CHAPTER IX
Beneath a big oak Pole stood holding his bridle-rein and waiting, his earnest gaze on the long road leading to Jeff Wade’s farm. Suddenly he descried a cloud of dust far ahead and he chuckled.
“He’s certainly on time,” he mused. “He must ’a’ had his hoss ready out in the thicket. Mel made good time, too. The dern devil is thirstin’ fer bloodshed. Mel’s that sort. By gum, that hain’t Wade; it’s Mel hisse’f, an’ he’s certainly layin’ the lash to his animal.”
In a gallop Jones bore down on him, riding as wildly as a cowboy, his broad hat in one hand, a heavy switch in the other. He drew rein when he recognized Baker.
“Did you deliver that message?” Pole questioned.
“Oh, yes, I finally got him alone; his wife seems to suspicion some’n, and she stuck to ’im like a leech. She’s a jealous woman, Pole, an’ I don’t know but what she kinder thought Jeff was up to some o’ his old shines. He was a sorter tough nut before he married, you know, an’ a man like that will do to watch.”
“Well, what did he say?” Pole asked.
“Why, he said ‘all hunkydory.’ The spring plan ketched him jest right. He said that one thing—o’ bloodyin’ up the main street in town—had bothered him more than anything else. He admired it in Floyd, too. Jeff said, ‘By gum! fer a town dude that feller’s got more backbone than I expected. He’s a foe wuth meetin’, an’ I reckon killin’ ’im won’t be sech a terrible disgrace as I was afeared it mought be.’”
“But whar are you headin’ fer in sech a rush?” Pole asked.
Jones laughed as he put his hat carefully on his shaggy head and pressed the broad brims up on the sides and to a point in front. “Why, Pole,” he answered, “to tell you the truth, I am headed fer that thar spring. I’m goin’ to acknowledge to you that, as long as I’ve lived in this world, I hain’t never been on hand at a shootin’ affair. Mighty nigh every man I know has seed oodlin’s of ’em, but my luck’s been agin me. About the most excitin’ thing I ever attended was a chicken fight, and so I determined to see this un. I know a big rock jest above that spring, and I’m a-goin’ to git thar in plenty o’ time. You let me git kivered all but my eyes, an’ I’ll run the resk o’ gettin’ hit from thar up. Whar you makin’ fer, Pole?”
“Me? Oh, I’m on the way home, Mel. I seed the biggest rattlesnake run across this road jest now I ever laid eyes on. I got down to settle his hash, but I didn’t have anything to hit ’im with, an’ I’m done stompin’ at them fellers sence Tobe Baker, my cousin, over at Hillbend, got bliffed on the knee.”
“Well, so long!” Mel laughed. “I’ll hunt rattlesnakes some other time. Are you plumb shore you hain’t got the jimmies agin’, Pole? Take my advice an’ don’t tell about seein’ snakes; it sets folks to thinkin’. Why, I seed you once in broad daylight when you swore black spiders was playin’ sweepstakes on yore shirt front.”
“So long, Mel!” Pole smiled and waved his hand. He made a fair pretense at getting ready to mount as Mel galloped away in a cloud of dust. The horseman was scarcely out of sight when a pair of fine black horses drawing a buggy came into view. The vehicle contained Captain Duncan and his daughter Evelyn. She was a delicate, rather pretty girl of nineteen or twenty, and she nodded pleasantly to Pole as her father stopped his horses.
“You are sure that thing’s off, are you, Baker?” the planter said, with a genial smile.
“Oh, yes, Captain.” Pole had his eyes on the young lady and had taken off his hat, and stood awkwardly swinging it against the baggy knees of his rough trousers.
“Well, I’m very glad,” Duncan said. “I know you told some of the crowd back at the store that it had been settled, but I didn’t know whether it was reliable or not.”
Pole’s glance shifted between plain truth and Evelyn Duncan’s refined face for a moment, and then he nodded. “Oh, yes, it was all a mistake, Captain. Reports get out, you know; and nothin’ hain’t as bad as gossip is after it’s crawled through a hundred mouths an’ over a hundred wigglin’ tongues.”
“Well, I’m glad, as I say,” the planter said as he jerked his reins and spoke to his horses.
As he whirled away Pole growled. “Damned ef I hain’t a-makin’ a regular signpost out o’ myself,” he mused, “an’ lyin’ to beat the Dutch. Ef that dern fool don’t come on purty soon he’ll—but thar he is now, comin’ on with a swoop—looks like his hoss is about to run from under ’im, his dern legs is so long. Now, looky here, Pole Baker, Esquire, hog-thief an’ liar, you are up agin about the most serious proposition you ever tackled, an’ ef you don’t mind what you are about you’ll have cold feet inside o’ ten minutes by the clock. You’ve set in to carry this thing through or die in the attempt, an’ time’s precious. The fust thing is to stop the blamed whelp; you cayn’t reason with a man that’s flyin’ through the air like he’s shot out of a gun, an’ Jeff Wade’s a-goin’ to be the devil to halt. He’s got the smell o’ blood, an’ that works on a mad man jest like it does on a bloodhound—he’s a-goin’ to run down some’n. The only thing in God’s world that’ll stop a man o’ that sort is to insult ’im, an’ I reckon I’ll have that to do in this case.”
Jeff Wade was riding rapidly. Just before he reached Pole he drew out his big silver open-faced watch and looked at it. He wore no coat and had on a gray flannel shirt open at the neck. Round his waist he wore a wide leather belt, from which, on his right side, protruded the glittering butt of a revolver of unusual size and length of barrel. Suddenly Pole led his own horse round, until the animal stood directly across the narrow road, rendering it impossible for the approaching rider to pass at the speed he was going.
“Hold on thar, Jeff!” Pole held up his hand. “Whar away? The mail hack hain’t in yet. I’ve jest left town.”
“I hain’t goin’ after no mail!” Wade said, his lips tight, a fixed stare in his big, earnest eyes. “I’m headed fer Price’s spring. I’m goin’ to put a few holes in that thar Nelson Floyd, ef I git the drap on him ’fore he does on me.”
“Huh!” Pole ejaculated; “no, you hain’t a-goin’ to see him, nuther; that is, not till me’n you’ve had a talk, Jeff Wade. You seem in a hurry, but thar’s a matter betwixt me an’ you that’s got to be attended to.”
“What the hell do you mean?” Wade demanded, a stare of irritated astonishment dawning in his eyes.
“Why, I mean that Nelson Floyd is a friend o’ mine, an’ he ain’t a-goin’ to be shot down like a dog by a man that could hit a nickel a hundred yards away nine times out o’ ten. You an’ me’s close together, an’ I reckon chances ’ud be somewhar about equal. I hain’t a brag shot, but I could hit a pouch as big as yourn is about as easy as you could me.”
“You—you—by God, do you mean to take this matter up?”
Jeff Wade slid off his horse and stood facing Pole.
“Yes, I do, Jeff; that is, unless you’ll listen to common sense. That’s what I’m here fer. I’m a-goin’ to stuff reason into you ef I have to make a new hole to put it in at. You are a-goin’ entirely too fast to live in an enlightened Christian age, an’ I’m here to call a halt. I’ve got some things to tell you. They are a-goin’ to hurt like pullin’ eye-teeth, an’ you may draw yore gun before I’m through, but I’m goin’ to make a try at it.”
“What the——?”
