It is a well known historical fact that the extraction of metals and
minerals from the earth has been more subject to monopoly than almost
any other business. It was, and in a large part of the civilized world
still is, esteemed a prerogative of the sovereign. Agricultural products
have always been gathered from a wide area; manufactures were formerly
the product of mean and scattered workshops; but in the working of a
rich mine, there was a constant income more princely than was to be
obtained from any other single source. Again, with all due respect to
the traditions of former generations, it seems to have been thought that
any thing to which no one else had a valid title belonged to the crown;
and as no one was able to assert any stronger claim to the ownership of
mineral wealth than that they had stumbled upon it, it was natural for
the sovereign to claim it as his. We see thus the recognition at an
early date of the inherent difference between natural wealth and that
created by labor.
But coming down to the present time, it is evident that the business of
extracting some of the rarer metals from the earth is peculiarly liable
to become a monopoly. It is one of the new laws of trade, whose force
and importance we are just finding out, that the ease of restricting
competition varies with the number of competing units which must be
combined. Our most valuable metal, iron, is so widely distributed that
any attempt to control the whole available supply could not long be
successful. But it is one of the peculiarities of modern industry that
by its specialization it furnishes constant opportunities for the
establishment of new forms of monopoly, whose power is not generally
understood. In the manufacture of Bessemer steel, which has now largely
displaced wrought iron in the arts, it is necessary to use an iron ore
of peculiar chemical composition. This ore is found most abundantly and
of best quality in the mines of the Vermilion range, lying about one
hundred miles north of Duluth, Minn., and in the mines of the Marquette
Gogebic, and Menominee regions in the north Michigan peninsula.
According to good authorities, a combination more or less effective has
been formed among the owners of all these mines; and the highest price
is charged for the ore which can be obtained without driving the
customer to more distant markets for his supply. Among the mines of this
district, competition, if not entirely stopped, is greatly checked, and
is likely soon to be entirely a thing of the past. It is an interesting
fact that among the members of the syndicate which owns the principal
mines in the Vermilion regions are some of the trustees of the Standard
Oil Trust. It is stated that some of these mines have paid 90 per cent.
per annum on their capital stock, which, it is to be noted, represents a
much greater sum than the amount invested in the plant of the mine.
It is thus apparent that the mining of the raw ore from which iron is
made, abundant and scattered though it is, is not free from monopoly.
The combinations to restrict competition among the makers of cast iron
and of steel belong properly under the head of monopolies in
manufactures. We need only refer here to the fact that they are supposed
to exist and have more or less control of the market.
Fortunately for the stability of our system of currency and of finance,
the precious metals, through the small ratio which their current
production bears to the world's stock, and the fact that this stock is
scattered among an enormous number of holders, are safe from any
attempts to establish a monopoly to control their price through the
control of their production. Other metals, however, which are like
silver and gold in being found in workable deposits at but a few points
on the globe but are there found in abundance, are peculiarly adapted to
facilitate the schemes of monopolists. Of lead, copper, zinc, and tin,
we require a steady supply for use in the various arts; and the
statement has been made that the supply of each one of these is in the
hands of a trust. To see the effect which these combinations have had on
prices, let us examine the prices which have prevailed for two years
past on these four articles, as shown in the following table:
Table of wholesale prices (cents per lb.) in New York City of copper,
lead, tin, and zinc during 1886, 1887, and 1888:
+--------------+-------+------+-------+------+
| |Copper | Lead | Tin | Zinc |
| +-------+------+-------+------+
| 1885 Dec. 31 | 11.50 | 4.60 | - | 5.35 |
| 1886 Apr. 3 | 11.45 | 4.90 | - | 5.50 |
| 1886 July 3 | 10.00 | 4.90 | - | 5.60 |
| 1886 Oct. 7 | 11.00 | 4.35 | - | 5.60 |
| 1887 Jan. 5 | 12.25 | 4.75 | 24.50 | 6.42 |
| 1887 Apr. 6 | 11.00 | 4.75 | 24.50 | 6.50 |
| 1887 July 6 | 10.50 | 4.92 | 25.00 | 7.00 |
| 1887 Oct. 6 | 11.00 | 4.45 | 23.30 | 6.75 |
| 1887 Dec. 29 | 17.75 | 5.00 | 37.00 | 6.00 |
| 1888 Mar. 29 | 17.50 | 5.50 | 39.50 | 6.75 |
| 1888 July 3 | 17.25 | 4.25 | 22.00 | 6.50 |
| 1888 Oct. 4 | 18.50 | 5.75 | 26.00 | 6.75 |
| 1889 Jan. 3 | 17.50 | 3.85 | 22.00 | 5.50 |
| 1889 Apr. 29 | 16.50 | 4.25 | 23.00 | 6.50 |
+--------------+-------+------+-------+------+
Taking the evidence of this table, we conclude that the combination
which is said to control the zinc and lead markets is probably not a
trust, but a "Producer's syndicate" or corner. The prices of lead show
no such firm tendency to advance as would be expected if the production
was in the hands of a single combination.
