In common use the word "trust" is at present rather loosely used to
denote any combination formed for the purpose of restricting or killing
competition. Properly speaking, however, a trust is a combination to
restrain competition among producers, formed by placing the various
producing properties (mills, factories, etc.) in the hands of a board of
trustees, who are empowered to direct the operations of production and
sale, as if the properties were all under a single ownership and
management.
The novel characteristic of the trust is not the fact that it is a
monopoly, but that it is a monopoly formed by combining several
competitors according to a new plan. The process of placing property in
the hands of trustees is familiar to every business man. In the
formation of a trust the different firms or companies who have been
competing with each other in the production and sale of goods agree to
place the management of all their several properties in the hands of a
board of trustees. The powers of this board and its relation to the
owners of the various properties are ingeniously devised to evade the
common law, which declares that contracts in restraint of competition
are against public policy, and illegal.
The first of the modern trusts was the Standard Oil Trust, which was a
combination formed among several of the refiners of crude petroleum in
the States of Pennsylvania and Ohio in the year 1869. The original
combination grew out of the control of certain important patents
connected with the process of refining. It pursued its course for a
number of years without attracting much attention outside of the centre
of its operations; but of late years so much has been published in
regard to it that the very word "Standard" has come to be almost a
synonym for monopoly. It is probable that certain branches of the iron
and steel trade were the next to be combined by means of a trust, but as
these were arrangements between private firms, not much information as
to the time of their origin has reached the public. The second great
trust to attract general public attention was the American Cotton Oil
Trust, in which some of the same men who have so successfully engineered
the Standard Oil combination are heavily interested. These two great
trusts, the Cotton Oil and the Standard, have attracted widespread
attention, and, to a certain extent, the public has become familiar with
their organization and plan of operation; but popular feeling on the
subject was not fully aroused until 1887, when the newspapers of the
country made generally known the fact that the trust principle of
combination was being rapidly adopted by the manufacturers of a large
number of important lines of goods. The effect which these monopolies
were believed to have upon the public welfare was pointed out by writers
and speakers, and Congress and the State Legislatures were besought to
investigate these combinations and seek to suppress them. Meanwhile it
seems to be true that the popular agitation has had no effect in
lessening the number of trusts, or checking their formation and growth;
and they continue to increase and to gather their profits, while the
public impotently wonders what it is going to do about it. Let us be
careful, however, to make no assumption that the trust is injurious to
the public at large. That is a matter which is before us for
investigation.
It is safe to assume that the reader is somewhat familiar with the
general charges which have been brought against the trusts; but even if
this side of the story has not been heard, it is not unfair to look at
them first from the standpoint of the men who make and manage them. In
order to do this, suppose we select some particular trust which will
serve as a type, and imagine that some frank, candid manufacturer, who
is a member of this trust, comes before us to give an account of its
formation and operations. This man comes, we suppose, not as an
unwilling informant, or as one on trial. He is frank, honest, and
plain-spoken. He talks as man to man, and gives us, not the specious
argument of an eloquent pleader in defence of trusts, but just that view
of his trust and its work that his own conscience impels him to take.
Certainly, then, he deserves an impartial hearing.
A number of years ago the principal manufacturers of linseed oil in
the United States formed an association. It was started largely for
social ends, and was very successful. Business men are generally
most interested in their own plans and operations; and those who
are familiar with the same topics and have similar interests and
purposes are apt to make agreeable companions for each other. We
discussed many points connected with the management of our business
at the meetings, and by interchanging with each other our views
and experiences with different devices, methods of management,
etc., we were able to get much valuable information, as well as
social pleasure, from meeting one another.
