benefit + themselves in so many different ways as we have supposed this + imaginary trust to have done. But to shorten our investigation, + the author has purposely extended the scope of this trust's + action, to bring out clearly the variety and importance of the + methods by which a trust reaps profits, aside from any advance in + the price of its product. + +If we omit the references to the especial trade, the above view of a +trust from the trust-makers' standpoint will do for almost any of the +many combinations which have been formed by different manufacturers for +the purpose of controlling production and prices. One thing is clearly +indicated in the above, and will certainly be conceded: That the men who +have formed these trusts are animated by the same motives as those that +govern humanity in general. They have, in some cases at least, known +what it was to be crowded close to the wall by severe competition. They +all at once saw a way opening by which they could be freed from the +worries and losses which had been making their business one of small and +uncertain profits, and would be set squarely on their feet with a sure +prospect for large and steady gains. It is using a common expression to +say that they would have been more than human if they had refused to +improve this opportunity. Certainly, then, in examining further the +trusts, we shall do so with no feeling of personal prejudice toward the +men who originated them and carry them on. + +As we have given a hearing to the case from the trust-makers' +standpoint, it is only fair that we should hear at equal length from the +public who oppose the trusts; but to abbreviate the investigation, let +us suppose that we are already familiar with the various charges which +are brought against the trust monopolies, and let us proceed at once to +consider the actual effect of the trusts upon the public. + +Since we have heard so much in defence of the linseed oil trust, it will +be well for us to inquire concerning the results, in which the public is +interested, which have followed its organization. During the year 1887 +(the trust was formed in January of that year) the price per gallon of +linseed oil rose from thirty-eight cents to fifty-two cents; and this +price was kept up or exceeded during 1888. That is to say, every +purchaser of linseed oil, or every one who had occasion to have +painting done, pays to the members of this trust, for every gallon of +oil that he uses, about fourteen cents _over and above_ the sum which he +would pay if competition were allowed to do its usual work in keeping +down prices. + +What profits are the members of this trust making? Let us suppose that +they were just able, at the old price of thirty-eight cents per gallon, +to pay all their running expenses and four per cent. on the capital +invested, making nothing for profits beyond a fair salary to the +managers of the business. Then the gain of fifteen cents a gallon in the +selling price is _clear profit_ to them. Now add to this the fact, which +was plainly brought out in the foregoing supposed statement by a member +of the trust, that it is possible by means of the trust to greatly +reduce expenses in many directions as well as to increase receipts, and +we begin to form some conception of the profits which this trust is +harvesting. If we wish to put the statement in figures, suppose we take +the annual consumption of linseed oil in the country at thirty million +gallons. Then the profits of the trust from the increased prices alone +will amount to four and one half million dollars per annum. + +There is another way in which trusts directly affect the public, which +has received very much less attention than it deserves. Besides the +people who use the linseed oil and pay the trust an extra fourteen cents +a gallon for the privilege, there are a great number of people who would +have used oil if the price had not advanced, but who cannot afford to do +so at the advanced price. It is a well-known fact that every increase in +the price of any article decreases the demand, and the advance in the +price of linseed oil has undoubtedly had a great effect in decreasing +the consumption of oil. So while it is undoubtedly true that _at the +trust's prices_ there are more linseed-oil mills in the country than are +needed to supply its wants, yet if the prices were lowered to the point +which free competition would fix, there would probably be demand enough +to keep all the mills running. To the trust, then, must be ascribed the +final responsibility for the stoppage of the mills and the loss of +employment by the workmen. Nor does the effect upon the labor market +stop there. From the fact that less people can afford to paint their +houses, because of the higher price of the oil, it is certain that there +will be less employment for painters; and as less paint is used, all +those interested in and employed in the paint trade are sufferers. It is +to be remembered that we are speaking of the linseed oil trust only to +make the case more vivid. The principle is general and applies equally +well to other trusts, as for instance to the loss of employment by +thousands of men working in refineries controlled by the sugar trust, in +the fall of 1888. Still another effect of this trust's action is to be +especially noted: the fact that the diminished production of oil lessens +the demand for seed; and also that in the purchase of seed, as well as +in the sale of oil, the trust has killed competition. The trust may, if +it chooses, fix uniform prices for the seed which it purchases; and the +farmer can take the prices they offer or keep his seed. Fortunately the +farmer can raise other products instead of flax-seed, and will do so if +the price is lowered by any large amount. + +One other possible mode of profit for the trusts, which, however, they +are hardly likely to engage in--from their fear of public opinion, if +for no other reason--lies in the power which they possess over the labor +market. It will probably be conceded at once that the rate of wages in +any occupation depends, among other things, upon the competition of the +various workmen who seek employment in that occupation, and also upon +the competition among those who wish to hire men to work at that +occupation. It is plain that when the competition among employers to +secure men is active, wages will rise; and when this competition falls +off, wages will fall. Now the trust is more than a combination for +selling purposes only. It is a combination of all the properties +concerned under practically a single ownership. Clearly, then, as the +various mills belonging to a single owner will not compete with each +other in the employment of labor, the mills belonging to a trust will be +no more likely to do so. Thus if it were not for the fact that the +workmen are able to take up some other employment if their wages are too +low, they would be absolutely obliged to take what wages, great or +small, the trust chose to give, and would be as dependent for their food +and clothing upon the trust as was the slave upon his master. + +The question is often asked why trusts have not been formed before, and +what the causes are which have started them up so rapidly in such varied +lines of industry. There is certainly room for much honest difference of +opinion in reference to these causes; but one cause concerning whose +influence there can be no dispute is the culmination of the change from +the ancient system of manufacturing to the modern. Let us briefly trace +the manner in which this branch of civilization has grown: In the most +primitive state of existence, each man procures and prepares for himself +the few things which he requires. With the first increase in +intelligence those of most skill in making weapons and preparing skins +make more than they require for themselves, which they exchange with +others for the products of the chase. The next step is to teach to +others the special skill required, and to employ them to aid the chief +workman. Conditions analogous to these existed down to the end of the +last century. The great bulk of all manufacturing was done in small +shops, each employing only a few workmen; and the manufacturer or master +workman labored at the side of his journeymen and apprentices. The +products of these little workshops were sold in the country immediately +adjacent. Of course the number of these scattered shops was so great +that the possibility of uniting all the manufacturers in any one trade +into a single organization to prevent competition among them, was beyond +the thoughts of the most visionary. + +The present century has seen three great economic wonders accomplished: +the invention of labor-saving machinery, greatly multiplying the +efficiency of labor in every art and trade; the application of steam +power to the propulsion of that machinery; and the extension over all +civilized lands of a network of railway lines, furnishing a rapid, safe, +and miraculously cheap means of transportation to every part of the +civilized world. In order to realize the greatest benefit from these +devices, it has become necessary to concentrate our manufacturing +operations in enormous factories; to collect under one roof a thousand +workmen, increase their efficiency tenfold by the use of modern +machinery, and distribute the products of their labor to the markets of +the civilized world. The agency which has acted to bring about this +result is competition. The large workshops were able to make goods so +much cheaper than the small workshops that the latter disappeared. Then +one by one the large workshops were built up into factories, or were +shut up because the factories could make goods at less cost. So the +growth has gone on, and each advance in carrying on production on a +larger scale has resulted in lessening the cost of the finished goods. +Competition, too, which at first was merely an unseen force among the +scattered workshops, is now a fierce rivalry; each great firm strives +for the lion's share of the market. Under these conditions it is quite +natural that attempts should be made to check the reduction of profits +by some form of agreement to limit competition. Many plans have been +tried which attempted to effect this by mere agreements and contracts, +methods which left each property to the control of its special owners; +but none have been permanently successful. By the trust plan of +combination, the properties are practically consolidated; and the +failure of the combination through withdrawal of its members is avoided. +It offers to manufacturers, close crowded by competition, a means of +swelling their profits and ensuring against loss; and encouraged by the +phenomenal success of the Standard Oil combination, they have not been +slow to accept it. + +The point to which we need to pay especial attention, in the foregoing +consideration of the causes which have produced trusts, is the fact that +the cost of production is continually being cheapened as it is carried +on on a larger and larger scale. And because the cheaper mode of +production must always displace the mode which is more expensive: as +Prof. Richard Ely expresses it, "Production on the largest possible +scale will be the only practical mode of production in the near future." +We need not stop to prove the statement that the cost of production by +the modern factory system is a small fraction of that by the old +workshop system. The fact that the former has beaten the latter in the +race of competition would prove it, if it were not evident to the most +careless observer. But it is also a fact that the trust, apart from its +character as a monopoly, is actually a means of cheapening production +over the system by independent factories, for it carries it on on a +larger scale than it has ever before been conducted. Our review of the +trust from the trust makers' standpoint showed this most forcibly; and +we shall see more of it as we study further the methods by which the +monopoly gains an advantage over the independent producer in dispensing +with what we may call the waste of competition. In the argument +presented by the Standard Oil Trust before the House Committee on +Manufactures in the summer of 1888, occurs the following statement of +the work which that monopoly has done in cheapening production: + + "The Standard Oil Trust offers to prove by various witnesses, + including Messrs. Flagler and Rockefeller, that the disastrous + condition of the refining business and the numerous failures of + refiners prior to 1875 arose from imperfect methods of refining, + want of co-operation among refiners, the prevalence of speculative + methods in the purchase 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-operation and association among the refiners, and that such + association and co-operation, resulting eventually in the Standard + Oil Trust, has enabled the refiners so co-operating to reduce the + price of petroleum products and thus benefit the public to a very + marked degree and that this has been accomplished: + + "1. By cheapening transportation, both local and to the seaboard, + through perfecting and extending the pipe-line system, by + constructing and supplying cars with which oil can be shipped in + bulk at less cost than in packages, and the cost of packages also + be saved; by building tanks for the storage of oil in bulk; by + purchasing and perfecting terminal facilities for receiving, + handling, and reshipping oils; by purchasing or building steam tugs + and lighters for seaboard or river service, and by building + wharves, docks, and warehouses 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 quality of illuminating oil at less cost, the + actual cost of manufacturing having been thereby reduced about 66 + per cent. + + "3. That by the same methods, the cost of manufacture in barrels, + tin cans, and wooden cases has been reduced from 50 to 60 per cent. + + "4. That as a result of these savings in cost, the price of refined + 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." + +Certainly it would seem that this is a strong defence of the trust's +character as a public benefactor; but it is well to note that while it +has been making these expenditures and reducing the price of oil to the +consumer, it has also been making some money for itself. The profits of +this trust in 1887, according to the report of the committee appointed +to investigate the subject of trusts by the New York Legislature, were +$20,000,000. The nominal capital of the trust is but $90,000,000, a +large portion of which is confessedly water. In answer to the statement +that the price of oil has been reduced steadily by the operations of the +trust, it is charged that no thanks is due to the trust for this +benefit. The trust has always wished to put up the price, but the +continual increase in the production of the oil fields has obliged the +trust to make low prices in order to dispose of its stock. There are +also about one hundred independent refineries competing with the trust, +and their competition may have had some influence in keeping prices +down. It is undoubtedly true that the economy in the storage, +transportation, and distribution of oil by the systematic methods of the +Standard Oil Trust has made it possible to deliver oil to the consumer +at a small fraction of its cost a decade ago. But it is also true that a +good part of the reduction in the price of oil is due to the abundant +production of the petroleum wells, which have furnished us so lavish a +supply. The principal charges against this trust, made by those who were +conversant with its operations, have never been that it was particularly +oppressive to consumers of oil; but that, in the attempt to crush out +its competitors, it has not hesitated to use, in ways fair and foul, its +enormous strength and influence to ruin those who dared to compete with +it. + +In a later chapter we shall be able to study these more intricate +questions regarding trusts with a better understanding of our problem. +Let us pay some attention now to the growth of the trusts and of +combinations in general for the purpose of limiting competition among +manufacturers, which has taken place within the past few years. + +According to the little book entitled "Trusts," by Mr. Wm. W. Cook, the +production of the following articles was, in February, 1888, more or +less completely in the hands of trusts: petroleum, cotton-seed oil and +cake, sugar, oatmeal, pearl barley, coal, straw-board, castor oil, +linseed oil, lard, school slates, oil cloth, gas, whiskey, rubber, +steel, steel rails, steel and iron beams, nails, wrought-iron pipe, iron +nuts, stoves, lead, copper, envelopes, paper bags, paving pitch, +cordage, coke, reaping and binding and mowing machines, threshing +machines, ploughs, and glass--a long and somewhat jumbled list, to +which, however, at the present time, there should probably be added: +white lead, jute bagging, lumber, shingles, friction matches, beef, +felt, lead pencils, cartridges and cartridge-shells, watches and watch +cases, clothes-wringers, carpets, coffins and undertakers' supplies, +dental tools, lager beer, wall paper, sandstone, marble, milk, salt, +patent leather, flour, and bread. It should be said that, as regards +most of these combinations, the public is ignorant beyond its knowledge +that some form of combination for the purpose of restricting competition +has been formed. For the purpose of our present investigation it makes +little difference just what this combination may be. + +The salient facts for us to note are, that among the manufacturers of +this country there has arisen a widespread movement to partially or +wholly avoid competition in the production and sale of their goods; that +in a very great number of manufacturing industries these combinations +have progressed so far that their managers have been able to advance +prices and check production; that some of these combinations have taken +the form of trusts, and by this means have every prospect of maintaining +their stability and reaping their enormous profits with the same +permanency and safety as has their predecessor, the Standard Oil Trust; +and, finally, that with this prospect before them, our manufacturers, as +a class, would lose their reputation as shrewd business men if they did +not follow out the path marked out for them, and combine every +manufacturing industry in which combination is possible upon the plan of +the trust. + +In conclusion, it may be well to examine the statement attributed to Mr. +Andrew Carnegie, that, "there is no possibility of maintaining a trust. +If successful for a time, and undue profits accrue, competition is +courted which must be bought out; and this leads to fresh competition, +and so on until the bubble bursts. I have never known an attempt to +defeat the law of competition to be permanently successful. The public +may regard trusts or combinations with serene confidence." + +Surely if this statement is true, we have little need for further +examination of this subject. We have now knowledge enough of our subject +to enable us to determine its truth or falsity. We have found in the +actual trusts that we have examined none which have shown signs of +succumbing to outside competition. More than this, however, we have seen +that it is possible for a trust to carry on business and deliver goods +to the consumer at much less cost than an independent manufacturer can. +And as surely as this law holds that production on the largest scale is +the cheapest production, so surely will the trust triumph over the +independent manufacturer wherever they come into competition. If the +trust were always content when its competitors were disposed of, to make +only the profits which it could secure by selling at such prices as the +independent manufacturers could afford, there would be less outcry +against it. But with the consumers wholly dependent upon it for +supplies, the prices are in the trust's hands; and the tendency is to +reap not only the profits due to its lessened cost of production, but +also all it can secure by raising the selling price without arousing too +much the enmity of the public. + +Clearly the trust is at once a benefit and a curse. Can we by any means +secure the benefit which it gives of reduction in cost without placing +ourselves at the mercy of a monopoly? This is the question which must +occur to every thoughtful man. Before we can answer it, however, we must +examine the effects of competition and monopoly in other industries. + + + + +III. + +MONOPOLIES OF MINERAL WEALTH. + + +It is a well known historical fact that the extraction of metals and +minerals from the earth has been more subject to monopoly than almost +any other business. It was, and in a large part of the civilized world +still is, esteemed a prerogative of the sovereign. Agricultural products +have always been gathered from a wide area; manufactures were formerly +the product of mean and scattered workshops; but in the working of a +rich mine, there was a constant income more princely than was to be +obtained from any other single source. Again, with all due respect to +the traditions of former generations, it seems to have been thought that +any thing to which no one else had a valid title belonged to the crown; +and as no one was able to assert any stronger claim to the ownership of +mineral wealth than that they had stumbled upon it, it was natural for +the sovereign to claim it as his. We see thus the recognition at an +early date of the inherent difference between natural wealth and that +created by labor. + +But coming down to the present time, it is evident that the business of +extracting some of the rarer metals from the earth is peculiarly liable +to become a monopoly. It is one of the new laws of trade, whose force +and importance we are just finding out, that the ease of restricting +competition varies with the number of competing units which must be +combined. Our most valuable metal, iron, is so widely distributed that +any attempt to control the whole available supply could not long be +successful. But it is one of the peculiarities of modern industry that +by its specialization it furnishes constant opportunities for the +establishment of new forms of monopoly, whose power is not generally +understood. In the manufacture of Bessemer steel, which has now largely +displaced wrought iron in the arts, it is necessary to use an iron ore +of peculiar chemical composition. This ore is found most abundantly and +of best quality in the mines of the Vermilion range, lying about one +hundred miles north of Duluth, Minn., and in the mines of the Marquette +Gogebic, and Menominee regions in the north Michigan peninsula. +According to good authorities, a combination more or less effective has +been formed among the owners of all these mines; and the highest price +is charged for the ore which can be obtained without driving the +customer to more distant markets for his supply. Among the mines of this +district, competition, if not entirely stopped, is greatly checked, and +is likely soon to be entirely a thing of the past. It is an interesting +fact that among the members of the syndicate which owns the principal +mines in the Vermilion regions are some of the trustees of the Standard +Oil Trust. It is stated that some of these mines have paid 90 per cent. +per annum on their capital stock, which, it is to be noted, represents a +much greater sum than the amount invested in the plant of the mine. + +It is thus apparent that the mining of the raw ore from which iron is +made, abundant and scattered though it is, is not free from monopoly. +The combinations to restrict competition among the makers of cast iron +and of steel belong properly under the head of monopolies in +manufactures. We need only refer here to the fact that they are supposed +to exist and have more or less control of the market. + +Fortunately for the stability of our system of currency and of finance, +the precious metals, through the small ratio which their current +production bears to the world's stock, and the fact that this stock is +scattered among an enormous number of holders, are safe from any +attempts to establish a monopoly to control their price through the +control of their production. Other metals, however, which are like +silver and gold in being found in workable deposits at but a few points +on the globe but are there found in abundance, are peculiarly adapted to +facilitate the schemes of monopolists. Of lead, copper, zinc, and tin, +we require a steady supply for use in the various arts; and the +statement has been made that the supply of each one of these is in the +hands of a trust. To see the effect which these combinations have had on +prices, let us examine the prices which have prevailed for two years +past on these four articles, as shown in the following table: + +Table of wholesale prices (cents per lb.) in New York City of copper, +lead, tin, and zinc during 1886, 1887, and 1888: + + +--------------+-------+------+-------+------+ + | |Copper | Lead | Tin | Zinc | + | +-------+------+-------+------+ + | 1885 Dec. 31 | 11.50 | 4.60 | - | 5.35 | + | 1886 Apr. 3 | 11.45 | 4.90 | - | 5.50 | + | 1886 July 3 | 10.00 | 4.90 | - | 5.60 | + | 1886 Oct. 7 | 11.00 | 4.35 | - | 5.60 | + | 1887 Jan. 5 | 12.25 | 4.75 | 24.50 | 6.42 | + | 1887 Apr. 6 | 11.00 | 4.75 | 24.50 | 6.50 | + | 1887 July 6 | 10.50 | 4.92 | 25.00 | 7.00 | + | 1887 Oct. 6 | 11.00 | 4.45 | 23.30 | 6.75 | + | 1887 Dec. 29 | 17.75 | 5.00 | 37.00 | 6.00 | + | 1888 Mar. 29 | 17.50 | 5.50 | 39.50 | 6.75 | + | 1888 July 3 | 17.25 | 4.25 | 22.00 | 6.50 | + | 1888 Oct. 4 | 18.50 | 5.75 | 26.00 | 6.75 | + | 1889 Jan. 3 | 17.50 | 3.85 | 22.00 | 5.50 | + | 1889 Apr. 29 | 16.50 | 4.25 | 23.00 | 6.50 | + +--------------+-------+------+-------+------+ + +Taking the evidence of this table, we conclude that the combination +which is said to control the zinc and lead markets is probably not a +trust, but a "Producer's syndicate" or corner. The prices of lead show +no such firm tendency to advance as would be expected if the production +was in the hands of a single combination. + +The prices of zinc, however, show a decided advance in the past two +years over the prices for the three years preceding, the average price +for 1886 being but 5.50, while for 1887-8 it is 6.58. This is a rise of +no small importance, and the way it is maintained seems to give evidence +of restriction of competition among producers. + +But the striking fact in the above table is the evidence it presents of +the work which has been done by that most gigantic and daring +combination for the suppression of competition ever organized, the +French Copper Syndicate or _La Société Industrielle Commerciale des +Metaux_. This syndicate of French capitalists began operations in 1887, +with the intention of "cornering" the tin supply of the world. The rise +in price which was due to their operations is shown in the above table. +But before completing their scheme they relinquished it for a grander +enterprise, which would embrace the copper production of the world. They +made contracts with the copper-mining companies in every country of the +globe, by which they agreed to purchase all the copper which should be +produced by the mines for three years to come at the fixed price of 13 +cents per pound, and a bonus of half the profit which the syndicate was +able to make from its sales to consumers. In effect this move killed the +competition in the copper trade of the world, and placed every consumer +at the mercy of this Paris syndicate. The advance in tin was of short +duration, and those who suffered by it were speculators rather than +consumers; but the advance in copper, as shown by our table, is still +firmly maintained, and its effect on the industries using copper has +been seriously felt all through 1888. In October, 1888, the _Société_ +extended its contracts with several mining companies to cover a period +of twelve years, and advanced its price to the producers to 13½ cents +per pounds. At the same time, to avoid the accumulation of stock, which +the diminished consumption consequent upon the increased price had +caused, and which it had been generally predicted would finally be the +cause of the _Société's_ downfall, they arranged for the restriction of +the production of the mines. If the _Société_, which is backed by the +heaviest capital, and managed by the shrewdest business skill of France, +does what it intends to do, and its tributary producers are faithful to +their contracts, for ten years to come, yes, for all years to come--for +it is not likely that an enterprise of such golden returns will ever be +abandoned if it can once profitably be carried out,--the world must pay +for its copper whatever these monopolists demand. + +Probably the argument against the private ownership and control of the +wealth which nature has stored up for the whole world's use was never +brought home to men's minds so forcibly as it has been by the acts of +these French speculators. Copper is a necessity to the industries of +civilized society; and the mind of every unprejudiced person protests +against the injustice of placing in the hands of any single firm or +combination the power to exact such prices as they choose for the great +staples of human consumption. This increase of price of about 7 cents +per pound is a tax which affects, directly or indirectly, every person +in the civilized world. Let us inquire what becomes of this tax. Perhaps +2 cents per pound will go into the pockets of the Frenchmen who have +engineered the combination, a sum which will give them, if we set the +annual consumption of copper at 400,000,000 pounds, a comfortable net +income of about $8,000,000 per annum. The lion's share of the profits is +taken by the producers, however; who, if 10 cents is the price at which +copper would sell if free competition were in force, are receiving under +the present contract with the _Société_ about 5 cents per pound as a +reward for their co-operation in its monopolistic scheme.[2] + + [2] Since the above was written the collapse of the copper + syndicate has taken place. The causes which brought this about were + the failure to complete the contracts for restriction of + production, and lack of funds to meet the current liabilities. The + reason for both these must be largely ascribed to the fact that it + had come to be generally realized how great and how obnoxious the + monopoly was; and capitalists rightly feared that government + interference would be interposed to check the monopoly's + operations. If the syndicate had made its long-time contracts at + the start, or if it had been bold and shrewd enough to have + inveigled speculators on the bear side of the market into operating + against it, M. Secretan and his associates might have won as many + millions as they could have wished. It is a significant fact that + the downfall of the syndicate was not followed by the + reëstablishment of free competition. Instead there was at once talk + of another syndicate being formed to hold the copper stored up by + the _Société_, and keep the price up as long as possible. On this + side of the water the question was at once canvassed whether a + combination could be formed among the different American companies + to prevent competition and support the price. Evidently the failure + of this scheme has not discouraged the makers of monopolies. + +It is appropriate here, too, to make reference to the enormous profits +which the owners of the copper mines of the country are receiving, apart +from the special influence of this great syndicate. The richest and most +valuable copper mines in the world lie on the southern shore of Lake +Superior. The Calumet and Hecla Company, which works one of the richest +deposits of native copper ever found, has a capital stock of $2,500,000, +on which it has paid, since 1870, $30,000,000 in dividends. The reports +of these companies to their stockholders show that the present cost of +refined copper at the mines is as low as 4 cents per pound, and its +cost, delivered in the New York market, is only 5¾ cents. Probably the +officers of these companies are right in their belief that in no other +mines of the world can copper be produced so cheaply. But the question +that comes with force to every thinking man is: If the wealth of the ore +in these mines is so much greater than that in any other that it can be +produced at so much less cost, does there not exist here a natural +monopoly, of which the owners of these mines are getting the sole +benefit? And, again, by what right does the chief benefit from this rich +deposit accrue to the few men who own the mines, rather than to the many +men in all parts of the world who wish to use their product? + +Great and important as is the copper monopoly, of far greater importance +to us than any and all the combinations in the metal industries are the +monopolies which control the price of coal. We do not often realize how +intimately connected is our nineteenth-century civilization with the +store of fuel laid up for us in distant geologic ages. And in this +country, with our severe climate, coal is all-important as a factor of +domestic economy, as well as a necessity to manufacturing and +metallurgical industries. The total cost to the consumers of the coal +used in the United States every year (about 120,000,000 tons), calling +the average retail price $4.00 per ton, is nearly $500,000,000, or over +$8.00 per annum for every man, woman, and child in the country. Surely, +then, the statement which we make at the outset, that the coal trade of +the United States is in the hands of monopolists; and that competition, +where not killed, is almost impotent to keep down prices, is one which +merits earnest attention. + +The United States possesses coal fields of enormous extent and richness. +The mineral is widely distributed, too, productive mines being now in +operation in 27 of the States and Territories. Anthracite coal, however, +which is by far the best adapted to domestic use, only occurs in a +limited area in the State of Pennsylvania; but here the deposit is of +phenomenal richness. The total area of the Pennsylvania anthracite field +is about 300,000 acres. Of this area nearly 200,000 acres is owned by +seven railway corporations. These companies, either directly or through +subsidiary companies controlled in the same interest, carry on mining +operations, carry the coal to market, and sell it. The following +figures[3] exhibit the receipts of each of these companies from sales of +coal from their mines during the year 1887: + + +-----------------------------------------+-----------+------------+ + | COMPANY. | TONS. | RECEIPTS. | + +-----------------------------------------+-----------+------------+ + | Philadelphia and Reading R. R. Co. | 7,555,252 |$18,856,550 | + | Central R. R. Co. of N. J. | 4,852,859 | 12,132,146 | + | Lehigh Valley R. R. Co. | 5,784,450 | 14,461,125 | + | Del., Lackawanna, and Western R. R. Co. | 6,220,793 | 19,044,803 | + | Delaware and Hudson Canal Co. | 4,048,340 | 10,100,118 | + | Pennsylvania R. R. Co. | 3,818,143 | 8,820,718 | + | New York, Lake Erie, and Western R'y Co.| 2,363,290 | 6,846,342 | + | +-----------+------------+ + | Total |34,643,127 |$90,261,805 | + +-----------------------------------------+-----------+------------+ + + [3] Compiled from "The Coal Trade," 1888, (H. E. Saward), and + "Poor's Manual of Railroads," and partially estimated. + +Thus these seven corporations alone produced from their own mines, +carried to market, and sold, over 34,000,000 tons of coal during the +year, for which they received about $90,000,000. Of the magnitude of the +operations carried on by these great corporations we now have some idea. +Let us next inquire to what extent competition is allowed to act between +them to keep down prices. + +Many years ago these seven companies formed the famous anthracite-coal +pool. This was an agreement by which all the companies concerned agreed +to maintain a uniform selling price for coal at all important +distributing points where two or more of the companies came into +competition. Some of the prices which were fixed by the pool were +extremely arbitrary. Cities in Pennsylvania within an hour's ride of the +coal fields had to pay nearly as high a price for coal as those 500 +miles or more distant. Rates of transportation on coal mined by +individual operators were made such that the latter could not afford to +sell below the prices fixed by the pool, even if they had been so +disposed. At the present time the situation has been modified by the +long and short-haul clause of the Interstate Commerce law, by which the +railroad is obliged to make its transportation rates somewhat +proportionate to distance, and also by the passage of a law in the State +of Pennsylvania, by which the acts of the anthracite-coal pool were +declared illegal and punishable. Nominally, therefore, the pool is a +thing of the past; but the practical fact is, that by secret or tacit +agreement the various companies are not competing with each other any +more now than in the days of the pool, and at points like New York or +Buffalo, where two or more roads meet, the same prices are quoted by +each different company. + +Nor are the charges against the pool comprehended in its autocratic +determination of the price of coal. To make production correspond with +price, it was necessary at times to close collieries entirely, throwing +the miners out of employment. The individual operators, too, have no +love for the combination. Their profit depends more than any thing else +on the rate of transportation, and thus whether they shall make or lose +depends on the railroad companies. They claim that the railways base +their rates for carrying coal upon the principle of "charging what the +traffic will bear." This is a matter, however, which we can better +discuss in the next chapter. + +It is thus evident beyond dispute that the production of anthracite coal +in this country is an industry uncontrolled by competition. To sum up: +these seven great corporations own more than two thirds of the area in +which workable anthracite coal is found: they mine and market directly +the great bulk of the total production; the individual operators are +dependent on the railways for getting their coal to a market; and the +price at which they can afford to sell it depends on the railroad +rates. Finally, consider that these seven companies work in harmony, +both as to traffic rates and prices for the sale of coal, and the +conclusion is irresistible that competition in anthracite-coal +production in the United States is practically dead. + +Let it be noted, for the benefit of those who may conceive that the +above statement is unfair to the railway companies, that no charge is +here made that the prices fixed by the companies for the coal are at the +present time extortionate or unjust. That is a separate matter; in +which, doubtless, there would be plenty to affirm on the one hand that +the prices charged were no more than a just compensation, while their +opponents would declare that the prices adopted by the pool favor some +points to the prejudice of others, and that the statement that they were +on the whole exorbitant was proven by the fact that the railway lines in +the coal regions, where honestly managed, have paid great dividends on +the actual capital invested. + +Compared with the production of Pennsylvania anthracite, the coal +production of any other single section seems small. But it is only so by +comparison, for the Western coals, while inferior in quality, are +abundant and easily mined, and must remain the staple for general +consumption throughout the region west of the Mississippi, as well as +for large sections further east. + +As is well known, the people of the Western and Northwestern plains are +wholly dependent upon the railroads for their supplies of every +description, except the raw products of the soil. The railways +themselves are great consumers of coal, and have bought up large tracts +of coal lands and opened mines. In the desire to develop traffic and +ensure a supply of coal to the settlers on their lines--we will even say +of cheap coal,--the railway companies have entered the coal trade +themselves, either directly or through subsidiary companies. Thus it +comes about that hundreds of thousands of people of the West and +Northwest must pay for coal, which is an absolute necessity of life +during several months of the year, whatever price the managers of a +single railway corporation may demand. Let it be understood that no +charges are here made of injustice or extortion on the part of the +railway companies. It is only wished to bring out the fact that +competition is here wholly absent. It is believed that, in some cases at +least, an honest attempt has been made to mine and sell the coal at +merely a fair profit. But in days to come it will not be so directly for +the interest of the railways to deal liberally with their patrons as at +present. Other men of less breadth and principle and more ready to grasp +at a chance for enormous profits may control the company's affairs; and +if that happens, the opportunity to take advantage of the absence of +competition and raise the price of coal will be utilized. + +A brief review of the actual status of the coal production of the West +and South will help us to a clear appreciation of the case. The Missouri +Pacific Railway Company, through subsidiary companies, extracted from +its mines in Missouri and the Indian Territory, during 1887, 1,618,605 +tons of coal. Through its control of transportation rates, private +operators have been compelled to sell coal at the company's prices in +the market. The company has recently purchased large tracts of coal +lands in Colorado, on which it is opening mines. The Atchison, Topeka, +and Santa Fé, the Chicago, Burlington, and Quincy, the Denver and New +Orleans, the Union Pacific, and the Denver and Rio Grande Railway +companies are also heavily interested in the Colorado coal mines. The +last company has long held a bonanza in the monopoly of the coal mining +and transportation for the Colorado silver-mining and smelting +districts. Though the other companies, to which the Rock Island should +probably be added, come in as competitors, there can be no doubt that +their active competition will be of short duration. The Wyoming coal +fields are being worked by the Union Pacific and the Chicago and +Northwestern companies, while the Chicago, Burlington, and Quincy and a +company supposed to be closely connected with the Northern Pacific are +preparing to take the field at an early date. On the Pacific coast the +coal trade has long been a monopoly in the hands of the Oregon Railway +and Navigation Company, who have kept the prices in San Francisco just +below the point at which it becomes profitable to import Australian +coal. Other railways are now preparing to reach the coal fields, but can +we doubt that the competition to which the coal consumers are looking +with eager anticipation will prove evanescent? Returning to the East, we +find the coal mines of northern Illinois all held by a single company, +which has full control of the traffic; while the mines of southern +Illinois, on which the St. Louis consumers depend, are united as the +Consolidated Coal Company. This latter corporation has "wrecked" many of +its mines for the purpose of limiting the supply and raising the price; +and has bought many mines of competing companies and closed them for the +same purpose. The Attorney-General of Illinois has been requested to +bring suit against this "trust" for the forfeiture of its charter. + +In the Hocking Valley coal fields in Ohio, the Columbus, Hocking Valley +and Toledo Railway Company owns 10,000 acres of coal lands, and mined, +in 1887, 1,870,416 tons of coal. The coal in western Virginia is coming +into the hands of the Norfolk and Western Railroad Company, while the +coal of Alabama, of which so much has been noised abroad, has been +quietly gathered in by the Louisville and Nashville corporation. The +Tennessee Coal and Iron Company, which owns 76,000 acres of coal lands, +and mined 1,145,000 tons in 1882, is owned by parties largely interested +in the East Tennessee, Virginia and Georgia Railroad system. West +Virginia has probably the most valuable untouched coal deposits of any +State in the Union, but these also are rapidly being gathered up by +railway corporations. + +To sum up, in the words of one of the best informed authorities, the +coal business of the country is at the mercy of the railroads. + +It is to be noted, however, that this is simply the result of natural +causes. Railway managers, in seeking to develop and place on a sound +basis the mineral properties which could furnish a heavy and profitable +traffic to their lines, have only done what they regarded as their duty +to the owners of their roads. And that this policy has effected a rapid +development of our resources is beyond question. + +The combinations to restrict competition among bituminous coal producers +have been of a very different sort from those in force among the +anthracite producers. The soft-coal fields are so widely scattered that +it has never been possible to combine all the producers so as to control +prices by a single authority. Local combinations, however, controlling +all the fields of a single locality, have long been an important +feature of the trade, and have been able to control prices pretty +absolutely within their respective localities. The fact that the +principal item in the cost of coal is transportation, enables a +combination covering all the producers of a certain field to raise +prices very notably before competitors can afford to ship from other +coal-producing districts. + +It would seem that our fuel is especially liable to be subjected to +monopoly, for, as we have already seen in the preceding chapter, the +control over the petroleum trade is held by the Standard Oil Trust. How +much of the production of crude petroleum is in the hands of the trust +it is hard to say. This much is certain, that there is a "Petroleum +Producers' Association," which has a compact enough organization to be +able to make contracts with the Standard Oil Company regarding the +limitation of production. It is even stated that the Standard Oil Trust +itself controls to a considerable extent the oil-producing territory; +but this is hardly probable. + +Our newest and most wonderful fuel, natural gas, has already come under +the control of a few great corporations, who own the wells and the pipes +for conveying and distributing it to the consumers. A striking instance +of the arbitrary nature of prices when under a monopoly's control was +shown at Pittsburgh a few months ago. As is well known, upon the +introduction of natural gas to that city a great number of the +manufactories, as well as the private houses, discarded coal, and at +considerable expense fitted up boilers, furnaces, etc., to use the new +fuel. After the use of the gas had become general and its value had come +to be thoroughly understood, the company furnishing the supply advanced +the rates 100 per cent., without previous notice; and despite the +remonstrance of indignant consumers, the advanced rate had to be paid or +the use of the gas discontinued, the latter alternative involving the +loss of the money invested in piping, burners, etc. + +Of the minor products of mines and quarries, marble, sandstone, borax, +salt, and asphalt are all known to be more or less thoroughly under the +control of monopolies, which, though less important and powerful, show +the same tendency toward the destruction of competition. + +Great as is the extent to which the monopoly of the mineral wealth of +the world has gone, we can scarcely doubt that if the movement is +unchecked it will go much farther. In one sense the only absolute +necessaries of life are food and clothing. But to the civilization of +to-day the metals and minerals are no less indispensable; and these +cannot be made anywhere, like manufactured goods; or grown on wide +areas, like the products of the soil. We are absolutely at the mercy of +the men who own our deposits of coal and copper and lead, and it is only +to be expected that they will take greater advantage of their legal +industrial advantage. The combinations that exist will be made stronger +and more binding, and new ones will be formed. The French copper +"corner" has taught men that under the broad protection of International +law their schemes of industrial conquest may embrace the world; and it +is not to be doubted that the temporary "corner" will yet result in a +strong permanent combination; and that the precedent set by this +successful monopoly will be eagerly followed by those who wish to secure +like profits by the control of some other form of mineral wealth. + + + + +IV. + +MONOPOLIES OF TRANSPORTATION AND COMMUNICATION. + + +We have already alluded to the fact that the concentration of +manufacturing in large mills at great commercial centres has been made +possible by the development of railway transportation, and that the +rapid settlement of our Western prairies is due to the same agency; but +it is worth while to note more fully the difference between ancient and +modern conditions in the business of transportation. + +In the first place, it is plain that no more than a century ago the +world had comparatively very little need for railways. Each community +produced from its farms and shops most of the things which it needed; +and the interchange of goods between different sections, while +considerable in the aggregate, was as nothing in comparison with modern +domestic commerce. The king's highways were open to every one, and +though monopolies for coach lines were sometimes granted and toll roads +were quite common, there was no possibility for any really harmful +monopoly in transportation to arise, because the necessity of +transportation was so small. Some writer has ascribed all the evils of +modern railway monopolies to the fact that in their establishment the +old principle of English common law that the king's highway is open to +every man, was disregarded. But if we sift down this ancient maxim of +law to its essential principle, we find it to be, _there must be no +monopoly in transportation_; and the problem of obtaining the advantages +of modern railway transportation and keeping up, at the same time, the +free competition that exists in transportation on a highway is seen to +be as far from solution as before. + +The importance of our railway traffic is proven by statistics. Of the +total wealth annually produced in this country, it is probably a fair +estimate to say that ten per cent. is paid for transportation of the raw +material and finished goods in their various journeys between producers, +dealers, and consumers, and for transportation of passengers whose +journeys directly or indirectly contribute to the nation's industry. +That is to say, the gross yearly earnings of all the railroads and +transportation lines of the country is about one tenth of the total +value of all the year's products. The average is brought down by the +amount of sustenance still consumed in the locality where it is +produced, and by the amount of valuable merchandise. But of the bulky +products like coal and grain, the greater part of the cost to the remote +consumer is due to the cost of carriage. + +It is also necessary to a proper appreciation of the problem, that we +understand that railway transportation is now as absolutely necessary as +is the production of food and clothing. Annihilate the railway +communications of any of our great cities, and thousands would perish by +starvation before they could scatter to agricultural regions. There was +great suffering in many small communities in Minnesota and Dakota in +the severe winter of 1887-8, because the heavy storms blockaded the +railroads and prevented them from bringing in a supply of coal and +provisions. But it is not taking the question in its broadest sense to +consider whether we could eke out an existence without railway +communication. The fact is that under modern conditions every man +obtains all the things which he desires, not by producing them himself, +but by producing some one thing which others desire. The interchange +between each producer and each consumer must, broadly speaking, be all +made by means of the railway; and without that, stores, factories, +mills, mines, and farms, would have to cease operation. + +Remembering now the importance and necessity of transportation, let us +inquire how the price at which it is sold to the public, the rate of +fare and freight, is fixed. Is it or can it be generally fixed by +competition? + +There are now in the United States about 37,000 railway stations where +freight and passengers are received for transportation. Now, from the +nature of the case, not more than ten per cent. of these are or can be +at the junction of two or more lines of railway. (By actual count, on +January 1, 1887, eight per cent. of existing stations were junction +points.) Therefore the shippers and buyers of goods at nine-tenths of +the shipping points of the country must always be dependent on the +facilities and rates offered by a single railway. Such rates of +transportation as are fixed, be they high or low, must be paid, if +business is carried on at all. And when we consider the ten per cent. of +railway stations which are, or may be, junction points, we find that at +least three-fourths of them are merely the junction of two lines owned +by the same company. Consolidation of railway lines has gone on very +rapidly within the past few years and is undoubtedly destined to go much +further. Of the 158,000 miles of railway in the country, about eighty +per cent. is included in systems 500 miles or more in extent; and a +dozen corporations control nearly half of the total mileage. The +benefits which the public receive from this consolidation are so vast +and so necessary that no one who is familiar with railway affairs would +dream of making the suggestion that further consolidations