Gentlemen say, they have been saying for a long time, and, therefore, I
assume that they believe, that trusts are inevitable. They don't say that
big business is inevitable. They don't say merely that the elaboration of
business upon a great co-operative scale is characteristic of our time and
has come about by the natural operation of modern civilization. We would
admit that. But they say that the particular kind of combinations that are
now controlling our economic development came into existence naturally and
were inevitable; and that, therefore, we have to accept them as
unavoidable and administer our development through them. They take the
analogy of the railways. The railways were clearly inevitable if we were
to have transportation, but railways after they are once built stay put.
You can't transfer a railroad at convenience; and you can't shut up one
part of it and work another part. It is in the nature of what economists,
those tedious persons, call natural monopolies; simply because the whole
circumstances of their use are so stiff that you can't alter them. Such
are the analogies which these gentlemen choose when they discuss the
modern trust.
I admit the popularity of the theory that the trusts have come about
through the natural development of business conditions in the United
States, and that it is a mistake to try to oppose the processes by which
they have been built up, because those processes belong to the very nature
of business in our time, and that therefore the only thing we can do, and
the only thing we ought to attempt to do, is to accept them as inevitable
arrangements and make the best out of it that we can by regulation.
I answer, nevertheless, that this attitude rests upon a confusion of
thought. Big business is no doubt to a large extent necessary and natural.
The development of business upon a great scale, upon a great scale of
co-operation, is inevitable, and, let me add, is probably desirable. But
that is a very different matter from the development of trusts, because
the trusts have not grown. They have been artificially created; they have
been put together, not by natural processes, but by the will, the
deliberate planning will, of men who were more powerful than their
neighbors in the business world, and who wished to make their power secure
against competition.
The trusts do not belong to the period of infant industries. They are not
the products of the time, that old laborious time, when the great
continent we live on was undeveloped, the young nation struggling to find
itself and get upon its feet amidst older and more experienced
competitors. They belong to a very recent and very sophisticated age, when
men knew what they wanted and knew how to get it by the favor of the
government.
Did you ever look into the way a trust was made? It is very natural, in
one sense, in the same sense in which human greed is natural. If I
haven't efficiency enough to beat my rivals, then the thing I am inclined
to do is to get together with my rivals and say: "Don't let's cut each
other's throats; let's combine and determine prices for ourselves;
determine the output, and thereby determine the prices: and dominate and
control the market." That is very natural. That has been done ever since
freebooting was established. That has been done ever since power was used
to establish control. The reason that the masters of combination have
sought to shut out competition is that the basis of control under
competition is brains and efficiency. I admit that any large corporation
built up by the legitimate processes of business, by economy, by
efficiency, is natural; and I am not afraid of it, no matter how big it
grows. It can stay big only by doing its work more thoroughly than anybody
else. And there is a point of bigness,--as every business man in this
country knows, though some of them will not admit it,--where you pass the
limit of efficiency and get into the region of clumsiness and
unwieldiness. You can make your combine so extensive that you can't
digest it into a single system; you can get so many parts that you can't
assemble them as you would an effective piece of machinery. The point of
efficiency is overstepped in the natural process of development
oftentimes, and it has been overstepped many times in the artificial and
deliberate formation of trusts.
A trust is formed in this way: a few gentlemen "promote" it--that is to
say, they get it up, being given enormous fees for their kindness, which
fees are loaded on to the undertaking in the form of securities of one
kind or another. The argument of the promoters is, not that every one who
comes into the combination can carry on his business more efficiently than
he did before; the argument is: we will assign to you as your share in the
pool twice, three times, four times, or five times what you could have
sold your business for to an individual competitor who would have to run
it on an economic and competitive basis. We can afford to buy it at such a
figure because we are shutting out competition. We can afford to make the
stock of the combination half a dozen times what it naturally would be
and pay dividends on it, because there will be nobody to dispute the
prices we shall fix.
Talk of that as sound business? Talk of that as inevitable? It is based
upon nothing except power. It is not based upon efficiency. It is no
wonder that the big trusts are not prospering in proportion to such
competitors as they still have in such parts of their business as
competitors have access to; they are prospering freely only in those
fields to which competition has no access. Read the statistics of the
Steel Trust, if you don't believe it. Read the statistics of any trust.
They are constantly nervous about competition, and they are constantly
buying up new competitors in order to narrow the field. The United States
Steel Corporation is gaining in its supremacy in the American market only
with regard to the cruder manufactures of iron and steel, but wherever, as
in the field of more advanced manufactures of iron and steel, it has
important competitors, its portion of the product is not increasing, but
is decreasing, and its competitors, where they have a foothold, are often
more efficient than it is.