Now within the past few years things have been going from bad to
worse with the manufacturers of linseed oil. The long and short of
it all was that the margin between the cost of the raw seed and
running our mills, and what we could get for the oil cake and the
linseed oil in the market, has grown exceedingly narrow. It's hard
to tell just what has caused it. They say over-production; but what
has caused the over-production? One thing that may have had
something to do with it is the new mills they have been putting up
in the Northwest. Many of the Eastern mills used to get large
quantities of seed from Iowa; but they are building cities out
there now, as well as raising flax-seed, and when they were booming
some of those cities they would raise heavy bonuses in aid of new
enterprises. Among these were some great linseed oil mills, which
have loaded up the market pretty heavily of late years; so that not
only has the price sagged down, but we have all had to work to get
rid of our stocks. The firms which had the best mills and
machinery, and were in a position to get their seed reasonably and
put their goods on the market with least expense for
transportation, etc., have been making a small profit over and
above their expenses. But some of the works which had to bring
their seed a long way, and which haven't quite as good machinery as
can be had now, were in a bad way. There were some of the oldest
houses in the trade among them, too, and with fine men at their
head. It was too bad to have them go under. They tried to cut down
expenses, but strikes and trouble with their men prevented their
saving much in that way. Then there was one item of expense which
they had to increase instead of cutting down: that was the cost of
marketing. Competition was so fierce, that, in order to keep up
their trade, they had to spend more on salaries of expensive
salesmen, and in advertising and pushing their goods, than they
would dream of ordinarily.
It seemed too bad to cut each other's throats in that way, for that
was what it amounted to, and when the association met,--or what was
left of it, for the business rivalries had grown so bitter that
many of the former personal friendships between the members had
become strained and one after the other had dropped out,--the
situation was discussed by the few members who met together. It
was discussed earnestly, too, by men who felt an interest in what
they said, because unless some remedy could be devised, they had
got to sit still and watch the savings of a lifetime slip through
their fingers. One thing was very clear to all. Though competition
was as sharp as any one could possibly wish, the public was not
getting such a wonderful benefit after all. Prices were not so very
much lower for oil, nor higher for seed. It was the selling expense
which had run up to a ruinous figure; and on one point all the
members were unanimous,--that if all the firms in the trade could
only work together in harmony in marketing their goods, they could
save enough in salesmen's salaries, etc., to make a great
difference in the profit-and-loss account without affecting the
selling prices in the market one penny.
Another very important matter, which we had to handle pretty
tenderly in our discussions, was that of adulteration. I must
confess that a good many firms in the trade, who used to be above
any thing of the sort, have been marketing some goods in the past
few years which were not exactly the "pure linseed oil" which they
were labelled. It's a mean business--adulteration,--but not many of
our customers ever test their purchases. The one thing they are apt
to look at is price, for they are buying to sell again; and when
rivals are selling a cheaper oil that seems just as good until it
is laid on as the pure linseed that you are obliged to ask a higher
price for, the temptation to meet them at their own game, rather
than lose your old customers, is a very strong one. Certainly, when
competition took this form, it hurt the public even more than it
hurt us. When people wish to buy pure linseed oil they ought to
have some prospect of getting it, instead of getting an adulterated
mixture of various substances; but at the rate competition was
running, there seemed to be small prospect that there would be any
really pure linseed oil put on the market in a short time. We have
often discussed the possibility of stopping these adulterations,
but it was a hard matter to cure by mere mutual agreement. How do I
know what my competitor in a city a hundred miles away, does with
the vats in his cellar after working hours, even if he has solemnly
agreed not to adulterate his goods? For I must confess that there
are a few men in our trade who are as tricky as horse jockeys.
Quite a number of improvements have been patented in linseed oil
machinery in the past twenty years. Nothing wonderful, but things
that effect little economies in the manufacture. We could have done
without them; but when a few firms took them up, of course the rest
had to follow suit, or fall behind in the race of competition. We
have had to pay a heavy royalty on some of these machines, and it
has been rather galling to count out our hard-earned dollars to the
company which has bought up most of the patents, and is making 100
per cent. a year on what it paid for them, with no risk, and
without doing a stroke of work. Now if we manufacturers could work
in harmony, we could make this company come down from their high
horse, and they would have to ask a reasonable price for their
machines. But we could do more than this. It stands to reason that
a good many improvements will be made in our machinery in the
future. We don't object to paying a fair price to any inventor who
will work out these new ideas for us; but it does seem unjust for
him to go and sell them to some outside company for a song, and
have that company bleed the users of the improvement for every
ounce they will stand. Now, by working together, we can refuse to
pay royalties on any thing new which comes up; but require,
instead, that any new patent in our line be submitted to a
committee, who will examine and test it; and if they find it to be
of value, will purchase it for the use of all members of the
association.
