A notable illustration of such confusion is the volume by Dr. F. C. Howe, entitled, "Privilege and Democracy in America." He maintains that bituminous coal, copper ore, and natural gas are true monopolies, but gives no adequate proof to support this assertion. Moreover, he exaggerates considerably the part played by landownership in the formation of industrial monopolies. Thus, his contention that the petroleum monopoly is due to ownership of oil-producing lands is certainly incorrect; for the Standard Oil Company (or companies) has never controlled as much as half the supply of raw material. "The power of the Standard does not rest upon a direct monopoly of the production of crude oil through ownership of the wells."[49] Perhaps the most remarkable misstatement in the volume is this: "The railway is a monopoly because of its identity with land."[50] Now there are a few important railway lines traversing routes or possessing terminal sites which are so much better than any alternative routes or sites as to give all the advantages of a true monopoly. But they are in a small minority. In the great majority of cases, a second parallel strip or parallel site could be found which would be equally or almost equally suitable. Neither the amount nor the kind of land owned by a railroad, nor its legal privilege of holding land in a long, continuous strip, is the efficient cause of a railway monopoly. To attribute the monopoly to land is to confound a condition with a cause. One might as well say that the land underlying the "wheat king's" office is the cause of his corner in wheat. It is true that in a few of the great cities the existing railroads may, through their ownership of all the suitable terminal sites, prevent the entrance of a competing line. In the first place, such instances are rare; in the second place, the fact that there are several roads already in existence shows that competition was possible without the entrance of another one. The influence impelling them to form a monopoly for the regulation of charges is not their ownership of terminal sites. No sort of uniform action with regard to terminals would produce any such effect. The true source of the monopoly element in railways is inherent in the industry itself. It is the fact of "increasing returns," which means that each additional increment of business is more profitable than the preceding one, and that in most cases this process can be kept up indefinitely. As a consequence, each of two or more railroads between two points strives to get all the traffic; then follows unprofitable rate cutting, and finally combination.[51] The same forces would produce identical results if railroad tracks and terminals were suspended in the air.
Dr. Howe asserts that the monopolistic character of such public utility corporations as street railways and telephone companies is due to their occupation of "favoured sites."[52] How can this be true, when it is possible to build a competing line on an adjoining and parallel street? If the city forbids this, and gives an exclusive franchise to one company, this legal ordinance, and not any exceptional advantage in the nature of the land occupied, is the specific cause of the monopoly. If the city permits a competing line, and if the two lines sooner or later enter into a combination, the true source and explanation are to be found in the fact of increasing returns. Combination is immeasurably more profitable than cut-throat competition. Moreover, the evils of public service monopolies can be remedied through public control of charges and through taxation. Neither in railroads nor in public utilities is land an impelling cause of monopoly, or a serious hindrance to proper regulation.
Most of Dr. Howe's exaggerations of the influence of land upon monopoly take the form of suggestion rather than of specific and direct statement. When he attempts in precise language to enumerate the leading sources of monopoly, he mentions four; namely, land, railways, the tariff, and public service franchises.[53] Nor is he able to prove his assertion that of these the most important is land.
Nevertheless, land is one of the foremost causes. The most prominent examples of land monopoly in this country are the anthracite coal mines and the iron ore beds. Fully ninety per cent. of our anthracite coal supply (exclusive of Alaska) is under the control of eight railway systems which in this matter act as a unit.[54] According to Dr. Howe, the excessive profits reaped from this monopolistic control amount to between one hundred and two hundred million dollars annually.[55] In other words, the consumers of anthracite coal must pay every year that much more than they would have expended if the supply had not been monopolised. On the other hand, the formation of monopoly would have been much more difficult if the railroads had been legally forbidden to own coal mines. As things stand, railway monopoly is an important cause of the anthracite coal monopoly. Some authorities are of the opinion that a similar condition of monopoly will ultimately prevail in the bituminous coal mines. Iron ore has been brought under the control of the United States Steel Corporation to such an extent that the Commissioner of Corporations writes: "Indeed, so far as the Steel Corporation's position in the entire iron and steel industry is of a monopolistic character, it is chiefly through its control of ore holdings and the transportation of ore."[56] From this statement, however, it is evident that the monopoly depends upon control of transportation as well as upon ownership of the ore beds. If the former were properly regulated by law, the latter would not be so effective in promoting monopoly.
Speaking generally, we may say that when a great corporation controls a large proportion of the raw material entering into its manufactured products, such control will supplement and reinforce very materially those other special advantages which make for monopoly.[57] Prominent examples are to be found in steel, natural gas, petroleum, and water powers. In his "Report on Water Power Development in the United States," the Commissioner of Corporations (March 14, 1912) declared that the rapidly increasing concentration of control might easily become the nucleus of a monopoly of both steam and water power. Ten great groups of interests, he said, already dominated about sixty per cent. of the developed water power, and were pursuing a policy characterised by a large measure of agreement.[58] As a rough generalisation, it would be fair to say that in one or two instances, at least, landownership is the chief basis, and in several other cases an important contributory cause of monopoly.
Even an approximately accurate estimate of the amount of money which consumers are compelled to pay annually for the products of such concerns over and above what they would pay if the raw material were not wholly or partially monopolised, is obviously impossible. It may possibly run into hundreds of millions of dollars.
Excessive Gains from Private Landownership
The second evil of private landownership to be considered here, is the general fact that it enables some men to take a larger share of the national product than is consistent with the welfare of their neighbours and of society as a whole. As in the matter of monopoly, however, so here, Single Tax advocates are chargeable with a certain amount of overstatement. They contend that the landowner's share of the national product is constantly increasing, that rent advances faster than interest or wages, nay, that all of the annual increase in the national product tends to be gathered in by the landowner, while wages and interest remain stationary, if they do not actually decline.[59]
The share of the product received by any of the four agents of production depends upon the relative scarcity of the corresponding factor. When undertaking ability becomes scarce in proportion to the supply of land, labour, and capital, there is a rise in the remuneration of the business man; when labour decreases relatively to undertaking ability, land, and capital, there is an increase in wages. Similar statements are true of the other two agents and factors. All these propositions are merely particular illustrations of the general rule that the price of any commodity is immediately governed by the movement of supply and demand. In view of this fact, it is not impossible that rent might increase to the extent described in the preceding paragraph. All that is necessary is that land should become sufficiently scarce, and the other factors sufficiently plentiful.
As a fact, the supply of land is strictly limited by nature, while the other factors can and do increase. There are, however, several forces which neutralise or retard the tendency of land to become scarce, and of rent to rise. Modern methods of transportation, of drainage, and of irrigation have greatly increased the supply of available land, and of commercially profitable land. During the nineteenth century, the transcontinental railroads of the United States made so much of our Western territory accessible that the value and rent of New England lands actually declined; and there are still many millions of acres throughout the country which can be made productive through drainage and irrigation. In the second place, every increase of what is called the "intensive use" of land gives employment to labour and capital which otherwise would have to go upon new land. In America this practice is only in its infancy. With its inevitable growth, both in agriculture and mining, the demand for additional land will be checked, and the rise in land values and rents be correspondingly diminished. Finally, the proportion of capital and labour that is absorbed in the manufacturing, finishing, and distributive operations of modern industry is constantly increasing. These processes call for very little land in comparison with that required for the extractive operations of agriculture and mining. An increase of one-fifth in the amount of capital and labour occupied in growing wheat or in taking out coal, implies a much greater demand for land than the same quantity employed in factories, stores, and railroads.[60]