We have now examined all the important occupations in which men engage
for the purpose of gain; and we have found that while certain large
classes of men still have the returns for their industry fixed by the
laws of competition, other large and important classes have been able to
check and limit competition, so that their returns from their work are
constantly increased; while others still, are in possession of certain
agents, so necessary to the community and so rare, that a price can be
exacted for their use greatly in excess of the original cost to their
owners. Some of the effects of this state of affairs it is easy to
perceive. We have, indeed, pointed out for each monopoly described some
of the especial abuses to which it gives rise; and it is plain enough
that the general tendency is, first, to greatly enrich the possessors of
the strongest monopolies at the expense of all other men; second, to
give a certain degree of advantage to the possessors of minor
monopolies,--as, for instance, monopolies in articles which are
luxuries, and can easily be dispensed with; and third, to seriously
injure all those engaged in occupations in which the price of the
product is still fixed by competition.
Every one will agree that this is an evil state of affairs. It is not
just that my neighbor, who owns a mine or a railroad, should ask me
what he pleases for coal, or for carriage of my produce to market; while
I, being a farmer, must sell the products of my labor at a price
determined by competition with the products of ten thousand other farms.
No one can deny at this day that it is contrary to the principles of
justice to give to the men in any one occupation or calling an advantage
over those in any other, except in just the degree that one occupation
is more beneficial to the world than another. The question then arises,
how may we best remedy this state of affairs? Shall our panacea be to do
away with all monopolies, and put every industry back upon the
competitive system? If so, by what means are we to apply this remedy? Or
shall we go to the other extreme and adopt the antipodal doctrine to the
foregoing, that competition is an evil which ought to be done away with;
and then proceed to abolish competition in every trade and occupation
where it still exists, if we can find any possible means of
accomplishing such a task.
The investigation we have already pursued gives us no answer to these
questions. We have thus far studied facts, and made little attempt to
deduce from them general truths. We are now informed as to the
widespread growth of monopoly; and we have paid some attention to the
injustice and wrong to which it gives rise, in order that we may
understand the urgent necessity for finding the right remedies, and
finding them at once. Our study is henceforth to be devoted to this end.
How shall we go about it? In the first place, it is evident that we
might make a far wider and more detailed investigation of existing
monopolies, and still be no nearer our desired end. We might study the
facts concerning each especial railroad monopoly in the country, for
instance, without reaching any valuable conclusion with regard to the
proper method of restricting railroad monopolies in general. But if we
were to take the monopoly exercised by a single railroad company, and
study the principles on which it is founded and the laws by which it is
governed, we might then be able to state something of value in reference
to proper methods for its control. Evidently, then, principles rather
than facts are to be the chief subjects of our future discussion,
although, of course, we can only discover these principles by
investigating the facts already found, together with others which may
come to our notice.
Our very first and most obvious generalization from the facts which we
have studied is, that in all the monopolies we have considered, the
inherent principle is the same, and the effect on the community is of
the same sort. Therefore, instead of hunting for separate remedies for
railroad monopolies and trusts and labor monopolies, we will see what
the general problem of monopoly is, and what is the general nature of
the remedy that should be applied; the details applicable to each case
will, of course, be different; but the underlying principle must be the
same.
But if we examine our problem a little more closely we see that the word
_monopoly_ seems to be only a negative, expressing the fact that
_competition_ is absent. We will therefore direct our studies to
competition itself, and will consider first its action as the basis of
our social system.
In the most primitive condition of man which we can imagine, each person
provided for his or her own need. The competition which then existed was
not competition, in the sense which we use the word in this volume, but
was a struggle for existence and a gratification of the baser desires,
of the same sort as that which now prevails in the brute creation,
resulting in a "survival of the fittest." With the introduction of the
family relation, the principle of the "division of labor" was utilized,
the female doing the hard and menial work, while the male devoted
himself to hunting and fishing, or subsisting on the results of his
helpmate's industry. As men's wants increased and they became more
industrious in supplying them, this division of labor was extended. The
man most skilful in fishing neglected the use of the bow and spear, and
his surplus of fish he exchanged with his neighbor for the fruit of the
chase. The very same principle applied to different tribes brought about
the first commerce. A pastoral tribe, with large flocks and herds,
exchanged their surplus products with less civilized tribes who
continued to live by the chase, or with a more civilized people who had
begun to till the soil.