The prices of zinc, however, show a decided advance in the past two
years over the prices for the three years preceding, the average price
for 1886 being but 5.50, while for 1887-8 it is 6.58. This is a rise of
no small importance, and the way it is maintained seems to give evidence
of restriction of competition among producers.
But the striking fact in the above table is the evidence it presents of
the work which has been done by that most gigantic and daring
combination for the suppression of competition ever organized, the
French Copper Syndicate or _La Société Industrielle Commerciale des
Metaux_. This syndicate of French capitalists began operations in 1887,
with the intention of "cornering" the tin supply of the world. The rise
in price which was due to their operations is shown in the above table.
But before completing their scheme they relinquished it for a grander
enterprise, which would embrace the copper production of the world. They
made contracts with the copper-mining companies in every country of the
globe, by which they agreed to purchase all the copper which should be
produced by the mines for three years to come at the fixed price of 13
cents per pound, and a bonus of half the profit which the syndicate was
able to make from its sales to consumers. In effect this move killed the
competition in the copper trade of the world, and placed every consumer
at the mercy of this Paris syndicate. The advance in tin was of short
duration, and those who suffered by it were speculators rather than
consumers; but the advance in copper, as shown by our table, is still
firmly maintained, and its effect on the industries using copper has
been seriously felt all through 1888. In October, 1888, the _Société_
extended its contracts with several mining companies to cover a period
of twelve years, and advanced its price to the producers to 13½ cents
per pounds. At the same time, to avoid the accumulation of stock, which
the diminished consumption consequent upon the increased price had
caused, and which it had been generally predicted would finally be the
cause of the _Société's_ downfall, they arranged for the restriction of
the production of the mines. If the _Société_, which is backed by the
heaviest capital, and managed by the shrewdest business skill of France,
does what it intends to do, and its tributary producers are faithful to
their contracts, for ten years to come, yes, for all years to come--for
it is not likely that an enterprise of such golden returns will ever be
abandoned if it can once profitably be carried out,--the world must pay
for its copper whatever these monopolists demand.
Probably the argument against the private ownership and control of the
wealth which nature has stored up for the whole world's use was never
brought home to men's minds so forcibly as it has been by the acts of
these French speculators. Copper is a necessity to the industries of
civilized society; and the mind of every unprejudiced person protests
against the injustice of placing in the hands of any single firm or
combination the power to exact such prices as they choose for the great
staples of human consumption. This increase of price of about 7 cents
per pound is a tax which affects, directly or indirectly, every person
in the civilized world. Let us inquire what becomes of this tax. Perhaps
2 cents per pound will go into the pockets of the Frenchmen who have
engineered the combination, a sum which will give them, if we set the
annual consumption of copper at 400,000,000 pounds, a comfortable net
income of about $8,000,000 per annum. The lion's share of the profits is
taken by the producers, however; who, if 10 cents is the price at which
copper would sell if free competition were in force, are receiving under
the present contract with the _Société_ about 5 cents per pound as a
reward for their co-operation in its monopolistic scheme.[2]
[2] Since the above was written the collapse of the copper
syndicate has taken place. The causes which brought this about were
the failure to complete the contracts for restriction of
production, and lack of funds to meet the current liabilities. The
reason for both these must be largely ascribed to the fact that it
had come to be generally realized how great and how obnoxious the
monopoly was; and capitalists rightly feared that government
interference would be interposed to check the monopoly's
operations. If the syndicate had made its long-time contracts at
the start, or if it had been bold and shrewd enough to have
inveigled speculators on the bear side of the market into operating
against it, M. Secretan and his associates might have won as many
millions as they could have wished. It is a significant fact that
the downfall of the syndicate was not followed by the
reëstablishment of free competition. Instead there was at once talk
of another syndicate being formed to hold the copper stored up by
the _Société_, and keep the price up as long as possible. On this
side of the water the question was at once canvassed whether a
combination could be formed among the different American companies
to prevent competition and support the price. Evidently the failure
of this scheme has not discouraged the makers of monopolies.
