MONOPOLIES AND THE PEOPLE
BY
CHARLES WHITING BAKER, C. E.
ASSOCIATE EDITOR OF "THE ENGINEERING NEWS"

NEW YORK & LONDON
G. P. PUTNAM'S SONS
The Knickerbocker Press
1889

COPYRIGHT BY
G. P. PUTNAM'S SONS
1889

The Knickerbocker Press
Electrotyped and Printed by
G. P. Putnam's Sons

to all those who love truth and justice and equity, who
value our heritage of liberty and peaceful fraternity,
and who are willing to unite in upholding
and defending THE COMMONWEALTH—that
preserver and protector of the rights
of the whole people—the author
dedicates this work.

PREFACE.

In the following pages it has been my endeavor to present, first, the results of a careful and impartial investigation into the present and prospective status of the monopolies in every industry; and, second, to discuss in all fairness the questions in regard to these monopolies—their cause, growth, future prospects, evils, and remedies—which every thinking man is to-day asking.

The first part of this task, the presentation of facts with regard to existing monopolies, may seem to the well informed reader to be imperfectly done, because of the host of powerful and important monopolies of every sort that are not so much as mentioned. But I have deemed it most important that the broad facts concerning monopolies should be widely known; and I have, therefore, aimed to present these facts in a readable and concise way, although, in so doing, only a few of the important monopolies in each industry could be even mentioned. It is to be hoped that no one will underrate the importance of the problem of monopoly, or question the conclusions which I have reached, because of these omissions. To any such readers who may not be satisfied from the facts hereafter given that monopolies are the salient feature of our present industrial situation, and, moreover, that they have come to stay, I would recommend a careful perusal of the financial and trade journals for a few months.

Wherever possible I have presented actual statistics bearing on the question at issue; but as regards trusts, monopolies in trade, mining, labor, and in fact nearly all monopolies, there are no statistics to be had. Nor can any be obtained, for it would be absurd for the government to collect statistics of the operation of that which it pronounces illegal but makes no effort to punish.

It may increase the respect of some readers for the conclusions I have reached, to know that it was a practical acquaintance with monopolies rather than any study of economic theories which led me to undertake the present work; that, at the time I undertook it, I was wholly undecided as to the proper remedies for monopolies, and was quite willing to believe, if the facts had proved it to me, that they were destined to work their own cure; and that the rapid growth and increase of monopolies in very many industries, in the few months since these chapters were written, have furnished fresh evidence that my conclusions have not been amiss.

Finally, I wish to place all emphasis on the fact that all the great movements toward genuine reform must go hand in hand. The cause of the people is one cause, and those who work for honest officers in our government, pure elections, the suppression of crime and pauperism, the mental and moral elevation of men and women, are striking harder blows at monopolies than they may realize. But if they desire to hasten the day of their success, they must bring the great masses of the people to comprehend that these movements aim at nothing less than their complete deliverance; and that the reformers who labor so earnestly to make our government purer and its people nobler, heartily desire also to cure the evils of monopoly, and to serve the cause of the people in its every form.

Charles Whiting Baker.

Tribune Building, New York City.
June, 1889.

TABLE OF CONTENTS.

I.
THE PROBLEM PRESENTED.

The word "trust," standing for one of the noblest faculties of the heart, has always held an honorable place in our language. It is one of the strange occurrences by which languages become indelible records of great facts in the history of the world, that this word has recently acquired a new meaning, which, to the popular ear at least, is as hateful as the old meaning is pleasant and gratifying.

Some future generation may yet be interested in searching out the fact that back in the nineteenth century the word "trust" was used to signify an obnoxious combination to restrict competition among those engaged in the same business; and that it was so called because the various members of the combination entrusted the control of their projects and business to some of their number selected as trustees. We of the present day, however, are vitally interested in a question far more important to us than the examination of a curiosity of philology. We are all of us directly affected to-day by the operation of trusts; in some cases so that we feel the effect and rebel under it; in other cases, so that we are unconscious of their influence and pay little heed to their working.

It is but a few months since public attention was directed to the subject of trusts; but, thanks to the widespread educational influence of the political campaign, at the present day the great proportion of the voters of the country have at least heard of the existence of trusts, and have probably some idea of their working and their effect upon the public at large. They have been pointed out as a great and growing evil; and few speakers or writers have ventured to defend them farther than to claim that their evil effects were exaggerated, and predict their early disappearance through natural causes; but while remedy after remedy has been suggested for the evil so generally acknowledged, none seems to have met with widespread and hearty approval, and practically the only effect thus far of the popular agitation has been to warn the trust makers and trust owners that the public is awakening to the results of their work and is likely to call them to account.

The truth is, as we shall see later, that it is a difficult matter to apply an effective remedy of any sort to the trusts by legislation, without running counter to many established precedents of law and custom, and without serious interference with what are generally regarded as inalienable rights. Yet we are making the attempt. Already legislative and congressional committees have made their tours of investigation, and bills have been introduced in the legislatures of many of the States, and in Congress, looking to the restriction or abolition of trust monopolies.

It is the wise surgeon, however, who, before he takes the knife to cut out a troublesome growth, carefully diagnoses its origin and cause, determines whether it is purely local, or whether it springs from the general state of the whole body, and whether it is the herald of an organic disease or merely the result of repressed energies or wrongly-trained organs. So we, in our treatment of the body politic, will do well to examine most carefully the actual nature of the diseases which we seek to cure, and discern, if we can, the causes which have brought them on and tend to perpetuate them. If we can discover these, we shall, perhaps, be able to cure permanently by removing the ultimate cause. At any rate, our remedies will be apt to reach the disease far more effectually than if they were sought out in a haphazard way.

The crudest thinker, at the first attempt to increase his knowledge of the general nature of trusts, discovers that the problem has a close connection with others which have long puzzled workers for the public good. Trusts ally themselves at once in his mind with monopolies, in whichever form he is most familiar with them, and are apt to be classed at once, without further consideration, as simply a new device for the oppression of the laborer by the capitalist. But the man of judicious and candid mind is not content with any such conclusion; he finds at once, indeed, that a trust is a combination to suppress competition among producers of manufactured goods, and he calls to mind the fact that other combinations to suppress competition exist in various other lines of industry. Surely when the governing motives are so similar, the proper remedies, if remedies are needed, cannot be greatly unlike. And though, taking the country as a whole, trusts have occupied more attention lately than any other form of monopoly, the problem of railroad monopoly is still all-absorbing in the West; in every city there is clamor against the burdens of taxation levied by gas, electric-light, street-railway, and kindred monopolies; while strikes in every industry testify to the strength of those who would shut out competition from the labor market. These and similar social and industrial problems are quite as important as the problem of trusts, and their solution is becoming every day more urgent and necessary. If we neglect them too long, or carelessly adopt some unsuitable or unjust remedy, who knows the price we may pay for our folly in blood and treasure?

The problem before us, then, as we see it from our present standpoint, is the problem of monopoly. What is it? Whence comes it? What are its effects? And, most important of all, what ought we to do about it? Surely questions whose correct answer is of such importance to the welfare of each person and to the very existence of society demand the careful consideration of every thinking man.

Let us then take up this problem and give it the fairest and most candid investigation possible. In order to do this, let us remember that the truth is the object of our search, and that it will be necessary, if the conclusions from our investigation are to be of value, that we divest ourselves, so far as possible, of all preconceived opinions founded, perhaps unconsciously, on the statements or evidence of incompetent authorities, and also of all prejudices. Let us, in searching for facts and principles, examine with impartiality the evidence and arguments which each side presents, and judge with candor between them.

The author wishes to make an earnest personal request to the reader who is minded to follow the discussion through the following pages, that he will in good faith attempt to do this thing: that he will lay aside for the present his opinions already formed, as the author himself has conscientiously aimed to do while pursuing this investigation, and give a fair hearing to both sides of the question. A complicated machine can only be understood when it is viewed from different standpoints. So, here, in order to find the truth, we must examine trusts from the standpoint of the trust maker as well as from that of the consumer; and trade unions, from the standpoint of their members as well as from the ground of employers and of the public at large. We shall indeed meet much error by this method of study, but is it not proverbial that there are two sides to every question? It will be our task to study these opposing views and sift from them the truths for which we seek.

In taking up now the problem before us, let us adopt the true scientific method for its solution. We must first find out as fully as possible the actual facts with regard to monopolies of every sort and the competition which monopoly replaces. Next, by discussing and comparing the evidence obtained, we may be able to discover the natural laws by which competition and monopoly are controlled; and finally, with our knowledge of these, we will try to discover both the source of the evils which vex us and the proper methods for ameliorating, curing, or preventing them, whichever may be found possible.

Such is the outline of the investigation before us, which it may as well be said here could easily be extended and amplified to fill many volumes. The author has preferred to prepare the present volume without such amplification, believing that the busy men of affairs, to whom a practical knowledge of the subjects herein treated is most essential, have, as a rule, no leisure for the extended study which the volumes into which the present one might easily be expanded would require. He trusts, however, that brevity will not be found wholly incompatible with thoroughness; and that the fact that much which might have properly been included in the book is omitted, will not be taken as a necessary indication that the conclusions arrived at are without value.

II.
TRUSTS AND MONOPOLIES IN MANUFACTURING INDUSTRIES.

In common use the word "trust" is at present rather loosely used to denote any combination formed for the purpose of restricting or killing competition. Properly speaking, however, a trust is a combination to restrain competition among producers, formed by placing the various producing properties (mills, factories, etc.) in the hands of a board of trustees, who are empowered to direct the operations of production and sale, as if the properties were all under a single ownership and management.

The novel characteristic of the trust is not the fact that it is a monopoly, but that it is a monopoly formed by combining several competitors according to a new plan. The process of placing property in the hands of trustees is familiar to every business man. In the formation of a trust the different firms or companies who have been competing with each other in the production and sale of goods agree to place the management of all their several properties in the hands of a board of trustees. The powers of this board and its relation to the owners of the various properties are ingeniously devised to evade the common law, which declares that contracts in restraint of competition are against public policy, and illegal.

