mail order house or the increased adoption of direct selling by
manufacturers, aided by governmental postal delivery, would not confer
one benefit on the consumer in cheapened prices, because of these
facts. The change in the method of distribution would be merely the
shifting of the final price from one shoulder to the other. The margin
between the actual net cost of manufacture and the price paid by
the ultimate consumer is at present divided in varying proportions
into the profits of the maker, the percentage allowed the jobber
for economical distribution, and the final profit of the retailer
in completing this distribution, and in each case competition, that
most effective friend of the consumer, has forced these margins down
to a low general average. Assuming that the jobber and the retailer
have been eliminated and that the manufacturer sells direct, is there
any possible advantage that the consumer or the farmer would obtain?
Decidedly not. The manufacturer would, of a necessity, be compelled to
make and hold a stock of goods ready to respond to instant call. His
cost of manufacture would immediately increase for the reason that his
quantity would be wisely restricted, awaiting the edict of whimsical
fashion, and his sole dependence for the sale of his product would be
that obtained from extensive advertising. I do not believe there is a
man here tonight who has any knowledge of the expense of an advertising
campaign, but will admit that the usual profits of both jobbers and
retailers combined would fall far short of the expense necessary to
continuously maintain any general range of articles of fashion or
utility by advertising alone, and every large advertiser, even if this
stock be protected by trademark or patent, will bear testimony that
not only does the expense of advertising continuously increase, but
also that any cessation of publicity results in immediate suspension of
sales.
The second argument or sham pretext for action is that advanced
relating to express companies.
_The Interstate Commerce Commission Now Has Power to Adjust and
Regulate Express Rates and Will Regulate Them_
I am aware, and expensively so, that this monopoly is a menace both to
our pocketbooks and to the general prosperity of the community. Their
course of action is guided by those who fully exemplify the modern
greed and relentless clutch of soulless corporations. Personally,
in their private homes, or in open contact in social gatherings,
these organizers and executives of express companies are attractive
as friends or companions, but officially, and as part of their
corporations, their individuality is lost and the Golden Rule is
locked away to be used only on Sunday or in the imminence of death.
The dangers that confront a free people when monopoly obtains a
stronghold have been freely discussed during the past few years, and
wise restrictions have been placed among our laws. At this very moment
the rates and methods of express companies are being considered by the
Interstate Commerce Commission, and from them we may expect the same
fair-minded decision as recently shown in railroad matters. The laws
are on our books. It is for us to urge, argue, even threaten that they
be obeyed, but the appeal of the proponents of the parcels post bill
that we punish the express companies by starting a government monopoly
in opposition has about the same force to me as an invitation to jump
from the frying-pan into the fire. The power is always ours to regulate
by law, and the law is already ours. One-half of the same energy in
letters, telegrams and petitions asking and insisting on the immediate
action of the law, as has been shown in the propaganda for the novelty
of the parcels post, would have produced results long ago. If this
association, if the various boards of trade, or chambers of commerce,
should manfully and persistently follow this line of action, results
would follow, and thus avoid the dangerous expedient of increasing the
already formidable list of government officials.
_Objections to Parcels Post_
Passing from the consideration of these elusive and mendacious appeals
by self-seeking interests, I ask your attention to what in my judgment
are positive objections to the parcels post, objections that are not
based wholly on dollars and cents, but on the broader principles of
humanity that are above the fleeting tribulations of our little hour,
and whose laws of action create or destroy states or nations as they
are applied wisely or unfortunately.
_Will Injure Country Communities_
John Stuart Mill, one of the strongest reasoners in political economy,
stated in an incisive sentence that “The community that contains the
greatest diversity of industries will always be the most prosperous
and intelligent.” It would seem as if his vision were prophetic of
our loved New England, where towns and villages contain within their
borders the farmer, the manufacturer, the merchant, the teacher,
living in useful harmony, and by their diversity of thought and action
producing men equipped to accomplish the destiny of this wonderful
land. Such environment, such healthy conditions, produce the character
of Americans that the country needs, and the practical benefit from the
New Englander reared in such communities is impressed upon all sections
of this great land. It is to wither and destroy these safeguards of
national security that the proponents of the parcels post intend. In
their infinite wisdom they would sweep the village aside in their zeal
for the mail order octopus and the magazine advertisements. A great
city whose water supply is polluted is in serious danger; a great
community that stems or hinders the growth and influx of healthful men
is short-sighted, and decay will follow. Totally aside from personal
gain, I believe we should steadfastly oppose any attempt, open or
concealed, to sap the vitality of the New England town. Boston exists
because of New England, and Boston should protect its own.
