I
We have, first, the enormous growth of industrial, commercial,
and financial combinations. A crude idea of the extent to which
concentration in manufactures had grown up to May 31, 1900, may
be gained from Census Bulletin No. 122. In this report only those
aggregations are considered which consisted of “a number of formerly
independent mills which have been brought together into one company
under a charter obtained for that purpose.” Several of the new
security-holding stock companies are included, but “many large
establishments comprising a number of mills which have grown up, not
by combination with other mills, but by erection of new plants or the
purchase of old ones,” are not considered, nor are gas and electric
lighting plants, or pools, and “gentlemen’s agreements.”
The list contains records of 183 corporations, with 2029 active and 174
idle plants, an average of 11 active plants each. The actual capital
invested in these corporations, exclusive of that for 56 of the idle
plants, was $1,458,522,573, and the authorized capitalization was
$3,607,539,200. These combinations employed 24,585 salaried officers
and clerks, and an average of 399,192 wage-earners. The 1047 officers
received an average of $6,825.28 yearly and the wage-earners, $487.32.
There were 40 combinations in iron and steel, with 447 plants; 28 in
liquor and beverages, with 219 plants; 21 in food and allied products,
with 273 plants; 15 in clay, glass, and stone products, with 180
plants, and 14 in chemicals, with 248 plants. The gross value of the
manufactured product of these combinations, as given by the census,
was $1,661,295,364. Excluding hand trades, government establishments,
educational, eleemosynary, and penal workshops, and shops with a
product of less than $500, this total represented 14 per cent of the
value of the manufactured product for the whole country.
The spring of 1900 was, however, but the mid-morning of the combination
movement. Only 63 of these companies had been formed previous to
1897, while more than 50 per cent of them were formed during the
eighteen months from January 1, 1899, to June 30, 1900. Since then
the movement has swept forward like a great tide. The consolidations
of manufacturing companies for the first five months of 1901 alone
probably exceeded $2,000,000,000 in capitalization. The great steel
“trust” (to use the popular term), an $88,000,000 tin-can trust, still
other trusts in tobacco machinery, carpets, coal and coke, witch-hazel,
glass lamps and electric glass fittings, ship-building, cotton duck,
agricultural implements, and watches, had their birth during this
period. More recently came the steel-castings trust, subordinate to the
steel corporation, a recombination in tobacco, and very lately a new
ship-building combination, a $120,000,000 harvester trust, and a cotton
compress trust. The capital invested in manufacturing combinations is
now probably two and one-half times what it was in May, 1900; and it is
a reasonable guess that nearly one-third of the manufactured product of
the country, outside of the petty trades, comes from the combinations.
Of the magnitude of some of these concerns the average mind can form
but an inadequate idea. The figures expressing it are comparable with
those of star distances, which must be transmuted into light-years to
make them conceivable. A New York newspaper has recently made some
computations on the great steel trust, which help to bring home to us
a realization of its size and power. Its yearly net profits are now
double the amount of the total revenues of the United States Government
in the year Lincoln was elected. Its wage-roll carries on an average
of the round year over 158,000 names--an army of employees larger by
45,000 than serves the National Government in every branch of its
civil service, classified and unclassified, except only fourth-class
postmasters. Its wage-payments for last year aggregated nearly
$113,000,000, more by $13,000,000 than the huge annual city budget of
Greater New York. Its annual production of steel is 10,000,000 tons,
67 per cent of the total production of the country; and its freight
payments for the year 1901 amounted to more than $54,000,000.
During the same period financial, commercial, mining, and
transportation trusts have also had their splendid inning. We read
of an accident-insurance trust with a capitalization of $50,000,000,
the great shipping trust, the $120,000,000 jobbing hardware trust, the
Interurban Street Railway stock-holding combination, the beef trust,
a $50,000,000 lead merger, a recombination in copper, and a universal
oil trust. _Moody’s Manual of Corporation Securities_ for 1902 gives a
list of 82 industrial and mercantile consolidations effected between
January 1, 1899, and September 1, 1902, each of which is capitalized
at $10,000,000 or more, the whole aggregating a capitalization of
$4,318,005,646. Thirty-nine of these, with $1,232,947,790 authorized
capital, were formed during 1899; 7 with $186,110,400 capital, in
1900; 20 with $2,141,197,456 capital in 1901, and 16 with $757,750,000
capital during the first eight months of 1902. The list is admittedly
incomplete. “It embraces only the so-called gigantic combinations
which have been forming in the past three and one-half years. A
complete list, without regard to date of formation, and including
both large and small,” says this authority, “would probably aggregate
850 different-going combinations, and would easily foot up over
$9,000,000,000 of capitalization. Including railroad consolidations,
such a list would make a total of over $15,000,000,000 outstanding
capitalization.” As for the railroads, the formation of the Northern
Securities Company, the recent assimilation of the Louisville and
Nashville, and the “reorganization” of the Rock Island show the
same drift. Five men, according to a recent statement of Interstate
Commerce Commissioner J. A. Prouty, control all the railroads of the
country; and Mr. John W. Gates, a financier who may be supposed to
know something on that head, has more recently declared, according to
a newspaper interview, that two men are really in control. “I believe
that the time is not far distant,” declared Professor Francis L.
