Trusts are an attempt to deal with this state of things. It is, of course, a jest when the makers of a trust affirm that they make it for the benefit of consumers, and it may very well be doubted whether a trust is a feasible and beneficial device in the interest of either party; but it is wrong to overlook the fact that the trust, in its efforts to deal with the case, and to secure orderly and rational development, instead of heats and chills in industry, has a real and legitimate task on hand. It is certain that there is room for the introduction of intelligent method into modern industry, under forms which shall be germane to modern conditions, and it is certain that this will never be done properly by legislation, but only by the voluntary and intelligent coöperation of the parties interested. It is also by no means certain that this systematization of industry, under intelligent coöperation of the parties conducting it, would cost consumers anything, provided always that there was no legislation to prevent the recourse at any time to any other sources of supply which might be available. The economies of management under intelligent administration are a source from which gains may be made which will cost the consumer nothing. The expenses of industrial war constitute a big fund for dividends to which the consumer does not contribute.
It is worth while to notice, by some familiar examples, what the motive of a trust is; it will be found a far more everyday matter than most people suppose. A man who owns a house and lot buys the vacant lot adjacent in order to control it. He and his neighbors buy up all the vacant lots on the street in order to prevent undesirable contact with anything which would deteriorate their property. They have already fallen victims to the spirit of monopoly, and are subject to all the denunciations heaped upon aristocrats and exclusivists. In their case already the practical difficulty of defining the unit to be comprehended, in order to attain the object and no more, is apparent. Examples are furnished every day in which capital is refused for certain enterprises because it is seen that the investment might no sooner be made than its profits might be destroyed by another enterprise parallel with it. The thing cannot be done at all until it is done on a scale sufficiently large to constitute a complete unit. We are familiar enough with the dilemma offered to us when, on the one hand, railroads which consolidate put themselves in a position to serve us far more efficiently, yet on the other hand, railroads which consolidate cease to compete with each other for our benefit. Which do we want them to do? The railroads themselves are familiar with the experience that they are constantly forced to make extensions in order to secure a certain territory, that is, to establish a closed unit, and that every extension, instead of attaining a finality, only makes further extension unavoidable. This is the class of facts in the industrial development of our time which has produced the trusts, and it is certain that they offer another motive than that of simple desire to secure means of extortion.
I am not yet able to see that any trust can succeed unless it is founded on a natural or legislative monopoly, and furthermore on a monopoly whose product cannot be produced in an amount exceeding the demand at the price which has been customary before the formation of the trust; and I cannot see any chance for legislation to do any good unless it is in the repeal of all such laws as are found to furnish a basis for the organization of an artificial monopoly.
It cannot have escaped the attention of the reader that trades-unions are a monopolistic organization on the side of labor entirely parallel with the trusts on the side of capital, “a product of the same age and of the same forces,” and an endeavor to deal with the same problem from the standpoint of another interest. The motives of coercion, discipline, and strict internal organization are the same in both cases, and some of the sanctions are the same; for the pools and rings have tried the boycott until they have proved its worthlessness. There is a notion afloat that the modern trades-union is a descendant of the mediæval gild. It might, with equal truth, and equal futility, be asserted that the modern college, stock exchange, and joint stock company, are descended from the mediæval gild. The nineteenth-century trades-union is a nineteenth-century institution, as much or more so than the ring, pool, corner, or trust. They are all products of the same facts in the industrial development, and one is just as inevitable, and, in that sense, legitimate, as the other. There are some who, while vehemently denouncing trusts, offer us, with great complacency and satisfaction, as a solution of the “labor question,” the assertion that the employers and employees ought to combine or coöperate in some way; they do not appear to see at all that if any such thing should be brought about it would be the most gigantic “trust” that could possibly be conceived.
AN OLD “TRUST”[45]
In the year 1579, Conrad Roth, a merchant of Augsburg, who had been interested in the trade in spices between Lisbon and Germany, proposed to an officer of the treasury of the Elector of Saxony a scheme for a company to monopolize the pepper trade. The Elector was one of the most enterprising and enlightened princes of his time, and the proposition was really intended to be made to him as the only person who could command the necessary capital and had, at the same time, courage and energy to undertake the enterprise.
A company was formed of officers of the treasury, called the Thuringian Company, and a warehouse was prepared at Leipzig. It was reckoned that if the company could raise the price of pepper one groschen per pound, the profits would be over 38,000 florins per annum. Roth and the Thuringian Company were to participate in the enterprise equally, but the Prince was to put up all the capital, and Roth was to do all the work. The latter also owned a very valuable contract with the King of Portugal, according to which he was, for five years, to send to India money enough to buy up all the pepper produced, so that none could come into Europe through Egypt and Italy. Before that time the Portuguese officers had illegally sold some of it, so that it did get into Europe that way; but by buying in India this was now to be stopped.
Roth proposed to divide Europe into three sections: Portugal, Spain, and the West; Italy and the South; Germany and the North. The Saxon company was to have the last as its share of the monopoly. It was hoped that the gains might be forced up to a much higher figure than the one above given, if only all pepper then in Frankfort, Venice, Nuremberg, and Hamburg could be bought up.
No sooner was the plan formed, however, than Roth began to reach out after extensions to it. He wanted to include the trade in other spices. He also proposed that the Elector should provide the capital for an exchange bank to do the exchange business between Leipzig and Lisbon. Next he found that the existing postal arrangements were entirely inadequate to the requirements of his business, and he proposed to the Elector a complete plan for a postal service between Italy, Germany, France, Spain, and Portugal. Then, having found the shipping facilities unsatisfactory, he proposed that the Elector should enter into a contract with the King of Denmark, by which the latter, who owned ships, should provide a regular service between Lisbon and the Elbe.