“Hold on, hold on, hold on, Jeff!” Pole raised a warning hand. “Keep that paw off’n that cannon in yore belt or thar’ll be a war right here before you hear my proclamation of the terms we kin both live by. Jeff, I am yore neighbor an’ friend. I love you mighty nigh like a brother, an’ I’m here to tell you that, with all yore grit an’ good qualities, you are makin’ a bellowin’ jackass o’ yoreself. An’ ef I let you put through yore present plans, you’ll weep in repentance fer it till you are let down in yore soggy grave. Thar’s two sides to every question, an’ you are lookin’ only at yore side o’ this un. You cayn’t tell how sorry I am about havin’ to take this step. I’ve been a friend to yore entire family—to yore brothers, an’ yore old daddy when he was alive. I mighty nigh swore a lie down in Atlanta to keep him out o’ limbo when he was arrested fer moonshinin’.”
“I know all that!” growled Wade; “but God——”
“Hold yore taters now, an’ listen! You mought as well take yore mind off’n that spring. You hain’t a-goin’ to git at Nelson Floyd without you walk over my dead body—an’ thar’s no efs an’ ands about that. You try to mount that hoss, an’ I’ll kill you ef it’s in my power. I say I’ve got some’n to tell you that you’ll wish you’d listened to. I know some’n about Minnie that will put a new color on this whole nasty business; an’ when you know it, ef you kill Nelson Floyd in cold blood, the law will jerk that stiff neck o’ yourn—jerk it till it’s limber.”
“You say you know some’n about Minnie?” The gaunt hand which till now had hovered over the butt of the big revolver hung down straight. He stood staring, his lip hanging loose, a sudden droop of indecision upon him.
“I know this much, Jeff,” Pole said, less sharply. “I know you are not after the fust offender agin yore family honor, an’ when I prove that to you I don’t believe you’ll look at it the same.”
“You say—you say——?”
“Listen now, Jeff, an’ don’t fly off the handle at a well-wisher sayin’ what he thinks has to be said in justice to all concerned. The truth is, you never seed Minnie like other folks has all along. You seed ’er grow up an’ she was yore pet. To you she was a regular angel; but other folks has knowed all along, Jeff, that she was born with a sorter light nature. Women folks, with the’r keen eyes, has knowed that ever since she got out o’ short dresses. Even yore own wife has said behind yore back a heap on this line that she was afeared to say to you. Not a soul has dared to talk plain to you, an’ even I wouldn’t do it except in this case o’ life an’ death.”
Wade shook back his long, coarse hair. He was panting like a tired dog. “I don’t believe a damn word of what you are a-sayin’!” he muttered, “an’ I’ll make you prove it, by God, or I’ll have yore life-blood!”
“Listen to me, Jeff,” Pole said gently. “I’m not goin’ to threaten any more. Believe me or not, but listen! You remember when Thad Pelham went off to Mexico a year or so ago?”
Wade made no reply, but there was a look of dawning comprehension in his great, blearing eyes.
“I see you remember that,” Pole went on. “Well, you know, too, that he was goin’ with Minnie a lot about that time—takin’ her buggy-ridin’ an’ to meetin’. He was a devil in pants; his whole family was bad. The men in it wouldn’t go in the gate o’ heaven ef a woman was winkin’ at ’em on the outside. Well, Thad started fer Mexico one day, an’ at the same time Minnie went on a visit to yore brother Joe in Calhoun.
“She went thar a year ago,” Wade said, “fer I bought ’er ticket at Parley.”
“She told you she went to Calhoun.” Pole’s eyes were mercifully averted. “I met her an’ Thad in Atlanta.”
Wade caught his breath. He shook from head to foot as with a chill.
“You say—Pole, you say——?”
Pole pulled at his mustache and looked down.
“Well, I reckon they wasn’t down thar to attend a Sunday-school convention, Jeff—they didn’t have that look to me. But I was so worried fer fear I mought be doin’ a woman injustice in my mind that, after they left me—to make sure, I went in the office o’ the hotel an’ made sure.”
Suddenly Wade put out his hand and laid it heavily on Pole’s shoulder. “Looky here, Baker,” he said, “if you are lying to me, I——”
“Hold on, hold on, Jeff Wade!” Pole broke in sternly. “Whenever you use words like them you smile! So fer, this has been a friendly talk, as I see it; but you begin to intimate that I’m a liar, an’ I’ll try my best to make you chaw the statement. You’re excited, but you mustn’t go too fur.”
“Well, I want the truth, by God, I want the truth!”
“Well, you are a-gittin’ it, with the measure runnin’ over,” Pole said, “an’ that ought to satisfy any reasonable man.”
“So you think then, that Nelson Floyd never done any—any o’ the things folks says he did—that ’twas jest report?”
“Well, I ain’t here to say that, nuther,” said Pole most diplomatically. “But la me! what a stark, ravin’ fool you was about to make o’ yoreself, Jeff!” Pole went on. “You started to do this thing today on yore sister’s account, when by doin’ it you would bust up her home an’ make her life miserable.”
“You mean——?”
“I mean that Joe Mitchell, that’s been dead stuck on Minnie sence she was a little gal, set up to her an’ proposed marriage. They got engaged an’ then every old snaggle-toothed busybody in these mountains set in to try to bust it up by totin’ tales about Floyd an’ others to ’im. As fast as one would come Minnie’d kill it, an’ show Joe what a foolish thing it was to listen to gossip, an’ Joe finally told ’em all to go to thunder, an’ they was married an’ moved on his farm in Texas. From all accounts they are doin’ well an’ are happy; but la me; they wouldn’t be that a-way long ef you’d ’a’ shot Nelson Floyd this mornin’.”
“You say they wouldn’t, Pole?”
“Huh, I reckon you wouldn’t dance a jig an’ sing alleluia ef you was to pick up a newspaper this mornin’ an’ read in type a foot long that yore wife’s brother, in another state, had laid a man out stiff as a board fer some’n that folks said had tuck place some time back betwixt the man an’ her.”
“Huh!” Wade’s glance was now on Pole’s face. “Huh, I reckon you are right, Pole, I reckon you are right. I wasn’t thinkin’ about that.”
“Thar was another duty you wasn’t a-thinkin’ about, too,” Pole said. “An’ that is yore duty to yore wife an’ childern that would be throwed helpless on the world ef this thing had ’a’ come off today.”
“Well, I don’t see that, anyway,” said Wade dejectedly.
“Well, I do, Jeff. You see, ef you’d ’a’ gone on an’ killed Floyd, after I halted you, I’d ’a’ been a witness agin you, an’ I’d ’a’ had to testify that I told you, in so many words, whar the rale blame laid, an’ no jury alive would ’a’ spared yore neck.”
“I reckon that’s so,” Wade admitted. “Well, I guess I’ll go back, Pole. I won’t go any further with it. I promise you not to molest that scamp. I’ll not trade any more at his shebang, an’ I’ll avoid ’im all I kin, but I’ll not kill ’im as I intended.”
“Now, you’re a-talkin’ with a clear head an’ a clean tongue.” Pole drew a breath of relief and stood silent as Wade drew his horse around, put his foot into the heavy wooden stirrup and mounted. Pole said nothing until Wade had ridden several paces homeward, then he called out to him, and beckoned him back with his hand, going to meet him, leading his horse.
“I just thought o’ some’n else, Jeff—some’n I want to say. I reckon I wouldn’t sleep sound tonight, or think of anything the rest o’ the day, ef I don’t git it off my mind.”
“What’s that, Pole?”
“Why, I don’t feel right about callin’ you to halt so rough jest now, an’ talkin’ about shootin’ holes in you an’ the like, fer I hain’t nothin’ agin you, Jeff. In fact, I’m yore friend now more than I ever was in my life. I feel fer you ’way down inside o’ me. The look on yore face cuts me as keen as a knife. I—I reckon, Jeff, that you sorter feel like—like yore little sister’s dead, don’t you?”
