"TO GET ALL WE CAN"
Are the combinations, trusts, syndicates of modern industry organized
scarcity or organized plenty? Dearness or cheapness? "They are doing
their work cheaper," said one of the oil combination of himself and his
associates, "than any rival organization can afford to do it, and that
is their policy, and by that only will they survive."[605]
"We think our American petroleum is a very cheap light. It is our
pleasure to try to make it so," said its head.[606]
"Our object has always been to reduce rates, and cheapen the product,
and increase its consumption by making the lowest price possible to the
consumer," said another.[607]
Even if this were true-- But is it true?
The then president of the United Pipe Lines of the oil combination, who
was also president of a subordinate corporation, was a witness in 1879
in the suit brought by the Commonwealth of Pennsylvania. His refinery,
he stated, did nothing but make the oil. "It is taken and sold by
another organization"--the oil combination. "We agree to take the same
prices that they take for their oil. It is kind of pooled--the sale of
the oil." The "agreement," he said, is "simply to hold up the price of
refined oil, ... to get all we can for it ... under some arrangement by
which they keep the price up to make a profit." Not only was the price
fixed under the agreement "to get all we can," but the combination, as
at Cleveland,[608] fixed the amount to be produced. The subordinate
company was allowed to have nothing to do with the business--except to
do the work, and to do only as much as its superior chose to permit.
Other refiners, in the same investigation, were shown to be sufferers
from the same kind of "grip." Asked what other concerns besides his
of Oil City were in this arrangement, he named the principal ones of
Titusville, Pittsburg, Philadelphia, and New York.
"These companies were all acting in concert, were they?"
"So far as sales of refined oil were concerned, I think they were."
Capitalists are usually supposed to be hard of heart and head,
suspicious, great sticklers for "black and white," and careful to
have all that is due them "nominated in the bond." This arrangement,
by which this witness and his associates put themselves entirely at
the disposal of others--as to how much they should manufacture, what
freight they should pay, what price they should receive, etc.--was not
in writing.
"It is a verbal one."[609]
The purchase of the refineries at Baltimore by the oil combination
in 1877, under the name of the Baltimore United Oil Company, was
immediately followed by an advance in price. The Baltimore _Sun_, in
December, 1877, said: "The combination has already begun to exert
its influence on the market. Oil for home consumption was yesterday
quoted at 14 cents, having raised from 11-1/2 cents, the quotation
on Wednesday. The combination will not make contracts ahead, which
might be interpreted to mean an intended advance in price." In Buffalo
the manager of one of the properties of the oil combination said in
evidence: "My son is on a committee, he told me, that regulates the
price of oil."[610] While the trust had the trade of Buffalo to itself,
it held the price of oil at a high rate. "In Buffalo there were then no
rival works," said State's Attorney Quinby to the jury who were trying
its representatives for conspiracy against a competing refinery, "and
we were paying for kerosene 18 cents a gallon. To-day, with the little
Buffalo company in the market making kerosene, you can get it for 6
cents a gallon."
This Buffalo competitor was a very modest affair, insignificant in
capital and resources, but it cut down the price of oil as far away as
Boston. It established there an agent who "went around" and "cut the
prices down," and then the agent of the combination "went around and
cut the prices further," as its Boston employé described it. He was
instructed, he said, "to follow them down, ... only not to sell at a
loss." Before this competitor came he had been selling oil as high as
20 cents a gallon. "We got the price down to 18 cents, and got down
then, I believe, to 8 cents, so that I have been selling them since
then at 8 cents."[611] Eight cents, then, was not at a loss--since
he had been told "not to sell at a loss"--and yet these passionate
pilgrims of cheapness had been making the Boston buyer pay 20 cents!
"I have been selling since at 8 cents," he says. This testimony was
given in 1886; the reduction to 8 cents from 20 was made in 1882. Four
years' consumption of this oil had been given to the buyer in Boston at
8 cents a gallon instead of 20, in consequence of the entrance of so
insignificant a competitor.
When a member of the trust was testifying before the New York courts,
he referred to the competition of the independent of Marietta as "his
power for evil." Asked to define what he meant by his phrase "power
for evil," he said, "It was to make prices that would be vexatious
and harassing." He was asked if it harassed the oil trust, and the
corporations connected with it, to have prices in any part of the
country lower than they fixed.
"Lower than a reasonable basis."
