As to the effect of trusts upon wages it may be said that up to the present time no very strongly marked change is perceptible in the matter of rates of wages paid by the trusts as compared with other employers in the same line. Doubtless the combinations of numerous establishments under one general management have reduced the numbers of employes in certain lines, but in those lines in
which the trusts require labor for the carrying on of their work no marked changes in the rates of wages have been developed as a result of the combinations. In steadiness of employment for the men and women engaged in the work of the establishments it seems probable that the trusts or great combinations of this character offer certain advantages, since their business is less liable to fluctuations than that of the smaller, and even in the absence of orders they are more likely to continue work accumulating stocks for future use than is the small manufacturer with limited capital or credits. In the matter of relations with the labor organizations certain of the trusts have made long time agreements with the labor organizations, thus adding to the steadiness of employment, though in some cases the trusts have declined to recognize the demands of labor organizations.
An example of the causes and methods of the combination of kindred manufacturing interests under one general central organization is found in the United States Steel Corporation as described by J. Russell Smith, in his “The Story of Iron and Steel.” No industry, he says, is naturally so uncertain and consequently so competitive as the steel industry. The demand for the product is fitful and uncertain because most of it goes into new constructions and new enterprises, and these are notorious for the spurts and depressions of demand which affect them.... The uncontrolled iron and steel market can make wild rises unknown to many commodities, because it is difficult to suddenly increase the amount of manufactures in response to sudden demand. A wave of prosperity sends a thousand industries which must have iron and steel clamoring, begging for steel. When the industrial sky darkens purchases of iron and steel cease as suddenly as they began and the price must tumble if the output is sold. These were the normal conditions through which all steel makers lived down to the depression of 1893-98. The numerous independent
manufacturers thought that if they could get together and agree upon prices they could improve their condition. Attempts to achieve this in the form of pools provided that each of the makers of a certain material should make a stipulated proportion of the product to be sold at an agreed price, and if a factory made more than its share, the owner made a cash payment to the pool. The weak part of these pools was their absolute lack of power of coercion, and the further fact that no member had faith in the other.
The failures in the attempt at price control resulted in the consolidation of many companies, formerly rivals, under one control. The chief companies which later became members of the United States Steel Corporation formed two distinct groups, each group classified according to the product. One group included the manufacturers of unfinished steel, such as ingots, billets, plates and slabs, and included the Carnegie Steel Company, the Federal Steel Company, and the National Steel Company. Other companies which purchased the product of these manufacturers of unfinished steel and turned it into the finished state included the American Tin Plate Company, the National Tube Company, the American Steel and Wire Company and others. The first thought which came to the minds of this finishing group when hard times compelled them to cut down costs was to cheapen their raw material (such as pig iron, steel ingots, billets, etc.) by becoming manufacturers of their own pig iron. The Carnegie Steel Company had already done this and had obtained facilities for transporting the ore to the coal fields of Ohio and Pennsylvania and facilities for transforming the ore into the classes of material which it supplied. The Carnegie Steel Company thus became independent of other companies in the supply of its fuel, its ore, and the transportation of the same, and all of the requirements of operation. When the finishing companies announced their purpose to also
supply themselves with the same facilities for producing their own raw material through the ownership of ore lands, transportation, facilities for smelting, manufacture of pig iron and the steel which they themselves required, the raw materials group could not view this operation with unconcern. It meant the loss of their market and necessity of seeking new markets in the United States or in foreign countries. As a consequence, the companies designated as the raw materials group, making pig iron, steel billets, etc., announced that they would establish their own finishing plants and thus compete directly with the group of companies which had formerly occupied the field without interference by the great organizations transforming the ore into the earlier processes of pig iron and steel billets. Mr. Carnegie announced that he would build a finishing mill in northern Ohio at the end of his ore railway which would eclipse anything that the world had ever seen and would be in equipment without a rival in the world. The Federal Steel Company increased its holdings of ore and coal, of upper-lake railways, and of lake steamers, and prepared to establish its plants for turning out finished products. Thus was threatened a doubling of the capacity of production of iron and steel in all of its stages, a capacity already far beyond that of the markets of the United States. Pools had failed, and the earlier trusts, aiming at monopolizing each line of the iron trade, had in the first temporary depression come face to face with the immediate prospect of ruinous competition among themselves. Then came the supreme effort at controlling prices through the creation of the most stupendous corporation that man has yet dared to launch—the United States Steel Corporation. This combination included most of the companies of both groups referred to—the producers of unfinished steel and those transforming the same into the finished product. The combination formed under the leadership
of Mr. J. Pierpont Morgan controlled two-thirds of the steel output of the country.
The new company began business in April, 1901, and a comparison of prices since that date with those of earlier years shows regularity and steadiness of prices rather than any marked decline or advance. “This price-steadying,” says J. Russell Smith, “is of incalculable benefit to the independent manufacturer (as well as to the combinations) even when it limits the heights to which a price spurt will go. Rapidly rising prices start a feverish, intoxicated condition of the market very pleasant while it lasts, but followed by a more unpleasant reaction; therefore the Trust tries to keep sober and keep its little brothers sober also, and all are profiting by the new temperance.... Despite its efforts at control, the Trust is not as near monopoly as it was the day it began. The four full years of its operation, 1902-1905, inclusive, did not indicate any increased share of production. The bulletin of the American Iron and Steel Association shows that during these four years there was an almost universal decline in the percentages of iron and steel products made by the Trust.”
VI. THE IRON AND STEEL INDUSTRY.
The history of the iron and steel industry of the world forms an excellent example of the recent advance in manufacturing. The manufacture of iron and steel has made perhaps a more rapid advance than have many others, and its development is due in such a marked degree to the use of machinery and the investment of large sums of capital in the industry that a detailed study of the history and causes of its development seems justified.