It is appropriate here, too, to make reference to the enormous profits
which the owners of the copper mines of the country are receiving, apart
from the special influence of this great syndicate. The richest and most
valuable copper mines in the world lie on the southern shore of Lake
Superior. The Calumet and Hecla Company, which works one of the richest
deposits of native copper ever found, has a capital stock of $2,500,000,
on which it has paid, since 1870, $30,000,000 in dividends. The reports
of these companies to their stockholders show that the present cost of
refined copper at the mines is as low as 4 cents per pound, and its
cost, delivered in the New York market, is only 5¾ cents. Probably the
officers of these companies are right in their belief that in no other
mines of the world can copper be produced so cheaply. But the question
that comes with force to every thinking man is: If the wealth of the ore
in these mines is so much greater than that in any other that it can be
produced at so much less cost, does there not exist here a natural
monopoly, of which the owners of these mines are getting the sole
benefit? And, again, by what right does the chief benefit from this rich
deposit accrue to the few men who own the mines, rather than to the many
men in all parts of the world who wish to use their product?
Great and important as is the copper monopoly, of far greater importance
to us than any and all the combinations in the metal industries are the
monopolies which control the price of coal. We do not often realize how
intimately connected is our nineteenth-century civilization with the
store of fuel laid up for us in distant geologic ages. And in this
country, with our severe climate, coal is all-important as a factor of
domestic economy, as well as a necessity to manufacturing and
metallurgical industries. The total cost to the consumers of the coal
used in the United States every year (about 120,000,000 tons), calling
the average retail price $4.00 per ton, is nearly $500,000,000, or over
$8.00 per annum for every man, woman, and child in the country. Surely,
then, the statement which we make at the outset, that the coal trade of
the United States is in the hands of monopolists; and that competition,
where not killed, is almost impotent to keep down prices, is one which
merits earnest attention.
The United States possesses coal fields of enormous extent and richness.
The mineral is widely distributed, too, productive mines being now in
operation in 27 of the States and Territories. Anthracite coal, however,
which is by far the best adapted to domestic use, only occurs in a
limited area in the State of Pennsylvania; but here the deposit is of
phenomenal richness. The total area of the Pennsylvania anthracite field
is about 300,000 acres. Of this area nearly 200,000 acres is owned by
seven railway corporations. These companies, either directly or through
subsidiary companies controlled in the same interest, carry on mining
operations, carry the coal to market, and sell it. The following
figures[3] exhibit the receipts of each of these companies from sales of
coal from their mines during the year 1887:
+-----------------------------------------+-----------+------------+
| COMPANY. | TONS. | RECEIPTS. |
+-----------------------------------------+-----------+------------+
| Philadelphia and Reading R. R. Co. | 7,555,252 |$18,856,550 |
| Central R. R. Co. of N. J. | 4,852,859 | 12,132,146 |
| Lehigh Valley R. R. Co. | 5,784,450 | 14,461,125 |
| Del., Lackawanna, and Western R. R. Co. | 6,220,793 | 19,044,803 |
| Delaware and Hudson Canal Co. | 4,048,340 | 10,100,118 |
| Pennsylvania R. R. Co. | 3,818,143 | 8,820,718 |
| New York, Lake Erie, and Western R'y Co.| 2,363,290 | 6,846,342 |
| +-----------+------------+
| Total |34,643,127 |$90,261,805 |
+-----------------------------------------+-----------+------------+
[3] Compiled from "The Coal Trade," 1888, (H. E. Saward), and
"Poor's Manual of Railroads," and partially estimated.
Thus these seven corporations alone produced from their own mines,
carried to market, and sold, over 34,000,000 tons of coal during the
year, for which they received about $90,000,000. Of the magnitude of the
operations carried on by these great corporations we now have some idea.
Let us next inquire to what extent competition is allowed to act between
them to keep down prices.
Many years ago these seven companies formed the famous anthracite-coal
pool. This was an agreement by which all the companies concerned agreed
to maintain a uniform selling price for coal at all important
distributing points where two or more of the companies came into
competition. Some of the prices which were fixed by the pool were
extremely arbitrary. Cities in Pennsylvania within an hour's ride of the
coal fields had to pay nearly as high a price for coal as those 500
miles or more distant. Rates of transportation on coal mined by
individual operators were made such that the latter could not afford to
sell below the prices fixed by the pool, even if they had been so
disposed. At the present time the situation has been modified by the
long and short-haul clause of the Interstate Commerce law, by which the
railroad is obliged to make its transportation rates somewhat
proportionate to distance, and also by the passage of a law in the State
of Pennsylvania, by which the acts of the anthracite-coal pool were
declared illegal and punishable. Nominally, therefore, the pool is a
thing of the past; but the practical fact is, that by secret or tacit
agreement the various companies are not competing with each other any
more now than in the days of the pool, and at points like New York or
Buffalo, where two or more roads meet, the same prices are quoted by
each different company.