Patton, former head of Princeton University, in a recent address before
the Presbyterian Social Union of Chicago, “when there will not be a
thing that we eat, drink, or wear that will not be made by a trust.”
He might have gone farther and fared as well; for the theatrical
trust determines what dramas we shall witness; the pulp trust, the
typefounders’ trust, the news trust, and the school-book trust exert a
most direct bearing on what we read and what our reading costs us; and
finally the undertakers’ trust determines the style and cost of our
burial.
II
The tendencies make not only for combination in specific trades, but
for unification--for complete integration of all capital which is
susceptible of organization. Capitalistic atoms of low valency--to
use a term from chemistry,--such as those invested in some of the
hand trades, custom and repairing and the like--may continue their
course, but those of a high valency are sooner or later brought into
association. From this fundamental grouping comes integration, the
concentration of the material units which go to make up an aggregate.
The lesser gravitates to the larger. It needs no modern Newton to
proclaim that in finance, commerce, and industry, as in the physical
world, all bodies attract one another in direct proportion to their
mass. Distance provides a limitation, it is true, to the action of
this law in the physical world; but less so in the economic world, for
such is the perfection of our means of communication that they provide
a more transmissible medium to capital than is the pervading ether to
light and gravitation.
The separate trade trusts are not sufficient unto themselves, but
move steadily toward unification. A glance at the directorates of
the leading combinations shows many names repeated through a long
list of varied industries. The combinations themselves reach out and
acquire new interests, often distinct from their primary interests. In
Pennsylvania coal is mined and railroads are operated by practically
the same companies, and in Colorado and West Virginia nearly as
complete an identity is discovered. The steel corporation owns coal
lands, limestone quarries, railroads, and docks; it is allied with the
great Atlantic shipping trust; it is related, not distantly, to the
Standard Oil Company; and the beginnings of a public opinion trust
are indicated, for already its chief magnate has acquired several
newspapers and a prominent magazine. Bishop Potter’s prediction, it
would seem, is in fair way of fulfilment. “We must fully realize,” he
said to the Yale students last April, “the danger that mind as well
as matter will be at some time in the future capitalized, and that
the real thinking and planning for the many will be done by a mere
handful.” Beet and cane sugar are soon to be joined, we read; paper and
lumber, if not already wedded, are at least on excellent terms. Oil
and gas on the one hand, coal and iron on the other, have a “common
understanding,” and each of them holds morganatic relations with one
or more of the railroads. All the great combinations recognize a
growing community of interest; they tend more and more to a potential,
if not an actual, coalescence; and in the face of popular agitation,
legislative aggressiveness, or the formal demands of labor, they
develop a unity of purpose and method. Their support is thrown, in
general, to the same candidates for governors, senators, judges, and
tax assessors. In brief, they tend to the formation of a state within
a state, and their individual members to the creation of an industrial
and political hierarchy.
III
The counter-tendency toward the persistence of small-unit farming and
of small-shop production and distribution must not be lost sight of,
nor must the great combinations be looked upon as necessarily a proof
of individual concentration of wealth. That they generally so result is
hardly to be disputed; but primarily, they mean the massing together of
separately owned capitals, often small, for a particular use. There is
every reason to suppose that the shareholders grow in numbers, and that
they increase their holdings. So that while the magnates tend to become
Midases, there is a concurrent tendency making for diffused ownership.
The small investor is to be found in every stratum of society, and the
number of shareholders in some of the great combinations reaches an
astonishing figure. The “one touch of nature” which in Shakespeare’s
eyes made the whole world kin was the love of novelty; in our day it is
the passion for investing in shares.