Why? Why, with unlimited capital and innumerable mines and plants
everywhere in the United States, can't they beat the other fellows in the
market? Partly because they are carrying too much. Partly because they are
unwieldy. Their organization is imperfect. They bought up inefficient
plants along with efficient, and they have got to carry what they have
paid for, even if they have to shut some of the plants up in order to make
any interest on their investments; or, rather, not interest on their
investments, because that is an incorrect word,--on their alleged
capitalization. Here we have a lot of giants staggering along under an
almost intolerable weight of artificial burdens, which they have put on
their own backs, and constantly looking about lest some little pigmy with
a round stone in a sling may come out and slay them.
For my part, I want the pigmy to have a chance to come out. And I foresee
a time when the pigmies will be so much more athletic, so much more
astute, so much more active, than the giants, that it will be a case of
Jack the giant-killer. Just let some of the youngsters I know have a
chance and they'll give these gentlemen points. Lend them a little money.
They can't get any now. See to it that when they have got a local market
they can't be squeezed out of it. Give them a chance to capture that
market and then see them capture another one and another one, until these
men who are carrying an intolerable load of artificial securities find
that they have got to get down to hard pan to keep their foothold at all.
I am willing to let Jack come into the field with the giant, and if Jack
has the brains that some Jacks that I know in America have, then I should
like to see the giant get the better of him, with the load that he, the
giant, has to carry,--the load of water. For I'll undertake to put a
water-logged giant out of business any time, if you will give me a fair
field and as much credit as I am entitled to, and let the law do what from
time immemorial law has been expected to do,--see fair play.
As for watered stock, I know all the sophistical arguments, and they are
many, for capitalizing earning capacity. It is a very attractive and
interesting argument, and in some instances it is legitimately used. But
there is a line you cross, above which you are not capitalizing your
earning capacity, but capitalizing your control of the market,
capitalizing the profits which you got by your control of the market, and
didn't get by efficiency and economy. These things are not hidden even
from the layman. These are not half-hidden from college men. The college
men's days of innocence have passed, and their days of sophistication have
come. They know what is going on, because we live in a talkative world,
full of statistics, full of congressional inquiries, full of trials of
persons who have attempted to live independently of the statutes of the
United States; and so a great many things have come to light under oath,
which we must believe upon the credibility of the witnesses who are,
indeed, in many instances very eminent and respectable witnesses.
I take my stand absolutely, where every progressive ought to take his
stand, on the proposition that private monopoly is indefensible and
intolerable. And there I will fight my battle. And I know how to fight it.
Everybody who has even read the newspapers knows the means by which these
men built up their power and created these monopolies. Any decently
equipped lawyer can suggest to you statutes by which the whole business
can be stopped. What these gentlemen do not want is this: they do not want
to be compelled to meet all comers on equal terms. I am perfectly willing
that they should beat any competitor by fair means; but I know the foul
means they have adopted, and I know that they can be stopped by law. If
they think that coming into the market upon the basis of mere efficiency,
upon the mere basis of knowing how to manufacture goods better than
anybody else and to sell them cheaper than anybody else, they can carry
the immense amount of water that they have put into their enterprises in
order to buy up rivals, then they are perfectly welcome to try it. But
there must be no squeezing out of the beginner, no crippling his credit;
no discrimination against retailers who buy from a rival; no threats
against concerns who sell supplies to a rival; no holding back of raw
material from him; no secret arrangements against him. All the fair
competition you choose, but no unfair competition of any kind. And then
when unfair competition is eliminated, let us see these gentlemen carry
their tanks of water on their backs. All that I ask and all I shall fight
for is that they shall come into the field against merit and brains
everywhere. If they can beat other American brains, then they have got the
best brains.
But if you want to know how far brains go, as things now are, suppose you
try to match your better wares against these gentlemen, and see them
undersell you before your market is any bigger than the locality and make
it absolutely impossible for you to get a fast foothold. If you want to
know how brains count, originate some invention which will improve the
kind of machinery they are using, and then see if you can borrow enough
money to manufacture it. You may be offered something for your patent by
the corporation,--which will perhaps lock it up in a safe and go on using
the old machinery; but you will not be allowed to manufacture. I know men
who have tried it, and they could not get the money, because the great
money lenders of this country are in the arrangement with the great
manufacturers of this country, and they do not propose to see their
control of the market interfered with by outsiders. And who are outsiders?