The first of the modern trusts was the Standard Oil Trust, which was a combination formed among several of the refiners of crude petroleum in the States of Pennsylvania and Ohio in the year 1869. The original combination grew out of the control of certain important patents connected with the process of refining. It pursued its course for a number of years without attracting much attention outside of the centre of its operations; but of late years so much has been published in regard to it that the very word "Standard" has come to be almost a synonym for monopoly. It is probable that certain branches of the iron and steel trade were the next to be combined by means of a trust, but as these were arrangements between private firms, not much information as to the time of their origin has reached the public. The second great trust to attract general public attention was the American Cotton Oil Trust, in which some of the same men who have so successfully engineered the Standard Oil combination are heavily interested. These two great trusts, the Cotton Oil and the Standard, have attracted widespread attention, and, to a certain extent, the public has become familiar with their organization and plan of operation; but popular feeling on the subject was not fully aroused until 1887, when the newspapers of the country made generally known the fact that the trust principle of combination was being rapidly adopted by the manufacturers of a large number of important lines of goods. The effect which these monopolies were believed to have upon the public welfare was pointed out by writers and speakers, and Congress and the State Legislatures were besought to investigate these combinations and seek to suppress them. Meanwhile it seems to be true that the popular agitation has had no effect in lessening the number of trusts, or checking their formation and growth; and they continue to increase and to gather their profits, while the public impotently wonders what it is going to do about it. Let us be careful, however, to make no assumption that the trust is injurious to the public at large. That is a matter which is before us for investigation.

It is safe to assume that the reader is somewhat familiar with the general charges which have been brought against the trusts; but even if this side of the story has not been heard, it is not unfair to look at them first from the standpoint of the men who make and manage them. In order to do this, suppose we select some particular trust which will serve as a type, and imagine that some frank, candid manufacturer, who is a member of this trust, comes before us to give an account of its formation and operations. This man comes, we suppose, not as an unwilling informant, or as one on trial. He is frank, honest, and plain-spoken. He talks as man to man, and gives us, not the specious argument of an eloquent pleader in defence of trusts, but just that view of his trust and its work that his own conscience impels him to take. Certainly, then, he deserves an impartial hearing.

A number of years ago the principal manufacturers of linseed oil in the United States formed an association. It was started largely for social ends, and was very successful. Business men are generally most interested in their own plans and operations; and those who are familiar with the same topics and have similar interests and purposes are apt to make agreeable companions for each other. We discussed many points connected with the management of our business at the meetings, and by interchanging with each other our views and experiences with different devices, methods of management, etc., we were able to get much valuable information, as well as social pleasure, from meeting one another.

Now within the past few years things have been going from bad to worse with the manufacturers of linseed oil. The long and short of it all was that the margin between the cost of the raw seed and running our mills, and what we could get for the oil cake and the linseed oil in the market, has grown exceedingly narrow. It's hard to tell just what has caused it. They say over-production; but what has caused the over-production? One thing that may have had something to do with it is the new mills they have been putting up in the Northwest. Many of the Eastern mills used to get large quantities of seed from Iowa; but they are building cities out there now, as well as raising flax-seed, and when they were booming some of those cities they would raise heavy bonuses in aid of new enterprises. Among these were some great linseed oil mills, which have loaded up the market pretty heavily of late years; so that not only has the price sagged down, but we have all had to work to get rid of our stocks. The firms which had the best mills and machinery, and were in a position to get their seed reasonably and put their goods on the market with least expense for transportation, etc., have been making a small profit over and above their expenses. But some of the works which had to bring their seed a long way, and which haven't quite as good machinery as can be had now, were in a bad way. There were some of the oldest houses in the trade among them, too, and with fine men at their head. It was too bad to have them go under. They tried to cut down expenses, but strikes and trouble with their men prevented their saving much in that way. Then there was one item of expense which they had to increase instead of cutting down: that was the cost of marketing. Competition was so fierce, that, in order to keep up their trade, they had to spend more on salaries of expensive salesmen, and in advertising and pushing their goods, than they would dream of ordinarily.

It seemed too bad to cut each other's throats in that way, for that was what it amounted to, and when the association met,—or what was left of it, for the business rivalries had grown so bitter that many of the former personal friendships between the members had become strained and one after the other had dropped out,—the situation was discussed by the few members who met together. It was discussed earnestly, too, by men who felt an interest in what they said, because unless some remedy could be devised, they had got to sit still and watch the savings of a lifetime slip through their fingers. One thing was very clear to all. Though competition was as sharp as any one could possibly wish, the public was not getting such a wonderful benefit after all. Prices were not so very much lower for oil, nor higher for seed. It was the selling expense which had run up to a ruinous figure; and on one point all the members were unanimous,—that if all the firms in the trade could only work together in harmony in marketing their goods, they could save enough in salesmen's salaries, etc., to make a great difference in the profit-and-loss account without affecting the selling prices in the market one penny.

Another very important matter, which we had to handle pretty tenderly in our discussions, was that of adulteration. I must confess that a good many firms in the trade, who used to be above any thing of the sort, have been marketing some goods in the past few years which were not exactly the "pure linseed oil" which they were labelled. It's a mean business—adulteration,—but not many of our customers ever test their purchases. The one thing they are apt to look at is price, for they are buying to sell again; and when rivals are selling a cheaper oil that seems just as good until it is laid on as the pure linseed that you are obliged to ask a higher price for, the temptation to meet them at their own game, rather than lose your old customers, is a very strong one. Certainly, when competition took this form, it hurt the public even more than it hurt us. When people wish to buy pure linseed oil they ought to have some prospect of getting it, instead of getting an adulterated mixture of various substances; but at the rate competition was running, there seemed to be small prospect that there would be any really pure linseed oil put on the market in a short time. We have often discussed the possibility of stopping these adulterations, but it was a hard matter to cure by mere mutual agreement. How do I know what my competitor in a city a hundred miles away, does with the vats in his cellar after working hours, even if he has solemnly agreed not to adulterate his goods? For I must confess that there are a few men in our trade who are as tricky as horse jockeys.

Quite a number of improvements have been patented in linseed oil machinery in the past twenty years. Nothing wonderful, but things that effect little economies in the manufacture. We could have done without them; but when a few firms took them up, of course the rest had to follow suit, or fall behind in the race of competition. We have had to pay a heavy royalty on some of these machines, and it has been rather galling to count out our hard-earned dollars to the company which has bought up most of the patents, and is making 100 per cent. a year on what it paid for them, with no risk, and without doing a stroke of work. Now if we manufacturers could work in harmony, we could make this company come down from their high horse, and they would have to ask a reasonable price for their machines. But we could do more than this. It stands to reason that a good many improvements will be made in our machinery in the future. We don't object to paying a fair price to any inventor who will work out these new ideas for us; but it does seem unjust for him to go and sell them to some outside company for a song, and have that company bleed the users of the improvement for every ounce they will stand. Now, by working together, we can refuse to pay royalties on any thing new which comes up; but require, instead, that any new patent in our line be submitted to a committee, who will examine and test it; and if they find it to be of value, will purchase it for the use of all members of the association.

Some of the members thought this was as far as we ought to go. They were opposed to "trusts" on principle. But the great majority saw so clearly where we could continue to better ourselves that they became enthusiastic over it.

Some speculators, in years of short crops, have occasionally tried to "corner" flax-seed in a small way. We could refuse to buy except directly from the growers, and that branch of speculation would be a thing of the past. We have sent out some pretty sharp men as buyers, and sometimes they have bought flax-seed in some of the backwoods districts at very low rates. At other times, two buyers from rival firms have run counter to each other, and paid prices larger than their employers could really afford. But with our combination, we cannot only fix uniform prices for seed, but we can send out only enough buyers to cover the territory; and the work of buying is reduced to simply inspecting and weighing the seed.

Now another thing: Of course, not every manufacturer in the business owns his mills. It is a fact that since the close times of the past few years the majority of the firms are carrying mortgages on their mills; and some of them in the West are paying as high as eight or ten per cent. interest. But with the combined capital of all the firms in the trade at our back, we can change all that. Either by a guaranty, or by assuming the obligations, we can bring the interest charges on every mill in the association down to four or five per cent. at most.

We have been paying enormous rates to fire insurance companies. They are not as familiar with our business as we are ourselves, and they don't know just how much risk there really is; so they charge us a rate which they make sure is high enough. We can combine together and insure ourselves on the mutual plan; and by stipulating that each firm shall establish and keep up such precautions against fire as an expert may direct, we can not only reduce the cost of our insurance to that of our actual losses, but we can make these a very small amount.

It may be said that we might have done all these things without forming any trust to control prices. But the practical fact was that we could not. There was so much "bad blood" between some of the different firms in the business, from the rivalry and the sharp competition for trade, that as long as that was kept up it was impossible to get them to have any thing to do with each other in a business way. It was no small task to get these old feuds patched up; but some of the best and squarest men in the business went right into the work, and at meetings of the association, and privately, exerted all their influence to forward this coming together for mutual aid and protection. They did it conscientiously, too, I think, believing that it was necessary to save many of us from financial ruin; and that we were not bound, under any circumstances, to sacrifice ourselves for the sake of the public. The trust has been formed, as every one knows, and many of the things we planned to do have been already accomplished. We have stopped adulterations on all goods made by members of the trust; and the improvement in the quality of linseed oil which has been effected is an important benefit to the public. We are managing all the works in the trust as if it were all a single property, controlled by different managers; and the saving in expense, over the old plan of cut-throat competition, when everybody was striving to save himself and sink his rivals, is an enormous one.

One thing which has caused much hue and cry, is the fact that we have closed half a dozen mills or so. But the matter stood in this way: these mills were not favorably situated for doing business, all things considered; and all the mills in the country cannot run all the time, because there are more mills in existence than are needed to supply the market. These mills must have been closed soon, if the trust had not commenced operations, because they could not be run under the old regime and pay expenses. We knew we could make the oil at a less cost in our other mills, so we concluded to buy out the owners of these at a fair price, and shut up the works. Prices of linseed oil have been raised somewhat, we confess; but we claim that they had been forced down much too low, by the excessive competition which has prevailed for a few years past. Of course some of the most hot-headed and grasping among us, were anxious to force prices away up, when they once realized that we had an absolute monopoly of the linseed oil trade of the country; but the great majority were practically unanimous in a demand for just prices only, and the adoption of the policy of live and let live; for trust-makers are not entirely selfish.

