We have now investigated the nature of all the different classes of
monopolies and combinations for the suppression of competition. We have
studied their working and their effect upon the different classes of
society. We have discussed the foundation principles of civilized
society as seen in abstract theory and as seen in the actual practice of
to-day, with the evils which intense competition on the one hand and
extortionate monopoly on the other have brought upon us. Finally, we
have considered the influences which tend to lessen and ameliorate these
evils, and the extent to which we may rely on them to benefit the
condition of society. We are now fully prepared to consider the remedies
which are proposed for these evils, and to see in what direction our
hope lies for the improvement of the condition of mankind.
It would be a far larger task than we propose to attempt, however, to
discuss all the schemes which have been proposed for bettering the
condition of society. They have been numerous ever since the dawn of the
idea of popular liberty, have accompanied it all through its centuries
of growth, and to-day, despite the fact that the amount of the comforts
of life accessible to the masses of the people is far greater than ever
before, plans for further betterment of the condition of society, the
more economical production and equitable distribution of wealth, are
being pressed forward and advocated more strongly than ever. Nor does
this fact furnish any ground for pessimism. We shall have far more
occasion to deplore when men become so conceited over the advancement
which the race has already made,--so numb to the evils which still
oppress them,--that they will no longer take part in the agitation of
plans for further advancement.
In considering now the plans proposed at the present day by those who
wish to remedy the evils of monopoly, we shall find it profitable to
consider first two great opposing principles, which we will designate as
_individualism_ and _societism_. Upon one or the other of these
principles almost every scheme for bettering the condition of society is
based.
The doctrine of individualism has for its foundation the absolute
industrial liberty of each individual. By this is meant that every
person shall have "the free right of contract,"--that is, the right to
sell his labor or property or purchase that of others as he chooses. It
holds that in all matters where the production and distribution of
wealth is concerned, the desire of each man to advance his own interests
will, alone, in the long run, result in the highest good to the greatest
number. It asks the government to "let alone" the industrial affairs of
the country, and leave private enterprise to take its own course. Its
adherents are fond of asserting that each man knows his own wants and
can direct his own business affairs much better than any government can
direct them for him. It declares that free competition is the best
possible agent to regulate all industrial affairs, and it ascribes all
economic evils to the fact that free competition has been thwarted or
destroyed.
The opposing doctrine of societism holds that the waste in the
production of wealth and the inequities in its distribution, which
afflict mankind to-day, are due to the extreme application of the
doctrine of individualism. Its adherents analyze competition and declare
it to be but another expression of a law of savage nature, tersely
expressed as "the survival of the fittest." A system which brutally
forces the weaker to the wall, say they, is unfit to govern the
inter-relations of civilized human beings. Condemning thus the
principles and practice of their opponents, they would go to the
opposite extreme and place the control of the production and
distribution of wealth in the hands of organized society or of local and
central governments, to be by them administered for the common benefit.
The first and most obvious commentary upon these two opposing doctrines
is that either of them is impracticable; and that if either of them were
given the entire control of our industries, the whole people would unite
in condemning it. Lest there should be any mistake as to what is meant
by this, it is well to say that we now refer to neither the
individualism nor the societism which is practically advocated at the
present day, but rather to the essence of the two opposing principles.
To see most clearly the practical failure of either of these principles
when applied without modification by the other, consider our present
social system, which is based on both individualism and societism. If
the principle of individualism were to be fully applied and societism
were to be entirely abolished, a first step would be the relinquishment
by the government of all the enterprises it now carries on; and they
would be left for private enterprise to take up or leave alone as it
chose. This means, for one thing, to bring the matter plainly home, that
the whole national postal system would be wiped out, and we should
depend on some private company or companies to collect, carry, and
distribute our mails. The government would also abandon all its work in
keeping clear and safe the natural waterways of the country, as well as
all the harbors, light-houses, etc. Municipal governments would give up
all their systems of water supply to private companies, as well as their
sewerage systems, and even paving, street cleaning, etc. Indeed, the
maintenance of our whole system of highways would be given over to
private enterprise. Is this too much? It is only a legitimate
application of the principle that government should leave to private
enterprise all matters connected with commerce and industry.