be stopped or +that past ones be undone. + +There is a great tendency on the part of the public, however, to look +with fear and disfavor on further railway consolidation. And because +this is so, it is greatly to be desired that the beneficial effects of +consolidation should be better understood. The most important benefits +are included under one head, the saving in expense and the avoidance of +waste, and this is effected in very many different ways. Suppose a great +system like the Pennsylvania or the Chicago & Northwestern were cut up +into fifty or sixty independent roads, each with its own complete staff +of officers. Each road would have to pay its president, directors, and +heads of operating departments, would have to maintain its own +repair-shops, general offices, etc., and conduct in general all the +business necessary to the profitable operation of a railway corporation. +A car of wheat or a passenger in going from Chicago to New York would +have to be transferred from one road to another at perhaps twenty +different points, and the freight or fare paid would be divided among +twenty different companies, with corresponding clerical labor. The +modern conveniences of through tickets, through baggage-checks, and +through freight shipments, would be difficult, if not impossible. +Further, consolidation tends to produce vastly better service and +greater safety. The large systems can and do employ the highest grade of +talent to direct their work. Every thing is systematized and managed +with a view to producing the best results in efficiency and safety with +the least waste of material and labor. And while the improvement in +safety and convenience is all for the benefit of the public, a large +part of the saving in expense effected by consolidation has likewise +come back to the patrons of the roads in the form of reduced rates of +fare and freight. + +It is difficult, however, for any one not familiar with the technical +details of the railway business to fully appreciate the importance and +necessity of the consolidations which have been effected, and the grave +results that would follow the realization of the mad proposition to set +us back a half century by cutting up our railroad systems into short +local lines. It must be plain to every one, however, that while the loss +of all the benefits of consolidation would be certain, the gain in +competition could affect only the few junction points; and as we shall +now see, the effect even on them would be small. + +Assuming that the total number of railway junction points in the United +States is 3,000, we find, on examination, that at about two-thirds only +two lines meet, and at more than half the remainder only three lines +meet. It is plain that in the vast majority of cases where two roads +intersect, and in many cases where three or four come together, the +lines meet perhaps at right angles and diverge to entirely different +localities. The shipper bringing goods to the station, then, may choose +whether he will send his goods north or east perhaps; but only in the +few cases where two lines run to the same point does he really have the +choice of two rates for getting his produce to market. Practically, +then, there are not, and never can be, more than a few hundred places in +the country where shippers will be able to choose different routes for +sending their goods to market. We say there never can be, because the +building of a line of railway to parallel an existing line able to carry +all the traffic is an absolute loss to the world of the capital spent in +its construction, and a constant drain after it is built in the cost of +its operation. This fact is now, fortunately, generally appreciated. + +But what of the competitive traffic which exists between commercial +centres, like the trunk-line traffic between Chicago and the cities on +the seaboard, or between the former city and the collecting centres +farther west like St. Paul, Omaha, and Kansas City? Here, indeed, there +is competition; and it is of great importance because of the enormous +bulk of the traffic which traverses these few routes. + +It is a peculiar feature of the railway business which we have now to +consider, and one which is not generally understood. We have already +perceived the principle that competition cannot permanently exceed a +certain intensity; and the proof of this principle in the case of the +railway is remarkably plain. Suppose two roads are competing for the +traffic between Omaha and Chicago. A shipper at the former city who +wishes to send a few tons of freight to Chicago may go to one company +and ask their rates, then to the other and induce them to give him a +lower rate, and then back to the first again, until he secures rates low +enough to suit him. Now it is a fact that either company can afford to +carry this especial freight for less than the actual cost of carrying +it better than it can afford to lose the shipment. This is because it +costs the company practically _no more_ to carry the goods than if they +were not shipped by its line; and hence whatever is received for the +freight is so much profit. Stated in the form of a principle, this fact +is expressed thus: _Receipts from additional traffic are almost clear +profit_. Nor is this all. The practical impossibility of distinguishing +_additional_ traffic from other traffic, and the enactment of State and +National laws requiring uniform rates to be charged, places all traffic +on a common basis; and the same cause which makes it more profitable to +carry additional traffic for a song than to lose it, makes it better for +a railroad to carry traffic, temporarily at least, for less than the +actual running expenses of the road, rather than to lose it. The train +and station service, the general office and shop expenses, must all be +kept up, though the freight and passengers carried dwindle to almost +nothing; and the capital invested in the road is a total loss, unless +the line is kept in operation and earns some income, even though it be +small. This last influence, as we shall see later, is a most important +and far-reaching one in its effect on industrial competition. + +The cause of the intensity of competition in railway traffic is now +evident. And from what we have seen, it follows that two railway lines +competing freely with each other cannot possibly do business at a +profit. Let us see what are the actual results of this law of practical +railway management. Evidently the managers of two competing railway +lines have but two possible courses open. They may, by tacit or formal +agreement, unite in fixing common rates on both the roads, or they _may_ +attempt to do business with free competition. But we have already +proven that the latter course must result in reducing the income of the +road certainly below the amount necessary to pay the operating expenses +and the interest on the bonds, and probably it will be insufficient to +pay the running expenses alone. The inevitable result, then, is the +bankruptcy of the weaker road, the appointment of a receiver, and its +sale, in all probability to its stronger competitor. This is the chain +of cause and effect which has wrought the consolidation of competing +parallel roads in scores of cases, and which, if free competition is +allowed to act, is sure to do so. + +We can now appreciate the _necessity_ which managers of competing lines +are under to agree upon uniform rates for traffic over their roads, and +at the same time the difficulty of doing this. The strange paradox is +true that while it is _necessary_ to the continued solvent existence of +the competing corporations that such an agreement be made, it is also +greatly to their advantage to break it secretly and secure additional +traffic. It is necessary, therefore, that the parties to the agreement +be strongly bound to maintain it inviolate; and to effect this, "pools" +were established. In pooling traffic, each company paid either the whole +or a percentage of their traffic receipts into a common fund, which was +divided among the companies forming the pool, according to an agreed +ratio. Under this method it is evident that all incentive to secret +cutting of rates and dishonest methods for stealing additional traffic +from another road was taken away. + +How widespread and universal is the restraint of competition by railway +corporations may be seen by the following pithy words, penned by Charles +Francis Adams, President of the Union Pacific Railway: + + "Irresponsive and secret combinations among railways always have + existed, and, so long as the railroad system continues as it now + is, they unquestionably always will exist. No law can make two + corporations, any more than two individuals, actively undersell + each other in any market, if they do not wish to do so. But they + can only cease doing so by agreeing, in public or private, on a + price below which neither will sell. If they cannot do this + publicly, they will assuredly do it secretly. This is what, with + alternations of conflict, the railroad companies have done in one + way or another; and this is what they are now doing and must always + continue to do, until complete change of conditions is brought + about. Against this practice, the moment it begins to assume any + character of responsibility or permanence, statutes innumerable + have been aimed, and clauses strictly interdicting it have of late + been incorporated into several State constitutions. The experience + of the last few years, if it has proved nothing else, has + conclusively demonstrated how utterly impotent and futile such + enactments and provisions necessarily are." + +Disregarding for the present the latter part of the above quotation, +consider the statement that during the whole history of railway +corporations, agreements to restrain competition have been the rule. +This the slightest research proves to be an historical fact, and it is +in perfect accord with our preceding statement, that such agreements +were necessary to the solvent existence of railway corporations. The +records also show that invariably when these agreements have been broken +and competition has been allowed to have full play, the revenues of the +roads have been rapidly reduced to a point where, unless a peace was +effected, bankruptcy ensued. + +Mr. Adams said, with truth, that no law had proven of any effect in +preventing these competition-killing agreements between railways; but +since the above extract was written, the Interstate Commerce law has +been enacted. Let us pay some attention to its working and results. It +is a curious fact that the framers of railway legislation in this +country, almost down to the present time, have concentrated all their +energies on the endeavor to keep up free competition; and the Interstate +law is no exception to this rule. The plan of the Interstate law was +about as follows: "Here are a few dozen great commercial centres where +the railway lines of different systems meet. We will first prohibit the +pooling by which they have restricted competition at these points. Then, +in order that the thousands of other shipping points shall receive an +equal benefit, we will enact a 'long and short haul clause,' obliging +the rates charged to be in some degree proportionate to the distance. +Thus competition at the great centres will bring rates down everywhere, +and the public will be benefited." + +For a year after the enactment of the law its effects were not +prominent. Pooling was abolished, but the agreements to maintain rates +were still kept up and were fairly observed. But in 1888, the second +year of the law's working, it came to be realized that the pool was the +vital strength of the agreement to maintain rates, and that this +agreement might now be easily broken. Then ensued a remarkable season of +rate cutting, which, at the present writing, has reduced many strong +companies to the verge of bankruptcy. It is plain enough that if this is +allowed to go on, the various stages of receivership, sale, and +consolidation will follow in regular order. To avoid this too sudden +revolution and the general financial disaster which all sudden +revolutions entail, the principal companies in the West are now striving +to combine in an association for the maintenance of rates by a plan +which will bind them more closely together than any other ever before +adopted. Thus to quote Mr. Adams again: "The Interstate Commerce law has +given a new impetus to the process of gravitation and consolidation, +and it is now going on much more rapidly than ever before. It is at this +moment rapidly driving us forward toward some grand railroad-trust +scheme." + +It is a fact which we shall do well to ponder over, that this +legislation intended to stimulate competition has finally had just the +opposite effect from that which its makers desired. They did increase +the intensity of the competition, and have thereby nearly brought about +a permanent end to all competition in railway traffic. + +It must now be clear that the railway is essentially a monopoly, not, be +it noted, because of any especial wickedness of its managers or owners, +but because competition is _impossible_ as regards the greater part of +its business, and because wherever competition is possible, its effect, +as the managers well know, would be to annihilate all profits from the +operation of the road. + +Let us consider now some of the evils with which this monopoly is +charged. The first of these is _discrimination_ between persons and +between places. A favored shipper has been enabled to ruin his +competitors because he could obtain special rates, while they, perhaps, +were charged an extra amount. The strong monopolies have in this way +been able to strengthen their hands for the purpose of throttling their +weak competitors. Passenger rates, too, have been low to one class and +high to another; and the system of free passes has led to great abuses. +Discrimination between towns and cities and States has been hardly less +serious; and while the railways were permitted to make high local rates +and low through rates, a great stimulus was given to the city at the +expense of the country. The second class of evils is that rates in +themselves have been too high. The railways have been wastefully built +and then capitalized at double their actual cost, and it has been +attempted to pay dividends of 6 to 10 per cent. on these securities. In +some cases the principle of charging "what the traffic will bear" has +been so applied that industries have been ruined through the absorption +of their profits by unjust transportation charges. But our space will +not permit a comprehensive review of the many abuses of railway +management. They are already familiar to the public. We needed only to +refer to them sufficiently to carry on our argument by showing that the +railroad monopoly is not by any means a harmless monopoly if left to +work its own pleasure. + +There are two evils of our present railway system, however, which are +not chargeable to monopoly, but to the _attempt to defeat monopoly_, and +which are important to our discussion. The first is the waste of +competition in railway traffic; the second, the waste of competition by +the construction and _threatened_ construction of competing lines where +present facilities are ample for the traffic. Of the first it need only +be said that in advertising, "drumming," and soliciting patronage the +railways spend many millions of dollars every year, which comes out of +the pockets of the public. The second is most serious, for it involves a +far greater waste. It is a conservative estimate to say that 5 per cent. +of the railways of the country were only built to divide the profits of +older roads, and that their owners would be delighted to-day to have +their money back in their possession and the railroad wiped out. The +millions these roads have cost, the millions required every year to +maintain and operate them, the millions spent on proposed roads that +never reached completion, and the millions squandered in fighting +proposed roads by every means short of actual bloodshed,--these are +some of the wastes which we have made in our endeavor to create +competition in railway transportation. And with all our efforts, and +notwithstanding the fact that until within a short time the public +sentiment and the railway managers have been united in the belief that +free competition was the only mode of regulating railroad rates, we are +farther removed from free competition now than ever before. + +And now consider in addition to all this the fact that every railway +company must first of all secure from the State a right to exercise the +sovereign power of Eminent Domain, and that it may and does choose and +take every advantage of the favorable locations where its road can be +built most cheaply; which natural highways, mountain passes, and the +like, are gifts of Nature, the right to whose use equitably belongs to +the general public, and not to private parties exclusively. Taking these +facts also into consideration, it seems needless to offer further proof +of the fact that the business of railway transportation is essentially a +monopoly, and that the attempt to regulate it by competition must always +prove a failure in the future, as it always has in the past. + +Necessarily we have limited our discussion to the most salient points, +and have not touched at all many of the complicated details of the +railway problem. In a later chapter we can study farther the evils due +to railway monopolies, and the proper remedies therefor. At present we +have accomplished our purpose in finding out the fact that railways are +monopolies, and that they are so by their inherent nature. + +Of monopolies in other forms of internal transportation, but little need +be said. Our once busy canals and great rivers seem destined, with the +constant rapid improvement and cheapening in the carriage of goods by +rail, to lose all their former importance. The monopolies small and +great that once held sway there have all vanished before their strong +rival, the railway. + +The use of steam in the vessels that navigate the ocean has had an +effect very similar to the replacing of stage-coaches and freight wagons +by the locomotive. Where hundreds of sailing vessels plied their slow +and uncertain trade, steamer lines now make trips only less regular than +the railway itself. The only cause for the existence of a monopoly in +ocean traffic by steam is the greatly increased capital required for a +rival steamship line as compared with that needed for the old sailing +vessels. We find this, the requirement of a large capital, to be a +feature of more or less importance in nearly every monopoly of the +present day. In this case, however, unless there is an artificial +monopoly in the shape of government aid or authorization, the strength +of its capital is the only power the monopoly has. + +We may reach a clear idea of the essential nature of all the monopolies +considered in this chapter by considering an especial class of +monopolies of communication, namely, mountain passes, bridges, and ship +canals. If a person or a railway corporation could secure sole control +of the only pass through a high mountain range separating two wealthy +and populous districts producing goods of different sorts, they might +exact a princely yearly revenue for its use, equal to the interest on +the capital required to secure an equally favorable passage by +tunnelling, or the annual cost of sending goods over some longer and +more expensive route. But under the law no private person would be +allowed to do this; and if the pass were a very important and necessary +one, probably no one railway company would be allowed to do so. The law +recognizes to some extent, and should recognize much more than it does, +the fact that the benefit of this natural pathway is not the property of +any one man or set of men, but equitably belongs equally to every person +who needs to use it directly or remotely. + +A very large and expensive bridge is like an important mountain pass, +differing only in that one is the gift of Nature, while the other is +wholly the work of man. But because the latter is the work of man, it +does not follow that it is not a monopoly. The great bridge across the +Mississippi River at St. Louis is owned by a private company which +levies tolls for the teams and trains passing over it. These are deemed +excessive, as they are sufficient to pay an exorbitant interest on the +cost of the bridge. Yet for many years no one has cared to invest money +in the erection of a new bridge, for they saw that there was no more +traffic than one bridge could readily carry, and they knew that if a new +bridge were erected, in the rivalry in tolls which would ensue, the +old-established company would probably bankrupt its rival. It is thus +plainly seen how an important bridge may become a monopoly, and a most +powerful and onerous one. + +We have still one important monopoly of communication to describe, the +telegraph. Viewed from a narrow standpoint it may be thought that there +should be no monopoly in the telegraph. A telegraph line is not +expensive to erect and maintain, and it gets no monopoly from taking +advantage of the most favorable route through difficult country as a +railway does. But the economy effected by combination and the effect of +sharp competition in bringing about bankruptcy and then consolidation +are exactly similar to the case of the railway, which we have just +described. In the early history of telegraph companies, many short +competing lines struggled and fought for supremacy. In 1859 the Western +Union Telegraph Company was formed with the avowed intention of +combining these warring companies and making the telegraph business +profitable. It has exceeded the most sanguine dreams of its promoters by +swallowing up its rivals until the entire system of telegraph +communication of the country is practically in its hands. The effects of +this consolidation have been of two sorts. On the one hand we have the +telegraph service of the country performed with the least possible work; +there is nothing wasted in the maintenance of two or more rival offices +in small towns where one is sufficient, nor in operating two lines of +wire where a single one would serve as well. All expense of "drumming +up" business in various ways is avoided, and also the cost of keeping +the complicated books necessary when the receipts of a single message +must be divided among several companies. On the other hand it is plain +that the public is wholly at the mercy of the monopoly in the matter of +rates, and must pay for the use of the telegraph exactly what the +corporation asks. There is a weak and foolish argument which is often +used in an attempt to show that this particular monopoly is not hurtful. +It is that the telegraph is a luxury which only wealthy people use, and +hence whether its rates are high or low is of little account. The +fallacy of this statement is easily seen. A principal use of the +telegraph is to aid the prosecution of business; hence to unduly raise +rates is to cause an additional tax on business,--on the carrying on of +the processes of production. This tax will certainly have its effect, +either in decreased profits, decreased wages, or an increased price for +the product. Another large class of telegrams are those which are sent +with little thought of the cost, in time of sickness, death, or sudden +emergency, yet by people whose purse feels severely the tax. + +What to do with this vast monopoly is one of the questions of the day, +but we will content ourselves at present with this investigation of its +character, reserving its proper treatment for later consideration. + + + + +V. + +MUNICIPAL MONOPOLIES. + + +The people who live in cities are far more dependent on monopolies than +the resident of the country. The farmer can still, on necessity, return +to the custom of primitive times, and supply himself with food, +clothing, fuel, and shelter without aid from the outside world; but the +city dweller must supply all his wants by purchasing, and is absolutely +dependent on his fellow-men for the actual necessaries, as well as the +luxuries of life. From the peculiar circumstances of city life, many +monopolies arise in production and transportation which occur nowhere +else. One of these is the carriage of passengers on street and suburban +railways. There is no better instance, perhaps, of the great power which +is placed in the hands of railway managers than this matter of suburban +passenger traffic. One example must suffice to show this. Let us suppose +that the managers of a railway, which has hitherto not been run with a +view to the development of suburban traffic, secure control of several +choice tracts of land on the line of their road near a growing city, and +establish low rates of commutation and frequent and convenient train +service. The land which they purchased is sold out in building-lots for +many times its cost, and a number of thriving villages become +established there, inhabited chiefly by people whose business is in the +city and who are obliged to go back and forth on the trains. After a +number of years the growth of the towns becomes more sluggish, and the +managers find that the commutation traffic is not after all extremely +profitable; therefore they lessen their train service and increase the +rates of fare. Perhaps they may abolish commutation rates altogether. It +is a well known fact that the value of suburban real estate depends +almost entirely on the convenience and cheapness of access to the city. +By the removal and forced sale, which many of these people will be +obliged to make, it may easily happen that they may lose their entire +property. It is not stated that such flagrant cases of autocracy on the +part of railway managers are common. Indeed, it is a high compliment to +the uprightness and probity of these men that such occurrences are so +infrequent, and that the temptation, so constantly presented, of +enriching one's self at the expense of the owners of the road and the +public is yielded to so seldom. But there have been cases where railway +managers have secured excellent train service and low rates of fare to +benefit places where they held an interest in real estate, while other +and competing places were given poor service and high rates. And the +entire abolition of long-established commutation rates has happened more +than once. + +But turning now to the city railways proper, those carrying passengers +through the streets, it is evident at first sight that we have another +case where competition is a factor of little account. The power of this +monopoly for harm is greatly intensified by the fact that its use is +largely a necessity. In all our great cities the business sections are +far removed from the residence sections, and the great mass of the +industrial population is _obliged_ to ride at least twice each day in +going to and returning from work. In nine cases out of ten there is one +route so much more convenient than any other as to overbalance any +slight difference of fare. Thus, even on the supposition that every +different line was run in competition with every other line, the amount +of really competitive business would be but a trifle. But besides this, +as is well known, in a great many cities consolidation has gone on as +rapidly among street-railway companies as among the great trunk-line +railways. The three lines of New York elevated roads were originally +projected by rival companies; but they were not long in coming together +under one management. A Philadelphia syndicate has secured control of +most of the street railways of that city, and in addition has purchased +a number of the lines in Boston, Chicago, Pittsburg, and St. Louis. +Although the benefit in economy by consolidation is much less in the +case of street railways than in the case of steam roads, yet +considerable is gained, and the competition which is killed by the +consolidation is, as we have just seen, of no great importance to the +public. The so-called street-railway trust, then, is really of no great +moment. The monopoly in street-railway traffic arises from the nature of +the business rather than from any especial effort of capitalists to kill +competition. + +But the railway companies are not the only monopolies which have the use +of our city streets. Water, gas, and steam pipes beneath the pavements, +and wires, either in subways or strung overhead, carrying electricity +for street and domestic lighting, telegraph, telephone, and messenger +service, are all necessities to our modern civilization. + +The absolute necessity of a public water supply, and the practical +impossibility in most cases that any competition in the furnishing +thereof can be established and maintained, have led, in the case of most +of our large cities, to the work of water supply being undertaken by the +municipal authorities. But many of our smaller cities have entrusted to +private companies the work of furnishing a water supply. While this is a +case of real monopoly, yet under the conditions which may be enforced, +most of the power for harm is taken away. According to the best plan in +vogue, the city sells the franchise for constructing the works to the +company who bids to furnish water at the lowest rates under definitely +specified conditions, the franchise being sometimes perpetual, but +oftener granting to the city at some future date an option for the +purchase of the works. It is to be particularly noticed that this is a +case in which the administration of an absolute monopoly has been +entrusted to private enterprise with excellent results; a fact which may +be of use to us in our later investigation. + +While the fact was early appreciated that a water supply when once +introduced became an absolute necessity, it was not recognized when +illuminating gas was first brought into use how important it was to +become. Franchises, or more properly permits, for erecting works and +laying mains for supplying consumers were given away to hastily formed +companies; and even at the present time there are but a few cities (only +five in the United States) which own their works and mains for supplying +gas. As a matter of course the gas companies saw their advantage. +Knowing that gas once introduced was a necessity at almost any price, +they made no move toward lowering rates as new and cheaper methods came +into vogue and their output and profits increased. The stocks of our +gas companies have been swollen by enormous amounts of water, and upon +this fictitious capital they have continually paid enormous dividends. +At one time there was a great call for competition in the gas business. +The public demanded it, and as usual the demand was supplied. Rival +companies were organized, and the city authorities made haste to grant +them permits for laying their mains in the city streets. A war of rates +of course ensued, and lasted till one company gave up the fight and sold +out to its rival. The consolidated company promptly increased its stock +by at least the amount which had been spent in purchasing and laying +this extra and entirely needless set of gas mains. The public has to pay +interest on this sum, and suffer besides the damage done to the +pavements by tearing up and re-laying. + +In at least twenty cities of the United States has this farce been +repeated, and in every case with the same result. It is now generally +acknowledged that the attempt to regulate the price of gas by +competition is unwise and harmful. Prof. E. J. James, of the University +of Pennsylvania, in a monograph entitled "The Relation of the Modern +Municipality to the Gas Supply," has treated this subject most fully. He +describes the experience of cities in England, France, and Germany, +where competition has been tried and abandoned, it being found by dear +experience that the gas business is necessarily a monopoly. A +Congressional Committee, who reported on the application of a rival gas +company which proposed to lay mains in the city of Washington, declared +that "it is bad policy to permit more than one gas company in the same +part of the city." One of the best informed men in the gas business +says: "The business is almost outside of the domain of rules governing +other enterprises. Competition is so deadly to it that it is impossible +for rival companies to occupy the same street without ruin to both, or +without consolidation with its attendant double investment, and cheap +light is thus rendered an impossibility." + +Hon. T. M. Cooley says: + + "The supply of public conveniences to a city is usually a monopoly, + and the protection of the public against excessive charges is to be + found first in the municipal power of control. Except in the very + large cities, public policy requires that for supplying light and + water there should be but one corporation, because one can perform + the service at lower rates than two or more, and in the long run + will be sure to do so. In some kinds of business competition will + keep corporations within bounds in their charges; in others it will + not. When it will not, it may become necessary to legislate upon + profits." + +Considering it determined, therefore, that the gas industry is a +monopoly, let us inquire something of the manner in which this monopoly +regulates the prices for its service. According to recent statistics, +collected from 683 gas companies in the United States, 148 companies +charge $2 per thousand cubic feet, and 145 companies charge $2.50 per +thousand. It is thus seen that rates have been fixed to make "even +figures," something which does not occur when margins of profit are +reduced by competition. The complete table shows this fact more fully as +follows: + + 7 companies charge $1.00 per thousand cubic feet. + 32 " " 1.50 " " " " + 24 " " 1.75 " " " " + 148 " " 2.00 " " " " + 57 " " 2.25 " " " " + 145 " " 2.50 " " " " + 20 companies charge 2.75 per thousand cubic feet. + 86 " " 3.00 " " " " + 25 " " 3.50 " " " " + 19 " " 4.00 " " " " + 120 companies charge various other prices per thousand cubic feet. + +According to the same authority these companies in 1886 produced +23,050,706,000 cubic feet of gas, for which they received $40,744,673, +an average price per M. of $1.76-71/100. According to the statement of +good authorities, gas can be manufactured at a cost of 50 to 75 cents +per M. in this country. Prof. James, in his work before quoted, says: +"In England at the present time gas is manufactured at a net cost of 30 +cents per thousand feet; some works in New England now manufacture it +for 38 cents per thousand feet to the holder." The President of the +American Gas-Light Association is quoted as stating in an address before +the Association that the cost of the gas delivered to consumers by the +South Metropolitan Company of London in 1883 was 39.65 cents per +thousand, and figuring by the relative cost of coal and labor there and +here, he stated that gas could be delivered in New York at a cost of 65 +cents per thousand. In Germany the price of gas to consumers varies from +61 cents in Cologne to $1.02 in Berlin. Very recent improvements in +processes have greatly cheapened the cost of manufacture. Mr. Henry +Woodall, the engineer of the Leeds, England, gas-works, states that +coal-gas costs in the holder 22 cents per thousand. Of nineteen +companies doing business in principal English cities, the average rate +charged consumers is 52½ cents, and the average cost of manufacture +is 37-1/3 cents. + +The history of the gas monopoly is repeating itself in the matter of +electric lighting. The smaller cities of the country, in their haste to +"boom," are ready to grant a liberal franchise to the first firm or +company which offers to supply an electric-lighting system, trusting to +future competition to regulate prices, a resource that must prove of no +avail. Nor are the men in power in our larger cities any wiser. The city +of New York is taking every means to encourage the operation of rival +electric-light companies, and is letting yearly contracts for +street-lighting to the lowest bidder. It is true that competition is +active just now, but it requires no far-seeing eye to discern the +inevitable combination and consolidation among the companies. + +Again, not only is competition of this sort sure to fail, but the +attempt to establish it is very harmful. To say nothing of the expense +and waste of wealth which is involved when rival companies are allowed +to stretch their wires and establish their extensive central stations in +the same district, it is everywhere acknowledged that the multiplication +of wires overhead is a crying evil and danger. Are we to double and +treble it, then, by permitting rival companies to place their wires +wherever they please? It is evident that the temporary rivalry which we +obtain in this way is bought at much too great a cost. What is true of +electric street light wires is equally true of the vastly greater +multitude of wires which belong to our rapidly growing system of +domestic lighting, and the telegraph, telephone, and messenger service. +Surely no man knoweth the beginning or the end of the network which is +woven over our heads, and which, besides all the useful wires already +enumerated, is full of "dead" wires, many of them strung by defunct or +irresponsible companies, who would never have been allowed to obstruct +the streets if they had not been "competing" for the business. Can there +be any doubt that it is the height of folly to continue this work, and +that the only rational way of entrusting electric service to +incorporated companies is to permit but a single company to operate in a +district and control prices by some other means than competition? + +We have the beginnings of other monopolies in our city economies which +are destined to become much more important, but to which we need only +refer. + +Steam for supplying heat and power is beginning to be distributed from +great central stations, through mains laid underground, to all parts of +the surrounding district. The necessity for frequent repairs and +stoppage of leaks renders it necessary to break the pavement and dig +down to the mains much oftener than is required for any other of our +underground furniture. Nothing would seem more evident than that the +number of these pipes to be laid should be the fewest consistent with +the proper supply of the district, yet it is a fact that for a time two +competing steam companies were permitted to run riot in the streets of +lower New York, until the weaker one succumbed "to over-pressure." Yet +it is scarcely to be doubted, that if another rival company were to ask +for a permit to operate in the district now monopolized by the New York +Steam Company, public opinion would tend to favor the granting of the +permit "because it would give more competition." It is to be hoped that +before these great systems for the distribution from central stations of +various necessities reach much greater proportions, the public will +become educated enough to perceive the folly of attempting to regulate +them by competition. + +The necessity for this will be more, rather than less, apparent with the +use of underground instead of overhead wires. The cost of placing wires +in subways is far beyond the cost of stringing them on poles, and if we +are obliged to build our subways large enough to accommodate all the +rival wires which may be offered, we have a herculean task upon our +hands. + +The great question of the monopoly of land can be merely touched in this +connection. While the fact that land is natural wealth must be freely +acknowledged, it is only where population is most dense that any great +monopoly appears in its ownership. The principle is well established, +indeed, that private ownership of land cannot stand in the way of the +public good. When a railway is to be built, any man who refuses to sell +right of way to the railway company at a reasonable price may have it +judicially condemned and taken from him. We have already noted in the +chapter on railway monopolies the injustice of permitting a single +person or corporation to control and own any especially necessary means +of communication, as a mountain pass or a long and expensive bridge, and +the same principle is apparent in connection with the railway terminals +in our large cities. The enormous expense attendant upon securing right +of way for an entrance to the heart of the city, makes it a very +difficult matter for any new company to obtain a terminus there, except +by securing running rights over the tracks of an older company. To give +to any single corporation the sole control of the entrance to a city +_and permit it to charge what toll it pleases_ for trains that pass +through it, evidently places the city at the mercy of a monopoly. +Practically the case is not so bad as this, as most large cities have +means of water communication, and the railroads are run to the heart of +the city through the public streets. But the time is fast approaching +when these city grade crossings will be done away with, and in every +city of importance the railways will enter the city on elevated viaducts +terminating in a single union depot. Evidently it is contrary to the +public welfare to sink more capital in these expensive structures than +is necessary; and in general, several companies will use a single +structure for entrance and exit. It is evident that the control of these +terminals, if vested in a single company, may give rise to just the +abuse we have set forth; and that the city itself should retain enough +control over its railway terminals and freight-transfer lines to ensure +that no single carrier or combination shall monopolize them. + +In the last analysis it is evident that the monopoly of entrance to a +city is really a monopoly in land, or, we might more properly say, in +space. We are fortunate in this country in having millions of acres of +land still awaiting cultivation; and while it is not intended here to +defend the policy of _giving away_ the estate of the public which our +government has pursued, there is no danger for a long time to come that +an actual monopoly will exist in agricultural lands. The price of land +used for business purposes in a city, however, depends almost wholly +upon its location. The price at which a single block of land near Wall +Street, in New York City, was recently sold was so great that, at the +same price, the value of a square mile would be equal to half the whole +estimated wealth of every sort in the United States. + +Now the question must occur to every thinking man, by what right does +the owner of this property receive this enormous wealth? To make the +case of those who advocate the public control of the gifts of Nature +more clear, let us consider a special case. Suppose a man in an Eastern +city chanced to come into possession two-score years ago of a tract of +land in what is now Kansas City. We may suppose that he got it by +inheritance, or through some chance, and that, except to pay the taxes +upon it, he has never given farther attention to it. During all the +years of the city's rapid growth he pays no attention to his land and +takes no part in furthering the growth of the city. At last, at the +height of the real-estate boom, he sells the land, and, whereas it cost +him in the first instance a merely nominal sum, perhaps $100, he sells +it now for $100,000. This value it has, not because of itself, as is the +case with farming lands, but because of its situation in reference to +the community around it. In other words, practically the whole value of +this land has been given it by the people who have come and built this +city around it. It is their labor that has given this property its +value, and, in equity, the value should be theirs. A more detailed +statement of the arguments for the public control of land incomes cannot +be given here. What we are concerned with here is the extent to which +land is subject to a monopoly. It appears too evident to require further +discussion that, as a general rule, agricultural lands in every section +of the country are competing to a greater or less extent with lands in +every other section, and that the lands used for business purposes in +the cities compete likewise, each city with others neighboring and of +similar size, while lands in the same city similarly situated compete +with each other. + + + + +VI. + +MONOPOLIES IN TRADE. + + +We have now examined the various forces which are destroying competition +in the production of goods in our factories, and of raw material from +our mines; in the transportation of these goods in their various +journeys between the producer and the consumer, and in the supply of the +especial needs of the dwellers in our cities. + +It is an old and well-worn adage that "competition is the life of +trade"; and if this be true, we shall certainly not expect to find the +men who are earning their living by the purchase and sale of goods +endeavoring to take away the life of their business by restraining or +destroying competition. At first sight it seems as if it would be a +difficult matter in any case to destroy competition in trade. The buyer +and seller of merchandise has no exclusive control over natural wealth; +no mine or necessary channel of transportation is under his direction; +nor does he in his trade produce any thing, as does the manufacturer. He +only serves the public by acting the part of a reservoir to equalize and +facilitate the flow between the consumers and producers; and if +necessity requires, the two can deal directly with each other and leave +him out altogether. But in dealing with the question of monopolies we +must not conclude that the absolute control of supply is at all +necessary to the existence of a monopoly. While there are monopolies, as +we have seen, which have the keys to some of the necessities of +civilized life, there are others which control merely some _easier +means_ for their production, carriage, or distribution; and to this +latter class belong the principal monopolies in trade. To be sure that +this constitutes a monopoly, we have but to turn to the case of the +mountain pass mentioned in a former chapter. The use of that particular +pass for transporting goods is only an _easier means_ of transportation +than the detour to some other pass or by some other route; and the +degree of power of the monopoly depends directly on the amount which is +saved by the use of its facilities. So with the monopolies in trade. +Brokers and jobbers and retail merchants form a channel through which +trade is accustomed to pass, and through which it can pass more readily +than by any new one. + +It is to be noted that under modern conditions the power of middle-men +has been greatly reduced from what it was formerly. As we have already +seen, manufacturing was then carried on only in families and small +workshops, and the mines which were worked were principally in the hands +of the king. The merchants were the wealthy men of olden time. They +controlled largely the transportation facilities of that day; and while, +as we have already noted, the commerce which then existed was but a +trifle compared with the present, the principal exchange being in local +communities, yet the trade in all articles which were imported, and all +domestic commerce between points any great distance apart was in the +hands of the merchants. + +It is natural, therefore, that we find monopolies in trade to have been +among the first which existed and to have been of importance and power +when manufacturers' trusts were not dreamed of. The guilds which +flourished near the close of the Middle Ages, while not devoted to the +establishment of a monopoly, did nevertheless aim, in some cases at +least, to hinder competition from those outside their guild. + +But turning to the present, let us examine the conditions under which +competition in trade is checked to-day. Let us take, first, the case of +retail trade in any of the thousands of country villages and petty trade +centres in the land. The history of the life of the country store-keeper +is a constant succession of combinations and agreements with his rivals, +interleaved with periods of "running," when, in a fit of spite, he sells +kerosene and sugar below cost, and, to make future prices seem +consistent, marks down new calico as "shop-worn--for half price." It is +true the sum involved in each case is a petty one, but when we consider +the enormous volume of goods which is distributed through these +channels, the total effect of the monopoly in raising the cost of goods +to the consumer must approach that effected by monopolies of much wider +fame. But perhaps it may not seem evident that this is a monopoly of the +same nature (not of the same degree) as a manufacturers' trust or a +railroad pool. It certainly _seems_ to be true that the merchant has a +right to do as he chooses with his own property; and that if he and his +neighbor over the way agree to charge uniform prices for their goods, it +is no one's business but their own. And, indeed, we are not yet ready to +take up the question of right and wrong in this matter. That the act is +essentially a "combination in restriction of competition," however, is +self-evident. The degree of this monopoly may vary widely. If the +merchants who effect this combination raise their prices far above what +will secure them a fair profit on the capital invested in their +business, and if it is difficult for their customers to reach any other +source of supply outside of the combination, the monopoly will have +considerable power. On the other hand, if the stores of another village +are easy of access, or if the merchants who form the combination fix +their prices at no exorbitant point, the effect of the monopoly may be +very slight indeed. + +We find this class of trade monopolies most powerful and effective on +the frontier. Wherever railroad communication is easy and cheap the +tradesmen of different towns--between whom combinations are seldom +formed--compete with each other. The extension of postal, express, and +railway-freight facilities to all parts of the country, too, have made +it possible for country buyers to purchase in the cities, if necessary. +Thus the railways have been a chief instrument in _lessening_ the power +of this species of monopoly in country retail trade, which was of great +power and importance a half century ago. + +Of retail trade in the cities, it is not necessary to speak at length. +Combination here has seldom been found practicable because of the great +number of competing units. There is, however, a noticeable tendency of +late to the concentration of the trade in large establishments, which by +their prestige and capital are able to take away business from their +smaller competitors. It does not seem likely, however, that this +movement will result in any very injurious monopoly among city +retailers. + +The wholesale trade is on quite a different basis from the retail. The +number of competitors being so much less, combination is vastly easier. +The tendency toward it has been greatly fostered and strengthened by the +formation of trusts among the producers. These combinations made the +manufacturer more independent in his treatment of jobbers, and disposed +him to cut their profits to the lowest point. Naturally these men +combined to resist this encroachment on their income. They refused to +handle any goods for less than a certain minimum commission. It might be +possible in many cases for manufacturers to sell directly to the retail +traders, but in general the difficulty of changing old commercial +channels is such that the friction and expense is less if the goods are +permitted to pass through the wholesaler's hands. It is to be noted that +one cause for ill-feeling between manufacturer and wholesaler is the +fact that before the days of trusts the latter often reaped much greater +proportionate profits than the producer himself. But in time this cause +of dissension will be forgotten, and the trust and the wholesalers' +association will work in harmony. + +The point of greatest interest in this is the fact that combinations +among this first class of middlemen are fostered and made possible by +the combination of producers. Nor does the series end here necessarily. +The increased price which the retail dealers are obliged to pay for the +goods, with the fact that others are making larger profits, makes them +eager to do the same; and by the aid and co-operation of the wholesale +merchants they may be able to do much toward checking competition among +themselves and increasing their profits. Thus by the operation of the +combination at the fountain-head among the producers, there is a +tendency to check competition all along the line, and grant to each +handler of the goods between producer and consumer an abnormal profit. +An excellent example of this is found in the sugar trade. The wholesale +Grocers' Guild of Canada, which includes 96 per cent. of the Dominion's +wholesale traders, entered into a compact with the Canadian sugar +refiners, who agreed that dealers outside of the guild should be charged +30 cents per 100 pounds more for sugar than those who were in the guild. +In November, 1887, fourteen members of the guild were expelled and were +compelled to pay the higher price. The executive committee of the guild +fixed the selling price for the retail dealers. The guild was so +successful with sugar that it extended its operations to starch, baking +powder, and tobacco, fixing prices for those goods as well. The +committee of the Dominion Parliament, appointed to investigate the +guild, reported that it was a combination obnoxious to public interest, +because it limited competition, advanced prices, and treated with gross +injustice those in the trade who were not its members. In New York State +there are two associations of wholesale grocers which are working to +prevent competition in the sugar trade. They have fixed a uniform price +for sugar, and have tried to make arrangements with the