Some of the members thought this was as far as we ought to go. They
were opposed to "trusts" on principle. But the great majority saw
so clearly where we could continue to better ourselves that they
became enthusiastic over it.
Some speculators, in years of short crops, have occasionally tried
to "corner" flax-seed in a small way. We could refuse to buy except
directly from the growers, and that branch of speculation would be
a thing of the past. We have sent out some pretty sharp men as
buyers, and sometimes they have bought flax-seed in some of the
backwoods districts at very low rates. At other times, two buyers
from rival firms have run counter to each other, and paid prices
larger than their employers could really afford. But with our
combination, we cannot only fix uniform prices for seed, but we can
send out only enough buyers to cover the territory; and the work of
buying is reduced to simply inspecting and weighing the seed.
Now another thing: Of course, not every manufacturer in the
business owns his mills. It is a fact that since the close times of
the past few years the majority of the firms are carrying mortgages
on their mills; and some of them in the West are paying as high as
eight or ten per cent. interest. But with the combined capital of
all the firms in the trade at our back, we can change all that.
Either by a guaranty, or by assuming the obligations, we can bring
the interest charges on every mill in the association down to four
or five per cent. at most.
We have been paying enormous rates to fire insurance companies.
They are not as familiar with our business as we are ourselves, and
they don't know just how much risk there really is; so they charge
us a rate which they make sure is high enough. We can combine
together and insure ourselves on the mutual plan; and by
stipulating that each firm shall establish and keep up such
precautions against fire as an expert may direct, we can not only
reduce the cost of our insurance to that of our actual losses, but
we can make these a very small amount.
It may be said that we might have done all these things without
forming any trust to control prices. But the practical fact was
that we could not. There was so much "bad blood" between some of
the different firms in the business, from the rivalry and the sharp
competition for trade, that as long as that was kept up it was
impossible to get them to have any thing to do with each other in a
business way. It was no small task to get these old feuds patched
up; but some of the best and squarest men in the business went
right into the work, and at meetings of the association, and
privately, exerted all their influence to forward this coming
together for mutual aid and protection. They did it
conscientiously, too, I think, believing that it was necessary to
save many of us from financial ruin; and that we were not bound,
under any circumstances, to sacrifice ourselves for the sake of the
public. The trust has been formed, as every one knows, and many of
the things we planned to do have been already accomplished. We have
stopped adulterations on all goods made by members of the trust;
and the improvement in the quality of linseed oil which has been
effected is an important benefit to the public. We are managing all
the works in the trust as if it were all a single property,
controlled by different managers; and the saving in expense, over
the old plan of cut-throat competition, when everybody was striving
to save himself and sink his rivals, is an enormous one.
One thing which has caused much hue and cry, is the fact that we
have closed half a dozen mills or so. But the matter stood in this
way: these mills were not favorably situated for doing business,
all things considered; and all the mills in the country cannot run
all the time, because there are more mills in existence than are
needed to supply the market. These mills must have been closed
soon, if the trust had not commenced operations, because they could
not be run under the old regime and pay expenses. We knew we could
make the oil at a less cost in our other mills, so we concluded to
buy out the owners of these at a fair price, and shut up the works.
Prices of linseed oil have been raised somewhat, we confess; but we
claim that they had been forced down much too low, by the excessive
competition which has prevailed for a few years past. Of course
some of the most hot-headed and grasping among us, were anxious to
force prices away up, when they once realized that we had an
absolute monopoly of the linseed oil trade of the country; but the
great majority were practically unanimous in a demand for just
prices only, and the adoption of the policy of live and let live;
for trust-makers are not entirely selfish.
