TRUST-BUSTING AS A NATIONAL PASTIME
A German economist recently visiting the United States was asked to explain how Germany's policy toward industrial combinations differed from ours. He said the difference that struck him most was that Germany did not go about solving the problem through legislation in the same light-hearted way that we seemed to. Perhaps, he added, this is because the old fashioned view still prevails in Germany that laws once enacted are to be rigidly and impartially enforced. He continued, that beyond amending her corporation law to insure that actual assets should bear a constant relation to nominal capital, to impose personal liability upon promoters and directors for losses due to untrue or misleading information which they might circulate, and to punish severely all forms of unfair competition, Germany had refrained from legislating on the subject. Nothing, he pointed out, like our anti-trust act,—to say nothing of our New Jersey seven-sister laws or our pending federal five-brother bills,—was to be found in German legislation. On the contrary, he asserted, combination agreements fixing prices and controlling outputs are enforced by German courts as readily as any other contracts, and the dissolution of a combination like the Westphalian coal cartell would be regarded not as a matter for public rejoicing, but as a serious blow to national prosperity. He did not maintain that Germany had solved the trust problem, but said that her attitude was well described as one of "watchful waiting."
To American statesmen the policy of Germany must seem weak and pusillanimous to a degree. They have become so habituated to the thought that "the anti-trust act is the magna charta of our business liberties," that attorneys-general and members of Congress vie with one another in the race to add fresh victims to the list of busted trusts to the credit of the dominant political party. Presidents "point with pride" to the number of prosecutions carried to a successful conclusion during their administrations. If the zeal of the department of justice seems to flag, Congress creates special committees to investigate the steel trust or other suspected combination, and thus a healthful rivalry is maintained which not only keeps the names of the "busters" prominently before the public, but supplies an unending stream of near facts for our newspapers, ever fearless champions of truth and justice.
Exhilarating as is this national pastime of trust-busting, the latest legislative proposals in Congress may well give pause even to the most ardent. Four bills have been seriously put forward which if enacted would make criminal many of the most common practices of American business men. The climax is reached in a clause in one of these measures that specifically makes it a crime for business men "to make any agreement, enter into any arrangement, or arrive at any understanding by which they, directly or indirectly, undertake to prevent a free and unrestricted competition among themselves or among any purchasers or consumers in the sale, production or transportation of any product, article, or commodity." Under this clause California orange growers who join together for the grading, packing and marketing of their fruit would be parties to a criminal conspiracy. Milk farmers who maintain coöperative creameries would be equally culpable. Labor organizations restraining the competition of their members in the sale of their labor are condemned. This bill, if enacted and rigidly enforced would make of business a bellum omnium contra omnes, and bring us back to the atomic stage of our industrial development. That such ill-considered legislation will be enacted is highly improbable, but its serious proposal invites a sober reconsideration of our whole trust policy.
The first aspect of the present situation that must strike the impartial observer is the inconsistency of the policy we are adopting toward our railroads and other common carriers. Since 1887 these businesses have been subject to regulation through the Interstate Commerce Commission, justified on the ground that for them competition is not an adequate means of control, and that unless their monopolizing greed is subjected to rigid regulation, the interests of the public must suffer. That these businesses are natural monopolies of organization, that is, businesses that can be most efficiently and economically administered as single or closely combined organizations in each of the localities to which they minister, every economist would agree. Competition in rates among railroads is undesirable because it means costly and destructive rate wars that can only end in rate agreements, tacit or open.
The policy of empowering the Interstate Commerce Commission to fix rates, and thus secure reasonableness and stability, is thus sound public policy. Amendments to the interstate commerce act, giving the commission a similar power over express rates and telegraph and telephone rates, where competition is also absent or self-destructive, have been made or should be made.
But while we are committed to this policy of regulated combination of common carriers, we still apply to them the Sherman act prohibiting combinations! Without any attempt to decide or even discuss whether the combinations into which the railroads have entered (the lease of the Southern Pacific by the Union Pacific, for example) make for economy and efficiency, the Attorney-General feels compelled by the law which he is bound to administer, to search out such combinations and force their dissolution. No well informed railroad man would maintain that any benefit redounded either to the public or to the railroads by forcing the Southern Pacific and the Union Pacific apart. Yet the Attorney-General congratulates himself on the achievement, and public opinion approves because it is clear that the process was both costly and painful to the railroads themselves. That what is bad for the railroads must be good for the rest of us seems to be the popular logic of the matter.
The most recent triumph of the department of justice, in this field, is the forcing apart of the telephone and telegraph monopolies. That these businesses can best be operated in combination, is obvious to anyone who has given any thought to the character of the services they render. Receiving and delivering telegrams by telephone add greatly to the efficiency of the system, not only because of the saving of time, but because of the multiplication of offices from which either telephone calls or telegrams may be despatched. In many localities the same poles may be used for stringing both kinds of wires. Finally, on the administrative side, the opportunity for saving through concentration of management is considerable. At the same time that the Attorney-General was effecting this divorce, the Postmaster General was urging the advantages not only of having these two businesses combined, but of having both managed by the government in connection with the postal service. As has been well said, if the Postmaster General is right in advocating the operation of both the telegraph and long-distance telephone businesses by the post-office, the Attorney-General cannot be right in thinking the dismemberment of the telegraph-telephone combination was in the line of wise public policy.