We claim, moreover, that we are breaking no legal or moral law by this action. We are, for the most part, private parties or firms—but few corporations,—hence the attempt to abolish trusts on the ground that the corporations composing trusts have exceeded the power given by their charters will fail to reach our case. We have certainly done this: we have killed competition in the linseed oil trade; but we submit that with so many other interests and trades organized to protect themselves from outside competition, and control the prices at which their products are sold to the public, we were, in self-defence and for our own preservation, obliged to take this step.[1]

If we omit the references to the especial trade, the above view of a trust from the trust-makers' standpoint will do for almost any of the many combinations which have been formed by different manufacturers for the purpose of controlling production and prices. One thing is clearly indicated in the above, and will certainly be conceded: That the men who have formed these trusts are animated by the same motives as those that govern humanity in general. They have, in some cases at least, known what it was to be crowded close to the wall by severe competition. They all at once saw a way opening by which they could be freed from the worries and losses which had been making their business one of small and uncertain profits, and would be set squarely on their feet with a sure prospect for large and steady gains. It is using a common expression to say that they would have been more than human if they had refused to improve this opportunity. Certainly, then, in examining further the trusts, we shall do so with no feeling of personal prejudice toward the men who originated them and carry them on.

As we have given a hearing to the case from the trust-makers' standpoint, it is only fair that we should hear at equal length from the public who oppose the trusts; but to abbreviate the investigation, let us suppose that we are already familiar with the various charges which are brought against the trust monopolies, and let us proceed at once to consider the actual effect of the trusts upon the public.

Since we have heard so much in defence of the linseed oil trust, it will be well for us to inquire concerning the results, in which the public is interested, which have followed its organization. During the year 1887 (the trust was formed in January of that year) the price per gallon of linseed oil rose from thirty-eight cents to fifty-two cents; and this price was kept up or exceeded during 1888. That is to say, every purchaser of linseed oil, or every one who had occasion to have painting done, pays to the members of this trust, for every gallon of oil that he uses, about fourteen cents over and above the sum which he would pay if competition were allowed to do its usual work in keeping down prices.

What profits are the members of this trust making? Let us suppose that they were just able, at the old price of thirty-eight cents per gallon, to pay all their running expenses and four per cent. on the capital invested, making nothing for profits beyond a fair salary to the managers of the business. Then the gain of fifteen cents a gallon in the selling price is clear profit to them. Now add to this the fact, which was plainly brought out in the foregoing supposed statement by a member of the trust, that it is possible by means of the trust to greatly reduce expenses in many directions as well as to increase receipts, and we begin to form some conception of the profits which this trust is harvesting. If we wish to put the statement in figures, suppose we take the annual consumption of linseed oil in the country at thirty million gallons. Then the profits of the trust from the increased prices alone will amount to four and one half million dollars per annum.

There is another way in which trusts directly affect the public, which has received very much less attention than it deserves. Besides the people who use the linseed oil and pay the trust an extra fourteen cents a gallon for the privilege, there are a great number of people who would have used oil if the price had not advanced, but who cannot afford to do so at the advanced price. It is a well-known fact that every increase in the price of any article decreases the demand, and the advance in the price of linseed oil has undoubtedly had a great effect in decreasing the consumption of oil. So while it is undoubtedly true that at the trust's prices there are more linseed-oil mills in the country than are needed to supply its wants, yet if the prices were lowered to the point which free competition would fix, there would probably be demand enough to keep all the mills running. To the trust, then, must be ascribed the final responsibility for the stoppage of the mills and the loss of employment by the workmen. Nor does the effect upon the labor market stop there. From the fact that less people can afford to paint their houses, because of the higher price of the oil, it is certain that there will be less employment for painters; and as less paint is used, all those interested in and employed in the paint trade are sufferers. It is to be remembered that we are speaking of the linseed oil trust only to make the case more vivid. The principle is general and applies equally well to other trusts, as for instance to the loss of employment by thousands of men working in refineries controlled by the sugar trust, in the fall of 1888. Still another effect of this trust's action is to be especially noted: the fact that the diminished production of oil lessens the demand for seed; and also that in the purchase of seed, as well as in the sale of oil, the trust has killed competition. The trust may, if it chooses, fix uniform prices for the seed which it purchases; and the farmer can take the prices they offer or keep his seed. Fortunately the farmer can raise other products instead of flax-seed, and will do so if the price is lowered by any large amount.

One other possible mode of profit for the trusts, which, however, they are hardly likely to engage in—from their fear of public opinion, if for no other reason—lies in the power which they possess over the labor market. It will probably be conceded at once that the rate of wages in any occupation depends, among other things, upon the competition of the various workmen who seek employment in that occupation, and also upon the competition among those who wish to hire men to work at that occupation. It is plain that when the competition among employers to secure men is active, wages will rise; and when this competition falls off, wages will fall. Now the trust is more than a combination for selling purposes only. It is a combination of all the properties concerned under practically a single ownership. Clearly, then, as the various mills belonging to a single owner will not compete with each other in the employment of labor, the mills belonging to a trust will be no more likely to do so. Thus if it were not for the fact that the workmen are able to take up some other employment if their wages are too low, they would be absolutely obliged to take what wages, great or small, the trust chose to give, and would be as dependent for their food and clothing upon the trust as was the slave upon his master.

The question is often asked why trusts have not been formed before, and what the causes are which have started them up so rapidly in such varied lines of industry. There is certainly room for much honest difference of opinion in reference to these causes; but one cause concerning whose influence there can be no dispute is the culmination of the change from the ancient system of manufacturing to the modern. Let us briefly trace the manner in which this branch of civilization has grown: In the most primitive state of existence, each man procures and prepares for himself the few things which he requires. With the first increase in intelligence those of most skill in making weapons and preparing skins make more than they require for themselves, which they exchange with others for the products of the chase. The next step is to teach to others the special skill required, and to employ them to aid the chief workman. Conditions analogous to these existed down to the end of the last century. The great bulk of all manufacturing was done in small shops, each employing only a few workmen; and the manufacturer or master workman labored at the side of his journeymen and apprentices. The products of these little workshops were sold in the country immediately adjacent. Of course the number of these scattered shops was so great that the possibility of uniting all the manufacturers in any one trade into a single organization to prevent competition among them, was beyond the thoughts of the most visionary.

The present century has seen three great economic wonders accomplished: the invention of labor-saving machinery, greatly multiplying the efficiency of labor in every art and trade; the application of steam power to the propulsion of that machinery; and the extension over all civilized lands of a network of railway lines, furnishing a rapid, safe, and miraculously cheap means of transportation to every part of the civilized world. In order to realize the greatest benefit from these devices, it has become necessary to concentrate our manufacturing operations in enormous factories; to collect under one roof a thousand workmen, increase their efficiency tenfold by the use of modern machinery, and distribute the products of their labor to the markets of the civilized world. The agency which has acted to bring about this result is competition. The large workshops were able to make goods so much cheaper than the small workshops that the latter disappeared. Then one by one the large workshops were built up into factories, or were shut up because the factories could make goods at less cost. So the growth has gone on, and each advance in carrying on production on a larger scale has resulted in lessening the cost of the finished goods. Competition, too, which at first was merely an unseen force among the scattered workshops, is now a fierce rivalry; each great firm strives for the lion's share of the market. Under these conditions it is quite natural that attempts should be made to check the reduction of profits by some form of agreement to limit competition. Many plans have been tried which attempted to effect this by mere agreements and contracts, methods which left each property to the control of its special owners; but none have been permanently successful. By the trust plan of combination, the properties are practically consolidated; and the failure of the combination through withdrawal of its members is avoided. It offers to manufacturers, close crowded by competition, a means of swelling their profits and ensuring against loss; and encouraged by the phenomenal success of the Standard Oil combination, they have not been slow to accept it.

The point to which we need to pay especial attention, in the foregoing consideration of the causes which have produced trusts, is the fact that the cost of production is continually being cheapened as it is carried on on a larger and larger scale. And because the cheaper mode of production must always displace the mode which is more expensive: as Prof. Richard Ely expresses it, "Production on the largest possible scale will be the only practical mode of production in the near future." We need not stop to prove the statement that the cost of production by the modern factory system is a small fraction of that by the old workshop system. The fact that the former has beaten the latter in the race of competition would prove it, if it were not evident to the most careless observer. But it is also a fact that the trust, apart from its character as a monopoly, is actually a means of cheapening production over the system by independent factories, for it carries it on on a larger scale than it has ever before been conducted. Our review of the trust from the trust makers' standpoint showed this most forcibly; and we shall see more of it as we study further the methods by which the monopoly gains an advantage over the independent producer in dispensing with what we may call the waste of competition. In the argument presented by the Standard Oil Trust before the House Committee on Manufactures in the summer of 1888, occurs the following statement of the work which that monopoly has done in cheapening production:

"The Standard Oil Trust offers to prove by various witnesses, including Messrs. Flagler and Rockefeller, that the disastrous condition of the refining business and the numerous failures of refiners prior to 1875 arose from imperfect methods of refining, want of co-operation among refiners, the prevalence of speculative methods in the purchase and sale of both crude and refined petroleum, sudden and great reductions in prices of crude, and excessive rates of freight; that these disasters led to co-operation and association among the refiners, and that such association and co-operation, resulting eventually in the Standard Oil Trust, has enabled the refiners so co-operating to reduce the price of petroleum products and thus benefit the public to a very marked degree and that this has been accomplished:

"1. By cheapening transportation, both local and to the seaboard, through perfecting and extending the pipe-line system, by constructing and supplying cars with which oil can be shipped in bulk at less cost than in packages, and the cost of packages also be saved; by building tanks for the storage of oil in bulk; by purchasing and perfecting terminal facilities for receiving, handling, and reshipping oils; by purchasing or building steam tugs and lighters for seaboard or river service, and by building wharves, docks, and warehouses for home and foreign shipments.

"2. That by uniting the knowledge, experience, and skill, and by building manufactories on a more perfect and extensive scale, with approved machinery and appliances, they have been enabled to and do manufacture a better quality of illuminating oil at less cost, the actual cost of manufacturing having been thereby reduced about 66 per cent.

