THE ORGANIZATION AND CONTROL OF INDUSTRY
_The purpose of this chapter is to explain how American industry is
organized and how the government has endeavored to regulate this
organization in the public interest._
[Sidenote: The broad scope of industry.]
=What is Industry?=—Industry comprises the whole process of converting
raw materials into finished products. It includes the production of
goods by hand in the workshops, and by machinery in the factories.
Agriculture, mining, and forestry furnish the raw materials; industry
works them up; commerce distributes them. In its widest sense industry
includes not only manufacturing, as we ordinarily understand the term,
but mining, lumbering, the fisheries, shipbuilding, and many other great
branches of economic activity. It engages the attention of more than
one-third of the American workers and is steadily growing to greater
relative importance. The United States is now entitled to be called one
of the great “industrial” nations of the world. As such its people have
many difficult problems to face, including such things as the proper
organization and control of industry, the improvement of conditions
under which it is carried on, and, most difficult of all, the
maintenance of good relations between industrial labor and industrial
management.
=The Old Industry and the New.=—One hundred and fifty years ago
practically all industry was carried on by hand. The making of cloth was
a home activity; the yarn was spun by hand and woven into fabric on the
hand-loom. Shoes were made—soles, heels, and uppers—by the village
cobbler. The local blacksmith made such agricultural implements as there
were. Large factories did not exist. But with the application of steam
power to industry all this began to change. Steam power began to be
utilized in American industry right after the War of Independence; it
was not widely used at the outset, but in the course of time it
completely revolutionized the methods of industry throughout the world.
It supplanted hand methods almost altogether, drove the village
industries out of existence, and introduced factory production on a
large scale. Factories containing machinery operated by steam power
could produce cloth, shoes, implements, and almost every other sort of
manufactured commodity more cheaply than they could be made by
hand-industry in the homes or in small shops. So the factory system
spread over the length and breadth of the land, drawing large
investments of capital into its vortex, giving rise to great industrial
corporations, creating a new labor class, fostering the growth of great
cities, and compelling the government to take a hand in the regulation
of industry. [Sidenote: The Industrial Revolution in America.] This
great transformation in industry, which covered the course of the
nineteenth century, is known as the Industrial Revolution, and a
gigantic revolution it was. Nothing in modern times has exerted a more
profound or far-reaching influence upon the general course of
civilization. The factory is the symbol of a new economic order. It has
been said, and rightly, that three things,—steam, steel, and
credit,—have revolutionized industry during the past hundred years.
=Industrial Organization of Today.=—In the days of hand-industry men
needed no large amounts of capital in order to engage in the production
of goods. The tools used in hand-industry were not expensive; nor was it
necessary to buy raw materials in large quantities. The things that the
workman produced, moreover, were sold almost as soon as they were made.
[Sidenote: The use of capital.] With the advent of the factory system,
however, capital in large amounts became essential because buildings and
machinery, both of which are costly, had to be provided. Large stocks of
materials must also be kept on hand, and workmen have to be paid before
the goods manufactured by them are sold. So, whereas one man of
relatively small wealth could carry on an industry under the old system,
the combined resources of many men are required under the new. This need
of combining the contributions of many persons into a large capital fund
has given rise to the modern industrial corporation.
[Sidenote: Corporate organization.]
American industry of today is carried on for the most part, therefore,
by corporations or companies. An industrial corporation or company is a
group of persons, each of whom contributes a portion of the capital
needed to carry on the business. These contributors receive shares in
the corporation proportionate to the amounts of money which they invest.
The man who contributes one hundred dollars becomes the owner of one
share; the man who invests a thousand dollars receives ten shares.[171]
An industrial corporation with a capital of a million dollars is able to
allot among its stockholders ten thousand shares of the par value of one
hundred dollars each. It may have only a few shareholders, or it may
have a great many. These shareholders, be they many or few, control the
management of the business. They elect each year a board of directors,
who, in turn, appoint the officers and managers. The latter purchase the
raw materials, engage the workmen, supervise their labor, sell the
finished goods, and distribute the profits among the shareholders in the
form of a dividend declared upon each share. Every corporation has as
its legal basis a charter, which is a document issued by the
governmental authorities, usually by the state. This charter states the
purpose of the corporation and authorizes it to do business. Charters of
corporations may be revoked if the powers conferred by the charter are
misused.