Why, all the rest of the people of the United States are outsiders.
They are rapidly making us outsiders with respect even of the things that
come from the bosom of the earth, and which belong to us in a peculiar
sense. Certain monopolies in this country have gained almost complete
control of the raw material, chiefly in the mines, out of which the great
body of manufactures are carried on, and they now discriminate, when they
will, in the sale of that raw material between those who are rivals of the
monopoly and those who submit to the monopoly. We must soon come to the
point where we shall say to the men who own these essentials of industry
that they have got to part with these essentials by sale to all citizens
of the United States with the same readiness and upon the same terms. Or
else we shall tie up the resources of this country under private control
in such fashion as will make our independent development absolutely
impossible.
There is another injustice that monopoly engages in. The trust that deals
in the cruder products which are to be transformed into the more elaborate
manufactures often will not sell these crude products except upon the
terms of monopoly,--that is to say, the people that deal with them must
buy exclusively from them. And so again you have the lines of development
tied up and the connections of development knotted and fastened so that
you cannot wrench them apart.
Again, the manufacturing monopolies are so interlaced in their personal
relationships with the great shipping interests of this country, and with
the great railroads, that they can often largely determine the rates of
shipment.
The people of this country are being very subtly dealt with. You know, of
course, that, unless our Commerce Commissions are absolutely sleepless,
you can get rebates without calling them such at all. The most complicated
study I know of is the classification of freight by the railway company.
If I wanted to make a special rate on a special thing, all I should have
to do is to put it in a special class in the freight classification, and
the trick is done. And when you reflect that the twenty-four men who
control the United States Steel Corporation, for example, are either
presidents or vice-presidents or directors in 55 per cent. of the railways
of the United States, reckoning by the valuation of those railroads and
the amount of their stock and bonds, you know just how close the whole
thing is knitted together in our industrial system, and how great the
temptation is. These twenty-four gentlemen administer that corporation as
if it belonged to them. The amazing thing to me is that the people of the
United States have not seen that the administration of a great business
like that is not a private affair; it is a public affair.
I have been told by a great many men that the idea I have, that by
restoring competition you can restore industrial freedom, is based upon a
failure to observe the actual happenings of the last decades in this
country; because, they say, it is just free competition that has made it
possible for the big to crush the little.
I reply, it is not free competition that has done that; it is illicit
competition. It is competition of the kind that the law ought to stop, and
can stop,--this crushing of the little man.
You know, of course, how the little man is crushed by the trusts. He gets
a local market. The big concerns come in and undersell him in his local
market, and that is the only market he has; if he cannot make a profit
there, he is killed. They can make a profit all through the rest of the
Union, while they are underselling him in his locality, and recouping
themselves by what they can earn elsewhere. Thus their competitors can be
put out of business, one by one, wherever they dare to show a head.
Inasmuch as they rise up only one by one, these big concerns can see to it
that new competitors never come into the larger field. You have to begin
somewhere. You can't begin in space. You can't begin in an airship. You
have got to begin in some community. Your market has got to be your
neighbors first and those who know you there. But unless you have
unlimited capital (which of course you wouldn't have when you were
beginning) or unlimited credit (which these gentlemen can see to it that
you shan't get), they can kill you out in your local market any time they
try, on the same basis exactly as that on which they beat organized labor;
for they can sell at a loss in your market because they are selling at a
profit everywhere else, and they can recoup the losses by which they beat
you by the profits which they make in fields where they have beaten other
fellows and put them out. If ever a competitor who by good luck has plenty
of money does break into the wider market, then the trust has to buy him
out, paying three or four times what the business is worth. Following
such a purchase it has got to pay the interest on the price it has paid
for the business, and it has got to tax the whole people of the United
States, in order to pay the interest on what it borrowed to do that, or on
the stocks and bonds it issued to do it with. Therefore the big trusts,
the big combinations, are the most wasteful, the most uneconomical, and,
after they pass a certain size, the most inefficient, way of conducting
the industries of this country.
A notable example is the way in which Mr. Carnegie was bought out of the
steel business. Mr. Carnegie could build better mills and make better
steel rails and make them cheaper than anybody else connected with what
afterward became the United States Steel Corporation. They didn't dare
leave him outside. He had so much more brains in finding out the best
processes; he had so much more shrewdness in surrounding himself with the
most successful assistants; he knew so well when a young man who came into
his employ was fit for promotion and was ripe to put at the head of some
branch of his business and was sure to make good, that he could undersell
every mother's son of them in the market for steel rails. And they bought
him out at a price that amounted to three or four times,--I believe
actually five times,--the estimated value of his properties and of his
business, because they couldn't beat him in competition. And then in what
they charged afterward for their product,--the product of his mills
included,--they made us pay the interest on the four or five times the
difference.