"3. That by the same methods, the cost of manufacture in barrels, tin cans, and wooden cases has been reduced from 50 to 60 per cent.

"4. That as a result of these savings in cost, the price of refined oils has been reduced since co-operation began, about 9 cents per gallon, after making allowance for reduction in the price of crude oil, amounting to a saving to the public of about $100,000,000 per annum."

Certainly it would seem that this is a strong defence of the trust's character as a public benefactor; but it is well to note that while it has been making these expenditures and reducing the price of oil to the consumer, it has also been making some money for itself. The profits of this trust in 1887, according to the report of the committee appointed to investigate the subject of trusts by the New York Legislature, were $20,000,000. The nominal capital of the trust is but $90,000,000, a large portion of which is confessedly water. In answer to the statement that the price of oil has been reduced steadily by the operations of the trust, it is charged that no thanks is due to the trust for this benefit. The trust has always wished to put up the price, but the continual increase in the production of the oil fields has obliged the trust to make low prices in order to dispose of its stock. There are also about one hundred independent refineries competing with the trust, and their competition may have had some influence in keeping prices down. It is undoubtedly true that the economy in the storage, transportation, and distribution of oil by the systematic methods of the Standard Oil Trust has made it possible to deliver oil to the consumer at a small fraction of its cost a decade ago. But it is also true that a good part of the reduction in the price of oil is due to the abundant production of the petroleum wells, which have furnished us so lavish a supply. The principal charges against this trust, made by those who were conversant with its operations, have never been that it was particularly oppressive to consumers of oil; but that, in the attempt to crush out its competitors, it has not hesitated to use, in ways fair and foul, its enormous strength and influence to ruin those who dared to compete with it.

In a later chapter we shall be able to study these more intricate questions regarding trusts with a better understanding of our problem. Let us pay some attention now to the growth of the trusts and of combinations in general for the purpose of limiting competition among manufacturers, which has taken place within the past few years.

According to the little book entitled "Trusts," by Mr. Wm. W. Cook, the production of the following articles was, in February, 1888, more or less completely in the hands of trusts: petroleum, cotton-seed oil and cake, sugar, oatmeal, pearl barley, coal, straw-board, castor oil, linseed oil, lard, school slates, oil cloth, gas, whiskey, rubber, steel, steel rails, steel and iron beams, nails, wrought-iron pipe, iron nuts, stoves, lead, copper, envelopes, paper bags, paving pitch, cordage, coke, reaping and binding and mowing machines, threshing machines, ploughs, and glass—a long and somewhat jumbled list, to which, however, at the present time, there should probably be added: white lead, jute bagging, lumber, shingles, friction matches, beef, felt, lead pencils, cartridges and cartridge-shells, watches and watch cases, clothes-wringers, carpets, coffins and undertakers' supplies, dental tools, lager beer, wall paper, sandstone, marble, milk, salt, patent leather, flour, and bread. It should be said that, as regards most of these combinations, the public is ignorant beyond its knowledge that some form of combination for the purpose of restricting competition has been formed. For the purpose of our present investigation it makes little difference just what this combination may be.

The salient facts for us to note are, that among the manufacturers of this country there has arisen a widespread movement to partially or wholly avoid competition in the production and sale of their goods; that in a very great number of manufacturing industries these combinations have progressed so far that their managers have been able to advance prices and check production; that some of these combinations have taken the form of trusts, and by this means have every prospect of maintaining their stability and reaping their enormous profits with the same permanency and safety as has their predecessor, the Standard Oil Trust; and, finally, that with this prospect before them, our manufacturers, as a class, would lose their reputation as shrewd business men if they did not follow out the path marked out for them, and combine every manufacturing industry in which combination is possible upon the plan of the trust.

In conclusion, it may be well to examine the statement attributed to Mr. Andrew Carnegie, that, "there is no possibility of maintaining a trust. If successful for a time, and undue profits accrue, competition is courted which must be bought out; and this leads to fresh competition, and so on until the bubble bursts. I have never known an attempt to defeat the law of competition to be permanently successful. The public may regard trusts or combinations with serene confidence."

Surely if this statement is true, we have little need for further examination of this subject. We have now knowledge enough of our subject to enable us to determine its truth or falsity. We have found in the actual trusts that we have examined none which have shown signs of succumbing to outside competition. More than this, however, we have seen that it is possible for a trust to carry on business and deliver goods to the consumer at much less cost than an independent manufacturer can. And as surely as this law holds that production on the largest scale is the cheapest production, so surely will the trust triumph over the independent manufacturer wherever they come into competition. If the trust were always content when its competitors were disposed of, to make only the profits which it could secure by selling at such prices as the independent manufacturers could afford, there would be less outcry against it. But with the consumers wholly dependent upon it for supplies, the prices are in the trust's hands; and the tendency is to reap not only the profits due to its lessened cost of production, but also all it can secure by raising the selling price without arousing too much the enmity of the public.

Clearly the trust is at once a benefit and a curse. Can we by any means secure the benefit which it gives of reduction in cost without placing ourselves at the mercy of a monopoly? This is the question which must occur to every thoughtful man. Before we can answer it, however, we must examine the effects of competition and monopoly in other industries.

III.
MONOPOLIES OF MINERAL WEALTH.

It is a well known historical fact that the extraction of metals and minerals from the earth has been more subject to monopoly than almost any other business. It was, and in a large part of the civilized world still is, esteemed a prerogative of the sovereign. Agricultural products have always been gathered from a wide area; manufactures were formerly the product of mean and scattered workshops; but in the working of a rich mine, there was a constant income more princely than was to be obtained from any other single source. Again, with all due respect to the traditions of former generations, it seems to have been thought that any thing to which no one else had a valid title belonged to the crown; and as no one was able to assert any stronger claim to the ownership of mineral wealth than that they had stumbled upon it, it was natural for the sovereign to claim it as his. We see thus the recognition at an early date of the inherent difference between natural wealth and that created by labor.

But coming down to the present time, it is evident that the business of extracting some of the rarer metals from the earth is peculiarly liable to become a monopoly. It is one of the new laws of trade, whose force and importance we are just finding out, that the ease of restricting competition varies with the number of competing units which must be combined. Our most valuable metal, iron, is so widely distributed that any attempt to control the whole available supply could not long be successful. But it is one of the peculiarities of modern industry that by its specialization it furnishes constant opportunities for the establishment of new forms of monopoly, whose power is not generally understood. In the manufacture of Bessemer steel, which has now largely displaced wrought iron in the arts, it is necessary to use an iron ore of peculiar chemical composition. This ore is found most abundantly and of best quality in the mines of the Vermilion range, lying about one hundred miles north of Duluth, Minn., and in the mines of the Marquette Gogebic, and Menominee regions in the north Michigan peninsula. According to good authorities, a combination more or less effective has been formed among the owners of all these mines; and the highest price is charged for the ore which can be obtained without driving the customer to more distant markets for his supply. Among the mines of this district, competition, if not entirely stopped, is greatly checked, and is likely soon to be entirely a thing of the past. It is an interesting fact that among the members of the syndicate which owns the principal mines in the Vermilion regions are some of the trustees of the Standard Oil Trust. It is stated that some of these mines have paid 90 per cent. per annum on their capital stock, which, it is to be noted, represents a much greater sum than the amount invested in the plant of the mine.

It is thus apparent that the mining of the raw ore from which iron is made, abundant and scattered though it is, is not free from monopoly. The combinations to restrict competition among the makers of cast iron and of steel belong properly under the head of monopolies in manufactures. We need only refer here to the fact that they are supposed to exist and have more or less control of the market.

Fortunately for the stability of our system of currency and of finance, the precious metals, through the small ratio which their current production bears to the world's stock, and the fact that this stock is scattered among an enormous number of holders, are safe from any attempts to establish a monopoly to control their price through the control of their production. Other metals, however, which are like silver and gold in being found in workable deposits at but a few points on the globe but are there found in abundance, are peculiarly adapted to facilitate the schemes of monopolists. Of lead, copper, zinc, and tin, we require a steady supply for use in the various arts; and the statement has been made that the supply of each one of these is in the hands of a trust. To see the effect which these combinations have had on prices, let us examine the prices which have prevailed for two years past on these four articles, as shown in the following table:

Table of wholesale prices (cents per lb.) in New York City of copper, lead, tin, and zinc during 1886, 1887, and 1888:

CopperLeadTinZinc
1885 Dec. 3111.54.605.35
1886 Apr. 311.454.905.50
1886 July 310.004.905.60
1886 Oct. 711.004.355.60
1887 Jan. 512.254.7524.506.42
1887 Apr. 611.004.7524.506.50
1887 July 610.504.9225.007.00
1887 Oct. 611.004.4523.306.75
1887 Dec. 2917.755.0037.006.00
1888 Mar. 2917.505.5039.506.75
1888 July 317.254.2522.006.50
1888 Oct. 418.505.7526.006.75
1889 Jan. 317.503.8522.005.50
1889 Apr. 2916.504.2523.006.50

Taking the evidence of this table, we conclude that the combination which is said to control the zinc and lead markets is probably not a trust, but a "Producer's syndicate" or corner. The prices of lead show no such firm tendency to advance as would be expected if the production was in the hands of a single combination.

The prices of zinc, however, show a decided advance in the past two years over the prices for the three years preceding, the average price for 1886 being but 5.50, while for 1887-8 it is 6.58. This is a rise of no small importance, and the way it is maintained seems to give evidence of restriction of competition among producers.