_It Will Increase the Horde of Government Employees_
Another objection to the parcels post is that its operation will add
a tremendous force of government officials to the already swelling
list. Excepting always that human hog who never votes, never reads,
never thinks, but roots and grubs along, grunting out one single
word, “Dollars,” which happily die with him, this objection should be
considered by all thinking men. The stronger the intrenched force of
the party in power, the more difficult will it be to effect needed
reforms when stagnation in office produces disease.
_It Limits the Field of the Individual_
Another objection is that our government of free men was never intended
to block or hinder the pathway of individual endeavor. Rather was its
function to be that of aid or protection to insure equal opportunity
under sane restriction. Following this connection and not to be lightly
regarded, is the assumption that is clearly foreshadowed, that
should the government engage in the transportation of merchandise the
inevitable result would be the national ownership of the railroads,
thereby still further increasing the centralization of power, which is
diametrically opposed to the conception and scope of our general system
of representative government.
_Extravagance Will Be Augmented_
Again a serious objection is that the transfer of conditions of
transportation with its accompanying word paintings of alluring
advertisements would tend to increase general extravagance,
particularly in those sections where prudence is necessary for
happiness, or precaution for old age. A distinguished writer has said
that more discord and misery are caused in this country by our national
extravagance than from any other source, not excepting the results from
alcohol.
Still again, it is closely argued with logical coherence that the
various monopolies that now practically control many branches of trade
would welcome the development of large distributors at the expense
of the present countless individuals, because of the greater ease of
organizing in combination. The tremendous sales and enormous profits
of one mail order house are the subject of daily comment, and should
the government lend its aid to still further increase these figures,
the time would not be distant when similar institutions would start
into life in other sections. Backed by ample capital, and equipped with
the experience regarding methods, their success would doubtless become
immediate, until such time as competition among themselves endangered
profits.
It is no fanciful assumption that when that point is reached
combination or absorption will add another impregnable monopoly to the
already threatening list.
The present monopolies have produced such colossal and unwieldy
fortunes that the employment of their surplus is a constant thought,
and so rich a plum would not escape.
Finally, for I have detained you gentlemen long enough, is the rank
injustice of this proposed measure. If by taxation of the people as a
whole, some permanent benefit be obtained, two blades of grass be grown
where one existed, or even one section developed through the agency
of the whole country’s help, no one would more eagerly advocate such
action, for I realize that a healthful growth spreads its benefits
everywhere. But this measure does nothing, creates nothing, carries
with it no lifting of burdens, but simply takes from A to give to B,
without assurance or guarantee of betterment of service or conditions.
As all dry goods retailers know, not one article sold by mail order
houses, in their line, but is daily and usually sold by them at the
same or lower price, without any special fuss or feather about it, and
all of us understand, without possibility of contradiction, that the
advertised brand, in nine cases out of ten, does not depend on its
intrinsic merit for its sales, but instead relies on the credulity of a
thoughtless purchaser.
Again, what justice is there in any law that proposes government aid
to the man whose product weighs eleven pounds, or measures within
certain cubic inches, and denies the same relief to another citizen and
taxpayer whose product necessarily exceeds these limits? If this is not
special legislation bestowing subsidy or patronage on the few at the
expense of the many, then what is it?
For these reasons, and many more, my friends, I oppose the parcels
post as today presented. I believe it unwise and manifestly unfair.
I believe its passage would cause tremendous initial loss, without
subsequent compensating gain. I believe it is a move in the wrong
direction as it affects the government. I believe that the people,
through their representatives, and under the constitution, should have
and should use the power to regulate the channels of trade, and I
strongly deprecate any additional departure from the simplicity, the
directness of our form of government, and especially if such action
should hinder or usurp the zeal or ambition of any citizen in his
wage earning capacity, conducted under the law. If an express company
violates the law treat it under the law with the same justice as would
be given a second story burglar, but no more consider the opening of
governmental lines of express in opposition than you would consider the
governmental employment of other second story burglars as punishment to
law breakers.
The fewer that we have the better, but as self-respecting citizens let
us strive to maintain their standard of even justice, regardless of
special interests or our own personal discomfort.
Journal of Political Economy. 16: 417-35. July, 1908.
Shall the Scope of Governmental Functions Be Enlarged so as to Include
the Express Business? Albert N. Merritt.
In the nature of things the local dealer cannot compete with the
mail-order houses on equal terms. He cannot afford to issue the
expensive catalogues, or to keep so large an assortment of goods.
Moreover, the immense volume of business of the catalogue concerns
enables them to quote cheaper prices on many commodities. Frequently
they are able to secure, on private contracts with manufacturers, large
stocks of goods at prices even lower than the jobber is required to
pay. Furthermore, their expense of doing business is proportionately
much lower, as practically their entire expense of distribution
consists of the outlay in issuing the catalogues and in packing and
shipping the goods when ordered. No experienced force of salesmen is
required to display the goods and argue their merits. Moreover, it is
often the case that the glowing terms in which goods are described
in these catalogues cause the credulous to believe them superior to
what they really are. Distance always seems to lend enchantment, and
abundant opportunities are offered for deception as to the quality of
the goods.