The rough face looking down from the horse filled. “Like she was dead an’ buried, Pole,” Wade answered.
“Well, Jeff”—Pole’s voice was husky—“don’t you ever think o’ what I said a while ago about shootin’. Jeff, I jest did that to git yore attention. You mought ’a’ blazed away at me, but I’ll be derned ef I believe I could ’a’ cocked or pulled trigger on you to ’a’ saved my soul.”
“Same here, old neighbor,” said Wade as he wiped his eyes on his shirt sleeve. “I wouldn’t ’a’ tuck them words from no other man on the face o’ God’s green globe.”
When Wade had ridden slowly away Pole mounted his own horse.
“Now, I’ll go tell Nelson that the danger is over,” he said. Suddenly he reined his horse in and sat looking thoughtfully at the ground.
“No, I won’t,” he finally decided. “He kin set thar an’ wonder what’s up. I was in a hair’s breadth o’ the grave, about to leave a sweet wife an’ kids to starvation jest beca’se of him. No, Nelsy, old boy, you look death in the eye fer a while; it won’t do you no harm.”
And Pole Baker rode to the thicket, where he had hidden his bag of cornmeal that morning, and took it home.
(To be continued.)
A Phase of the Money Problem Bankers Dare Not Discuss
BY ALBERT GRIFFIN
Author of “The Keynote: Substitute Honest Money for Fictitious Credit,” “The Hocus Pocus Money Boon”
BECAUSE of limited space, this paper contains little more than principles, facts and conclusions, without argument—and the subject is considered from the practical man’s standpoint rather than that of the theorizer. The one monetary proposition to which all schools agree is that “money is the medium of exchange.” To be used as such is its one and only universally admitted purpose—and no other characteristic is essential. No matter of what it consists, whatever is willingly used by people as their medium of exchange is money, and should be so recognized by everyone—but unfortunately, the greater part of it is not.
There is honest money and dishonest money. None is strictly honest that is not as good as the best—for exchange purposes. Ideal money has the same exchange value at all times, and everywhere—and the best money is that which is nearest the ideal. Without discussing what it should consist of, I hold that the material ought to be more substantial than a banker’s “confidence” that he will always be able to pay the most of his debts with mere debits and credits. As business cannot be done without money, and as each person needs enough of it to enable him to exchange his services and products for the services and products of others, it goes without saying that there ought to be enough to supply each and all liberally—and that no man, or set of men, should be allowed to affect materially this supply for selfish purposes.
To most people, the soundness of the “quantitative theory” of money is self-evident. Concisely stated, it is that, whenever the quantity of money in circulation increases faster than the exchanges to be made with it, commodities tend to rise in price—and vice versa—which is but the application to money of the inexorable law of supply and demand. While the soundness of this theory is generally admitted, every business man knows that sometimes facts seem to disprove it. In 1890, when the failure of Baring Brothers so nearly precipitated a panic throughout this country, the quantity of visible money in circulation was increasing; and the same fact was true in April, 1893, when the proceedings agreed upon at the conference between Secretary Carlisle and prominent New York bankers precipitated a fearful panic on the next business day—and yet, in both of these cases, the apparent conflict resulted from the suppression of a part of the facts.
Now for the explanation: In comparing the size or weight of two masses the whole of each must be contrasted with the whole of the other, and in comparing two actively operating forces all of the factors of each must be considered together, without regard to names. But, strange to say, three-fourths of what is being used and paid for as money, and which really does the work of money, and does nothing else, is denied the right of being called money by some doctrinaires—and also by bankers, when talking to the public. Although between May 1 and October 1, 1903, the volume of metallic and paper money actually increased, this something which had been doing the work of money was contracted $500,000,000 in New York City alone—but as it was not called money its relation to the results was not generally recognized.
Deposit banks are little more than clearing-houses; and the laws permit their owners to pay nine-tenths of their debts with money literally made by themselves—out of nothing—which they coolly call “liquid capital,” or “bank credit,” although it is neither capital nor credit. The real nature and far-reaching effects of this modern practice are not clearly understood by one in twenty even of the bankers themselves—and none of them dares discuss it publicly. The most of those that do not fully understand it feel that there is something wrong about it; and those that do understand it know that, if people once begin to study “the system,” they will demand radical changes in it—or its entire abolition.
Government reports for 1904 put the volume of metallic and paper money then in existence at $2,829,273,316—or $31.16 per capita; and the Comptroller’s report shows that the banks whose reports he consolidated were earning interest on more than $6,278,000,000 of money that had no existence—or $76.47 per capita. This stuff is what, for a dozen years, I have called “hocus pocus money.” It consists of nothing but, in the language of Professor Sidgwick, rows of figures on bank books; and yet it affects business, prices and values, exactly as that amount of real money would. Invisible, intangible and mythical, it is nevertheless very real—filling the land with prosperity, joy and song today, and disaster, tears and despair tomorrow, it is the most potent economic power ever known. Business men gladly accept it as money. The courts treat it as money. And, although, for technical reasons, most political economists do not do so, I insist that, to all intents and purposes, it is money, and should be so recognized. Indeed, until this shall be done, it will be impossible to frame a monetary system that will always work equitably and beneficently.
Between 1896 and 1904, as officially reported, the increase in the volume of visible money was, in millions, $1,322,000,000—or $9.75 per capita; but the quantity of hocus pocus money in use increased $5,275,000,000—or $43.42 per capita—the quantity of both kinds then actually in use being $107.63 per capita. This shows that four-fifths of the increase in the medium of exchange consists merely of the right given favored people to draw checks on banks to pay which no real money has been deposited.
In 1888, 5,866 bank reports showed that they were then collecting interest on $3.41 for each dollar of their capital available for “commercial loans”; but last year’s reports of the 13,772 national, state and private banks and loan and trust companies show that their aggregate capital (including surplus, undivided profits and bank-notes) amounted to $2,927,000,000. This was everything their owners had put into their business, and of it $2,743,000,000 had been paid out for bonds, stocks, real estate, real estate mortgages, etc., leaving only $183,000,000 available for “commercial loans.” And yet their “loans and discounts” aggregated $6,431,000,000, or $35.07 of “commercial loans” for every dollar of their not otherwise invested capital. If this is not “getting something for nothing” on a stupendous scale, I should like to know what would be so considered.
Remember, that these figures include all of the reported banks. Individual cases are incomparably worse. On December 2, 1899, the National City Bank, of New York City (the principal of the several hundred Standard Oil banks), had $6,709,216 of capital, surplus, etc.; its investments of capital aggregated $27,270,738; its available capital was therefore $20,561,519 less than nothing; and yet it was then actually earning interest on $60,906,034 of “loans and discounts,” making $81,467,553 of hocus pocus money. And remember further that, to make people more dependent on banks for this kind of money with which to do business, the volume of real money is kept as small as possible. This is the real reason why bankers engineered the contraction of the currency after the war and the demonetization of silver. But for them no class of business men would have consented to either of those economic crimes.
Here are a few more important facts:
1. Interest has to be paid to the banks on every dollar of hocus pocus money as long as it lives.
2. It lives, on an average, only about two months.
3. Every payment of a note or draft extinguishes the hocus pocus money involved in that transaction and contracts its volume that much, making it the most constantly and wildly fluctuating money ever known.
4. Whenever, for any reason, bankers fear a demand for an unusual amount of real money they make fewer “loans” and “call in” some that are outstanding, which destroys that part of the “liquid capital” that was in actual use as a medium of exchange and cramps the money market.