managers of the +sugar trust by which that organization shall discriminate against all +grocers who are not members of the association by refusing to sell them +sugar or charging them a higher price. In some other sections an attempt +has been, or is being, made by which the retail grocer sells only at +certain fixed prices determined by a committee of the wholesalers who +issue each week a card of rates. It is urged in defense of the movement +that sugar has been sold at an actual loss by both the wholesale and +retail trade for a very long time. The Grocers' Association, at its +first meeting, passed a resolution declaring that it was opposed to +combinations for the purpose of extorting unreasonable profits from the +public, and that all that was sought was to prevent the evil of handling +certain staples below the cost of doing the business. But if we inquire +why these staples have been handled at a loss, the answer is, because of +the strong competition which has prevailed. The organization, then, is a +combination to limit competition, to suppress it, in fact, and the +difference between its purpose and work and that of the Sugar Trust is a +difference of degree and not of kind. The reason for its moderate +demands may be because grocers are more liberal-hearted than refiners, +or because they understand that their power over the trade is more +limited than those who control the original product, so that an attempt +to exact too large profits would offer a tempting premium to competitors +of the Association. + +Another staple article of consumption in which combinations are known to +exist is meat. It is affirmed that a combine of buyers and slaughterers +controls the markets of Chicago and Kansas City, and both depresses the +price paid for cattle in the market, and raises the price of beef to the +retail dealer. This monopoly proved so oppressive, and attracted so much +attention, that in February, 1889, Gov. Humphrey of Kansas, called a +convention of delegates from the legislatures of ten different States +and Territories to devise a system of legislation, to be recommended for +adoption by the several States, which should destroy the power of the +combination. + +One of the combinations investigated by the New York State Committee +appointed to investigate trusts and similar organizations, was an +association of the retail butchers, and the brokers buying sheep, lambs, +calves, etc., from the farmers. The purpose of the association is to +prevent competition among its members and keep control of prices in its +own hands by charging a higher price to outsiders than to members of the +association. The ultimate effect is to increase profits by paying less +for the animals and getting higher prices for the meat sold. + +We might go on at indefinite length to examine the various monopolies of +this sort, but it does not seem necessary. The salient fact which is +evident to any one at all conversant with business affairs is, that in +almost every line of trade the restriction of competition is in force to +a greater or less extent. Those monopolies are strongest, indeed, which +have control of production; but in so far as they can control the +market, the men engaged in buying and selling are equally ready to +create minor monopolies, and an acquaintance with the general markets +convinces one that these monopolies are numerous enough to have a very +important effect in increasing the cost of goods to the consumer. + +We are accustomed to think of competition as a force which always tends +to keep prices down, and of a monopoly as always raising prices; but it +should be understood that this is true only of the competition and +monopolies among _sellers_ of goods. It must be remembered that the +competition among _buyers_, is a force which acts in the opposite +direction and tends to raise prices; and that it is quite possible to +have combinations among buyers to restrict competition and keep prices +down. Of course, where the buyer is the final consumer, this is almost +impossible, for the great number of competitors forbids any permanent +combination. Also where the product concerned is a manufactured article +or a mineral product, the mining or manufacturing company or firm will +generally have capital enough and business ability enough to defeat any +attempt of the wholesale merchants to combine to reduce the prices paid +for their output. This he can easily do by selling to retail dealers +direct. But in the case of products gathered from the farmers the case +is different, and the producer can less easily protect himself against +combinations among buyers to fix the price he shall receive. The power +and extent of these monopolies varies with the distance of the farmer +from markets, and also, it must be said, with the intelligence and +shrewdness of the farmer. In districts remote from railways and markets +the farmers are often dependent on the travelling buyers for a chance to +sell their cattle or produce. In a thinly settled region there may be no +more than two or three times in a season when a farmer will have an +opportunity to dispose of his surplus products; and, realizing his +necessity, he is apt to be beaten down to a much lower price than the +buyer would have given if other buyers had been competing with him to +secure the goods. In the chief markets, too, there is often a +combination of buyers formed to keep down prices. The combine of +cattle-buyers in Kansas City and Chicago has just been noted. The New +York Legislative Committee discovered that a milk trust had control of +the supply of milk for New York City, fixing the price paid to the +farmer at three cents per quart, and the selling price at 7 or 8 cents +per quart. According to the suit brought by the Attorney-General of +Louisiana against the Cotton-Seed Oil Trust, that monopoly has reduced +the price paid to the planters for seed from $7 to $4 per ton. As the +total amount of cotton seed which it purchases is about 700,000 tons a +year, it is evident that this feature of the combination alone puts into +the pockets of the owners of the Trust over two million dollars per +annum, over and above the profits made through its control of the +cotton-seed oil market. Evidently the combinations which lower prices by +restricting competition among purchasers are not to be overlooked +because of unimportance. + +In the chapter on monopolies of mineral wealth it was stated that the +French copper syndicate is not a "trust," but a "corner." It has not +been common to consider "corners" as a species of monopoly, except as +they have, like the latter, acquired a bad reputation with the general +public from their effect in raising the price of the necessaries of +life. But if we look at the matter carefully, it becomes plain that the +aim of the maker of corners is the same exactly as that of the organizer +of trusts,--to kill competition. The difference lies in the fact that +the "corner" is a temporary monopoly, while the trust is a permanent +one. The man who forms a corner in, let us say, wheat, first purchases +or secures the control of the whole available supply of wheat, or as +near the whole supply as he can. In addition to this he purchases more +than is really within reach of the market, by buying "futures," or +making contracts with others who agree to deliver him wheat at some +future time. Of course he aims to secure the greater part of his wheat +quietly, at low figures; but after he deems that the supply is nearly +within his control, he spreads the news that there is a "corner" in the +market, and buys openly all the wheat he can, offering larger and larger +prices, until he raises the price sufficiently high to suit him. Now the +men who have contracted to deliver wheat to him at this date are at his +mercy. They must buy their wheat of him at whatever price he chooses to +ask, and deliver it as soon as purchased, in order to fulfil their +contracts. Meanwhile mills must be kept in operation, and the millers +have to pay an increased price for wheat; they charge the bakers a +higher price for flour, and the bakers raise the price of bread. Thus is +told by the hungry mouths in the poor man's home, the last act in the +tragedy of the "corner." + +Fourier tells of an event in his early life which made a lasting +impression on him. While in the employ of a mercantile firm at +Marseilles, his employers engaged in a speculation in rice. They +purchased almost all the available supply and held it at high prices +during the prevalence of a famine. Some cargoes which were stored on +shipboard rotted, and Fourier had to superintend the work of throwing +the wasted grain, for the want of which people had been dying like dogs, +into the sea. The "corners" of the present day are no less productive of +discontent with the existing state of society than were those of +Fourier's time. + +But, returning to our subject, it should be said that the "corner," +generally speaking, does much less injury to the public than is commonly +supposed. As we have shown, the manipulators of the corner make their +chief profits from other speculators who operate on the opposing side of +the market; and it is but a small part of their gains which is taken +from the consumers. The effect on the consumer of the abnormal rise in +price caused by the corner is sometimes quite made up for by the +abnormal fall which occurs when the corner breaks. Generally, however, +the drop in prices will be slower to reach down to the final consumer, +past the middlemen, than will the higher prices. The corner makers also +are apt, if they are shrewd and successful, to make the total of their +sales for the current supply yield them a profit. Thus suppose that the +normal price of wheat is 70 cents per bushel, and that the syndicate +secures control of five million bushels at the normal price. If while it +keeps the price up it sells two million bushels at $1.20 per bushel, it +can afford to get rid of the rest of its stock at an average price as +low even as 50 cents per bushel, and still make four hundred thousand +dollars' profit. + +The operations of corner makers are confined principally to goods which +are dealt in upon commercial exchanges. One evident reason for this is +that the vast purchases and sales, which are necessary in the formation +of a corner are impossible without the facilities afforded by an +exchange. It must be said, too, that the plain truth is that our +principal commercial exchanges, while they do serve certain useful +purposes, are yet practically devoted chiefly to speculation. This, +simmered down to its essence, means that the business of the speculators +is to bet on the future prices of the articles dealt in,--a game in +which the largest players are able to influence prices to accord with +their bets, and hence have their "lamb" opponents at an obvious +disadvantage. The evil of this sort of commercial gambling is recognized +by practical men of every class; but its cure is yet to be effected. + +A sort of business allied both to trade and transportation is the +business of storage or warehousing, and this has recently shown some +interesting cases of monopoly. + +The owners of warehouses along the Brooklyn waterfront combined their +business in January, 1888, and doubled their rates for storage. In the +testimony of one of the members of this trust, before the New York +Legislative Committee, he said: "We want to destroy competition all we +can. It is a bad thing." The owners of grain elevators at Buffalo, N. +Y., have long combined to exact higher prices for the transfer of grain +than would have prevailed were free competition the rule. At the session +of 1887 the New York Legislature took the bull by the horns and enacted +a law fixing a maximum rate for elevator charges; a statute which was +based on the popular demand for its enactment, but is hard to accord +with the principles of a free government. + +There are a number of lines of business auxiliary to trade in which +competition is more or less restricted by the fact that the amount of +capital controlled and the prestige of the established firms renders it +a difficult and risky matter to start a new and competing firm. The +insurer of property or life, if he be wise, will demand financial +stability as a first requisite for the company in which he takes a +policy. The companies engaged in the business of fire insurance have +long been trying to agree on some uniform standard of rates and the +avoidance of all competition with each other. These combinations, +however, are apt to be broken, as soon as formed, by the weaker +companies, whose financial condition operates to prevent them from +getting their share of the business under uniform rates. Even when this +rate-cutting is stopped, there is still competition to be met from the +various small mutual companies, who are necessarily outside the +combination. + +Banks are a necessity to the carrying on of modern commerce, and they +have great power over the financial affairs of the business men of the +community which they serve. As a general rule, however, they are +largely owned by the merchants and others who patronize them, and the +instances of this power being abused are, therefore, not common. It is +to be remembered, in discussing this, as in other monopolies, that the +power of a monopoly depends entirely upon its degree. A bank, trust +company, or real-estate guaranty company which has a great capital, an +established reputation for safety and conservatism, sole control of many +special facilities, and conveniences for obtaining and dispatching +business, has a real monopoly, whose degree varies with the tendency +people have to patronize it instead of some weaker competitor, if one +exists. There is no evil effect from the monopoly upon the community, +unless it takes advantage of its power to charge a sum greater than +their real worth for the services it renders, or uses it to discriminate +to the injury of special persons or places. + +In closing our discussion of the monopolies in trade, there is an +important point to be noted. In the lines of industry considered in the +preceding chapter, the monopoly was easy of maintenance because it held +full control of the source of production, or of some necessary channel +through which commerce must pass. No gift of nature assists to maintain +a monopoly in trade. It must be wholly artificial, and it relies for its +strength simply on the adherence of its members to their agreement to +maintain prices. Its degree of power can never be great, compared with +monopolies which control the original sources of production; for if it +is attempted to put up prices inordinately, competition will start up +outside of the combination, or the consumer will be led to deal directly +with the producer. + +Because of this weakness, the temptation is great for these monopolies +to strengthen themselves in ways quite indefensible on any score. The +alliance of trade monopolies with trusts, in order to strengthen +themselves, we have already considered. But the trust which makes such +an alliance must plead guilty to the charge of _discrimination_ as well +as _monopoly_. It is bad enough to raise the prices of the necessaries +of life, and force the whole community to pay the tax; but it is worse +to add to this the crime of discrimination against certain persons in +the community, at the instance of a minor monopoly. + +But the trade monopoly does not confine its sins to tempting the +stronger monopoly to practise discriminations. It practises +discrimination itself in some very ugly forms. A combination among +manufacturers of railway car-springs, which wished to ruin an +independent competitor, not only agreed with the American Steel +Association that the independent company should be charged $10 per ton +more for steel than the members of the combine, but raised a fund to be +used as follows: When the independent company made a bid on a contract +for springs, one of the members of the trust was authorized to underbid +at a price which would incur a loss, which was to be paid for out of the +fund. In this way the competing company was to be driven out of +business. It is often argued that combinations to advance prices can +never exist long, because of the premium which the advanced price puts +upon the entrance to the field of new competitors; but the weapons which +this trust used to ruin an old and strong competitor are even more +effectual against a new-comer; and the knowledge that they are to meet +such a warfare is apt to deter new competitors from entering the field. + +The boycott was once deemed rather a degrading weapon of warfare; but +now the term has grown to be a familiar one in trade circles. Even the +great railway companies do not scruple to use the boycott in fighting +their battles. One might imagine that both the thing and the name filled +a long felt want. + + + + +VII. + +MONOPOLIES DEPENDING ON THE GOVERNMENT. + + +The fact has been already referred to that the principal monopolies +which existed previous to the present century were those created by +government. In the days when governments were less strong than now, and +less able to raise money by such taxes as they chose to assess, it was a +very convenient way to replenish the king's exchequer to sell the +monopoly of a certain trade to some rich merchant. Nor was the +establishment of these monopolies entirely without just reason. In those +days of scarce and timid capital, inducements had to be held out to +encourage the establishment of new enterprises. An instance of this, +familiar to every one, was the grant to the owners of the first +steamboat of the sole right to navigate the Hudson River by steam for a +term of years. In the early history of the nation and in colonial days, +government grants to establish local monopolies were very common. In +this, however, we only followed the example of the mother country, which +had long granted limited monopolies in trade and transportation as a +means of encouraging new enterprises and the investment of capital. + +The monopolies of the present day which are properly considered as +government monopolies are of two classes. The essential principle on +which all are based is that their establishment is for the common +benefit, real or supposed; but the first class--to which belong the +patents and copyrights--are also justified on the ground that the brain +worker should be protected in his right to reap the just profits from +his labor. + +The effect of a copyright is simply to make it possible for an author to +receive some recompense from his work. He can only do this by selling it +in printed form to those who may wish to buy; but if there were no +copyright, any printer might sell duplicates of the book as soon as it +was issued, and could sell them at a much less price than the original +edition, as the book would have cost him nothing to prepare. The +practical result would thus be that few could afford to spend study and +research in writing books, and the volumes which would be printed would +be apt to be only those of so cheap and worthless a sort that no one +would take the trouble to copy them. The monopoly produced by a +copyright takes nothing from the public which it previously enjoyed. The +writer of a book creates something which did not before exist; and if +people do not wish to buy that which he has created, they are at perfect +liberty not to do so. The monopoly relates only to the production and +sale of that particular book. Others are at liberty to write similar +books upon the same subject, which will compete with the first; and the +same information may be given in different words without infringing the +copyright. + +It seems clear enough, then, that the monopoly which occurs in the use +of a copyright, is of an entirely different sort from the monopolies +which we have previously considered. Competition is not destroyed by it, +and its only effect upon the public relates to an entirely new +production, which is not a necessity, and which the public could not +have had an opportunity to enjoy if the copyright law had not made it +possible for the author to write the book with the prospect of being +repaid for his labor by the sale of the printed volume. + +As already stated, the granting of patents is based on the same +principle as the granting of copyrights. A clause of the Constitution +empowers the general government to grant to authors and inventors for +limited periods the exclusive right to their respective writings and +discoveries. + +If we judge the granting of patents by the aims and intentions which are +held in the theory of the law, we must conclude that it is a highly +wise, just, and beneficial act. The man who invents a new machine or +device which benefits the public by making easier or cheaper some +industrial operation, performs a valuable service to the world. But he +can receive no reward for this service, if any one is at liberty to make +and sell the new machine he has invented; and unless the patent laws +gave him the power to repay himself for the labor and expense of +planning and designing his new device, it is altogether probable that he +would not spend his time in inventing. + +The wealth which a valuable patent promises has been a great incentive +to the work of inventors, and has undoubtedly been a chief cause of the +great mechanical advancement of the last half century. But the state of +mechanical science has greatly changed from what it was when the clause +of the Constitution was penned which speaks of inventions as +"discoveries." The trained mechanical designer now perfects a machine to +do a given work, with almost the same certainty that it will be +successful in its operation that he would feel if the machine were an +old and familiar one. The successful inventor is no longer an alchemist +groping in the dark. His task is simply to accomplish certain results +with certain known means at his disposal and certain well-understood +scientific principles to guide him in his work. But this statement, too, +must be qualified. There are still inventions made which are the result +of a happy inspiration as well as of direct design. Not all the +principles of mechanical science and the modes of reaching desired ends +are yet known or appreciated by even the best mechanical engineers. +There is still room for inventors whose rights should be protected. The +interpreters of our patent laws have always held the theory that the use +of a natural agent or principle could not be the subject of a patent. +This is undoubtedly wise and just. The distinction should always be +sharply drawn between those existing forces of nature which are as truly +common property as air and sunlight, and the tool or device invented to +aid in their use. + +Again, it is a notorious fact that the great multiplicity of inventions +has made the search to determine the novelty of any article submitted +for a patent for the most part a farce. No one is competent nowadays to +say surely of any ordinary mechanical device that it is absolutely new. +The bulky volumes of Patent-Office reports are for the most part a +hodge-podge of crude ideas, repeated over and over again under different +names, with just enough valuable matter, in the shape of the inventions +of practical mechanical designers and educated inventors, to save the +volumes from being an entire waste of paper and ink. Space, however, +will not permit us to discuss at length the faults of our patent system. +The important point for us to notice is that the patent system +establishes certain monopolies, and that these monopolies are not +always harmless. Patents are given to "promote the useful arts," but the +inventor whom they are supposed to encourage reaps but a small share of +the profits of his inventions. Valuable improvements soon fall into the +hands of large companies, who are able to defend them in the courts, and +reap all possible profits by their use. + +Again, patents sometimes aid in the formation of trusts and +combinations. Two or three firms may control all the valuable patents in +connection with some important industry. If they agree to combine their +interests and work in harmony, they are far stronger than an ordinary +trust, because the patents they hold prevent outside competition. It was +pointed out in the opening chapter how the control of patents was +sometimes a feature helping to induce the formation of trusts. The +Standard Oil Trust had its origin in the superiority which one firm +gained over its competitors through the control of an important patent. +The envelope trust, which, at this date, has raised the price of +envelopes about twenty per cent., owes its chief strength to its control +of patents on the machines for making the envelopes. Instances +innumerable could be given where a few manufacturers, who by their +ownership of patents controlled the whole field, have ended a fierce +competition by consolidating or agreeing to work together harmoniously +in the matter of selling-prices. Very many of these are monopolies in +trade or monopolies in manufacturing, and as such have already been +considered in the preceding chapters; but it is proper here to point out +the part which our patent system has taken in their formation, and the +fact that it is due to their control of patents that many of the +existing combinations owe their security against outside competition. + +Probably the public was never so forcibly reminded of the defects of our +patent system by any other means as it has been by the operation of the +Bell Telephone monopoly. The purpose in granting patents is to aid in +the establishment of new lines of industrial activity, secure to the +inventor the right to reap a reward for his work, and encourage other +inventors to persevere in their search for new improvements. All these +things are effected by the monopoly which is held by the Bell Telephone +Company; but they are effected at a cost to the users of the telephone +under which they have grown very restive. Passing by the statement that +the patents which the Bell company holds were illegally procured in the +first place, through the inventor having had access to the secret +records in the Patent Office of other inventions for which a patent had +been asked at about the same time as his own, it is an undisputed fact +that the Bell company holds the monopoly of communication by electric +telephone in this country. They have managed this monopoly with great +skill. While the instrument was yet in its introductory stage, and when +every smart town felt obliged to start a telephone exchange or fall +behind the times, prices were kept low; but when once the telephone +became a business necessity and its benefits were well known, rates of +rental were advanced to the point where the greatest possible profits +would accrue to the Bell company's stockholders. This was excellent +generalship. The same principle is applied in many other lines of +business; and it was only because the company held a monopoly of a most +valuable industry, that it proved so immensely profitable here. But +other acts of the company, it is alleged, while within the letter of +the law, are yet clearly infringements on the just rights of the public. +It is charged that the company has purposely refrained from putting into +practical use any of the many improvements which have been made in the +telephone during the past few years, but at the same time has quietly +secured their control. By skilfully managing "interferences" of one +patent against another, and by amending and altering the various +specifications, it contrives to delay as long as possible the issue of +the patents upon these inventions. By means of these improvements, which +it purposes to introduce as its present patents expire, it proposes to +continue its monopoly for many years to come. It is very likely that +this attempt will succeed. + +We have already seen the folly of establishing competing electric light +companies, and the attempt to establish rival telephone exchanges is +just as sure to result ultimately in a heavy additional tax on the +public. Then, too, the monopoly has grown so wealthy and powerful +through its enormous profits that it will be very loth to release its +hold, even when it is no longer protected by patents. Rival companies +which may be established then, it will seek to crush by a fierce +competition; and it will be quite likely to succeed. But in so far as it +is not protected by patents, it is properly to be considered with other +municipal monopolies, in which class we have already referred to it. + +The course pursued by the Bell Telephone Company has at least proved +that our whole patent system demands a thorough and radical revision. +The inventor should certainly be protected, but not to the public hurt. + +The second class of monopolies which the government establishes or aids +in establishing because it is deemed to be for the public welfare that +they exist, are, first, those private industries which receive aid from +the government, either directly by subsidies or indirectly by the +taxation of the goods of foreign competitors; and second, those branches +of industry which are carried on by the government itself. + +The question concerning the granting of subsidies is principally a past +issue. A century ago many new enterprises in all lines of industry +looked to the government for aid. In those days, when capital was scarce +and when investors hesitated at risk, it was perhaps wise to grant the +help of the public treasury to aid the establishment of young +industries; but nowadays, when millions of capital are ready to seize +every opportunity for profitable investment, it is recognized that +subsidies by the general government are no longer needed. The days of +subsidy granting ended none too soon. The people of the United States +gave away millions of acres of their fertile lands and other millions of +hard-earned dollars to aid in the building of the railroad lines of the +West; and a great part of the wealth thus lavished has been gathered +into the coffers of a few dozen men. The monopolies created by these +subsidies have been largely shorn of their power; but while they reigned +supreme, their profits were gathered with no halting hand. + +There is only one direction in which we still hear the granting of +subsidies by the general government strongly advocated; that is in the +direction of establishing steamship lines to foreign ports. It would be +apart from the scope of our subject to discuss the wisdom or folly of +such a proceeding farther than to note the fact that it establishes a +monopoly. + +Take, let us say, the case of a steamer line between New York and Buenos +Ayres. It is plain in the first place that the government aid will only +be granted if there is not business enough to induce private parties to +take up the enterprise. But as we suppose that there was not business +enough in the first place to support one steamer line unaided, it is +certain that none will undertake to establish a rival line to compete +with that already sure of profits by reason of the government aid. Hence +this line will have a monopoly of the trade; and unless some proper +restrictions as to rates accompany the subsidy, the monopoly may lay an +extortionate tax on the public who patronize it. + +The relation of the tariff to monopolies is one which deserves the +careful attention of every thinking man. Let us, in discussing this +question, lay aside all prejudice and preconceived ideas for or against +the protective tariff system and consider candidly what are the actual +facts of the case. It is evident, in the first place, that the purpose +of the tariff tax which the government levies on goods imported from +abroad is to _keep out foreign competition from our markets_. The +imported goods cost more by the amount of the tariff than they otherwise +would; and the American producer, if he makes equally desirable goods +and does not raise his selling price above that at which imported goods +can be bought, is secure against foreign competition. But we have +already learned that monopoly is simply the absence of competition; and +inasmuch as the tariff checks or shuts out foreign competition, it has a +_tendency_ toward the establishment of monopoly. But this tendency may +not result in the establishment of any monopoly. There is a tariff on +potatoes, but there is no monopoly in their production. Evidently the +tariff cannot create a monopoly; it only makes its establishment more +easy by narrowing the field of competition to the producers of this +single country. If we turn back over the list of monopolies we have +studied, to find those which the tariff has any effect in aiding to +establish, we shall find none till we reach the first two chapters. The +monopolies in mineral products and manufactured goods, known generally +by the name of trusts, it is self-evident are largely dependent upon the +tariff. If they raise their price above a certain point, people will buy +goods of foreign production instead. This point--the price at which +foreign goods can be profitably sold--depends on the rate of the tariff, +on the cost of production in foreign countries, and the cost of their +carriage here. + +Of the various trusts, it is evident that only those would be effected +by the removal or reduction of the tariff whose products are now covered +by it. Thus the Standard Oil Trust and the Cotton-Seed Oil Trust would +not be injured by any reduction in the tariff. As a matter of fact, +however, nearly all of the trusts have to do with manufactured goods +which are covered by the tariff, and the two exceptions already named +are about the only ones. + +The trusts in manufactured products, broadly speaking, then, are all +dependent on the tariff. Here is a strange condition of affairs. In the +early history of this nation, the people of this country, represented by +their popular government, were appealed to by the men engaged in +manufacturing after this fashion: "We cannot make the things you need as +cheaply as the manufacturers in foreign countries. They are wealthy and +we are poor. They have their mills already in operation, we have ours to +build. The capital we borrow bears a rate of interest double that which +the foreign mill-owner has to pay. The labor we must employ is not yet +trained as is theirs, and it must receive far higher wages. Therefore we +ask that you aid us in establishing our industries by paying us higher +prices for our goods than those for which you could purchase the same +goods of foreign manufacture. In order that every one shall be obliged +to do this, and that all may contribute equally to our support, we ask +you to pass laws laying a tax on all imported goods which compete with +ours, whereby none shall be able to buy them at a cheaper price than we +can afford to sell our own goods." + +And the people replied: "While we recognize the fact that we must pay an +increased price for your goods compared with that which is asked for +goods from foreign mills, and are thus taxing ourselves for your +benefit, yet we see how desirable it is that our industries should be +diversified and that we should not be dependent on foreign nations for +the necessaries and comforts of life. Thus _for a season_ we will grant +your petition and tax ourselves to establish you in your business." + +Such was the spirit of the movement that inaugurated the protective +tariff. One other great argument for its establishment, which was +believed by the people and was assented to by the manufacturers, was as +follows: "Our natural advantages for engaging in manufacturing are +beyond those of any other nation. Our workmen are more skillful, +intelligent, and ingenious; our capitalists are more enterprising. At +the same time there are many difficulties to be overcome in establishing +a manufacturing business in a new country. Some assistance is needed at +the outset to tide it past the critical period. Now, if we can give our +manufacturers a start and enable them to establish themselves, they +will improve all these natural advantages which we possess; and with the +abundance of raw material in our mines and farms and forests, with our +ingenuity and Yankee enterprise and skill, who can doubt that our +manufacturers, once established, can produce goods more cheaply than +they could ever be brought across from foreign countries? This +protection from foreign competition will be a great incentive to the +establishment of manufacturing enterprises. Everywhere mills and +factories will spring up; a brisk home competition will be created; and +that will finally reduce prices lower than they could ever go if we +remained dependent on foreign countries for our manufactured goods." + +It was a wise and well-founded plan, and only as to its final result did +it fail. The protective tariff did make manufacturing more profitable +than any other business, and mills and factories of every sort have +sprung up in all parts of the country. But the expected extreme +competition which was to reduce manufacturers' profits and the price of +manufactured goods to a basis in accordance with the profits in +agricultural and other branches of industry has been long delayed. The +wonderful development of the country has kept up prices and profits, and +has furnished a market for our manufacturers which has long kept in +advance of their capacity to supply it. At last, however, the result +which was expected by the founders of the protective tariff has come to +pass. Our domestic mills and factories have a capacity beyond the +present demand for their products. The home competition which was +predicted has come; and if it had operated to reduce prices as was +expected, there would now be employment for all our mills, for it is an +axiom that every reduction in price increases the demand. + +But the manufacturers who had been making enormous profits of ten, +twenty, and thirty per cent. on their capital for these many years, were +far from willing to accept calmly the situation and reduce their profits +to a reasonable figure. They have tried combinations of many sorts to +keep up prices, and at last have found in the trust a strong and +effective means of killing home competition and keeping up their +profits, if they choose, to the highest point which the tariff permits. + +It is not to be argued that the manufacturers were especially worse than +the general run of men in taking this action. It is the most natural +thing in the world that a man who has all his life been used to making +enormous profits in his business should come to think that he had an +inalienable right to make them; and that when competition became so +sharp that he had to lower his prices, it was due to an unnatural +condition of affairs glibly designated as "over-production," for which +the trust was an appropriate and wise remedy. + +It is thus plain how, in a secondary way, the tariff is a cause of the +trusts. The fat profits which the former gave have made men covetous +enough to engage in the latter. + +We are, perhaps, not yet prepared to discuss the question of the proper +remedies for trusts; but it is too obvious to call for comment that an +easy and most effective remedy is to cut away the protection from +foreign competition, under which they flourish, and let them sink or +swim as they best can. At the least it will be wise to reduce their +protection to a point where any attempt to tax the nation of consumers +and reap exorbitant profits by putting up prices so that profits of +twenty-five per cent. or more can be reaped, will be counteracted by +foreign competition. + +It is only fair to point out at the same time that this remedy is far +from being a panacea against all trusts and monopolies. The monopolies +in the peculiar products of this country will be unaffected by it, and +the combinations which embrace the whole globe in their plan of +operations are quite beyond its power. The copper syndicate and the salt +trust, and according to Mr. Carnegie a steel rail trust, are the only +actual examples of international combinations which have ever been +attempted, and it will probably be many years yet before the constant +movement towards Tennyson's "Federation of the World" permits the +general formation of effective industrial combinations which shall +embrace all commercial nations. + +We have finally to consider the monopolies carried on directly by the +government. The carriage of the mails is the most important monopoly +carried on by the government, and we may find some facts of interest by +enquiring the reasons why it is for the public welfare that it should be +so conducted rather than by private enterprise. In the first place, if +it were left to private enterprise to furnish us with postal facilities, +the postal service would be much more limited than now; many places of +small importance being left without postal facilities or charged a much +higher rate for service than now. On the other hand--and this is an +important point--there would, perhaps, be in and between the large +cities competition between different companies; in which case there +would be duplicate sets of postal facilities, including buildings, +mail-boxes, furniture, and employees of every grade. It is plain that +all this would be a waste. One set of facilities is better for the +public than two or three or more, and is ample to carry all the mails. +To put another set of men at the work that others are already able to +do, is to waste just so much of the working force of the world, as well +as the capital necessary to furnish tools and buildings for its use. The +matter of rates, too, would vary with the competition. One could never +be sure what his postage bill for the coming year was to be. The +receipts of the companies would be uncertain, and they would be obliged +to pay a high rate of interest on the capital invested in their plant, +thus making it necessary for them to charge high rates for their +service. The intense competition between rival companies would lead to +the bankruptcy of the weaker, and the final result would be the +establishment of a single corporation in the control of the whole +system. Rates would then be put up to the point where the greatest +profit would accrue to the corporation. + +Under the existing system, then, we save in cost of service over +competing systems under private direction, in that the existing +facilities are all made use of. There is no waste by setting two men to +do the work of one, or by renting two offices to do the business which +one could accommodate, neither is any energy wasted in soliciting +business. The capital invested by the government in its plant for +carrying on the postal service would bear interest, if the money were +borrowed, of not more than two or three per cent. But if a private +company borrowed money to carry a similar business, they would have to +pay five to seven per cent., which they would have to make up for by +charging a higher rate of postage. + +Other monopolies which have been carried on by the government are the +business of transportation, and the provision of roads, bridges, and +canals therefor; monopolies in mining; and in the case of municipal +governments, as already noted, the supply of water, gas, and electric +service, and street railway transportation. + + + + +VIII. + +MONOPOLIES IN THE LABOR MARKET. + + +It should be said at the outset of this chapter that, in a very true +sense, practically all men are laborers. That into which a man puts his +energy and by which he earns his living, is his labor, whether it be +work of the hand or the head. But the labor we are to consider in this +chapter is that of the men who work for wages; and we will also make the +arbitrary distinction that it is that of the men who work for wages in +some branch of manufacturing, mining, trade, or transportation, the +great divisions of modern industry which we have thus far considered. + +Almost all these monopolies employ large amounts of capital in carrying +on their business; and in the popular speech, "monopolist" and +"capitalist" are often used interchangeably. It is a very common belief +that monopolies are confined to the capitalized industries of +production, transportation, and trade, which we have already considered; +but we are now confronted by the fact that the wage-workers in the +various trades of the country are engaged in exactly the same +monopolistic schemes, in which they have exactly the same ends in view +as have the monopolists who combine millions of dollars' worth of +capital to effect their purposes. On the one hand we have the Standard +Oil Trust and the Railroad pools and the hundreds of other capitalistic +combinations striving to benefit the producer at the expense of the +consumer; while among those whose only capital is their strength and +skill, we find the workers in all the various trades, and even some of +the lower grades of laborers firmly banded together with the avowed +purpose of raising their wages above those which they would receive if +competition alone determined the rate. And they are successful, too. +Notwithstanding the fact that they deal with tens of thousands of +producing units where the combiner of capitalized interests deals with +tens, the success achieved by the combinations of labor is quite +comparable with that reached by combinations of capital. It speaks +volumes for the intelligence and ability of the wage-workers of the +present day--yes, and for the growth of the spirit of fraternity; that +in the advancement of what they deem a just and righteous cause, they +should voluntarily put themselves under discipline and endure patiently +the untold hardships of uncounted strikes, often brought on in the +unselfish work of aiding their brother laborers against what they deem a +common enemy. + +The modes in which the combinations of skilled laborers attain their +desired ends are akin to those which obtain in a well organized +manufacturers' trust. The former allow only a certain number of +apprentices to learn their trade. The latter permit the establishment of +only such additional mills as shall not unduly increase the market +supply. The former fix a standard scale of wages below which no member +of the union shall work; the latter fix a minimum price for the goods +sold in the market. If there are more laborers in the union than can be +employed at the advanced rate of wages, some must be idle. If there are +more mills in the trust than the lessened demand for the goods will keep +busy, some must be shut down. The trade-union boycotts competing workmen +outside its ranks, and stigmatizes them as "scabs." The trusts endeavor +to punish every outside manufacturer, sometimes by forcing upon him such +a competition as shall cause his ruin; sometimes by means as illegal and +criminal as are the riotous acts of a mob of hungry workmen, and far +less defensible. But let us not yet bring up the question of relative +blame. The main point which must impress every candid observer is that +the means employed for the monopolies of capital and the monopolies of +labor are identical in principle and motive. Nor are we confined to +manufacturers' trusts to show that the spirit of rule or ruin +characterizes capital as well as labor. Railroad monopolies, in the +words of the president of one of the greatest corporations of the +country, "strive eagerly to protect themselves while entirely +indifferent as to what shall befall their rivals." How many weak +corporations have been deliberately ruined by the cut rates of stronger +competitors? If the laborer has "scab" in his vocabulary, has not the +railroad manager his "scalper" and "guerilla"? + +The close relationship, viewed in many different aspects, of the +monopolies of labor and the monopolies in production generally has +hardly received the notice its importance deserves. Still, it is an +evidence that people are thinking of and discussing the matter when such +a writer as W. D. Howells, who is popularly supposed to cater to the +tastes of those who have very little in common with the laboring +classes, puts into the mouth of one of his characters a defence of +workingmen for executing a boycott on a non-union workingman, on the +ground that they "did only once just what the big manufacturing trusts +do every day." + +Perhaps it was never so forcibly realized how thoroughly effective these +labor combinations have become, and how completely they hold the country +at their mercy, as in the strike of the locomotive engineers on the +Chicago, Burlington and Quincy Railroad system in March, 1888. Here +were, perhaps two thirds of the men in the country qualified for the +responsible and onerous work of running a locomotive engine, firmly +banded together to advance their own interests and secure assent to +their demands. Granted the will, the courage, the discipline, and it was +possible, yes, easy, for them to have obliged the railroads to raise the +wages of every engineer in the brotherhood to $10.00 per day, for on a +refusal they could have enforced the extreme penalty of bringing down a +total paralysis upon the business of the country. It speaks volumes for +the good sense, the honesty and moderation of the men and their leaders, +that, notwithstanding the fact that their demands were not immoderate, +and that the failure which came permanently deprived of a remunerative +position a thousand members of their brotherhood, they refrained from +the extreme to which they might easily have gone, and permitted +themselves to be defeated, when they had the power to have forced a +different result. + +Organized workers in many trades have the power to force wages much +higher than they have done. Would that the Sugar Refineries Company, and +some other monopolies of production, were as moderate in their demands +upon the public as are the workingmen. But though their demands are in +one sense moderate, it is yet true that in so far as they exceed the +amount which the laborer would receive when the market for labor is +open to free competition, they are the direct result of the artificial +monopoly which the laborers have created by their combination, and, in +effect, levy a tax upon the community. To illustrate: let us suppose +that if every man were permitted to follow the trade of bricklaying who +wished to do so, the equilibrium between supply and demand would be +found at a rate of wages of $3.00 per day. At that rate, if the price +rose, more men would wish to follow the trade and at the same time less +people could afford to build houses, thus raising the supply above the +demand. If the price fell, some of the men would prefer to work at some +other trade and more people would conclude they could afford to build +houses. But when the rate, which, without prejudice, we call the natural +rate, is at $3.00 per day, suppose the men belonging to the trade form a +union and resolve to charge $5.00 a day for their work. Then it is very +evident that the cost of building is increased, and every one has to pay +more for construction and ask a higher rent to repay himself afterward. +Evidently, then, by this action of the bricklayers every man in the +trade receives $2.00 more per day for each day's work, which must be +paid, directly by their employers, but indirectly by the whole +community. It would be easy to prove that the tax on the community when +the wages are raised in any trade, affects the whole public as well as +those directly employing the workers in that trade; but it seems too +plain to require proof. The main point we now wish to show, is that any +increase in the wages of labor over that received under ordinary +competition must be paid by the community, just as much as any increase +in the price of coal, iron, copper, wood, wheat, or any other commodity +must be paid by consumers at large. Nor does the injury to the +community stop here, by any means. We saw that the advance of prices by +the linseed oil trust was an injury to all those who, on that account, +were obliged to forego painting; and that it thus caused a further +injury to painters, paint-makers, and even those employed in the +building trade. But the increase in the price of the bricklayers' work +has results no less important. Not only is injury done to those who +build and have to pay more for their buildings, but many are prevented +from building on account of the increased cost. If we argue according to +a prevalent method, we may say that this reduced activity in the +building trade will cause stagnation among allied trades with +corresponding loss of employment. Again, as a less number of houses are +built, and those which are built are more expensive, rents are certain +to rise, which means that the poor man must pay out a still greater part +of his earnings for his shelter, or else must put up with poorer and +meaner quarters. + +It is a strange thing to trace, in connection with this, the history of +labor, and see how recent it is that the natural right of a man to sell +his services for such a price as he could obtain has been acknowledged. +History shows that until modern times, compulsory personal servitude has +been in every age and country the lot of a large part of the human race. +And when wages began to be paid for service, conditions were not much +improved. In England, in the fourteenth century, in the reign of Edward +III., a pestilence seriously depopulated the country, and reduced the +supply of laborers so much that it was not equal to the demand for +labor, and wages began to rise. Laws were therefore enacted that each +able-bodied man and woman in the realm, not over three score, "not +living in merchandise, nor exercising any craft, nor having of his own +whereof to live, nor land about whose tillage he might employ himself, +nor serving any other," should be bound to serve at the wages accustomed +to be given five years previously. No persons were allowed to pay an +advance on these wages, on pain of forfeiting to the Crown double what +they had paid. Previous to the fifteenth century, workmen in various +occupations were impressed into the service of the king at wages +regardless of their will as to the terms and place of employment. +Indeed, all