Another more recent list by John Moody[4] gives the number of “industrial” trusts organized down to Jan. 1, 1904, as 318; these have acquired or control 5,288 plants,
and have a total nominal capital of $7,246,342,533. A movement so general and widespread, and of such gigantic proportions, must have had some powerful and intelligible causes behind. For it was not confined to the United States, but was equally observable in such industrial diverse countries as England, France, Germany, Russia, and other European nations.
| Decade. | Number Organized. | Total Nominal Capital. |
| 1860-69 | 2 | $ 13,000,000 |
| 1870-79 | 4 | 135,000,000 |
| 1880-89 | 18 | 288,000,000 |
| 1890-99 | 157 | 3,150,000,000 |
| Total, 40 years | 181 | $3,586,000,000 |
The most important and general cause was the desire to secure the legitimate economies of large-scale production. A combined or federated industry may secure even greater economies than a single large factory. These have been concisely stated as follows[5]: “The cost of management, amount of stock carried, advertising, cost of selling the product, may all be smaller per unit of product. A large aggregation can control credit better and escape loss from bad debts. By regulating and equalizing the output in the different localities, it can run more nearly full time. Being acquainted with the entire situation it can reduce the friction. A strong combination has advantages in shipment. It can have a clearing-house for orders and ship from the nearest source of supply. The least efficient factories can be first closed when demand falls off. Factories can be specialized to produce that for which each is best fitted. The magnitude of the industry and its presence in different localities strengthens its influence with the railroads. Its political as well as its economic power is increased.”
Many of these economies of production are not new to these trusts, but have been secured equally by large-scale manufacturing establishments. Some of the savings, especially in buying raw material and marketing their products, are peculiar to the trusts and mark a more efficient mode of organization than mere concentration of industry in single large establishments. Thus, it has been found possible to dispense with a great number of traveling salesmen, of whom it was said that 30,000 lost their positions in the year 1898 alone. When the whisky trust was formed only twelve of the eight distilleries entering into the combination were kept running, but as these were the largest, best located and best equipped, and were run at their full capacity, they were able to turn out as much as all had done before and at an immense economy. The saving of cross freights by having an order filled from the plant most conveniently located is considerable; Mr. Gates estimated the saving of the American Steel and Wire Company in this single point at $500,000 a year. Such an economy could not be secured by a single establishment, no matter how well organized or on how large a scale. The specialization of particular factories to do special processes is well illustrated by the organization of the United States Steel Corporation.
The growth of this latter combination is an example not only of consolidation, but of the integration of industry, that is, the grouping together under one control of a whole series of industries. From the mining of the ore and coal, through the processes of carrying it to the furnaces, coking the coal and making the pig iron, manufacturing the latter into the finished forms of iron and steel products, and down to the marketing of the latter, every step is carried on under the control of the United States Steel Corporation. The assets of the company were stated as follows soon after its organization, and illustrate the magnitude and scope of its operations:
| Iron and Bessemer ore properties | $ 700,000,000 |
| Plants, mills, machinery, etc. | 300,000,000 |
| Coal and coke fields | 100,000,000 |
| Railroads, ships, etc. | 80,000,000 |
| Blast furnaces | 48,000,000 |
| Natural gas fields | 20,000,000 |
| Limestone properties | 4,000,000 |
| Cash and cash assets | 148,251,000 |
| Total | $1,400,281,000 |
In addition to economies due to improvements in methods of organization, production and marketing, another cause for the sudden and vigorous outburst of trust promotion in the years 1898-1902 may be found in the profits to be secured by promoters and organizers. After the successful launching of the first few trusts, with their undoubted economies and advantages, the movement was taken in hand by professional promoters, who organized combinations, often with the help of underwriters, in every branch of industry where there was any promise of profit. That many of these were artificial or premature is evident from the financial results: of the 183 industrial combinations enumerated by the census in 1900, one-third paid no dividends whatever after their formation and another one-third paid no dividends to the holders of common stock. As an indication of the profits obtained by the successful trust promoter may be cited the testimony given before the Industrial Commission in the case of the Tin Plate Trust stating that this promoter realized from $2,000,000 to $3,000,000 profit from the undertaking. When to this is added the profit obtained by the owners of the constituent plants, which were usually taken over by the trust at an exorbitant valuation, it is clear that the stimulus of financial gain was probably stronger in many cases than that of economy in production. The bill was of course paid in most cases by the investing public, which absorbed large amounts of industrials in the years of their active promotion.
Other causes have sometimes been adduced to explain the growth of combinations, such as the tariff and railroad freight discriminations, but these are too local in their influence to explain adequately the world-wide movement toward combination. Trusts exist in free-trade England, and in Germany where freight discriminations on the state-owned railroads are practically unknown. It is, however, true that in the United States both these factors have been of decisive importance in building up certain powerful trusts. “There can be no doubt,” said the conservative report of the Industrial Commission, “that in early times special favors from railroads were a prominent factor, probably the most important factor, in building up some of the largest combinations. The receipt of discriminating favors from railroads has been conceded repeatedly by representatives of the combinations themselves.” The Standard Oil, beef, coffee, steel, and other trusts may be cited as illustrations. In the matter of the tariff Mr. Havemeyer’s statement that “the mother of all trusts is the customs tariff law” may be set down as the rather peevish utterance of a disappointed beneficiary; but there is no doubt that combination has been made easier behind the tariff wall. Instance the sugar trust itself, the leather, steel, tin plate, and others.