But the striking fact in the above table is the evidence it presents of the work which has been done by that most gigantic and daring combination for the suppression of competition ever organized, the French Copper Syndicate or La Société Industrielle Commerciale des Metaux. This syndicate of French capitalists began operations in 1887, with the intention of "cornering" the tin supply of the world. The rise in price which was due to their operations is shown in the above table. But before completing their scheme they relinquished it for a grander enterprise, which would embrace the copper production of the world. They made contracts with the copper-mining companies in every country of the globe, by which they agreed to purchase all the copper which should be produced by the mines for three years to come at the fixed price of 13 cents per pound, and a bonus of half the profit which the syndicate was able to make from its sales to consumers. In effect this move killed the competition in the copper trade of the world, and placed every consumer at the mercy of this Paris syndicate. The advance in tin was of short duration, and those who suffered by it were speculators rather than consumers; but the advance in copper, as shown by our table, is still firmly maintained, and its effect on the industries using copper has been seriously felt all through 1888. In October, 1888, the Société extended its contracts with several mining companies to cover a period of twelve years, and advanced its price to the producers to 13½ cents per pounds. At the same time, to avoid the accumulation of stock, which the diminished consumption consequent upon the increased price had caused, and which it had been generally predicted would finally be the cause of the Société's downfall, they arranged for the restriction of the production of the mines. If the Société, which is backed by the heaviest capital, and managed by the shrewdest business skill of France, does what it intends to do, and its tributary producers are faithful to their contracts, for ten years to come, yes, for all years to come—for it is not likely that an enterprise of such golden returns will ever be abandoned if it can once profitably be carried out,—the world must pay for its copper whatever these monopolists demand.

Probably the argument against the private ownership and control of the wealth which nature has stored up for the whole world's use was never brought home to men's minds so forcibly as it has been by the acts of these French speculators. Copper is a necessity to the industries of civilized society; and the mind of every unprejudiced person protests against the injustice of placing in the hands of any single firm or combination the power to exact such prices as they choose for the great staples of human consumption. This increase of price of about 7 cents per pound is a tax which affects, directly or indirectly, every person in the civilized world. Let us inquire what becomes of this tax. Perhaps 2 cents per pound will go into the pockets of the Frenchmen who have engineered the combination, a sum which will give them, if we set the annual consumption of copper at 400,000,000 pounds, a comfortable net income of about $8,000,000 per annum. The lion's share of the profits is taken by the producers, however; who, if 10 cents is the price at which copper would sell if free competition were in force, are receiving under the present contract with the Société about 5 cents per pound as a reward for their co-operation in its monopolistic scheme.[2]

It is appropriate here, too, to make reference to the enormous profits which the owners of the copper mines of the country are receiving, apart from the special influence of this great syndicate. The richest and most valuable copper mines in the world lie on the southern shore of Lake Superior. The Calumet and Hecla Company, which works one of the richest deposits of native copper ever found, has a capital stock of $2,500,000, on which it has paid, since 1870, $30,000,000 in dividends. The reports of these companies to their stockholders show that the present cost of refined copper at the mines is as low as 4 cents per pound, and its cost, delivered in the New York market, is only 5¾ cents. Probably the officers of these companies are right in their belief that in no other mines of the world can copper be produced so cheaply. But the question that comes with force to every thinking man is: If the wealth of the ore in these mines is so much greater than that in any other that it can be produced at so much less cost, does there not exist here a natural monopoly, of which the owners of these mines are getting the sole benefit? And, again, by what right does the chief benefit from this rich deposit accrue to the few men who own the mines, rather than to the many men in all parts of the world who wish to use their product?

Great and important as is the copper monopoly, of far greater importance to us than any and all the combinations in the metal industries are the monopolies which control the price of coal. We do not often realize how intimately connected is our nineteenth-century civilization with the store of fuel laid up for us in distant geologic ages. And in this country, with our severe climate, coal is all-important as a factor of domestic economy, as well as a necessity to manufacturing and metallurgical industries. The total cost to the consumers of the coal used in the United States every year (about 120,000,000 tons), calling the average retail price $4.00 per ton, is nearly $500,000,000, or over $8.00 per annum for every man, woman, and child in the country. Surely, then, the statement which we make at the outset, that the coal trade of the United States is in the hands of monopolists; and that competition, where not killed, is almost impotent to keep down prices, is one which merits earnest attention.

The United States possesses coal fields of enormous extent and richness. The mineral is widely distributed, too, productive mines being now in operation in 27 of the States and Territories. Anthracite coal, however, which is by far the best adapted to domestic use, only occurs in a limited area in the State of Pennsylvania; but here the deposit is of phenomenal richness. The total area of the Pennsylvania anthracite field is about 300,000 acres. Of this area nearly 200,000 acres is owned by seven railway corporations. These companies, either directly or through subsidiary companies controlled in the same interest, carry on mining operations, carry the coal to market, and sell it. The following figures[3] exhibit the receipts of each of these companies from sales of coal from their mines during the year 1887:

COMPANY.TONS.RECEIPTS.
Philadelphia and Reading R. R. Co.7,555,252$18,856,550
Central R. R. Co. of N. J.4,852,85912,132,146
Lehigh Valley R. R. Co.5,784,45014,461,125
Del., Lackawanna, and Western R. R. Co.6,220,79319,044,803
Delaware and Hudson Canal Co.4,048,34010,100,118
Pennsylvania R. R. Co.3,818,1438,820,718
New York, Lake Erie, and Western R'y Co.2,363,2906,846,342
Total34,643,127$90,261,805

Thus these seven corporations alone produced from their own mines, carried to market, and sold, over 34,000,000 tons of coal during the year, for which they received about $90,000,000. Of the magnitude of the operations carried on by these great corporations we now have some idea. Let us next inquire to what extent competition is allowed to act between them to keep down prices.

Many years ago these seven companies formed the famous anthracite-coal pool. This was an agreement by which all the companies concerned agreed to maintain a uniform selling price for coal at all important distributing points where two or more of the companies came into competition. Some of the prices which were fixed by the pool were extremely arbitrary. Cities in Pennsylvania within an hour's ride of the coal fields had to pay nearly as high a price for coal as those 500 miles or more distant. Rates of transportation on coal mined by individual operators were made such that the latter could not afford to sell below the prices fixed by the pool, even if they had been so disposed. At the present time the situation has been modified by the long and short-haul clause of the Interstate Commerce law, by which the railroad is obliged to make its transportation rates somewhat proportionate to distance, and also by the passage of a law in the State of Pennsylvania, by which the acts of the anthracite-coal pool were declared illegal and punishable. Nominally, therefore, the pool is a thing of the past; but the practical fact is, that by secret or tacit agreement the various companies are not competing with each other any more now than in the days of the pool, and at points like New York or Buffalo, where two or more roads meet, the same prices are quoted by each different company.

Nor are the charges against the pool comprehended in its autocratic determination of the price of coal. To make production correspond with price, it was necessary at times to close collieries entirely, throwing the miners out of employment. The individual operators, too, have no love for the combination. Their profit depends more than any thing else on the rate of transportation, and thus whether they shall make or lose depends on the railroad companies. They claim that the railways base their rates for carrying coal upon the principle of "charging what the traffic will bear." This is a matter, however, which we can better discuss in the next chapter.

It is thus evident beyond dispute that the production of anthracite coal in this country is an industry uncontrolled by competition. To sum up: these seven great corporations own more than two thirds of the area in which workable anthracite coal is found: they mine and market directly the great bulk of the total production; the individual operators are dependent on the railways for getting their coal to a market; and the price at which they can afford to sell it depends on the railroad rates. Finally, consider that these seven companies work in harmony, both as to traffic rates and prices for the sale of coal, and the conclusion is irresistible that competition in anthracite-coal production in the United States is practically dead.

Let it be noted, for the benefit of those who may conceive that the above statement is unfair to the railway companies, that no charge is here made that the prices fixed by the companies for the coal are at the present time extortionate or unjust. That is a separate matter; in which, doubtless, there would be plenty to affirm on the one hand that the prices charged were no more than a just compensation, while their opponents would declare that the prices adopted by the pool favor some points to the prejudice of others, and that the statement that they were on the whole exorbitant was proven by the fact that the railway lines in the coal regions, where honestly managed, have paid great dividends on the actual capital invested.

Compared with the production of Pennsylvania anthracite, the coal production of any other single section seems small. But it is only so by comparison, for the Western coals, while inferior in quality, are abundant and easily mined, and must remain the staple for general consumption throughout the region west of the Mississippi, as well as for large sections further east.

As is well known, the people of the Western and Northwestern plains are wholly dependent upon the railroads for their supplies of every description, except the raw products of the soil. The railways themselves are great consumers of coal, and have bought up large tracts of coal lands and opened mines. In the desire to develop traffic and ensure a supply of coal to the settlers on their lines—we will even say of cheap coal,—the railway companies have entered the coal trade themselves, either directly or through subsidiary companies. Thus it comes about that hundreds of thousands of people of the West and Northwest must pay for coal, which is an absolute necessity of life during several months of the year, whatever price the managers of a single railway corporation may demand. Let it be understood that no charges are here made of injustice or extortion on the part of the railway companies. It is only wished to bring out the fact that competition is here wholly absent. It is believed that, in some cases at least, an honest attempt has been made to mine and sell the coal at merely a fair profit. But in days to come it will not be so directly for the interest of the railways to deal liberally with their patrons as at present. Other men of less breadth and principle and more ready to grasp at a chance for enormous profits may control the company's affairs; and if that happens, the opportunity to take advantage of the absence of competition and raise the price of coal will be utilized.

A brief review of the actual status of the coal production of the West and South will help us to a clear appreciation of the case. The Missouri Pacific Railway Company, through subsidiary companies, extracted from its mines in Missouri and the Indian Territory, during 1887, 1,618,605 tons of coal. Through its control of transportation rates, private operators have been compelled to sell coal at the company's prices in the market. The company has recently purchased large tracts of coal lands in Colorado, on which it is opening mines. The Atchison, Topeka, and Santa Fé, the Chicago, Burlington, and Quincy, the Denver and New Orleans, the Union Pacific, and the Denver and Rio Grande Railway companies are also heavily interested in the Colorado coal mines. The last company has long held a bonanza in the monopoly of the coal mining and transportation for the Colorado silver-mining and smelting districts. Though the other companies, to which the Rock Island should probably be added, come in as competitors, there can be no doubt that their active competition will be of short duration. The Wyoming coal fields are being worked by the Union Pacific and the Chicago and Northwestern companies, while the Chicago, Burlington, and Quincy and a company supposed to be closely connected with the Northern Pacific are preparing to take the field at an early date. On the Pacific coast the coal trade has long been a monopoly in the hands of the Oregon Railway and Navigation Company, who have kept the prices in San Francisco just below the point at which it becomes profitable to import Australian coal. Other railways are now preparing to reach the coal fields, but can we doubt that the competition to which the coal consumers are looking with eager anticipation will prove evanescent? Returning to the East, we find the coal mines of northern Illinois all held by a single company, which has full control of the traffic; while the mines of southern Illinois, on which the St. Louis consumers depend, are united as the Consolidated Coal Company. This latter corporation has "wrecked" many of its mines for the purpose of limiting the supply and raising the price; and has bought many mines of competing companies and closed them for the same purpose. The Attorney-General of Illinois has been requested to bring suit against this "trust" for the forfeiture of its charter.