through the fifteenth and sixteenth centuries, there were +continual attempts to fix the rate of wages arbitrarily by law, and also +the hours of labor. These, by one old statute, were decreed to last from +5 A.M. to 7 or 8 P.M. + +These acts, and others of similar nature, were intended for the +subjugation of laborers and the benefit of the employers of labor. It is +only since the era of popular government that legislation for an +opposite purpose has come in vogue. Gradually the right of the +workingman to have the price of his labor fixed as is the price of other +commodities, by the law of supply and demand, came to be recognized, +although the progress was pitifully slow. The old ideas of the relation +between "master" and "servant" were very tenacious of life, and the +substitution of the terms "workman" and "employer" is a change which has +taken place in England during the present generation. + +It was the petty tyranny and the grinding extortion which the laborers +had begun to feel, even though they were far better paid and better +treated than their fathers, that caused the formation of the original +trade unions. Laborers saw that each was helpless alone, but that +combined they were a power which their employers need not despise. The +old craft guilds furnished them an example of effective combination +among those engaged in the same trade; and as men everywhere in every +age, when a common danger or misfortune has confronted them, have come +together for mutual help and defence, these ignorant laborers, in +violation of stringent statutes, but following blindly their human +instincts of self-defence, came together and organized the first trade +unions. + +The common law has always held trade unions to be "illegal combinations +in restraint of trade." Between the reigns of Edward I. and George IV., +the common law was affirmed and made more effective by the passage of +over thirty acts of Parliament, all intended to abolish the trade +unions. In 1800 a stringent law was passed, by which all persons +combining to advance their wages or decrease the quantity of their work, +or in any way affect or control those who carried on the business in +which they were employed, might be committed to jail by a justice for +not more than three months, or to work in the house of correction for +not more than two months. Not till 1824 was an act passed slightly +ameliorating this stringent law, and even then the trade unions remained +for the most part secret organizations. At last, in 1871 and 1876, laws +were passed under which no person can be prosecuted for conspiracy to +commit an act which would not be criminal if committed by him singly; +and the trade unions, thus legalized, were taken in common with other +benefit societies under the protection of the law. + +We have already pointed out the main fact that the chief end and aim of +the trade unions is the advancement of wages by securing a monopoly of +the supply of labor in some particular trade. It is now fair to explain, +as we have for other monopolies, the labor monopoly from the standpoint +of the laborer himself. + +It is a sound axiom of business that a forced sale is apt to be an +unprofitable one to the seller; and that when a man's needs are so great +that he is absolutely obliged to sell at any price, he is quite certain +not to get the full worth of his goods. Now it is an undeniable fact +that the condition of many of the wage-workers of the country +approximates to this: They must have food, shelter, and clothing for +themselves and their families, and the only thing they can offer in +exchange for it is their labor. Suppose an honest and industrious man +has some misfortune, as an accident, or illness, and loses employment. +When once more able to work, he finds his old place filled and new +places hard to find; but at last he finds a mercenary employer who +agrees to give him half wages. Disheartened at his prospects, he thinks +half a loaf is better than no bread, especially when those dearest to +him are hungry, and so takes the place. But his employer takes care that +his constant work shall leave him no time to hunt for a better position. +Indeed, by a few judicious threats from his employer, the man may be put +in terror of losing the pittance he already has, and seeing those +dependent on him in absolute starvation. Such cases are amply provided +for by the trade union. Ill treatment of any one of its members may be +avenged by the organization as a whole, on the principle, whose spirit +of fraternity and self-sacrifice all must admire, that "an injury to one +is the concern of all." More than this, by means of the benefit feature +of the fraternity, the member unfortunate, or in distress, is properly +cared for. No member is obliged to feel, when seeking for employment, +that his food or shelter is at stake if his attempts fail, and he need +never be at the mercy of employers who drive sharp bargains. + +It is often charged as an evil of trade-unions interfering with wages, +that they tend to bring all their members to the same level, and are +opposed to the payment of wages in proportion to the varying abilities +of the men working at the same employment. But with unorganized labor, +and employers who were none too just in their ideas, it was not uncommon +to see the necessity of the laborer, or his inability to drive a good +bargain, taken advantage of. Thus the workmen whose necessities were +greatest, and who were the most docile and obedient, received lower +wages than the men who were not particular whether they were busy or +idle, and were inclined to pay more attention to their own rights and +prerogatives than to the work for which they were hired. While the +tendency toward non-recognition of the varying abilities and ambitions +of workmen by the trade unions must be deprecated, it has largely grown +from the reform of this worse abuse. + +There is another benefit which the organization of labor has effected +which may, perhaps, be thought an evil by some, but which every broad +and generous man must gratefully recognize as a gain to the whole +community; and in a self-governed nation like our own, it is a benefit +whose importance it is difficult to over-estimate. This is the +maintenance of the laborer's dignity and self-respect. We have but to +look back to the times we have already mentioned, to see the laborer +hardly better than a dog, a cringing dependent, kicked and beaten on +slight pretext, and with almost every vestige of manhood worked and +bullied out of him. We have come upon far happier times to-day, and +there are few corners of the civilized world where conditions so evil +prevail now. But without the organization of labor, the status of +workingmen would be much farther removed from what is just and right +than it now is. Every employer who is wise and honest, and who has the +true spirit of a gentleman, will see that his workmen are treated with +the respect that is their just due. Discipline there must be, but it is +a wrong view of discipline that makes it consist of oaths and brutal +insults delivered according to the prevalent good temper or ugliness of +the overseer. Unfortunately, not every man who is placed in authority is +wise, honest, and a gentleman. Bodily violence is no longer permitted by +law, but too often the curses and insults which are heaped on men with +no due cause are a violence which is more severe to many a man than +actual cuffs and kicks. No man can take such treatment without +resentment, and maintain his dignity and self-respect. Yet in how many +places is petty tyranny of this sort still active, and its victims are +cowed into submission for fear of taking the bread from their children's +mouths. + +But the member of a strong labor organization need not be cowed or +tamely accept insult. He has the right to resent it, and has the power +of his fraternity to support him. He knows this, and his employer knows +it. Overseers, big with their importance, and inclined to show it by +attacking the self-respect of the men under them are no longer in +demand. + +It is very unfortunate that many people misconstrue this result of the +organization of labor as a move toward the abolition of all social ranks +and grades. It is nothing of the kind. Social gradations cannot be +created or brushed away by any legislative enactment, or the acts of +any single class. The combination of the workmen to secure their right +to protect themselves from insult is indeed a movement toward making +them better and nobler men, just as the abolition of slavery in all its +forms was a move in this direction. But no man is truly free if he is +not secure in his right to immunity from personal insult as well as from +bodily violence. It is not strange, however, that the workman, conscious +of the strength of the fraternity behind him, sometimes grows arrogant +and insolent toward those who must necessarily be in authority over him. +Unaccustomed for generations past to other government than fear of one +sort or other, he is all unused to self-control. But it is hardly +possible that this should be a great evil. The body of workmen will, +eventually, if not now, refuse to sanction and defend their members in +any thing which their innate sense of justice must teach them is wrong. +Few workingmen will causelessly ask their brotherhood to undertake the +hardships and loss of prestige which accompany a strike. And even when +insolence is shown toward employers or overseers, they have at least +equal power to resent it, and are not, as was the laborer of a +half-century ago, forced to submit to insults with outward humility. + +We have already noticed the condition of the laws in reference to the +laborer in former times: but the repeal of the laws oppressing the +workman, and making him a servant to a master instead of a workman for +an employer, has been largely due to the organized efforts of the trade +unions. To them, also, we owe the passage of many acts like those for +the guarding of machinery in factories, the restrictions upon the +employment of child labor, and the proper care for the health, comfort, +and convenience of employés in general. It cannot be said that the +labor interests have always shown great wisdom in all their advocacy of +new legislation, and too many acts, like those in reference to the +employment of convict labor, show a lamentable retrogression. On the +whole, however, there is every reason to believe that the general course +of justice has been aided by the influence of the trade +unions--something which can be said of very few special interests for +whose benefit our legislatures have enacted laws. + +All the above facts we must admit in defence of the organizations which +have, to a large degree, killed competition in the labor market. But in +defence of the especial action of the labor monopolists in forcing wages +up to a point above that which competition alone would determine, there +is also much to be said. Those who are unwilling to concede that there +is any justice in the claim of the wage-workers that full justice is not +yet awarded them, are accustomed to expand on the theme of the improved +condition of the laborer over that in which he was a century ago. How +this can be taken for argument is a mystery. No one thinks of disputing +or diminifying the well-known fact that many workmen of to-day have more +comforts than the princes of the Middle Ages. The single point in +dispute is this: Of the total wealth which is being produced in the +world to-day, is the laborer receiving his fair share? There are not +wanting men of judgment and ability who answer this question with a +decided No. And the greater share of the blame for this injustice they +lay upon the monopolies which we have been discussing. They charge, and +they verify their charge with ample and sound testimony, that of the +wealth which the united brains, and strength, and skill of the world +daily produces, the lion's share is taken by men who render the world no +proportionate service. This is partly due to existing laws, which the +public is not yet wise enough to better; partly to the inertia of public +opinion, which is still prone to cling in many points to the idea of +past generations that the workman was necessarily a slave; and partly to +the narrow selfishness and grasping ambition of many men in the business +world. This is not arguing for the reduction of all to a dead level, as +is so often absurdly claimed. It is arguing that the inequalities which +exist at the present day are not held securely in place by agreement +with the inflexible laws of justice and right. Instead they are abrupt +and uneven, and contrary to these laws; and there is great danger that +the readjustment, which must inevitably take place to bring them in +accord with these laws, will come, not as a gradual change, but as a +series of terrible social catastrophes, involving us in a wreck which +will require a century of civilization to repair. + +Only fanatics preach absolute equality. As men differ in their ability +and their power to serve the world, so is it just that the reward which +the world metes out to them should differ in like proportion. But if we +stretch to the utmost the benefit which we conceive the world to derive +from the life of many of its men who reap the richest harvest from its +production, we cannot in any way make out that their services are so +valuable as to deserve such munificent reward. Indeed, it is not very +far from the truth to say of some of our most wealthy men that their +wealth was won instead of earned; and many place a much worse term in +the place of "won." + +The workman sums up his case with the argument that as he is confessedly +not getting his just share of the results of his work, he is only +getting his due, or part of it, if by combination with his fellows to +crush out competition, he is able to put up the price of his labor above +the natural rate. Finally, as a last defence for the labor monopolies, +he calls attention to the trusts and pools and monopolies which are +taxing him at every hand for the necessaries of life, and declares that +if he, working on the same principle as the wealthy capitalists, is able +to combine his tens of thousands of fellows into an effective monopoly, +surely he should not be condemned for following the example of the men +who are, or are supposed to be, his social, moral, and intellectual +superiors. + +Such is the strong case which the labor organizations present in defence +of the unions which they have formed to kill competition in the labor +market. The investigation we have pursued in the preceding chapters +enables us to add to this a statement of the case more comprehensive and +striking even, than the narrower views which have preceded. In the +chapter on the monopolies in trade, reference was made to the fact that +the competition among purchasers tends to keep prices up, just as +competition among sellers tends to keep them down. Now labor is a +commodity whose price in the market is governed by the same laws of +supply and demand that regulate the prices of all other things that are +bought and sold. But it has this peculiar difference, that the _sellers_ +of labor are many, while the _purchasers_ are few, as compared with the +relative proportion of sellers and buyers of goods in general. Then, +wherever there is little competition among purchasers of labor, we shall +expect to find low wages; and where competition to secure workmen is +active, high wages will be the rule. This is so obviously true, in the +light of every one's experience, that we need not stop to prove it. +Now, in the days when manufacturing was carried on in small workshops, +there was a great number of purchasers of labor. The concentration of +manufacturing in great establishments where thousands of workmen are +employed has lessened the number of employers greatly; has it not also +lessened competition among them? It is a well-known fact that in many +great industries, as, for instance, the mining of coal or the +manufacture of iron, there is one rate of wages paid all through one +district, and the employers fix that rate through their associations. +The makers of trusts have sometimes defended them, on the ground that +they enabled the employer to pay his laborers higher wages; but it is +plain that when all the firms in a trade are united in one combination, +there can be no competition between them for the employment of labor. +They will pay them only such wages as they choose; and the bulk of +evidence seems to show that, notwithstanding the vast profits which the +monopolies are reaping, they have been far from showing any general +disposition to share their profits with their employés. It seems almost +unquestionable that we have here the real reason for the extraordinary +increase of labor monopolies within the past quarter century. This +period has witnessed a rapid growth of consolidation and combination in +all our industries, lessening thus the number of employers of labor. The +wage-worker found himself confronted with the fact that he was soon to +lose entirely the benefit of competition for the purchase of his work, +and felt that his only salvation from practical slavery was to prevent +the competition between himself and his comrades from forcing his wages +down to the starvation point. He met the monopoly that threatened to +lower his wages by forming another monopoly that could meet the first on +equal terms. + +We have given little space in this chapter to the consideration of the +limit of the power of labor monopolies; but it is obvious that this is +very clearly defined. In the first place, while there are certain +attempts at combination among unskilled laborers, and those not working +at trades, these attempts cannot, as a general rule, be at all +successful. Any man out of employment may be a competitor for the work +which they do, and it seems practically impossible that any organization +can combine, under effective discipline, even a majority of the +workingmen of the country not skilled in a trade. The only ways in which +attempts to kill competition in unskilled labor can be successful, then, +are by the use of force or the boycott, or similar means, and these can +never come into vogue as permanent agents in the world's industry. The +labor monopolies which exist, and which promise, if let alone, to enjoy +continued success, are principally combinations of the workers in +skilled trades, and certain of those employed in manufacturing, mining, +trade, and transportation. + + + + +IX. + +MONOPOLIES AND COMPETITION IN OTHER INDUSTRIES. + + +As we take a look back over the long list of monopolies which we have +investigated in the preceding chapters, the natural thought is that we +have considered now the greater part of the industries of the country. +Certainly these occupations of manufacturing and trade and +transportation, are generally considered as our important industries, +and a pretty good share of our legislation and public agitation concerns +itself with the welfare of these industries and with the men who are +employed in them. But certain questions will naturally arise in the +curious mind. Just what proportion of our total working population are +employed in these industries; and of that number how many are reaping +the profits of the monopoly? What are the remaining occupations of our +people, and are the workers in them doing any thing to destroy +competition? To the investigation of these matters we will devote the +present chapter. + +The United States Census Bureau classes the gainful occupations of the +people in four great divisions: (1) Agriculture. (2) Professional and +Personal Service. (3) Trade and Transportation. (4) Manufacturing, +Mining, and Mechanical Industries. The monopolies which we have studied +in the preceding chapters are all included in the last two classes. The +total number of persons engaged in trade and transportation in the +country in 1880 is given as 1,810,256, and the total engaged in +manufacturing, mechanical, and mining operations is 3,837,112, or a +total of 5,647,368 in all these occupations among which we have found +monopolies to exist. Of course the great proportion of the persons +included in the above number have no direct interest in the profits of +the industries in whose operation they aid. It is, indeed, argued that +the manufacturer, miner, or merchant who is making enormous profits, +pays, therefore, larger and more generous wages; but it is urged on the +other side that while this is true in isolated cases, the general rule +holds good that the price of labor is governed by the law of supply and +demand; and that, as already pointed out, monopoly among producers means +a monopoly among purchasers of labor. Let us now, however, leave out +this indirect benefit which may, or may not, accrue to the workmen in +these various occupations, and find as nearly as we can the number which +are, or can possibly be, directly benefited by the operation of +monopolies. Let us deduct from the total of 5,647,368, such classes of +persons as it is evident cannot have a direct share in the results of a +monopoly and are not engaged as skilled workmen in a trade which has +been organized to control competition. + +We may certainly deduct the following items from the total: + + +---------------------------------------------------------+----------+ + | Agents | 18,523 | + | Clerks, salesmen, and accountants in stores | 445,513 | + | Commercial travellers, hucksters, and peddlers | 81,649 | + | Draymen, hackmen, teamsters, etc. | 177,586 | + | Sailors, steamboat-men, canal-men, pilots, and watermen | 100,902 | + | Apprentices | 44,170 | + | Blacksmiths | 172,726 | + | Fishermen and oystermen | 41,352 | + | Lumbermen, raftsmen, and wood-choppers | 43,382 | + | Photographers | 9,990 | + | Saw-mill operatives | 77,050 | + | Tailors, tailoresses, milliners, and dressmakers | 419,157 | + | +----------+ + | Total |1,632,000 | + +---------------------------------------------------------+----------+ + +There are a great many other occupations in the list[4] from which these +items are taken which might properly be included in the above, as the +combination which does or can exist in them it is almost certain is of +no practical importance. On the other hand, however, our total of +5,647,368 takes no account of the persons interested in trade, +transportation, or manufacturing through holding the shares or bonds of +incorporated companies; also the errors and omissions of the census are +so great in any event that only broad and general statements can be +based upon them. Deducting, then, from the total of 5,647,368 the +1,632,000, which we found to be surely not interested in monopolies, we +have about four million persons as the utmost number who are benefited +by the profits of the monopolies which we have thus far considered. But +let us look into this a little farther. As we have already stated, the +monopolies of trade are generally unable to raise prices far above their +normal rate. In retail trade, especially, competition shows great +tenacity of life. Also with regard to labor monopolies, it is true, as +we have already stated, that the limits of their operation are pretty +closely defined; even the men in the highest grades of skilled labor +cannot secure for each workman by any combination more than two or +three dollars per day over what he would receive under the freest +competition. Let us, therefore, deduct from the preceding four millions +the persons engaged in retail trade, and all skilled laborers in the +various trades which we formerly included because we conceived that they +might be connected with some form of labor organization, and might also +obtain some benefit through the profits of their employers. But when we +make these deductions we find that we have only a hundred thousand or so +of our four millions left. Briefly summed up, therefore, the fact is, +that the strong monopolies in manufacturing, mining, trade, and +transportation are owned by a very small portion of the population. Just +what this number is, it is impossible to say, for the stock and bonds of +railroad companies, mining companies, and manufacturing companies are +changing hands continually, and no public record is taken of their +distribution and ownership. It may possibly be true, however, that one +million different persons own an interest in some of the various +monopolies which we have studied, excluding the monopolies in trade and +labor. But even if this estimate is correct, it is a well-known fact +that a few hundred immensely wealthy men hold a large share of the stock +of these very profitable monopolies. + + [4] From the "Compendium of the Tenth Census of the United States," + Part II., pp. 1378 and 1384. + +Leaving the questions which this statement opens up, for later +consideration, let us consider the other classes of occupations in which +men engage for the purpose of gain, and see if this far-reaching +movement towards the destruction of competition has infected them, and +whether it has proved, or can prove, so successful there as it has in +the industries considered in preceding chapters. + +The third great class of occupations, rendering professional or personal +service, gives employment to over four million persons (4,074,328), and +includes in its members those in widely separated ranks of society. + +It is, of course, true that the competition in the professions is far +more a competition of ability, real or supposed, than it is a +competition of price; and the former is a competition which is never +likely to be done away with. Yet in all occupations, to a greater or +less degree, there tends to arise more or less competition in relation +to price, and the professions are not entirely exempt. Lawyers, indeed, +seem never to have felt the necessity of fixing any minimum tariff of +fees; and so far as is known, clergymen have never combined to advance +their salaries. But the medical profession has its well known code of +ethics which debars its members from "pushing their business," and has, +in certain places and times at least, prescribed a minimum tariff of +fees. It should be clearly understood, however, that this is not cited +with the intention of putting any aspersion upon the medical profession +in any way. The services which are freely rendered to the poor, and the +disgusting indecencies and insults which are thrust upon the public by +some who choose to ignore this code of medical ethics, would make us +ready to forgive very much worse things than a possible tendency among +members of the profession to refrain from "cutting under each other" in +the matter of fees. + +But while the three older professions have evidently little need or +disposition to combine for the purpose of increasing their income from +the community, some of the newer professions occupy different ground. +Architecture is coming to be a profession of no small importance. The +principal architects' society, the Association of American Architects, +has a regular schedule of minimum commissions below which its members +are forbidden to go. Another singular case of professional combination +is the Musical Protective Union, a combination of professional musicians +in New York City, which fixes minimum prices that its members may charge +for their services. On the whole, however, it must be said that the +limitation of competition in the professional and intellectual +occupations is in this country still in its infancy. In England the +fixing of prices of professional service by usage is very much more +common, and in many professions the check to competition thus effected +is of no small importance. To the careful observer there are indications +of a tendency in a similar direction in this country. Is it not more and +more common in professional circles to see a slur cast on the man who +will work cheaply? There is hardly an occupation or specialty which has +not its Associations and its periodicals; and what is more natural than +that an association for mutual benefit should come to adopt that certain +method of securing mutual benefit at the expense of the public, the +restraint of competition? + +Examining the remaining occupations in this division, we find that those +engaged in them form a large percentage of the whole population. There +are of laborers whose occupation is not more definitely specified, +1,859,223. Then there are 1,075,655 domestic servants, 121,942 +launderers, 77,413 hotel and restaurant employés, 24,000 soldiers, +14,000 messengers, and enough in other occupations similar to the above, +in that very many persons can engage in them without special training, +to make it certain that at least three fourths of the members of this +division, or a little over three million persons, belong to the class of +unskilled workers, among whom, as we have already seen, the attempt to +limit competition and force up wages has not, and cannot possibly have, +more than a limited and doubtful success. Nevertheless, to a very great +extent, the unskilled laborers of the country as well as those working +at minor trades are organized for mutual help and protection; and while +they cannot increase much the rate of their wages without drawing a host +of competitors, they can do much in the way of protecting themselves +from injustice and extortion, as we have pointed out in the preceding +chapter. It may be possible, indeed, that certain changes in the future, +as the requirement of greater skill and efficiency in all kinds of +labor, may make combinations in this class of occupations easier and +more effective. Our domestic affairs, for instance, are constantly +growing more complex, and require greater skill in their operation. +Housekeepers are prone to think the "servant girl" problem serious and +perplexing enough already. It remains to be seen what they would say if +a "Cooks' Protective Union," a "Chambermaids' Sisterhood," or a +"Laundresses' Amalgamated Association," should assume control of the +wages and hours of labor of their domestics. + +To sum up, we find that as a whole the 4,000,000 persons engaged in +rendering professional and personal services are in general not +increasing the cost to the public of their services by combining +together to limit competition; and that so far as we can determine, it +is not probable that many of them can do so in the future, even if they +are so disposed. + +There remains yet one important class of the community to be considered: +those engaged in agriculture. Can the farmers of the country fall into +line behind the manufacturers and miners and railroad owners, and force +up the price of their products by killing competition, to correspond +with the increased prices which are demanded in many other lines of +industry? They have one thing in their favor in that the principal +products of the soil are necessaries of life, which the community cannot +do without whether the price be great or small, although an increase in +price is sure to result in a decreased consumption. + +We may best determine this question by inquiring exactly how the prices +are forced up by monopolies. There can be but one way. The laws of +supply and demand hold good, and it is out of the power of the producer +to greatly affect the demand. It is only the supply of which he has +control. From the manufacturers' trust to the laborers' union, the only +way in which prices can be controlled is through a reduction in the +supply of goods made or men allowed to work; and if the price were to be +arbitrarily raised, the result would be the same; there would be a +surplus of goods, or some unemployed workmen. In order to raise the +price of his products, then, the farmer must do one of two things, which +will bring in the end the same result. He must send less of his products +to market--lessen the supply--or refuse to sell any thing at less than +the increased price which he desires. In either case, if he plants the +same acreage and gets the same yield as before, he will have a part of +his crop left on his hands. + +The query then comes, can it be possible for the farmers all over the +country to form so perfect and well-disciplined an organization that +every member shall diminish his remittances to market of grain, wool, +meat, hay, or what not, enough to raise prices; or that he shall refrain +from selling all these articles below a certain defined price? It must +be plain to every intelligent person that it would be a practical +impossibility to effect such a thing. It would be possible to bring only +a small percentage of the farmers in an area 3,000 miles in length and +1,500 in width into a single organization; and it would be essential to +the success of this, as of every other scheme, that no outside +competition should be permitted to exist. + +It may be argued that the Knights of Labor succeeded to a degree in +gathering into one organization a large proportion of the workingmen in +all the various trades in the country; but their members were mostly in +cities, many worked together in great factories, and as regards ease of +combination, they were far more easily handled than the widely scattered +farmers of the country could hope to be. Besides, the Knights of Labor +organization appears to be too unwieldy and cumbrous to be long +successful, and internal dissension seems to have already brought it +near its end. It is plain that the farmers are powerless to effect a +reduction of the competition among themselves. Nor is this condition at +all likely to change. Farming is unlike other modern productive +industries in that the cost of production does not decrease as it is +conducted on a larger scale. The most profitable farms are, and perhaps +will always be, the small ones, where the details of the tillage come +directly under the eye of the owner. + +Such are the facts with respect to the prospect of making a monopoly of +agriculture, and it would seem that they are so simple and so easily +understood that no attempt would ever be made to restrict competition +among farmers. It is to be recorded, however, that such attempts are +being seriously made. Prominent farmers of the West in the spring of +1888 took the preliminary steps towards the formation of a farmers' +trust. Conventions were held and resolutions adopted reciting that the +operation of trusts in manufacturing industries and of monopolies in +trade and transportation laid serious burdens on the farmers of the +country; and that in order not to be left behind in the struggle for +existence the farmers must combine for their own protection. Committees +were appointed to work out the details of a plan of organization; but +the movement seems to have lost vitality when its projectors came to +study it in detail. The preceding argument fully explains the reason. + +It should be said, however, that coöperative associations among the +farmers are growing at a rapid pace. The Grange and the Farmers' +Alliance are primarily coöperative associations for the purpose of +benefiting their members in the purchase of goods and in various other +directions, and they are fast increasing in numbers and influence. The +attempts made to benefit their members in the sale of their produce have +been generally confined to protection against the "middle men." The only +movement of which the author is aware for restricting production to +increase price, has been in certain sections of the South, where +recently a general attempt has been made to restrict the acreage planted +in tobacco in the hope of raising the price. + +It is a matter worthy of note here that the combined influence of the +farmers of the country has recently been successful in securing +legislation to defeat an important outside competitor. A few years ago +some chemists found out that from a cheap substance known as beef suet, +an imitation butter could be made, which was in composition and +appearance the same as butter made by the ordinary process, and was +exactly as nourishing a food. There has been much talk of the halcyon +days to come when the progress of science will be so great that food +will be made in the laboratory. Well, here was an important practical +step in that direction. A cheap product worth three or four cents a +pound could be easily converted by a chemical treatment into a valuable +food worth three times as much, and the great profit in the business +brought this substitute for butter rapidly into use. But at once an +indignant protest went up from the farmers of the land. They were being +ruined by the competition of the "grease butter" as they disrespectfully +called it. There was something suggested about the idea that if just as +good butter could be made out of the fat of the cow as out of her milk, +and at half the expense, that it would be a benefit to everybody in the +country who had butter to buy. But the weak protest for the protection +of the general interests of the whole people was not heeded, and +Congress passed a bill laying a tax on the new butter sufficient to stop +the sale. Here was an evident case of killing competition for the sake +of the farming interests, and the force of their unorganized sentiment +alone was sufficient to secure the desired legislation. But when the +farmers attempt to form a trust, they will have to kill competition +among themselves instead of outside competition; and that is a different +and far harder matter. + +To agricultural laborers the same rule applies which we have found to +govern other unskilled labor, viz.: that combination cannot effect much +in raising wages. Added to this is the fact that they are widely +scattered, and that a great proportion do not follow this as a steady +occupation. In England, indeed, there is an agricultural laborers' +union, and we may possibly come to that here. But our circumstances are +widely different. The fact that in many sections the agricultural +laborer is not a "hand," or an "employé," or "servant," but a "hired +man," is an important one, for the difference in terms denote a vast +difference in conditions. It is hardly likely that an organization of +any sort is to be expected among those in this occupation. + +This last division of occupations contains the most members of any of +the four divisions. The farmers of the country number 4,225,945 and the +farm laborers number 3,323,876. Other minor occupations of the division, +as gardener, florist, etc., bring up the total engaged in agriculture to +7,670,493. + +We can now make some interesting comparisons. The evident effect of +monopoly is, in general, to tax the community at large for the benefit +of those who own the monopoly. Let us see what proportion exists between +the two classes: + + +-----------------------------------------------------+------------+ + | Total number of persons engaged in manufacturing, | | + | mining, trade, and transportation (occupations more | | + | or less monopolized) | 5,647,368 | + | | | + | Total number of persons engaged in agriculture and | | + | in furnishing professional and personal services | | + | (occupations not monopolized) | 11,744,821 | + +-----------------------------------------------------+------------+ + +Thus at the greatest estimate we can make of the number benefited by +monopolies, for each man who is gaining by them, two are having their +income reduced. If we take the estimate previously made, that the utmost +number of persons who can possibly be reaping benefit by ownership of +the especially profitable monopolies, trusts, transportation lines, +mines, etc., is one million, we have opposed over sixteen millions of +the community who are being taxed by their operation. Let a sharp +distinction be drawn at this point, however. The above comparison is to +be confined to the things between which it is made, and not confused +with others to which it has no reference. It is not a comparison of the +sort which social agitators are fond of making between the great numbers +of the working classes and the relative scarcity of the wealthy. Except +so far as the operation of profitable monopolies by the few tends to +bring about this unequal distribution of wealth, that is a matter with +which we have nothing now to do. + +There is one point in this connection, however, which it is well to make +plain, as it concerns a class of people which is not included in either +of the four divisions that we have already described--those who live on +the income of their property. + +We have before alluded to the fact that in the popular speech +"capitalist" and "monopolist" are often used interchangeably. If we +carefully consider the real status of the capitalist, however, we find +that of the three requisites of production--labor, capital, and natural +agents--capital is the requisite which is most perfectly secured from +the control of monopoly. The rate of interest for the use of capital is +regulated so perfectly by the law of supply and demand, that all the +anti-usury laws which have ever been enacted have been able to +accomplish but little in enabling the borrower to secure loans at a less +rate than that prescribed by competition. The reason for this is plain +on consideration. The total supply of accumulated wealth of the whole +civilized world is engaged in this competition, and the millions of +wealth which are added every day are new contestants in the market. +Competition in other products is held in local bounds by the cost of +shipment over long distances; but wealth in the form of value can be +transferred quickly and easily to any part of the civilized world where +a market awaits it. Every person who earns money or owns property is a +potential competitor, in that he can be made to lend his capital for +great enough inducements. Under the pressure of this competition, the +price for the use of capital--the rate of interest--has steadily fallen; +and the enormous production of wealth of which our industrial resources +are now capable is such that the fall is certain to continue, and a very +few years will see loans at 2 per cent. as common as those at 4 per +cent. are to-day. Combination to restrict competition among those who +loan capital for investment is an utter impossibility. The number of +people with money to loan, or with property on which they can raise +money for that purpose, if they wish, is too large a proportion of the +population to be ever brought into a combination to restrict +competition. The stringency which sometimes occurs in the money market +need not be cited as a contradiction of this statement. That is a matter +which has only to do with the currency. The broad fact, and it is a most +important one, is that capital, a necessary agent of production, can +never be monopolized. + + + + +X. + +THE THEORY OF UNIVERSAL COMPETITION. + + +We have now examined all the important occupations in which men engage +for the purpose of gain; and we have found that while certain large +classes of men still have the returns for their industry fixed by the +laws of competition, other large and important classes have been able to +check and limit competition, so that their returns from their work are +constantly increased; while others still, are in possession of certain +agents, so necessary to the community and so rare, that a price can be +exacted for their use greatly in excess of the original cost to their +owners. Some of the effects of this state of affairs it is easy to +perceive. We have, indeed, pointed out for each monopoly described some +of the especial abuses to which it gives rise; and it is plain enough +that the general tendency is, first, to greatly enrich the possessors of +the strongest monopolies at the expense of all other men; second, to +give a certain degree of advantage to the possessors of minor +monopolies,--as, for instance, monopolies in articles which are +luxuries, and can easily be dispensed with; and third, to seriously +injure all those engaged in occupations in which the price of the +product is still fixed by competition. + +Every one will agree that this is an evil state of affairs. It is not +just that my neighbor, who owns a mine or a railroad, should ask me +what he pleases for coal, or for carriage of my produce to market; while +I, being a farmer, must sell the products of my labor at a price +determined by competition with the products of ten thousand other farms. +No one can deny at this day that it is contrary to the principles of +justice to give to the men in any one occupation or calling an advantage +over those in any other, except in just the degree that one occupation +is more beneficial to the world than another. The question then arises, +how may we best remedy this state of affairs? Shall our panacea be to do +away with all monopolies, and put every industry back upon the +competitive system? If so, by what means are we to apply this remedy? Or +shall we go to the other extreme and adopt the antipodal doctrine to the +foregoing, that competition is an evil which ought to be done away with; +and then proceed to abolish competition in every trade and occupation +where it still exists, if we can find any possible means of +accomplishing such a task. + +The investigation we have already pursued gives us no answer to these +questions. We have thus far studied facts, and made little attempt to +deduce from them general truths. We are now informed as to the +widespread growth of monopoly; and we have paid some attention to the +injustice and wrong to which it gives rise, in order that we may +understand the urgent necessity for finding the right remedies, and +finding them at once. Our study is henceforth to be devoted to this end. +How shall we go about it? In the first place, it is evident that we +might make a far wider and more detailed investigation of existing +monopolies, and still be no nearer our desired end. We might study the +facts concerning each especial railroad monopoly in the country, for +instance, without reaching any valuable conclusion with regard to the +proper method of restricting railroad monopolies in general. But if we +were to take the monopoly exercised by a single railroad company, and +study the principles on which it is founded and the laws by which it is +governed, we might then be able to state something of value in reference +to proper methods for its control. Evidently, then, principles rather +than facts are to be the chief subjects of our future discussion, +although, of course, we can only discover these principles by +investigating the facts already found, together with others which may +come to our notice. + +Our very first and most obvious generalization from the facts which we +have studied is, that in all the monopolies we have considered, the +inherent principle is the same, and the effect on the community is of +the same sort. Therefore, instead of hunting for separate remedies for +railroad monopolies and trusts and labor monopolies, we will see what +the general problem of monopoly is, and what is the general nature of +the remedy that should be applied; the details applicable to each case +will, of course, be different; but the underlying principle must be the +same. + +But if we examine our problem a little more closely we see that the word +_monopoly_ seems to be only a negative, expressing the fact that +_competition_ is absent. We will therefore direct our studies to +competition itself, and will consider first its action as the basis of +our social system. + +In the most primitive condition of man which we can imagine, each person +provided for his or her own need. The competition which then existed was +not competition, in the sense which we use the word in this volume, but +was a struggle for existence and a gratification of the baser desires, +of the same sort as that which now prevails in the brute creation, +resulting in a "survival of the fittest." With the introduction of the +family relation, the principle of the "division of labor" was utilized, +the female doing the hard and menial work, while the male devoted +himself to hunting and fishing, or subsisting on the results of his +helpmate's industry. As men's wants increased and they became more +industrious in supplying them, this division of labor was extended. The +man most skilful in fishing neglected the use of the bow and spear, and +his surplus of fish he exchanged with his neighbor for the fruit of the +chase. The very same principle applied to different tribes brought about +the first commerce. A pastoral tribe, with large flocks and herds, +exchanged their surplus products with less civilized tribes who +continued to live by the chase, or with a more civilized people who had +begun to till the soil. + +It is plain that these were first steps in civilization. Man, so long as +he supplies only such of his wants as he can supply with the labor of +his unaided hands, must remain in a half-fed, half-clothed, and untaught +condition, because his strength and skill, when diverted in the many +directions which his wants require, are not enough to enable him, even +when he spends all his time at work, to supply himself with more than +the barest necessaries of life. It would be interesting to trace the +development of this principle of action through its various stages down +to the present time, when we see men everywhere working at various +trades and occupations, and always to supply some want of their +fellow-men. Every person in the community is absolutely dependent upon a +multitude of others, most of whom he knows nothing of, for the supply +of almost all his wants. Human society is thus growing more and more +interwoven and interdependent. The motto of the Knights of Labor is a +true one, apart from the altruism involved in it. "An injury to one _is_ +the concern of all," because the mass of humanity is connected and woven +together by such strong ties of self-interest, as well as fraternity, +that a calamity to any class or country is felt in some degree +throughout the civilized world. This is vastly more true now than it was +a half-century ago. Under such conditions as existed then, the doctrine +of _laissez-faire_, that the government should confine itself to the +prevention of violence and crime and the maintenance of national honor +and integrity, letting alone the industries of the country to develop +and operate according to natural laws, was not liable to do harm. But +the conditions now are wholly changed. The interdependence of the +community involves a moral inter-responsibility, and the time has come +when we must recognize this by making it a legal responsibility as well. + +We are now ready to consider in detail this inter-relationship of +society, and to examine the natural laws which govern it. We have +already stated the fact that, broadly speaking, each man is engaged in +supplying the wants of his fellow men, because in that way better than +in any other he can supply his own wants. We shall find this an easy +matter to understand if we conceive that every man puts the products of +his labor, of whatever sort it be, into a common public stock (offers it +for sale), and takes out of this common stock (buys) the various +articles which he wants. He does the first simply that he may do the +second, not because he desires to benefit his fellow-men. The money +which he receives (as we do not propose to consider here any questions +regarding the currency) we may regard as simply a certificate that he +has done a certain amount of work for the world, the measure of which is +the number of dollars he receives; and on presentation of that +certificate, he can obtain other articles which he desires. + +We have next to consider the fact that there is a great variation in the +amount which a man can take out from this common stock. One man is able +to provide himself from the common stock with a host of luxuries, while +another may only take out a scant supply of the barest necessaries of +life. If this distribution operated with perfect equity, a man would be +permitted to take out of this common stock exactly in proportion to the +benefit which the world at large received from that which he put in. No +human judgment, however, is competent to fix, with even an approach to +precision, the relative actual benefit which each member of society +renders to his fellow-men as a whole. But our social system effects that +for us better than it could be fixed by any arbitrary human judgment. +This it does by a law known as the law of supply and demand. Instead of +the actual benefit, this law takes what people choose to consider as +benefit, which is the granting of their desires, whether they desire +things hurtful or beneficial. It is these desires for things which +others can produce which constitute demand. It is to be borne in mind +that this is a broad term, and includes not only desires for food, +clothing, and actual things, but for service of every sort, in short, +demand is the desire for any thing whatever for which people are willing +to pay money. But when there is this demand--this willingness to pay +money for any article--people begin at once to supply it, because the +money they receive allows them to take goods which they wish from the +common stock. Evidently, if there is an unlimited supply of any thing, +people will not pay money for it. People will not pay money for fresh +air to breathe when they are out-of-doors, and the supply is unlimited; +but when indoors, the supply may be limited, and they will spend money +to have ventilators and air-pipes built to supply them with fresh air. +Or take the contrary case: The supply of some commodity, say flour, +falls very short. Evidently less flour must be used by the world than +was used in the years of a more plentiful wheat harvest. But no one will +wish to be the one to go without, and most people will pay a little more +rather than do so. Therefore the price rises. + +The competition which we have chiefly considered is the rivalry which +exists between the men who supply the same sort of goods; but there is a +rivalry among buyers as well. Speaking generally, every buyer is trying +to purchase for as little as possible, and every seller is trying to +dispose of his goods or services to the world for as much as possible, +which each has a perfect right to