Little need be said to prove that a similar application of the principle
of societism to our industrial system would result even more
disastrously. As a general thing, the necessary formality and expense of
administration when business is carried on by the government, causes the
final cost of production to be much greater than under private
management, even when conducted with all honesty. But the chief reason
why the principle of societism is impracticable and unwise for universal
application, lies in the fact that the men who administer our
governments are neither the wisest nor the most honest of men. The
competition among those engaged in private business tends by a process
of natural selection to bring the men of greatest business ability into
control of affairs. But by any form of government yet tried, popularity
rather than merit, and excellence in the arts of the politician, rather
than experience and capacity as a statesman and business man, are the
qualities which place men in positions where they can control public
affairs. Not that very many wise and good men do not now hold office,
and that many unprincipled and vicious men do achieve success in private
business. But, as a general rule, the statements just made hold good.
It seems plainly apparent, then, that neither the principle of
individualism nor the principle of societism can be taken as an
infallible guide for determining the control of our industry. It would
be as manifestly unwise to take a step toward abolishing existing
societism by placing our postal department under the control of a
private company, as it would be to make a move toward abolishing
individualism by having the government assume the management of all the
farms in the country. Both of these principles are necessary.
There is, indeed, a marked tendency toward an increased reliance on the
principle of societism as civilization progresses and our life becomes
necessarily more intense and complex. A community of plain farmers,
isolated from each other, can live their individual lives about as they
please, without any interference of the government becoming necessary to
protect the rights of each man from infringement by his neighbors. But
the resident in a large village must submit to certain restrictions for
the common good. He must not carry on any kind of business likely to
become a public nuisance. His cattle may not graze in the streets. He
must give part of his earnings toward maintaining a water supply for a
protection against fire. The citizen of a great city is subject to far
more restrictions. The government assumes the control of education,
charities, the care of the public health, the drainage of the streets,
the collection of offal, and a multitude of other duties which in a less
intense civilization each family performs for itself.
The advance in science and the arts, too, has brought about a revolution
whose effect we must recognize. A hundred years ago almost every
community, and to a large degree every family, was industrially almost
independent of every other, as we have already shown. To-day each man
relies on a million others to supply him with the commonest necessaries
of life. The armored knight was proof against all foes, save the few
antagonists similarly clad. To-day my life is dependent on the fidelity
and vigilance of ten thousand men, and every man I meet has me in his
power. Given the malignant will and fiendish cunning necessary, and one
single man can kill a thousand human beings and destroy a million
dollars at a blow. To sum up, each advance in civilization makes men
more dependent upon each other, and increases the advantage and
necessity of having industries most important to the common welfare
controlled by society as a whole instead of by individuals.
It is contended by some that from the increased interference of
government with private affairs, there is danger that the liberties of
the people will be curtailed, and that their rights will be so hedged
about by restrictions that the result will be evil instead of
beneficial. To this it must be answered that the people themselves are
the source of the government's authority and power of restriction, and
that in no case will a restriction of the government be long maintained
which does not benefit far more in conserving the rights of men than it
injures by infringing them. Apply this rule to any case of government
action in industrial matters. A city government, for instance,
constructs a system of sewerage. All taxpayers must contribute something
towards its expense, and their right to spend that money in such other
ways as they choose is abridged; but, at the same time, the more
important right of having healthy and safe drainage for their houses is
conserved. In a similar way, the government may pass laws of various
sorts to restrict and control what seems to be at first sight purely
private business, such as the sale of explosives, spirituous liquors,
poisons, drugs, and many other articles. In every instance, this is done
on the ground that the interference of government is necessary to
protect the rights of the community as a whole, even though the
liberties of certain classes are abridged.
The study of these facts brings to our attention an important principle
of governmental action, which should always be remembered when in any
industrial matter we find that the principle of individual action is
producing unsatisfactory results, and conclude, therefore, to ask the
government to take some part in its control. This principle is as
follows: _government, as the representative of the will of the whole
people, should in general, attempt the regulation, or control, of
industrial matters only to benefit the people as a whole_.