5. Bankers sometimes do these things unnecessarily, for the purpose of making a “bear market”; but it is also true that business conditions sometimes compel them to do so, as was the case in 1857 and 1873.
6. If the banks had on hand as much money as they reported (which is not always true), they, in 1888, owed $6.01 for every dollar they reported; and last year the proportion was $9.98 to $1. The sixty-two national banks in the central reserve cities are required to keep nearly 25 per cent. of their deposits on hand in cash; the 285 in the other reserve cities only 12½ per cent., and the 5,065 in non-reserve cities only 6 per cent. State bank requirements vary greatly, private banks and loan and trust companies are under few or no restrictions, and the loan and trust companies keep only about 2 per cent.
7. Less than one-tenth of the “deposits” in banks are real money—the others being mere promises of the banks to pay money to those who have bought (with notes) the right to draw checks against them—and it is simply impossible to so regulate the system as to prevent it from frequently working disastrously.
8. Contracting the volume of any kind of money that is willingly accepted by producers always causes suffering. Indeed, modern conditions require a large annual increase in the volume of money; and, with an insufficient supply of real money, it is not now possible to prevent the use of hocus pocus money.
9. It is well known that, when their interests seem to require it, great bankers defy the laws made to restrain them.
10. There ought to be places in which people can deposit money and know it will remain there until checked out by themselves.
For ten years I have called attention to the fact that there never has been, in this or any other country, a widespread commercial panic that was not caused solely by the sudden contraction of the hocus pocus money then being used by banks, and have challenged contradiction; but this challenge has never been accepted. Hocus pocus money is the one and only seriously disturbing factor that has always and everywhere preceded these catastrophes. Other causes aggravate them, but, with it eliminated, panics would be impossible, because it is this sudden, absolute destruction of the bank’s manufactured “liquid capital,” used by so many as their medium of exchange, which paralyzes their business operations and makes “the bottom drop out of the market,” as it were.
No words are lurid enough to portray properly the terrible evils and personal suffering that its use causes, and I submit that it is time people should begin to consider earnestly the question, Had we not better insist that some kind of real money shall be substituted for the unreal now in use, and thus permanently remove the cause that so often produces such baleful results? Conditions were never so favorable for doing this as they are now. No election is pending; the two great parties are lazily talking on similar platforms; all financial organs insist that the country is prospering; and, although people are deeply stirred, they are not excited.
The use of hocus pocus money, and its evil results, have increased steadily from the beginning of the deposit banking system. From time to time methods change, but every change increases the power and profits of the few—and the helplessness of the many. The gravest of these changes began to be felt about a decade ago. Leading bankers had always used some of their hocus pocus money for the promotion of their own schemes, but from that time the Rockefellers, Morgans and others have been systematically getting control of the principal deposit banking institutions, and using, not only a rapidly increasing proportion of their depositors’ real money, but also more of the hocus pocus money made possible by those deposits. Mr. Lawson and others have shown how this has been done on a gigantic scale, in specific cases, and of all unfossilized, sober-minded people I ask, can 999 business men afford to permit the thousandth man to continue appropriating to his own use the hocus pocus money their own deposits have made possible—and, in addition, help him to keep the volume of real money ruinously small? Indeed, would it not be idiotic folly to do so?
To me the problem appears to be: How can hocus pocus money be safely eliminated—or so restricted as to be harmless—and the quantity of real money so increased that all will, at all times, be able to exchange their products and services; that commercial panics and long periods of business depression will become impossible; and that a few men in each community will no longer have the power to ruin all who refuse to obey their orders?
Space will not permit me to tell here how this can be done, but I will say that, fortunately, this greatest and most overshadowing of the economic problems that confront humanity is the easiest of all to solve; that, as bankers are the controlling spirits in—or back of—nearly all trusts and combines, settling the money problems will make the solution of all the others easier; that it can be done without wronging anyone, or imposing additional burdens on the people; and that economic and social conditions would improve during the entire process.
But suppose that some of my conclusions may not be correct, does not the experience of the last hundred years prove, beyond controversy, that our banking and financial systems must be radically unsound in some very important particulars? And, if so, should we not insist upon their prompt improvement—or the substitution of better ones?
Every business man knows that, if the banks were required to keep larger reserves always on hand, they would be safer places of deposit. And they are equally well aware that the more real money there is in circulation the more prosperous and happy are the people. And the vitally important question is, not how far or how fast shall we go, but, shall we not begin to move steadily and determinedly in the direction of less danger and more permanent prosperity?
A Leaf From a Protective Tariff Catechism
(OVERHEARD IN A PROTECTIVE KINDERGARTEN)
BY JOEL BENTON
Q. WHAT is Protection?
A. It is placing a duty upon foreign goods, of many kinds, to enable American makers of similar goods who “plead the baby act” to get higher prices for those goods than they otherwise would. It is compelling all the people to pay taxes to a few of the people.
Q. Why is this favor given to the few people?
A. On account of the fact that they pay so much higher wages than foreign manufacturers do and to compel them to pay still higher wages.
Q. Is this necessary?
A. It is very necessary to the Republican Party; for it gives it an issue and its chief cause for existence. When it saw accomplished, by the fortune of war, the freedom of the slave, what could be more natural and glorious than its ready espousal of anti-freedom for commerce?
Q. Are “protective” duties always just equal to the difference between our wages and foreign wages?
A. That is what our argument implies; and, if our argument is true, that is all we can ask. But how is a noble army of patriots to be maintained, and how can election expenses be met if we do not—in our tariff—treble and more than quadruple this difference often?
Q. Are high wages given by our manufacturers without an equivalent advantage in return?
A. It is true of wages, as of other things—that they are ordinarily worth their price, so that our high-priced labor is really labor of low cost. But it is a mighty convenient subterfuge to keep this fact out of sight and by this means hoodwink the poor laborer for his vote.
Q. Do manufacturers keep a lobby at Washington for securing a tariff that makes them pay high wages and yet sell their goods at low prices?
A. That is what we very often say, substantially.
Q. Can our manufacturers sell goods abroad?
A. They do very largely over other tariff walls, and bear the expense of transportation and insurance and secure handsome profits. But the question is too delicate a one to enlarge upon.
Q. Does Mexico have a protective tariff?
A. She does. The plea for it there is that it is a defense against our high-priced labor. The Mexican peons work for very low prices and at a more than correspondingly high cost. It is one of the beauties of Protection that, whether labor costs little or much, you can plead for it for either reason.
Q. Does Protection help Agriculture?
A. It puts a tariff on hay, grain, potatoes, eggs, etc. Very little of any of these commodities are imported by us. When they are imported to any extent the farmers are the chief buyers, as they are of peas, beans and other seeds for planting. By paying the duty on all these things themselves they not only feel certain there is a duty, but they have the satisfaction of knowing they are not forgotten in the great “protective” scheme.
Q. Why is Protection called the American System?
A. This was the question Daniel Webster asked Henry Clay, who so named it, when they were not in accord upon the tariff. Webster was puzzled by the name, for he knew the system was European and medieval; but “American” sounds well and makes us consistent in berating foreign things and ideas.
Q. How does Protection help commerce?
A. Commerce is so foreign we don’t need to help it. So we let it go to the miserable foreigners—what we permit to exist. It is really better to pay the two hundred million dollars we pay them yearly to carry our goods than to let that amount of money pervert our high and noble doctrine.