do. + +We have already seen that prices vary with the relative proportion +between supply and demand, rising as demand rises or supply fails, and +falling as supply increases or demand falls off. But to complete the +wonderful perfection of the mechanism, the reciprocal relation is +introduced, so that supply and demand vary with price. If the price +rises, fewer people can afford to buy and more will be anxious to sell; +while if the price falls, more people will wish to buy and fewer people +will be willing to sell. + +We can now easily see why some men are able to take out from the world's +common stock of product so large an amount, while most men can take but +a meagre allowance. By the law of supply and demand the price is far +higher for the service which one man renders to the world than another. +Let us take the operation of a large machine shop, for instance. Only +one superintendent is needed, and he should be a man who has devoted +much time to mastering all the details of the business, and is +experienced and competent to so govern the work that a large product +will be turned out at a small expense. There is a demand in the country, +let us say, for 5,000 such men; but out of the 5,000 who are filling +such places, there are perhaps 50 who seem almost faultless in their +skill and industry, there are 500 who are with one or two exceptional +faults, almost equally efficient, there are 3,000 who are fairly good +men, and the rest may be classed as those who hold their positions +because better men for the place cannot be had. So with the skilled +machinists, the relation of supply and demand is such that the price of +their labor is kept up to perhaps $4.00 per day. But of common laborers +the supply is so related to demand that the price of their work is very +low. Thus the three classes take very unequal amounts from the common +stock. The superintendent, perhaps, is able to take five thousand +dollars' worth of goods each year. The skilled workman can spend perhaps +one thousand five hundred dollars, while the laborer can spend but five +or six hundred dollars. Thus the men who secure the greatest amount of +wealth in return for their services to the world, secure it because +people are willing to pay it rather than pay less for men of less +ability. This is not the same as rewarding a man according to the actual +benefit which he does to the community, but it is an approach to it; and +it seems to be as close an approach as is possible by human methods. + +This social system is not the creation of any man or set of men, but has +grown of itself out of the tendency among men to secure the things they +wish for with the least exertion. And its theoretical working is +marvellously perfect. Any thing which men desire sufficiently to exert +themselves to secure it, can be bought with a small part of the time and +labor, measured in money, which would be required if each made it for +himself. Not only this, but the aim of every man is to do the greatest +service to the world and best meet its desires, thus securing in return +the greatest rewards for himself. Rivalry among purchasers constantly +tends to increase the rewards of the producers, while competition among +the latter tends toward the furnishing of a better article at a smaller +price. These two forces hold each other in stable equilibrium, for a +variation tends always to bring things back to their normal condition. + +Let us look more closely at the theory of the competition among +producers. We see that, speaking broadly, all occupations are competing +with each other. If changes in the supply or demand raise the rewards in +any calling, men will leave other work to engage in it. Men by the +pressure of competition are forced to seek out the easiest and most +direct methods, and to learn how to secure the greatest results with the +least expenditure of labor and material. + +It is this principle which lies at the very root of our industrial +development. Men have so striven to meet each other's competition and +outstrip each other in the production of superior goods at low prices, +that the cost of the staple articles of consumption, measuring by the +labor required to produce them now and the labor required by the clumsy +tools and hand work of a century ago, is from a tenth to a hundredth of +the cost in those days. It must be remembered, too, that this system of +competition is in accordance with the sense of inalienable personal +rights which is implanted in the breast of every man. The work of my +hands and brain are my own. In disposing of it for a price, I have a +right which none may deny to obtain such a sum as I can induce any one +to pay me. If I choose to sell it for less than my neighbor, it is my +right. In short, the open market is open to all; and every man has a +right to sell there his labor, his skill, or his goods, of whatever sort +he can produce, at such a price as he can obtain. The same is true of +the buyer. I have a _right_ to go into the open market and secure such +goods as any one wishes to sell me at the lowest price for which he will +part with them. A curious illustration of this sense of personal right +is the custom duties on imported goods. It is an evidence of this +inherent feeling of a natural right that both public opinion and the law +hold that it is a much less serious crime to smuggle than to steal. +There are a dozen people who would smuggle, if tempted to do so, to one +who would steal. Another illustration is the opposition shown to +sumptuary laws on the same grounds. + +It is to be said that the fact that competition lies at the foundation +of our industrial civilization, tersely expressed in the saying, +"Competition is the life of trade," has long been known, and, to a +certain extent, appreciated. The common law, based on the decisions of +men most eminent for wise insight and sound judgment, has always held +that combinations to restrict competition and establish a monopoly were +contrary to public policy, and the protection of the law has invariably +been refused, whether they were combinations of labor or of capitalized +industries. The establishment of labor combinations, indeed, was long a +criminal offence, as we have pointed out more fully in the chapter +devoted to that subject. It must be said, too, that the principle has +come to be generally, though rather blindly, understood by the masses of +men. It is recognized, though perhaps not very clearly, that competition +lowers the prices of goods, and that this benefits every consumer. Let a +proposition to build a competing railroad line, or a competing +electric-light plant be submitted to popular approval, and, under the +impression that they are benefiting themselves, hard-working men will +cheerfully assume heavy burdens of taxation to aid the new enterprise. +So blind and unreasoning indeed, is this popular abiding faith in the +merits of competition, that it has been responsible for some of the +greatest wastes of wealth in unproductive enterprises that have ever +been known. + +We have now examined the theory of universal competition as commonly +accepted at the present day, and it is rightly considered a fundamental +principle of society. It is the practice of most economic writers of the +orthodox school to lay great stress on the importance of this +fundamental principle, and enlarge upon its various manifestations. The +many attempts to limit and destroy competition, which we have studied, +they consider merely as abnormal manifestations which are opposed to +law, and so not worth while considering very fully. But we have seen +clearly to what extent the destruction of competition has gone on; and, +with this knowledge, the question almost inevitably occurs to us: Is not +this decay and death of competition, this attempt to suppress it under +certain conditions, too wide and general a movement to be treated as +merely a troublesome excrescence? Is it not likely that there are +certain fixed laws regarding competition which determine its action and +operation, and sometimes its death? If this be so, it is of the highest +importance that we find and study these laws; and to that purpose we +will devote the following chapter. + + + + +XI. + +THE LAWS OF MODERN COMPETITION. + + +Thus far in our study, we have assumed that we knew what competition +was. Now, however, as we are to study it scientifically, we are in need +of an exact definition, that we may know just what the term includes. +Prof. Sturtevant, in his "Economics," says: "_Competition is that law of +human nature by which every man who makes an exchange will seek to +obtain as much as he can of the wealth of another for a given amount of +his own wealth._" Simmer this down to its essence, and we have simply: +_Competition is selfishness._ To the other evident faults of the +definition we need not allude. It is a much more satisfactory definition +which Webster's Dictionary gives us, for it includes the idea that +competition necessitates two or more parties to exercise it: +"_Competition is the act of seeking the same object that another is +seeking._" But this is too broad a definition for our purpose. It takes +in competitions for fame, social standing, etc., with which we have +nothing to do. + +Failing to find a satisfactory definition, let us make one, as follows: +_Competition is that force of rivalry between buyers or between sellers +which tends to make the former give a greater price for the commodity +they wish to secure, and tends to make the latter offer better +commodities for a less price._ + +That competition _is_ a force, even in the popular estimation, is +evidenced by such common expressions as "the pressure of competition," +"a strong competition," and indeed, "the force of competition." But +these very expressions show us as well, what we have already found to be +true in the preceding chapters, that it is not a constant force but a +variable one. What, then, are the laws of its variation? + +Let us see what we can learn by a study of three typical examples of the +force of competition. Let us take first the business of growing corn. +There are perhaps three million farmers in the United States engaged in +producing corn, and each one of these competes with all the others. Is +this doubted? We have defined competition as a rivalry that tends to +make the sellers offer better goods for a less price. Now at first sight +it may seem that there is no rivalry at all. Neighboring farmers work +together in all harmony; and no man thinks that because his neighbors +have raised a large crop of corn, he is in any way injured. And yet this +_tendency_ to give better goods and lower prices exists and is plainly +felt. Suppose a new and superior variety of corn were introduced, which +buyers preferred. Some farmers would at once begin to raise it, so that +they might be more sure of a market and perhaps of a better price, and +other farmers would be obliged to follow suit to meet the competition. +Again, consider that the supply and demand adjust themselves to each +other through competition. For suppose, at the ruling price, the demand +to be less than the supply; then to increase the demand, the price must +fall; and the cause of the fall in price is simply that the farmers +compete with each other for the market, and lower their prices in order +to secure a sale for their crops. Note, however, that the rivalry in +this case never becomes a personal one. Each farmer recognizes that an +increased supply lessens the price for his goods; but his neighbor's +extra acreage is such a drop in the bucket, that he never thinks of it +as being really a rival of his own crop. + +Take as a second example, the wholesale paper trade. Here are perhaps +three hundred men, each knowing personally many of his competitors and +probably hating some of them cordially. Each striving to secure for +himself all the trade possible, and to gain, if he can, his rivals' +customers. He sends out his salesmen with instructions to, "Sell goods! +For the best prices you can get, but sell them, anyhow." These +"drummers" are sharp, active business men, they might well be employed +in directing some productive process; but they go out and spend their +time in inducing customers by all the means in their power to buy their +goods. They spend money in various "treats" to secure the +good-fellowship of the man with whom it is desired to trade, and use his +time as well as their own. Another item of expense is for advertising +and for keeping the firm name prominently before the purchasing public. +All these things cost money, as any wholesale merchant engaged in a +business where there is sharp competition can testify. It may be thought +that a firm which would have the courage to do away with all these +expenses and give the money thus saved to their patrons in reduced +prices and better goods, would be able to keep its trade and even gain +over its competitors. But it is hardly so; most men are more likely to +be wheedled into taking slightly inferior goods at a slightly greater +price. + +Another matter to be considered in this connection is the variation in +price. In the case of the producers of corn, we saw that prices were +practically uniform at any given place, being fixed by the ratio of +supply and demand in the chief markets of the world. But in making sales +of paper, the sharp, close-dealing buyer is generally able to secure a +better price than a buyer not posted in regard to the condition of the +paper trade. + +As competition becomes more intense, its burdens become more heavy to +carry. Perhaps two of the largest houses in the trade, who are able to +force prices lowest, come to a sort of tacit understanding that their +salesmen "will respect each others rights a little and not force prices +down beyond all reason." It is plain that _here_ the foundation is laid +for the establishment of a monopoly. Yet the agreement certainly seems +to be nothing more than these two firms have a right to make. Its result +is seen, however, in a slight increase in the price their customers have +to pay. Soon the tacit agreement becomes a formal one. Then other firms +are taken in. The first seed has borne fruit. The combination grows +larger and stronger. The number of producing units is growing less. +Finally it includes practically all the paper manufacturers in the +country. Whoever wants paper must buy of the combination, there is no +other source of supply. Competition is dead. + +If the combination is strong enough and is managed well enough, it may +be permanent; and prices of paper will be regulated by other laws than +the law of competition. But suppose that the number of paper makers is +so great and that they are so widely scattered that the combination +proves difficult to maintain; local jealousies creep in, and charges are +made of partiality on the part of the managers. The combination finally +breaks up. Can we expect a perfect return to the old system of free +competition? When men have once reaped the enormous returns that are +yielded by the control of a monopoly, the ordinary profits of business +seem tame and dull. There will surely be attempts to form the monopoly +anew on a stronger and more permanent basis; and even if these attempts +do succeed in producing only short-lived monopolies, the effect will be +to keep the whole trade and all dependent upon it in a state of disquiet +and uncertainty. Prices will swing up and down very suddenly between +wide limits; and it is everywhere recognized that _stability in price_ +is a most important element in inducing general prosperity. A perusal of +the trade journals for the years 1887 and 1888 will convince one of the +truth that when a combination is once formed, its members are loth to +try competition again. A considerable number of combinations which were +formed in 1887 were soon broken up, often from the strength of old feuds +and jealousies. But in almost every case they have been formed anew on a +stronger basis after a short experience of competition. + +This matter of the variation in price is a very important one, and it +has an important influence in checking business prosperity. Men are far +less apt to engage in an enterprise, if they cannot calculate closely on +prices and profits. But the main point, after all, is the waste which is +due to competition. It is for the interest of the public at large that +the papermakers should devote all the energies which they give to their +business to making the best quality of each grade of paper with the +least possible waste of labor and material. + +Take for a third example two railway lines doing business between the +same points. We have fully pointed out the practical working of this +sort of competition in the chapter devoted to railways. It is plain that +the general effect is a fluctuation of rates between wide limits, an +enormous waste of capital and labor, and ultimately, the permanent death +of competition by the consolidation of the two lines. + +In comparing now the above three cases, the most noticeable difference +in the conditions is in the _number of competing units_. There were in +the first example three million competitors; in the second, three +hundred; and in the last, but two. + +The first difference in the competition which existed is in intensity. +In the case of the producers of corn, competition was so mild that its +very existence was doubted. In the case of the papermakers it was vastly +more intense, so that it caused those engaged in it to take steps to +restrict and finally abolish it. In the case of the railroads it was +still more intense, so that it was not able to survive any length of +time, but had to suffer either a temporary or permanent death very soon. +Let us state, therefore, as the first law of competition, this: _In any +given industry the intensity of competition tends to vary inversely as +the number of competing units._ + +We also saw that among the producers of corn there was virtually no +waste of energy from competition. Among the paper makers there was a +large waste. And in the case of the railroads, the whole capital +invested in the rival railroad, as well as the expense of operating it, +was probably a total waste. Let us state, then, for a second law of +competition: _In any given industry the waste due to competition tends +to vary directly as the intensity._ As an additional example to prove +the truth of these laws, take the competition which exists between +buyers. In the case of ordinary retail trade the number of buyers is +very great, and the competition between them is so moderate that we +hardly remember that it exists. It is difficult to see how there could +be any waste from this competition among buyers, at least of any amount. +Expressed in the language of the laws we have found: The number of +competing units is so great that competition is neither intense nor +wasteful. + +From these two laws and a study of the examples we have given, it is +easy to deduce a third. We have seen that when competition became very +wasteful, monopoly arose; indeed, we have noted the working of this law +all through our investigation. The principal cause assigned for the +formation of the linseed-oil trust was the waste which intense +competition had caused. The third law is, then: _In any given industry +the tendency toward the death of competition (monopoly) varies directly +with the waste due to competition._ + +We might now combine these three laws to deduce the fourth law, which +is: _In any given industry the tendency toward the death of competition +(monopoly) varies inversely with the number of competing units._ But +this law is also proved independently. Look back over all the monopolies +we have studied, and it will be seen that one of the most important +conditions of their success was the small number of competitors. Fifty +men could be brought together and organized, and made to bury their +feuds and rivalries, when with a thousand the combination would have +been impossible. We have seen, in the case of the farmers, how their +great number alone has prevented them from forming combinations to +restrict the competition among themselves. + +It should be said that these laws, like all other laws of economics, +are not to be taken in a narrow mathematical sense. We cannot study +causes and effects dependent on the caprice of men's desires and wills +with the minute exactness with which we solve numerical problems. Taken +in the broad sense, however, the study we have made in the preceding +chapters is sufficient proof of their truth. + +The common expressions of trade afford still further evidence. We often +hear the expression: "A healthy competition." But the very existence of +the phrase implies that there may be an unhealthy competition, and if +so, what is it? Is it not that competition whose intensity is so great +that it causes a large waste of capital and labor in work other than +production; whose intensity is so great that, like an animal or a +machine working under too great a load, it labors intermittently,--now +acting with great intensity and forcing prices far below their normal +plane, now pausing in a reaction, when a temporary combination is +formed, and allowing prices to spring back as far above the point +indicated by the relation of supply and demand; and finally reaching the +natural end for unhealthiness--death. In fact, a recent economic writer +declares that especially intense competition should be called war, as, +indeed, it frequently is called, rather than competition. + +Looking about us for other causes of variation in the intensity of +competition we discover a fifth law: _The intensity of competition tends +to vary directly in proportion to the amount of capital required for the +operation of each competing unit, especially when the interest on the +capital invested forms a large proportion of the cost of production._ +Take, for example, the case of a railway line. All the capital invested +in it is wasted unless the road is in operation. Hence it will be +better to operate the road, so long as receipts are any thing more than +the expense of operation, than to abandon it. An enterprise in which no +capital is invested will cease operations when receipts do not exceed +its expenditure and there is no prospect of betterment. But in the total +expense of operating a railroad, a large item is the interest on the +capital invested, which is as truly a part of the total cost of carrying +the traffic as is the daily labor expended in keeping the road in good +repair. (In railway bookkeeping only an arbitrary line can ever be drawn +between capital account and operating expenses.) Now, in order to pay +operating expenses and fixed charges, railways must secure traffic. We +suppose that they are doing this by competition, and that they have not +yet combined to form a monopoly. Let us suppose that this competition +cuts down receipts to a point where they are just sufficient to pay the +whole cost of carriage. In an enterprise in which no capital was +invested some of the competitors would be sure to fall out when profits +disappeared; but here there is no such chance of relief; and though the +competition keeps on until the receipts are only enough to pay the +operating expenses, still the road is not abandoned because then the +capital invested, in it would be a complete loss. Changes in productive +processes often lessen the demand for a line of goods; but the owners of +the capital invested in factories and machines for making these goods +may often cause them to be continued in operation at a loss rather than +lose all that they have invested, and because they hope for better days +and a renewal of the demand. + +For the sixth law of competition we have: _In any given industry the +tendency toward the death of competition (monopoly) varies directly +with the amount of capital required for each competing unit._ This law +is proven in part by the preceding laws; for when a large capital is +required for each competing unit, the number of competitors will be +small and the tendency toward monopoly will be strong; but it may also +be proven independently. Business men, before they form a combination, +are certain to ask whether new competitors are likely to enter the field +against the combination. Now, as we have seen in very many cases in the +preceding chapters, when there is a great amount of capital required, +new competitors will be very unlikely to enter the field. If there is +but little capital required, they will be very apt to do so, being +tempted by the prospect of large profits at the monopoly's prices. But +they know that the combination will concentrate its strength to fight +them in every way; and if they must invest a great deal of money in +buildings, plant, etc., to start operations, they will be apt to think +twice before they take the field against the combination. + +The seventh law of competition is: _In any given industry in which +natural agents are necessary, the tendency toward the inequality of +competition (monopoly) tends to vary directly with the scarcity of +available like natural agents._ + +The influence of limited natural agents in promoting the growth of +monopolies is a matter of the greatest importance. That the law is true, +is evident upon slight investigation. For if some especial gift of +Nature is a necessity to any industry, and those who are engaged in that +industry can secure all the available gifts of Nature of that sort, +there is no opportunity for new competitors to enter the field. + +It is to be noted that in this seventh law we have used in apposition +with the term monopoly, the term "inequality of competition" instead of +"death of competition," as in the preceding laws. We are now in need of +a definition of the term monopoly. Webster defines it as "the sole +control over the sale of any line of goods"; Prof. Newcomb says "a +monopoly is the ownership or command by one or a limited number of +persons of some requisite of production which is not solely a product of +human labor"; Sturtevant says "a monopoly is such a control of the +supply of any desirable object as will enable the holder to determine +its price without appeal to competition." To the first definition we +object that it is both narrow and indefinite. The second seems to omit +such important classes of monopolies as the combinations to limit +competition; and Sturtevant's definition is unscientific in this: Hardly +any monopoly exists whose holders can without limit determine the price +of its product. If the price continues to rise, competition in some form +will appear. Take, for example, the business of transporting goods from +New York to San Francisco; if all the railway lines combine to form a +monopoly, the competition of ocean steamers via Panama would eventually +stop the rise in rates, if no other outside competition stopped it +before. The owners of a rich mine have a real monopoly, though they +cannot raise the price above a certain point without being undersold by +the owners of poorer mines or those more remote from market. +Consideration of these facts lead us to construct the following +definition: _A monopoly in any industry consists in the control of some +advantage over existing or possible competitors by which greater profits +can be secured than these competitors can make._ For the law of +monopolies we have: _The degree of a monopoly depends upon the amount of +advantage which is held over existing or possible competitors._ When the +advantage of the monopoly is so great that no other competitor will try +to do business in competition with it, we may rightly say that +competition is dead. The great share of the monopolies which are based +on this seventh law of competition, those due to the control of natural +agents, only restrict competition by the attainment of an advantage over +their competitors, and do not destroy it. + +The principal natural agents which are necessary to production, and +whose supply may be so limited to cause an appreciable monopoly, are: +(1) Land for agricultural purposes; (2) land for purposes of manufacture +or commerce; (3) transportation routes, such as mountain passes, room +for railway tracks in a city street, or for gas-and water-pipes beneath +its surface; (4) natural deposits of minerals and metals; (5) sources of +water supply or water power. (The latter is unimportant now compared +with a score of years ago, because of the lessened cost of its +competitor, steam.) + +Let us be especially careful not to confound this seventh law of +competition with a certain doctrine which is now receiving more and more +credence, which is, in brief, that the private ownership of the gifts of +Nature used in production should be abolished. The grounds in opposition +to this doctrine we will discuss in a later chapter. The law we have +stated says nothing of the right or wrong of the private ownership of +the gifts of Nature. What it does say is, that when any of these are +limited in amount, those who control them are given an advantage over +other would-be competitors, which constitutes a monopoly. + +In considering the natural agents enumerated above, we can easily see +the truth of the law. Agricultural lands, the most important of natural +agents, are in this country so abundant that their rental is entirely +fixed by competition. In England, where they are so much more limited in +area, rent is fixed by custom. As regards land for purposes of +manufacture or commerce, we have already pointed out the cases in which +monopolies are prominent, as also for transportation routes. As regards +mineral wealth, deposits of iron are so numerous and widespread that no +monopoly has ever yet succeeded in controlling competition in the +manufacture of pig-iron to any great extent. But the rarer metals, like +copper, tin, nickel, and others, are largely controlled by monopolies. + +Now, while this seventh law says nothing as to the right or wrong, the +expediency or inexpediency of the private ownership of natural wealth, +it does follow from it that this private ownership generally constitutes +a monopoly, as we have defined it. For of no class of natural agents is +it true that their richness and availability are absolutely equal. Those +competitors who have the richest and best natural resources to work with +have an advantage over their competitors which is essentially a +monopoly. Thus the owners of fertile lands near a large city have an +advantage over the owners of less fertile lands far removed from +markets, which is of a monopolistic nature. If any one doubts this, let +him say how this case is logically different from that of the ownership +of a mine of native copper so near to New York City that the cost of +laying it down in the market there will be half what it is from any +existing mine; or, for a second case, take the New York Central railway, +which has the control of such a valuable pathway between the Mississippi +Valley and the Atlantic seaboard that it has an advantage over all +competitors in the business of transportation between those points. + +We have now to turn our attention to other variations in competition +besides the variation in intensity. We need to distinguish the different +species of competition. That competition which is in daily operation in +most branches of industry we may call _actual_ competition. That +competition which would spring up in any industry in case an increase in +profits called it out, we may call _potential_ competition. The third +class is instanced in the letting to the highest bidder a franchise for +city water or gas-works, or street-car lines. Here competition acts at a +single time to fix the price for perhaps twenty years. We may call this, +for want of a better name, _franchise_ competition. It possesses the +evident advantage that it avoids both the waste of competition and the +fluctuation of prices. It has the disadvantage that, unless the owners +of the franchise are held strictly to their contract, quality is apt to +be sacrificed; also that if the purchase is for a term of years, +cheapening in processes may result in undue profits to the franchise +holders. The discussion of this matter, however, does not properly +belong to this chapter. + +Arranging in their logical order the laws of competition which we have +found, we have the following diagram: + + In any given industry the tendency toward monopoly increases: + + (1.) As the waste due to competition increases. + + The waste of competition increases in proportion to its intensity. + + (1.) The intensity of competition increases as the number of + competing units decreases. + + (2.) The intensity of competition increases with the amount of + capital required for each competing unit. + + (2.) As the number of competing units decreases. + + (3.) As the amount of capital required for each competing unit + increases. + + (4.) As the number of available natural agents decreases. + +The preceding diagram sets plainly before us the three great salient +causes from which have grown the long list of monopolies under which our +civilization labors. First, the supply of natural agents of which new +competitors in any industry may avail themselves has been largely +exhausted, or has been gathered up by existing monopolies to render +their position more secure; the world has not the natural resources to +develop that she had a century ago. Second, the concentration of all the +productive industries, except agriculture, into great establishments, +while it has enormously lessened the cost of production, has so reduced +the number of competing units that a monopoly is the inevitable final +result. Last, the enormous capital required for the establishment and +maintenance of new competing units tends to fortify the monopoly in its +position and render the escape of the public from its grasp practically +impossible. These terse statements contain exactly the kernel of potent +truth for which we are seeking; MONOPOLIES OF EVERY SORT ARE AN +INEVITABLE RESULT FROM CERTAIN CONDITIONS OF MODERN CIVILIZATION. + +The vital importance of this truth cannot be over-estimated. For so long +as we refuse to recognize it, so long as we attempt to stop the present +evils of monopoly by trying to add a feeble _one_ to the number of +competing units, or by trying to legislate against special monopolies, +we are only building a temporary dam to shut out a flood which can only +be controlled at the fountain head. + +The facts of history testify to the truth of this law. Monopolies were +never so abundant as to-day, never so powerful, never so threatening; +and with unimportant exceptions they have all sprung up with our modern +industrial development. The last fifteen years have seen a greater +industrial advancement than did the thirty preceding, but they have also +witnessed a more than proportionate growth of monopolies. How worse than +foolish, then, is the short-sightedness that ascribes monopolies to the +personal wickedness of the men who form them. It is as foolish to decry +the wickedness of trust makers as it is to curse the schemes of labor +monopolists. Each is working unconsciously in obedience to a natural +law; and the only reason that almost every man is not engaged in forming +or maintaining a similar monopoly is that he is not placed in similar +circumstances. Away, then, with the pessimism which declares that the +prevalence of monopolies evidences the decay of the nobler aspirations +of humanity. The monopolies of to-day are a natural outgrowth of the +laws of modern competition, and they are as actually a result of the +application of steam, electricity, and machinery to the service of man, +as are our factories and railways. Great evils though they may have +become, there is naught of evil omen in them to make us fear for the +ultimate welfare of our liberties. + +To the practical mind, however, the question at once occurs, what light +have we gained toward the proper method of counteracting this evil? Can +it be true that the conditions of modern civilization necessitates our +subjection to monopolies, and that all our vaunted progress in the arts +of peace only brings us nearer to an inevitable and deplorable end, in +which a few holders of the strongest monopolies shall ride rough shod +over the industrial liberties of the vast mass of humanity? Were this +true, perhaps we had better take a step backward; relinquish the factory +for the workshop, the railway for the stage-coach. "Better it is to be +of an humble spirit with the lowly, than to divide spoil with the +proud." But the law we have found commits us to no such fate. We +cannot, indeed, abolish the causes of monopolies. We cannot create new +gifts of Nature, and it would be nonsense to attempt to bring about an +increase in the number of competing units and a decrease in the +capitalization of each by exchanging our factories and works of to-day +for the workshops of our grandfathers. But while monopolies are +inevitable, our _subjection_ to them is not inevitable; and when the +public once comes to fully understand that _the remedy for the evils of +monopoly is not abolition, but control_, we shall have taken a great +step toward the settlement of our existing social evils. To discuss the +details of the remedy, so far as it can be done in a volume of this +sort, belongs properly to a later chapter. Before undertaking it, +however, it seems well to devote some further attention to the evils +which the attempt to abolish monopolies and adhere to the ideal system +of universal competition has brought upon us, and to make, also, some +further study of the general evils due to monopoly. + + + + +XII. + +THE EVILS DUE TO MONOPOLY AND INTENSE COMPETITION. + + +It is a strange thing when we come to analyze the various social evils +which demand our attention, and which every true man longs to cure, to +find how great a proportion can be traced back to the one great evil of +faulty competition. As a preliminary to a survey of these evils, in +order that we may understand the necessity that all good men and true +should exert themselves in applying the remedy, let us see just what +conditions of our industrial society we should seek to work toward. What +is the theoretical perfection of human industry? + +Probably all thinking men, whatever their belief and practice, will +acquiesce in the proposition that the end we should aim to secure is +"the largest good to the greatest number." As we are discussing here +only economic questions, this means that the end to be sought is that +the largest number of people should have secured to them the greatest +possible amount of the necessaries and comforts of life; or, more +simply, that the total of human happiness to be derived from the world's +production of wealth should be the greatest possible. Now for our +present purpose we may assume that since all men desire wealth, the +greater its production, the greater will be the number of human desires +gratified. From this it follows that our social organization should be +such as to increase to the greatest possible degree the world's stock of +wealth. + +There is no easier or safer way of studying questions of economics than +to consider the community as a unit, and see what is for the interest of +the people as a whole; what conduces most to the "common wealth"; and if +we do this, whenever the question concerns production alone, the task is +simple, because the interests of the people as a whole are judged in the +same way as the interests of a single person. Whatever tends to increase +the total amount of wealth in the world, therefore, benefits the +community as a whole; and whatever diminishes the supply is an injury. +All work of every sort which tends to aid in the economical production +of wealth and its transfer to the consumer is a benefit to the +community; and any thing which destroys wealth, lessens its production, +or hinders men from exerting themselves to produce it, is an economic +injury. + +What, then, are we to say of the condition known as over-production? Is +it not a fact that some lines of industry are so overdone that the +production is far in excess of the demand, and is not this an evil +rather than a benefit? Do not periods of business depression occur when +all industries stagnate for want of a market for their goods? The true +answer to this question is: Over-production is not a fault of +_production_, but of _distribution_. It is true that, in special +industries, a surplus of production sometimes occurs, due to +over-stimulation, or too rapid growth; but over-production as commonly +spoken of, refers to a general state of trade, in which demand for all +sorts of goods seems to fall far below the market supply. But this lack +of demand is not due to lack of desire. The desires of men are always +in excess of their abilities to supply them; it follows, therefore, that +the condition known as over-production consists in a lack of _ability_ +to purchase goods rather than in a lack of _desire_ to purchase them. +This lack of ability has evidently to do with the distribution of wealth +rather than its production. + +While it is easy to formulate laws to govern the theoretically perfect +production of wealth, to whose justice all men will consent, we cannot +go far in the details of the ideal distribution of wealth without +reaching points upon which the views of different parties are +diametrically opposed. Some foundation principles, however, let us +state, believing that in their truth the great majority of men will +concur. + +In the chapter on the theory of competition we saw that, if we conceived +the results of the labor of the whole community to be placed in a common +storehouse and gave to each man the right to draw from it an amount just +equal to the benefit derived from the goods which he had placed within +it, the ideal of a perfect system of distribution of wealth would be +realized. No human judgment, however, is, or ever can be, competent to +measure the exact industrial benefits which each person confers upon the +community at large. We must inevitably permit men to measure the result +of their own work by securing for it such an amount of the results of +others' work as they can induce them to give in exchange. But while we +cannot measure exactly the benefit which each person confers, we can see +cases in which the reward received is manifestly out of all proportion +to the benefit conferred. Consider the fortunes which have been +accumulated by some of our Midases of the present decade. It is quite +certain that the benefits which Cornelius Vanderbilt, for instance, +conferred on the community by his enterprise and business sagacity, by +his work in opening new fields of industry, forming new channels for +commerce, etc., were so valuable that he honestly earned the right to +enjoy a large fortune. It is equally certain that a great part of his +gains had nothing whatever to do with any benefit conferred upon the +community, and that the fortune of $100,000,000 or so which he +accumulated was an example of inequitable distribution of the products +of the world's industry. Stating this in the form of a general +principle, we should say: _The amount of wealth which any man receives +should bear some approximate relation to the benefit which he confers +upon the world._ + +We have already stated that, by the law of supply and demand, the +rewards of each worker are regulated in theory even more perfectly in +accordance with our ideas of liberty than they could be on the basis of +actual benefit conferred. For it is inconceivable that people would +submit to pay for what was beneficial to them instead of what they +desired. A man who prefers to purchase wines instead of books with his +surplus money would think it a great injustice if he were prevented from +doing as he preferred with his own. But so long as every one is at +liberty to use his income in buying whatever he desires most, +_demand_--the willingness to pay money for the gratification of the +desire--will exist, and so long as demand exists it will be met by a +supply, furnished by those who are desirous of money and what it will +bring. It is inconceivable, then, that any juster arrangement than this +law of supply and demand can ever be practicable for regulating the +compensation of each individual. The man who can drive a locomotive will +receive larger wages than the man who shovels the earth to form its +pathway, because the supply of men competent to drive an engine is small +in proportion to the number of men who are wanted for that work, while +almost any man can shovel dirt. Let us state, then, for our second +principle: _The amount of wealth which any man receives should depend on +the ratio between the demand which exists for his services and the +supply of those able to render like service._ Farther than these +statements of the ideal principles governing the economical production +and equitable distribution of wealth we need not go at present. + +Let us turn now to examine the result of a violation of these principles +in some of the crying evils of the present day which are wholly or in +part due to the growth of monopoly and the waste of competition. + +Every candid man will acknowledge that the enormous congestion of wealth +in a few hands which exists to-day is a danger to be feared. We have had +it constantly dinned in our ears that in this free land the ups and +downs of fortune were such that the rich man of to-day was apt to be the +beggar to-morrow; also that almost invariably a rich man's sons were +reckless spendthrifts. These things, aided by the abolition of +primogeniture and entails, it was said, were to prevent the growth of a +moneyed aristocracy in this country. The propounders of this amiable +theory never explained how the community received reparation for the +destruction of wealth which the spendthrift sons were to carry on; but +so long as the theory has failed to work in practice, that does not +matter so much. + +A few years ago it was a favorite occupation of newspaper paragraphers +to estimate the Gould and Vanderbilt fortunes; but lately they seem +to have given them up as beyond the limits of even their robust +guessing abilities. Some idea of the latter's fortune may be gained, +however, by realizing the fact that the Vanderbilt railway system now +has a total extent of nearly 12,000 miles, the total value of which can +hardly be less than one thousand millions of dollars. Probably not less +than half of the securities of these companies are owned by the +Vanderbilt family, and it is well known that their investments are by no +means confined to railways. The important fact is, that this fortune +grows so fast now that it is sure to increase; and will double itself +every fifteen or twenty years, because all that its owners can spend is +but a drop in the bucket toward using up their income. But this fortune, +while the largest which is still under one name, is but one of many +enormous ones. The names of Gould, Flagler, Astor, Rockefeller, +Stanford, Huntington, and a host of others follow close after the +Vanderbilts. In the days of our grandfathers, millionaires were no more +plentiful than hundred-millionaires are to-day. + +We have next to show the present and prospective evils which result from +this congestion of wealth. The first and most obvious one is its injury +to the remainder of the people of the country, by the diversion from +them of wealth which they have rightfully earned and which they would +receive were it not for the tax of monopoly. It is obvious that a +certain amount of wealth is annually produced by the industry of the +country from which the whole wants of the country must be supplied. This +amount may be greater, indeed, when a Gould or a Flagler or a Crocker +directs the enterprise; but for the most part it is indisputable that +the owners of these colossal fortunes have made them, not by any +stimulus of the production of wealth by their owners, but by a +diversion of the produced wealth in the general distribution from +others' pockets to their own. In short, all other men are poorer that +these many times millionaires may be richer. To show how these fortunes +have in many cases been obtained, I cannot do better than to quote a +writer not at all likely to err by undue severity to our millionaires, +as he is himself the president of a railway system a thousand miles in +extent: + + The great majority of the phenomenal fortunes of the day are the + result of what may be called lucky gambling.... Man is a gambling + animal by nature, and modern methods have enormously developed both + its facilities and its temptations and have opened large fields in + which gambling is not held to be disreputable. + + Under such stimulus is it wonderful that its growth has been + phenomenal? Wall street is its head-quarters, and millions upon + millions of dollars are accumulated there to meet the wants of the + players. Railroad stocks are its favorite cards to bet upon, for + their valuation is liable to constant fluctuation on account of + weather, crops, new combinations, wars, strikes, deaths, and + legislation. They can also be easily affected by personal + manipulations.... Money makes money, and money in great masses has + its attractive power increased. The aspect of phenomenal fortunes, + therefore, is a social problem of some importance. Their manner of + growth and their manner of use are to be observed, and what + restrictions, if any, should be placed on their accumulation should + be considered.