Social legislation and social activity

by American Academy of Political and Social Science

When transportation was measured by the strength and endurance of animals, only a limited area could be reached from a given centre. Its slowness and expense confined all inland distribution within narrow bounds. Only eighty years ago it cost $125 to move a ton of freight from Philadelphia to Pittsburg, and the average price for carrying the necessaries of life was not less than twenty cents a ton for every mile of haul. On such a basis most commodities were shut off from distant markets, and farm products would seldom permit of conveyance more than 100 or 150 miles. Only such articles as were of small bulk and weight compared with their value were moved to any considerable distance from the place of production. For this reason the requirements of an ordinary family were almost wholly supplied from nearby sources. And this means—without amplifying the statement—that productive energy, for the most part, was restricted by the consuming capacity of the surrounding neighborhood. The forces outside each separate circle were but feebly felt and had little influence upon its daily affairs. Broadly speaking, the activities of each locality were adjusted to its own conditions and were practically undisturbed by like operations in other places. What we call competition was held in check by slow and costly means of conveyance; its effects were moderate and limited, its friction seldom severe.

But the use of steam for motive power and electricity for communication increased enormously the range of accessible markets, and at once intensified competition by the celerity and cheapness of distribution. Industrial strife has already become world-wide in extent, and distance an ineffectual barrier against its destructive assaults. For the commercial factor of distance is not at all a matter of miles, it is merely a question of time and money. The fact that the cost of moving a hundred pounds of goods a single mile by wagon transports a ton of the same goods by rail more than three times further is some indication of the effect of cheap and rapid conveyance in bringing remote places closer together. Our grandparents got their supplies mainly in the localities where they resided and only a few persons were concerned in their production. To-day it may safely be said that five millions of people and five hundred millions of capital are directly or indirectly employed in furnishing an ordinary dinner. When merchandise of every description is carried at great speed from one end of the land to the other, and at an average cost of less than three-quarters of a cent a ton a mile, as is now the case, the expense of transport is but a trifling impediment to the widest distribution.

Nor should we forget that it was the opening up of new and ever enlarging markets, by the cheapness of steam transportation, which gave the first opportunity for the extensive use of machinery; and this in turn quadrupled the capacity of labor and greatly reduced the cost of large-scale production. By this revolution in the methods of manufacture—caused by the railroad and steamship—the mechanic was supplanted by the operative, and the skilled and independent craftsman of former days found his occupation gone. For what chance now have hand-made articles when the factory-made product is carried across the continent at nominal cost? But the factory without the railroad would be only a toy-shop. If its wares had to be hauled over country roads by mules and horses, the points they could reach would be few and nearby, and thus contracted sales would limit the size of the plant and the volume of its business. It is simply because transportation is now so speedy, so cheap and so abundant that great establishments have become profitable and driven their smaller rivals from the field.

These facts—which might be multiplied without limit—bear directly, as I think, and with a force not fully perceived, upon the whole problem of industrial competition. For, as the means by which industrial products are distributed become more convenient, quicker in action and less expensive, the area of distribution rapidly enlarges, and as the area of distribution enlarges the competition of industrial forces increases in something like geometrical ratio. The movement of property by rail in the United States alone already exceeds three millions of tons every twenty-four hours. Think of the rivalry of products, the strife of labor, the strain and struggle of trade, which such a movement implies. With the constant acceleration of that movement, which is certain to happen, how long can the friction be endured? How soon will it become unbearable?

When Adam Smith wrote “The Wealth of Nations,” it took two weeks to haul a wagon-load of goods from London to Edinburgh, and such a thing as a business or industrial corporation was virtually unknown. To-day the great enterprises of the world are in the hands of corporations, and the time is fast approaching when they will absorb all important undertakings. Why? Simply because the railroad and the steamship—cheap and rapid transportation, all the while growing cheaper and quicker—ever widening the area of profitable distribution, furnish the opportunity, otherwise lacking, for the employment of larger and still larger capital. This opportunity permits and encourages the concentration of financial resources; so that, within limits not yet ascertained, the larger the business the greater its possibilities of gain. But the legitimate, the inevitable offspring of corporations is monopoly. Why? Simply because the operation of these massive forces—impinging and grinding upon each other in every market—begets an extremity of mutual danger which always invites and often compels a common agreement as to prices and production; that is, a trust. Just as the implements of warfare may become so devastating in their effects that nations will be forced to live in amity, so the destructiveness and exhaustion of commercial strife in these larger spheres of action may make combination a necessity.