Q. What is meant by having the tariff “revised by its friends”?
A. That, as the English say, is a good “half-crown phrase.” But its real meaning is to oppose revising the tariff in any way whatever. Several elections have been carried by this plea, and we are still working it for all it is worth. Of course no one goes to have his shoes mended to a shoemaker who is in favor of their holes and lack of heels, and no one selects depredators of hen-roosts to watch chicken thieves; but we must not defer to ordinary rules when “the noble citadel of Protection” is in danger.
Q. Is it understood that to change the tariff injures business?
A. We always say that, and charge to Free Trade the calamity that ensues.
Q. Suppose someone tells us there has been no Free Trade, and if Free Trade existed there would be no tariff to change, and therefore no injury from tariff changes?
A. Then is the time to look wise and say little. For our main object is to make Protection the source of all good and Free Trade the cause of all evil.
Q. How did it happen that, when hides were freed from duty in 1872—and even by the McKinley bill—they were taxed under the Dingley bill?
A. Well—but—let’s see. Why shouldn’t hides enjoy prosperity? It’s certain the big cattle dealers, who use the Government pastures without cost, profit by the duty, while we can claim it helps the farmers.
Q. Why are works of art tariff?
A. Not because the artists ask for Protection. They’re such curious people that they all oppose it. So we choose to be benevolent to them in spite of their eccentric behavior.
Q. What other peculiar tricks have our Protection wise men?
A. A pretty good one is to say that we are not tied up to any present or definite “schedules,” but to remember constantly that, if any change is made in the tariff, it must be one that goes up and never one that goes down. It was a great mistake for Garfield to say, “I believe in a Protection that leads to Free Trade.”
Q. What is Reciprocity?
A. It is—well, suppose you should build a bonfire and then pour water on it, or build a levee on the Mississippi and then punch holes through it. It is a part of our consistent scheme. Blaine knew, and who can dispute Blaine?
Q. What is Free Trade?
A. It is any scale of duties for any purpose that is the least bit lower than the Dingley bill. Everything that preceded that “bravest tariff ever made” is Free Trade. If some day Protection should climb to loftier heights, those who should oppose it by the lower Dingley bill would be Free Traders.
Here a boy, who got surreptitiously into the class, asked this unauthorized question:
Q. But you say this country has prospered under almost unbroken Protection. Now, since everything tariff-like before the Dingley bill is either Free Trade or Free Tradish, why is not all our prosperity up to the passage of that owing to Free Trade?
A. A boy cannot be expected to understand the flexibility of our nomenclature or the grandeur of a great principle. We are struggling to help “American Industries.” Must so little a thing as mere consistency stand between us and our friends? Boys should be seen and not heard.
Q. What is meant by American Industries?
A. Mainly manufactures. Of course these, and all protected interests, represent only from 5 to 8 per cent. of the real and total industries of the country. But they are the ones having large capital and power—the ones that can hire attorneys and maintain a lobby, and that have abundant “fat for frying” when important elections are at hand. Doesn’t “American Industries” sound well, if you only mouth it right, and roll it from the editorial pen and the platform often enough?
Q. How about the industries that are left out, or get merely nominal Protection?
A. The question is quite irrelevant. What more can they ask than to live in a “protected” country and be saved from Free Trade?
Q. Why do we protect woolen goods, and then de-protect manufacturers by “protecting” wool?
A. For the same reason that the boy cuts off a shoestring on one end and ties the cut-off piece on the other end. It amuses the boy and very likely helps us to get rid sooner of a foreign shoestring.
Q. Mention the value of Protection to American shipping.
A. It doesn’t hurt it; for, by its aid and the help of our navigation laws, there is none to hurt. The way to have ships is first to make it impossible for us to build them, and then give enough subsidy to make it possible. Now you see the little joker and now you don’t. Didn’t President Harrison almost shed tears when he hauled up the American flag on a steamer rescued from a foreign register? It isn’t possible to have Protection and have everything, but isn’t it lovely to make things impossible at much expense and then make them possible at more expense, and at last call in a President and have a melodramatic time about it? Besides all this, it employs money and promotes labor.
Q. Does Protection make wages high and goods manufactured low?
A. That is what our philosophers maintain. Manufacturers are so anxious to exist here, and it is so necessary that we should have them, that they must pay high for their labor and sell its product low. To avoid paying but a little for labor, and to be prevented from selling their goods at high prices, they are even willing to maintain expensive lobbies at Washington and contribute large sums for electing Protectionists to Congress, to say nothing of “hypnotizing” doubtful or opposing senators.
Q. Can the first part of the above answer be really so?
A. It must be. A Protection journal had for its headlines on a Protection article the other day the statement that for many years Protection had done for manufacturers just this: It has made the wages they give high and the prices they get low, and so they would be splendidly off if it were not for the shadow of that wicked Wilson bill.
Q. Does prosperity then consist in enlarging your expenses and reducing your income?
A. It always does in Wonderland and Topsy-Turvydom, and under Protection.
Q. But do not “protected” manufacturers import laborers?
A. Manufacturers are held by us to be benevolent. Of course they import laborers, in order that there may be more here to get the benefit of our higher wages.
Q. How about invention under Protection?
A. It isn’t necessary. So long as you can run the old ramshackle machinery, and be defended by the Government, you are saved the trouble of inventing newer and better methods. Some way might possibly be found if Yankee wit were once to be let loose, whereby we could compete with other nations in our manufactures, so that everybody would admit it, and then what would become of Protection? Remember constantly it isn’t the welfare of the people that is paramount; it is Protection.
Q. Protection being so much more necessary than free government, free soil, free speech, and so cherubically philanthropic when compared with the dreadfulness of British Free Trade, the question arises, How shall we maintain its propaganda?
A. We must first of all be very careful to say that Free Trade is British. Of course Magna Charta, including trial by jury and many other good things, are British too, but we mustn’t lose so good a stock argument. It is true, also, that England has prospered far more under Free Trade than she ever did under Protection. But the glorious Blaine accounted for that by saying that Free Trade might be good for England, but it must never come here. In other words, two and two make five or six over there, but here they fail to make four.
Q. What next must we do?
A. As our country has been very prosperous from its commencement, and we have had more or less Protection within that period, the best way is to say that all this has happened “under Protection.” It has happened under other things, too, both good and evil, because it couldn’t happen over them. But never let us forget that it was all caused by Protection. The very slight fact that our country was most prosperous when we had very low revenue duties is purely accidental and irrelevant. In Mr. Blaine’s history of his career in Congress he described the period of our greatest prosperity. But there was no election in view then, and he was careless enough to say that this period coincided with what is called the period of the Free Trade tariff of 1846. It was a dreadful mistake, because the statement was altogether too true, and Protection has no use for that which is merely true.
Q. There are other arguments, are there not?
A. A very decisive one is to call Free Trade a theory. For it is a theory of the Creator, who seemed to favor the idea of commerce along with civilization. But He, of course, left something for men to find out. The Chinese found out in the twelfth century that a big wall around their country would keep off nations that were savage and hostile; but the Republican Party have gone the Chinese one better and have walled off trade. No doubt some college Free Trader will ask you ironically if it is really the man who walks on his feet who is the theorist and innovator, and if the one who walks on stilts, and who tries to get everyone else on stilts, and who thinks it is a mistake that people were not born already stilted—as nations should have been already walled—is not one. But levity like this is what a great cause must not notice.
Q. What more must be said?
A. We must take pains to compare the United States with some foreign country. As we have already shown that everything good that has occurred here is wholly owing to Protection, we must take some foreign country and charge all that is bad there, such as the costly armies, the despotic or kingly rule, the dense population, the illiteracy, etcetera, to Free Trade. There are no really Free Trade countries in Europe except England, and possibly Belgium. They are protective in part. But they are foreign, and that is sufficient for the argument. Only put the excess of our benefits over theirs to the benefit of Protection, and all will be right.
