CHAPTER 56
PUBLIC POLICY AS TO CONTROL OF INDUSTRY
§ I. STATE REGULATION OF CORPORATE INDUSTRY
The social problems of corporations
1. The great increase of late in the number of industries under corporate control has brought new problems of social regulation. Inventions, machinery, better transportation, better communication, widening markets, have united to favor large-scale production, and this in turn to multiply corporations. Corporate organization makes possible greater massing of capital, greater stability of policy, and (because not dependent on a single life) greater permanence than does individual ownership. With these advantages the corporation brings also new social problems. The relations in corporate business are more complex than those in individual enterprise. The ordinary stockholder cannot have personal knowledge of the business or exercise personal supervision over his investment. The corporate official controls chiefly not his own wealth, but the wealth of others. When men deal personally with each other their sympathies are more appealed to. But, as noted in the case of the railroad, the corporate official at best seeks to satisfy his employers, often to the detriment both of the employes and of the public. Corporations are "soulless" because they permit less of the close personal relation that makes for morality. At various points in these later chapters on the relation of the state to industry, mention has been made of the measures society has taken to regulate corporate industry. The purpose now is to survey the field more systematically and to see the extent of this regulation, the difficulties arising, and the principles involved.
Examples of public control of corporate industry
2. Numerous laws and commissions recently have been established to provide public regulation of industry. The Interstate Commerce Commission is the most prominent of the agencies for regulating corporate industry, as the railroad problem is the most prominent of the corporation questions. But before the advent of the railroad, banks had been recognized as having an exceptional public character. Not only stockholders, investors, depositors, and note-holders, but a large part of the public suffers losses by the failure of banks. As investigation by the various interested persons is quite impossible, the state through its agents inspects the books of the bank in a manner not thought of in the case of ordinary private business. The bank commission is the eye of the public, safeguarding the public welfare. State inspection of insurance companies, a later kind of corporate enterprise, grew out of a similar need. Insurance to provide for sickness, old age, or death is socially desirable and is possible in an equitable way only by the association of a large number of policy-holders. But inspection of the business by each policy-holder being impossible, regulation and control through some public agency is needed. The tax commissions now found in a majority of the states have been created principally to deal with corporations. In California, a debris commission regulates the relations between the farmers and the miners using hydraulic processes. A number of states have mining commissions, harbor commissions, labor commissions, boards of arbitration, and other similar bodies. The increase of these public agencies to regulate corporate industry has lately been condemned by some as a useless multiplication of state machinery. Doubtless some commissions have, through improper influences, been needlessly created; others having important duties have been intrusted to incompetent political appointees. But most of these commissions are needed, though at first their work may be ineffective.