Thus the potent agencies by which distribution is more and more rapidly and cheaply effected, which so unite and intensify the forces of production, are fast altering the conditions and changing the character of industrial development. And the end is not yet; it outruns imagination. What will be the ultimate effect of these methods of conveyance when brought to higher perfection and employed with still greater efficiency? When these agencies of commerce are increased in number and capacity, as they will be; when cost is still further and greatly reduced, as it will be; when speed is doubled, as it will be, and quadrupled, as it may be; when the whole United States shall have reached the density of population now existing in Great Britain, how can industrial competition possibly survive?

So, in the measureless and transforming effects of modern transportation, and the ends to which it resistlessly tends, I find the primary cause of the economic revolution upon which we have entered. The incoming of these new and unfettered forces not only changed the basic function of society, but disturbed its industrial order. In the effort to restore a working equilibrium the gravest difficulties are encountered, and we do not clearly see how they are to be overcome. Already we are compelled to doubt the infallibility of many inherited precepts and to reopen many controversies which our grandsires regarded as finally settled. The ponderous engine that moves twice-a-thousand tons across an empire of states, the ocean steamer that carries the population of a village on its decks and the products of a township in its hold, are indeed splendid evidences of constructive skill, but more than this they are economic problems as well which challenge and dismay the present generation. They force us to discredit the venerable maxim that “competition is the life of trade,” and warn us, I think, that the political economy of the future must be built on a nobler hypothesis. If it be true in the long run, as I believe experience teaches, that where combination is possible competition is impossible, is it not equally true that combination becomes possible just in proportion as transportation becomes ampler, speedier and cheaper? So the opportunity, if not the necessity, for combination has already come in many lines of activity and will certainly come in many more. The circumstance that permits competition, its sine qua non, is mainly difference of conditions. Practically speaking, this difference is chiefly found in the means of distribution. As that difference disappears, with the constantly diminishing time and cost of transport, the ability to combine will enlarge and the inducement to do so become overwhelming. That seems to me the obvious tendency of our industrial and social forces to-day, and that tendency, I predict, will be more and more marked as time goes on.

In the unrest and discontent around us, deep-seated and alarming here and there, I read the desperate attempt to avoid the effects of industrial competition and a tremendous protest against its savage reprisals. Every trust and combination, whether organized by capitalists or by artisans, is a repudiation of its teachings and a denial of its pretensions. The competitive theory may have answered the age of mules and sail-boats and spinning-wheels, but it fails to satisfy the interlacing needs or to sustain the interdependent activities which are founded on modern methods of intercourse and distribution; it is a theory unsuited to the era of railways and wireless telegraphy, this era of ours, so restless in thought, so resistless in action.

This, then, as I conceive, is the underlying question. Shall we continue to enforce with precept and penalty the rule of competition, whose cruel creed is “every man for himself,” or shall the effort and industry of the world be hereafter conducted on a more humane and fraternal principle? That is to say, is society—stripped of its polish and altruistic pretences—is society after all only a mass of struggling brutes fighting for the best places and the biggest bones, and is government simply an armed referee standing by to see that every dog has fair play? In short, is personal selfishness the ultimate force and individual greed the bottom fact? For myself, I disbelieve the doctrine. I am not terrified by the cry of paternalism nor dismayed by unreasoning clamor at the dangers of monopoly. The trusts and the unions are here, in money, in labor, in production and in distribution—they came with the railroad and the steamship—and they have come to stay.

When population was scattered and sparse, when movement was difficult and costly, when communities were isolated by distance and by dissimilarity, and bonds of relationship were feeble and few, the attrition of rivalry was complacently endured. But now, when seas are spanned with steamships and netted with electric wires; when city and forest, farm and factory, mine and counting-room are joined together by innumerable pathways of steel, and the swift locomotive, rushing across continents—like the shuttle through the loom—weaves this majestic fabric of commerce which covers the globe; when life is no longer localized in effort or achievement, and the thought of one man is the instantaneous possession of all men, the friction of unbridled competition has become irksome and intolerable. It is folly to shut our eyes to unmistakable facts or to stand in the way of inevitable events. Doubters may deride, demagogues denounce, and ignorant lawmakers strive to build up legal barriers; but neither agitation, nor protestation, nor legislation can stop the growth or prevent the advance of industrial federation.