In the Hocking Valley coal fields in Ohio, the Columbus, Hocking Valley and Toledo Railway Company owns 10,000 acres of coal lands, and mined, in 1887, 1,870,416 tons of coal. The coal in western Virginia is coming into the hands of the Norfolk and Western Railroad Company, while the coal of Alabama, of which so much has been noised abroad, has been quietly gathered in by the Louisville and Nashville corporation. The Tennessee Coal and Iron Company, which owns 76,000 acres of coal lands, and mined 1,145,000 tons in 1882, is owned by parties largely interested in the East Tennessee, Virginia and Georgia Railroad system. West Virginia has probably the most valuable untouched coal deposits of any State in the Union, but these also are rapidly being gathered up by railway corporations.

To sum up, in the words of one of the best informed authorities, the coal business of the country is at the mercy of the railroads.

It is to be noted, however, that this is simply the result of natural causes. Railway managers, in seeking to develop and place on a sound basis the mineral properties which could furnish a heavy and profitable traffic to their lines, have only done what they regarded as their duty to the owners of their roads. And that this policy has effected a rapid development of our resources is beyond question.

The combinations to restrict competition among bituminous coal producers have been of a very different sort from those in force among the anthracite producers. The soft-coal fields are so widely scattered that it has never been possible to combine all the producers so as to control prices by a single authority. Local combinations, however, controlling all the fields of a single locality, have long been an important feature of the trade, and have been able to control prices pretty absolutely within their respective localities. The fact that the principal item in the cost of coal is transportation, enables a combination covering all the producers of a certain field to raise prices very notably before competitors can afford to ship from other coal-producing districts.

It would seem that our fuel is especially liable to be subjected to monopoly, for, as we have already seen in the preceding chapter, the control over the petroleum trade is held by the Standard Oil Trust. How much of the production of crude petroleum is in the hands of the trust it is hard to say. This much is certain, that there is a "Petroleum Producers' Association," which has a compact enough organization to be able to make contracts with the Standard Oil Company regarding the limitation of production. It is even stated that the Standard Oil Trust itself controls to a considerable extent the oil-producing territory; but this is hardly probable.

Our newest and most wonderful fuel, natural gas, has already come under the control of a few great corporations, who own the wells and the pipes for conveying and distributing it to the consumers. A striking instance of the arbitrary nature of prices when under a monopoly's control was shown at Pittsburgh a few months ago. As is well known, upon the introduction of natural gas to that city a great number of the manufactories, as well as the private houses, discarded coal, and at considerable expense fitted up boilers, furnaces, etc., to use the new fuel. After the use of the gas had become general and its value had come to be thoroughly understood, the company furnishing the supply advanced the rates 100 per cent., without previous notice; and despite the remonstrance of indignant consumers, the advanced rate had to be paid or the use of the gas discontinued, the latter alternative involving the loss of the money invested in piping, burners, etc.

Of the minor products of mines and quarries, marble, sandstone, borax, salt, and asphalt are all known to be more or less thoroughly under the control of monopolies, which, though less important and powerful, show the same tendency toward the destruction of competition.

Great as is the extent to which the monopoly of the mineral wealth of the world has gone, we can scarcely doubt that if the movement is unchecked it will go much farther. In one sense the only absolute necessaries of life are food and clothing. But to the civilization of to-day the metals and minerals are no less indispensable; and these cannot be made anywhere, like manufactured goods; or grown on wide areas, like the products of the soil. We are absolutely at the mercy of the men who own our deposits of coal and copper and lead, and it is only to be expected that they will take greater advantage of their legal industrial advantage. The combinations that exist will be made stronger and more binding, and new ones will be formed. The French copper "corner" has taught men that under the broad protection of International law their schemes of industrial conquest may embrace the world; and it is not to be doubted that the temporary "corner" will yet result in a strong permanent combination; and that the precedent set by this successful monopoly will be eagerly followed by those who wish to secure like profits by the control of some other form of mineral wealth.

IV.
MONOPOLIES OF TRANSPORTATION AND COMMUNICATION.

We have already alluded to the fact that the concentration of manufacturing in large mills at great commercial centres has been made possible by the development of railway transportation, and that the rapid settlement of our Western prairies is due to the same agency; but it is worth while to note more fully the difference between ancient and modern conditions in the business of transportation.

In the first place, it is plain that no more than a century ago the world had comparatively very little need for railways. Each community produced from its farms and shops most of the things which it needed; and the interchange of goods between different sections, while considerable in the aggregate, was as nothing in comparison with modern domestic commerce. The king's highways were open to every one, and though monopolies for coach lines were sometimes granted and toll roads were quite common, there was no possibility for any really harmful monopoly in transportation to arise, because the necessity of transportation was so small. Some writer has ascribed all the evils of modern railway monopolies to the fact that in their establishment the old principle of English common law that the king's highway is open to every man, was disregarded. But if we sift down this ancient maxim of law to its essential principle, we find it to be, there must be no monopoly in transportation; and the problem of obtaining the advantages of modern railway transportation and keeping up, at the same time, the free competition that exists in transportation on a highway is seen to be as far from solution as before.

The importance of our railway traffic is proven by statistics. Of the total wealth annually produced in this country, it is probably a fair estimate to say that ten per cent. is paid for transportation of the raw material and finished goods in their various journeys between producers, dealers, and consumers, and for transportation of passengers whose journeys directly or indirectly contribute to the nation's industry. That is to say, the gross yearly earnings of all the railroads and transportation lines of the country is about one tenth of the total value of all the year's products. The average is brought down by the amount of sustenance still consumed in the locality where it is produced, and by the amount of valuable merchandise. But of the bulky products like coal and grain, the greater part of the cost to the remote consumer is due to the cost of carriage.

It is also necessary to a proper appreciation of the problem, that we understand that railway transportation is now as absolutely necessary as is the production of food and clothing. Annihilate the railway communications of any of our great cities, and thousands would perish by starvation before they could scatter to agricultural regions. There was great suffering in many small communities in Minnesota and Dakota in the severe winter of 1887-8, because the heavy storms blockaded the railroads and prevented them from bringing in a supply of coal and provisions. But it is not taking the question in its broadest sense to consider whether we could eke out an existence without railway communication. The fact is that under modern conditions every man obtains all the things which he desires, not by producing them himself, but by producing some one thing which others desire. The interchange between each producer and each consumer must, broadly speaking, be all made by means of the railway; and without that, stores, factories, mills, mines, and farms, would have to cease operation.

Remembering now the importance and necessity of transportation, let us inquire how the price at which it is sold to the public, the rate of fare and freight, is fixed. Is it or can it be generally fixed by competition?

There are now in the United States about 37,000 railway stations where freight and passengers are received for transportation. Now, from the nature of the case, not more than ten per cent. of these are or can be at the junction of two or more lines of railway. (By actual count, on January 1, 1887, eight per cent. of existing stations were junction points.) Therefore the shippers and buyers of goods at nine-tenths of the shipping points of the country must always be dependent on the facilities and rates offered by a single railway. Such rates of transportation as are fixed, be they high or low, must be paid, if business is carried on at all. And when we consider the ten per cent. of railway stations which are, or may be, junction points, we find that at least three-fourths of them are merely the junction of two lines owned by the same company. Consolidation of railway lines has gone on very rapidly within the past few years and is undoubtedly destined to go much further. Of the 158,000 miles of railway in the country, about eighty per cent. is included in systems 500 miles or more in extent; and a dozen corporations control nearly half of the total mileage. The benefits which the public receive from this consolidation are so vast and so necessary that no one who is familiar with railway affairs would dream of making the suggestion that further consolidations be stopped or that past ones be undone.

There is a great tendency on the part of the public, however, to look with fear and disfavor on further railway consolidation. And because this is so, it is greatly to be desired that the beneficial effects of consolidation should be better understood. The most important benefits are included under one head, the saving in expense and the avoidance of waste, and this is effected in very many different ways. Suppose a great system like the Pennsylvania or the Chicago & Northwestern were cut up into fifty or sixty independent roads, each with its own complete staff of officers. Each road would have to pay its president, directors, and heads of operating departments, would have to maintain its own repair-shops, general offices, etc., and conduct in general all the business necessary to the profitable operation of a railway corporation. A car of wheat or a passenger in going from Chicago to New York would have to be transferred from one road to another at perhaps twenty different points, and the freight or fare paid would be divided among twenty different companies, with corresponding clerical labor. The modern conveniences of through tickets, through baggage-checks, and through freight shipments, would be difficult, if not impossible. Further, consolidation tends to produce vastly better service and greater safety. The large systems can and do employ the highest grade of talent to direct their work. Every thing is systematized and managed with a view to producing the best results in efficiency and safety with the least waste of material and labor. And while the improvement in safety and convenience is all for the benefit of the public, a large part of the saving in expense effected by consolidation has likewise come back to the patrons of the roads in the form of reduced rates of fare and freight.

It is difficult, however, for any one not familiar with the technical details of the railway business to fully appreciate the importance and necessity of the consolidations which have been effected, and the grave results that would follow the realization of the mad proposition to set us back a half century by cutting up our railroad systems into short local lines. It must be plain to every one, however, that while the loss of all the benefits of consolidation would be certain, the gain in competition could affect only the few junction points; and as we shall now see, the effect even on them would be small.

