Monopolies and the People

by Charles Whiting Baker

The investigation we have already pursued gives us no answer to these questions. We have thus far studied facts, and made little attempt to deduce from them general truths. We are now informed as to the widespread growth of monopoly; and we have paid some attention to the injustice and wrong to which it gives rise, in order that we may understand the urgent necessity for finding the right remedies, and finding them at once. Our study is henceforth to be devoted to this end. How shall we go about it? In the first place, it is evident that we might make a far wider and more detailed investigation of existing monopolies, and still be no nearer our desired end. We might study the facts concerning each especial railroad monopoly in the country, for instance, without reaching any valuable conclusion with regard to the proper method of restricting railroad monopolies in general. But if we were to take the monopoly exercised by a single railroad company, and study the principles on which it is founded and the laws by which it is governed, we might then be able to state something of value in reference to proper methods for its control. Evidently, then, principles rather than facts are to be the chief subjects of our future discussion, although, of course, we can only discover these principles by investigating the facts already found, together with others which may come to our notice.

Our very first and most obvious generalization from the facts which we have studied is, that in all the monopolies we have considered, the inherent principle is the same, and the effect on the community is of the same sort. Therefore, instead of hunting for separate remedies for railroad monopolies and trusts and labor monopolies, we will see what the general problem of monopoly is, and what is the general nature of the remedy that should be applied; the details applicable to each case will, of course, be different; but the underlying principle must be the same.

But if we examine our problem a little more closely we see that the word monopoly seems to be only a negative, expressing the fact that competition is absent. We will therefore direct our studies to competition itself, and will consider first its action as the basis of our social system.

In the most primitive condition of man which we can imagine, each person provided for his or her own need. The competition which then existed was not competition, in the sense which we use the word in this volume, but was a struggle for existence and a gratification of the baser desires, of the same sort as that which now prevails in the brute creation, resulting in a "survival of the fittest." With the introduction of the family relation, the principle of the "division of labor" was utilized, the female doing the hard and menial work, while the male devoted himself to hunting and fishing, or subsisting on the results of his helpmate's industry. As men's wants increased and they became more industrious in supplying them, this division of labor was extended. The man most skilful in fishing neglected the use of the bow and spear, and his surplus of fish he exchanged with his neighbor for the fruit of the chase. The very same principle applied to different tribes brought about the first commerce. A pastoral tribe, with large flocks and herds, exchanged their surplus products with less civilized tribes who continued to live by the chase, or with a more civilized people who had begun to till the soil.

It is plain that these were first steps in civilization. Man, so long as he supplies only such of his wants as he can supply with the labor of his unaided hands, must remain in a half-fed, half-clothed, and untaught condition, because his strength and skill, when diverted in the many directions which his wants require, are not enough to enable him, even when he spends all his time at work, to supply himself with more than the barest necessaries of life. It would be interesting to trace the development of this principle of action through its various stages down to the present time, when we see men everywhere working at various trades and occupations, and always to supply some want of their fellow-men. Every person in the community is absolutely dependent upon a multitude of others, most of whom he knows nothing of, for the supply of almost all his wants. Human society is thus growing more and more interwoven and interdependent. The motto of the Knights of Labor is a true one, apart from the altruism involved in it. "An injury to one is the concern of all," because the mass of humanity is connected and woven together by such strong ties of self-interest, as well as fraternity, that a calamity to any class or country is felt in some degree throughout the civilized world. This is vastly more true now than it was a half-century ago. Under such conditions as existed then, the doctrine of laissez-faire, that the government should confine itself to the prevention of violence and crime and the maintenance of national honor and integrity, letting alone the industries of the country to develop and operate according to natural laws, was not liable to do harm. But the conditions now are wholly changed. The interdependence of the community involves a moral inter-responsibility, and the time has come when we must recognize this by making it a legal responsibility as well.