"What they consider a reasonable basis?"
"Yes."[612]
That we can understand. But we cannot understand what the president of
the trust meant when he said, "We like competition," for that would
imply a natural proclivity for fellowship with the power of evil.
"Who fixes the price of oil in New York?" was asked of one of the
witnesses before the Interstate Commerce Commission at Washington. That
was done, he said, by the selling agent of the oil combination. He "has
the price marked in the New York Produce Exchange daily--the price at
which they will sell oil."[613] When the vice-president of the company
representing the trust in St. Louis and the Southwest was on the stand
before the Interstate Commerce Commission, he was asked what was the
price of oil in the territory in which he was operating. The price of
oil in tank-cars, in Arkansas, he said, "is now and has been during
about three years or more--since Mr. Rice commenced shipping by water
to Little Rock--10 cents per gallon. The average price, independent of
competition, which I suppose is what you want, in the State of Texas is
about 13 cents per gallon in bulk, covering the whole State of Texas.
The average price per barrel would be about 17 cents, and the average
price in cases about 20 cents."[614]
"Since Mr. Rice commenced shipping by water to Little Rock;" "the
average price independent of competition in Texas"--these are telltale
phrases. Where the combination was "independent of competition" the
price was one-third greater.
The committee of Congress which investigated trusts in 1889 gathered
a great deal of sworn evidence--the details of which remained
uncontradicted, and which were met only by general statements like
those quoted at the head of this chapter--showing how extortionate
prices had been charged until competition appeared, that in all cases
a war of extermination had been made upon those competitors, and that
when their business was destroyed prices were put up again. Losses in
competitive wars were merely investments from which to draw dividends
in perpetuity. The "cheapness" of the combination followed the
cheapness of competitors, and was merely a feint, one of the approaches
in a siege to overcome the inner citadel of cheapness, a strategic
cheapness to-day on which to build dearness forever. This battle of
prices is shown in a table covering fifty towns in Texas, Mississippi,
Louisiana, Alabama, Tennessee, Georgia, Kentucky, for three to five
years. The appearance of competitive oil, for instance, cut the prices
of oil from 15 cents a gallon down to 10 in Paris, Texas; from 25 to
15 in Calvert, Texas; from 22 cents to 10 in Austin, Texas; from 16 to
5 in Little Rock, Arkansas--evidently a war price; from 16 to 8-1/2
in Huntsville, Alabama; from 16 to 8 in Memphis, Tennessee, and so
on.[615] The committee of Congress submit pages of evidence of the
reimposition of high prices the moment competition was killed off.
If the combination found a rival dealer out of oil for only a day it
"popped the prices up 3-1/2 cents."[616] "One day," wrote one of the
dealers, "oil is up to 20 cents and over, and when any person attempts
to import here, other than the vassals 'of the oil combination,' it is
put down to 7 cents a gallon."[617]
Prices were frequently put higher after the war than before. In the
debate in the Canadian Parliament last year on the proposal to reduce
the Canadian tariff, supported by a strong lobby from the American
oil trust, it was shown by affidavits that at Selma, Alabama, oil
was reduced during the "war" against outside refiners to 8 from 15
cents. After "competition was overcome," in the language of the South
Improvement Company contract, the price was put up, not to 15 cents
where it had been, but to 25 cents. In the same debate a large number
of affidavits were exhibited showing how the price charged by the oil
trust in America varied in places near each other in arbitrary and
extraordinary ways, as 7 cents a gallon at Port Huron, Michigan, and
14-1/2 cents at Bay City, only a few miles distant. Under the rule of
the trust prices are on a mechanical basis everywhere, from the retail
markets to the seaboard, where the refined, the manufactured article,
is quoted at a lower price than the crude, its raw material.[618]
In the report of the tenth United States census in 1886, on the
necessaries of life, the retail price of kerosene is given for
thirty-five places. At a few of these there was competition; there
the price was 12-1/2 to 15 cents a gallon. At all other points it
ranged from 20 to 25 cents. Such a tax on the 400,000,000 gallons of
oil consumed in this country is the only kind of income-tax that is
"American."
Application was made in May, 1894, by the Central Labor Union of New
York City to the Attorney-General of the State to vacate the charter of
the principal corporation in the oil trust. In the argument to support
it, it was shown that New York consumers were then paying twice as much
for their lamp-oil as the people of Philadelphia, and three times as
much as the foreign consumer buying in New York for export.