[Sidenote: Ways of avoiding industrial competition]
=Industrial Agreements and Pools.=—With large numbers of industrial
corporations engaged in the same line of business it is inevitable that
they should compete with one another for the sale of their respective
products. This competition, quite naturally, tends to keep prices down,
because each corporation does its best to get trade by underselling its
rivals. But competition which forces down prices also results in
reducing profits, and the industrial corporations often find that higher
profits can be earned for their shareholders if some arrangement is made
to limit this competition. Thus it came to pass that the men who
controlled large corporations in the same line of business got together
and made informal agreements not to compete in such way as to force
prices down. [Sidenote: Gentlemen’s agreements.] These “gentlemen’s
agreements”, so-called because they had no legal force but merely rested
upon the honor of the various corporations, usually provided that a
certain scale of prices would be maintained and that no concern would
sell its products below this stipulated scale.
[Sidenote: Pools.]
These agreements, however, were not altogether satisfactory to the
corporations. At the fixed scale of prices some companies, by reason of
special advantages, were able to make large profits while others earned
very little and became dissatisfied. Hence a new method, commonly known
as _pooling_ was devised to give every corporation its fair share in the
earnings of the entire trade. Under this plan each company was allotted
a certain territory within which it might sell its products without
competition on the part of the others. Then, at the end of the year, the
profits of all the companies were put into a “pool” or common fund and
so distributed that no company would have a higher rate of earnings than
the others. This was an ingenious method of ensuring substantial profits
to each corporation, no matter how well or how badly it was managed.
Incidentally, it deprived the public of the benefits which would have
come to it, in reduced prices, if competition had been freely carried
on. For this reason the practice of “pooling” was soon forbidden by law
as an unreasonable restraint of trade.
[Sidenote: Trusts.]
=Trusts, Holding Companies, and Mergers.=—Not to be balked in this way
the corporations devised a new plan for checking competition. This took
the form of a trust. Corporations agreed to place their shares in the
hands of trustees and these trustees, by virtue of holding the shares,
controlled the business of all.[172] Through this control the trustees
were able to make sure that no price-cutting would result from
competition among the various companies comprised within the trust.
[Sidenote: Holding companies.] Another plan, not widely different, was
to organize a “holding company”, in other words a large corporation to
hold all the shares of the smaller corporations not merely in trust but
as the actual owner.[173] [Sidenote: Mergers.] Finally in some cases,
the smaller companies were merged or consolidated outright into a single
giant corporation. In such instances the smaller concerns passed out of
existence and their former owners received shares in the new
corporation.
[Sidenote: Combinations stifle competition.]
=Why Industrial Combinations are Objectionable.=—The chief objection to
all these combinations, whether by informal agreement, pooling, trusts,
holding companies, mergers is that they seek to restrain trade, to
create monopolies, and to prevent the public from obtaining the
advantages in the way of reduced prices and better quality which arise
from free competition. So long as free competition exists the rise of
prices is automatically checked. But when competition is stifled by
monopoly, the public gets fleeced. When a monopoly is once created,
moreover, free competition is difficult to establish again. The reason
for this is that when anyone enters the monopolized line of business the
holders of the monopoly cut their prices temporarily below the
profit-making point and thus make it impossible for the new competitor
to continue. Then, when they have driven him out of business, they put
prices up once more.
[Sidenote: The value of large-scale production.]
On the other hand we must not lose sight of the fact that large-scale
production is more economical than production in small quantities, and
that large-scale production almost inevitably leads to industrial
combinations. Most manufactured commodities are produced under what
economists call “the law of increasing returns”, that is to say the
larger the quantity produced, the smaller the cost per article. There is
a great deal of overlapping and waste when goods are manufactured in
small independent shops or factories. Large industrial combinations can
obtain capital more easily; they can buy raw materials in larger
quantities and at better prices; they are in a position to secure and
use modern machinery; and they can create better facilities for selling
their goods. Large-scale production also permits a profitable use of
by-products, such as coke in the manufacture of gas or scraps of leather
in the making of shoes. Where industries are small these by-products are
not sufficient to make their sale worth while; but large-scale
industries realize considerable sums from the sale of their by-products.
From almost every point of view the large manufacturing establishments
have a great advantage, and if we were to insist that all industry be
carried on in small concerns, the public would be the loser in the end.
Large-scale production is not in itself to be frowned upon but rather
encouraged. The trouble arises from the misuse of the power over prices
which results from _monopoly_, and this misuse of power is what the laws
are endeavoring to prevent.
