One may fairly ask how they did it. It is clear enough when one looks at what they have had to go on. In the first place, the shoes of this country are now made almost entirely by machines. The first practical machine invented was the famous McKay sewing machine. It was followed rapidly by others: machines for welting, lasting, heeling, pegging, more than a score for performing the many complicated operations by which the modern “ready-made” shoe is built up. Up to 1899 these various machines were handled by different companies. But in that year the twelve most important concerns were combined into the trust named above, officially the United Shoe Machinery Company. Now there prevails and has since the days of McKay—who, by the way, was not the inventor but the promoter of the first shoe machine—a system of handling its output peculiar in manufacturing industries. It never sells, it always rents its machines. That is, a maker of shoes cannot buy for his factory the machines to do his work, as the ship-builder, the miller, the woollen manufacturer, can. He rents the machines for a term of years, paying a royalty on each shoe made. When the shoe machinery company was formed in 1899, it inherited this curious method. It took hold of its various acquisitions with rare energy and ability, its aim being to produce what it calls a system of shoe manufacturing. To accomplish this it proposed to “tie” together the machines it controls in such a way as to give a practical continuity of service. That is, each machine was to be so adjusted to the others that the shoe could be passed from one to another without loss of time or waste of effort. To do this effectually meant improving the old machines as well as adding new ones. The results of the combination of machines and of the improvement are extraordinary. It is a practically continuous service enabling the manufacturer to increase his product, and the laborer, who in the shoe industry is paid by the piece, to increase his earnings.
The management of the new organization proposed at the start not to raise the royalties paid at the time the combination was formed for the use of the various machines, and it has never done so. It proposed also to take off what had been a custom in the business—the initial charges for installing machines. Indeed, the company claims that while before the combination the initial charge for fitting out a factory was $12,000, it now is but $1700. In the case of many of the metallic machines, as they are called, the practice was to charge no rent, but to require the manufacturer to take from the companies certain findings, like tacks, wire nails, and eyelets; the company charged its own price, not the current one, and in this way got its pay. These prices probably were always high, but the company claims it has never raised them. That is, the new organization proposed to make no changes in what the manufacturer had been paying, but to increase its profits through the greater continuity and perfection of the service of its system.
But this of course meant that the manufacturer should use all the machines in its system; that is, all those that it had tied together. And to make sure that he did this, the company prepared a remarkable lease, requiring that all the machines it made pertaining to the bottoming of shoes beginning with the lasting of the uppers should be kept together; that is, that no outside machines for any of these processes could be used, and if an attempt was made to introduce one, the company had the right to take out the remaining machines of the system.
In addition to the regular bottoming and lasting machinery the company handled a large number of general machines, and it was specifically provided in the leases of each of these that it should not be used on shoes that had been lasted and welt-stitched, or turn-stitched on other machines than those put out by the company. The penalty for using the leased machine with outside machines was the forfeiture of all leases in all departments—also the breach made the lessees liable to an action for damages.
The New England Shoe and Leather Association considered certain features of the leases for the metallic fastening machines so objectionable that a long series of conferences was held in 1901 with the company, and certain modifications were obtained. Thus an alternative was secured for the ironclad lease covering the metallic fasteners by which the shoe manufacturer could use them with foreign machines by paying ten per cent more for his materials. (The rent of these machines, it will be remembered, was included in the price charged for the materials.) The penalty for disobedience was also lightened, and other concessions were obtained. Thus it is possible now to buy the general machines outright. The committee said quite frankly in its report that it was clear that the company intended to make such contracts as would give it a monopoly of the manufacture and renting of all shoe machinery, but it added it was patent that to do this it must continue to serve the shoe manufacturers better than they could be served elsewhere.
The monopoly the committee foresaw was of course inevitable. To-day the United Shoe Machinery Company owns more than ninety per cent of the shoe machinery of the country. Its profits are enormous, as the expansion noted above shows. The royalty on a pair of woman’s shoes is about three cents. On a pair of man’s shoes it is from four to five cents. In a factory turning out a thousand pairs a day of the former there is a royalty of $30.00 a day. The writer has talked with one shoe manufacturer who claimed he had paid $165,000 a year in royalties to the trust and upward of $100,000 for materials. Many would-be independent manufacturers claim they could reduce the cost of manufacture two cents a pair if allowed to own their machines. It is a common assertion among them that the royalties for the first year pay a reasonable price for the machines; that as the life of a machine is ten years, there are nine years of “unholy profits to the trust!” While discontent at the “benevolent despotism” which rules the business breaks out all over the country in spots, and a few energetic attempts are working to build up independent systems, the shoe manufacturers as a body have accepted the combination. Certainly they are getting from it such a service as they never had before, whatever the oppression. The shoe manufacturer can by the use of the “system” increase his product and the piece-paid laborer his wages. At the same time without raising royalties the company profits enormously. The person who gets no advantage is the man who buys the shoes. The royalty paid on each pair is just what it was when the trust was formed.
And what has the United Shoe Machinery Company to do with the Linen Thread Company? The president and the vice-president of the latter, Mr. William Barbour and Mr. A. R. Turner, are both directors in the former. Mr. Barbour, who is reputed to be the largest owner of the linen thread stock, is also a large individual stock-holder of United Shoe Machinery. Can any one doubt that such a relation has not been of importance to the Linen Thread Company in securing the 80 per cent of the linen thread business which it controls? Or would it be surprising, the power, the protection, and the surpluses of the two being given, if there soon was nobody outside of their fold making either linen thread or shoe machinery?
Moreover, is not the logical and almost inevitable result of the practical monopoly of these two interwoven concerns the rapid absorption of the shoe manufacturers themselves? Why, when they own and control all machinery and linen thread, and furnish a rapidly increasing list of the findings, should they stop there? Does not the strategy of the situation, do not the same arguments, the same laws which have led to the monopoly of each and the alliance of the two, force them into shoe manufacturing? This is no new alarm. In 1901, when the New England Shoe and Leather Association made the report referred to above, it said:
“The fear has been expressed that should one company control all the machinery in use in the production of shoes it would be quite easy and enormously profitable to create a trust which would be a monopoly in the shoe manufacturing business. The committee has not discovered the remotest indication of such intention. The present managers of the United Shoe Machinery Company are unusually able, experienced men, and they know that their profits are to come from coöperation with shoe manufacturers rather than competition with them.”
That was true of the profits then; it is true now, but with recalcitrant manufacturers refusing to coöperate—wanting to work out their own salvation—and with funds piling up for expansion, the “good of the shoe business,” which led to the first monopoly, will probably some day point strongly to a second.