Petty industries and small-unit farming persist, despite the movement
toward combination. The recent census gives the number of manufacturing
establishments in the United States as 512,726, an increase of 44.3
per cent. This is a larger percentage of increase than is shown for
any other of the fifteen items in the census summary of manufactures,
except capital, children’s wages, and miscellaneous expenses. Doubtless
many of these establishments belong to the trusts; but with all
allowances the numerical growth is remarkable. The undeveloped sections
show the greatest increase, but even industrially settled States,
such as Massachusetts, Connecticut, and Rhode Island, reveal marked
gains. Professor Ely has pointed out several branches of industry in
which small-shop production is increasing. Some investigations which
the present writer made two years ago in two branches confirm this
tendency. It is pronounced in the notion trades and in the manufacture
of women’s ready-made wear. In the latter the industry has been
revolutionized, the large houses being menaced with disaster and some
of them with extinction. In dry-goods distribution the tendencies are
confused and puzzling. While the number of general jobbing houses in
New York City has decreased from thirty-five to five in twenty-five
years, the remaining ones growing to enormous proportions, the number
of smaller houses distributing special lines has either maintained
its own or has grown. In Baltimore and St. Louis small jobbing houses
persist in the face of the larger houses. In the retail trades, even in
New York, despite the creation of a number of mammoth general stores,
the dullest observer will note the continuance of thousands of small
grocery, dry-goods, and furniture stores, confectionery and butcher
shops; while custom and repairing work is still done in the little
tailoring and shoemaking shops that speak a sort of defiance to the
great emporiums. Through convenience of location to the community of
customers about them--often, too, by the giving of credit--many of
these little shops and stores furnish a social service that cannot be
performed by the larger stores, which are mostly to be found massed in
the central shopping district.
Something of the same nature is to be found in agriculture. Though the
great estates are increasing in size, so also is the number of small
holdings increasing. Nearly every State and Territory shows an increase
in the number of farms, while the majority show a decrease in average
acreage. The great stock-grazing farms of the West and the unproductive
“gentlemen’s estates” of the East help to make the census figures
misleading. It is probable that in every State real farming is done on
a smaller average acreage than ever before.
Even independent capital in trading and manufactures shows an
unexpected persistence. An interesting article in a recent issue of
the New York _Journal of Commerce_ puts the capitalization of the
great trusts for the twelve years ending with 1901 at $6,474,000,000,
of which it marks off $2,000,000,000 as “spurious common stock,” that
is, stock not representing real capital in any form. Not more than
$300,000,000 of new capital, it maintains, had been thrown into the
consolidations. This would leave $4,474,000,000 as the sum of values
already established by previous investment. On the other hand, it
maintains that actual records show that in seventeen months from
the beginning of 1901, in the four States of New York, New Jersey,
Delaware, and Maine, the aggregate capitalization of newly organized
companies with a capital of $1,000,000 and upwards is $1,969,650,000;
and it calculates that for the whole country, including the large and
small corporations, “the national industrial capital (exclusive of
that for transportation appliances) must have increased approximately
$5,000,000,000 since the end of 1900.” Several rather obvious demurrers
might be made to the conclusions reached, but they need not now concern
us. With all possible discounting, strong proof is given of the
aggressive persistence of independent capital.
IV
Such facts, however, do not carry on the surface their real import.
Independent capital persists as a force, but the units that compose
it melt like bubbles in a stream. These companies are but the raw or
“partly manufactured” material out of which the great combinations are
made. Formation, growth, and absorption into a trust are generally the
three terms in their life-history; or if, through ill environment
or spirited warfare waged against them, they fail to get secure
footing, they soon slip back into the slough of disaster. The fate of
independent tobacco factories, sugar and oil refineries, railroads,
independent companies of one kind or another, is constantly before
us. If they are worth having, they are more or less benevolently
assimilated; and if they are not worth having, they are permitted to
struggle onward to the almost inevitable collapse.
Neither do small holdings in agriculture mean economic independence.
As the late census reveals, they mean tenantry. The number of farms
operated by owners is decreasing; tenantry is becoming more and
more common, and so is salaried management of great estates. Of the
5,739,657 farms of the nation, tenants now operate 2,026,286. Owners
operated 74.5 per cent of all farms in 1880, 71.6 per cent in 1890,
64.7 per cent in 1900. The tendency is general, and applies to all
sections. Since 1880 tenantry has relatively increased in every State
and Territory (no comparative data are given for the Indian Territory)
except Arizona, Florida, and New Hampshire. Since 1890 it has increased
in Arizona. In twenty years it has increased 49.4 per cent in Florida,
though the unloading of “orange groves” and other tropical paradises on
the too susceptible Northerner has increased ownership by a slightly
greater ratio; while in New Hampshire, where 2857 farms have been given
up in the last twenty years, tenantry has decreased by but five-tenths
of 1 per cent since 1890, and but six-tenths of 1 per cent since 1880.