The local dealer, on the other hand, in order to fill orders promptly,
must keep a stock of goods which, in proportion to the amount of
business he does, is vastly greater than that of the catalogue houses.
In order to purchase his goods to advantage, he must lay in a stock in
the fall sufficient for six months or a year, while few, if any, of
the larger mail-order houses would have at any time sufficient goods
in stock to enable them to fill orders for a fortnight. Naturally,
therefore, where the turnover of capital is slower, the percentage of
profit upon individual transactions must be higher, and competition
upon an equal basis becomes impossible.
But quite apart from a theoretical exposition of causes, the facts
show that the local dealers are rapidly losing trade to the catalogue
houses, and in many districts the local retail business has become so
unprofitable that the number of retail stores is decreasing, and their
volume of business less instead of greater as might be expected with
the normal growth of population.
Not only do the mail-order houses excel in the volume of business, and
in the greater assortment of goods, but they are able to effect the
most efficient and economical management by the employment of the most
able managers and department men, which is rarely or never the case in
the ordinary country store, owing to the natural scarcity of men of
that grade. In fact the business management of the ordinary country
store is lamentably weak. From the economic standpoint, therefore, one
is compelled to admit that, in accordance with the laws of competition
and of the survival of the fittest, the catalogue houses have already
demonstrated their superiority.
Admitting, therefore, that the economic position of the mail-order
houses is stronger, are there not important social arguments against
permitting the absorption of local business by the rapidly expanding
catalogue concerns at our large trade centers?
In the first place, it should be noted that the rapid consolidation
of our manufacturing industries makes it more difficult every day to
conduct such enterprises in small communities in competition with the
large plants in the large communities. The result has been that for a
long time the proportion of the manufacturing business done in small
communities has been growing smaller. With the gradual and necessary
elimination of the manufacturing business in smaller communities, the
mercantile business is about all that is left as an economic basis for
the existence of such communities.
These forces tend to a rapid concentration of business in the large
trade centers, and the resulting congestion of humanity at such points.
In one generation the proportion of the population of the United States
living in our large cities has more than doubled, and just at present
is increasing more rapidly than ever before.
It may well be doubted whether this tendency will ultimately be
beneficial to the race. Vice, crime, and disease are rampant in the
slums of our great cities. Human life, under such conditions, becomes
cramped. The unfolding process is impossible. The exigencies of the
situation cause sporadic and abnormal development. The moral and
physical culture of the individual is almost wholly neglected, and
the intellectual development resulting is nearly always one sided,
and too frequently resolves itself into the attainment of solely
those qualities which make for greater acquisitive power. The social
superiority resulting under the questionable standards prevailing in
such centers may be obtained only with the sacrifice of much that is
higher and nobler in human nature.
A large proportion of the population is compelled to lead a sedentary
life. It may well be asked whether the conditions prevailing in our
large mail-order houses and department stores make for the good of
humanity. From 8:00 a. m. till 6:00 p. m. the many children and young
girls employed are kept at close, confining work, frequently straining
every nerve far beyond the limit of safety and human endurance, in
order to make themselves independent, and to meet the conditions which
city life imposes upon them. During the fall rush these girls are often
asked to remain at work till 9:00 or 10:00 p. m. They realize that it
is necessary for them to acquiesce in such unreasonable and brutal
demands or lose their positions during the dull season immediately
following the holidays.
An eminent physician not long ago remarked that it was his personal
opinion, based upon long practice, that less than 10 per cent. of the
girls in our large cities are as strong and healthy as their mothers
were at a corresponding age. This he plausibly explained by the fact
that nearly all of the latter had come from the country where they
lived close to nature, with plenty of fresh air and sunshine, and with
plenty of hard work too, but of the kind which upbuilds and strengthens
the health rather than destroys it.
Furthermore, the wages paid in such institutions are seldom high enough
to enable the individual to live at the prevailing social standards,
and only too frequently the female employees are compelled to piece out
their salaries by questionable means. It is inevitable that the future
generation of the city-bred population should be as much beneath the
present, as the present is beneath the last, unless radical reforms
take place. Such progressive degeneration must be regarded as a
tremendous social calamity.
Without trespassing too far upon the field of the sociologist, it
may safely be assumed that an increased concentration of industry
and population is far from desirable. Why then should the government
take active steps to promote it? Would it not be better to allow the
mail-order houses and local retailers to fight out their own battle
for trade supremacy upon equal terms, on the basis of the survival
of the fittest? The retailer would then at least be able to cling
tenaciously to the few natural advantages which he does possess, and
would necessarily retain a considerable portion of the business. In
establishing the parcels-post the government would be taking action
to crush the local dealer, and would thus take away the last economic
basis for the rural community, and accelerate the concentration of
industry in great cities.