[Sidenote: Federal and state control.]
=The Legal Control of Industrial Corporations.=—The right to exercise
control over industrial corporations, and thereby to protect the public
against extortion, rests partly with the states and partly with the
national government. Most corporations are created by state charters and
this gives the state authority over them. So long, therefore, as a
corporation confines its business within the limits of the state in
which its charter was obtained, the national government has no control
over it. But most large corporations, such as steel and oil companies,
woolen and cotton companies, carry on their business in more than one
state. They have factories scattered over several states. They buy
materials in one state, manufacture them in another, and sell the
products in a third. Wherever this is the case the national government
does have authority over them, for the constitution gives to Congress
the power “to regulate commerce among the several states”.
=Industrial Corporations and the Sherman Law.=—To understand the
relation of the laws to combinations and monopolies it is necessary to
go back a little way into legal history. [Sidenote: The common law rule
against combinations in restraint of trade.] By the common law of
England, which was introduced into the colonies before the Revolution
and became the basis of the American legal system, it was provided that
combinations were illegal when formed to restrain trade _unreasonably_.
This was the prevailing legal doctrine in the United States for a
hundred years after the formation of the Union, but it did not suffice
to prevent the steady growth of monopolies. In 1890, therefore, Congress
decided to draw the line more strictly and to this end enacted the
Sherman Anti-Trust Law, which declared every contract or combination, in
the form of a trust or otherwise, or conspiracy in restraint of trade or
commerce among the several states, to be illegal. [Sidenote: The rule in
the Sherman Law.] No distinction was made by the words of this law
between reasonable and unreasonable restraint of trade; the Sherman Law
simply forbade all trade-restraining combinations in interstate
business. It applied to railroads and industries alike, but it was not
enforced widely until 1904, when the Supreme Court applied its
provisions in the Northern Securities Case (see p. 365).
This decision caused a great stirring among the dry bones of corporate
industry. Many combinations and mergers had been formed in all parts of
the country during the closing years of the nineteenth century, and it
was argued that to tear these combinations apart would be exceedingly
difficult. But the government proceeded against other consolidations,
notably the Standard Oil Company and the American Tobacco Company, and
secured their dissolution as well.[174] [Sidenote: The rule of reason.]
In these latter cases, however, the Supreme Court gave hope for a less
drastic interpretation of the Sherman Law by avowing its intention to
decide each future case in accordance with the “rule of reason”. In
other words the court stated its belief that the Sherman Law was not
intended to break up all combinations, good, bad, and indifferent, but
only those which were contrary to the public interest. By this dictum
the Supreme Court re-established in effect the old common law principle
that a combination may be legal or illegal according as its purpose is
reasonable or unreasonable. And such is the law of the land today.[175]
=The Practice of Price-Fixing.=—Meanwhile some new abuses on the part of
various large industrial corporations had arisen. Many manufacturers
began the habit of dictating to retail merchants the prices at which
goods should be sold. If a merchant refused to maintain these prices and
sold goods at lower figures, the manufacturer would thereupon decline to
supply him with any more merchandise. This was an effective way of
bringing a merchant to terms, particularly in the case of patented
articles which are made by only one firm and which cannot be obtained
from anyone else. [Sidenote: The Clayton Act.] Here, again, the of the
Clayton Act intervened by forbidding price discriminations wherever the
effect of such action tends to lessen competition or to create a
monopoly. The Clayton Act also prohibited manufacturers and wholesalers
from dictating to retail merchants the sort of goods they may sell. The
makers of a particular brand of flour, for example, are not permitted to
say to the merchant: “You must sell our brand only, otherwise we will
not sell to you.”
=The Federal Trade Commission.=—The foregoing statutes, the Sherman and
Clayton Acts, are examples of our attempt to regulate industry by law.