That is the difference between a big business and a trust. A trust is an
arrangement to get rid of competition, and a big business is a business
that has survived competition by conquering in the field of intelligence
and economy. A trust does not bring efficiency to the aid of business; it
_buys efficiency out of business_. I am for big business, and I am against
the trusts. Any man who can survive by his brains, any man who can put the
others out of the business by making the thing cheaper to the consumer at
the same time that he is increasing its intrinsic value and quality, I
take off my hat to, and I say: "You are the man who can build up the
United States, and I wish there were more of you."
There will not be more, unless we find a way to prevent monopoly. You know
perfectly well that a trust business staggering under a capitalization
many times too big is not a business that can afford to admit competitors
into the field; because the minute an economical business, a business with
its capital down to hard pan, with every ounce of its capital working,
comes into the field against such an overloaded corporation, it will
inevitably beat it and undersell it; therefore it is to the interest of
these gentlemen that monopoly be maintained. They cannot rule the markets
of the world in any way but by monopoly. It is not surprising to find them
helping to found a new party with a fine program of benevolence, but also
with a tolerant acceptance of monopoly.
* * * * *
There is another matter to which we must direct our attention, whether we
like or not. I do not take these things into my mouth because they please
my palate; I do not talk about them because I want to attack anybody or
upset anything; I talk about them because only by open speech about them
among ourselves shall we learn what the facts are.
You will notice from a recent investigation that things like this take
place: A certain bank invests in certain securities. It appears from
evidence that the handling of these securities was very intimately
connected with the maintenance of the price of a particular commodity.
Nobody ought, and in normal circumstances nobody would, for a moment think
of suspecting the managers of a great bank of making such an investment in
order to help those who were conducting a particular business in the
United States maintain the price of their commodity; but the circumstances
are not normal. It is beginning to be believed that in the big business of
this country nothing is disconnected from anything else. I do not mean in
this particular instance to which I have referred, and I do not have in
mind to draw any inference at all, for that would be unjust; but take any
investment of an industrial character by a great bank. It is known that
the directorate of that bank interlaces in personnel with ten, twenty,
thirty, forty, fifty, sixty boards of directors of all sorts, of railroads
which handle commodities, of great groups of manufacturers which
manufacture commodities, and of great merchants who distribute
commodities; and the result is that every great bank is under suspicion
with regard to the motive of its investments. It is at least considered
possible that it is playing the game of somebody who has nothing to do
with banking, but with whom some of its directors are connected and joined
in interest. The ground of unrest and uneasiness, in short, on the part of
the public at large, is the growing knowledge that many large undertakings
are interlaced with one another, are indistinguishable from one another in
personnel.
Therefore, when a small group of men approach Congress in order to induce
the committee concerned to concur in certain legislation, nobody knows the
ramifications of the interests which those men represent; there seems no
frank and open action of public opinion in public counsel, but every man
is suspected of representing some other man and it is not known where his
connections begin or end.
I am one of those who have been so fortunately circumstanced that I have
had the opportunity to study the way in which these things come about in
complete disconnection from them, and I do not suspect that any man has
deliberately planned the system. I am not so uninstructed and misinformed
as to suppose that there is a deliberate and malevolent combination
somewhere to dominate the government of the United States. I merely say
that, by certain processes, now well known, and perhaps natural in
themselves, there has come about an extraordinary and very sinister
concentration in the control of business in the country.
However it has come about, it is more important still that the control of
credit also has become dangerously centralized. It is the mere truth to
say that the financial resources of the country are not at the command of
those who do not submit to the direction and domination of small groups of
capitalists who wish to keep the economic development of the country under
their own eye and guidance. The great monopoly in this country is the
monopoly of big credits. So long as that exists, our old variety and
freedom and individual energy of development are out of the question. A
great industrial nation is controlled by its system of credit. Our system
of credit is privately concentrated. The growth of the nation, therefore,
and all our activities are in the hands of a few men who, even if their
action be honest and intended for the public interest, are necessarily
concentrated upon the great undertakings in which their own money is
involved and who necessarily, by very reason of their own limitations,
chill and check and destroy genuine economic freedom. This is the greatest
question of all, and to this statesmen must address themselves with an
earnest determination to serve the long future and the true liberties of
men.