We are now ready to consider in detail this inter-relationship of society, and to examine the natural laws which govern it. We have already stated the fact that, broadly speaking, each man is engaged in supplying the wants of his fellow men, because in that way better than in any other he can supply his own wants. We shall find this an easy matter to understand if we conceive that every man puts the products of his labor, of whatever sort it be, into a common public stock (offers it for sale), and takes out of this common stock (buys) the various articles which he wants. He does the first simply that he may do the second, not because he desires to benefit his fellow-men. The money which he receives (as we do not propose to consider here any questions regarding the currency) we may regard as simply a certificate that he has done a certain amount of work for the world, the measure of which is the number of dollars he receives; and on presentation of that certificate, he can obtain other articles which he desires.

We have next to consider the fact that there is a great variation in the amount which a man can take out from this common stock. One man is able to provide himself from the common stock with a host of luxuries, while another may only take out a scant supply of the barest necessaries of life. If this distribution operated with perfect equity, a man would be permitted to take out of this common stock exactly in proportion to the benefit which the world at large received from that which he put in. No human judgment, however, is competent to fix, with even an approach to precision, the relative actual benefit which each member of society renders to his fellow-men as a whole. But our social system effects that for us better than it could be fixed by any arbitrary human judgment. This it does by a law known as the law of supply and demand. Instead of the actual benefit, this law takes what people choose to consider as benefit, which is the granting of their desires, whether they desire things hurtful or beneficial. It is these desires for things which others can produce which constitute demand. It is to be borne in mind that this is a broad term, and includes not only desires for food, clothing, and actual things, but for service of every sort, in short, demand is the desire for any thing whatever for which people are willing to pay money. But when there is this demand—this willingness to pay money for any article—people begin at once to supply it, because the money they receive allows them to take goods which they wish from the common stock. Evidently, if there is an unlimited supply of any thing, people will not pay money for it. People will not pay money for fresh air to breathe when they are out-of-doors, and the supply is unlimited; but when indoors, the supply may be limited, and they will spend money to have ventilators and air-pipes built to supply them with fresh air. Or take the contrary case: The supply of some commodity, say flour, falls very short. Evidently less flour must be used by the world than was used in the years of a more plentiful wheat harvest. But no one will wish to be the one to go without, and most people will pay a little more rather than do so. Therefore the price rises.

The competition which we have chiefly considered is the rivalry which exists between the men who supply the same sort of goods; but there is a rivalry among buyers as well. Speaking generally, every buyer is trying to purchase for as little as possible, and every seller is trying to dispose of his goods or services to the world for as much as possible, which each has a perfect right to do.

We have already seen that prices vary with the relative proportion between supply and demand, rising as demand rises or supply fails, and falling as supply increases or demand falls off. But to complete the wonderful perfection of the mechanism, the reciprocal relation is introduced, so that supply and demand vary with price. If the price rises, fewer people can afford to buy and more will be anxious to sell; while if the price falls, more people will wish to buy and fewer people will be willing to sell.

We can now easily see why some men are able to take out from the world's common stock of product so large an amount, while most men can take but a meagre allowance. By the law of supply and demand the price is far higher for the service which one man renders to the world than another. Let us take the operation of a large machine shop, for instance. Only one superintendent is needed, and he should be a man who has devoted much time to mastering all the details of the business, and is experienced and competent to so govern the work that a large product will be turned out at a small expense. There is a demand in the country, let us say, for 5,000 such men; but out of the 5,000 who are filling such places, there are perhaps 50 who seem almost faultless in their skill and industry, there are 500 who are with one or two exceptional faults, almost equally efficient, there are 3,000 who are fairly good men, and the rest may be classed as those who hold their positions because better men for the place cannot be had. So with the skilled machinists, the relation of supply and demand is such that the price of their labor is kept up to perhaps $4.00 per day. But of common laborers the supply is so related to demand that the price of their work is very low. Thus the three classes take very unequal amounts from the common stock. The superintendent, perhaps, is able to take five thousand dollars' worth of goods each year. The skilled workman can spend perhaps one thousand five hundred dollars, while the laborer can spend but five or six hundred dollars. Thus the men who secure the greatest amount of wealth in return for their services to the world, secure it because people are willing to pay it rather than pay less for men of less ability. This is not the same as rewarding a man according to the actual benefit which he does to the community, but it is an approach to it; and it seems to be as close an approach as is possible by human methods.