The trouble with regulation by law, however, is its stiffness. Laws are
hard and fast while the scope and methods of modern business are
continually and rapidly changing. A law which is sufficient to meet one
problem today proves quite inadequate to cope with another problem
tomorrow. The strictest legal provisions, moreover, can usually be
circumvented or evaded by some new device. Accordingly, the national
government has reached the conclusion that it is better to have the laws
lay down the general principles of industrial regulation, leaving the
details to be applied by an administrative board or commission. In
conformity with this idea Congress in 1914 authorized the establishment
of a Federal Trade Commission, the duty of which is to investigate all
complaints regarding unfair methods of competition in interstate
commerce (except in the case of banks and railroads) and to order that
such unfair methods, if found to be in existence, shall be
discontinued.[176] Decisions of the Federal Trade Commission are reached
after a hearing at which both sides may be represented. The commission
is also given power to compile and publish information concerning the
organization, management, and policy of any industrial corporation
engaged in interstate trade. Since 1914 it has rendered signal service
in protecting the business men of the country, and the general public as
well, against economic injustice.
=The Control of Industrial Corporations by the States.=—What has been
said in the preceding pages relates only to corporations which are
engaged in interstate business. This includes most of the largest
industrial concerns. Smaller corporations which keep their operations
within the bounds of a single state, are not subject to the provisions
of the Sherman or Clayton Acts, neither do they come within the
jurisdiction of the Federal Trade Commission. This does not mean,
however, that the smaller industrial corporations are exempt from
regulation altogether. Most of the states have their own anti-trust laws
and their own legal regulations to prevent the growth of local
monopolies. These rules differ from state to state; in some they are
much more strict than in others. State regulation is beset with serious
difficulties everywhere because in all the states industries are to some
extent carried on by corporations which have obtained their charters
from some other state and thus cannot be fully controlled except by the
national government.
=The Greatest Problem of Modern Industry.=—The most difficult industrial
problems of today, however, are not connected with the question of
government control. So far as the protection of the public against
combinations and monopolies is concerned the government is bound to be,
in the long run, successful in its efforts although even the strictest
laws can work no miracle over night. Far more perplexing is the problem
of determining the proper relations between industrial employers on the
one hand and industrial workmen on the other. Although labor is a great
and essential factor in industry it has hitherto had practically no
direct voice in determining the conditions under which industry shall be
carried on.
Taking American industry as a whole, labor has had no share in ownership
or management. [Sidenote: The human relation in industry.] The relation
of the worker to industry has been strictly that of a hired employee who
does his job, takes his pay, and calls the account square. But of late
years it has been becoming apparent that this relation does not satisfy
the workman altogether and that he does not regard wages alone as a
sufficient recompense for his share in industrial production. His
leaders are asking, in some cases, for a share in the profits, for a
voice in determining the conditions of labor and, ultimately, for some
share in the management.
[Sidenote: The representation of the workers.]
=Industrial Democracy.=—In some large industrial concerns representation
has already been given to the workers. They are permitted and encouraged
to select a committee from among themselves whose function it is to take
up with the management, in an official way, all questions of wages,
hours of labor, discipline, and conditions of work. In case of
disagreement between the committee and the management impartial arbiters
are called in. Thus the employees are given a fair share in the
settlement of all matters affecting their work and welfare.
The success of such schemes will depend, of course, upon the degree of
fairness which both sides display in conference. Just as the success of
political democracy depends upon the exercise of tolerance on the part
of those to whom power is given, so in any form of industrial democracy
the abuse of power, whether by employers or workmen, will surely spell
failure. It is essential to the well-being of the nation that the
workers in industry shall receive their rightful share from the earnings
of industry, that they shall have just conditions of employment and be
treated like men. But it is also essential that the management of
industry shall not be subjected to unreasonable demands and that a
system of production which the world has spent a century in building up
shall not be broken down until something well tried and tested by
experience can be put in its place.
=Profit Sharing as a Step toward Industrial Harmony.=—One of the ways
suggested for ensuring to the workman his full share in the earnings of
industry is known as profit sharing. The usual provision is that after
the current rates of interest, wages, and salaries are paid the surplus
earnings shall be divided between the employers and the workers on some
fair basis determined in advance. But the amount which goes to the
workers is not necessarily paid in cash. Either in part or in whole it
may be given to them in the form of shares in the business and on these
shares they receive thereafter the regular rate of earnings.
It was hoped that an arrangement of this sort would bring the employer
and his workers more closely together. Profit sharing, indeed, was at
one time proclaimed to be a solution of the whole labor problem. But on
the whole it has not fulfilled expectations. For this there are several
reasons. [Sidenote: Why profit sharing has not made great headway.] Some
workers did their best, others scamped their work; but all shared alike.