Q. What shall we say about cheapness and dearness?
A. Didn’t the Apostle Paul say we must be all things to all men? If we do seem to oppose somewhat the solidarity of humanity, we meet in our arguments a variety of mental difficulties. Our Apostle Harrison went for dearness by not wanting to find a cheap coat, for fear he should find a cheap man under it. Another Apostle thought “cheap and nasty go together.” At the final period of a Presidential election, however, it is better to say that Protection makes things cheap, and our editors almost always take that cue. To be sure, if cheapness were our intention, Protection could not be established, and we could not cry out against “cheap pauper labor.” The arguments must therefore be shuffled—and cheap and dear must sometimes be taken and at other times denied. The question is more or less of a crux, but it is the beauty of the noble doctrine of Protection that all trivialities of this sort it majestically sweeps away. Not being amenable to any of the laws of human reason, it is not disturbed by such trifles as truth and consistency.
Q. But can’t we say the foreigner pays the tax?
A. We certainly can and we do. But this argument needs very cautious handling. Sometimes duties are collected through the Post-Office, when the cat is let out of the bag and the duty comes directly to the man to whom the package is addressed. If he asks to have it charged to the foreign country his goods came from, even a Republican postmaster will sometimes laugh at him. Such perverse incidents as this are what Artemus Ward might call “in-fe-lick-et-us”—very.
Q. How was it when Congress removed the tax from sugar?
A. Well—sugar isn’t everything. It won’t do to be too one-sided. We could not resist telling the public then that we had removed a heavy burden from its shoulders. We really hated to tax the foreigners so much.
Q. What can be argued about the terms Protection and Free Trade?
A. Argument is superfluous here. The very word Protection is an assumption that meets all our requirements. It forecloses argument and shuts off dispute. Who doesn’t wish to be “protected”? And how charming it sounds to say we are protected from burglars, from enemies and from the horrors of trade—that is, trade with a foreigner. It must be always understood that if you could stand near the Canada or Mexico boundary and make a good bargain on the other side—say, the purchase of a horse for fifty dollars less than you could purchase him in your own country—you would inflict upon yourself and your country just so much loss. But if you buy the horse here at a price higher by fifty dollars, or over a tariff, with the fifty dollars added, you enrich both yourself and your country. On this doctrine, which is our fundamental one, we must and can stake everything, and against it the frothy waves of Free Trade will beat in vain.
Q. Why is not Free Trade also a felicitous term?
A. Things that are in themselves good, and that are made free and abundant, are, we must admit, generally to be approved. Abundant health or abundant friendship or abundant money we have not yet thought it wise to consider objectionable. But there are exceptions to all rules. Abundant trade—or Free Trade—which is trade done voluntarily by shrewd and sane men in order to procure abundant money, is different. To have it otherwise would upset our whole system of philosophy. What was this land of the free made for, if its main purpose were not to put shackles on trade? What we want is to eat our own cake and have it too; to sell everything we can to foreigners and buy nothing from them, and finally to get fat by stewing in our own juice.
The term Free Trade—to refer to the original question—is now so asphyxiated by us, by our contempt of it, that it suggests a Pandora’s box of horrors the moment we mention it. To speak of it in this contemptuous way is really one of our strong arguments. What we want is to scream it out as a horror, to make it a bugbear. It is like telling children of some dreadful bogy lying in wait for them in the dark, or like Dr. Johnson’s experiment with the fishwoman of Billingsgate, when he called her a hypothenuse, a triangle, a parallelopipedon, and several other mathematical things of which she had not the faintest knowledge and which she consequently supposed were very bad.
No, whatever else we do, let us stick to our insistent and persistent screech against Free Trade.
Monopoly; The Power Behind the Trust
BY JOSEPH DANA MILLER
HOW comes it that a power in its unimpeded operations beneficent—namely, the force or forces of combination or co-operation—becomes under certain conditions so injurious to modern industry? Why is a union of two factories or many factories, of two companies or many companies, a signal to the community of anticipated extortion? And why should the development of natural laws—those of combination and co-operation—provoke a public demand for regulation, and those who avail themselves of these operations be deemed amenable to punishment?
We may grant that a perfected combination which should succeed in forestalling any given commodity would be criminal. The law from its very beginnings has so regarded all such attempts. It is conceivable that, under certain conditions, a mere agreement between individuals might perfect a combination clearly within the provision of the law compelling its forcible dissolution. But this is not conceivable under modern conditions where wide distribution of capital and free labor exists. Law, indeed, may create such monopolies, which it may by popular demand be called upon to destroy, undoing with one hand what it has done with the other. State-created monopolies have existed often in history—as notably in the reign of Queen Elizabeth—but because these have been created by direct act they have been exceedingly unpopular. So, in periods of greater public intelligence, and where the people exercise larger powers of government, it became necessary to accomplish the same result by indirect means, by putting into operation some general law under which monopoly could find a shelter, and the secret sources of which could not be so easily traced.
For, contrary to the almost universal opinion, monopoly is weak. It demands protection. And from what does it demand protection? From the all-powerful natural law of competition. The curious Socialist notion that competition leads to monopoly is true only in the sense that monopoly, seeing how powerless it is when threatened by the forces of competition, seeks the protection of such laws as it can secure, or which already exist, for the suppression of competition. And this brings us to the conclusion which is unavoidable that there are no monopolies save law-created monopolies.[1]
If this seem a novel proposition to the reader I will ask him not to grow impatient, for the demonstration will grow upon him as he reflects. It will seem novel, for if true all the laws and statutes for the regulation of combinations are so much waste of time and paper and the hours of legislatures and courts. In the acceptance of such explanation of the trust problem must go the rejection of many proposed remedies, among them the much-lauded one of “publicity.” While publicity is always to be commended and sought for in public or semi-public matters, it does not appear that laws enforcing publicity upon purely private industrial combinations are founded upon equity. Nor is it likely that publicity will assure us the possession of knowledge beyond what we already have through the work of independent investigators. Nor is it probable that enforced publicity will elicit impartial truth. This proposition is of a piece with the punitive theory in the treatment of the problem, a theory which has already led the people far astray. Men shrink instinctively from such stringent regulation, and this is a true index of the moral relation, if we may so speak, of this problem to legislation. But because they will not think clearly they return to the proposition of legal interposition.
Along with the remedy of “publicity” must go all laws, existing or proposed, limiting capitalization or stock watering. Beyond the fact that such laws would often force capitalization below the earning capacity—which is no unfair basis of capitalization—it must be said that the evils of stock watering are largely imaginary. It is true that over-capitalization may conceal from the public the real extent of monopoly profits, and is for this purpose, if for no other, often resorted to. But this of itself ought to constitute no valid reason for drastic legislation. Investors ought to be left free to take their own risks, and speculative ventures ought to be left free to fix their own capitalization, for otherwise perfectly legitimate, if largely speculative, business interests may be made to suffer injuriously to the interests of the community. But laying aside for the time all considerations of this kind, stock watering is only a symptom—a sign that monopolistic powers, and not legitimate business interests, are being capitalized.[2]
High capitalization, it is sometimes said, tends to increase price. It does offer temptation to increase of price, but nothing can put it within the power of combinations to increase price save the forces of monopoly. This power you do not increase or decrease by adding to the numbers of the counters, the considerations governing which are purely those of the stock-gambling fraternity.