Assuming that the total number of railway junction points in the United States is 3,000, we find, on examination, that at about two-thirds only two lines meet, and at more than half the remainder only three lines meet. It is plain that in the vast majority of cases where two roads intersect, and in many cases where three or four come together, the lines meet perhaps at right angles and diverge to entirely different localities. The shipper bringing goods to the station, then, may choose whether he will send his goods north or east perhaps; but only in the few cases where two lines run to the same point does he really have the choice of two rates for getting his produce to market. Practically, then, there are not, and never can be, more than a few hundred places in the country where shippers will be able to choose different routes for sending their goods to market. We say there never can be, because the building of a line of railway to parallel an existing line able to carry all the traffic is an absolute loss to the world of the capital spent in its construction, and a constant drain after it is built in the cost of its operation. This fact is now, fortunately, generally appreciated.

But what of the competitive traffic which exists between commercial centres, like the trunk-line traffic between Chicago and the cities on the seaboard, or between the former city and the collecting centres farther west like St. Paul, Omaha, and Kansas City? Here, indeed, there is competition; and it is of great importance because of the enormous bulk of the traffic which traverses these few routes.

It is a peculiar feature of the railway business which we have now to consider, and one which is not generally understood. We have already perceived the principle that competition cannot permanently exceed a certain intensity; and the proof of this principle in the case of the railway is remarkably plain. Suppose two roads are competing for the traffic between Omaha and Chicago. A shipper at the former city who wishes to send a few tons of freight to Chicago may go to one company and ask their rates, then to the other and induce them to give him a lower rate, and then back to the first again, until he secures rates low enough to suit him. Now it is a fact that either company can afford to carry this especial freight for less than the actual cost of carrying it better than it can afford to lose the shipment. This is because it costs the company practically no more to carry the goods than if they were not shipped by its line; and hence whatever is received for the freight is so much profit. Stated in the form of a principle, this fact is expressed thus: Receipts from additional traffic are almost clear profit. Nor is this all. The practical impossibility of distinguishing additional traffic from other traffic, and the enactment of State and National laws requiring uniform rates to be charged, places all traffic on a common basis; and the same cause which makes it more profitable to carry additional traffic for a song than to lose it, makes it better for a railroad to carry traffic, temporarily at least, for less than the actual running expenses of the road, rather than to lose it. The train and station service, the general office and shop expenses, must all be kept up, though the freight and passengers carried dwindle to almost nothing; and the capital invested in the road is a total loss, unless the line is kept in operation and earns some income, even though it be small. This last influence, as we shall see later, is a most important and far-reaching one in its effect on industrial competition.

The cause of the intensity of competition in railway traffic is now evident. And from what we have seen, it follows that two railway lines competing freely with each other cannot possibly do business at a profit. Let us see what are the actual results of this law of practical railway management. Evidently the managers of two competing railway lines have but two possible courses open. They may, by tacit or formal agreement, unite in fixing common rates on both the roads, or they may attempt to do business with free competition. But we have already proven that the latter course must result in reducing the income of the road certainly below the amount necessary to pay the operating expenses and the interest on the bonds, and probably it will be insufficient to pay the running expenses alone. The inevitable result, then, is the bankruptcy of the weaker road, the appointment of a receiver, and its sale, in all probability to its stronger competitor. This is the chain of cause and effect which has wrought the consolidation of competing parallel roads in scores of cases, and which, if free competition is allowed to act, is sure to do so.

We can now appreciate the necessity which managers of competing lines are under to agree upon uniform rates for traffic over their roads, and at the same time the difficulty of doing this. The strange paradox is true that while it is necessary to the continued solvent existence of the competing corporations that such an agreement be made, it is also greatly to their advantage to break it secretly and secure additional traffic. It is necessary, therefore, that the parties to the agreement be strongly bound to maintain it inviolate; and to effect this, "pools" were established. In pooling traffic, each company paid either the whole or a percentage of their traffic receipts into a common fund, which was divided among the companies forming the pool, according to an agreed ratio. Under this method it is evident that all incentive to secret cutting of rates and dishonest methods for stealing additional traffic from another road was taken away.

How widespread and universal is the restraint of competition by railway corporations may be seen by the following pithy words, penned by Charles Francis Adams, President of the Union Pacific Railway:

"Irresponsive and secret combinations among railways always have existed, and, so long as the railroad system continues as it now is, they unquestionably always will exist. No law can make two corporations, any more than two individuals, actively undersell each other in any market, if they do not wish to do so. But they can only cease doing so by agreeing, in public or private, on a price below which neither will sell. If they cannot do this publicly, they will assuredly do it secretly. This is what, with alternations of conflict, the railroad companies have done in one way or another; and this is what they are now doing and must always continue to do, until complete change of conditions is brought about. Against this practice, the moment it begins to assume any character of responsibility or permanence, statutes innumerable have been aimed, and clauses strictly interdicting it have of late been incorporated into several State constitutions. The experience of the last few years, if it has proved nothing else, has conclusively demonstrated how utterly impotent and futile such enactments and provisions necessarily are."

Disregarding for the present the latter part of the above quotation, consider the statement that during the whole history of railway corporations, agreements to restrain competition have been the rule. This the slightest research proves to be an historical fact, and it is in perfect accord with our preceding statement, that such agreements were necessary to the solvent existence of railway corporations. The records also show that invariably when these agreements have been broken and competition has been allowed to have full play, the revenues of the roads have been rapidly reduced to a point where, unless a peace was effected, bankruptcy ensued.

Mr. Adams said, with truth, that no law had proven of any effect in preventing these competition-killing agreements between railways; but since the above extract was written, the Interstate Commerce law has been enacted. Let us pay some attention to its working and results. It is a curious fact that the framers of railway legislation in this country, almost down to the present time, have concentrated all their energies on the endeavor to keep up free competition; and the Interstate law is no exception to this rule. The plan of the Interstate law was about as follows: "Here are a few dozen great commercial centres where the railway lines of different systems meet. We will first prohibit the pooling by which they have restricted competition at these points. Then, in order that the thousands of other shipping points shall receive an equal benefit, we will enact a 'long and short haul clause,' obliging the rates charged to be in some degree proportionate to the distance. Thus competition at the great centres will bring rates down everywhere, and the public will be benefited."

For a year after the enactment of the law its effects were not prominent. Pooling was abolished, but the agreements to maintain rates were still kept up and were fairly observed. But in 1888, the second year of the law's working, it came to be realized that the pool was the vital strength of the agreement to maintain rates, and that this agreement might now be easily broken. Then ensued a remarkable season of rate cutting, which, at the present writing, has reduced many strong companies to the verge of bankruptcy. It is plain enough that if this is allowed to go on, the various stages of receivership, sale, and consolidation will follow in regular order. To avoid this too sudden revolution and the general financial disaster which all sudden revolutions entail, the principal companies in the West are now striving to combine in an association for the maintenance of rates by a plan which will bind them more closely together than any other ever before adopted. Thus to quote Mr. Adams again: "The Interstate Commerce law has given a new impetus to the process of gravitation and consolidation, and it is now going on much more rapidly than ever before. It is at this moment rapidly driving us forward toward some grand railroad-trust scheme."

It is a fact which we shall do well to ponder over, that this legislation intended to stimulate competition has finally had just the opposite effect from that which its makers desired. They did increase the intensity of the competition, and have thereby nearly brought about a permanent end to all competition in railway traffic.

It must now be clear that the railway is essentially a monopoly, not, be it noted, because of any especial wickedness of its managers or owners, but because competition is impossible as regards the greater part of its business, and because wherever competition is possible, its effect, as the managers well know, would be to annihilate all profits from the operation of the road.

Let us consider now some of the evils with which this monopoly is charged. The first of these is discrimination between persons and between places. A favored shipper has been enabled to ruin his competitors because he could obtain special rates, while they, perhaps, were charged an extra amount. The strong monopolies have in this way been able to strengthen their hands for the purpose of throttling their weak competitors. Passenger rates, too, have been low to one class and high to another; and the system of free passes has led to great abuses. Discrimination between towns and cities and States has been hardly less serious; and while the railways were permitted to make high local rates and low through rates, a great stimulus was given to the city at the expense of the country. The second class of evils is that rates in themselves have been too high. The railways have been wastefully built and then capitalized at double their actual cost, and it has been attempted to pay dividends of 6 to 10 per cent. on these securities. In some cases the principle of charging "what the traffic will bear" has been so applied that industries have been ruined through the absorption of their profits by unjust transportation charges. But our space will not permit a comprehensive review of the many abuses of railway management. They are already familiar to the public. We needed only to refer to them sufficiently to carry on our argument by showing that the railroad monopoly is not by any means a harmless monopoly if left to work its own pleasure.

There are two evils of our present railway system, however, which are not chargeable to monopoly, but to the attempt to defeat monopoly, and which are important to our discussion. The first is the waste of competition in railway traffic; the second, the waste of competition by the construction and threatened construction of competing lines where present facilities are ample for the traffic. Of the first it need only be said that in advertising, "drumming," and soliciting patronage the railways spend many millions of dollars every year, which comes out of the pockets of the public. The second is most serious, for it involves a far greater waste. It is a conservative estimate to say that 5 per cent. of the railways of the country were only built to divide the profits of older roads, and that their owners would be delighted to-day to have their money back in their possession and the railroad wiped out. The millions these roads have cost, the millions required every year to maintain and operate them, the millions spent on proposed roads that never reached completion, and the millions squandered in fighting proposed roads by every means short of actual bloodshed,—these are some of the wastes which we have made in our endeavor to create competition in railway transportation. And with all our efforts, and notwithstanding the fact that until within a short time the public sentiment and the railway managers have been united in the belief that free competition was the only mode of regulating railroad rates, we are farther removed from free competition now than ever before.

And now consider in addition to all this the fact that every railway company must first of all secure from the State a right to exercise the sovereign power of Eminent Domain, and that it may and does choose and take every advantage of the favorable locations where its road can be built most cheaply; which natural highways, mountain passes, and the like, are gifts of Nature, the right to whose use equitably belongs to the general public, and not to private parties exclusively. Taking these facts also into consideration, it seems needless to offer further proof of the fact that the business of railway transportation is essentially a monopoly, and that the attempt to regulate it by competition must always prove a failure in the future, as it always has in the past.