The employers did not find that labor responded with increased
efficiency when a share of profits was given. The workers, on their
part, found that profits sometimes declined greatly in spite of their
hardest efforts. Bad judgment on the part of the management would offset
hard work on the part of the men. Not having access to the books and
figures the workers often suspected that their rightful share of the
profits was being withheld from them. The trade unions, moreover, looked
askance at the whole proposal and insisted, among other things, that no
one who was not a member of the union should be a profit-sharer. So the
movement has slackened, although it still has some strong advocates and
seems to be losing none of the ground that it has gained.
=Other Remedies for Industrial Unrest.=—Several other remedies for
industrial unrest have been suggested, and some of them are being given
a trial. The relations of labor to industry constitute a large and
difficult problem, however, and cannot be made clear in a single
paragraph. They are, in fact, of sufficient importance to have a chapter
to themselves.
[Sidenote: Industrial opportunities.]
=Industry and the Individual.=—The opportunities for capable young men
and women in industry were never greater than they are today. The
operations of industry have become so complex that they afford openings
for every type of individual skill and proficiency. The management of
American business is no longer conducted by hit-or-miss methods;
everything is worked out with scientific precision in buying materials,
merchandising, manufacturing, marketing, and financing. American
industry in all its branches is hiring brains as well as muscle.
[Sidenote: The choice of a vocation]
The success of the young man or woman who goes from school into industry
depends in the first instance upon a wise selection at the start.
Different types of industrial work call for altogether different tastes
and abilities on the part of the individual. Some individuals are of a
distinctly mechanical temperament; their interests run to machinery and
the processes of working with material things. Others have no interest
at all in that direction; but they may be tactful in dealing with other
people, able to use their imaginations, with perhaps a penchant for
figures. Others, again, have none of these qualities but are punctual,
industrious, and can always be depended upon to carry out instructions
to the letter. American industry has openings which exactly fit
individuals of all temperaments and capacities; the big problem is to
bring the man and the opportunity into touch with each other. A square
peg will not go into a round hole; no amount of patience will put it
there. But there are many square pegs trying to fit themselves into the
round holes of industrial employment today because so many young men and
women have taken the first job offered to them without reference to its
real suitability. These first jobs very often lead up a blind alley. The
time spent in them by thousands of young men and women is time wasted.
[Sidenote: Vocational guidance.]
It is to help eliminate this enormous waste of human effort that
facilities for vocational guidance are now provided by a great many
schools. But no vocational counsellor can properly plan the start in
life without assistance from the boy or girl immediately concerned. It
is the duty of everyone to make a personal study of the opportunities
which the various forms of industry afford, to reflect upon his own
tastes, abilities, and ambitions, and to look at the problem as one of
supreme importance to himself. A right start is half the victory.[177]
General References
R. T. ELY, _Outlines of Economics_, pp. 26-62 (The New Industrial
System);
W. Z. RIPLEY, _Trusts, Pools, and Corporations_, pp. 78-96; 703-734;
F. W. TAUSSIG, _Principles of Economics_, Vol. II, pp. 419-442
(Industrial Combinations);
F. A. OGG, _National Progress_, pp. 58-75 (The Legal Control of
Industrial Combinations);
L. H. HANEY, _Business Organization and Combination_, pp. 81-116;
E. D. DURAND, _The Trust Problem_, pp. 9-30;
J. R. COMMONS, _Labor and Administration_, pp. 120-148;
F. A. FETTER, _Modern Economic Problems_, pp. 427-457;
ISAAC LIPPINCOTT, _Economic Development of the United States_, pp.
469-490. See also U. S. BUREAU OF THE CENSUS: _Abstract of the Census of
Manufacturers_, 1914, ch. vi, vii.
Group Problems
=1. The advantages and defects of large industrial organizations.=
Advantages of large-scale production. Are large organizations essential
to large-scale production? Large industrial organizations and monopoly.
Some examples. The distinction between “good trusts” and “bad trusts”.
Can large organizations be effectively regulated? Summary of merits and
defects. =References=: F. W. TAUSSIG, _Principles of Economics_, Vol.
II, pp. 419-442; L. H. HANEY, _Business Organization and Combination_,
pp. 365-382; E. D. DURAND, _The Trust Problem_, pp. 60-85; W. Z. RIPLEY,
_Trusts, Pools, and Corporations_, pp. 324-355; J. T. YOUNG, _The New
American Government and Its Work_, pp. 141-186; JOHN MOODY, _The Truth
about the Trusts_, pp. 102-132; E. S. MEADE, _Trust Finance_, pp.