Of course it cannot be said that all government action for the benefit
of special classes of the community is wrong. The granting of pensions
to those defenders and upholders of the government who deserve it, is a
case in point where special legislation is justifiable and proper; and
many other cases exist. Nevertheless, the shaping of legislation to
effect the interests of special classes of the community is one which is
now working the nation serious injury; and it has obtained so firm a
bold that it will take a long time for us to throw it off. It causes men
of all classes to consider the government as a paternal benefactor,
whose duty it is to aid them, either in their schemes for getting rich
or their struggles to earn a living; when its real office is to protect
all citizens in their individual rights, undertake only such industrial
enterprises as can manifestly be better and more economically conducted
by it than by private enterprise, and enforce restrictions upon industry
only as they are needed to protect personal rights or the interests of
the community as a whole. Worst of all, the use of government to advance
special interests places a premium on the efforts of those who seek to
corrupt the expression of the popular will in its every stage, from the
voters at the polls to the chief rulers in the seats of government. For
by combining to accomplish their mutual purposes, they are able to turn
aside all departments of government from their legitimate work and
occupy them with measures to advance special interests, some commendable
enough, others a mere excuse for stealing from the public treasury, but
all alike claiming attention and action, while the business of the
people goes all awry.
It has seemed necessary to thus briefly discuss these two opposing
theories of society, individualism and societism, in order to show the
impracticability of either when applied to the society of to-day without
limitation and modification by the other; and that in adopting or
rejecting any remedies that may be proposed for the industrial evils
which we have discussed, we should be guided by the facts as we find
them, and not by blind adherence to abstract principles.
Let us now gather up the salient decisions which we have reached in all
our past investigation. We have discovered that a great industrial
revolution is in progress, by which manufacturing, mining, and
transportation to a very great extent, and other industries to a
considerable extent, have been and are being concentrated in the hands
of a very few competitors. We have found that by the laws of competition
this reduction in the number of competitors greatly increases the
intensity of competition and the resulting waste and instability of
price, and finally brings monopoly into existence. This monopoly we have
determined to be a serious infringement on the rights of the people, and
we have found that the losses due to intense competition and the
fruitless attempts to defeat monopoly by adding new competing units have
wasted the wealth of the nation in uncounted millions. We are now to
consider the remedies proposed for these evils.
The most obvious remedy for monopoly, and the one which has been tried
and persevered in with the most remarkable faith, is _the creation of
new competitors_. Does a railroad monopoly oppress us? Build a competing
line. Is the gas company of our city charging us $3 per thousand for gas
which cost but 50 cents to produce and deliver? Let us start another gas
company and tear up all our pavements again to lay its mains. Has the
sugar trust put up the price of sugar two cents per pound? Well, "sugar
can be produced anywhere by the expenditure of labor and capital," the
Trust's lawyers say, and so _we_ will "trust" that some enterprising
manufacturer will take the field against the combination. But if we do
any of these things, we have added only _one_ competitor to the number
in the field. And with only _two_ competitors in the field, competition
is sure to be so _intense_ and _wasteful_ that the formation of a new
monopoly is a matter of but a short time.
This is the conclusion to which the theory brings us; and the more one
studies the history of actual attempts to create competition in this
way, the more thoroughly convinced he must be that the inevitable result
will be the same,--the tacit or formal combination between the old
monopoly and the new competitor, resulting in the re-establishment of
the absolute reign of monopoly. The author has thoroughly studied the
actual working of hundreds of schemes, in every part of the United
States, whose object was to create competition in railroad
transportation. It is a most astonishing fact to see the eagerness with
which thousands of municipalities, all over the country, which have
taken great loads of debt upon their shoulders to secure "competing
lines," and have seen these lines swallowed up by their rivals, are
still anxious to repeat the folly and assume new burdens to aid in
building new lines, which will inevitably be absorbed like those which
they preceded. If the people as a whole learn wisdom by experience, they
seem to learn with painful slowness. The first great lesson for the
people who are groaning under the burden of monopoly to learn, then, is
that when we try to defeat monopoly by creating new competing units, the
remedy is worse for the community at large than the disease, and effects
at best but a temporary relief.