National licensing of corporations to do business—a remedy proposed by Mr. Bryan and adopted by President Roosevelt—must also be dismissed. Obviously if the state has endowed corporations and armed them with letters of marque by authority of which they may prey upon commerce, it is the height of absurdity to ignore this feature of the question with talk about licensing them. In a very real sense they are already licensed, for it must be repeated that combinations do not create the monopoly, but merely avail themselves of the monopolistic powers created by society through acts of Government.
Of necessity all such laws must fail. This, it is scarcely necessary to say, has been the universal experience. And from future legislation no more is to be hoped than from past legislation, however well intentioned.
The reason why all this anti-trust legislation is futile is because, having created monopoly privileges, Government has appealed to the natural instincts of all men to seek these opportunities and benefits. Such laws are attempts to give effective form to the public’s foolish anathemas against impulses shared by everybody, and are therefore as futile as the Pope’s bull against the comet. When we understand that these great trusts are monopolies that Government has made, we will realize why it is that Government cannot unmake them by any other process than by removing the causes of their creation.[3] Books prescribing such anti-trust legislation may continue to cumber the libraries of our lawyers, and streams of statutes may continue to pour from the lawmaking bodies of states and Nation, but these will be either positively harmful or wholly harmless, never effective.
We are, indeed, “fooling” with natural laws, and we can do so only at our peril. The law of competition and the law of co-operation or combination are what they have often been called, the centripetal and centrifugal forces of social economics. Competition is often a painful but really a merciful process; it weeds out the useless and the inefficient; selects unerringly its business leaders; destroys, but where it destroys builds up; rescues from the mass the individuals and processes most fitted to survive, and out of chaos brings order. It replaces obsolete with more perfect organization, and where such organization becomes unwieldy it replaces organization with individuals, reverting to the earlier type of industry. Thus the country store is succeeded by the store in which is sold but one line of goods, and this is succeeded by the mammoth type of country store, the great city’s department store; and the development of the last named type seems again to revert to the second—viz., a congeries of stores in which each is distinct from the other, each attaining a reputation for competitive excellence in one line of goods, thus illustrating in the retail trade the interplay of the forces of competition and combination.
Just as there is a limit fixed to the bounds of competition, so there is a limit to the bounds of combination. The maximum of combination and the maximum of efficiency are not the same. There is a point in the progress of combination beyond which it does not, or would not naturally advance—and that is when it reaches the maximum of efficiency. It seems very likely that the element of monopoly in society today forces combination far beyond the point of the most efficient co-operation.
These natural laws may not be “regulated.” Such laws are not for regulation, but for obedience. We may impede, we may interrupt their operation, but only to our injury. The most we can do is to regulate our institution by these laws, as we trim a sail to the wind and tides; we do not attempt to “regulate” wind and tides; and these laws of co-operation and competition are of the same order—natural laws which to disobey is to be destroyed.
We hear much superficial talk about “the wastes of competition.” The Socialists play into the hands of the trust apologists who defend them on the ground that competition leads to waste. Beyond the fact that competition has never yet been fully tried, that it has never yet been wholly free, and that such waste as it entails is inseparable from the natural process which weeds out the incompetent, the antedated and the unskilled—a process of which the waste is but incidental to the conservation—is that these combinations do not seek primarily to escape the waste of competition so much as to avail themselves of those artificial laws which prevent competition from doing its perfect work.
The term expressing the opposite of competition is not combination, but monopoly. Professor Jenks, in his work, “The Trust Problem,” falls into this error when he speaks of combinations in the retail trade as overcoming the “friction” of competition, instancing associations of hardware dealers, druggists, etc. Here, he says, we have an element of combination from which he assumes the element of competition has been eliminated. But his error is in the analogy he seeks to establish between such agreements from which the element of competition cannot be expelled, and agreements which are based upon the control of some special privilege created by law, and of which the great railroad and industrial trusts are examples, and which people have in mind when they talk of the “trust problem.”
Clearly no monopoly exists nor can be made to exist in the retail trade. Agreements may be made, but they will be broken; and the fact that they can be broken by isolated individuals who can thus separate themselves from the combination, and by their separation cause it to dissolve, is proof that the monopoly element does not exist. For the monopoly element in the possession of the great trusts is the potent weapon with which the combinations can compel the recalcitrant member to return, or beat him into starvation. From mere agreements in the retail trade, such as Professor Jenks instances, the primary element of monopoly being absent, desertions are fatal, and for this reason such combinations are never effective as means for extortion, though they do often arrest the sacrifices of keenly competing retailers. And the illicit intrusion of such examples is a favorite trick of the trust apologist, who, when the evils of the trust are pointed out, grows righteously indignant over the right of men to combine—which nobody seriously disputes—or points out with superfluous wealth of illustration how combination effects the cheapening of production—which nobody ever really denies. For the same reason labor unions cannot be considered as effective monopolies—though the trust apologist does not forget them in his special pleas—for the reason that they possess no effective legal privilege.
But to avoid a possible misunderstanding let us now answer a query which may have risen in the mind of the reader. Is competition or combination the beneficent law of industry? Both; for one is the complement of the other. They exist together, and together they effect the industrial progress of the world. But monopoly is the negation of both, since further combination or co-operation is no longer possible where monopoly is complete. And where there is competition there will be combination, healthy, rational, continuous, and competition will determine its development and direction. The defense of the trust based upon the economic benefits resulting from the elimination of the unskilled is a defense of the principle of combination present under free competition, and is in no sense a defense of monopoly of which what we know as the “trust” is the manifestation. Such discussion, together with much talk of the wastes of competition, which helps to swell so many pretentious works on the trust problem, is so much irrelevant “padding.”
That the trusts avail themselves of all possible economies in production has often been urged in their defense. Certainly such economies are not needed to secure a monopoly in possession, nor does it seem that the greatest incentives to their adoption are present. The sacrifice of inventions rather than their use by these great monopolies is proof that they do much to prevent such economies. A monopoly can be induced to accept only with difficulty improved devices which under the spur of competition it would gladly avail itself of. Thus in the Post-Office, which is a monopoly, though a Government monopoly, improvements are introduced only with the greatest difficulty.
If combination can of itself effect monopoly, why are huge sums set aside by these great corporations to influence legislation? Why are contributions made to the campaign funds of the two great parties? Is it not because these combinations seek to perpetuate their monopolistic privileges? It may be said that it is contributed to effect the defeat of “strike bills.” But what would a business partnership, not in some way dependent upon previously existing legislation, care about “strike bills”? Why does the American Sugar Refining Company (according to the testimony of Mr. Havemeyer) contribute in some states to the Republican campaign fund, and in other states to the Democratic campaign fund?
As an example of the kind of defense urged by the trust apologists here is a work entitled, “The Trust; Its Book,” containing articles from the pens of Charles R. Flint, James J. Hill, S. C. T. Dodd, Francis B. Thurber, and others. It is a plea of “confession and avoidance.” The authors fight shy of even the hated term monopoly, and content themselves with defending the right of combination. Not one of them appears to think that the popular outcry against trusts is founded on anything but utter ignorance; and they therefore devote themselves to showing the advantages of large scale production—as if that were the question. All this seems purely disingenuous. It is hardly conceivable that men who know so well the effects of monopoly, who know how potent has been the use by combination of existing laws securing the possession of special privileges, should write this way from any other motive than to becloud the issue. We can acquit them of intentional deception far less readily than the professors of political economy. The latter may be at once exonerated, since it is incredible that men who have become involved in the self-created subtleties of modern economics should retain sufficient clearness of comprehension to see anything in its proper relation.