The trust, notwithstanding its powers of "producing the very best oil
at the lowest possible price," compels dealers to sign away their
rights to buy oil where they can buy it the cheapest or best. When
opposition is encountered from any of the retailers in a town the plan
of campaign of its "war" is very simple. Some one is found who is
willing for hire to sell his oils at a cut price until the rest are
made sick enough to surrender. Then contracts are made with all the
dealers, binding them to buy of no one else, and prices are put up to a
point at which a handsome profit is assured. After this competitors can
find no dealer through whom to sell, and the consumer can get no oil
but that of the monopoly. Price and quality are both thenceforth such
as the combination chooses to make them. There are bargains in oil,
but one party makes both sides of them. "We do not wish to ruin you
without giving you another chance," said an agent of the combination
gently to a merchant who persisted in selling opposition oil. "Look at
this map; we have the country divided into districts. If you insist on
war we will cut the prices in your territory to any necessary extent
to destroy you, but we lose nothing. We simply make a corresponding
advance in some other district. You lose everything. We cannot by any
possibility lose anything."
Only by thus contracting themselves out of their rights could these
"free" merchants get oil with which to supply their customers. "Their
agent," wrote a dealer of Hot Springs, Arkansas, "has made threats to
some of our merchants that they must or shall buy oil from them and
no one else, or if otherwise they would come here and ruin them--by
fair means if they could, by underhand ways if necessary." Another
firm in Pine Bluff, Arkansas, wrote that the agent of the combination
had called upon them and several of the other large dealers to make
a "contract, ... and, failing to do so, in a short time he threatens
opening a retail house," as at Columbus.[619] Another wrote, December
13, 1886, from Navasota that the monopoly "will not sell unless you
sign an obligation to buy from them and them only."[620]
This maintenance of prices until some "power for evil" appears with
lower rates, then wars to kill, and raising of prices if the war
ends in victory--these phenomena of cheapness continue to date. Many
chapters could be filled with accounts of these wars of which record
has been kept. To merely name the battle-fields would require pages.
When the combination, through its agents, attacked Toledo in the courts
for undertaking the municipal supply of natural gas, it "urged," as
it is quoted in the language of the decision, "that the main object
and primary purpose of the act is to enable the city to supply its
individual inhabitants with fuel for private use and consumption at
a cheaper rate than they can obtain it from other sources." The act
of the Legislature gave Toledo "a power for evil." At Denver oil was
sold at 25 cents a gallon until an independent company began refining
the petroleum which abounds in the Rocky Mountain basin. During the
Colorado war of 1892 all the familiar tactics--cut rates, espionage,
and all--were employed. This continued after the dissolution of the
trust as before, showing that its change of name and form meant no
real change. In Pueblo and Colorado Springs the price was put down
to 5 cents a gallon from 25 cents. In Denver the price was made 7
cents. Spotters followed the wagons of the independent company to spy
out its customers, and get them, by threats or bribes, to sign away
their right to buy where they could buy cheapest. The comments of the
local press did credit to the inspiriting mountain air of the American
Switzerland. The complaint recently filed with the Interstate Commerce
Commission by a dealer of the Pacific coast charges that, among other
discriminations injurious to the public, the rates between the Pacific
coast and Colorado were so manipulated that the oil found in the Rocky
Mountains and refined in Colorado could not be shipped to California
and the other Pacific states. Consumers there had to buy the oil of the
trust hauled all the way from Cleveland or Chicago. When an independent
refiner ran the blockade into New York, in 1892, and began selling to
the people from tank wagons, the price fell in New York, Brooklyn,
and Jersey City from 8 and 8-1/2 to 4 and 4-1/2 cents. The St. Louis
_Chronicle_ of May 19, 1892, reports a reduction of the price of the
best grade of oil to 5 cents a gallon--"the fortieth reduction," it
says, made since an independent company "entered the field three years
ago, at which time the price was 14-1/2 cents," as it would be still
but for competition.
War has been made on poor men, paralytics, boys, cripples, widows,
any one who had the "business that belongs to us." An instance taken
from abroad will be the last. The combination between the American and
the Scotch refiners, formed several years ago, fixed the price of the
principal product, scale, at threepence a pound in 1892. The break-up
in that year was followed at once by a decline from threepence to
twopence. This is a saving to the public of $1,000,000 a year. "All
the relative products," says the London _Economist_, November 12, 1892,
"have practically collapsed in value." Candles, for instance, declined
20 cents a dozen, "and the finer qualities were sold at the same rate
as the commoner sorts."