We claim, moreover, that we are breaking no legal or moral law by
this action. We are, for the most part, private parties or
firms--but few corporations,--hence the attempt to abolish trusts
on the ground that the corporations composing trusts have exceeded
the power given by their charters will fail to reach our case. We
have certainly done this: we have killed competition in the linseed
oil trade; but we submit that with so many other interests and
trades organized to protect themselves from outside competition,
and control the prices at which their products are sold to the
public, we were, in self-defence and for our own preservation,
obliged to take this step.[1]
[1] It should be explained that the above is not given as a
_bona-fide_ statement of facts concerning this especial trust,
but as a vivid description of the organization and plans of a
typical trust, from the standpoint of its owners and managers.
Probably, too, few or no existing trusts have tried to benefit
themselves in so many different ways as we have supposed this
imaginary trust to have done. But to shorten our investigation,
the author has purposely extended the scope of this trust's
action, to bring out clearly the variety and importance of the
methods by which a trust reaps profits, aside from any advance in
the price of its product.
If we omit the references to the especial trade, the above view of a
trust from the trust-makers' standpoint will do for almost any of the
many combinations which have been formed by different manufacturers for
the purpose of controlling production and prices. One thing is clearly
indicated in the above, and will certainly be conceded: That the men who
have formed these trusts are animated by the same motives as those that
govern humanity in general. They have, in some cases at least, known
what it was to be crowded close to the wall by severe competition. They
all at once saw a way opening by which they could be freed from the
worries and losses which had been making their business one of small and
uncertain profits, and would be set squarely on their feet with a sure
prospect for large and steady gains. It is using a common expression to
say that they would have been more than human if they had refused to
improve this opportunity. Certainly, then, in examining further the
trusts, we shall do so with no feeling of personal prejudice toward the
men who originated them and carry them on.
As we have given a hearing to the case from the trust-makers'
standpoint, it is only fair that we should hear at equal length from the
public who oppose the trusts; but to abbreviate the investigation, let
us suppose that we are already familiar with the various charges which
are brought against the trust monopolies, and let us proceed at once to
consider the actual effect of the trusts upon the public.
Since we have heard so much in defence of the linseed oil trust, it will
be well for us to inquire concerning the results, in which the public is
interested, which have followed its organization. During the year 1887
(the trust was formed in January of that year) the price per gallon of
linseed oil rose from thirty-eight cents to fifty-two cents; and this
price was kept up or exceeded during 1888. That is to say, every
purchaser of linseed oil, or every one who had occasion to have
painting done, pays to the members of this trust, for every gallon of
oil that he uses, about fourteen cents _over and above_ the sum which he
would pay if competition were allowed to do its usual work in keeping
down prices.
What profits are the members of this trust making? Let us suppose that
they were just able, at the old price of thirty-eight cents per gallon,
to pay all their running expenses and four per cent. on the capital
invested, making nothing for profits beyond a fair salary to the
managers of the business. Then the gain of fifteen cents a gallon in the
selling price is _clear profit_ to them. Now add to this the fact, which
was plainly brought out in the foregoing supposed statement by a member
of the trust, that it is possible by means of the trust to greatly
reduce expenses in many directions as well as to increase receipts, and
we begin to form some conception of the profits which this trust is
harvesting. If we wish to put the statement in figures, suppose we take
the annual consumption of linseed oil in the country at thirty million
gallons. Then the profits of the trust from the increased prices alone
will amount to four and one half million dollars per annum.
There is another way in which trusts directly affect the public, which
has received very much less attention than it deserves. Besides the
people who use the linseed oil and pay the trust an extra fourteen cents
a gallon for the privilege, there are a great number of people who would
have used oil if the price had not advanced, but who cannot afford to do
so at the advanced price. It is a well-known fact that every increase in
the price of any article decreases the demand, and the advance in the
price of linseed oil has undoubtedly had a great effect in decreasing
the consumption of oil. So while it is undoubtedly true that _at the
trust's prices_ there are more linseed-oil mills in the country than are
needed to supply its wants, yet if the prices were lowered to the point
which free competition would fix, there would probably be demand enough
to keep all the mills running. To the trust, then, must be ascribed the
final responsibility for the stoppage of the mills and the loss of
employment by the workmen. Nor does the effect upon the labor market
stop there. From the fact that less people can afford to paint their
houses, because of the higher price of the oil, it is certain that there
will be less employment for painters; and as less paint is used, all
those interested in and employed in the paint trade are sufferers. It is
to be remembered that we are speaking of the linseed oil trust only to
make the case more vivid. The principle is general and applies equally
well to other trusts, as for instance to the loss of employment by
thousands of men working in refineries controlled by the sugar trust, in
the fall of 1888. Still another effect of this trust's action is to be
especially noted: the fact that the diminished production of oil lessens
the demand for seed; and also that in the purchase of seed, as well as
in the sale of oil, the trust has killed competition. The trust may, if
it chooses, fix uniform prices for the seed which it purchases; and the
farmer can take the prices they offer or keep his seed. Fortunately the
farmer can raise other products instead of flax-seed, and will do so if
the price is lowered by any large amount.