Another class of remedies against monopoly seek to accomplish their
purpose by opposing the tendency to a reduction in the number of
competing units. There are not wanting people who, having gained a dim
perception that monopolies are an inevitable result of the modern
concentration of industry, conclude that, after all, "the former days
_were_ better than these," and that our wisest course is a retrograde
one. Fortunately, however, these people are comparatively few. It is a
fact so plain that even the dullest can hardly fail to perceive it, that
the consolidation and concentration of industry which have gone on
everywhere have wonderfully cheapened the cost of production,--made it
possible for us to make better goods with a less expenditure of labor
and material. The revolution in our industries could not be undone
without a more radical action toward vested property rights than could
be countenanced now; and as already seen, it would work to the detriment
of every person in the community. We cannot go back to the stage-coach,
the workshop, and the hand-loom of our ancestors; we cannot, if we
would, undo the growth of a century in civilization; and it is well that
it is so.
But while most men see the benefit which has resulted from the
consolidations already effected, there are but few who are not opposed
to further consolidations. It is argued that the reduction in the number
of competing units results in increasing the intensity of competition,
which is assumed to be a desirable end; and that it has also worked
great benefit in the reduction in cost. Having attained this, it is
proposed to stop further consolidations and prevent the establishment of
monopoly. This is what most of the present plans for giving relief from
monopoly propose to accomplish. Certainly the task is no easy one; let
us inquire if it be even possible.
We may safely assume, in the first place, that the competitors in any
industry will always be reduced to a very small number before the public
will be sufficiently aroused to make any movement for the prevention of
consolidation. So long as a monopoly is not imminent, usually, indeed,
so long as it is not in actual operation, no one cares or notices how
far consolidation and combination goes. Now by the laws of competition,
when the number of competing units is small, competition is intense and
wasteful, and acts to so reduce the returns from industry that
combination and the establishment of a monopoly are a natural sequence.
Evidently this result can only be prevented by some interference outside
the industry itself. If we allow it to take its own course, a monopoly
is certain, sooner or later, to be formed. But the only agency which has
the right and power to interfere is government. The question then is,
can government successfully interfere to prevent intense competition
from bringing about monopoly? In order to do this it must of course keep
competition in action; but it cannot do this directly. Competition is
essentially a strife. No law was ever enacted which could force two men
to fight if they were really determined to be at peace. No law was ever
enacted which could force two manufacturers or merchants to compete with
each other in price, if they really were agreed to sell at the same
price. The common-law principle that contracts in restraint of
competition are void, so often appealed to nowadays, has really but
slight power. It merely prevents the parties who make an agreement to
restrain competition, from enforcing such agreements in court. Attempts
have also been made to apply this principle to secure an annulment of
the charter of corporations which engage in monopolistic combinations.
Even if this be successful, the only result probable is that private
parties instead of corporations will carry on the monopolies in a few
cases, while in most cases the competition-destroying agreements will be
made so secretly that it will be impossible to prove their existence.
It is thus plain that the action of the government in declaring the
restriction of competition to be illegal is wholly ineffectual to check
the growth of monopoly. And, further, the fact is that it is hardly
possible for the government to take any more extreme stand in the
matter. Let us suppose that it does declare, not only that these
combinations are against public policy, but that they shall be punished.
Then would it be a punishable offence for two country grocers who had
been selling sugar below cost to agree that henceforth they would charge
a uniform price and make an eighth of a cent per pound! It is to be
remembered that _competition_ necessitates _action_. Can the government,
therefore, _compel_ a man to compete, to cut prices below his neighbors,
or to carry on his business at all, if he does not choose to do so? Such
a law would establish the government's right to regulate the conduct of
purely private business to a degree never before known. Such a law to
protect the theory of individualism would be a most flagrant
infringement of the rights of individuals. It is plain, then, that
government cannot possibly keep up competition by direct action.
Whether it is possible to do so by indirect means is a much harder
question. Monopoly results, as we have found, from the intensity of
competition. If it is possible to modify the intensity, to keep the
candle from burning itself out too quickly, so to speak, it is possible
that competition may be kept alive by legislative enactment. So far,
practically nothing has been done in this direction, and it remains yet
to be seen what remedies of this sort may accomplish.
