Limits to aggregation.—It is easy to see that the advantages of great establishments cannot always be gained. The limits of demand restrict the possibility of profit in supply. The element of space in connection with the market and in relation to the buyers makes an important limit. Special advantages of location on a small scale may outweigh the advantages of aggregation. Utilization of forces in nature, like pure water or water power, or special qualities of raw materials, may outweigh all other considerations. In general the requirement of interested oversight in a single superintendent has checked such growth. The more perfect, however, the system of management, the less effective is such a limitation. It is possible with extreme division of labor to make distinct rules take the place of personal [pg 197] direction, and oversight is reduced to a minimum. All these limitations serve to check the too rapid growth of this factory system and to hold in check the tendency to misuse of power in possible monopolies. Any raising of prices which diminishes the demand destroys the advantage of a great combination. It makes its profits by the quantity of its products sold. A reduction of the quantity much more certainly than a reduction in price destroys the advantage. Hence a monopoly gained in the ordinary progress of trade can seldom operate for any long time to advance prices, though it may destroy the competition of smaller establishments completely.
Disadvantages of aggregation.—It is impossible to overlook a considerable number of disadvantages to the welfare of a community in a too rapid aggregation of its industrial enterprises. It changes large numbers of laborers from independent workers to wage earners, and thus makes them a part of the great machine, with an immense momentum in production which does not so readily yield to the fluctuations of demand. An independent worker is not worried if he has a leisure day. The great establishment cannot adjust its machinery to a lessened demand without a uniformity of reduction in wages or time of employment, or else the discharge of numbers of employés. This is one of the causes of over-production so evident in certain directions upon the coming of financial crises. Another great disadvantage is seen in the breakdown of any such enterprise. Then its employés, trained for its particular uses, find themselves not only without employment, but [pg 198] unfitted to drop into other niches of usefulness. The absolute routine of the great establishment so fixes habits as to make very difficult a change of work except in line of promotion in a similar organization. The dissatisfaction and distress from such absence of employment is more apparent than in ordinary poverty.
The strongest objections, however, to the great aggregations are found in the possibility of oppression through a monopoly of business, and therefore almost absolute control by a few persons of the interests not only of a large body of employés, but of every competitor upon a smaller scale. A large combination practically compels all to yield to its methods. The certain economy of methods has led to the statement, “Where combination is possible, competition ceases.” The common saying, “Competition is the life of trade,” becomes untrue whenever that competition implies a costly service. Competition is supposed to reduce cost by stimulating energy and ingenuity. But when that ingenuity can be better applied in combination, the result is the destruction of competition. Competition may drive the milk wagon faster, but combination will deliver more quarts of milk in the same time. The natural opposition to combination rests upon the same ground as the opposition to improved machinery. It certainly throws out of their ordinary employment a considerable number of independent workers.
This power of the combination is a constant temptation to unscrupulous and grasping managers to increase their advantage by vicious discrimination and false competition, expecting the destruction of others' business to [pg 199] increase their own. The largeness of the operation makes more plain the injustice of the maxim, “All is fair in trade.” The final dangers of combination are thus likely to be overestimated. It is not true that any larger proportion of false methods of business enters into the large establishment than into the small, and the possibility of profit in a great combination is quite as truly dependent upon the universal welfare as anywhere. The same extremes of prices mark the range for these establishments as for any others. The price cannot continue higher than buyers will pay with an increasing disposition to buy more. It cannot remain lower, of course, than will enable sellers to continue living as well as in any other business. Checks upon increased price come as certainly from substitutes as from rival production, and the ability of the people will always gauge the amount of sales. The expression “What the trade will bear,” means a price such as not to diminish consumption. Indeed, the business principles of a great trust are essentially the same as those in any single manufactory. A trust which stops the work of certain factories in a combination for the sake of diminishing the output, because of danger to prices from too rapid production, follows the same principle as a farmer who stops raising wheat from the probability of too much wheat in the market. The farmer would better lose the use of his land for a time than lose the advantage of both land and labor by over-production of wheat. In the same way a trust may wisely hold its fixed capital unproductive till the consumption of the community reaches the full extent of its power to [pg 200] produce. The power of one combination to interfere with the workings of another by indirect methods, like investment in the other's stock, is an evil to be treated like any fraud. Laws and courts are in the power of the people, and should preserve the rights of all.
