Monopolies and the People

by Charles Whiting Baker

So much for the power of the public to exercise its supreme control, when public exigency requires, over Nature's gifts in land and water. As an example of the supreme control of the public over the franchises which it grants, take the case of the railway again. It is well established that the public has the right through its legal representatives to regulate the management and operation of the railway in every detail; and not only that, but the rates which the railway may charge for its services as well. Many other examples might be given, for the necessities of the present decade have awakened men as never before to the facts which we have just discussed. The final conclusion must inevitably be that the public as the sole possible holder of the natural title to the gifts of Nature, while it may find it expedient to transfer this ownership to private owners, retains always supreme control, which may be exercised as the public exigency demands.

We have next to determine in what cases the exercise by the public of this right of supreme control over its heritage is demanded. We are greatly aided here, however, by the thorough study we have made of the laws of competition. It is evident at once that competition in the case of natural agents acts according to the laws already found. Agricultural land in this country is so abundant and its ownership is so widely diffused that any monopoly of it is now impossible. Each farmer competes with every other farmer, and the extension of transportation facilities has so broadened the field of competition that in no industry is the day when the few competing units shall replace the many, and monopoly shall ensue, farther off than in this. In Great Britain and Ireland opposite conditions prevail. A limited amount of land is held by a few owners, and its rental is fixed without competition; consequently the land question has been almost, if not quite, the chief issue in British politics during this decade.

If we examine Nature's gifts to the world in the shape of metals, we find iron to be so widely distributed that competition has always acted to reduce profits, and that combinations to restrict competition in the production of the metal have only recently become even possible. On the other hand, the workable deposits of copper are so scarce and the number of competitors in its production is so much smaller, that it has become the subject of the greatest monopoly the world has ever seen.

With these examples—and any number of others might be cited—is it not plain enough that the laws of competition are exactly applicable to aid in solving the problem? The smaller the number of competing units, the stronger the tendency to monopoly. Certain gifts of Nature are given to us in profusion. The people transfer the title to private owners, and of these there must of necessity be so many that they will compete steadily with each other. The consequence is that the people receive the benefit from the country's natural resources, while the private owner gets only enough to compensate him reasonably well for the labor he employs and the capital which he invests. Certain other gifts of Nature are, as we have found, very scarce; the number of men who can own and use them and compete with each other in offering their advantages to the public is necessarily small. The inevitable result of this condition is, first, intense competition and then monopoly.

It is thus evident that there is no necessity for the State to interfere with the private ownership of those gifts of Nature which are so widely distributed that competition can act for the protection of the public. As regards those other gifts which are so limited in their extent that their control has become a matter of monopoly, the right of the public to exercise its control is already proven. Whether in any given case the exigency is so great as to call for the assertion of this power, is a question which must be decided in each case separately.

It may be objected, with truth, that nothing short of the actual ownership of all Nature's gifts by the public is in accord with absolutely perfect justice; but as a matter of fact every human work carried out by human hands and brains is only an approach to perfection. It will never be possible by any human agency to distribute the wealth production of the world with absolute equity. A careful writer says: "The view that the right of every human being to his share in the gifts of Nature should be recognized is not an unreasonable one." But by no system possible of putting into practical execution can these gifts be equitably divided among all men. What can be done is to cause the benefit of these gifts to be widely distributed, and to prevent them from being monopolized for the benefit of a few.

The fact maybe alluded to, that even under widespread competition the holders of the most favorably situated and richest lands, mines, etc., receive a benefit which in absolute equity should be divided among all men. But the vastly more important matter of the monopolies which prevent the public from obtaining the benefit of the natural resources to which it holds an inalienable title, so overshadows such trivial injustices that they may be neglected. So much attention has been called of late, however, to the fact that land as a gift of Nature should, if absolute justice were done, have the benefit from its use equally divided among all men, that something further on this subject may be said.

Let us first note the fact, which no one will dispute, that the title held by the public refers only to the "site value." The value of all improvements which are the product of labor belongs to the owner by natural right. Now it is conceivable that of the total value of $10,197,000,000 at which the farms of the United States were valued at the last census, $7,000,000,000 may perhaps have been the value of the land apart from the value of the buildings and improvements made since the country was settled. In 1880 there were at least 3,500,000 farmers who owned agricultural lands. It is a well-known fact that the holding of agricultural land in large parcels is the rare exception. We may reasonably conclude, therefore, that the "site value" held by each farmer was about $2,000. This is the sum which in absolute equity is said to belong to the public at large. But let us reflect that each farmer has only received a small proportion of this $2,000 through the increase in the value of his land. The fact is that the land which at first was actually valueless has increased in value with each generation, and it is this increase alone, apart from the increase due to the betterments, after which the public has any right to inquire. Remembering the number of sales and changes in the ownership which take place in this country, how often the benefits which have accrued to a single property are divided up among a number of heirs, and that each owner represents on the average a family of three individuals, it seems reasonable to suppose that this increase in the "site value" of each farm may have been divided among twenty different persons. Thus, while the statement may be made that the public has a claim upon the farms of the country of $7,000,000,000, it must be remembered that this sum has been divided among about 70,000,000 different people, and that this division has been in progress for over two centuries. When the benefits of our natural resources are so widely distributed as this, there can be little occasion to alarm ourselves regarding injustice through the private control of farming lands.

This, however, is somewhat apart from our argument. The main point, of which we must not lose sight, is that the private ownership of those gifts of Nature which are widely distributed operates to the general benefit of the community far more than any system of public ownership that could be devised. But, on the other hand, in the case of natural agents limited in amount, it is practically certain that sooner or later a monopoly will be established by their private owners, to the serious detriment of the public at large. The sovereign right of the public in this latter case to take such steps as are necessary for its proper protection, is something which both a priori reasoning and judicial decisions amply prove.

The great problem of monopoly would be a far easier one to solve, both theoretically and practically, were it as easy to regulate justly those forms of monopoly whose strength lies in combination only, as it is those whose power depends on the possession of gifts of Nature, which we have just considered. In dealing with trusts, monopolies in trade, and labor monopolies, we are in danger, on the one hand, of sanctioning oppressive interference with private business, and on the other of permitting a license in the conduct of private business which encourages its managers to continue to extort unjust gains from the public. In the face of this difficulty, which careful consideration shows to be very serious, and in the dread of other evils, such as the government proving incompetent to safely undertake these new and strange responsibilities, we may well feel like trying to get along with the aid of those old defenses against monopolies that have always, until the modern concentration of industry was accomplished, been ample to hold them in check.