The conclusion to which we are driven seems to be that the competitive system has the same effect upon trade unions as upon the rest of the industrial field—it sacrifices the many to the few. During these last two years wages have not been appreciably reduced. The most efficient have continued to receive the same wages as before. But the price paid for this advantage has been the reduction of between five and twenty millions of people to the verge of starvation, a large part of whom must by the very necessity of things be driven to vagrancy and through vagrancy to crime.[99]
What Socialism proposes is to maintain the principle of competition to the extent necessary to assure most comfort to the most efficient without exposing the rest to so awful an alternative as unemployment. And I think it will be seen that the education of the workingman through the organization, the order, the democracy of trade unions will play no small part in making Socialism possible, and that it is probably through the organization of trade unions that a true democracy will eventually be attained.
§ 4. Trusts
Two pictures of trusts have already been borrowed in this book,[100] one by Mr. Rockefeller, showing the economies they make, and the other by Mr. Havemeyer, showing the dangers that attend them. Trade unions start out to include all the men in the industry; this is their ideal; and it has been shown how far short of it they fall. It is generally supposed that trusts likewise seek to include all employers in the industry, but this is a great mistake. Not only does the law forbid this, but it would be a mistaken policy. A trust that included all the industry would invite newcomers for blackmailing purposes if for no other. The last and best policy of the promoter is to include only the most prosperous and to leave around the trust a fringe of independents too weak to affect prices but just strong enough to live as a warning to others. A good collection of independent factories on the verge of bankruptcy is the finest bulwark a trust can have, for they discourage the starting of any more.
How the trusts make prices and keep independents in their wake is well illustrated by the following extract:[101] "The custom has regularly been for some years for the Standard Oil Company to announce from day to day the price which it would pay for crude petroleum and the price at which it would sell refined petroleum. This price is generally accepted as the market price, and competitors follow."
"Likewise, the American Sugar Refining Company first posts the prices for the day, and is then followed by its competitors, who post theirs. Generally they take the prices fixed by the American Sugar Refining Company; but at times, if they have a little surplus stock on hand, or if it is difficult for them to secure a customer, they will cut the price perhaps one-sixteenth of a cent per pound. One or two of the chief competitors seem to be forced to put their prices quite frequently at one-sixteenth of a cent below that of the American Sugar Refining Company. In spite of its control over the output it is said by Mr. Post that the American Sugar Refining Company has not, in his judgment, unduly restricted the output. It is probable, he thinks, that had that company not been formed the competitive system would have ruined many established refineries, so that as many would have been closed as is now the case, and the output would have been fully as small, probably even less. Practically all of the witnesses, both members of the combination and their opponents, concede that while there is a certain arbitrariness in fixing the prices it has been exercised in most cases only within comparatively narrow limits, and then, mainly to meet competition or stifle it."
Trusts, therefore, do in one sense succeed where trade unions fail; that is to say, they do succeed in getting all to join them that they want; whereas the trade unions do not, the essential difference between the two being that the trust is essentially monopolistic whereas the trade union is essentially democratic. The one wants to benefit a few at the expense of the many; the other wants to benefit all at the expense of none. As the competitive system favors the policy of the trust and disfavors that of the union, the trust succeeds where the union fails.
No one would accuse the organizers of a union of seeking to benefit a few at the expense of the many, and yet this under the competitive system is not only what happens but what must happen. On the other hand, no one imagines that the organizers of a trust have any other intention: they deliberately set out to eliminate competitors for their own benefit and they have succeeded in their task to an altogether unexpected degree.
It has been claimed, however, for the trusts that whatever may be the private benefit of their stockholders, they do perform a great public service.
Among the public services they were supposed to render it was claimed that they would pay good wages and furnish steady employment.[102] Even the labor unions themselves were of this opinion. Their leaders testified that they did not fear industrial combination and that if combinations were able by virtue of their savings to increase the profits of industry, workingmen would be able by pressure to "maintain or increase their wages quite as readily as before the combinations were made."[103] Another contention made for trusts was that they would lower prices. With the view of maintaining this contention, the trust magnates themselves testified to the enormous economies effected by combination, for the purpose of persuading us that the consumers would profit by these economies. Mr. Havemeyer was honest enough, however, to admit that he would be guided in fixing the price only by business considerations. But it was believed at that time that business considerations would be sufficient to keep prices down and the experience of the Whisky Trust was cited to prove that it was impossible to maintain prices above a reasonable margin of profit.