[5] + + [5] "Railway Practice." By E. P. Alexander, President Central + Railroad and Banking Co. of Georgia. + +The fact pointed out by General Alexander in the above quotation is one +which is far too lightly appreciated. The evils of railway management by +which the owners of the stocks and bonds of the company are victimized +to enrich stock speculators are much too complex and numerous to be +described here. The state of affairs can be briefly summed up, however, +with the statement that our present system of conducting corporate +enterprises results inevitably in the gravitation of their ownership +into the hands of the holders of large fortunes. The railways of the +country are an instance in point. Time was when the stocks and bonds of +railways were owned by people of small means all over the country. But +after many severe lessons in the shape of stocks wiped out, and bond +interest scaled down, these small holders were taught the folly of +investing their savings in business over which they had practically no +control, and thus placing them at the mercy of irresponsible corporate +officers. Broadly speaking, the railway property of the country is owned +by men worth their millions; and the small holdings are being rapidly +absorbed every day. But the case is not true of railways alone. +Telegraph lines, telephone, and electric light plants, our mines, and to +a large extent our factories, which were once held by private owners, +are now controlled by corporations whose shares are quoted on the +exchanges and are consequently subject to a forced variation, dictated +according as "bull" or "bear" has the ascendancy. And when the ownership +of a property is once brought into this channel, it is no longer a +suitable investment for the man of small means. It is the prey of men +who practically make bets as to what its future price will be, and +manipulate the price, if possible, to win their bets. If it is ever +again held for investment simply, it is when it is locked in the safe of +some modern Croesus. + +We have shown now the extent to which the congestion of wealth has gone. +We have shown that other men are poorer that these men may be richer. We +have explained that these great fortunes have been made, not by +legitimate enterprise, but largely by "lucky gambling." And finally we +have seen how the transfer of each enterprise to the control of stock +speculators adds it eventually to some already overgrown fortune. The +connection with the subject of the present volume is obvious. The +cotton-seed oil mills of the South, once held by private owners, are now +in the hands of a trust whose certificates are quoted on the +stock-exchanges, and are held only by men of large capital, or by stock +gamblers. This is a typical example of the change which is everywhere +occurring. Private enterprise gives way to the stock company, and that +in turn gives way to the trust. The salient fact, then, we may express +in similar terms to those of our first law of competition, as follows: +_The congestion of wealth tends to increase inversely with the number of +competing units._ + +The facts we have stated make it impossible for the greater monopolies +to defend themselves, on the ground that their profits inure to the +benefit of any great number of people. But this is not an innocuous +state of affairs. It is one of serious injustice and evil. The workman +who struggles hard to save a hundred dollars a year can receive only a +paltry three dollars and a half of interest or less, if he deposits it +in a saving-bank. But the capitalist who is clearing a hundred thousand +a year may make twice or thrice that interest from his investments. In +short, the charge is: That monopoly and intense competition, with the +variation in price which they cause, have shut out the small capitalists +of the country from the ownership of the most profitable sorts of +property; and by confining them to other lines, have decreased their +possible income from their investments. + +A further evil resulting from the congestion of wealth is what is +commonly spoken of as over-production. We are confronted of late years +with the strange spectacle of factories and mills shut down for months +at a time, of markets which, at various times, are glutted with every +sort of commodity. All sorts of causes are given; all sorts of remedies +are suggested and tried. Where is the true one? With the exception of a +few special cases, the fault is not that there are no people who want +the goods. Probably ninety-nine families out of every hundred would buy +more if they had the money to buy with. In many cases the lack of money +to buy with is due to the fact that the bread-winners are out of +employment because of the glutted markets and idle mills. In this way +the evil tends to perpetuate itself and grow worse. Now combine this +fact with the fact that the holders of monopolies are in the receipt of +incomes so great that, in many cases, they are quite unable to spend +them. Also, that this income is largely locked up to wait the chance of +profitable investment, or is used in speculation. Is it not obvious, +now, that the reason why people cannot afford to purchase the goods, +with which the storehouses are glutted, is that too large a proportion +of profits has been diverted to swell fortunes already enormous? Have we +not in this way accounted for a large amount, at least, of the +over-production which is throwing out of employment thousands of +workmen, rendering useless a vast amount of valuable capital, and +affecting from time to time the business of the whole country with a +veritable paralysis? + +The facts bear out this theory. For, at many times when producers in +every industry are complaining of dull times because people who buy have +no money to spend, there is an abundance of money to be had for +investment. Fortunately, the evil seen from this aspect must, to a +certain extent, be but a temporary one, and will tend to work its own +cure. For as the world's stock of invested wealth continues to grow, +there is less opportunity for its profitable investment in improving +undeveloped natural resources. The greater portion of our wealth we save +and invest, the faster will the rate of interest tend downward. But, as +this occurs, the operators of mills and mines have to pay less out of +their receipts as interest on their borrowed capital, and can, +therefore, pay more to their workmen. + +There is another way in which monopoly works to cause over-production, +with its attendant evils. Suppose a trust is formed in some +manufacturing industry, where the working capacity is just equal to +supplying the demand. The first work of the trust is to raise the prices +perhaps 20, 30, or 40 per cent. Of course this causes a falling off in +the demand, and the trust has to shut down some of its mills to ward off +over-production. The true cause of over-production in this case is, that +the prices are not in equilibrium with the relation between supply and +demand. Let prices come down, and the demand will increase. The working +of this special case gives us an idea of the way in which general +over-production is caused. For it is well known that monopolies have +raised the prices and reduced the consumption not of one, but of +hundreds of articles. If the men who are made idle by the +over-production in these industries flock into other occupations to +secure work, they reduce wages there; so that, in any case, their +purchasing power is reduced, and this tends to perpetuate and increase +the evil. Of course it is not pretended to claim that all industrial +depressions have been due to over-production, or the local congestion +of the world's income. But that a large part of it may be justly laid to +this cause, seems to be beyond question. + +We have shown that the congestion of wealth is very largely due to the +growth of monopoly, and we have discussed the more immediate evils that +result from this congestion of wealth. But when we attempt to describe +the evils and abuses which follow close after, as a result of the power +which monopoly has placed in the hands of a few, we may well pause at +the task. The whole array of perplexing social problems comes before us, +and we realize more and more what a curse monopoly has become. The +philanthropist tells us that poverty, and all the distresses that follow +in its wake, are largely due to the fact that our workingmen under +present conditions _must_ live from hand to mouth, _must_ rely on +charity for aid in every emergency, and _must_, therefore, decrease in +manliness and self-reliance and the ambition to better themselves, as +the practical impossibility of success is comprehended. + +Good men are lamenting because the Church has, to a great degree, lost +its hold on the laboring classes, and are casting about on all sides for +a remedy. Will they ever find one as long as the wage-worker carries in +his bosom a rankling sense of injury done him? Injury which he feels +that the Church is merely seeking to drug with charity instead of +wishing to cure it with justice? There is great need that the Church, +not alone by the sermons of its most enlightened thinkers, like Dr. +Heber Newton, but by the daily practice of the rank and file of its +membership, should recognize, as it never yet has done, the great +principles of human fraternity, and move intelligently and earnestly to +remedy the great evils that menace us. + +Even the evil of intemperance can be traced back to a connection with +monopoly. Who shall blame the tired laborer, if after a week with sixty +hours of unremitting toil, he takes refuge from the dreariness and +lassitude of physical exhaustion, the hopelessness of ambition-quenched +life, and perhaps the discomforts and disquiet of the place he calls +home, in a long draught of that which does, for the time, create in him +an image of exhilaration, strength, self-respect, and manhood? It is but +an image, indeed, and to all but the victim it is a caricature; but when +a man cannot hope for the reality, to only imagine for a brief hour that +he is indeed a king of men, and that care and woe and degradation are no +longer his lot, is a refuge not to be despised. + +There is indeed a class of philanthropists who say, with some truth, +that the laboring classes as a whole have now more than they will spend +for their own good, and declare that higher wages means merely more +spent on sprees and debasing sports, of different sorts but universally +harmful. On the other side, the wise philanthropists who are trying to +help their fellow-men in that best of all ways, by teaching them to rely +on themselves, testify that their efforts to make men independent are +largely hampered because it is so extremely difficult for a workingman +to live in any other way than from hand to mouth, especially in our +large cities. The true solution seems to be that all these reforms must +go hand in hand. We must teach men how to make nobler uses of their +incomes and themselves, while we endeavor to bring about reforms that +shall give them greater comforts and more leisure to use for either +self-improvement or self-debasement. + +Much more might be said of the indirect effects which result from the +taxation which monopolies inflict upon the community for their own +profit; but they are now so generally realized and understood that we +can devote our time more profitably to the investigation of other evils. + +Under the ideal system of competition which we studied in Chapter X., we +found that all occupations were competing with each other; so that if, +from any cause, one calling became especially profitable, men would +flock to it and bring down the profits to a normal point. Monopolies +have seriously interfered with this important and beneficent law. How +often do we hear the complaint of the great difficulties that beset +young men on their first entrance to business or industrial life in +securing a situation. The monopolized industries shut out new +competitors by every means in their power. The trade-unions limit the +number of apprentices which shall be allowed to learn their trade each +year. The result is, first, a most deplorable tendency to idleness on +the part of young men just at the time when they should be most active; +and, second, a still larger increase of men in the professions and +non-monopolized callings, tending to still further increase the +competition in those callings, where returns are already inferior to +what they should be. Surely, we must begin to appreciate how vitally +important to every person in the land is this matter of competition and +monopoly. + +The evils which we have thus far considered pertain to the distribution +of wealth. Let us now turn our attention to the production of wealth. +Our second law of competition stated that the waste due to competition +varied directly as its intensity. We have frequently referred to this +waste of competition; let us now inquire more fully concerning its +amount and effect. In the first place, however, let us settle the +question, once for all, that waste or destruction of wealth of any sort +is an economic injury to the community. We have, indeed, already +explained this in the first paragraphs of the chapter; but while all +authorities on economics agree on this point, the general public is +still seriously infected with the fallacy that waste, destruction, and +unprofitable enterprises are beneficial because they furnish employment +to labor. If this were merely a theory, we could afford to ignore it; +but the trouble is that it is acted upon, and works untold evil and +damage to the world. To take a typical case, people reason that damage +done by flood or fire or storm is not a total loss because employment +will be furnished to many in repairing and rebuilding after the +devastation. They do not stop to reflect that so much wealth has been +wiped out of the world, and that _instead of the destruction furnishing +so much additional employment, it has only changed the direction of the +employment_. For money nowadays is always spent, either directly, by its +owners, or by some one to whom he lends it. And wherever money is spent +it furnishes employment. Therefore, if the money which was used in +repairing and rebuilding had not been required for that work, it would +have been spent in some other direction and furnished employment to +labor there. Understanding, then, that the economic interests of the +community are best served when each one of its members exerts his +energies with the greatest result and with the least waste in producing +wealth, let us see to what extent intense competition and monopolies +have violated this law. + +In his interesting book entitled "Questions of the Day," Prof. Richard +P. Ely, of Johns Hopkins University, refers to the building of two great +railways with closely paralleled roads already in operation, the Nickel +Plate, and the New York, West Shore and Buffalo, and says: + + "It is estimated that the money wasted by these two single attempts + at competition amounts to $200,000,000. Let the reader reflect for + a moment what this means. It will be admitted that, taking city and + country together, comfortable homes can be constructed for an + average of $1,000 each. Two hundred thousand homes could be + constructed for the sum wasted, and two hundred thousand homes + means homes for one million people. I suppose it is a very moderate + estimate to place the amount wasted in the construction of useless + railroads at $1,000,000,000, which, on the basis of our previous + calculations, would construct homes for five millions of people. + But this is probably altogether too small an estimate of even the + direct waste resulting from the application of a faulty political + economy to practical life. When the indirect losses are added, the + result is something astounding, for the expense of a needless + number of trains and of what would otherwise be an excessively + large permanent force of employés must be added. Of course, nothing + much better than guesswork is possible, but I believe that the + total loss would be sufficient to provide a greater portion of the + people of the United States with homes." + +But it seems quite possible to make a closer estimate of the wealth +wasted by the construction of unneeded railways than the general one +above. There are now, in round numbers, 158,000 miles of railway in the +United States. The two lines named above have a total extent of nearly +1,000 miles; and while they are the most flagrant examples of +paralleling in the country, there is no small number of other roads in +various parts of the country which, except for their competition with +roads already constructed, would never have been built. Considering the +fact that the paralleling has been done in regions where the traffic +was heaviest and where the cost of construction was greatest, it seems a +conservative estimate to say that 5 per cent. of the capital invested in +railways in the United States has been spent in paralleling existing +roads. But the total capital invested in the railways of the United +States is about $9,200,000,000, 5 per cent. of which is $460,000,000. It +is also to be remembered that this 7,500 miles of needless road has to +be maintained and operated at an average expense per mile per annum of +$4,381, or a total annual cost of nearly $33,000,000. Taking Prof. Ely's +estimate of $1,000 as the cost at which an average size family can be +provided with a comfortable home, and we find that the cost of these +unneeded railways would have provided 460,000 homes, sufficient to +accommodate 2,300,000 people. Say that 3 per cent. of the cost of these +homes is required annually to keep them in repair, then this could be +furnished by the $33,000,000 now paid for the operating expenses of +needless railways, and an annual margin of about $19,000,000 would be +left, or enough to provide each year homes for nearly 100,000 more +people in addition. Of course, this is merely a concrete example of what +possible benefits we have been deprived by wasting our money in building +needless railways. + +As a matter of fact, the money we have spent on unprofitable railways, +as well as those totally useless, has wrought us an amount of damage far +in excess of their actual cost. It is generally agreed by financiers +that the periods of industrial depression during the past score of years +have been largely due to excessive railway building. For in a period of +active railway construction, roads are built whose only excuse for +existence is that they will encroach upon the territory of some rival. +The capital invested fails to make a return. The loss of income which +ensues decreases the purchasing power of the community; and this +combines with the sudden loss of business confidence caused by the +failure of the enterprise to bring about a general panic and crash which +affects the whole community; and by checking enterprise and industry, +damages the country ten times the amount of the original loss. + +The waste of competition is by no means confined to railways. The Sugar +Refiners' trust has raised the price of sugar and thus reduced its +consumption so much that they have permanently closed several of their +factories. Yet Claus Spreckels is now building a great refinery in +Philadelphia, the output of which is to compete with the trust. All this +capital invested in that which is not needed by the community is an +injury to the public. The French Copper syndicate so raised the price of +copper that it became profitable to work old mines of poor ore, which +under ordinary circumstances could not be worked at all at a profit. +Capital was expended in opening and refitting these mines, and in +preparing them for working; while other mines, able to produce the metal +at much less cost, were reducing their output because of their contract +with the trust. + +In various cities of the country, millions have been wasted in tearing +up the streets to bury the unneeded mains of competing gas companies. +The electric light competitors are stringing their wires over our heads +and beneath our feet, and by covering the same district twice or three +times, double and treble the attendant evils as well as the cost. + +The waste due to intense competition in trade may be avoidable or +unavoidable; but it is certainly of enormous magnitude, although the +fact of its being a waste is still little appreciated. + +The waste due to labor monopolies is much better understood. The strikes +which paralyze industry and send want and distress in ever widening +circles are universally recognized to be a waste of wealth whose annual +amount is enormous. The cost to employers and workmen of the strikes in +the State of New York in 1886 and 1887, was $8,507,449. Reckoning from +this as a basis, it is probable that the total annual cash cost of +strikes in the United States is twenty or twenty-five million dollars. +The results of these strikes in decreasing the purchasing power of +employés and thus causing overproduction, and in discouraging enterprise +and increasing the cost of capital, serve to spread their effect +throughout the whole industrial community and thus cause an actual loss +and injury many times that borne by the parties directly engaged. + +It is thus evident that the waste due to the intense competition which +the concentration of productive enterprise has brought about in modern +times is a matter of startling proportions. We are wasting and +destroying wealth all the time sufficient to go a long way towards +abolishing all the poverty in our midst; and the blame for this state of +affairs we are now able to place where it belongs. + +Surely with a full appreciation of these evils, every honest and +patriotic man must be willing to use every endeavor to strike at the +root of the evil. The public indeed is, and has long been, a unit in its +opposition to monopoly; but in endeavoring to defeat monopoly it has +taken just the course which could give no permanent gain. Cities have +beggared themselves to aid competing railway lines only to see them +consolidated eventually with the monopoly which it was expected to +defeat. The multitude regard Claus Spreckels as a benefactor--and will +till he forces the Sugar Trust to divide their 25 per cent. profits with +him in return for the control of his refinery. + +It is no benefit to us if in steering away from the Scylla of monopoly, +we be wrecked on the Charybdis of wasteful competition. We have been +trying for a score of years now to defeat monopolies by creating +competition; but in spite of a universal public sentiment in favor of +the reform, and notwithstanding the millions of wealth which we have +poured out like water to accomplish this object, monopolies to-day are +far more numerous and powerful than ever before. The people who are +groaning under their burden of oppression are anxious for relief. The +remedy they have so long and faithfully tried to apply has but made a +bad matter worse; and it is small wonder that, despairing of other +relief, they are adopting false and injurious plans for bettering +themselves which serve merely to extend the monopoly policy into all +industrial affairs. + +We are threatened with a state of society in which most of the principal +industries will be wholly given over to monopoly. Those in each +occupation will band together to secure the greatest returns for +themselves at the expense of all other men; while the few occupations +which cannot thus combine in a monopoly--farming, and the different +sorts of unskilled labor--will be filled to overflowing with those +crowded out of other callings. Those who follow them will do so only +because the monopolized occupations are closed to them. Thus will our +farming population degenerate into a peasantry more miserable than that +of Europe, and our laborers be ground down to a level lower than they +have yet known. Is there a probability that such a state of affairs will +come to pass? There might be if the public were not keenly alive to the +curse of monopoly. But as it is, the greater danger is that through +ignorance a wrong course may be adopted for the cure of our present +evils, which will aggravate instead of curing them. + + + + +XIII. + +AMELIORATING INFLUENCES. + + +If pure selfishness were the only motive influencing the masses of +mankind, the evils which we have considered in the preceding chapter +would be wholly unbearable. All men would be waging an industrial +warfare with each other in their greed for gain, just as the barons of +feudal times fought to satisfy their thirst for power and possessions; +and as motive is the great force which determines character, we would +be, as far as moral excellence is concerned, in the same category as the +uncivilized savages. + +Fortunately for the happiness of the race, there are important +influences at work counteracting, modifying and ameliorating the social +evils that threaten us. These influences are not cures for these evils, +though they are so considered by very many people. But they are very +important palliatives. They are certainly of inestimable value in the +lack of real remedies; but it is better to consider them as palliatives +merely; for necessary, as they are and always will be, to soften and +relieve the ruggedness of human laws and human administration of law, in +the present condition of humanity they cannot effect a cure of the evils +which burden us. + +The first of these palliatives has a purely selfish origin. It arises +from the desire of the managers of every monopoly to make the greatest +possible profit from its operations. Let us take, for example, a street +railway monopoly which is at liberty to charge such rates of fare as it +chooses and which has no competitors. If it fixes its fare at 10 cents, +very many people will prefer to walk or take some other mode of +conveyance, who, if the fare was at 5 cents, would patronize the road. +Thus it may very likely happen that 5-cent fares will yield it the +greatest net income. It is often said that it is competition which has +brought our rates of railroad transportation down to their present low +point. While this is largely true, it is also true that the tendency to +foster the growth of traffic by making a low tariff has been a large +factor in bringing rates down to a reasonable point. Another example of +this principle's operation is in the case of monopolies protected by the +patent laws. In this case the collection of only a moderate royalty will +generally result in greater profits to the inventor than he would secure +by exacting a large fee, because of the greatly increased sales in the +former case. + +It should not be understood, however, that this principle has its only +application in cases similar to the two mentioned. There is hardly an +industry, monopolized or competitive, into which it does not enter to +effect important results. It is to be noted, however, that it is least +effective where the demand for the monopolized article is least +sensitive to a variation in price. This fact should be considered by +those who are fond of arguing that this principle alone is always +sufficient to prevent monopolies from doing much harm. While it is +powerful in the case of such monopolies as we have mentioned, where the +demand for the commodity furnished varies greatly with the price, in the +case of the great copper trust or of the quinine trust or of any +monopoly controlling the great staples of human consumption, it seems +plain that it can have little effect. Nor do we need to base our proof +that this principle is not a sufficient remedy upon this ground alone. +Grant it to be true that a certain monopoly makes the greatest net +profit when its rates or prices are at a certain point; then will it not +be apt to set them slightly above that point, where they will give +nearly the same profit with a considerable decrease in the volume of +business transacted and in the corresponding labor and responsibility? +And, again, the point where it makes the greatest net profit is +considerably above the point where it is of the greatest possible +benefit to the community at large. This latter end is attained when it +uses its facilities to their full capacity for the benefit of the +public. The rates should be fixed at such a point that this full +capacity will be utilized, or as much higher as may be necessary to pay +the monopoly a fair profit on its operations. + +This influence just considered has its origin in the selfishness of men. +The second, and by far the most important influence tending to +ameliorate the evils due to monopolies and intense competition arises +from that essentially noble trait of human character whose province it +is to seek the welfare of others before that of self. It is not to be +wondered at that the large benevolence of our noblest Christian thinkers +rebels against the inflexible laws of competition, or rather at their +stern application to modern conditions of life. Under our social system, +indeed, each man is striving to do his utmost to benefit his fellow-men, +but only so far as it benefits himself. Christianity goes far beyond +this. It teaches the Fraternity of Man, the Fatherhood of God, and thus +the duty of all men to care for and love their brothers' happiness and +welfare. It is in accord with the noblest and most exalted desires of +the human soul. It teaches a man to seek to benefit others for their own +sake, not for the sake of the reflex benefit on himself. + +The burden of Christ's sermon on the mount was that golden rule of +action, "Whatsoever ye would that men should do to you, do ye even so to +them"; and the whole of his teachings glow with the spirit of +fraternity; the strong bearing the burdens of the weak; the rich cast +down and the poor exalted; brother sharing with brother, according to +their needs. We are accustomed to make ourselves complaisant with the +reflection that these were figurative expressions, and not meant as +literal commands. But if we consider candidly, we must confess that if +it is the spirit of its Master's commands which the Church means to +follow, it is very far, as a body, from reaching up to their full +import. The love for one's fellow-men which Christ taught was certainly +meant to be expressed in great, noble acts of brotherly kindness. +Consider the want, the suffering, the distress, the misfortune, the +inequality by which a thousand families have hard work and scanty fare +while one revels in luxury. Are these thing repugnant to the spirit of +Christianity, or not? Every one knows that they are. It is because +Christian men in these days are prone to follow their own ease in common +with the rest of the world, and are accustomed to make their Christian +code of morals to fit that which public opinion declares to be +sufficiently advanced, that Christianity as a remedy for social evils +has fallen into disrepute with the laboring classes. But men, both in +and out of the Church, who are better informed as to the grand and noble +spirit that lies at its foundation, are coming to look more and more +toward Christianity as the only deliverance from the evils that threaten +us. + +Our social system, say the devout among these men, is based on the +selfish desires of men, their wish to get the most for themselves with +the least service to their fellow-men. It is inconceivable that a system +founded on any thing less than the noblest attributes of humanity can be +intended as a permanent basis for society. The system founded on +competition was adapted to the conditions of men during the formative +period of civilization: but modern inventions, processes, and methods +are revealing a strange want of elasticity in its action. It is leading +us to such grave evils that men everywhere are looking for an escape +from it. We are brought face to face with the fact that the law of +competition, the cruelly terse "survival of the fittest," was never +meant to control the wondrously intricate relations of the men of the +coming centuries. And if selfishness is not to control, it is because +unselfishness is to reign in its stead. It is because there will grow up +in the hearts of men a fraternal love, such as the world has not yet +seen, which will make them gladly share a common inheritance with each +other, as they do a common Fatherhood. Men will then labor for others' +welfare as now; but each with the thought of others' benefit, not of his +own. + +Nor are these men alone in their belief. Earnest thinkers outside of the +Church, who are familiar with the evils which intense competition and +extortionate monopoly are constantly pushing into our notice, discern a +tendency in our social organism to pulsate with stronger and more rapid +beats in its convulsions of strike and boycott and commercial crisis. +And in these mighty vibrations, like the swing of a gigantic pendulum, +there is danger that it may swing so hard and so far as to break its +controlling bonds and leave humanity in chaos. + +Anarchy means more than the reign of individualism. It means such a ruin +of the world's wealth, the storehouses and fields and factories which +supply its wants, that nine tenths of the population of the globe would +be swept off its face by actual starvation. Some social organism there +must be if our civilization is to continue. What can adjust the delicate +relations of man to man when the bond of selfishness which holds us +together breaks? There are many men, even now, whose greatest desire and +strongest purpose is to benefit their fellow-men; and if we can extend +and strengthen this noble principle so that it will govern the great +mass of humanity, why may we not cease to measure and bargain and weigh +with our brother men? + +Such is the argument for what we may appropriately call Christian +communism. Who shall say what shall be possible with a new and nobler +generation of men? When the great mass of the race has Altruism for its +governing motive, then it may be possible to use that trait of character +as the basis of industrial society. But to-day the governing motives of +mankind are largely selfish. Society must govern men in their dealings +with each other, not by arbitrary force but by their inner motives of +action. When men at large begin to heartily desire to benefit others +more than themselves, then the system of selfish competition will begin +to disappear, and the system of fraternal devotion will arise to take +its place. This will come about naturally. It will be an effect which +can only be brought about by producing the cause. When Christianity +shall have so regenerated mankind that its governing motives are noble +and generous, then the social problems we are discussing, as well as +many others, will be forever happily solved. + +Every one will say, God speed the attempt to implant such noble motives +in the breasts of men; but we recognize at the same time the vast change +which must be wrought before mankind at large will reach this high +standard; and in the centuries which will be required to effect this, we +must have other forces to govern society. Thus, while not denying the +possibility that the Christian principle of Altruism may be the final +solution of the problem of society, it seems best for us to regard it at +the present day as what it is,--an influence tending to smooth over the +inequalities and soften the asperities of our social system, and to +transform the warfare of competition into a peaceable and friendly +emulation. + +It is not easy to overestimate the valuable work which this Christian +principle of human fraternity is thus doing at the present day. It is +recognized in many ways so common that we cease to think of them as what +they are--expressions of the common brotherhood of man. Our vast public +charities supported by law are an instance. It is recognized now by all +civilized countries that it is a duty for the State to care for those +who are so poor or unfortunate as to be unable to care for themselves. +Private charities, too, are as much more enormous now than they were a +century ago as private fortunes are, compared with those of that day. In +fact, beneficence has come to be recognized as an important duty of the +very wealthy; and churches, schools, hospitals, and the like bear +witness everywhere to the benevolence of wealthy men. All this public +and private benevolence has certainly accomplished wonderful results in +relieving the want and misfortune of men, and making their lot a +bearable one. + +The above beneficences require outright giving; but there are many ways +in which the fraternal spirit of men works to cause men to treat each +other in business affairs more liberally than they would if competition +were the only governing motive. In very many cases of the employment of +labor, the wages paid are higher than the rate which competition alone +would fix. It is true that this is largely due to a selfish motive. The +men are more contented and industrious than when their wages are lower. +There are always plenty of applicants for any vacant position. The men +are not prone to find fault with their pay, knowing that plenty would be +glad to fill their places. At the same time, it is certainly true that +in many cases a principal motive for giving higher wages is the desire +to be liberal and generous with the workers whose labor brings income +and profits. Again it is very frequently the case that mills and mines +are kept in operation in dull times, when goods must be sold at a loss, +if sold at all, simply to keep the employees from the destitution and +suffering consequent upon idleness. Cases of especial personal +benevolence are still more common. There are tens of thousands of +working people to-day rendering service whom their employers well know +to be unprofitable servants, but who are retained because their youth or +age or incapacity renders them proper objects of assistance in this way, +a sort of charity far better than outright gift. + +In business enterprises, again, the spirit of fraternity is widely +diffused. As we have seen, it has been one principal cause of the +formation of trusts and combinations to limit and restrain competition. +There are also a growing number of enterprises which are purely +philanthropic, such as the provision of cheap and healthy homes for +working men and women. + +In the conduct of business, too, public opinion does not approve of the +man who exacts the utmost farthing, and weighs and measures to the +closest fraction. The most grasping creditor, who precipitates the ruin +upon the bankrupt, and the landlord or money-lender, who exacts +pitilessly and turns a deaf ear to the call of a brother for mercy, are +also condemned at the bar of public opinion. + +These and many other considerations lead us to some knowledge of the +inestimable value of the principle of fraternity to correct the harsh +and inequitable working of the industrial organism. It remains only to +be said that in this sphere of action its influence is but a small +fraction of what it ought to be and what it promises to become. + +It is through their conscience, as well as through their innate sense of +justice and right, that men are coming to see how the extortion by +monopolies and the waste of competition in which they have engaged are +an injury to the common weal and an expression of might rather than of +right. It is in this way that we are beginning to discern the faults and +imperfections of our present industrial system and to recognize that +progress toward better things is to be found by recognizing, not +covering, these faults, and doing all in our power to remedy them. In +this work the Christian Church should be in the lead; and a large +proportion of its pastors, accustomed to an earnest and sympathetic +appreciation of social evils, are among the foremost to second the +efforts of modern reformers. Of the rank and file of the Church, +however, it is to be regretfully said that they are eminently +conservative; and that, with very many notable exceptions, they are +certainly not in the lead in the efforts to equalize the injustices +which have grown up under the laws of competition. It is largely because +the course of Christians is in this respect so inconsistent with their +professed belief in that grand doctrine of man's divine origin and +universal brotherhood, that the Church, is losing the respect of the +laboring classes. Nor will it regain that respect until it shows by +unmistakable evidence to the men who toil with their hands that it is +alive to the questions of the day,--alive to the injustice of society +to-day; and that the love of the Church's great Master for their souls +is echoed by a longing in the hearts of his followers for their temporal +welfare. + +But it should be also said that, save as they assume it, the +responsibility of those within the Church is not greater than of those +without. All men alike are brothers; and it is more, far more, than a +selfish tie that binds us together in civilized society. Legal rights +are based largely on the system of competition under which our +industries have grown up; but the moral duties of all men go far beyond +this. It is the duty of all men alike to supplement the working of the +law of selfish competition with the acts of a fraternal love for the +welfare of all men. Too much stress cannot be laid on this. There can be +little doubt that if it were not for the charity and beneficence and for +the strong spirit of humanity, which lives in a strange strength, even +in the hearts of the debased and evil-minded, the industrial warfare +which our modern competition has come to be would have wrought tenfold +more evil than it has, and would have already arrayed class against +class with other weapons than those of peaceable industry. May Heaven +grant that the time shall never come when the growth of the principle +of human fraternity shall not far outstrip and overtop the growth of +human selfishness, whatever forms the latter may take. + +In concluding this chapter it seems eminently proper to call attention +to one practical application of this great principle of fraternity which +ought to go a great way towards saving us from the results of mistakes +in our attempts to remedy the evils which have grown up. The fraternal +principle should lead men to judge charitably the men who are engaged in +monopolies and in wasting the world's wealth in intense competition. The +more especially as _these evils are due, not to the malignity of any +person, but to our system of industry, which causes them to spring up_. +The investigation which we pursued in the first chapters showed very +clearly that monopolists are simply striving, like all other men, to +protect and advance their own interests by what they consider legal and +honorable means. And our study of the laws of competition has shown us +that the evils of monopoly and unhealthy competition are the natural +outgrowth of the great revolution in modern industries by which the +number of competing units has been reduced from many to few. + +Unfortunately there is a great tendency to make these evils worse by +recrimination. It is very common to hear those engaged in monopolistic +enterprises, whether as owners or managers, denounced as unscrupulous +villains, double-dyed rascals, scoundrelly enemies of the people, or +perhaps in terms less blunt but more scathing. Now, what are the facts +of the case? Speaking broadly, it is a fact that the men who own and +manage our modern monopolies are as a class far more large-hearted in +their sympathies than the average of men. It is only because they do not +realize the consequences of their acts that they seem to those who do +realize them and those who suffer by them to be incomprehensibly brutal. +The same man who at a corporation meeting may do his part toward +throwing a thousand men out of employment or wasting a million dollars +of the world's wealth to effect some monster "deal," may stop as he +leaves his office to help a crippled beggar regain his feet; and when he +hears of the destitution that his own official act has helped create, he +will give with a lavish hand to relieve it. When we come to questions +between labor and its employers, more than this is true. The employers +of labor as a class are closely in sympathy with the honest desire of +their men to better themselves, and the constant increase in the +employment of arbitration to settle difficulties, the experiments in +co-operation and profit-sharing, and the furnishing of cheap and good +houses to the workers are all evidences of this fact. + +The truth is, that it is circumstances, not men, which have created +monopolies. For to tell the truth, there are but very few men who, if +put in the place of the stigmatized monopolists, would not have done as +much or more, as their abilities permitted, to achieve a fortune as have +these men. All men strive in general to make as much as possible out of +their fellow-men, and to gain the most possible with the least labor. +The monopolist only goes further on this road than most other men can +go. + +On the other hand, a still more common error exists with reference to +the monopolies of labor. The newspaper press seems strangely fond of +repeating the statement that all labor organizations are kept up by idle +and turbulent labor agitators, who wish to live off the proceeds of +their fellows' labor. A little candid thought and investigation will +convince any one that this is an out-and-out lie, and as such deserves +the condemnation of all honest men. Granted, indeed, that labor +monopolies are an evil, as we have fully shown, and that the men who +have charge of them are far from perfect, and make many mistakes, they +have far more to excuse them than have the men who form monopolies for +the purpose of adding to fortunes already plethoric. The truth is, that +if the men who are so incomprehensibly unjust in their estimate of the +work of labor organizations were put in the place of the laborers at the +bench or in the mill, they would be foremost in securing their own +rights by organizing their fellow workmen. It would be a great thing for +the world's peace if men would try to look at their brother's failings +through their brother's eyes. Before you criticise a man too harshly, +candidly consider whether you would do any better if you were in his +place. + +We hear much said of the folly and wickedness of stirring up and +reviving the sectional animosity between the North and the South; and +all patriotic men rejoice in burying past issues and inaugurating the +era of a united nationalism. But those who, by personal attacks upon +monopolists, whether they are millionaire monopolists or hard-handed +workingmen, cultivate animosity and hatred between social classes +already too widely separated and too prone to hostility, are sowing seed +whose fruit may be reaped in a social strife far more destructive and +fatal than any sectional strife could be. In discussing remedies for the +evils we have been investigating, we should always keep the fact in mind +that our remedy should seek, not to punish, but to cure. Personal or +class enmities never yet helped the world to advance. It will be +fortunate if men can be taught to see how useless such enmities are in +this case; and how little revenge and reprisal can ever do to heal a +wrong. + + + + +XIV. + +REMEDIES FOR THE EVILS OF MONOPOLY. + + +We have now investigated the nature of all the different classes of +monopolies and combinations for the suppression of competition. We have +studied their working and their effect upon the different classes of +society. We have discussed the foundation principles of civilized +society as seen in abstract theory and as seen in the actual practice of +to-day, with the evils which intense competition on the one hand and +extortionate monopoly on the other have brought upon us. Finally, we +have considered the influences which tend to lessen and ameliorate these +evils, and the extent to which we may rely on them to benefit the +condition of society. We are now fully prepared to consider the remedies +which are proposed for these evils, and to see in what direction our +hope lies for the improvement of the condition of mankind. + +It would be a far larger task than we propose to attempt, however, to +discuss all the schemes which have been proposed for bettering the +condition of society. They have been numerous ever since the dawn of the +idea of popular liberty, have accompanied it all through its centuries +of growth, and to-day, despite the fact that the amount of the comforts +of life accessible to the masses of the people is far greater than ever +before, plans for further betterment of the condition of society, the +more economical production and equitable distribution of wealth, are +being pressed forward and advocated more strongly than ever. Nor does +this fact furnish any ground for pessimism. We shall have far more +occasion to deplore when men become so conceited over the advancement +which the race has already made,--so numb to the evils which still +oppress them,--that they will no longer take part in the agitation of +plans for further advancement. + +In considering now the plans proposed at the present day by those who +wish to remedy the evils of monopoly, we shall find it profitable to +consider first two great opposing principles, which we will designate as +_individualism_ and _societism_. Upon one or the other of these +principles almost every scheme for bettering the condition of society is +based. + +The doctrine of individualism has for its foundation the absolute +industrial liberty of each individual. By this is meant that every +person shall have "the free right of contract,"--that is, the right to +sell his labor or property or purchase that of others as he chooses. It +holds that in all matters where the production and distribution of +wealth is concerned, the desire of each man to advance his own interests +will, alone, in the long run, result in the highest good to the greatest +number. It asks the government to "let alone" the industrial affairs of +the country, and leave private enterprise to take its own course. Its +adherents are fond of asserting that each man knows his own wants and +can direct his own business affairs much better than any government can +direct them for him. It declares that free competition is the best +possible agent to regulate all industrial affairs, and it ascribes all +economic evils to the fact that free competition has been thwarted or +destroyed. + +The opposing doctrine of societism holds that the waste in the +production of wealth and the inequities in its distribution, which +afflict mankind to-day, are due to the extreme application of the +doctrine of individualism. Its adherents analyze competition and declare +it to be but another expression of a law of savage nature, tersely +expressed as "the survival of the fittest." A system which brutally +forces the weaker to the wall, say they, is unfit to govern the +inter-relations of civilized human beings. Condemning thus the +principles and practice of their opponents, they would go to the +opposite extreme and place the control of the production and +distribution of wealth in the hands of organized society or of local and +central governments, to be by them administered for the common benefit. + +The first and most obvious commentary upon these two opposing doctrines +is that either of them is impracticable; and that if either of them were +given the entire control of our industries, the whole people would unite +in condemning it. Lest there should be any mistake as to what is meant +by this, it is well to say that we now refer to neither the +individualism nor the societism which is practically advocated at the +present day, but rather to the essence of the two opposing principles. + +To see most clearly the practical failure of either of these principles +when applied without modification by the other, consider our present +social system, which is based on both individualism and societism. If +the principle of individualism were to be fully applied and societism +were to be entirely abolished, a first step would be the relinquishment +by the government of all the enterprises it now carries on; and they +would be left for private enterprise to take up or leave alone as it +chose. This means, for one thing, to bring the matter plainly home, that +the whole national postal system would be wiped out, and we should +depend on some private company or companies to collect, carry, and +distribute our mails. The government would also abandon all its work in +keeping clear and safe the natural waterways of the country, as well as +all the harbors, light-houses, etc. Municipal governments would give up +all their systems of water supply to private companies, as well as their +sewerage systems, and even paving, street cleaning, etc. Indeed, the +maintenance of our whole system of highways would be given over to +private enterprise. Is this too much? It is only a legitimate +application of the principle that government should leave to private +enterprise all matters connected with commerce and industry. + +Little need be said to prove that a similar application of the principle +of societism to our industrial system would result even more +disastrously. As a general thing, the necessary formality and expense of +administration when business is carried on by the government, causes the +final cost of production to be much greater than under private +management, even when conducted with all honesty. But the chief reason +why the principle of societism is impracticable and unwise for universal +application, lies in the fact that the men who administer our +governments are neither the wisest nor the most honest of men. The +competition among those engaged in private business tends by a process +of natural selection to bring the men of greatest business ability into +control of affairs. But by any form of government yet tried, popularity +rather than merit, and excellence in the arts of the politician, rather +than experience and capacity as a statesman and business man, are the +qualities which place men in positions where they can control public +affairs. Not that very many wise and good men do not now hold office, +and that many unprincipled and vicious men do achieve success in private +business. But, as a general rule, the statements just made hold good. + +It seems plainly apparent, then, that neither the principle of +individualism nor the principle of societism can be taken as an +infallible guide for determining the control of our industry. It would +be as manifestly unwise to take a step toward abolishing existing +societism by placing our postal department under the control of a +private company, as it would be to make a move toward abolishing +individualism by having the government assume the management of all the +farms in the country. Both of these principles are necessary. + +There is, indeed, a marked tendency toward an increased reliance on the +principle of societism as civilization progresses and our life becomes +necessarily more intense and complex. A community of plain farmers, +isolated from each other, can live their individual lives about as they +please, without any interference of the government becoming necessary to +protect the rights of each man from infringement by his neighbors. But +the resident in a large village must submit to certain restrictions for +the common good. He must not carry on any kind of business likely to +become a public nuisance. His cattle may not graze in the streets. He +must give part of his earnings toward maintaining a water supply for a +protection against fire. The citizen of a great city is subject to far +more restrictions. The government assumes the control of education, +charities, the care of the public health, the drainage of the streets, +the collection of offal, and a multitude of other duties which in a less +intense civilization each family performs for itself. + +The advance in science and the arts, too, has brought about a revolution +whose effect we must recognize. A hundred years ago almost every +community, and to a large degree every family, was industrially almost +independent of every other, as we have already shown. To-day each man +relies on a million others to supply him with the commonest necessaries +of life. The armored knight was proof against all foes, save the few +antagonists similarly clad. To-day my life is dependent on the fidelity +and vigilance of ten thousand men, and every man I meet has me in his +power. Given the malignant will and fiendish cunning necessary, and one +single man can kill a thousand human beings and destroy a million +dollars at a blow. To sum up, each advance in civilization makes men +more dependent upon each other, and increases the advantage and +necessity of having industries most important to the common welfare +controlled by society as a whole instead of by individuals. + +It is contended by some that from the increased interference of +government with private affairs, there is danger that the liberties of +the people will be curtailed, and that their rights will be so hedged +about by restrictions that the result will be evil instead of +beneficial. To this it must be answered that the people themselves are +the source of the government's authority and power of restriction, and +that in no case will a restriction of the government be long maintained +which does not benefit far more in conserving the rights of men than it +injures by infringing them. Apply this rule to any case of government +action in industrial matters. A city government, for instance, +constructs a system of sewerage. All taxpayers must contribute something +towards its expense, and their right to spend that money in such other +ways as they choose is abridged; but, at the same time, the more +important right of having healthy and safe drainage for their houses is +conserved. In a similar way, the government may pass laws of various +sorts to restrict and control what seems to be at first sight purely +private business, such as the sale of explosives, spirituous liquors, +poisons, drugs, and many other articles. In every instance, this is done +on the ground that the interference of government is necessary to +protect the rights of the community as a whole, even though the +liberties of certain classes are abridged. + +The study of these facts brings to our attention an important principle +of governmental action, which should always be remembered when in any +industrial matter we find that the principle of individual action is +producing unsatisfactory results, and conclude, therefore, to ask the +government to take some part in its control. This principle is as +follows: _government, as the representative of the will of the whole +people, should in general, attempt the regulation, or control, of +industrial matters only to benefit