Nor are the charges against the pool comprehended in its autocratic
determination of the price of coal. To make production correspond with
price, it was necessary at times to close collieries entirely, throwing
the miners out of employment. The individual operators, too, have no
love for the combination. Their profit depends more than any thing else
on the rate of transportation, and thus whether they shall make or lose
depends on the railroad companies. They claim that the railways base
their rates for carrying coal upon the principle of "charging what the
traffic will bear." This is a matter, however, which we can better
discuss in the next chapter.
It is thus evident beyond dispute that the production of anthracite coal
in this country is an industry uncontrolled by competition. To sum up:
these seven great corporations own more than two thirds of the area in
which workable anthracite coal is found: they mine and market directly
the great bulk of the total production; the individual operators are
dependent on the railways for getting their coal to a market; and the
price at which they can afford to sell it depends on the railroad
rates. Finally, consider that these seven companies work in harmony,
both as to traffic rates and prices for the sale of coal, and the
conclusion is irresistible that competition in anthracite-coal
production in the United States is practically dead.
Let it be noted, for the benefit of those who may conceive that the
above statement is unfair to the railway companies, that no charge is
here made that the prices fixed by the companies for the coal are at the
present time extortionate or unjust. That is a separate matter; in
which, doubtless, there would be plenty to affirm on the one hand that
the prices charged were no more than a just compensation, while their
opponents would declare that the prices adopted by the pool favor some
points to the prejudice of others, and that the statement that they were
on the whole exorbitant was proven by the fact that the railway lines in
the coal regions, where honestly managed, have paid great dividends on
the actual capital invested.
Compared with the production of Pennsylvania anthracite, the coal
production of any other single section seems small. But it is only so by
comparison, for the Western coals, while inferior in quality, are
abundant and easily mined, and must remain the staple for general
consumption throughout the region west of the Mississippi, as well as
for large sections further east.
As is well known, the people of the Western and Northwestern plains are
wholly dependent upon the railroads for their supplies of every
description, except the raw products of the soil. The railways
themselves are great consumers of coal, and have bought up large tracts
of coal lands and opened mines. In the desire to develop traffic and
ensure a supply of coal to the settlers on their lines--we will even say
of cheap coal,--the railway companies have entered the coal trade
themselves, either directly or through subsidiary companies. Thus it
comes about that hundreds of thousands of people of the West and
Northwest must pay for coal, which is an absolute necessity of life
during several months of the year, whatever price the managers of a
single railway corporation may demand. Let it be understood that no
charges are here made of injustice or extortion on the part of the
railway companies. It is only wished to bring out the fact that
competition is here wholly absent. It is believed that, in some cases at
least, an honest attempt has been made to mine and sell the coal at
merely a fair profit. But in days to come it will not be so directly for
the interest of the railways to deal liberally with their patrons as at
present. Other men of less breadth and principle and more ready to grasp
at a chance for enormous profits may control the company's affairs; and
if that happens, the opportunity to take advantage of the absence of
competition and raise the price of coal will be utilized.
A brief review of the actual status of the coal production of the West
and South will help us to a clear appreciation of the case. The Missouri
Pacific Railway Company, through subsidiary companies, extracted from
its mines in Missouri and the Indian Territory, during 1887, 1,618,605
tons of coal. Through its control of transportation rates, private
operators have been compelled to sell coal at the company's prices in
the market. The company has recently purchased large tracts of coal
lands in Colorado, on which it is opening mines. The Atchison, Topeka,
and Santa Fé, the Chicago, Burlington, and Quincy, the Denver and New
Orleans, the Union Pacific, and the Denver and Rio Grande Railway
companies are also heavily interested in the Colorado coal mines. The
last company has long held a bonanza in the monopoly of the coal mining
and transportation for the Colorado silver-mining and smelting
districts. Though the other companies, to which the Rock Island should
probably be added, come in as competitors, there can be no doubt that
their active competition will be of short duration. The Wyoming coal
fields are being worked by the Union Pacific and the Chicago and
Northwestern companies, while the Chicago, Burlington, and Quincy and a
company supposed to be closely connected with the Northern Pacific are
preparing to take the field at an early date. On the Pacific coast the
coal trade has long been a monopoly in the hands of the Oregon Railway
and Navigation Company, who have kept the prices in San Francisco just
below the point at which it becomes profitable to import Australian
coal. Other railways are now preparing to reach the coal fields, but can
we doubt that the competition to which the coal consumers are looking
with eager anticipation will prove evanescent? Returning to the East, we
find the coal mines of northern Illinois all held by a single company,
which has full control of the traffic; while the mines of southern
Illinois, on which the St. Louis consumers depend, are united as the
Consolidated Coal Company. This latter corporation has "wrecked" many of
its mines for the purpose of limiting the supply and raising the price;
and has bought many mines of competing companies and closed them for the
same purpose. The Attorney-General of Illinois has been requested to
bring suit against this "trust" for the forfeiture of its charter.