One other possible mode of profit for the trusts, which, however, they
are hardly likely to engage in--from their fear of public opinion, if
for no other reason--lies in the power which they possess over the labor
market. It will probably be conceded at once that the rate of wages in
any occupation depends, among other things, upon the competition of the
various workmen who seek employment in that occupation, and also upon
the competition among those who wish to hire men to work at that
occupation. It is plain that when the competition among employers to
secure men is active, wages will rise; and when this competition falls
off, wages will fall. Now the trust is more than a combination for
selling purposes only. It is a combination of all the properties
concerned under practically a single ownership. Clearly, then, as the
various mills belonging to a single owner will not compete with each
other in the employment of labor, the mills belonging to a trust will be
no more likely to do so. Thus if it were not for the fact that the
workmen are able to take up some other employment if their wages are too
low, they would be absolutely obliged to take what wages, great or
small, the trust chose to give, and would be as dependent for their food
and clothing upon the trust as was the slave upon his master.
The question is often asked why trusts have not been formed before, and
what the causes are which have started them up so rapidly in such varied
lines of industry. There is certainly room for much honest difference of
opinion in reference to these causes; but one cause concerning whose
influence there can be no dispute is the culmination of the change from
the ancient system of manufacturing to the modern. Let us briefly trace
the manner in which this branch of civilization has grown: In the most
primitive state of existence, each man procures and prepares for himself
the few things which he requires. With the first increase in
intelligence those of most skill in making weapons and preparing skins
make more than they require for themselves, which they exchange with
others for the products of the chase. The next step is to teach to
others the special skill required, and to employ them to aid the chief
workman. Conditions analogous to these existed down to the end of the
last century. The great bulk of all manufacturing was done in small
shops, each employing only a few workmen; and the manufacturer or master
workman labored at the side of his journeymen and apprentices. The
products of these little workshops were sold in the country immediately
adjacent. Of course the number of these scattered shops was so great
that the possibility of uniting all the manufacturers in any one trade
into a single organization to prevent competition among them, was beyond
the thoughts of the most visionary.
The present century has seen three great economic wonders accomplished:
the invention of labor-saving machinery, greatly multiplying the
efficiency of labor in every art and trade; the application of steam
power to the propulsion of that machinery; and the extension over all
civilized lands of a network of railway lines, furnishing a rapid, safe,
and miraculously cheap means of transportation to every part of the
civilized world. In order to realize the greatest benefit from these
devices, it has become necessary to concentrate our manufacturing
operations in enormous factories; to collect under one roof a thousand
workmen, increase their efficiency tenfold by the use of modern
machinery, and distribute the products of their labor to the markets of
the civilized world. The agency which has acted to bring about this
result is competition. The large workshops were able to make goods so
much cheaper than the small workshops that the latter disappeared. Then
one by one the large workshops were built up into factories, or were
shut up because the factories could make goods at less cost. So the
growth has gone on, and each advance in carrying on production on a
larger scale has resulted in lessening the cost of the finished goods.
Competition, too, which at first was merely an unseen force among the
scattered workshops, is now a fierce rivalry; each great firm strives
for the lion's share of the market. Under these conditions it is quite
natural that attempts should be made to check the reduction of profits
by some form of agreement to limit competition. Many plans have been
tried which attempted to effect this by mere agreements and contracts,
methods which left each property to the control of its special owners;
but none have been permanently successful. By the trust plan of
combination, the properties are practically consolidated; and the
failure of the combination through withdrawal of its members is avoided.
