It is not necessary to cite further evidence to show that billions of dollars of fictitious values were saddled upon the country between the end of the Civil War and the close of the century. A considerable portion of the amount of stocks and bonds issued was doubtless based on the dividend-paying power of the concerns in question. In many instances the stock was not purchased in large quantities by the investing public, but was simply issued to promoters, and when values collapsed they only lost so much worthless paper. It is apparent, therefore, that all the stock watering is not of the same character or effect; but nevertheless it remains a fact that the buying public and the working class are paying millions in annual tribute to the holders of paper which represents no economic service whatever. If the water were all squeezed out of railway, franchise, and industrial stocks and bonds and the mineral and other resources which have been actually secured at a nominal value, or fraudulently were returned to the government, there would be a shrinkage in the necessary dividends paid out that would startle the world.
Those who followed the literature of political economy during this period of gigantic consolidation and high finance could not help discovering a decided change in the views of leading men about the nature of industrial evolution. The old practice of indiscriminate abuse of all trusts began to undergo a decided modification; only persons from the backward industrial regions of the West and South continued the inordinate clamor for the immediate and unconditional dissolution of all of them, on the theory that they were "artificial" products, brought forth and nourished by malicious men bent solely upon enhancing their personal fortunes. The socialist contention (set forth by Marx and Engels in 1848) that competition destroyed itself, and that the whole movement of industry was inevitably toward consolidation, began to receive attention, although the socialist solution of the problem was not accepted.
This change in attitude was the result partly of the testimony of practical business men before the Industrial Commission in 1900, which was summarized in the following manner by the Commission: "Among the causes which have led to the formation of industrial combinations, most of the witnesses were of the opinion that competition, so vigorous that profits of nearly all competing establishments were destroyed, is to be given the first place. Even Mr. Havemeyer said this, though, as he believed that in many cases competition was brought about by the fact that the too high protective tariff had tempted too many rivals into the field, he named the customs tariff law as the primal cause. Many of the witnesses say that their organization was formed to make economies, to lessen competition, and to get higher profits—another way of saying that competition is the cause without conceding that the separate plants were forced to combine."
In a careful and thoughtful analysis of the problem, published in 1900 by Professor J. W. Jenks, then of Cornell University, the wastes of competition and the economies of combination (within limits) were pointed out with clarity and precision. The Industrial Commission had reported that rebates and discriminations by railways had been declared to be a leading cause of combination by several witnesses appearing before it; but Professor Jenks at the close of his survey came to the positive conclusion "that, whenever the nature of the industry is one which is peculiarly adapted for organization on a large scale, these peculiarities will so strengthen the tendency toward a virtual monopoly that, without legal aid and special discriminations or advantages being granted by either the State or any other influence, a combination will be made, and if shrewdly managed can and, after more experience in this line has been gained, probably will practically control permanently the market, unless special legal efforts better directed than any so far attempted shall prevent."[50] The logical result of this conclusion is at least government supervision, and this Mr. Jenks advocated.
Whether some special privileges beyond the ownership of basic natural resources was necessary to bring about combinations on a large scale, the leaders in such combinations seem to have engaged extensively in politics, contributing to the campaign funds of both parties, helping to select their candidates, and maintaining expensive lobbies at Washington and at the capitals of the several states. Mr. Havemeyer admitted before a Senate committee in 1893 that the Sugar Trust was "a Democrat in a Democratic state and a Republican in a Republican state"; and added that in his opinion all other large corporations made contributions to the two leading parties as a matter of course, for "protection." The testimony taken by the New York insurance investigating committee in 1905 and by the Clapp committee of the United States Senate in 1912 revealed the fact that during the period between 1896 and 1912 millions of dollars had been contributed to the Republican party by the men who had been most active in organizing the great industrial combinations, and that representatives of the same group had also given aid and comfort to the Democratic party,[51] although the latter, being out of power at Washington, could not levy tribute with the same effectiveness.
The statesman of the new capitalism was Mr. Marcus A. Hanna. Mr. Hanna was born in 1837 of pioneer stock of the second or third generation, after the roughness of the earlier days was somewhat smoothed away without injury to the virility of the fiber. He entered business in Cleveland in 1858 at a time when a remarkable group of business men, including Mr. John D. Rockefeller, were laying the foundation of their fortunes. Endowed with hard, practical, economic sense, he refused to be carried away by the enthusiasm that was sweeping thousands of young men of his age into the Union army, and he accordingly remained at his post of business.[52] It was fortunate for his career that he did not lose those four years, for it was then that he made the beginnings of his great estate in coal, iron, oil, and merchandising.
Mr. Hanna, like most of the new generation of northern business men, was an ardent Republican. "He went into politics as a citizen," remarks his biographer. "The motive, in so far as it was conscious, was undoubtedly patriotic. That he should wish to serve his country as well as himself and his family was rooted in his make-up. If he proposed to serve his country, a man of his disposition and training could only do so by active work in party politics. Patriotism meant to him Republicanism. Good government meant chiefly Republican government. Hence the extreme necessity of getting good Republicans elected and the absolute identity in his mind and in the minds of most of his generation between public and party service."[53] In his early days, therefore, he participated in politics in a small way, but it was not until 1891, during the candidacy of Mr. McKinley for governor of Ohio and Mr. Sherman for the Senate, that he began to serve his party in a large way by raising campaign funds.[54]
In 1895 Mr. Hanna retired from active business and set about the task of elevating Mr. McKinley to the Presidency. He spent a great deal of time at first in the South securing Republican delegates from the states where the Republican party was a shadow, and other than party considerations entered largely into selection of delegates to the Republican convention. While laying a solid foundation in the South, Mr. Hanna bent every effort in capturing the delegates in northern states. According to Mr. Croly, "Almost the whole cost of the campaign for Mr. McKinley's nomination was paid by Mr. Hanna.... He did receive some help from Mr. McKinley's personal friends in Ohio and elsewhere, but its amount was small compared to the total expenses. First and last Mr. Hanna contributed something over $100,000 toward the expense of the canvass."[55]
Mr. Hanna firmly believed, and quite naturally too, that the large business concerns which had prospered under the policies of the Republican party should contribute generously to its support. As early as 1888, when the tariff scare seized certain sections of the country, he was selected as financial auxiliary to the Republican national committee, and raised about $100,000 in Cleveland, Toledo, Mahoning Valley, and adjacent territory.[56]