These are the facts, to fit the phrase of one of the monopoly who
described to Congress how it "bridges it to the consumer at the lowest
reasonable rate." The "bridge to the consumer" spans 1872 to 1894 and
Europe and America, but it is not a bridge of cheapness.[621]
To prove that oil is cheaper than it was is not to prove that it is
cheap.
Anything begins to be dear the moment the power to fix the price has
been allowed to vest in one. The question whether our monopolies have
made things cheap or dear in the past pales before the exciting query,
What will they do in the future, when their power has become still
greater, or has passed by death, descent, or sale into hands less
shrewd and greedier? Such power never moves backward. Says President
Andrews, of Brown University, in the article quoted below: "When a
commodity is turned out under such conditions, cost no longer regulates
the price. This is done quite arbitrarily for a time, the seller's whim
being perhaps sobered a little by his memory of old competitive rates.
Slowly caprice gives way to law; but it is a new law--that of man's
need. Prices go higher and higher till demand, and hence profit, begins
to fall off; and they then play about the line of what the market will
bear, just as they used to about that of cost. The producer can be more
or less exacting, according to the nature of the product. If it is a
luxury, the new law may not greatly elevate prices above the old notch.
If it is a necessity, he may bleed people to death."
"At any reasonable price, say three or four times the present selling
price of refined oil, it is the cheapest light in the world, and if
the prices were advanced to 20 cents a gallon the sales would be as
large as they are now at 7-1/2 cents," wrote Vice-president Cassatt,
of the Pennsylvania Railroad, to the Pennsylvania Legislature, in 1881,
opposing the Free Pipe Line bill. The possibilities here were touched
upon by the New York committee of 1888: "What the trust's course would
have been if, instead of increased production, it had been required to
deal with the problem of a constantly diminishing or stationary volume
of oil, is an interesting subject for speculation. Certain it is that
the trust has the power to put up prices, even if it fails to exercise
it. If, in the future, the field producing the commodity manufactured
and sold by this combination of corporations shall fail to increase its
present product, or shall return a diminished quantity, the oil trust
will be able to fix the price of the product of its refineries in this
country, if not in the world."[622]
It was not great capital which put this industry in the possession of
these enthusiasts for "all the little economies." The same universal
forces of cheapness which have been at work everywhere have been at
work upon the cost of the instrumentalities of production, and put
machinery, transportation, raw material, and market agencies within
reach of moderate capital. Such great capital is wasteful capital. It
operates through agents at great distances, attenuating incentives
to energy and care. Many practical men, real refiners, who have been
forced to give up their business to refiners of railroad privileges,
have testified to the same effect as the manufacturer who said to
Congress in 1872: "I believe a refinery of 100 barrels can be run
cheaper than the larger establishments."[623]
If production on a natural scale, directed by the eye of the owner,
were not more economical than production mobilized from the metropolis
by salaried men hundreds of miles away, the independent refiners
and producers of Pennsylvania, New York, and Ohio would not have
been able to survive at all. It was said in one of the Buffalo
papers by one of these independent refiners: "There are several
well-equipped independent refineries in operation at the present time
in Pennsylvania and Ohio oil-fields where the refiner has his own
crude oil, his own pipe line, and produces his own natural gas for
fuel purposes. It is needless to say that an experienced and skilful
refiner operating under such favorable conditions can manufacture at
less cost per barrel than any trust with a long list of pensioners and
burdened with the control of two political parties and the maintenance
of numerous city mansions, stock farms, and theological seminaries."