193-217; THEODORE ROOSEVELT, _Autobiography_, pp. 476-515.
=2. The position of women in industry—past, present, and future.=
=References=: EDITH ABBOTT, _Women in Industry_, especially pp. 1-9;
215-245; 307-323; T. S. ADAMS and H. L. SUMNER, _Labor Problems_, pp.
19-67; J. A. HOBSON, _Evolution of Modern Capitalism_, pp. 290-321; JOHN
MITCHELL, _Organized Labor_, pp. 131-141; B. L. HUTCHINS, _Women in
Modern Industry_, pp. 239-265.
Short Studies
1. =The far-reaching effects of machine industry.= L. C. MARSHALL and L.
C. LYON, _Our Economic Organization_, pp. 106-126.
2. =Evils of the factory system.= W. C. TAYLOR, _The Modern Factory
System_, pp. 177-227.
3. =The power of Congress to regulate corporations.= S. P. ORTH,
_Readings on the Relation of Government to Prosperity and Industry_, pp.
208-220.
4. =Roosevelt and the trusts.= F. A. OGG, _National Progress_, pp.
40-75; THEODORE ROOSEVELT, _Autobiography_, pp. 476-515; OTTO H. KAHN,
_Our Economic Problems_, pp. 317-322.
5. =The Clayton Act.= JAMES T. YOUNG, _The New American Government and
Its Work_, pp. 173-178.
6. =The work of the Federal Trade Commission.= W. H. S. STEVENS, _Unfair
Competition_, pp. 217-244.
7. =Politics and big business.= J. G. BROOKS, _The Social Unrest_, pp.
46-67.
8. =Competition and big business.= J. H. HAMMOND and J. W. JENKS, _Great
American Issues_, pp. 160-173.
9. =Profit sharing in industry.= T. S. ADAMS and HELEN SUMNER, _Labor
Problems_, pp. 333-378.
10. =The contribution of American industry to the winning of the war.=
W. F. WILLOUGHBY, _Government Organization in War Time and After_, pp.
67-120.
Questions
1. Show why the rise of the factory system is entitled to be called a
“revolution.” Are people better or worse off as a result?
2. “Machinery has made life more varied,” “Machinery has reduced life to
routine.” With which of these statements do you agree and why?
3. Make a diagram showing how a corporation is organized. If you owned
one or more shares in a corporation, what would be your rights? Your
duties? Your risks? What is meant by the statement that a corporation
has “legal immortality”?
4. What is the difference between a pool, a trust, a holding company,
and a merger? Is it better to forbid these things or to regulate them?
5. Why is it that the Chicago meat-packing concerns have been able to
sell dressed meat to marketmen in the towns of the Eastern states more
cheaply than it can be procured and slaughtered locally?
6. Explain what President Roosevelt meant when he said that there are
good trusts and bad trusts. What service can a good trust perform? What
harm can a bad trust do?
7. What are the chief provisions of the Sherman Law? The Clayton Act?
8. Show how regulation by a commission is likely to be more effective
than regulation by law.
9. In determining a choice of a vocation what considerations are you
going to keep in view? What tests have you applied to make sure that you
know your own tastes and abilities? Have you made yourself acquainted
with the industrial opportunities? See foot note on p. 397.
10. To what extent should the workers share in the management of
industry?
Topics for Debate
1. The Sherman Law should be repealed.
2. The government should have the power to fix maximum prices in the
case of all goods produced by industrial organizations which possess a
monopoly.
-----
Footnote 154:
After the Revolution the different states claimed vast tracts of
western lands but they ultimately surrendered these claims to the
national government. The lands were surveyed and offered for sale at
low prices. Many years later Congress adopted the homestead system by
which actual settlers might get lands for almost nothing.
Footnote 155:
It is said that if all the available water power of the United States
were put to use, it would take the place of all the coal that is now
being used in supplying industries with power. “White coal” it is
called, and there is an abundance of it.
Footnote 156:
In early days the slaughtering of cattle was done locally, but the use
of refrigerator cars has led to the centralizing of the meat industry
at a few great centers.
Footnote 157:
We have had a striking illustration of this in recent years. During
the World War the prices of all agricultural products rose enormously
and they continued high for a short time after the war came to an end.
Then they dropped quickly to a low level and by so doing left the
American farmer in a hard situation. Labor and supplies cost him
nearly as much in 1921 as in 1919, while he received in some cases
only half as much for the products of his land.