It offers to manufacturers, close crowded by competition, a means of
swelling their profits and ensuring against loss; and encouraged by the
phenomenal success of the Standard Oil combination, they have not been
slow to accept it.
The point to which we need to pay especial attention, in the foregoing
consideration of the causes which have produced trusts, is the fact that
the cost of production is continually being cheapened as it is carried
on on a larger and larger scale. And because the cheaper mode of
production must always displace the mode which is more expensive: as
Prof. Richard Ely expresses it, "Production on the largest possible
scale will be the only practical mode of production in the near future."
We need not stop to prove the statement that the cost of production by
the modern factory system is a small fraction of that by the old
workshop system. The fact that the former has beaten the latter in the
race of competition would prove it, if it were not evident to the most
careless observer. But it is also a fact that the trust, apart from its
character as a monopoly, is actually a means of cheapening production
over the system by independent factories, for it carries it on on a
larger scale than it has ever before been conducted. Our review of the
trust from the trust makers' standpoint showed this most forcibly; and
we shall see more of it as we study further the methods by which the
monopoly gains an advantage over the independent producer in dispensing
with what we may call the waste of competition. In the argument
presented by the Standard Oil Trust before the House Committee on
Manufactures in the summer of 1888, occurs the following statement of
the work which that monopoly has done in cheapening production:
"The Standard Oil Trust offers to prove by various witnesses,
including Messrs. Flagler and Rockefeller, that the disastrous
condition of the refining business and the numerous failures of
refiners prior to 1875 arose from imperfect methods of refining,
want of co-operation among refiners, the prevalence of speculative
methods in the purchase and sale of both crude and refined
petroleum, sudden and great reductions in prices of crude, and
excessive rates of freight; that these disasters led to
co-operation and association among the refiners, and that such
association and co-operation, resulting eventually in the Standard
Oil Trust, has enabled the refiners so co-operating to reduce the
price of petroleum products and thus benefit the public to a very
marked degree and that this has been accomplished:
"1. By cheapening transportation, both local and to the seaboard,
through perfecting and extending the pipe-line system, by
constructing and supplying cars with which oil can be shipped in
bulk at less cost than in packages, and the cost of packages also
be saved; by building tanks for the storage of oil in bulk; by
purchasing and perfecting terminal facilities for receiving,
handling, and reshipping oils; by purchasing or building steam tugs
and lighters for seaboard or river service, and by building
wharves, docks, and warehouses for home and foreign shipments.
"2. That by uniting the knowledge, experience, and skill, and by
building manufactories on a more perfect and extensive scale, with
approved machinery and appliances, they have been enabled to and do
manufacture a better quality of illuminating oil at less cost, the
actual cost of manufacturing having been thereby reduced about 66
per cent.
"3. That by the same methods, the cost of manufacture in barrels,
tin cans, and wooden cases has been reduced from 50 to 60 per cent.
"4. That as a result of these savings in cost, the price of refined
oils has been reduced since co-operation began, about 9 cents per
gallon, after making allowance for reduction in the price of crude
oil, amounting to a saving to the public of about $100,000,000 per
annum."
Certainly it would seem that this is a strong defence of the trust's
character as a public benefactor; but it is well to note that while it
has been making these expenditures and reducing the price of oil to the
consumer, it has also been making some money for itself. The profits of
this trust in 1887, according to the report of the committee appointed
to investigate the subject of trusts by the New York Legislature, were
$20,000,000. The nominal capital of the trust is but $90,000,000, a
large portion of which is confessedly water. In answer to the statement
that the price of oil has been reduced steadily by the operations of the
trust, it is charged that no thanks is due to the trust for this
benefit. The trust has always wished to put up the price, but the
continual increase in the production of the oil fields has obliged the
trust to make low prices in order to dispose of its stock. There are
also about one hundred independent refineries competing with the trust,
and their competition may have had some influence in keeping prices
down. It is undoubtedly true that the economy in the storage,
transportation, and distribution of oil by the systematic methods of the
Standard Oil Trust has made it possible to deliver oil to the consumer
at a small fraction of its cost a decade ago. But it is also true that a
good part of the reduction in the price of oil is due to the abundant
production of the petroleum wells, which have furnished us so lavish a
supply. The principal charges against this trust, made by those who were
conversant with its operations, have never been that it was particularly
oppressive to consumers of oil; but that, in the attempt to crush out
its competitors, it has not hesitated to use, in ways fair and foul, its
enormous strength and influence to ruin those who dared to compete with
it.