This money trust, or, as it should be more properly called, this credit
trust, of which Congress has begun an investigation, is no myth; it is no
imaginary thing. It is not an ordinary trust like another. It doesn't do
business every day. It does business only when there is occasion to do
business. You can sometimes do something large when it isn't watching, but
when it is watching, you can't do much. And I have seen men squeezed by
it; I have seen men who, as they themselves expressed it, were put "out of
business by Wall Street," because Wall Street found them inconvenient and
didn't want their competition.
Let me say again that I am not impugning the motives of the men in Wall
Street. They may think that that is the best way to create prosperity for
the country. When you have got the market in your hand, does honesty
oblige you to turn the palm upside down and empty it? If you have got the
market in your hand and believe that you understand the interest of the
country better than anybody else, is it patriotic to let it go? I can
imagine them using this argument to themselves.
The dominating danger in this land is not the existence of great
individual combinations,--that is dangerous enough in all conscience,--but
the combination of the combinations,--of the railways, the manufacturing
enterprises, the great mining projects, the great enterprises for the
development of the natural water-powers of the country, threaded together
in the personnel of a series of boards of directors into a "community of
interest" more formidable than any conceivable single combination that
dare appear in the open.
The organization of business has become more centralized, vastly more
centralized, than the political organization of the country itself.
Corporations have come to cover greater areas than states; have come to
live under a greater variety of laws than the citizen himself, have
excelled states in their budgets and loomed bigger than whole
commonwealths in their influence over the lives and fortunes of entire
communities of men. Centralized business has built up vast structures of
organization and equipment which overtop all states and seem to have no
match or competitor except the federal government itself.
What we have got to do,--and it is a colossal task not to be undertaken
with a light head or without judgment,--what we have got to do is to
disentangle this colossal "community of interest." No matter how we may
purpose dealing with a single combination in restraint of trade, you will
agree with me in this, that no single, avowed, combination is big enough
for the United States to be afraid of; but when all the combinations are
combined and this final combination is not disclosed by any process of
incorporation or law, but is merely an identity of personnel, or of
interest, then there is something that even the government of the nation
itself might come to fear,--something for the law to pull apart, and
gently, but firmly and persistently, dissect.
You know that the chemist distinguishes between a chemical combination and
an amalgam. A chemical combination has done something which I cannot
scientifically describe, but its molecules have become intimate with one
another and have practically united, whereas an amalgam has a mere
physical union created by pressure from without. Now, you can destroy that
mere physical contact without hurting the individual elements, and this
community of interest is an amalgam; you can break it up without hurting
any one of the single interests combined. Not that I am particularly
delicate of some of the interests combined,--I am not under bonds to be
unduly polite to them,--but I am interested in the business of the
country, and believe its integrity depends upon this dissection. I do not
believe any one group of men has vision enough or genius enough to
determine what the development of opportunity and the accomplishment by
achievement shall be in this country.
The facts of the situation amount to this: that a comparatively small
number of men control the raw material of this country; that a
comparatively small number of men control the water-powers that can be
made useful for the economical production of the energy to drive our
machinery; that that same number of men largely control the railroads;
that by agreements handed around among themselves they control prices, and
that that same group of men control the larger credits of the country.
* * * * *
When we undertake the strategy which is going to be necessary to overcome
and destroy this far-reaching system of monopoly, we are rescuing the
business of this country, we are not injuring it; and when we separate the
interests from each other and dismember these communities of connection,
we have in mind a greater community of interest, a vaster community of
interest, the community of interest that binds the virtues of all men
together, that community of mankind which is broad and catholic enough to
take under the sweep of its comprehension all sorts and conditions of men;
that vision which sees that no society is renewed from the top but that
every society is renewed from the bottom. Limit opportunity, restrict the
field of originative achievement, and you have cut out the heart and root
of all prosperity.
The only thing that can ever make a free country is to keep a free and
hopeful heart under every jacket in it. Honest American industry has
always thriven, when it has thriven at all, on freedom; it has never
thriven on monopoly. It is a great deal better to shift for yourselves
than to be taken care of by a great combination of capital. I, for my
part, do not want to be taken care of. I would rather starve a free man
than be fed a mere thing at the caprice of those who are organizing
American industry as they please to organize it. I know, and every man in
his heart knows, that the only way to enrich America is to make it
possible for any man who has the brains to get into the game. I am not
jealous of the size of any business that has _grown_ to that size. I am
not jealous of any process of growth, no matter how huge the result,
provided the result was indeed obtained by the processes of wholesome
development, which are the processes of efficiency, of economy, of
intelligence, and of invention.