One great danger of large combinations is the tendency to govern by iron rule instead of by fair judgment of individual cases. This is a difficulty always connected with great enterprises, to be cured as growth advances through establishing well trained experts whose judgment makes the rules not only good in themselves, but well executed. The government itself is subject to the same difficulty, as seen in the handling of an army, and is obliged to meet it in the same way. Even the abuses often referred to from enormous difference of wages between the executive officers and the inferior operatives are quite possibly only a natural method for solving these difficulties. A first-class officer has no difficulty with his men. In general those institutions whose management is costly do better for their workmen than the weaker institutions with weaker men at the head.
The supposed dangers from too rapid improvement in the machinery of production are scarcely to be credited in the light of improvements during the last hundred years. Every improvement has certainly given a larger enjoyment and better employment to the masses of people. The enterprise which invents better ways of accomplishing anything is the best possible means for enlarging and stimulating the wants and abilities of the whole people. The very profits themselves are sure to [pg 201] awaken larger enterprise, and even if the accumulated surplus is distributed in so-called watered stock, it does not cease to promote production. The wider the distribution of stock, the more permanent and more generally satisfactory is the working of the great combination. If employés themselves become sharers in the business, the true interests of all are likely to be promoted. When the savings of the multitude can be perfectly united in a joint stock company, to furnish the capital with which the same people work, the general conditions of wealth production for all the community are fairly met.
Bonanza farms.—An illustration of some effects of aggregation may be seen in the enormous farms of the wheat regions of America. There machinery is introduced as far as possible, all work is methodically planned and executed, and wholesale rates in purchases and in transportation are secured. The result is that certain staple products, especially wheat, are raised at a cost far below the average cost to moderate farmers. The result is large profits upon the capital invested, in spite of the fact that such farms do not make best use of soil fertility and certainly do not maintain the best condition of soil for future use. This, however, is due rather to the nature of pioneer farming, which makes immediate use of the powers of the soil, than to the nature of the management. It is conceivable that the same ingenuity may continue the development of large farms under greatly improved agriculture. In that case the general effect will be much more widely felt than now. So far it seems that bonanza farming is [pg 202] confined to a very few lines of production, where everything is bent in the direction of lessening labor instead of benefiting the soil or making homes.
There is no question as to the general advantage of small farms in making farm homes. It is a question whether the general improvements in agriculture, except in machinery and its use, have not come from the diligent ingenuity of the small farmer in making most of his own acres. Ben Franklin said, “The best manure for the farm is the foot of its owner.” The interested constancy among small farmers certainly develops both character and ability in any country. This fact has probably been one reason for the small farms of large parts of Europe. One-third of France is cultivated by owners of farms averaging 7-½ acres. Four-fifths of Bavaria, Belgium and Switzerland are in farms of less than twelve acres. Even Prussia has 900,000 farms of less than four acres. These farms vary in quality from poorest to richest, and peasant farmers are not able to boast of their wealth. Yet some of the most fertile regions are made so and kept so by the labor employed upon the small farm. Some of them also involve large capital. The Isle of Jersey, where land is worth $1,000 an acre, is so divided that an average farm is eight acres. Of course, but little labor-saving machinery reaches these places. Tillage with the spade costs five times as much as tillage by plough; yet the small farmer finds such advantage from its use as to call it gold mining. It is probable that the strong competition of immense farms in grain raising, possibly also in sugar raising from either cane or beets, and in seed raising, will awaken among the smaller [pg 203] farmers attention to finer grades of farming and more care for the fertility of their fewer acres.
On the whole, the tendency with increasing population is toward smaller farms with more intensive farming. Whether our country, with its stronger commercial energy, will follow this tendency as exhibited in northern Europe seems doubtful. It is not likely that we shall ever admit the legal restrictions under which division and subdivision have made their way in that region. The question will doubtless be settled by economic conditions independent of legislation. At present we are far from either extreme, as can be seen by reference to Chart No. [I], p. [9].
Department stores.—Increasing application of the principles of aggregation is seen in the so-called department stores, which not only deal in everything but with everybody, extending their trade by mail over large territory. The very evident economy of such aggregation of capital for purposes of exchange appeals so directly to the customers as to make the sufferers in competition cry out in vain for restrictions. Such stores seem sure to maintain their advantage in exchange, except with reference to mere local distribution of every-day necessities and expert handling of specialties. The community does well to give attention not so much to restrictions upon this trade as to reduction of opportunity for abuse of power over the mass of employés under control. The great establishment will certainly bring more satisfactory conditions in time than the multitude of small ones beyond the reach of public inspection.