The influence of great prosperity shows in the large number of combinations; but in 1893, the number was less, altho the total nominal capital (stocks and bonds) was still the greatest it had ever been in any year. Then came the period of depression, 1894-97, when both the numbers and the capital were comparatively small. Then from 1898 to 1901 followed the period of the greatest formation of trusts the world has ever seen.
The list of these four years contains the names of the most widely known American combinations, a few of which are here given with the years of their formation: 1898, American Thread, National Biscuit; 1899, Amalgamated Copper, American Woolen, Royal Baking Powder, Standard Oil of N.J., American Hide and Leather, United Shoe Machinery, American Window Glass; 1900, Crucible Steel, American Bridge; 1901, United States Steel Corporation, Consolidated Tobacco, Eastman Kodak, American Locomotive.
§ 10. #Height of the movement toward combinations.# In a list by another authority[8] it appears that the data for all industrial trusts are in round numbers as follows:
Number of
Plants Acquired Total
Date Number or Controlled Nominal Capital
Jan. 1, 1904 318 5288 $7,246,000,000
These figures compared with those given above would indicate that the industrial trusts had about doubled in the years 1900-1903 inclusive. Probably most of this growth was in the years 1900 and 1901; then the movement became very slow, because, as is generally believed, of the aroused public opinion, of more vigorous prosecution by the government, and of additional legislation against trusts. The authority last cited gives in a more comprehensive list, in six groups, all the monopolistic combinations in the United States, at the date of January 1, 1904, as follows (the figures just given above being the totals of the first three groups):
No. of Plants Total Nominal
Groups Number Acquired or Controlled Capital
1. Greater industrial
trusts 7 1528 $2,260,000,000
2. Lesser industrial
trusts 298 3426 4,055,000,000
3. Other industrial
trusts in process
of reorganization
or readjustment 13 334 528,000,000
4. Franchise trusts 111 1336 3,735,000,000
5. Great steam
railroad groups 6 790 9,017,000,000
6. Allied independent 10 250 380,000,000
—- ——- ———————
Total, 445 8664 $20,000,000,000
§ 11. #Motive to avoid competition.# This remarkable movement toward the formation of united corporations from formerly independent enterprises called forth a variety of explanations. The organizers of trusts gave as the first explanation of their action that it was the necessary result of excessive competition. It is not to be denied that a hard fight and lower prices often preceded the formation of the trusts. But as this excessive competition usually is begun for the very purpose of forcing others into a combination, this explanation is a begging of the question. It is fallacious also in that it ignores the marginal principle in the problem of profits. Profits are never the same in all factories, and to those manufacturers that are on the margin competition may appear excessive. It generally has been the largest and strongest factories, in the more favored situations, that, in order to get rid of troublesome competitors, have forced the smaller, weaker, industries to come into the trust. In other cases the smaller enterprises have been eager to be taken in at a good price, altho they might have continued to operate independently with moderate profits. When, therefore, it is said that competition is destructive, it may be a partial truth, but more likely it is a pleasantry reflecting the happy humor of the prosperous promoters of the combination.
§ 12. #Motive to effect economies.# Another advantage of the combination of competing plants that was strongly emphasized was the economy of large production.[9] The economies that are possible within a single factory may be still greater in a number of combined or federated industries. The cost of management, amount of stock carried, advertising, cost of selling the product, may all be smaller per unit of product. Each independent factory must send its drummers into every part of the country to seek business. In combination they can divide the territory, visit every merchant and get larger orders at smaller cost. A large aggregation can control credit better and escape losses from bad debts. By regulating and equalizing the output in the different localities, it can run more nearly full time. Being acquainted with the entire situation, it can reduce the friction. A combination has advantages in shipment. It can have a clearing-house for orders and ship from the nearest source of supply. The least efficient factories can be first closed when demand falls off. Factories can be specialized to produce that for which each is best fitted. The magnitude of the industry and its presence in different localities often, in the period of trust formation, served to strengthen its influence with the railroads, and to increase its political as well as its economic power.