So, too, with petty industries and the small retailers. M. Emile
Vandervelde, in his sterling work, “Collectivism and Industrial
Evolution,” has well shown how “small trade is the special refuge of
the cripples of capitalism.” It is the particular refuge “of all who
prefer, in place of the hard labor of production, the scanty gleaning
of the middleman, or who, no longer finding a sufficient revenue in
industry or farming, desire to add a string to their bow by opening a
little shop.” But it would be a mistake, he continues, to suppose that
these miniature establishments, which the census officials characterize
as distinct enterprises, can be generally regarded as the personal
property of those who carry them on. “A great number of them, and a
number constantly increasing, as capitalism develops, have only a
phantom of independence, and are really in the hands of a few great
money lenders, manufacturers, or merchants.”
Though M. Vandervelde argues on the basis of these phenomena as
observed in Belgium, France, Germany, and England, the same conclusions
are applicable in the United States. Our national census figures are
practically useless as illuminators on the subject, and one must get
his data from the observation or investigation of himself or others. It
is generally known that small industries the product of which is more
or less ingenious or artistic manage to survive; that those the product
of which is common or usual are sooner or later extinguished; and that
the petty retailers represent so many heterogeneous elements that
it is impossible to predicate anything of them as a class. Of these
latter there is a moderate number who, by furnishing a needful social
service, make profits; there is a large and constantly changing number
who, through ease of credit, manage to obtain stock without capital,
and who almost invariably succumb; there is then a larger number whose
little shops are run by women and children, the husbands and fathers
working at some trade or office job, and hopefully expending their
weekly earnings in the vain attempt to “build up a business”; finally,
there is a class, the numbers and relative importance of which it
is impossible to estimate, whose businesses are owned, directly or
indirectly, by other men or by companies.
V
Many of these so-called independent concerns find it possible, and
some of them find it fairly profitable, to continue. But the more the
large combinations wax in power, the greater is the subordination of
the small concerns. An increasing constraint characterizes all their
efforts. They are more closely confined to particular activities and
to local territories, their bounds being dictated and enforced by
the pressure of the combinations. The petty tradesmen and producers
are thus an economically dependent class. Equally subordinate--and
for the most part subservient--are the owners of small and moderate
holdings in the trusts. The larger holdings--often the single
largest holding--determine what shall be done. Generally, too, the
petty investors are acquiescent to the will of the Big Men. But
occasionally, as in the case of the transfer of the Metropolitan Street
Railway stock, they rebel, and it becomes necessary to suppress them.
At the meeting which determined this action, the protesting minority
were emphatically ordered to “shut up”; when they still objected,
the presiding officer declared, “We will vote first; you can discuss
the matter afterward,” and the vote was promptly taken. The head of
an American corporation, moreover, is often an absolute ruler, who
determines not only the policy of the enterprise, but the personnel
of the board of directors. It was a naïve letter which a well-known
New York financier recently wrote to his “board of directors” on the
occasion of his retirement from the presidency of a great trust company
in favor of a retiring Cabinet minister. He had been looking about,
he explained, for some time for a competent successor. Now he had
found him and had chosen him. Of course the formal action of the board
would be a welcome detail; and, equally a matter of course, it was
promptly given. One of the copper kings recently testified in a legal
action that he “didn’t want to call the board of directors together
to obtain authority to buy adjacent properties.” He went ahead, did
what he pleased, and let the board discuss the matter afterward. If
there was ever so much as a question about it, it was but a profitless
interference.
VI
The tendencies thus make, on the one hand, toward the centralization of
vast power in the hands of a few men--the morganization of industry,
as it were--and, on the other, toward a vast increase in the number
of those who compose the economically dependent classes. The latter
number is already stupendous. The laborers and mechanics were long ago
brought under the yoke through their divorcement from the land and the
application of steam to factory operation. They are economically unfree
except in so far as their organizations make possible a collective
bargaining for wages and hours. The growth of commerce raised up an
enormous class of clerks and helpers, perhaps the most dependent class
in the community. The growth and partial diffusion of wealth has in
fifty years largely altered the character of our domestic service and
increased the number of servants many fold. The professions, too, have
felt the change. Behind many of our important newspapers are private
commercial interests which dictate their general policy, if not, as
is frequently the case, their particular attitude upon every public
question; while the race for endowments made by the greater number of
the churches and by all colleges except a few State-supported ones,
compels a cautious regard on the part of synod and faculty for the
wishes, the views, and the prejudices of men of wealth. To this growing
deference of preacher, teacher, and editor is added that of two yet
more important classes,--the makers and the interpreters of law. The
record of legislation and judicial interpretation regarding slavery
previous to the Civil War has been paralleled, if not surpassed, in
recent years by the record of legislatures and courts in matters
relating to the lives and health of manual workers, especially in such
matters as employers’ liability and factory inspection. Thus, with a
great addition to the number of subordinate classes, with a tremendous
increase of their individual components, and with a corresponding
growth of power in the hands of a few score magnates, there is needed
little further to make up a socio-economic status that contains all the
essentials of a renascent Feudalism.