If it be true that there are no monopolies save law-created monopolies, it only remains for the state to undo the work it has done. The means by which the state, consciously or unconsciously, has fostered monopolies may be removed, and a new, and up to this time untried, method for remedying the evils of trusts be set in motion.
Before we can agree to this, however, we must understand what monopoly is. Briefly stated, it is the power to charge more than a competitive price for a commodity or service. This power can be permanently secured by the favor of Government, and in no other way. An agreement between individuals cannot accomplish it, since such agreements, even if they include all individuals in interest, which is impossible, or at all events inconceivable, would infallibly be broken. The only way such agreements may be made effective is for Government to make powerless, or nearly so, the potential competitive elements or individuals in interest. This it does in several ways, or to be explicit, chiefly in three ways.
By Land Laws,
Tax Laws,
Laws Regulating (or that fail to regulate) the use of the steam highways of the country.
I know of no other source of monopoly unless it be our patent laws. But these being—originally at least—rewards of invention, the injury results from their misuse.[4] Even the misuse of patent laws is not one of the chief potent influences in the perpetuation of monopoly. But without, in most cases, adding to the power of monopoly, which derives its strength from other causes, it puts in the hands of the great combinations the power to arrest progress. The value to society of an invention is in its use. Under present misuse of patents, inventions are held out of use and are often bought up and destroyed for the purpose of depriving competitors of the use of like improvements, or because such inventions would often reduce the machinery in present use to the value of old iron. Clearly, if industrial progress is to be made to yield its full results, some change in our patent laws is imperatively called for. Were the law of competition allowed to work freely, the use of such inventions, even under present patent laws, would be determined largely by the law of self-preservation. For the sources we have indicated are also the sources to a degree of the patent monopoly. In a competitive market for the use of an invention the inventor would be less likely to part with his invention, even under the present patent system. Where the bidding is artificially restricted the inventor sells at a disadvantage. Monopoly has the inventor at its mercy. But however this may be, nothing less than the free use of an invention to everyone willing to pay a royalty to the inventor for its use will do justice to the inventor and meet, at the same time, the interests of the great public and the necessary demands of industrial progress.
Certain superficial economists, misled by recent manifestations in trust building, have hastily concluded that the problem it presents is a new one. For example, Collier, in his work on the subject, says: “The problem of the trusts is a momentous one, yet it is unqualifiedly a new one.” Of course it is not new. It is the same old problem of monopoly, and the so-called trust problem is but a phase of it. It is the problem of monopoly crystallized. The evils of the trust rivet the public attention, not because they are more real than the evils of monopoly per se, but because they are more obvious. In some respects the trust, by combining certain elements of monopoly, tends to make monopoly more perfect and its operations more harmful. But it simply avails itself of monopolistic institutions—that is to say, it is built upon land, railroad or tax monopoly; it takes to itself certain privileges which society has created and which have hitherto been appropriated and exercised by individuals. It therefore immediately makes these evils concrete. The trust is thus a manifestation, and the people, with their customary thoughtlessness, attack the manifestation rather than the thing itself—the fruit of monopoly rather than the tree.
The great combinations which suggest themselves when we think of the trust problem—is there one of them which does not owe its existence to some monopoly privilege? What would the Standard Oil Company be but for its control of rights of way, sources of supply, railroad terminals and the preferential benefits it is enabled to secure? What is the Steel Trust but a network of artificial privilege? Has not Mr. Charles E. Russell clearly shown, in his recent articles in Everybody’s Magazine, that the Beef Trust draws its life-blood from its monopolization of railroad privileges? What would the Sugar Trust be without the favors it receives from the tariff in its control of the raw material? Could the Tobacco Trust exist save for the power of taxation which strangles competition?
Those mentioned include nearly all the greater trusts. A more detailed demonstration of the truth we are insisting upon could be given, but the reader can himself carry this line of analysis further. He will find that it explains the existence of every oppressive combination, and that it leaves little unresolved or unexplained. It may happen that injurious combinations will present themselves in which this element of monopoly does not clearly appear. But these are by-monopolies, so to speak, and their sources of power may be traced to indirect association with the giant monopolies.
Let us admit all the good there is in aggregated capital. Let us take the trust advocates at their word that industry should be left free of all meddling, repressive or restrictive legislation. Is there, then, a common ground upon which we can meet? To think so is to delude ourselves. For their objection is not so much to mischievous laws of this sort as to interferences with things as they are. Their plea for laissez faire is hollow and insincere; true laissez faire would render every combination of capital innocuous for evil; there would be no mammoth aggregations of wealth in the hands of single individuals and no plethoric incomes.
The law of competition, let the Socialists prate as they will, gives only to those who earn. But from the denial of this law (of competition) flows all existing inequality in the distribution of wealth. There are, it is true, great swollen fortunes, which seem unconnected with these artificial laws of monopoly. Some of these, while clearly not the result of greater enterprise or greater ability, seem to be due to cunningly arranged devices independent of existing monopoly laws. But this is so in appearance only. There are no such made-to-order arrangements of industrial combination that can be used for extortion. Competition is too keenly scrutinizing for such arrangements to go undetected. The inevitable day when imitation shall overtake them can only be permanently postponed by seeking the shelter of monopoly.
Some of these gigantic fortunes are the result of stock speculation. But these are incidental, and are the profits and losses of the gambling fraternity—a game really played with the counters of monopoly, like “chips” in a poker game, and the transference of which from one to another enriches or depletes the finances only of those who play. They do not concern the man who refrains from taking part in the game, and whether it be played with railroad stocks or industrials is no great matter. If these gamblers sometimes use the moneys on deposit in public institutions—as Mr. Lawson has asserted they do—that also is another question, though a momentous one.
With the dissolving of these giant combinations which would result from the removal of the laws of monopoly would disappear the great host of gamblers and stock jugglers. The great fortunes that result from the granting of legislative favors would also disappear, since there would be no longer any legislative favors to grant. And so with many other unjust possessions. And with them would be banished forever much that corrupts our social and political life.
[1] In his definition of a trust Mr. John Moody, author of the “Truth About Trusts,” says: “When men form corporate organizations, or make agreements, they do not form monopolies. They may take advantage of monopoly in one way or another, but they do not create it. The monopoly itself is a social product, which exists with the consent of society, and men in business take advantage of it where found, just as they take advantage of other factors for the purpose of achieving their ends.”
[2] Charles M. Schwab, in his testimony before the Industrial Commission at Washington in excuse of the apparently excessive capitalization of the Steel Trust, estimated as the approximate valuation of plants, mills, machinery and transportation properties the sum of $380,000,000, but the value of the ore, coal, natural gas and limestone properties he put at the enormous sum of $1,100,000,000.
[3] This is vaguely recognized by the trust advocates and those who have written on the subject. Professor Jenks, who is one of the most temperate and discriminating, says: “So far as the industrial combinations are the result of special advantages granted to individuals or corporations, whether by the state or by others, it is probable that in most instances the evil effects would be lessened, if not completely removed, by the removal of such discriminating powers.” Which is barely more than an involved method of stating that the removal of a cause will also result in removing the effect.
[4] Undoubtedly the control of patents is an effective source of monopoly in very many instances. Some of the large combinations have succeeded in obtaining control practically of all the patents used in certain lines of manufacture. That this is a potent source of power one instance alone may suffice to prove. Professor Jenks tells us that all of the barbed wire made in this country at the present time, as well as the wire fencing, is in the hands of the American Steel and Wire Company because that company has all the valuable patents, with one or two exceptions, in those lines of manufacturing.
The Heritage of Maxwell Fair
BY VINCENT HARPER
Author of “A Mortgage on the Brain”
(Conclusion)