It is plain that these were first steps in civilization. Man, so long as
he supplies only such of his wants as he can supply with the labor of
his unaided hands, must remain in a half-fed, half-clothed, and untaught
condition, because his strength and skill, when diverted in the many
directions which his wants require, are not enough to enable him, even
when he spends all his time at work, to supply himself with more than
the barest necessaries of life. It would be interesting to trace the
development of this principle of action through its various stages down
to the present time, when we see men everywhere working at various
trades and occupations, and always to supply some want of their
fellow-men. Every person in the community is absolutely dependent upon a
multitude of others, most of whom he knows nothing of, for the supply
of almost all his wants. Human society is thus growing more and more
interwoven and interdependent. The motto of the Knights of Labor is a
true one, apart from the altruism involved in it. "An injury to one _is_
the concern of all," because the mass of humanity is connected and woven
together by such strong ties of self-interest, as well as fraternity,
that a calamity to any class or country is felt in some degree
throughout the civilized world. This is vastly more true now than it was
a half-century ago. Under such conditions as existed then, the doctrine
of _laissez-faire_, that the government should confine itself to the
prevention of violence and crime and the maintenance of national honor
and integrity, letting alone the industries of the country to develop
and operate according to natural laws, was not liable to do harm. But
the conditions now are wholly changed. The interdependence of the
community involves a moral inter-responsibility, and the time has come
when we must recognize this by making it a legal responsibility as well.
We are now ready to consider in detail this inter-relationship of
society, and to examine the natural laws which govern it. We have
already stated the fact that, broadly speaking, each man is engaged in
supplying the wants of his fellow men, because in that way better than
in any other he can supply his own wants. We shall find this an easy
matter to understand if we conceive that every man puts the products of
his labor, of whatever sort it be, into a common public stock (offers it
for sale), and takes out of this common stock (buys) the various
articles which he wants. He does the first simply that he may do the
second, not because he desires to benefit his fellow-men. The money
which he receives (as we do not propose to consider here any questions
regarding the currency) we may regard as simply a certificate that he
has done a certain amount of work for the world, the measure of which is
the number of dollars he receives; and on presentation of that
certificate, he can obtain other articles which he desires.
We have next to consider the fact that there is a great variation in the
amount which a man can take out from this common stock. One man is able
to provide himself from the common stock with a host of luxuries, while
another may only take out a scant supply of the barest necessaries of
life. If this distribution operated with perfect equity, a man would be
permitted to take out of this common stock exactly in proportion to the
benefit which the world at large received from that which he put in. No
human judgment, however, is competent to fix, with even an approach to
precision, the relative actual benefit which each member of society
renders to his fellow-men as a whole. But our social system effects that
for us better than it could be fixed by any arbitrary human judgment.
This it does by a law known as the law of supply and demand. Instead of
the actual benefit, this law takes what people choose to consider as
benefit, which is the granting of their desires, whether they desire
things hurtful or beneficial. It is these desires for things which
others can produce which constitute demand. It is to be borne in mind
that this is a broad term, and includes not only desires for food,
clothing, and actual things, but for service of every sort, in short,
demand is the desire for any thing whatever for which people are willing
to pay money. But when there is this demand--this willingness to pay
money for any article--people begin at once to supply it, because the
money they receive allows them to take goods which they wish from the
common stock. Evidently, if there is an unlimited supply of any thing,
people will not pay money for it. People will not pay money for fresh
air to breathe when they are out-of-doors, and the supply is unlimited;
but when indoors, the supply may be limited, and they will spend money
to have ventilators and air-pipes built to supply them with fresh air.
Or take the contrary case: The supply of some commodity, say flour,
falls very short. Evidently less flour must be used by the world than
was used in the years of a more plentiful wheat harvest. But no one will
wish to be the one to go without, and most people will pay a little more
rather than do so. Therefore the price rises.
The competition which we have chiefly considered is the rivalry which
exists between the men who supply the same sort of goods; but there is a
rivalry among buyers as well. Speaking generally, every buyer is trying
to purchase for as little as possible, and every seller is trying to
dispose of his goods or services to the world for as much as possible,
which each has a perfect right to do.
We have already seen that prices vary with the relative proportion
between supply and demand, rising as demand rises or supply fails, and
falling as supply increases or demand falls off. But to complete the
wonderful perfection of the mechanism, the reciprocal relation is
introduced, so that supply and demand vary with price. If the price
rises, fewer people can afford to buy and more will be anxious to sell;
while if the price falls, more people will wish to buy and fewer people
will be willing to sell.
We can now easily see why some men are able to take out from the world's
common stock of product so large an amount, while most men can take but
a meagre allowance. By the law of supply and demand the price is far
higher for the service which one man renders to the world than another.
Let us take the operation of a large machine shop, for instance. Only
one superintendent is needed, and he should be a man who has devoted
much time to mastering all the details of the business, and is
experienced and competent to so govern the work that a large product
will be turned out at a small expense. There is a demand in the country,
let us say, for 5,000 such men; but out of the 5,000 who are filling
such places, there are perhaps 50 who seem almost faultless in their
skill and industry, there are 500 who are with one or two exceptional
faults, almost equally efficient, there are 3,000 who are fairly good
men, and the rest may be classed as those who hold their positions
because better men for the place cannot be had. So with the skilled
machinists, the relation of supply and demand is such that the price of
their labor is kept up to perhaps $4.00 per day. But of common laborers
the supply is so related to demand that the price of their work is very
low. Thus the three classes take very unequal amounts from the common
stock. The superintendent, perhaps, is able to take five thousand
dollars' worth of goods each year. The skilled workman can spend perhaps
one thousand five hundred dollars, while the laborer can spend but five
or six hundred dollars. Thus the men who secure the greatest amount of
wealth in return for their services to the world, secure it because
people are willing to pay it rather than pay less for men of less
ability. This is not the same as rewarding a man according to the actual
benefit which he does to the community, but it is an approach to it; and
it seems to be as close an approach as is possible by human methods.