the people as a whole_. + +Of course it cannot be said that all government action for the benefit +of special classes of the community is wrong. The granting of pensions +to those defenders and upholders of the government who deserve it, is a +case in point where special legislation is justifiable and proper; and +many other cases exist. Nevertheless, the shaping of legislation to +effect the interests of special classes of the community is one which is +now working the nation serious injury; and it has obtained so firm a +bold that it will take a long time for us to throw it off. It causes men +of all classes to consider the government as a paternal benefactor, +whose duty it is to aid them, either in their schemes for getting rich +or their struggles to earn a living; when its real office is to protect +all citizens in their individual rights, undertake only such industrial +enterprises as can manifestly be better and more economically conducted +by it than by private enterprise, and enforce restrictions upon industry +only as they are needed to protect personal rights or the interests of +the community as a whole. Worst of all, the use of government to advance +special interests places a premium on the efforts of those who seek to +corrupt the expression of the popular will in its every stage, from the +voters at the polls to the chief rulers in the seats of government. For +by combining to accomplish their mutual purposes, they are able to turn +aside all departments of government from their legitimate work and +occupy them with measures to advance special interests, some commendable +enough, others a mere excuse for stealing from the public treasury, but +all alike claiming attention and action, while the business of the +people goes all awry. + +It has seemed necessary to thus briefly discuss these two opposing +theories of society, individualism and societism, in order to show the +impracticability of either when applied to the society of to-day without +limitation and modification by the other; and that in adopting or +rejecting any remedies that may be proposed for the industrial evils +which we have discussed, we should be guided by the facts as we find +them, and not by blind adherence to abstract principles. + +Let us now gather up the salient decisions which we have reached in all +our past investigation. We have discovered that a great industrial +revolution is in progress, by which manufacturing, mining, and +transportation to a very great extent, and other industries to a +considerable extent, have been and are being concentrated in the hands +of a very few competitors. We have found that by the laws of competition +this reduction in the number of competitors greatly increases the +intensity of competition and the resulting waste and instability of +price, and finally brings monopoly into existence. This monopoly we have +determined to be a serious infringement on the rights of the people, and +we have found that the losses due to intense competition and the +fruitless attempts to defeat monopoly by adding new competing units have +wasted the wealth of the nation in uncounted millions. We are now to +consider the remedies proposed for these evils. + +The most obvious remedy for monopoly, and the one which has been tried +and persevered in with the most remarkable faith, is _the creation of +new competitors_. Does a railroad monopoly oppress us? Build a competing +line. Is the gas company of our city charging us $3 per thousand for gas +which cost but 50 cents to produce and deliver? Let us start another gas +company and tear up all our pavements again to lay its mains. Has the +sugar trust put up the price of sugar two cents per pound? Well, "sugar +can be produced anywhere by the expenditure of labor and capital," the +Trust's lawyers say, and so _we_ will "trust" that some enterprising +manufacturer will take the field against the combination. But if we do +any of these things, we have added only _one_ competitor to the number +in the field. And with only _two_ competitors in the field, competition +is sure to be so _intense_ and _wasteful_ that the formation of a new +monopoly is a matter of but a short time. + +This is the conclusion to which the theory brings us; and the more one +studies the history of actual attempts to create competition in this +way, the more thoroughly convinced he must be that the inevitable result +will be the same,--the tacit or formal combination between the old +monopoly and the new competitor, resulting in the re-establishment of +the absolute reign of monopoly. The author has thoroughly studied the +actual working of hundreds of schemes, in every part of the United +States, whose object was to create competition in railroad +transportation. It is a most astonishing fact to see the eagerness with +which thousands of municipalities, all over the country, which have +taken great loads of debt upon their shoulders to secure "competing +lines," and have seen these lines swallowed up by their rivals, are +still anxious to repeat the folly and assume new burdens to aid in +building new lines, which will inevitably be absorbed like those which +they preceded. If the people as a whole learn wisdom by experience, they +seem to learn with painful slowness. The first great lesson for the +people who are groaning under the burden of monopoly to learn, then, is +that when we try to defeat monopoly by creating new competing units, the +remedy is worse for the community at large than the disease, and effects +at best but a temporary relief. + +Another class of remedies against monopoly seek to accomplish their +purpose by opposing the tendency to a reduction in the number of +competing units. There are not wanting people who, having gained a dim +perception that monopolies are an inevitable result of the modern +concentration of industry, conclude that, after all, "the former days +_were_ better than these," and that our wisest course is a retrograde +one. Fortunately, however, these people are comparatively few. It is a +fact so plain that even the dullest can hardly fail to perceive it, that +the consolidation and concentration of industry which have gone on +everywhere have wonderfully cheapened the cost of production,--made it +possible for us to make better goods with a less expenditure of labor +and material. The revolution in our industries could not be undone +without a more radical action toward vested property rights than could +be countenanced now; and as already seen, it would work to the detriment +of every person in the community. We cannot go back to the stage-coach, +the workshop, and the hand-loom of our ancestors; we cannot, if we +would, undo the growth of a century in civilization; and it is well that +it is so. + +But while most men see the benefit which has resulted from the +consolidations already effected, there are but few who are not opposed +to further consolidations. It is argued that the reduction in the number +of competing units results in increasing the intensity of competition, +which is assumed to be a desirable end; and that it has also worked +great benefit in the reduction in cost. Having attained this, it is +proposed to stop further consolidations and prevent the establishment of +monopoly. This is what most of the present plans for giving relief from +monopoly propose to accomplish. Certainly the task is no easy one; let +us inquire if it be even possible. + +We may safely assume, in the first place, that the competitors in any +industry will always be reduced to a very small number before the public +will be sufficiently aroused to make any movement for the prevention of +consolidation. So long as a monopoly is not imminent, usually, indeed, +so long as it is not in actual operation, no one cares or notices how +far consolidation and combination goes. Now by the laws of competition, +when the number of competing units is small, competition is intense and +wasteful, and acts to so reduce the returns from industry that +combination and the establishment of a monopoly are a natural sequence. + +Evidently this result can only be prevented by some interference outside +the industry itself. If we allow it to take its own course, a monopoly +is certain, sooner or later, to be formed. But the only agency which has +the right and power to interfere is government. The question then is, +can government successfully interfere to prevent intense competition +from bringing about monopoly? In order to do this it must of course keep +competition in action; but it cannot do this directly. Competition is +essentially a strife. No law was ever enacted which could force two men +to fight if they were really determined to be at peace. No law was ever +enacted which could force two manufacturers or merchants to compete with +each other in price, if they really were agreed to sell at the same +price. The common-law principle that contracts in restraint of +competition are void, so often appealed to nowadays, has really but +slight power. It merely prevents the parties who make an agreement to +restrain competition, from enforcing such agreements in court. Attempts +have also been made to apply this principle to secure an annulment of +the charter of corporations which engage in monopolistic combinations. +Even if this be successful, the only result probable is that private +parties instead of corporations will carry on the monopolies in a few +cases, while in most cases the competition-destroying agreements will be +made so secretly that it will be impossible to prove their existence. + +It is thus plain that the action of the government in declaring the +restriction of competition to be illegal is wholly ineffectual to check +the growth of monopoly. And, further, the fact is that it is hardly +possible for the government to take any more extreme stand in the +matter. Let us suppose that it does declare, not only that these +combinations are against public policy, but that they shall be punished. +Then would it be a punishable offence for two country grocers who had +been selling sugar below cost to agree that henceforth they would charge +a uniform price and make an eighth of a cent per pound! It is to be +remembered that _competition_ necessitates _action_. Can the government, +therefore, _compel_ a man to compete, to cut prices below his neighbors, +or to carry on his business at all, if he does not choose to do so? Such +a law would establish the government's right to regulate the conduct of +purely private business to a degree never before known. Such a law to +protect the theory of individualism would be a most flagrant +infringement of the rights of individuals. It is plain, then, that +government cannot possibly keep up competition by direct action. + +Whether it is possible to do so by indirect means is a much harder +question. Monopoly results, as we have found, from the intensity of +competition. If it is possible to modify the intensity, to keep the +candle from burning itself out too quickly, so to speak, it is possible +that competition may be kept alive by legislative enactment. So far, +practically nothing has been done in this direction, and it remains yet +to be seen what remedies of this sort may accomplish. + +A pertinent example of an attempt by the government to keep competition +alive is the Interstate Commerce law. Before its passage the railway +companies had a patched-up and nominally illegal species of combination +to restrict competition, known as pooling. As described by President +Charles Francis Adams of the Union Pacific Railway, "it was merely a +method through which the weaker corporations were kept alive." The +Interstate law prohibited this restriction of competition, and also, by +enactment of the long-and short-haul clause, made the competition more +widespread and injurious to the railways. As a result an astonishing +impetus has been given to the growth of the great systems and the +consolidation of the minor competing roads. More than that, however, the +great increase in the intensity of competition has done so much to drain +the resources of the companies and injure their revenues, that some +measure for uniting all the railroads of the country under one +management is now being seriously planned by many men in railroad +circles. Thus this result, which was probably inevitable, has doubtless +been hastened many years by the action of the law. The means taken to +intensify competition has operated, as might have been expected, to +hasten the complete establishment of monopoly. + +We have now found that monopoly is the inevitable result of the +concentration of competition in any industry in a few hands, if events +are allowed to take their natural course; that the only agent which has +either the right or the power to interfere in the case is the +government,--National, State, or Municipal; that government cannot +punish directly those who form combinations to restrict competition, +without exercising to an unprecedented degree its right to interference +with private affairs; while its attempt to deter men from establishing +monopolies by refusing its protection to them in their contracts to +restrict competition has proved to be but a slight hindrance to the +growth of monopoly. + +There are, then, but two ways of preventing monopoly from establishing +itself and laying such a tax upon the people at large for the supply of +the commodity which it controls as it chooses. The first is, action to +reduce the intensity of competition so that the weaker competitors may +maintain their independence and not be forced to consolidate with their +stronger rivals. The second is, action to permit or encourage the +establishment of monopoly, and regulate by some means other than +competition the prices which it shall charge for the products and the +quality of product which it shall supply. These two general classes of +remedies which we find to be feasible we will discuss here only in a +general way. The first, reduction in the intensity of competition, has +hardly been tried in any form, and we cannot yet say what practical +means should be taken to put it into effect. We will return to this at a +later period in our discussion. + +The second remedy is the one towards whose adoption we are rapidly +working. State and Interstate Commissions have already been established +to regulate railway monopolies; and in general it is true that the +people who feel the burden of monopolies are looking to the government +for relief, and expect it to take positive action for the control of +other monopolies as it has for the control of railways. It will be seen +that we have now arrived by a study of the various possible remedies for +monopoly at the same irresistible conclusion to which we were brought +by our study of the laws of competition. _The proper remedy for monopoly +is not abolition but control._ It seemed necessary to conduct this +independent investigation in order that no blind adherence to +individualism and no thought of the possible efficacy of other remedies +might lead us to doubt this important truth. + +We have next to consider the fact that the government can control +monopolies in two ways. It can either permit the monopoly to remain +under private ownership, and regulate its operations by law and by duly +appointed officers; or it can itself assume the entire ownership and +control of the monopoly. Which of these plans is the better, is a +question of public policy over which future political parties are likely +to dispute. One party will hold that when it is necessary for the +government to interfere to protect those whom it represents from the +oppression of monopoly, it should assume at once the whole ownership and +management of the monopoly. Their opponents will argue that government +should interfere only to the extent needful to maintain the rights of +the public; and that it is far better that industry should be directed +by the private individuals whose interests are at stake than by +government officials. To discuss fully the arguments for each of these +two principles of our future practice in dealing with monopolies, would +be beyond the intended scope of this volume. It can only be briefly said +that the arguments presented will certainly indicate that the conditions +surrounding each given monopoly will have great weight in determining +which policy is the most advantageous. It would be manifestly unwise, +for instance, to place our postal facilities under the direction of a +corporation, even though its operations were regulated by government. +It would be even more unwise to place the operations of the flouring +mills of the country in the hands of a department of the government. The +important factors to be considered in deciding any given case are, +first, the importance and necessity to the public of the service, and, +second, the question whether production in the given case is likely to +be carried on more economically by the government or by private +enterprise. The former has an advantage in that it can secure its +capital at a lower rate of interest. The latter, an advantage in that it +secures greater efficiency from the labor it employs. Other +circumstances being equal, it would appear wisest, then, for government +to take direct charge of those monopolies in which the greatest amount +of capital is invested and the least labor is employed, leaving to +private enterprise under government regulation the operation of +monopolies in which the opposite set of conditions prevails. + +As already stated, however, the question is complicated by the social +and industrial effects which might follow a large transfer of enterprise +from private to governmental direction; and these effects we will not +now discuss. + + + + +XV. + +THE SOVEREIGN RIGHTS OF THE PEOPLE AND OF THEIR REPRESENTATIVE, THE +GOVERNMENT. + + +We have now at last deduced the important facts, that the only remedy +for the evils of monopoly must come from the popular will, expressed in +direct action by the government; that the government may possibly keep +competition alive by checking its intensity, or can certainly allow +events to take their natural course and permit monopolies to be +established. It can then protect the public, either by assuming itself +the ownership and operation of the monopoly, or by taking the less +radical step of placing the monopoly under official supervision and +control while permitting its private ownership to continue. This +conclusion is of the utmost importance, for it marks out one single +direction as the one in which relief from the evils which vex us may be +found. If we can once make the thinking people of the country understand +the effect which monopolies have upon their welfare, and that the evil +will not cure itself and cannot be cured by attempts to create +competition or by any remedy short of direct action by the government, +we shall have made a great advance. + +But with this goal reached, new questions at once present themselves. +Can the interference of the government with private industries be +defended? How shall government exercise its control, so as to protect +the people without infringing vested property rights and discouraging +private enterprise? It may be objected, too, that, while our preceding +discussion has fully proved the weakness of other methods of dealing +with monopoly, compared with that by the direct action of government, it +has not been shown that the latter is practicable, or that it would not +be likely to result in more harm than good to the people at large. + +These questions are coming before the people in a thousand practical +forms. They are being fought over in courts and legislatures and +councils, and are destined to be fought over at the polls. How important +their right decision is, we have already seen. Let us make some attempt +to find what this right decision is. + +In taking up first the question of the rights of private property +holders, we touch a point over which there is likely in the future to be +serious dispute. A certain faction vigorously contend that past +precedents are no ground on which to base future action, and that little +attention need be paid to the rights of private owners if the public +interest is at stake. A far stronger and more influential faction are +jealous of every thing which seems to question their right to hold and +use their property in whatever way they see fit. But certainly, if their +claims are just, they need not fear the result of that investigation +which every idea we have inherited from former generations has in these +days to receive. It would be beyond the scope of our investigation to +make any exhaustive study of this subject, but it is necessary to note +some of the important facts in connection with property rights as light +upon the question at issue. + +In the first place, it must be conceded that the question is to be +decided upon its merits, and not by precedent. It is of little use for +one faction to show, as they can, that the idea of private property is +largely of modern growth; or for their opponents to prove, as they may, +that the progress of law and government has been continually toward +better protection of the rights of property. The question must be, on +what grounds of inherent right or public expediency is property held +to-day in private ownership? Distasteful as it may be, to realize that +what has been considered a fundamental principle of civilized society is +here challenged and put upon the defensive, the fact remains that the +defence must be made, and must be based only on what is just and wise +to-day, for the opposing side may properly reject arguments based on the +wholly different conditions under which past generations lived. + +The question of the rights of property in the products of labor we may +pass briefly, as it is almost undisputed; and while certain thinkers +have asserted that there is no such thing as a natural right to the +ownership of property of any sort, it seems certain that this is true +only in a technical sense; and that a man's right to hold, control, +dispose of, and enjoy the fruits of his own strength or skill is as +certain as his right to "life, liberty, and the pursuit of happiness," +and follows from that right as a natural sequence. The most radical +revolutionist hardly ventures nowadays to argue against this fact. Thus, +though it is recognized that private property even in one's own strength +and skill must, at times, be subjected to the higher law of public +necessity--as when in time of war a man may be obliged to give up his +time, strength, and even life for the public welfare--in general the +right to hold the results of labor as private property is well +established, on the grounds both of natural right and public expediency. + +But when we consider the private ownership of the gifts of Nature and of +public franchises, it is apparent that we are on very different ground. +These forms of property, which constitute a great proportion of the +world's total wealth, are not created by labor. Nature's gifts were not +stored up to enrich and benefit any one man, but the whole race. It +follows, therefore, that they are always, in the first instance, public +property. + +The argument presented to prove any inherent right of the private owners +to any form of natural wealth seem to be insufficient to prove the case. +The fact seems to be that the inherent right to the benefit of every one +of Nature's gifts is vested, if perfect equity were established, in the +whole human race; or, as a reasonable approach to this, in that portion +of the public to whom this gift is a direct benefit. The title which the +public holds may be transferred to private individuals, as a matter of +expediency; but the public must still retain a prior claim upon the +property. Its right to have the property used for the general welfare, +transcends the right of any private owner to direct it solely to his own +profit and the public injury. + +It is thus plain that the private ownership of our natural wealth and of +all public franchises rests on the grounds of expediency alone. All the +lands and mineral wealth, all franchises for railway lines and for the +various public works discussed in the chapters on municipal monopolies +were the heritage of the whole people in the first instance, and they +have only transferred the title to private owners because it seemed +expedient so to do. On the grounds of expediency alone, then, is the +private ownership of natural wealth to be considered. + +It can hardly be doubted that in the case of our own country, the +transfer to private owners of the title to our natural resources has +been in the past the wisest and only proper course. It is a fact not +often realized that the title to nearly all the natural wealth of the +country, almost all the lands and mines and forests, has been held +directly by the public within a century, and that the transfer to +private owners of a great part of it has taken place within a +generation. + +The question now comes: Did the public, in transferring the title to a +private owner, relinquish all its right to the future control of these +valuable properties, as a private owner would have done? The answer must +be in the negative. Regarded simply as a matter of expediency, it is +plain that to cause the act of any public official to bind all +succeeding generations, living under dissimilar conditions and +circumstances, which were then unknown and unprophesied, might result in +unbearable evils. Necessary as it might be at the start to give away +valuable properties to meet present needs, one generation or its +representatives has no conceivable right to sell for a mess of pottage +the heritage of all succeeding ones. The fact is, then, that the natural +title to all gifts of Nature is vested in the public at large; and while +it is in duty bound to observe the contracts which it makes with private +parties, it is also not to be thought that the dishonesty or +incompetence of a public official, or the failure to foresee the future, +can work for too long a time an injury to the community. + +It seems certain that, in every case where the public has transferred to +private owners the title to any gift of Nature, or has conferred any +franchise upon a corporation, under whatever conditions, the right of +supreme control still remains with the natural owner, the public; and +when the need arises, this control may be exercised. The rights of the +owners and the contract obligations into which the public has entered +should be regarded so far as possible; but when the public necessity +demands, control on its behalf can always be exercised. + +This may seem like a formidable and revolutionary doctrine, but, in +reality, it is based on every-day acts of the public representatives, +with which every one is familiar. Suppose it is conceived to be for the +public interest that a certain railway shall be built. To do this it is +necessary to cross many hundred tracts of land, the title to which was +many years ago transferred by the public to private owners who have +bought and sold since then as they pleased, as if their control were +absolute. Many of the owners of these lands may be opposed to parting +with the right of way necessary for a railroad, but their private wishes +must not stop the progress of improvements necessary to the general +welfare. The State, which has the natural title, asserts its right to +supreme control; and, if necessary, will use all its power to force +these private owners to relinquish their land for the public good. This +is the commonest example of the exercise of the right of eminent domain, +but other cases frequently occur. The laying out of city streets, +building public bridges, and, in fact, highways of every class, furnish +a similar example. Provision of public water supply often requires an +exercise of this power even more positive than in the cases just cited. +By the construction of one great reservoir to store the flow of the +Croton water-shed for the supply of New York City, it is proposed to +condemn the dwellings and lands now owned and occupied by several +thousand people. It is to be noted that, in every case, the rights of +the private owners are observed, and compensation is made them for the +damage done. + +Under the common law the owner of lands bordering a running stream has +certain rights to its use; and these riparian rights, as they are +called, have been established by precedent for centuries. But, in the +State of Colorado, it was found that the water in the streams was of +such value for irrigation that the old system of permitting private +ownership of these riparian rights led to grave abuses. The State +Constitution, therefore, declares that all water in running streams is +the inalienable property of the whole people, and the system providing +for its use by private parties is based on this principle. + +So much for the power of the public to exercise its supreme control, +when public exigency requires, over Nature's gifts in land and water. As +an example of the supreme control of the public over the franchises +which it grants, take the case of the railway again. It is well +established that the public has the right through its legal +representatives to regulate the management and operation of the railway +in every detail; and not only that, but the rates which the railway may +charge for its services as well. Many other examples might be given, for +the necessities of the present decade have awakened men as never before +to the facts which we have just discussed. The final conclusion must +inevitably be that _the public as the sole possible holder of the +natural title to the gifts of Nature, while it may find it expedient to +transfer this ownership to private owners, retains always supreme +control, which may be exercised as the public exigency demands_. + +We have next to determine in what cases the exercise by the public of +this right of supreme control over its heritage is demanded. We are +greatly aided here, however, by the thorough study we have made of the +laws of competition. It is evident at once that competition in the case +of natural agents acts according to the laws already found. Agricultural +land in this country is so abundant and its ownership is so widely +diffused that any monopoly of it is now impossible. Each farmer competes +with every other farmer, and the extension of transportation facilities +has so broadened the field of competition that in no industry is the day +when the few competing units shall replace the many, and monopoly shall +ensue, farther off than in this. In Great Britain and Ireland opposite +conditions prevail. A limited amount of land is held by a few owners, +and its rental is fixed without competition; consequently the land +question has been almost, if not quite, the chief issue in British +politics during this decade. + +If we examine Nature's gifts to the world in the shape of metals, we +find iron to be so widely distributed that competition has always acted +to reduce profits, and that combinations to restrict competition in the +production of the metal have only recently become even possible. On the +other hand, the workable deposits of copper are so scarce and the number +of competitors in its production is so much smaller, that it has become +the subject of the greatest monopoly the world has ever seen. + +With these examples--and any number of others might be cited--is it not +plain enough that the laws of competition are exactly applicable to aid +in solving the problem? The smaller the number of competing units, the +stronger the tendency to monopoly. Certain gifts of Nature are given to +us in profusion. The people transfer the title to private owners, and +of these there must of necessity be so many that they will compete +steadily with each other. The consequence is that the people receive the +benefit from the country's natural resources, while the private owner +gets only enough to compensate him reasonably well for the labor he +employs and the capital which he invests. Certain other gifts of Nature +are, as we have found, very scarce; the number of men who can own and +use them and compete with each other in offering their advantages to the +public is necessarily small. The inevitable result of this condition is, +first, intense competition and then monopoly. + +It is thus evident that there is no necessity for the State to interfere +with the private ownership of those gifts of Nature which are so widely +distributed that competition can act for the protection of the public. +As regards those other gifts which are so limited in their extent that +their control has become a matter of monopoly, the right of the public +to exercise its control is already proven. Whether in any given case the +exigency is so great as to call for the assertion of this power, is a +question which must be decided in each case separately. + +It may be objected, with truth, that nothing short of the actual +ownership of all Nature's gifts by the public is in accord with +absolutely perfect justice; but as a matter of fact every human work +carried out by human hands and brains is only an approach to perfection. +It will never be possible by any human agency to distribute the wealth +production of the world with absolute equity. A careful writer says: +"The view that the right of every human being to his share in the gifts +of Nature should be recognized is not an unreasonable one." But by no +system possible of putting into practical execution can these gifts be +equitably divided among all men. What can be done is to cause the +benefit of these gifts to be widely distributed, and to prevent them +from being monopolized for the benefit of a few. + +The fact maybe alluded to, that even under widespread competition the +holders of the most favorably situated and richest lands, mines, etc., +receive a benefit which in absolute equity should be divided among all +men. But the vastly more important matter of the monopolies which +prevent the public from obtaining the benefit of the natural resources +to which it holds an inalienable title, so overshadows such trivial +injustices that they may be neglected. So much attention has been called +of late, however, to the fact that land as a gift of Nature should, if +absolute justice were done, have the benefit from its use equally +divided among all men, that something further on this subject may be +said. + +Let us first note the fact, which no one will dispute, that the title +held by the public refers only to the "site value." The value of all +improvements which are the product of labor belongs to the owner by +natural right. Now it is conceivable that of the total value of +$10,197,000,000 at which the farms of the United States were valued at +the last census, $7,000,000,000 may perhaps have been the value of the +land apart from the value of the buildings and improvements made since +the country was settled. In 1880 there were at least 3,500,000 farmers +who owned agricultural lands. It is a well-known fact that the holding +of agricultural land in large parcels is the rare exception. We may +reasonably conclude, therefore, that the "site value" held by each +farmer was about $2,000. This is the sum which in absolute equity is +said to belong to the public at large. But let us reflect that each +farmer has only received a small proportion of this $2,000 through the +increase in the value of his land. The fact is that the land which at +first was actually valueless has increased in value with each +generation, and it is this increase alone, apart from the increase due +to the betterments, after which the public has any right to inquire. +Remembering the number of sales and changes in the ownership which take +place in this country, how often the benefits which have accrued to a +single property are divided up among a number of heirs, and that each +owner represents on the average a family of three individuals, it seems +reasonable to suppose that this increase in the "site value" of each +farm may have been divided among twenty different persons. Thus, while +the statement may be made that the public has a claim upon the farms of +the country of $7,000,000,000, it must be remembered that this sum has +been divided among about 70,000,000 different people, and that this +division has been in progress for over two centuries. When the benefits +of our natural resources are so widely distributed as this, there can be +little occasion to alarm ourselves regarding injustice through the +private control of farming lands. + +This, however, is somewhat apart from our argument. The main point, of +which we must not lose sight, is that the private ownership of those +gifts of Nature which are widely distributed operates to the general +benefit of the community far more than any system of public ownership +that could be devised. But, on the other hand, in the case of natural +agents limited in amount, it is practically certain that sooner or later +a monopoly will be established by their private owners, to the serious +detriment of the public at large. The sovereign right of the public in +this latter case to take such steps as are necessary for its proper +protection, is something which both _a priori_ reasoning and judicial +decisions amply prove. + +The great problem of monopoly would be a far easier one to solve, both +theoretically and practically, were it as easy to regulate justly those +forms of monopoly whose strength lies in combination only, as it is +those whose power depends on the possession of gifts of Nature, which we +have just considered. In dealing with trusts, monopolies in trade, and +labor monopolies, we are in danger, on the one hand, of sanctioning +oppressive interference with private business, and on the other of +permitting a license in the conduct of private business which encourages +its managers to continue to extort unjust gains from the public. In the +face of this difficulty, which careful consideration shows to be very +serious, and in the dread of other evils, such as the government proving +incompetent to safely undertake these new and strange responsibilities, +we may well feel like trying to get along with the aid of those old +defenses against monopolies that have always, until the modern +concentration of industry was accomplished, been ample to hold them in +check. + +But the one argument which prevents this is the fact that this tendency +to concentration and consolidation is still actively at work. In the +words of Prof. Ely: "Production on the largest possible scale will be +the only practical mode of production in the near future." It is for +this reason that we must not cease to look about for some better +protection against this new class of monopolies than are afforded by +merely placing stumbling-blocks in their way. We shall have need, for +many years yet, of such weapons in fighting monopoly as the public is +already familiar with; the creation of new competitors and their support +by public opinion, judicial decisions against combinations, and the +like. But before these grow absolutely useless, we ought to be prepared +to meet the new conditions of industry with something better than mere +opposition; and even now be experimenting and studying upon a permanent +and consistent policy. + +In attempting to control monopolies which are not dependent on natural +agents for their strength, we are met at once by the declaration that +the government has no power or right to interfere with property which is +the product of labor; and that the owner cannot be prevented from making +such disposition of it as he chooses. The President and Counsel of the +Sugar Trust said after Judge Barrett's decision was announced: "We do +not believe that the law prevents two persons engaged in rivalry with +each other from uniting their interests." This seems indeed true; and +yet, on reflection, it appears to be absolutely certain that power must +reside in the sovereign people to protect themselves from the unjust +taxation which a monopoly may seek to enforce. Let us brush away cobwebs +and set the facts clearly before us. That competition among producers is +the sole present protection of the public against extortionate prices is +undoubted. When by combination this defense is abolished, has not the +public a right to adopt some other means of protection? There can be no +doubt that it has; the only question is, what form should that +protection take? + +It must be plain that, as a general rule, it is unfitting that +government should own and operate industrial establishments. Practical +experience has indicated that this experiment is wellnigh certain to +result in failure, for reasons so evident as to require no mention here. +The only alternative remaining is government regulation with private +ownership and management. The essential features in the adoption of any +plan should be that the returns of the private owner should be in +proportion to the skill and economy which he exercises in managing his +business; that competition and its resulting waste be done away with; +and that the industry be placed on such a safe and stable basis that the +capital invested in it shall receive the lowest possible rate of +interest, thus leaving the greatest possible amount for the payment of +wages of labor and permitting sales of the product at a low price. + + + + +XVI. + +PRACTICAL PLANS FOR THE CONTROL OF MONOPOLIES. + + +The investigation of the preceding chapters, leading up to the final +conclusion that the proper and only wise remedy for the evils of +monopoly lies in direct action of the government to protect the rights +of the people, finishes the chain of our argument and really +accomplishes the work laid out in the opening chapter. The laws which we +have found to govern competition in modern industry are so far-reaching +in their effects, and their correct apprehension by the people at large +is so important to the general welfare, that economists ought to unite +in recognizing and teaching their truth, while all who desire to work +for the alleviation of present crying evils of society should understand +these laws and be guided by them. + +In the practical application of these truths, however, so many +complicated details are involved that there is ample reason for the +widest differences of opinion. To decide intelligently upon these +practical methods demands special knowledge, in order that all necessary +details may be provided for, and rare practical judgment to adapt the +method to the means at hand. + +The investigations which the author has pursued in the preparation of +the preceding chapters and for certain other purposes have suggested to +him certain principles in the practical execution of plans for the +control of various monopolies, which seem to him necessary to success in +the work. Well understanding the fallibility of any one man's judgment, +especially in these matters of detail, he has determined to outline in a +brief way what seem to him the most feasible plans for the control of +each class of monopolies. These suggestions, however, are to be regarded +in an entirely different light from the general laws propounded in the +preceding chapters; and they are presented with a full knowledge of the +fact that slight variations in circumstances may necessitate wide +changes in plans and processes. + +Taking up the monopolies which by their use of natural agents or their +exercise of a franchise granted by the public, are already acknowledged +to be subject to the public control, let us consider first the railway +system. The two years in which the Interstate Commerce law has been in +force have seen a great progress toward the final solution of this +problem, even though railway affairs are at present in so unsatisfactory +a condition. The important features of our future policy which now seem +to be quite generally understood are: full State and national control +over both tariff rates and facilities; the abolition of competition, +either by consolidation or by legalized agreements to that end; and +strict prohibition of the construction of parallel lines not warranted +by the traffic. + +That we are working very rapidly in this direction, no one will deny who +is familiar with the progress of legislation affecting railway interests +and with the opinions of railway men. Evidently, however, government +cannot justly take so prominent a part in railway management without +becoming in some degree responsible to railway stock- and bond-holders +for the protection of their interests; and it is a difficult question to +say in what manner this responsibility should be met. It has been the +intention of the author in devising the following plan for the control +of our railway system to make this responsibility a definite one, and +not leave it as now, a vague constitutional right. For according to the +law at present, State and national legislators may make laws to vary the +receipts and expenditures of the railway companies as much as they +please, and the only redress of the railway owner is an appeal to the +courts, the judges of which must decide whether the company's revenue is +so injured that its legal rights are infringed. + +Space will not permit here a full statement of the many serious evils +and abuses with which our present system of railway management is +burdened. The study which the author has made of them has convinced him +of their importance and magnitude. The following plan is designed to +permit their remedy as well as to remedy the special evils of monopoly +with which our present investigation is concerned: + +Let the government acquire the title to the franchise, permanent way, +and real estate of all the railway lines in the country. Let a few +corporations be organized under government auspices; and let each, by +the terms of its charter, receive a perpetual lease of all the railway +lines built or to be built within a given territory. Let the territory +of each of these corporations be so large and so planned with regard to +its neighbors that there shall be, so far as possible, no competition +between them. For instance, one corporation would operate all lines +south of the Ohio and east of the Mississippi rivers; another all lines +east of the Hudson and of Lake Champlain, etc. Let the terms of rental +of these lines be about 3¼ per cent. on the road's actual "present +cost" (the sum of money it would cost to rebuild it entirely at present +prices of material and labor) less a due allowance for depreciation. The +corporations would be obliged to keep the property in as good condition +as when received, and would own absolutely all their rolling stock, +machinery, etc. + +It is not proposed, however, that the government shall own any interest +in the railways save the legal title. Bonds would be issued to the full +amount of the appraised valuation, running twenty-five years and bearing +interest at 3 per cent., principal and interest guaranteed by the +government, and these would be sold to the highest bidder. Thus the real +ownership of the roads would be vested in the bondholders. As is well +known, there is a great and fast increasing need for investments of +absolute safety, even though they bear very low rates of interest. This +is especially desirable for the continuance of our national banking +system, in order to insure us a safe, stable, and ample currency. Such +bonds would find a market at a premium as fast as offered. + +It would not even be necessary that the money to pay the interest +coupons should pass through the government's hands. The operating +company would pay it directly to the bond-holder and at the same time +the ¼ of 1 per cent. would be paid into the government treasury. + +The object in making the bonds run for no longer time than twenty-five +years, when it is intended that the whole value of the road shall be +perpetually held in the form of bonds, is that at proper intervals a +revaluation may be made of the improvements to the road and the +interest charges may be readjusted to correspond with the general +change in the income from capital. When the bonds fall due, a new block +would be issued and sold to the highest bidder. The interest rate should +be set at such a point that the bonds could be sold at a premium. These +premiums, with the ¼ of 1 per cent. on the bonds, paid by the operating +company to the government, (which we may regard as a legitimate fee to +the government for its guaranty) should form a government railway fund. +This should be used, first, to defray the expenses of the government +department of railways, and second, to pay the deficit when on any line +the net receipts after operating expenses are paid are insufficient to +pay the rental. The remainder should be expended in making improvements +and additions to the railway system, such as building new bridges and +stations, and improving the line, the cost of which, however, should be +represented by additional bonds at the end of the twenty-five-year term. +The amount of income should be so regulated, by varying the rate of +interest on new bonds, that the sum remaining for the last purpose may +be about sufficient for usual needs. The whole administration of the +receipt and expenditure of this fund should be vested in the government +department of railways. In this way the danger that the whole work of +this government department might be blocked through the neglect of +Congress to make necessary appropriations, would be avoided. + +The readjustment of existing stocks and bonds presents difficulties +which will be considered in very different ways by different classes of +persons. The "granger" element, for instance, would cut off the holder +of "watered stock" with a shilling. Fortunately, if we take time enough, +we can arrange this matter with no shadow of injustice. To illustrate: +The government can purchase the A. B. & C. road outright at its market +value, which, owing to inflated prices and watered securities, is +perhaps $3,000,000. It is desired to wipe out $1,000,000 of this to +place the road upon its proper basis. The government issues 3 per cent. +guaranteed ten-year bonds upon the road and leases it at an annual +rental of 6 per cent. on what it has paid. At the time the bonds are +due, the accumulation of rentals over interest is more than sufficient +to pay off $1,000,000 of the bonds, while the remainder are renewed on +the permanent basis. + +The author is well aware that a very strong prejudice exists against the +lending by the government of its credit to private corporations. This +prejudice--which has perhaps already been sufficient to condemn the +plan, as thus far presented, in the mind of the reader--he believes to +be a very wise and well founded one. The assumption by the government of +any risk in connection with corporate enterprise is highly undesirable. +It is now to be noted that this objection is wholly overcome; for, +notwithstanding the fact that the government guarantees the bonds of the +railways, it is not proposed that it shall really assume any risk, as +will be seen from the further description of the powers and obligations +of the operating corporations. + +These should be essentially private companies, but there should be two +or three representatives of the government on the Board of Directors. +They should be required to operate the roads in a safe, efficient, and +economical manner, and to keep accurate and simple records, open to the +inspection of the Government Commissioners, of the receipts and +expenditures on every separate line of road. The rates of fare and +freight should be, first of all, stable. When once fixed they should +neither be raised nor lowered except by the direction of the Government +Railway Commissioners. Next--and this is the cardinal feature of the +whole plan--it should be the endeavor to fix the rates of fare and +freight at such a point that the total receipts would be sufficient, +first, to pay the whole expense of operating and maintaining the road; +second, to pay the annual rental of 3¼ per cent. interest on the cost of +the road; and, third, an annual dividend to the stockholders of the +operating company of from 4 to 8 per cent. The capital stock of the +operating company should be fixed by law at about 1¼ times the actual +cost of rolling stock and machinery. The operating company should be +allowed to issue only one class of securities, and these should +represent at par the actual cash capital invested by the operating +company. + +Under this plan it is evident that every community would pay its +equitable share of the cost of transportation, since the rates would be +based on the cost of service.