By the elimination of the smaller towns the easiest and most natural
market is taken away from the farmer. His small produce would then have
to be shipped to the large cities, where he would almost certainly
become the prey of commission-house agents, whose methods of operation
are well known. Legitimate competition which means the lowest prices
in view of the quality of the goods offered would be eliminated. The
only competition would then be that of advertising. The one capable of
producing the most attractive advertisements would win in the end. The
American public is so great and so credulous that the house which has
once fooled the public can again under another name and perhaps with
different customers work off the same class of worthless or inferior
goods.
Furthermore, the nearby location of a small country town gives to
the farmer and his family immense social, educational, and cultural
advantages, which would be almost wholly inaccessible if it were not
for the existence of such communities. Take away the business and
economic support of such a community, and immediately it becomes
stagnant. Its ambitious and progressive citizens immediately migrate to
other fields, and the town is left to decay.
No parcels-post could be established which would be self-supporting.
The innate desire of the people to get something, as it were, for
nothing, would soon express itself in a demand for a reduction of
rates. No administration could be popular and at the same time
effectively resist such a demand. It has been proved over and over
again in history, that wherever a democratic body politic has
undertaken to conduct a commercial enterprise of a public-service
character, the demand for rates far below the cost of doing the
business has seldom or never been successfully resisted. If this has
proved true of local governments, how much more is it likely to be
true of the federal government which, nearly everybody seems to think,
already has a revenue so great that the principal problem with regard
to it is the determination of the best method of turning it back into
the channels of trade. Even at present with a nominal postal deficit
of from $11,000,000 to $14,000,000, but with an actual deficit as will
be subsequently shown of much more than that amount, it seems that the
demand for penny postage and for the increase of salaries of certain
classes of postmasters and of almost the entire clerical force is too
strong to be resisted effectively.
The real issue is, therefore, Can the government expect successfully to
compete with the express companies, on a business basis? If it can be
shown that the government would be utterly unable to compete it follows
that the government should not undertake the service.
Mr. H. A. Castle, former auditor of the Postal Department of the United
States, has shown in its true light the many defects of our present
postal system, and how far it comes from being that which should be
expected of a private enterprise of like character. Speaking upon this
point he says:
The protracted postal investigations of 1893 revealed to
thinking men the disquieting fact that our national mail
system, which is now the greatest business enterprise in
the world, is entirely destitute of logical, coherent,
business-like organization.
Among many other striking defects, he points out that there is utter
lack of business methods in the accounting department. Of the one
billion and a quarter dollars of transactions represented in the
accounts of the 70,000 postmasters all over the United States, less
than 10 per cent. have the double audit required by law. Fraud,
peculation, and embezzlement of third- and fourth-class postmasters
have become common occurrences and are exceedingly difficult to detect.
As the salary of these postal officials depends upon the number of
cancellations at their respective offices, all sorts of fraudulent
schemes are continually being practiced to swell the number of
cancellations beyond the legitimate amount.
Furthermore, there is no method of auditing the number of
cancellations, and the department must accept the word of the
postmaster, which may or may not be true. Several cases have been
unearthed where an agent of a manufacturer has secured a nominal
position of postmaster at some out-of-the-way point, and by drawing
a salary based upon the number of cancellations has practically been
able to secure a rebate amounting to about 75 per cent. on all matter
mailed, the mailable matter being shipped to said point by freight.
Absolutely no account is kept or record made of the number of stamps
issued by the Bureau of Printing and Engraving, and no one has any
means of knowing how many disappear before official record of the
stamps issued is made by the Postal Department.
The weighing of mail matter handled by the railroads takes place only
at stated intervals of four years. As the payment of the railroads
depends upon the average tonnage during the period in which the
weighing goes on, it is charged that all sorts of fraudulent schemes
are continually being practiced by the railroads to increase the weight
of the mail during this period.
There is no auditing of railroad accounts. Forty million dollars is
annually paid out by the department merely on the statement of the
railroads that the service has been performed. There is no effort made
to ascertain the truth or falsity of the allegations.
There is no method of accounting for the actual amount of cash received
by postmasters in payment for second-class mail. The amount of cash
turned in by the various postmasters may or may not bear any relation
to the actual amount of such mail received at their respective offices.
It is impossible to detect dishonest returns except in some of the most
aggravated cases. The average mercantile house which should practice
such methods would be forced out of business in less than six months.
The slowness of the Postal Department to adopt modern business methods
is strikingly illustrated by the fact that till quite recently the only
method of checking the money-order accounts of postmasters was by a
hasty examination of the stubs of order books turned in. No account was
made or reference taken to the actual receipted orders. Imagine a bank
attempting to settle accounts with its customers by the examination of
the stubs of their check-books, rather than by reference to the actual
checks!