(1) Industries connected with, or closely dependent on, the nature and properties of land. When the whole or a large proportion of the raw material required for producing any class of goods is confined within a restricted area, the possession of that land by a single body of owners will give a strong monopoly. It was not essential to the Standard Oil Trust in its earlier years to own the sources of the oil provided they could possess themselves of the stream after it had left the source. But they have strengthened this monopoly lately by securing the ownership of the oil lands in Pennsylvania. The most striking example, however, is the monopoly of the anthracite coal region in Pennsylvania by the shareholders of the Pennsylvania and Reading Railway. The tendency of a Trust to strengthen its industrial position and at the same time to find a profitable investment for its surplus profits by fastening upon an earlier process of production or a contiguous industry, and drawing it under the control of its monopoly, is one of the most important evidences of the rapid growth of the system in America. The rapidity with which the whole railway system is passing into the hands of the two great monopolist syndicates with the necessary result of stifling competition is in some respects the most momentous economic movement in the United States at the present time. The magnificent distances which separate the great mass of the producers of agricultural and other raw products from their market makes the railway their only high-road, and the fact that except between a few large centres of population there is no competition of rival railways, places the producer entirely at the mercy of a single carrier, who regulates his rates so as to secure his maximum profit. Indeed, so fast is the amalgamation of railway capital proceeding that even between large cities there is little genuine competition. The same is true of the telegraph and the supply of such things as water and gas, which, by reason of their relation to land, and the power thus conferred upon the owner of the first and most convenient means of supply, are "natural" monopolies. Where such industries are left, as in most cities of America, to private enterprise, they form the objects of a monopoly which is commonly so strong as to crush with ease attempts at competition where such are legally permissible. Jay Gould's Western Union Telegraph Company is an example of an absolute monopoly maintained for many years without the possibility of effective competition. The purchase of Western lands in order to hold them for monopoly prices has been a favoured form of syndicate investment during the last forty years.
(2) Articles which for economy of transport and distribution require to be massed together in large quantities are specially amenable to monopoly. Grains produced over a wide area have often to be collected in large quantities to be re-assorted according to quality, and to be warehoused before being placed in the market. So the produce of thousands of competing farmers passes into the hands of a syndicate of owners of grain elevators at Chicago or elsewhere. The same is true of meat, fish, fruit, vegetables, dairy produce. All these things, raised under circumstances which render effective co-operation for purposes of sale well-nigh impossible, flow from innumerable diverse places into a common centre, where they fall into the hands of a small group of middlemen, merchants, and exporters. Even the retail merchants, as we have seen, are able to make effective combinations to maintain prices in the case of more perishable goods.
In England the combination of retail merchants commonly takes the form of a trade regulation of prices restricting competition. But in the United States regular Trusts have been in some cases established in retail trade. The Legislative Committee of New York State, in its investigations, discovered a milk trust which had control of the retail distribution in New York City, fixing a price of three cents per quart to be paid to the farmer, and a selling price of seven or eight cents for the consuming public.
Hence it arises that the prices paid by the consumer for farm produce are picked pretty clean by various groups of monopolists or restricted competitors before any of them get back to the farmers or first producers.
The farmer, from his position in the industrial machine, is more at the mercy of Trusts and other combinations than any other body of producers. In the United States he is helpless under the double sway of the railway and the syndicate of grain elevators and of slaughterers in Chicago, Kansas City, and elsewhere. In England, in France, and in all countries where the farmer is at a long distance from his market, farm produce is subject to this natural process of concentration, and we hear the same complaints of the oppressive rates of the railway and the monopoly of the groups of middlemen who form close combinations where the stream of produce narrows to a neck on its flow to the consumer. The position of the American farmer, crushed between the upper and the nether mill-stone of monopoly, is one of pathetic impotence.
(3) In those industries to which the most elaborate and expensive machinery is applied, and where, in consequence, the proportion of fixed capital to labour is largest, the economies of large-scale production are greatest. Here, as we have seen, the growing strain of the fiercer competition of ever larger and ever fewer capitals drives towards the culminating concentration of the Trust. Where, owing either to natural advantages, as in the case of oil and coal, or to other social and industrial reasons, a manufacture is confined within a certain district, and is in the hands of a limited number of firms in fairly close commercial touch with one another, we have conditions favouring the formation of a Trust. In most of the successful manufacturing Trusts some natural economy of easy access to the best raw material, special facilities of transport, the possession of some state or municipal monopoly of market, are added to the normal advantages of large-scale production. The artificial barriers in the shape of tariff, by which foreign competition has been eliminated from many leading manufactures in the United States, have greatly facilitated the successful operation of Trusts. Where the political, natural, and industrial forces are strongly combined, we have the most favourable soil for the Trust. Where a manufacture can be carried on in any part of the country, and in any country with equal facility, it is difficult to maintain a Trust, even though machinery is largely used and the individual units of capital are big.
Each kind of commodity, as it passes through the many processes from the earth to the consumer, may be looked upon as a stream whose channel is broader at some points and narrower at others. Different streams of commodities narrow at different places. Some are narrowest and in fewest hands at the transport stage, when the raw material is being concentrated for production, others in one of the processes of manufacture, others in the hands of export merchants. Just as a number of German barons planted their castles along the banks of the Rhine, in order to tax the commerce between East and West which was obliged to make use of this highway, so it is with these economic "narrows." Wherever they are found, monopolies plant themselves in the shape of "rings," "corners," "pools," "syndicates," or "trusts."
FOOTNOTES:
[124] There still survive in certain old-fashioned trades firms which do business without formal written contracts, and which would be ashamed to take a lower price than they had at first asked, or to seek to beat down another's price.