[6] Instead of roads running along, +bankrupt for years, as now, we would have every community paying for +its transportation facilities just what it cost to furnish them. But if, +on any road, such a rule would raise the rates above a certain +prescribed maximum point, then the rate could be lowered, if necessary, +to a point where it was only great enough to pay the operating expenses; +and part or all the bond interest would be paid out of the government +railway fund. + + [6] It should be explained that it is only proposed to base the + _rates as a whole_ upon the cost of service. As regards the relative + rates on different commodities, the author, in common with all who + have given careful study to the question, recognizes that the only + equitable principle for proportioning rates is the much maligned one + of "charging [in proportion to] what the traffic will bear." The + argument against this principle is so very plausible that, until he + had given the subject thorough study he held a diametrically + opposite opinion. + + To make plain to the reader that this is really the only equitable + principle, the following illustration may serve: A coal-mine + operator and a sewing-machine manufacturer build together a railroad + to carry their respective products to a market. They will fix the + total rates of freight at such a point as to just pay the cost of + service; but it is required to find what relative rates each should + be equitably charged on the shipments from his works. Evidently, to + have the rates perfectly equitable, they must be in exact proportion + to the _benefit_ which each party derives from the use of the road. + But this benefit which each derives is _measured_ by the profits + which each makes from his business; and this profit, in turn, is the + measure of the amount each can afford to pay for the use of the + road,--that is to say, "what the traffic will bear." _Q. E. D._ + +"But," the objector says, "is it not true that when you limit the +profits of the companies and base rates on cost of service you take away +all incentive to economy and careful operation? The public, and not the +company, gain if the cost of service is reduced; so why should the +manager exert himself to economize? This very same principle has been +tried. Many States have chartered railway corporations, and provided +that fares and freight rates should be reduced when dividends exceeded a +certain per cent., or else that a percentage of the surplus earnings, +above the amount necessary to earn, say 10 per cent. dividends, should +be paid into the State treasury. Of course the railway corporations who +have been able to earn surplus dividends which they were not permitted +to pay, have been sharp enough to spend their surplus on their own +property instead of turning it over to the State treasury. How is it +possible, then, to base rates on cost of service and still leave the +incentive to economy, frugality, and efficiency which exists, when the +corporation is permitted to make all the profits it can?" + +To discover a means of overcoming this difficulty, let us see how it is +overcome under competition. A man invents a new machine, for instance, +which effects a saving in the cost of some manufacturing process of 50 +per cent. One manufacturer adopts it because it greatly increases his +profits, and one by one his competitors follow suit. The competition +between them cuts the prices lower and lower, till finally the consumers +of the goods get all the benefit from the saving effected by the new +machine, and the manufacturers' profits are no greater than they were +originally. But the important point to be noted is this, that the +benefit to the manufacturer continued long enough to repay him for +introducing the machine. So in our attempts to base railway rates upon +cost of service, we must permit the profit from the introduction of +economies, the use of improved appliances, etc., to be gathered by the +railway company long enough to induce it to work toward that end. + +All we need to do to effect this end is to _somewhat delay_ the change +in rates to correspond to change in cost of service. As already stated, +it is most necessary that rates should be _stable_, and it is proposed +to make any change, either advance or reduction, only through the action +of a Government Commission. Now, suppose that some such clause as this +forms a part of our railway law: "upon the petition of any railway +corporation, or of not less than twenty-five patrons of any single +'railway district,' it shall be the duty of the Railway Commission to +investigate regarding a readjustment of rates to correspond more closely +to the cost of service. If it shall be found that in the given 'railway +district' the net receipts over the operating expenses and fixed +charges have been for one year not less than 9 per cent. on the capital +of the operating company invested in the given railway district; and +that for two successive years they have been not less than 8 per cent.; +or, if they have been for one year 8 per cent., and for two years 7 per +cent., and it shall be proven to the satisfaction of the Commission, +that any due and proper measure of economy, to which the attention of +the officers was called in writing has been wilfully neglected, or that +any uncalled for and manifestly extravagant expenditures have been +entered into during that time, then it shall be the duty of the +Commission to lower the rates. If it shall be found that for one year +the net earnings have been less than 3½ per cent., and for two years +less than 4½ per cent., unless it shall be proven that this deficit has +been fostered by neglect of due economy, or by extravagant expenditure +as aforesaid, the rates shall be raised. In all cases where rates are +readjusted, it shall be the endeavor of the Commission to set them at +such a point that the net earnings will equal 6 per cent. on the capital +stock." + +The provision requiring two years of excess or deficiency before a +change, would be necessary to avoid the fluctuations which occur in +single seasons. Every piece of economy is so much gain to the +stockholders, and its benefit is received for at least two years. It +must be remembered that in any railway corporation, as at present +conducted, none but the highest of the managing officials have any +personal interest in the profit from operations. It may well be +believed, therefore, that the measure of economy and efficiency effected +would be at least as great as now. As this plan also contemplates +government representation on the Board of Directors, any action by the +higher officials to evade the law would be unlikely to occur. + +The receipts of a company operating say 30,000 miles of railway and +carrying its traffic at fixed rates would vary but little from year to +year; and its stock would be so largely held by investors and would vary +so little in price that there would be very little speculation in it. To +bankrupt the company would be an impossibility, since its receipts would +always be regulated to preserve its revenue, although not so strictly +but that the company would still have every incentive to cultivate +traffic by offering good facilities, and to economize at the same time +by the introduction of improved methods. + +No doubt it can be shown where every detail of the foregoing plan leaves +loop-holes for abuses to creep in. It will be much the same with any +plan whatever. The questions to be asked are, would abuses, waste and +stealing be any more likely to occur than under any other plan? Could +they be any more prevalent than they are now,--bearable only because we +are calloused to them? Of course, the foregoing is a mere outline of the +general principles of the plan. Details which readily suggest themselves +would, of course, be necessary to carry out the principle successfully. + +That some attempt should be made in this connection to solve the +perplexing problem of strikes on railway lines is proven by the +memorable engineers' strike on the Chicago, Burlington, & Quincy system. +Perhaps a provision requiring every employé and officer to hold at least +a certain number of shares in the operating company in proportion to his +salary would help to solve the labor problem; and it might give the +higher officers a greater interest in their work than they always show. + +The author has deemed it worth while to outline the foregoing plan for +the equitable control of railway monopolies with considerable fulness, +because, to a very great extent, the principles followed in the design +of this plan are applicable to a great number of other monopolies. These +important principles are: (1) Government protection to the owners of +fixed capital so that the public may obtain the use of it at the lowest +possible rate of interest. (2) The operation of monopolies by +corporations rather than by the government, thus securing the increased +efficiency of private over official management. (3) Securing to the +people at large the benefit of the monopoly by basing the prices for its +product on cost of service. (4) But leaving a suitable incentive for the +company's managers to maintain economy and efficiency in its operations. +(5) Government representation in the directorate controlling the +ordinary affairs of the company. + +It is evident that the plan just outlined for railways would be +especially well adapted, with but slight changes, for the control of the +telegraph lines of the country. + + * * * * * + +We will next consider the monopolies discussed in Chapter III. It seems +too plain to need proof that our mines and quarries are certain to have +a steady increase in value as we use up the easily worked surface +deposits and have to dig deeper shafts and develop the poorer deposits +to supply the demand. In the case of any metals or minerals of which the +deposits are so abundant, easily worked, and widely scattered, that the +number of evenly matched competitors is great enough to ensure steady +competition, the public will get the benefit of the especial gift of +Nature, and its owner can receive little more than an ordinary return +for his labor and capital. But, as we have already amply shown, in the +production of a great number of minerals and metals competition has been +killed, or is heavily handicapped by the vast advantages of a few +bonanza mines, and the public is being taxed millions of dollars for +that which belongs to it by right. + +How long is this condition to continue? Must all succeeding generations +pay for coal, copper, zinc, lead, nickel, marble, oil, gas, and various +other products of our mother-earth just what those who control the chief +deposits choose to ask? Because a pioneer stumbles upon a valuable mine, +shall the sole right to use the product of that mine be secured "to him, +his heirs and assigns" forever? + +Suppose, now, that each of the several States were to acquire the title +to all the productive mines, quarries, and mineral wealth within its +borders, and enact laws providing that future discoverers of minerals on +land where they are not now known to exist should be liberally rewarded, +if the discovery proved valuable, but the minerals should belong to the +State and not to the owner of the land. The same principle which we +found to apply in the case of the railways would serve here in +readjusting values, viz.: the difference in the rates of interest on +safe investments and on risky ones. When acquired, the mines should be +leased to private parties for operation. In the case of coal-mines and +perhaps of iron, it would be well to copy largely from the scheme +proposed for railway operation, viz.: place all the business in the +hands of a single company, which should thus be enabled to carry on its +business on the largest possible scale; do away with wasteful +competition, and aim to regulate prices to provide a certain reasonable +steady income on its capital to the mining company. + +For mines of copper, zinc, lead, and similar metals, it would be best to +pursue a different plan, and simply provide by statute that such mines +should be leased for short terms of years to the bidder who would offer +to sell his product at the lowest price per ton at the mines, all +lettings and relettings to be publicly advertised, and the successful +bidder to give bonds for the faithful performance of his contract. It is +difficult to see how, under these conditions, a combination to defeat +competition could be formed. Relettings of expired leases would be +frequent; and bidding by the _selling price_, a single competitor would +be sufficient to break any combination. Of course the lease should +specify a minimum product which the mine should furnish. + +It would be advisable, too, that a manifest duty of the government, +which should be undertaken even under present conditions, should be +observed. It should be required to work the mine with due attention to +saving the greatest possible amount of ore or mineral contained in the +seam or vein. + +The third class of monopolies, whose legal subjection to public control +is acknowledged, are those connected with our municipal public works. +There is already a widespread movement toward taking the control and +operation of these out of the hands of private corporations, and placing +it directly with the city government, and progress in this direction is +very rapid. The author believes, however, that the general law already +stated is applicable here. If the public works of States and of the +nation are more economically and efficiently managed when in the hands +of private parties, it is surely unwise, as a general rule, to entrust +the operation of municipal works to the average city official. While it +is in the highest degree desirable that water-works, gas, and +electric-lighting plants, street railways, and the other municipal +enterprises, discussed in Chapter V., should be _owned_ by the +municipality, their operation, in cases where the employment of +considerable labor and the carrying on of intricate business and +mechanical operations is involved, should in general be entrusted to +private companies. In every case where the financial condition of the +municipality obliges it to rely at first upon private corporations for +the construction and ownership of its public works, the franchise should +expire at the end of a short term of years, and the city should then +have the privilege of purchasing the works at their actual cost. + +As regards works for water supply, there can be little doubt that almost +invariably the municipality should operate as well as own the works, for +the administration of the works requires but a small amount of labor, +and that of such a class that the city can safely carry it on. But gas +or electric-light plants, both for street and resident lighting, should +be operated by private companies. + +These industries are making such rapid progress in the way of new +processes, effecting both economy and improvement, that it is somewhat +difficult to say what steps should be taken. Many are of the opinion +that gas is destined to be entirely replaced by the electric light; but +while this may eventually prove true, it will probably be a very long +time before the existing gas-works cease to supply consumers. Thus the +true solution of the problem seems to be that when a growing town +nowadays wishes to establish a new lighting plant of its own, it should +adopt electricity. But in the case of a town having gas-works already +established, the municipality is safe in assuming their ownership. + +As regards the operation of lighting plants in small towns, it would +doubtless be best to lease the plant for short terms of years to the +highest bidder, making sure that the call for proposals is widely +circulated. Great cities, however, would find this policy +unsatisfactory. If a ten-year lease of the Philadelphia gas-works, for +instance, were advertised for sale to the highest bidder, there would be +but few really close bidders upon it, and the danger of "a combination +to defeat competition" would be great. It is at least worth considering +whether such a plan as we proposed for railways could not be made +feasible here. Let a corporation be chartered to operate the lighting +plant of the city, and let the charter of the corporation provide that +its rates shall be such as to pay an annual dividend upon its capital +stock (fixed by law and not changeable) equal to the legal rate of +interest in the State. Provided, that in no case should the rates be +lowered unless the net profits in one year were more than 2 per cent. in +excess of this rate, and that the excess for two consecutive years was +more than 1½ per cent. in excess of this rate. Provided also, that in no +case should the rates be raised unless the deficit exceeded 1½ per cent. +in any year, and 1 per cent. for two consecutive years, and that it +should be proven by the company that it had exercised all reasonable +diligence, care, and economy in the management and operation of its +business. + +A certain proportion of the stock--less than a majority--should be held +by the city; and the mayor should appoint directors to represent the +city, at least one of whom should be personally conversant with the +industry carried on by the company. + +Although not often so considered, the matter of passenger transportation +is a much more important matter in our greatest cities than either +lighting or water supply. The laboring man, who has to pay perhaps +twelve cents for the necessary ride back and forth to his work every +day, feels this tax most severely. Suppose that under such an +arrangement for street railways as we have outlined for gas and electric +lighting companies the fare would be reduced to three cents. His savings +from this source would amount to at least $18 per year. Counting the +extra rides and those which his wife and children have to take, the +annual saving would probably reach $25, a sum which to the average +laboring man with a family dependent upon him means a great deal. + +Our municipal monopolies are now taxing us that they may pay swollen +dividends on millions of dollars of fictitious capital. It is quite time +that the public recovered possession of the valuable franchises which +are its rightful property, and managed them for its own benefit. The +legal difficulties in regaining the title to these franchises are +certainly not insuperable, and the readjustment of capitalization can be +made on the principle outlined in the case of steam railways. To +illustrate: The city of "Polis" purchases the works which supply it with +water from the private company owning them, paying the average market +value of the stock and bonds during five years past, which amounts, +perhaps, to one and one half times the cost of the works. The revenue +from the works has been sufficient, probably, to pay 8 per cent. on +these securities. The city issues 3 per cent. ten-year bonds to raise +funds for the purchase, and it then operates the works so as to gain a +yearly revenue of 6 per cent., or 2 per cent. less than that gained by +the private company. At the end of ten years the surplus income from the +works is enough to pay more than one third the bonded indebtedness; and, +if desired, the rest may be reissued as new bonds to run for a long +period. + +The three classes of monopolies just discussed--railways, mineral +wealth, and municipal works--include practically all the monopolies +which are generally acknowledged to be subject to the public control by +virtue of their use of natural agents or the exercise of franchises +granted by the public. + +We will next consider the monopolies in trade, in manufacturing, and +in the purchase and sale of labor, to see what steps should be taken +to protect them from encroaching on the rights of the people. In +exercising the right of the people at large to take control of these +purely private industries from the hands of their owners, we are +assuming a power which, like a strong medicine, may be as potent for +evil as for good. Only extreme necessity should sanction its use, and +its abuse must be carefully guarded against. It is not saying too much +to assert that the abuse of this power has already become an evil. We +have become so used to legislation for the benefit of special +industries, that legislation for their injury does not seem to be +regarded as the exercise of a dangerous prerogative. Thus we are +threatened with a flood of laws to fix the prices in various industries +now subject to monopoly, or to crush them out altogether by enacting +some restrictive measure,--legislation which, by its directness, is apt +to strike the average lawmaker very favorably, but which, it needs +little wisdom to see, is the sure forerunner of abuses. The author +trusts that nothing in this book may be construed as advocating or +defending some of the crude and ill-considered attempts at anti-monopoly +legislation already made, or that may be made in the future. + +We have proven in the preceding chapters that, from the character of +modern concentrated industry, a very large number of our manufactures +must either exist as monopolies or else must engage in intense and +wasteful competition. If the monopoly can be so managed that it shall +carry on the industry economically, adopt improvements, keep up the +character of its product, and keep the prices therefor so low as to make +no more than ordinary profits, it would be for the public advantage that +monopolies rather than competition should exist. Can we regulate +monopolies to secure such results? If so, our problem will be solved. + +The author has proposed for the first class of monopolies--those +obtaining the benefit of natural agents and public franchises--government +ownership of fixed capital and regulation of prices, with private +operation and general management. But he is far from believing that such +a plan would now be wise for regulating trusts. It may indeed be that, +at some time in the future, many of the great staple manufactures will +be formally established by the government as monopolies, and controlled +in a similar way to that which we have outlined for the railway system; +but it is so far in the future that we need not consider it in detail +now. Under our present political organization it would be practically +impossible for the government to undertake to regulate justly and +equitably such an industry, for instance, as the steel-rail manufacture. +We have set our State, national, and municipal governments a hard enough +task in the preceding pages of this chapter, in bringing under public +control our monopolies of transportation and communication and our +productive mines; and although it is a work possible of accomplishment, +it will need good statesmanship to carry it out. By the time that task +is accomplished, a similar plan, improved as experience will then +suggest, may perhaps be found available for the regulation of the +important manufacturing industries. + +We decide, then, that it is for the public advantage at present that +both the ownership and operation of manufacturing industries and of +trade must remain in private hands. The next question is, will the +greatest advantage to the public be secured by starting a crusade to +re-establish competition and break up all existing monopolies in +manufacturing and trade; or by taking the opposite course, legalizing +monopolies and so regulating them by law that they shall be prevented +from making undue profits by laying an exorbitant tax upon the public? + +Practically all the efforts made or proposed thus far for remedying the +evils of monopolies in manufacturing and trade have had for their +purpose the re-establishment of competition. The investigation to which +the first part of this book was devoted shows the wide extent of the +movement to restrict competition. Is it possible to wholly counteract +this? All our study of the laws of competition seems to show that the +tendency of modern competition is to destroy itself by its own +intensity. Certainly all the strenuous efforts to keep it alive by the +force of legal enactment and public opinion have thus far proved +unavailing. There are now, probably, at least a million persons in the +United States who are directly or indirectly interested in unlawful +contracts in restraint of competition; and among them are included many +of the best financiers and most enterprising business men of the +country. Certainly those who propose to drive these men into a renewal +of competitive strife contrary to their will have set themselves a very +difficult task. + +Let us consider the opposite alternative. It cannot be a good thing to +have such a great proportion of the active business men of the country, +who bear the highest personal character, engaged in illegal contracts. +Let us therefore take them within the pale of the law. They seem to be +determined to make contracts with each other in restraint of +competition; and believe, indeed, that they are forced to do it by +modern conditions of trade. Suppose we were to legalize these contracts +and permit the establishment of monopolies. What can we then do to +protect the public from extortion in prices and adulteration in its +products on the part of the monopoly? + +In the first place, now that we have legalized monopolies there is no +more excuse for secrecy. To work in darkness and privacy befits +law-breakers, but is needless for legitimate enterprises. Let the law +provide that every contract for the restriction of competition shall be +in writing, and that a copy shall be filed, as a deed for real estate is +filed now, with the proper city or town officer where the property +affected is situate, and also with the Secretary of State where the +contract is made. Certainly no honest man will object to this provision. +The contention has been made that contracts to restrict competition were +necessarily kept secret because they were "without the pale of the law." +Very well; we have legalized them. There can be no further defense of +secrecy. If any now refuse to make public their contracts to restrict +competition, the refusal is evidence that the contract is for the injury +of the public or some competitor and therefore properly punishable. We +shall now know just what monopolies exist; just what is their strength, +and for just how long a time their members are bound. Let us next see +what measures we can adopt to prevent these legalized monopolies from +practising extortion upon the public and abusing the power they have +gained by the combination. + +The first important means to secure this which the author would +suggest is simply an extension of the common-law principle of +non-discrimination. A man in conducting certain sorts of business is +permitted to do as he chooses. He may sell to one person and refuse to +sell to another; he may give to one and withhold from another. But if he +enters business as the keeper of an inn or as a common carrier of +passengers or freight, he can no longer exercise partiality. He has +_elected to become a necessary servant of the public_, and as such he is +bound to serve impartially all who apply. In the same way a manufacturer +while he engages in business under the usual laws of competition, may +sell to whom he pleases and exercise such preference as he chooses. But +when he combines with all other manufacturers of the same sort in a +combination to restrict competition, he and his allies voluntarily +change their relation to the public. Is it not true that they do +actually _elect to become necessary servants of the public_--far more +necessary, indeed, than the inn-keeper or the stage-coach driver,--and +ought they not therefore to be placed under similar legal restrictions? + +In every case where combination or consolidation restricts competition +in an industry, one effect produced is an increase in the power over +the public which the industry possesses. But this increased power over +the public, thus voluntarily assumed, must inevitably carry with it +increased responsibility to the public. It is the duty of the government +to see that this responsibility is legally enforced. + +This first principle, then, should be embodied in a law providing, in +substance, that every person or firm entering into a contract to +restrict competition should, so long as that contract was in force, be +debarred from showing any preference in his or its purchases and sales, +by giving more or less favorable prices to any person or firm than those +quoted to any other person or firm. To enforce this requirement and +prevent its evasion it is necessary to provide also that prices shall be +public and that they shall not be altered without due notice. The +requirement of publicity might be best effected by providing that the +contract restricting competition should contain a schedule of prices, +which would usually be the case in any event. + +While this may seem like quite an assumption of authority on the part of +the State, it is exactly what trusts and trade associations are striving +to effect, though with the important qualification that when occasion, +in the shape of an obnoxious competitor, requires, they wish to be at +liberty to put prices up or down at short notice and exercise their +preferences as they choose. + +Let us now see what we would effect by the enforcement of this principle +of non-discrimination. We have explained in the chapter on combinations +in trade how one monopoly gains strength by alliance with another; as +when the firms belonging to the car-spring combination made a contract +with the steel combination by which that monopoly agreed to sell to +them at a reduced price and to make an extra rate to their competitors. +Under this law it would be impossible to found one monopoly upon the +favors of another in this manner. + +The obnoxious trade boycott, too, which is now becoming so common, would +be effectually checked. And the scheme for crushing out a rival by +giving all his customers specially favorable rates would no longer be +practicable. The fact is that if we can stop the discriminations which +the monopolies have practised, we shall cure a large share of the evils +they have caused. It may be said that the courts will already punish +many conspiracies of this sort; but a monopoly which is already breaking +the law by its contracts of combination, finds in its methods of doing +business plenty of chances to evade the laws against conspiracy. +Certainly with a properly drawn law with reference to the publicity and +stability of prices, it should be possible to practically wipe out the +evil of discrimination by monopolies. It is also to be noted that the +requirement of non-discrimination and of public and stable prices would +bring profit in doing away with the waste of competition. + +We have now to inquire what means it is possible to take to ensure that +the prices charged by the monopoly shall not only be the same to all, +but that they shall not in themselves be so exorbitant that the monopoly +will reap large profits at the public expense. How can we keep the +prices charged by the monopoly from rising far above the point where +they would stand if free competition were in force? Two methods are open +to us. We may keep down the monopoly's rates by what we will call +_potential_ competition, or we may reduce them directly by legislative +enactment. + +The right of the public to take this latter course may be defended on +the ground that the monopoly has voluntarily made itself a necessary +public servant, and in that capacity offers to the public its goods. +While it is true that the people permit the monopoly to become a +necessary public servant and protect it in the contracts by which it +restricts competition, it is also true that the monopoly cannot justly +make merchandise of the necessities of the people. The public may allow +a combination to obtain control of all the sugar refineries, for +instance, and protect the combination in its formation. But suppose the +owners of the combination then say: "The people are obliged to have +sugar and we control the supply. We will set a high price on sugar, +therefore, because we know that they will pay it rather than go +without." They are then making the necessity of the public a source of +gain, and it cannot be believed that this will be permanently suffered. + +The serious difficulty in fixing by direct government action the prices +which a monopoly of this sort shall charge, is that we cannot stop at +that point. When once the government steps in to do so radical a thing +as to fix the price which a monopoly shall charge, it becomes in equity +responsible to the owners of that monopoly for the maintenance of their +incomes from their capital invested. If their profits have been so +reduced by this action as to seriously injure the value of their +property, they have a legal right to claim compensation from the state +for the injury it has done them. And in almost every case they would set +up the claim that their property had been thus injured. To determine the +point at which reasonable prices and reasonable profits become +extortionate prices and unjust profits is a task requiring expert +knowledge and the most comprehensive judgment, aided by the most +accurate statistics. To impose this task on our already overburdened +courts would permanently block the wheels of justice, and would give to +the judicial department of government a work which its machinery is +wholly unsuited to carry on. + +It seems evident, therefore, that when it becomes necessary for the +state to directly fix prices to be charged by monopolies, a more radical +step should be taken. The monopoly should be established on a permanent +basis, and the state should have some part in its direct control. + +Discarding, therefore, direct action by the state to fix prices as +inexpedient, for the present, at least, let us see what we can effect by +means of "potential" competition, which term we will use to signify that +competition which may be established in any monopolized industry if the +inducements offered are sufficiently great. It must be remembered that +nowadays men of capital and enterprise are always on the look-out for +every opportunity to invest money and expend their industry where it +will bring the greatest returns. If any monopoly seems to be making +large returns, people are generally ready to believe that it is making +twice as great profits as it really is; and some one is quite likely to +start in as a competitor, if there is a prospect of large profits. Now +we wish to do two things. We wish to make it so easy for new competitors +to enter the field against a monopoly that its managers will keep their +profits down in order not to call in any new competitors. We also wish +to so modify the intensity of competition between the monopoly and the +new competitor that the latter may have a chance at least of being +repaid for its expenditure in entering the field. The simplest and best +of the legal provisions which we may enforce to this end is the one +already stated of non-discrimination. The monopoly can no longer reduce +its price to apply to only the limited field in which the new competitor +works, but must reduce its prices everywhere to meet those made by the +rival. In the case of monopolies in trade and all monopolies in +manufacturing in which the fixed capital required is but small, this is +all that would be needed to encourage the establishment of new +competitors and discourage the monopoly from grasping after undue +profits from the public. + +In the case of those manufacturing monopolies in which a large fixed +capital must be invested at the start by any new competitor, we have a +much more difficult problem. It is true that in this case the monopoly +itself has more at stake; and this may induce the starting up of new +competitors simply to be bought out by the trust,--a sort of +blackmailing operation which is certainly repugnant in its character. It +might be possible to provide that rates charged by the monopoly must be +so stable that a competitor would have a chance to establish itself +before the monopoly could bring its own rates down. It might be possible +to force the monopoly to keep all its factories in operation, and thus +oblige it to keep down its price in order to dispose of its products; +but there are evident practical difficulties in the way of enforcing +such laws. It seems a great pity that just now, when to find some +employment of prison convicts in some manner that will not "compete with +free labor," and thus displease the labor interests, seems an +impossibility, we cannot set the convicts at work to compete with the +trusts and bring down their profits to a reasonable point. Surely the +labor party would find no fault with this use of convict competition. + +There is one step, however, which we can take, and whose effect would +certainly be very great; in its desirability, apart from questions of +monopoly, all honest men are practically united. We can reform our laws +regarding corporate management. It is a mild arraignment compared to +what is deserved, to say that our present laws regarding the formation +and management of corporations, taking the country as a whole, are a +shame to the people and a disgrace to the men who made them. They seem +designed to place a premium on fraud and knavery, and to assist the +professional projector and stock manipulator in reaping gains from +innocent--generally very innocent--stockholders. Now a real reform in +our corporation laws would greatly simplify our work in controlling +monopolies. Let us have no more stock-watering of any sort at any time +in a corporation's life. Let us have no more "income bonds" which yield +no income, and "preferred stock" in which another is preferred after +all. Two classes of securities are enough for an honest corporation, and +the public interest requires the charter of no other class of companies. +Let us have done, too, with the iniquitous custom of one corporation +holding another's stock or bonds. With a few such simple reforms as +these effected, the holders of stock in our corporations would have some +idea where they stand and what their securities represent, and would +take some interest in the control of their property. + +With these reforms, in the case of every corporation making a contract +to restrict competition, it would be required that the company make +public annually a full statement of its receipts, expenditures, and +profits. Every monopoly would stand before the public then in its true +position, and every one would know if it were making 50 per cent. per +annum on the actual capital invested, or only 5 per cent. With these +facts made public, if any monopoly ventured to raise its price till it +reaped unusual profits, some of the heaviest consumers of the +monopolized product would be very apt to start a factory of their own in +opposition. It is to be remembered that under the law of +_non-discrimination_ the monopolies would be prevented from currying +favor with the large consumers by giving them specially favorable +prices. It is now common to do this, as it removes the danger of +combination among these important customers to compete with the +monopoly. + +To sum up, the chief features of the plan proposed for the control of +monopolies in manufacture and trade are as follows: Make contracts to +restrict competition, legal and binding, instead of illegal and void as +now. _But_; provide that every such contract shall be filed for public +inspection; that prices charged by the combination shall be public, +stable, and absolutely unvarying to all; that the affairs of the +combination shall be managed according to a consistent and stringent +corporation law; and that an annual report of the operations of the +combination be made to a public commission. + +Contrast this with the existing law upon this important subject. In +Judge Barrett's decision in the Sugar Trust case he said: + + "The development of judicial thought, in regard to contracts in + restraint of trade, has been especially marked. The ancient + doctrine upon that head has been weakened and modified to such a + degree that but little if any of it is left. Indeed, excessive + competition may sometimes result in actual injury to the public; + and anti-competitive contracts, to avert personal ruin, may be + perfectly reasonable. It is only when such contracts are publicly + oppressive that they become unreasonable, and are condemned as + against public policy." + +This is probably the best statement of the present status of the common +law upon this subject now extant. But what a path to endless litigation +does it open! Who shall draw the line where a contract to restrain +competition ceases to be beneficial and lawful, and becomes an injury to +the public welfare? Must this be left to judge and jury? If so, the +responsibilities of our already overburdened Courts are vastly +increased. + +In contrast with such a policy as this, the plan before presented +certainly promises definiteness in the place of uncertainty; and treats +all contracts in restraint of competition with impartiality. It is +believed that the effect of its enforcement would be a great reduction +in the tax now levied on us by monopolies. + +There is yet one way, however, in which all these monopolies that we +have found it so difficult to devise a plan to deal with--the +manufacturers' trusts--may be quickly and certainly reduced. Our heavy +tariff on imported goods, by protecting manufacturers from foreign +competition, and thus reducing the number of possible competitors, has +undeniably been a chief reason why trusts have appeared and grown +wealthy in this country before any other. The author has purposely +refrained, as far as possible, from reference to the relation of the +tariff to monopolies; for the question has been so hotly fought over, +and the real facts concerning it have been so garbled and distorted, +that people are not yet ready to consider it in an unprejudiced way. +This much, however, no one can gainsay. We hold in our hands the means +to at any time reduce the prices and profits of practically all our +monopolies in manufacturing to a reasonable basis, by simply cutting +down the duty on the products of foreign manufactories. Now, if after +our plan just described is in force, the managers of any monopoly choose +to be so reckless as to raise its prices to a point where its published +reports will show it to be making enormous profits, thus tempting new +competitors to enter the field and breeding public hostility, all honest +protectionists and free-traders will be quite apt to unite in a demand +that the "protection" under which this monopoly is permitted to tax the +public be taken away. + +If only we could find in any possible plan so excellent a solution of +the problem of labor monopolies as a reduction of the tariff offers us +in the case of trusts! The question is so complex a one that it is +hardly possible to consider it here, except very briefly. Certainly, if +we legalize combinations to restrict competition among capitalists, we +should among laborers as well. Indeed, the decay of the old common-law +principle, that such contracts were against public policy, and that such +combinations were punishable, has been more marked in the case of trade +unions than anywhere else. Besides this, as long as employers have the +right to kill competition in the purchase of labor, workmen should +certainly have the right to avoid competition in its sale. But to +prevent by force other competitors from taking the field, if they +choose, against any labor combination, is an infringement of the +personal liberty guaranteed to every man by the Constitution, and can by +no means be lawfully permitted. + +If workingmen only understood how much the apparent gain when they win +in a strike is overbalanced by their loss in the higher prices which +they have to pay for the necessaries of life, and in the reduced demand +for labor, they would be as anxious to protect capital as they now +are--some of them--to injure it. The strikes make timid the men who have +capital to invest. They will not loan their money to business men, +builders, manufacturers, or any one who wishes to use it to employ +workmen, except at a higher rate of interest, to pay for the increased +risk. _Hence_, the cost of the capital used in production is greater, +and the price the public has to pay for the product must be greater. + +Again, when men have to pay higher rates of interest for the money they +borrow they are slower to engage in new enterprises. Mr. A. a builder, +intended to put up a block of a dozen houses this season, which would +have tended to reduce rents; but the fear of strikes, with their +attendant damage and loss, has prevented him from borrowing money at +less than 8 per cent. interest. He concludes that, on the whole, this +will eat up so much of his profits that he will not build. Is it not too +plain to need proof that the _moral influence_ alone of the strikes has +robbed the workmen at every point? And this is one of a thousand cases +in a hundred different industries. + +The plans we have discussed for the treatment of monopolies have for +their object a benefit to the people at large, by enabling them to +purchase the products of industry and of natural wealth free from the +tax now levied upon them by monopolies. If we can effect this, we shall +not have a millennium; there will still be injustice and suffering +enough in the world; but we shall have reduced the pressure upon the men +who work with their hands for their daily bread, enough so that we shall +no longer see the strange spectacle of over-production and hunger and +nakedness existing side by side. Men's desires were made by an All-wise +Creator to be always in advance of their ability to gratify them. And +the commercial supply of that ability--the supply of men willing to +work--ought always to be behind the demand for men. + +It seems beyond dispute, then, that whatever will remove these +obstructions to the wheels of production will increase the demand for +labor, as well as increase the wages of labor by lowering the prices of +the necessaries of life. This the plan we have discussed promises to do, +and it also promises to benefit the whole people by lowering the cost of +monopolized articles. + +The men and women who work with their hands, and those dependent on +them, form 97 per cent. of the population of the country. Instead of +combining to stop production in this shop or that factory, why not join +hands to work for reforms in the interest of the whole people? Be sure +that in so doing, organized labor will have the hearty co-operation, and +leadership if need be, of the best men in every class of society. + +But while the reforms proposed promise great and important benefits to +the workers on whom the tax laid by monopoly falls most cruelly, the +question, "What shall fix the rate of wages, if competition cannot?" is +still left undecided. The best answer the author can make to this is as +follows: The monopoly formed by the trade unions in the sale of labor is +unnatural, because the number of competing units is great instead of +small. As new competitors must continually arise, the monopoly can never +be successful without the use of unlawful means. If it raises the price +of labor above what free competition would determine, it as truly lays a +tax on the whole people as did the copper monopoly. On the other hand, +we must recognize the fact that competition is now often absent in the +_purchase_ of labor, and this is a chief and sufficient cause for the +existing attempts to kill competition in its sale. But this is largely +due to the fact that the supply of labor is now in excess of the demand. +When instead of signs everywhere, "No one need apply for employment +here," we see placards, "Men wanted; high prices to good workmen," then +competition will assert itself in the purchase of labor. + +In regard to the first class of industries, those utilizing natural +agents, which we proposed to place under the care of the state, it is +evident that we can permit no strikes there. Our transportation lines, +our mines, our gas-works, our water supplies, are to be operated for the +benefit of the whole people, and no labor monopoly can be permitted to +stop them. The plan that might be adopted to prevent interruptions in +these industries has been already referred to. The author would suggest +a similar plan for the benefit of labor in general. Suppose that in the +charter of a manufacturing corporation, a certain portion of the stock +in small-sized shares was set aside for the employés required to operate +the mill. Let each employé be _required_ to hold a certain number of +shares in proportion to his wages; to purchase them when he begins to +work, and to return them when he leaves the service of the corporation; +the price in all cases to be par. In case he leaves without giving a +certain notice, he should forfeit a certain proportion of his stock. If, +on the other hand, he is discharged without an equal notice, he should +receive the full amount of his stock, and a sum in addition equal to the +penalty which he would have incurred had he broken the contract. Who +will deny that such a move would be vastly to the interest of both +parties, the employer and employed. Is not a protection needed by the +workman against the power of the employer to turn him adrift at any time +without a penny? + +Finally it must be said that the labor question, more than any other +connected with monopoly, needs solution through the influence of the +principles of Christian fraternity. In the last analysis, every man +sells to his brother men his service and receives his food, clothing, +and shelter in return. We may execute justice never so well, and +regulate never so nicely the wages of men by the law of supply and +demand, there will still be special cases demanding and deserving to be +treated by the rules of brotherly charity. The strong were given their +power that they might aid the feeble; and they who fall behind in the +struggle for position are not to be blotted out by the brute law of the +survival of the fittest, but cared for as the noblest instincts of +humanity prompt. + + * * * * * + +I am well aware that the indictment which conservative critics will be +apt to bring against the plans for the equitable control of monopolies +presented in this chapter is that they are too novel, and that they +require too much of an upheaval of existing institutions for their +accomplishment. The conservative man is invariably in favor of getting +along with things as they are. The answer to be made to this is, that no +candid man who will make a thorough study of the present status of +monopoly and of the attempts to control it can be conservative. The +present status of monopolies is just neither to their owners nor to the +public. They are plundering the public as much or as little as they +choose; and the sovereign people are submitting to it and taking their +revenge by passing retaliatory laws intended to ruin the monopolies if +possible. These legislative "strikes" are thus especially well +calculated to foster extortion on the part of the owners of monopolies, +who naturally wish to make what profits they can before some piece of +legislation is put through to destroy the industry they have built up. + +In contrast to this are the plans proposed in this chapter. They offer +to establish a definite relation between the public and the monopolies, +and a permanent and stable foundation for each industry they affect in +place of the present fickle and ever changing one. + +There is another class of critics who may complain that the plan +proposed leaves too much power still in the hands of the monopolists, +and gives the government too small a part in their management. The +answer to this is very evident. We have found the cardinal value of the +system of individual competition to be that it tends by a process of +natural selection to bring the men of greatest ability into the control +and management of our industries; while the vital weakness in the +management of industry by government is the fact that the sovereign +people does not choose the wisest and most honest men to control its +affairs. Men may well say that if they are to be robbed it had better be +by a corporation, where innocent stockholders will receive part of the +benefit, than by dishonest officials of government. + +The ultimate remedy for the evils of monopoly, therefore, lies with the +people. When they will choose to control their affairs the men of +greatest wisdom and honor; when each man will exercise the same care in +choosing men to care for the public business that he does in caring for +his own private interests, then we can safely trust far greater +responsibilities to our government than is now prudent. + +There is no more important lesson to impress on the minds of the toiling +millions who are growing restless under the burdens of monopoly than +this: The only remedy for monopoly is control; the only power that can +control is government; and to have a government fit to assume these +momentous duties, all good men and true must join hands to put only men +of wisdom and honor in places of public trust. + +There is a virtue which shone in all brightness when this nation was +born, not alone in the hearts of the commander-in-chief and his brother +heroes, but in the hearts of the men and women who gave themselves to +their country's service. It glowed with all fervor when, a quarter of a +century ago, the North fought to sustain what the fathers had created, +and the rank and file of the South gave their lives and all they had for +what they deemed a righteous and noble cause. Though the robust spirit +of partisanship may seem for a time to have crowded out from men's +hearts the love of their country, surely that love still remains; and in +the days of new import which dawn upon us, in the virtue of PATRIOTISM +will be found a sufficient antidote for the vice of _monopoly_. + + +--------------------------------------------------------------+ + | Transcriber's Note and Errata | + | | + | Some tables have been reformatted for clarity. | + | | + | One instance of an oe ligature has been expanded to 'oe'. | + | | + | The following typographical errors have been corrected: | + | | + | |particularly |particular | | + | |1888, |1888. | | + | |succcessful |successful | | + | |ascendency |ascendancy | | + | |quenced |quenched | | + | |accomodate |accommodate | | + | |owership |ownership | | + | | + | The following words were hyphenated in varying fashion in | + | the text: | + | | + | |bond-holders (1) |bondholders (1) | | + | |midle-men (1) |middlemen (2) | | + | |over-estimate (1) |overestimate (1) | | + | |over-production (16) |overproduction (1) | | + +--------------------------------------------------------------+ + + + + + +End of Project Gutenberg's Monopolies and the People, by Charles Whiting Baker + +*** END OF THIS PROJECT GUTENBERG EBOOK MONOPOLIES AND THE PEOPLE *** + +***** This file should be named 21837-8.txt or 21837-8.zip ***** +This and all associated files of various formats will be found in: + https://www.gutenberg.org/2/1/8/3/21837/ + +Produced by Audrey Longhurst, LN Yaddanapudi and the Online +Distributed Proofreading Team at https://www.pgdp.net + + +Updated editions will replace the previous one--the old editions +will be renamed. + +Creating the works from public domain print editions means that no +one owns a United States copyright in these works, so the Foundation +(and you!) can copy and distribute it in the United States without +permission and without paying copyright royalties. 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