“The Western Cracker Bakers’ Association met in Chicago, in February, to consider among other things ‘the reprehensible system of cutting prices’ (i. e., the reprehensible system of free competition which capitalists in buying labor tell us is our salvation). They first had a banquet. After their ‘merriment and diversion’ the revellers, true to Adam Smith’s description, turned to consider ‘some contrivance to raise prices.’ ‘The price-lists were perfected,’ said the newspaper report; ‘and then they adjourned.’”
In 1875 broke out a severe competition among the fire insurance companies, upon the collapse of a previous pool; and the competition cost them in New York City alone $17,500,000 in seven years. Consequently in 1882 they made a new combination which covered the whole country, and which Mr. Lloyd declares to be wealthy, cohesive, and powerful. Though there is no pool or ring, I am credibly informed that there is a common understanding among the fire insurance companies of London. One of the most noted of combinations has been the great Copper Syndicate which attracted world-wide attention early in 1888. It was formed by some French speculators in October, 1887, and during the eighteen months of its existence, maintained copper at a purely arbitrary price in all the markets of the world. At its head was M. Eugène Secretan, managing director of the Société des Métaux, the world’s largest buyer of, and dealer in, manufactured copper. The syndicate’s agents bought all the copper that was visible and for sale, the result of their speculation being that the price of copper in the London market rose from less than £40 to over £80 a ton, and the price of Lake Superior copper in America rose from 10¹⁄₂ cents to 17³⁄₄ cents per pound. M. Secretan informed a London journal that his designs were purely philanthropic. “Our only purpose,” said he, “is that every miner, dealer and manufacturer should have fair remuneration for his work.” Thanks to M. Secretan’s philanthropy, copper, tin, lead and spelter rose enormously in price; several trades were more or less paralysed; and in France large numbers of workmen were thrown out of employment. And let it not be supposed that the suicide of M. Denfert-Rochereau, which heralded the collapse of this first attempt to corner the world’s copper—a collapse due to a miscalculation of the extent to which the supply of copper could increase under the stimulus of high prices—offers us any security against a repetition of the attempt. On the contrary, it has shewn how the thing may be safely done. The metal hoarded by the unlucky speculators is still so far cornered that it has been kept off the market up to the present, prices being not yet normal. “To a regular trust it must and will come at last,” says Mr. E. Benjamin Andrews, of Cornell University. “Nor has aught taken place to indicate that a Copper Trust, organized like the Standard Oil Trust, with its energy and relentless methods, would fail.”[60]
The Individualist who supposes that Free Trade plus private property will solve all economic problems is naturally surprised at these “rings,” which upset all his crude economic notions; and he very illogically asks for legislation to prevent the natural and inevitable results of the premises with which he starts. It is amusing to note that those who advocate what they call self-reliance and self-help are the first to call on the State to interfere with the natural results of that self-help, of that private enterprise, when it has overstepped a purely arbitrary limit. Why, on ordinary commercial principles, should not a copper syndicate grasp all the copper in the world? It is merely the fittest surviving. The whole case against Socialism is assumed by its most intelligent opponents to lie in that Darwinian theory. And yet when the copper syndicate or the “coal barons” survive, they arouse against themselves the fiercest and, from the commercial point of view, the most unreasonable antagonism. As sin when it is finished is said to bring forth death, so capitalism when it is finished brings forth monopoly. And one might as well quarrel with that plain fact as blame thorns because they do not produce grapes, or thistles because they are barren of figs.
The story of the growth of capitalism is not yet complete. The “ring” is being succeeded by a more elaborate organization known as the “trust.” Although in England great combinations like the Salt Union are rapidly rising, yet we must again travel to America to learn what the so-called “trust” is. The fullest information on the subject of trusts is contained in a report of a Committee of the New York State Legislature, which was appointed to investigate the new combination. The following trusts were inquired into: Sugar, milk, rubber, cotton-seed oil, envelope, elevator, oil-cloth, Standard oil, butchers’, glass, and furniture. A trust is defined by the Committee as a combination “to destroy competition and to restrain trade through the stockholders therein combining with other corporations or stockholders to form a joint-stock company of corporations, in effect renouncing the powers of such several corporations, and placing all powers in the hands of trustees.” The general purposes and effects are stated to be “to control the supply of commodities and necessities; to destroy competition; to regulate the quality; and to keep the cost to the consumer at prices far beyond their fair and equitable value.” It is unnecessary to deal with all these trusts, which possess certain features in common. I will select one or two, particularly the great Standard Oil Trust and the Cotton-seed Oil Trust.