Footnote 158:
A large part of our nitrate supply comes from Chile, but owing to the
lack of shipping during the war not much could be brought from that
quarter. The United States government built a huge nitrate-making
plant at Muscle Shoals, Ala., but it did not get into operation before
the close of the war. It has now been offered for sale to private
capitalists. There has been some discussion of the possibility of
making nitrates by the electric fixation of the nitrogen which is in
the air, using water power to generate the electric power cheaply. It
is an interesting fact that certain types of bacteria gather nitrogen
from the air at the roots of leguminous plants (peas, beans, alfalfa,
etc.), and in order to ensure the presence of these bacteria the seed
is frequently inoculated before planting.
Footnote 159:
An investigation of the exodus from Ohio farms a few years ago showed
that as many as 60,000 men and boys left the rural districts in a
single year, while fewer than 9000 went from the cities and towns to
the farms.
Footnote 160:
There is a somewhat similar situation in Europe today. The various new
states which were created at the close of the war all have their
tariffs, their rivalries, and their jealousies.
Footnote 161:
They did it, sometimes, in this way: Suppose A and B are towns of
about equal size and about the same distance from Chicago, or that A
is a little further away.
────────────● A
/
Chicago ●──────
╲
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A railroad desiring to build up A and make it an important industrial
center would merely give it lower freight rates to and from the
western metropolis, despite the greater distance.
Footnote 162:
The act further provides that all net profits above the rate of six
per cent upon the valuation of the railroads, as fixed by the
Interstate Commerce Commission, shall be divided in equal shares
between the railroads and the government. The share received by the
government is to go into a fund for the benefit of those railroads
which are not able to earn the normal net income.
Footnote 163:
Of the nine members three are representatives of the railroad owners,
three of the railroad employees, and three of the public. This board
has its headquarters at Chicago, which by reason of its location may
properly be termed the railroad capital of the country. When the board
hears both sides in a labor dispute it makes its recommendations but
has no power to enforce these recommendations. It is believed,
however, that the pressure of public opinion will give sufficient
force to its decisions.
Footnote 164:
Canal transportation, which declined after the railroads were built,
seems now to be gaining a new lease of life. The State of New York is
improving the Erie Canal and proposals have been made to enlarge the
canals between the Great Lakes and the Gulf of St. Lawrence so as to
permit through traffic from Europe to the Lake ports.
Footnote 165:
The general course of American tariff policy may be marked off into
four main periods. The first, which extended from 1792 to the close of
the War of 1812, was a period of relatively low tariff duties. The
duties levied during these years did not greatly hamper imports. While
the United States and England were at war, however, some new
industries were established in America, and it was deemed advisable to
afford these new industries protection against English competition
when the war was over. Accordingly, a more strongly protective policy
was adopted in 1816, and this action ushers in the second period,
which lasted till about 1842. During the earlier part of this interval
the duties on imported manufactures remained relatively high. The high
duties created strong opposition, however, especially in the Southern
states, and in time a reaction took place with the result that the
rates were gradually lowered to a general level of about twenty per
cent in 1842. From this date until the outbreak of the Civil War the
duties remained low, so that the third period saw the virtual
abandonment of protection in favor of a tariff for revenue only. Then
the outbreak of the Civil War changed the situation. The need of a
great increase in revenue became imperative, and high duties on
imports seemed to be a ready way of obtaining national funds. A series
of tariff measures put the rates higher and higher. When the war was
over the high rates for the most part remained and they have remained
relatively high throughout the fourth period, which carries us to the
present day. Since 1865 many tariff measures have been passed by
Congress; some have raised the duties, while others have lowered them.
In 1913 duties were considerably reduced by the Democrats; in 1921
they were put up again by the Republicans. The question of tariff
rates has been an issue at many national elections. But, with all its
ups and downs, the tariff has remained _protective_ both in its
purpose and effect.
Footnote 166:
In 1920 Congress enacted two important measures to aid the revival of
foreign trade. One of these measures relieved foreign trade from some
of the anti-trust restrictions; the other authorized the lending of
government funds to exporters.