A pertinent example of an attempt by the government to keep competition
alive is the Interstate Commerce law. Before its passage the railway
companies had a patched-up and nominally illegal species of combination
to restrict competition, known as pooling. As described by President
Charles Francis Adams of the Union Pacific Railway, "it was merely a
method through which the weaker corporations were kept alive." The
Interstate law prohibited this restriction of competition, and also, by
enactment of the long-and short-haul clause, made the competition more
widespread and injurious to the railways. As a result an astonishing
impetus has been given to the growth of the great systems and the
consolidation of the minor competing roads. More than that, however, the
great increase in the intensity of competition has done so much to drain
the resources of the companies and injure their revenues, that some
measure for uniting all the railroads of the country under one
management is now being seriously planned by many men in railroad
circles. Thus this result, which was probably inevitable, has doubtless
been hastened many years by the action of the law. The means taken to
intensify competition has operated, as might have been expected, to
hasten the complete establishment of monopoly.
We have now found that monopoly is the inevitable result of the
concentration of competition in any industry in a few hands, if events
are allowed to take their natural course; that the only agent which has
either the right or the power to interfere in the case is the
government,--National, State, or Municipal; that government cannot
punish directly those who form combinations to restrict competition,
without exercising to an unprecedented degree its right to interference
with private affairs; while its attempt to deter men from establishing
monopolies by refusing its protection to them in their contracts to
restrict competition has proved to be but a slight hindrance to the
growth of monopoly.
There are, then, but two ways of preventing monopoly from establishing
itself and laying such a tax upon the people at large for the supply of
the commodity which it controls as it chooses. The first is, action to
reduce the intensity of competition so that the weaker competitors may
maintain their independence and not be forced to consolidate with their
stronger rivals. The second is, action to permit or encourage the
establishment of monopoly, and regulate by some means other than
competition the prices which it shall charge for the products and the
quality of product which it shall supply. These two general classes of
remedies which we find to be feasible we will discuss here only in a
general way. The first, reduction in the intensity of competition, has
hardly been tried in any form, and we cannot yet say what practical
means should be taken to put it into effect. We will return to this at a
later period in our discussion.
The second remedy is the one towards whose adoption we are rapidly
working. State and Interstate Commissions have already been established
to regulate railway monopolies; and in general it is true that the
people who feel the burden of monopolies are looking to the government
for relief, and expect it to take positive action for the control of
other monopolies as it has for the control of railways. It will be seen
that we have now arrived by a study of the various possible remedies for
monopoly at the same irresistible conclusion to which we were brought
by our study of the laws of competition. _The proper remedy for monopoly
is not abolition but control._ It seemed necessary to conduct this
independent investigation in order that no blind adherence to
individualism and no thought of the possible efficacy of other remedies
might lead us to doubt this important truth.
We have next to consider the fact that the government can control
monopolies in two ways. It can either permit the monopoly to remain
under private ownership, and regulate its operations by law and by duly
appointed officers; or it can itself assume the entire ownership and
control of the monopoly. Which of these plans is the better, is a
question of public policy over which future political parties are likely
to dispute. One party will hold that when it is necessary for the
government to interfere to protect those whom it represents from the
oppression of monopoly, it should assume at once the whole ownership and
management of the monopoly. Their opponents will argue that government
should interfere only to the extent needful to maintain the rights of
the public; and that it is far better that industry should be directed
by the private individuals whose interests are at stake than by
government officials. To discuss fully the arguments for each of these
two principles of our future practice in dealing with monopolies, would
be beyond the intended scope of this volume. It can only be briefly said
that the arguments presented will certainly indicate that the conditions
surrounding each given monopoly will have great weight in determining
which policy is the most advantageous. It would be manifestly unwise,
for instance, to place our postal facilities under the direction of a
corporation, even though its operations were regulated by government.
It would be even more unwise to place the operations of the flouring
mills of the country in the hands of a department of the government. The
important factors to be considered in deciding any given case are,
first, the importance and necessity to the public of the service, and,
second, the question whether production in the given case is likely to
be carried on more economically by the government or by private
enterprise. The former has an advantage in that it can secure its
capital at a lower rate of interest. The latter, an advantage in that it
secures greater efficiency from the labor it employs. Other
circumstances being equal, it would appear wisest, then, for government
to take direct charge of those monopolies in which the greatest amount
of capital is invested and the least labor is employed, leaving to
private enterprise under government regulation the operation of
monopolies in which the opposite set of conditions prevails.
As already stated, however, the question is complicated by the social
and industrial effects which might follow a large transfer of enterprise
from private to governmental direction; and these effects we will not
now discuss.