The Standard Oil Trust is probably the largest single business monopoly in the world, the value of all its included interests being estimated, according to the evidence submitted, at £29,600,000. In the report it is described as “one of the most active and possibly the most formidable monied power on this continent. Its influence reaches into every State, and is felt in remote villages; and the products of its refineries seek a market in almost every seaport on the globe.” The germ of this huge monopoly was a small petroleum refinery near Cleveland, bought by one Rockefeller, a book-keeper in a store, and a friend of his, a porter, with borrowed money. Rockefeller formed an acquaintance with a rich whiskey distiller, who advanced money and put his son-in-law Flagler into the business. This person’s doctrines are thus described: “He says that there is no damned sentiment about business; that he knows no friendship in trade; and that if he gets his business rival in a hole he means to keep him there.” Such a man is eminently fitted to be the founder of a monopoly: he is a hero of self-help; for he helps himself to anything he can lay his hands on. A second refinery was established in Ohio, and a warehouse opened in New York. The concern grew, and was incorporated as the Standard Oil Company. It is charged with having secured special legislation by judicious expenditure in the lobbies of the Ohio and Pennsylvania Legislatures. By entering into arrangements with the trunk railway lines, it secured special rates for transit. New refineries were established and new oil lands in Pennsylvania acquired; the capital was increased; and an enormous yearly business was done. After a time the company controlled every avenue of transportation; managed all the largest refineries in the land; and was able to shut off every competitor from either receiving supplies or shipping its products. New companies, nominally distinct, but all under the control of the same men, were incorporated in New Jersey, Ohio, West Virginia and other States. The monopoly elected one of its chief stockholders into the United States Senate, it is said, through bribery in the Ohio Legislature over which body it certainly acquired strong hold. These tactics were known as “coal oil politics.” All the dirty work was, of course, done through agents, the directors pretending perfect innocence. In 1882 the Standard Oil Companies were consolidated in the Standard Oil Trust.[61] The stockholders surrendered their stock to the trustees, nine in number, created under the agreement, and received certificates in the place thereof, the representatives of the trust and the stockholders in the refineries making a joint valuation of the refineries, and the certificates being issued to that amount. Thus the separate concerns were merged in one gigantic business, controlled by nine men (owning a majority of the stock), having a monopoly of nearly all the oil lands in America, controlling legislative votes, forming a solid alliance with the railway and shipping interests, and determining to a gallon how much oil shall be produced and refined, and to a fraction of a cent what shall be its price. In 1887 there was a cash dividend of 10 per cent. declared, besides a stock dividend of 20 per cent. on the certificates of four years’ aggregation. In addition to the enormous stock they hold, the trustees receive an annual salary of £5,000. What are the economic results of this combination? It has not raised prices, as the trusts were charged by the committee with doing. On the contrary there has been a steady decrease in price during the decade 1877-1887. The consumption of oil has also enormously increased. The working and producing expenses have been greatly lowered by the dismissal of needless labor and vast improvements in machinery; the pipe lines controlled by the trust having displaced 5,700 teams of horses and 11,400 men in handling the oil. Thus of this trust we may say that though the means used to establish it were morally doubtful or even bad, the political results disastrous, the economic results have been beneficial, except in the matter of helping to form an unemployed class through the dismissal of needless labor consequent on the development of machinery.
The Cotton-seed Oil Trust was organized two or three years ago in the State of Arkansas.[62] Upwards of seventy different companies had been competing with each other and consequently suffering heavy losses. Their mills being comparatively small and equipped with imperfect machinery, they were glad to combine; and those that did not were forced to close. The seventy corporations, the vast majority of the members of which had agreed to the combination, surrendered their stock to a body of trustees and received in return $100 certificates. The various mills send a monthly report to the trust; and if the officers in a given mill do not sell at the terms imposed, they are dismissed by the trust.[63] The object of the trust was declared by a witness to be to prevent bankruptcy, to improve methods, to find markets, to develop the enterprise and to make money. The economic result has been displacement of labor by the machinery and great economy in production. Incidentally it came out that much cotton-seed oil was sold to the French and Italian buyers, who mix it with a little olive oil and export it back to America and to England, where a confiding public purchases it as pure Tuscan olive oil—an interesting illustration of international trade morality.
An examination of the milk and butchers’ trust ought to be a revelation to those who imagine that trade is “free,” and that competition rules. On April 29th, 1885, the directors of the Milk Exchange met in New York and unanimously resolved:
“That on the first day of May next, and until otherwise ordered, the market price of milk produced from meadow hay and sound cereals be 2¹⁄₂ cents per quart, and that produced from brewers’ grains and glucose and corn starch refuse be 2 cents per quart.”[64]
A representative of the Sheep and Lamb Butchers’ Mutual Benefit Association testified that the members of that body agreed that they would only buy sheep and calves from the Sheep Brokers’ Association, a penalty for violation of this rule being imposed at the rate of 15 cents a head per sheep or calf. The absolute despotism, and the system of espionage involved in such regulation is obvious. Here is a copy of a document issued by this body:
“New York, January 9, 1888. Permission has been granted by the board of trustees of this association to Simon Strauss to buy sheep and lambs in New York markets, providing he buys no sheep and lambs from outsiders, under penalty of 15 cents per head fine. Richard S. Tobin, Secretary.”[65]