In a later chapter we shall be able to study these more intricate
questions regarding trusts with a better understanding of our problem.
Let us pay some attention now to the growth of the trusts and of
combinations in general for the purpose of limiting competition among
manufacturers, which has taken place within the past few years.
According to the little book entitled "Trusts," by Mr. Wm. W. Cook, the
production of the following articles was, in February, 1888, more or
less completely in the hands of trusts: petroleum, cotton-seed oil and
cake, sugar, oatmeal, pearl barley, coal, straw-board, castor oil,
linseed oil, lard, school slates, oil cloth, gas, whiskey, rubber,
steel, steel rails, steel and iron beams, nails, wrought-iron pipe, iron
nuts, stoves, lead, copper, envelopes, paper bags, paving pitch,
cordage, coke, reaping and binding and mowing machines, threshing
machines, ploughs, and glass--a long and somewhat jumbled list, to
which, however, at the present time, there should probably be added:
white lead, jute bagging, lumber, shingles, friction matches, beef,
felt, lead pencils, cartridges and cartridge-shells, watches and watch
cases, clothes-wringers, carpets, coffins and undertakers' supplies,
dental tools, lager beer, wall paper, sandstone, marble, milk, salt,
patent leather, flour, and bread. It should be said that, as regards
most of these combinations, the public is ignorant beyond its knowledge
that some form of combination for the purpose of restricting competition
has been formed. For the purpose of our present investigation it makes
little difference just what this combination may be.
The salient facts for us to note are, that among the manufacturers of
this country there has arisen a widespread movement to partially or
wholly avoid competition in the production and sale of their goods; that
in a very great number of manufacturing industries these combinations
have progressed so far that their managers have been able to advance
prices and check production; that some of these combinations have taken
the form of trusts, and by this means have every prospect of maintaining
their stability and reaping their enormous profits with the same
permanency and safety as has their predecessor, the Standard Oil Trust;
and, finally, that with this prospect before them, our manufacturers, as
a class, would lose their reputation as shrewd business men if they did
not follow out the path marked out for them, and combine every
manufacturing industry in which combination is possible upon the plan of
the trust.
In conclusion, it may be well to examine the statement attributed to Mr.
Andrew Carnegie, that, "there is no possibility of maintaining a trust.
If successful for a time, and undue profits accrue, competition is
courted which must be bought out; and this leads to fresh competition,
and so on until the bubble bursts. I have never known an attempt to
defeat the law of competition to be permanently successful. The public
may regard trusts or combinations with serene confidence."
Surely if this statement is true, we have little need for further
examination of this subject. We have now knowledge enough of our subject
to enable us to determine its truth or falsity. We have found in the
actual trusts that we have examined none which have shown signs of
succumbing to outside competition. More than this, however, we have seen
that it is possible for a trust to carry on business and deliver goods
to the consumer at much less cost than an independent manufacturer can.
And as surely as this law holds that production on the largest scale is
the cheapest production, so surely will the trust triumph over the
independent manufacturer wherever they come into competition. If the
trust were always content when its competitors were disposed of, to make
only the profits which it could secure by selling at such prices as the
independent manufacturers could afford, there would be less outcry
against it. But with the consumers wholly dependent upon it for
supplies, the prices are in the trust's hands; and the tendency is to
reap not only the profits due to its lessened cost of production, but
also all it can secure by raising the selling price without arousing too
much the enmity of the public.
Clearly the trust is at once a benefit and a curse. Can we by any means
secure the benefit which it gives of reduction in cost without placing
ourselves at the mercy of a monopoly? This is the question which must
occur to every thoughtful man. Before we can answer it, however, we must
examine the effects of competition and monopoly in other industries.