In the Hocking Valley coal fields in Ohio, the Columbus, Hocking Valley
and Toledo Railway Company owns 10,000 acres of coal lands, and mined,
in 1887, 1,870,416 tons of coal. The coal in western Virginia is coming
into the hands of the Norfolk and Western Railroad Company, while the
coal of Alabama, of which so much has been noised abroad, has been
quietly gathered in by the Louisville and Nashville corporation. The
Tennessee Coal and Iron Company, which owns 76,000 acres of coal lands,
and mined 1,145,000 tons in 1882, is owned by parties largely interested
in the East Tennessee, Virginia and Georgia Railroad system. West
Virginia has probably the most valuable untouched coal deposits of any
State in the Union, but these also are rapidly being gathered up by
railway corporations.
To sum up, in the words of one of the best informed authorities, the
coal business of the country is at the mercy of the railroads.
It is to be noted, however, that this is simply the result of natural
causes. Railway managers, in seeking to develop and place on a sound
basis the mineral properties which could furnish a heavy and profitable
traffic to their lines, have only done what they regarded as their duty
to the owners of their roads. And that this policy has effected a rapid
development of our resources is beyond question.
The combinations to restrict competition among bituminous coal producers
have been of a very different sort from those in force among the
anthracite producers. The soft-coal fields are so widely scattered that
it has never been possible to combine all the producers so as to control
prices by a single authority. Local combinations, however, controlling
all the fields of a single locality, have long been an important
feature of the trade, and have been able to control prices pretty
absolutely within their respective localities. The fact that the
principal item in the cost of coal is transportation, enables a
combination covering all the producers of a certain field to raise
prices very notably before competitors can afford to ship from other
coal-producing districts.
It would seem that our fuel is especially liable to be subjected to
monopoly, for, as we have already seen in the preceding chapter, the
control over the petroleum trade is held by the Standard Oil Trust. How
much of the production of crude petroleum is in the hands of the trust
it is hard to say. This much is certain, that there is a "Petroleum
Producers' Association," which has a compact enough organization to be
able to make contracts with the Standard Oil Company regarding the
limitation of production. It is even stated that the Standard Oil Trust
itself controls to a considerable extent the oil-producing territory;
but this is hardly probable.
Our newest and most wonderful fuel, natural gas, has already come under
the control of a few great corporations, who own the wells and the pipes
for conveying and distributing it to the consumers. A striking instance
of the arbitrary nature of prices when under a monopoly's control was
shown at Pittsburgh a few months ago. As is well known, upon the
introduction of natural gas to that city a great number of the
manufactories, as well as the private houses, discarded coal, and at
considerable expense fitted up boilers, furnaces, etc., to use the new
fuel. After the use of the gas had become general and its value had come
to be thoroughly understood, the company furnishing the supply advanced
the rates 100 per cent., without previous notice; and despite the
remonstrance of indignant consumers, the advanced rate had to be paid or
the use of the gas discontinued, the latter alternative involving the
loss of the money invested in piping, burners, etc.
Of the minor products of mines and quarries, marble, sandstone, borax,
salt, and asphalt are all known to be more or less thoroughly under the
control of monopolies, which, though less important and powerful, show
the same tendency toward the destruction of competition.
Great as is the extent to which the monopoly of the mineral wealth of
the world has gone, we can scarcely doubt that if the movement is
unchecked it will go much farther. In one sense the only absolute
necessaries of life are food and clothing. But to the civilization of
to-day the metals and minerals are no less indispensable; and these
cannot be made anywhere, like manufactured goods; or grown on wide
areas, like the products of the soil. We are absolutely at the mercy of
the men who own our deposits of coal and copper and lead, and it is only
to be expected that they will take greater advantage of their legal
industrial advantage. The combinations that exist will be made stronger
and more binding, and new ones will be formed. The French copper
"corner" has taught men that under the broad protection of International
law their schemes of industrial conquest may embrace the world; and it
is not to be doubted that the temporary "corner" will yet result in a
strong permanent combination; and that the precedent set by this
successful monopoly will be eagerly followed by those who wish to secure
like profits by the control of some other form of mineral wealth.