This social system is not the creation of any man or set of men, but has
grown of itself out of the tendency among men to secure the things they
wish for with the least exertion. And its theoretical working is
marvellously perfect. Any thing which men desire sufficiently to exert
themselves to secure it, can be bought with a small part of the time and
labor, measured in money, which would be required if each made it for
himself. Not only this, but the aim of every man is to do the greatest
service to the world and best meet its desires, thus securing in return
the greatest rewards for himself. Rivalry among purchasers constantly
tends to increase the rewards of the producers, while competition among
the latter tends toward the furnishing of a better article at a smaller
price. These two forces hold each other in stable equilibrium, for a
variation tends always to bring things back to their normal condition.
Let us look more closely at the theory of the competition among
producers. We see that, speaking broadly, all occupations are competing
with each other. If changes in the supply or demand raise the rewards in
any calling, men will leave other work to engage in it. Men by the
pressure of competition are forced to seek out the easiest and most
direct methods, and to learn how to secure the greatest results with the
least expenditure of labor and material.
It is this principle which lies at the very root of our industrial
development. Men have so striven to meet each other's competition and
outstrip each other in the production of superior goods at low prices,
that the cost of the staple articles of consumption, measuring by the
labor required to produce them now and the labor required by the clumsy
tools and hand work of a century ago, is from a tenth to a hundredth of
the cost in those days. It must be remembered, too, that this system of
competition is in accordance with the sense of inalienable personal
rights which is implanted in the breast of every man. The work of my
hands and brain are my own. In disposing of it for a price, I have a
right which none may deny to obtain such a sum as I can induce any one
to pay me. If I choose to sell it for less than my neighbor, it is my
right. In short, the open market is open to all; and every man has a
right to sell there his labor, his skill, or his goods, of whatever sort
he can produce, at such a price as he can obtain. The same is true of
the buyer. I have a _right_ to go into the open market and secure such
goods as any one wishes to sell me at the lowest price for which he will
part with them. A curious illustration of this sense of personal right
is the custom duties on imported goods. It is an evidence of this
inherent feeling of a natural right that both public opinion and the law
hold that it is a much less serious crime to smuggle than to steal.
There are a dozen people who would smuggle, if tempted to do so, to one
who would steal. Another illustration is the opposition shown to
sumptuary laws on the same grounds.
It is to be said that the fact that competition lies at the foundation
of our industrial civilization, tersely expressed in the saying,
"Competition is the life of trade," has long been known, and, to a
certain extent, appreciated. The common law, based on the decisions of
men most eminent for wise insight and sound judgment, has always held
that combinations to restrict competition and establish a monopoly were
contrary to public policy, and the protection of the law has invariably
been refused, whether they were combinations of labor or of capitalized
industries. The establishment of labor combinations, indeed, was long a
criminal offence, as we have pointed out more fully in the chapter
devoted to that subject. It must be said, too, that the principle has
come to be generally, though rather blindly, understood by the masses of
men. It is recognized, though perhaps not very clearly, that competition
lowers the prices of goods, and that this benefits every consumer. Let a
proposition to build a competing railroad line, or a competing
electric-light plant be submitted to popular approval, and, under the
impression that they are benefiting themselves, hard-working men will
cheerfully assume heavy burdens of taxation to aid the new enterprise.
So blind and unreasoning indeed, is this popular abiding faith in the
merits of competition, that it has been responsible for some of the
greatest wastes of wealth in unproductive enterprises that have ever
been known.
We have now examined the theory of universal competition as commonly
accepted at the present day, and it is rightly considered a fundamental
principle of society. It is the practice of most economic writers of the
orthodox school to lay great stress on the importance of this
fundamental principle, and enlarge upon its various manifestations. The
many attempts to limit and destroy competition, which we have studied,
they consider merely as abnormal manifestations which are opposed to
law, and so not worth while considering very fully. But we have seen
clearly to what extent the destruction of competition has gone on; and,
with this knowledge, the question almost inevitably occurs to us: Is not
this decay and death of competition, this attempt to suppress it under
certain conditions, too wide and general a movement to be treated as
merely a troublesome excrescence? Is it not likely that there are
certain fixed laws regarding competition which determine its action and
operation, and sometimes its death? If this be so, it is of the highest
importance that we find and study these laws; and to that purpose we
will devote the following chapter.