NOTE.--The claims of the oil combination to the credit of having
cheapened oil have been subjected by competent men to statistical
tests. President Andrews, of Brown University, shows that from 1861 to
1872, inclusive--_i.e._, before any combination whatever existed--the
net annual percentage of decrease in the price of refining oil and
carrying it to tide-water--that is, the difference between the cost
of the petroleum at the wells and of the refined at New York--was
10-4332/10000 cents; from 1873 to 1881, inclusive, the trust's infirm
and formative period, the decrease was 7-8897/10000 cents; from 1882
to 1887, inclusive, the years of its full maturity and vigor, the
decrease was only 2-2879/10000 cents.[624]
The New York _Daily Commercial Bulletin_ (April 4, 1892) made a
similar study with similar results. It finds that under competition
in the refining of oil the difference between crude at the wells and
refined oil at New York was reduced from 13.45 cents per gallon in
1872 to 6.02 cents per gallon in 1881; under the reign of the trust
the difference was 5.84 in 1891--greater than in 1882, when the trust
began operations, when it was only 5.77. It concludes: "It has been
claimed that the oil trust has been a benefit to this county; that the
economies which it has introduced in the transportation and refining
of oil have been shared with the consumer, and that the enormous
wealth which it has accumulated during the past ten years has been
widely distributed. Not one of these claims has any substantial basis
in fact."
The comparisons of cheapness are made on the wholesale price at New
York of "export oil"--an inferior, almost a refuse product. Its price
must meet that made by the Russians. These comparisons, therefore,
really shed no light on the price movements of oil going into
consumption throughout the country. But the trust really gets the
retail price on all its domestic output. A full statistical statement
of the price movement in retail markets cannot be had; nor even of
the wholesale, for the combination has lately adopted a policy of
suppressing the wholesale quotations of the higher grades of oil for
domestic consumption. Comparisons, therefore, built on the export
price of this poor oil at New York, though good as far as they go, are
of oils of a low illuminating power. Comparisons that would really
show the part played by the combination as a true merchant--one who
discovers and distributes abundance for all at a fair price for his
service--can only be made by such illustrations as we have been giving
from its utterances, plans, and actions. But for monopoly an average
price of 5 cents a gallon could prevail throughout the United States,
with a saving of hundreds of millions to the people.
Trust prices are artificial prices, independent of supply and demand,
and in their perfection superior even to panic. This is illustrated by
the comparison below, made by Mr. Byron W. Holt:
COMPARATIVE PRICES OF STAPLES DURING THE CURRENT DEPRESSION
------------------------------+---------------+-------------+-------------
| | |Per cent. of
|April 28, 1893 |July 20, 1894|Decline since
| | |April 28,
| | |1893
------------------------------+---------------+-------------+-------------
Wheat, No. 2, red | 0.76-3/8 | 0.56-1/2 | 26
Corn, No. 2, mixed | .50 | .47-1/2 | 5
Cotton, middling upland | .07-13/16 | .07-1/16 | 10
Wool, Ohio and Pennsylvania, X| .28 | .18 | 36
Pork, mess, new |21.00 |14.00 @ 14.25| 33
Butter, creamery | .30 @ 33 | .17 | 45
Sugar, raw, 96° | .03-15/16 @ 4| .03-3/16 | 18
Sugar, granulated | .05-1/16 | .04-5/16 | 15
Petroleum, refined, gal. | .0555 | .0515 | 7
Pig Iron, Bessemer, Chicago |14.50 @ 15.00 |11.25 @ 11.50| 23
Steel Rails, Chicago |30.00 @ 32.00 |25.00 @ 27.00| 16
Steel Beams, Chicago | .02 | .01-1/2 | 25
| | |
| June 30, 1892 |June 30, 1894|June 30, 1892
Coal, Bituminous, Pittsburg |$ 1.07 | 0.86 | 20
Coal, Anthracite, New York | 4.15 | 4.15 | 00
------------------------------+---------------+-------------+-------------
The prices of four of these products--granulated sugar, petroleum,
steel rails, and anthracite coal--are controlled by strong
trusts. These prices have declined, since the beginning of the
depression--about May 1, 1893--not quite 10 per cent. Prices of the
other ten products have declined 24 per cent.
Under free conditions prices of manufactured articles would decline
faster than prices of farm products. Cost of production can be lowered
faster in machine or factory products than in farm products. Under the
influence of trusts the natural order is not only reversed, but prices
of farm products have declined more than twice as fast as prices of
factory or trust products. Trust influence is conspicuous in the cases
of sugar and coal. The price of raw sugar, in which there is no trust,
has declined 5 per cent. since June 30, 1891. The price of granulated
has advanced 4 per cent. The president of the trust admitted to
Congress in 1894 that it had advanced the price 3/8 of a cent a pound.
Cost of refining has declined since 1891. There being no well-defined
trust in bituminous coal, its price has declined 30 per cent. since
1891. The price of anthracite coal has advanced 2 per cent. in the
same time, because the producers have "regulated" production.