Footnote 167:
Many of the commercial treaties which the United States has concluded
with other countries contain what is known as the “most favored nation
clause”. This is a provision that if either of the treaty-making
countries should grant to a third nation any special trading
privilege, this same privilege shall at once accrue to the other
treaty-making country. For example, if the United States and Brazil
conclude a commercial treaty containing the “most favored nation
clause” and Brazil should subsequently grant to Mexico the privilege
of shipping oil into Brazil without payment of duty, the United States
would become forthwith entitled to the same privilege or favor.
Footnote 168:
In the days of wooden vessels, propelled by sail, America had natural
advantages in shipbuilding, particularly in the abundant supply of
ship-timber. Many such vessels were built and the once-famous American
“clipper ships” carried our commerce to all parts of the world. During
the period from 1815 to 1860 the American merchant marine reached its
zenith in size and prosperity. In 1860 it was second to that of Great
Britain and served not only to carry the entire commerce of the United
States but the trade of other countries as well. The Civil War
interfered greatly with the progress of American shipbuilding,
however, and with the advent of iron vessels, propelled by steam, the
United States began to drop behind in the construction of ships for
ocean service. European countries, particularly Great Britain, forged
far ahead during the period from 1865 to 1900. Of the tonnage which
cleared for foreign countries from the seaports of the United States
in 1900 less than one-fifth was American. This decline in the size of
the merchant marine inspired the government of the United States to
stimulate the construction of ships by the grant of subsidies, but no
great success attended these efforts. The shipbuilding industry did
not make renewed progress until it received a great impetus from the
World War.
Footnote 169:
As a means of facilitating commerce the national government also
maintains various aids to navigation. It provides lighthouses, buoys,
landmarks, and lifesaving stations. It has made surveys of the coasts
and furnishes charts for the use of navigators. It trains and licenses
pilots and makes rules to ensure the safety of vessels entering or
leaving American ports. Much money has also been spent by the national
government in the deepening and improvement of harbors. Mention should
likewise be made of the greatest enterprise ever undertaken by any
country for the promotion of maritime commerce, namely, the building
of the Panama Canal, which connects two oceans and cost the United
States more than three hundred and fifty million dollars.
Footnote 170:
In illustration of this it may be mentioned that in all the years from
1000 A. D. to 1750 A. D. there were only three inventions of
remarkable value or interest; namely, printing, gunpowder, and the
steam engine. But what of the period since 1750? The railroad, the
steamship, the telegraph, the cable, the telephone, radio
communication, the electric light, the electric motor and the trolley,
the submarine, the airplane, the cinematograph, the phonograph, the
internal combustion engine and motor vehicles of all kinds, the X-ray,
and so on. These, moreover, are only the landmarks of _mechanical_
progress, which is a relatively small item in the sum-total of human
advance.
Footnote 171:
The customary par value of a share is one hundred dollars, but it may
be fifty, ten, or five dollars. Occasionally shares of no par value
are issued.
Footnote 172:
The stockholders in the original corporation received “trust
certificates” in place of their shares.
Footnote 173:
During the presidential campaign of 1896 there was a good deal of
popular outcry over the asserted failure of the government to “curb
the trusts”. When Mark Hanna, chairman of the Republican National
Committee, replied, “There are no trusts”, he was laughed at from one
end of the country to the other. But he was right, for most of the
trusts had been converted into holding companies.
Footnote 174:
In the long run this action did not amount to much, however, for the
companies reorganized in a way which kept them within the letter of
the law.
Footnote 175:
In order to evade the provisions of the Sherman Act many large
corporations resorted to the plan of “interlocking directorates”.
While forming no combination, merger, or holding company, they merely
arranged that the various companies should elect the same men to their
respective boards of directors, thus placing control of the companies
in the hands of the same group of men. To put an end to this practice
Congress in 1914 enacted the Clayton Act, which provided, among other
things, that no person may serve as a director in two or more large
competitive interstate corporations except banks and railroads, these
latter being under separate regulations.
Footnote 176:
The Federal Trade Commission is made up of five members, each
appointed by the President, with the advice and consent of the Senate,
for a term of seven years.
Footnote 177:
For those who are willing to look at the matter in this light, bearing
in mind the old adage concerning the kindliness of fate to those who
help themselves, the following helpful books are suggested: FREDERICK
J. ALLEN, _A Guide to the Study of Occupations_ (Cambridge, 1921). A
survey of all the best literature on the subject. FREDERIC M. GILES
and I. K. GILES, _Vocational Civics_ (N. Y., 1920). A brief,
interesting account of the opportunities in different occupations.