Necessarily we have limited our discussion to the most salient points, and have not touched at all many of the complicated details of the railway problem. In a later chapter we can study farther the evils due to railway monopolies, and the proper remedies therefor. At present we have accomplished our purpose in finding out the fact that railways are monopolies, and that they are so by their inherent nature.

Of monopolies in other forms of internal transportation, but little need be said. Our once busy canals and great rivers seem destined, with the constant rapid improvement and cheapening in the carriage of goods by rail, to lose all their former importance. The monopolies small and great that once held sway there have all vanished before their strong rival, the railway.

The use of steam in the vessels that navigate the ocean has had an effect very similar to the replacing of stage-coaches and freight wagons by the locomotive. Where hundreds of sailing vessels plied their slow and uncertain trade, steamer lines now make trips only less regular than the railway itself. The only cause for the existence of a monopoly in ocean traffic by steam is the greatly increased capital required for a rival steamship line as compared with that needed for the old sailing vessels. We find this, the requirement of a large capital, to be a feature of more or less importance in nearly every monopoly of the present day. In this case, however, unless there is an artificial monopoly in the shape of government aid or authorization, the strength of its capital is the only power the monopoly has.

We may reach a clear idea of the essential nature of all the monopolies considered in this chapter by considering an especial class of monopolies of communication, namely, mountain passes, bridges, and ship canals. If a person or a railway corporation could secure sole control of the only pass through a high mountain range separating two wealthy and populous districts producing goods of different sorts, they might exact a princely yearly revenue for its use, equal to the interest on the capital required to secure an equally favorable passage by tunnelling, or the annual cost of sending goods over some longer and more expensive route. But under the law no private person would be allowed to do this; and if the pass were a very important and necessary one, probably no one railway company would be allowed to do so. The law recognizes to some extent, and should recognize much more than it does, the fact that the benefit of this natural pathway is not the property of any one man or set of men, but equitably belongs equally to every person who needs to use it directly or remotely.

A very large and expensive bridge is like an important mountain pass, differing only in that one is the gift of Nature, while the other is wholly the work of man. But because the latter is the work of man, it does not follow that it is not a monopoly. The great bridge across the Mississippi River at St. Louis is owned by a private company which levies tolls for the teams and trains passing over it. These are deemed excessive, as they are sufficient to pay an exorbitant interest on the cost of the bridge. Yet for many years no one has cared to invest money in the erection of a new bridge, for they saw that there was no more traffic than one bridge could readily carry, and they knew that if a new bridge were erected, in the rivalry in tolls which would ensue, the old-established company would probably bankrupt its rival. It is thus plainly seen how an important bridge may become a monopoly, and a most powerful and onerous one.

We have still one important monopoly of communication to describe, the telegraph. Viewed from a narrow standpoint it may be thought that there should be no monopoly in the telegraph. A telegraph line is not expensive to erect and maintain, and it gets no monopoly from taking advantage of the most favorable route through difficult country as a railway does. But the economy effected by combination and the effect of sharp competition in bringing about bankruptcy and then consolidation are exactly similar to the case of the railway, which we have just described. In the early history of telegraph companies, many short competing lines struggled and fought for supremacy. In 1859 the Western Union Telegraph Company was formed with the avowed intention of combining these warring companies and making the telegraph business profitable. It has exceeded the most sanguine dreams of its promoters by swallowing up its rivals until the entire system of telegraph communication of the country is practically in its hands. The effects of this consolidation have been of two sorts. On the one hand we have the telegraph service of the country performed with the least possible work; there is nothing wasted in the maintenance of two or more rival offices in small towns where one is sufficient, nor in operating two lines of wire where a single one would serve as well. All expense of "drumming up" business in various ways is avoided, and also the cost of keeping the complicated books necessary when the receipts of a single message must be divided among several companies. On the other hand it is plain that the public is wholly at the mercy of the monopoly in the matter of rates, and must pay for the use of the telegraph exactly what the corporation asks. There is a weak and foolish argument which is often used in an attempt to show that this particular monopoly is not hurtful. It is that the telegraph is a luxury which only wealthy people use, and hence whether its rates are high or low is of little account. The fallacy of this statement is easily seen. A principal use of the telegraph is to aid the prosecution of business; hence to unduly raise rates is to cause an additional tax on business,—on the carrying on of the processes of production. This tax will certainly have its effect, either in decreased profits, decreased wages, or an increased price for the product. Another large class of telegrams are those which are sent with little thought of the cost, in time of sickness, death, or sudden emergency, yet by people whose purse feels severely the tax.

What to do with this vast monopoly is one of the questions of the day, but we will content ourselves at present with this investigation of its character, reserving its proper treatment for later consideration.

V.
MUNICIPAL MONOPOLIES.

The people who live in cities are far more dependent on monopolies than the resident of the country. The farmer can still, on necessity, return to the custom of primitive times, and supply himself with food, clothing, fuel, and shelter without aid from the outside world; but the city dweller must supply all his wants by purchasing, and is absolutely dependent on his fellow-men for the actual necessaries, as well as the luxuries of life. From the peculiar circumstances of city life, many monopolies arise in production and transportation which occur nowhere else. One of these is the carriage of passengers on street and suburban railways. There is no better instance, perhaps, of the great power which is placed in the hands of railway managers than this matter of suburban passenger traffic. One example must suffice to show this. Let us suppose that the managers of a railway, which has hitherto not been run with a view to the development of suburban traffic, secure control of several choice tracts of land on the line of their road near a growing city, and establish low rates of commutation and frequent and convenient train service. The land which they purchased is sold out in building-lots for many times its cost, and a number of thriving villages become established there, inhabited chiefly by people whose business is in the city and who are obliged to go back and forth on the trains. After a number of years the growth of the towns becomes more sluggish, and the managers find that the commutation traffic is not after all extremely profitable; therefore they lessen their train service and increase the rates of fare. Perhaps they may abolish commutation rates altogether. It is a well known fact that the value of suburban real estate depends almost entirely on the convenience and cheapness of access to the city. By the removal and forced sale, which many of these people will be obliged to make, it may easily happen that they may lose their entire property. It is not stated that such flagrant cases of autocracy on the part of railway managers are common. Indeed, it is a high compliment to the uprightness and probity of these men that such occurrences are so infrequent, and that the temptation, so constantly presented, of enriching one's self at the expense of the owners of the road and the public is yielded to so seldom. But there have been cases where railway managers have secured excellent train service and low rates of fare to benefit places where they held an interest in real estate, while other and competing places were given poor service and high rates. And the entire abolition of long-established commutation rates has happened more than once.

But turning now to the city railways proper, those carrying passengers through the streets, it is evident at first sight that we have another case where competition is a factor of little account. The power of this monopoly for harm is greatly intensified by the fact that its use is largely a necessity. In all our great cities the business sections are far removed from the residence sections, and the great mass of the industrial population is obliged to ride at least twice each day in going to and returning from work. In nine cases out of ten there is one route so much more convenient than any other as to overbalance any slight difference of fare. Thus, even on the supposition that every different line was run in competition with every other line, the amount of really competitive business would be but a trifle. But besides this, as is well known, in a great many cities consolidation has gone on as rapidly among street-railway companies as among the great trunk-line railways. The three lines of New York elevated roads were originally projected by rival companies; but they were not long in coming together under one management. A Philadelphia syndicate has secured control of most of the street railways of that city, and in addition has purchased a number of the lines in Boston, Chicago, Pittsburg, and St. Louis. Although the benefit in economy by consolidation is much less in the case of street railways than in the case of steam roads, yet considerable is gained, and the competition which is killed by the consolidation is, as we have just seen, of no great importance to the public. The so-called street-railway trust, then, is really of no great moment. The monopoly in street-railway traffic arises from the nature of the business rather than from any especial effort of capitalists to kill competition.

But the railway companies are not the only monopolies which have the use of our city streets. Water, gas, and steam pipes beneath the pavements, and wires, either in subways or strung overhead, carrying electricity for street and domestic lighting, telegraph, telephone, and messenger service, are all necessities to our modern civilization.

The absolute necessity of a public water supply, and the practical impossibility in most cases that any competition in the furnishing thereof can be established and maintained, have led, in the case of most of our large cities, to the work of water supply being undertaken by the municipal authorities. But many of our smaller cities have entrusted to private companies the work of furnishing a water supply. While this is a case of real monopoly, yet under the conditions which may be enforced, most of the power for harm is taken away. According to the best plan in vogue, the city sells the franchise for constructing the works to the company who bids to furnish water at the lowest rates under definitely specified conditions, the franchise being sometimes perpetual, but oftener granting to the city at some future date an option for the purchase of the works. It is to be particularly noticed that this is a case in which the administration of an absolute monopoly has been entrusted to private enterprise with excellent results; a fact which may be of use to us in our later investigation.

While the fact was early appreciated that a water supply when once introduced became an absolute necessity, it was not recognized when illuminating gas was first brought into use how important it was to become. Franchises, or more properly permits, for erecting works and laying mains for supplying consumers were given away to hastily formed companies; and even at the present time there are but a few cities (only five in the United States) which own their works and mains for supplying gas. As a matter of course the gas companies saw their advantage. Knowing that gas once introduced was a necessity at almost any price, they made no move toward lowering rates as new and cheaper methods came into vogue and their output and profits increased. The stocks of our gas companies have been swollen by enormous amounts of water, and upon this fictitious capital they have continually paid enormous dividends. At one time there was a great call for competition in the gas business. The public demanded it, and as usual the demand was supplied. Rival companies were organized, and the city authorities made haste to grant them permits for laying their mains in the city streets. A war of rates of course ensued, and lasted till one company gave up the fight and sold out to its rival. The consolidated company promptly increased its stock by at least the amount which had been spent in purchasing and laying this extra and entirely needless set of gas mains. The public has to pay interest on this sum, and suffer besides the damage done to the pavements by tearing up and re-laying.

In at least twenty cities of the United States has this farce been repeated, and in every case with the same result. It is now generally acknowledged that the attempt to regulate the price of gas by competition is unwise and harmful. Prof. E. J. James, of the University of Pennsylvania, in a monograph entitled "The Relation of the Modern Municipality to the Gas Supply," has treated this subject most fully. He describes the experience of cities in England, France, and Germany, where competition has been tried and abandoned, it being found by dear experience that the gas business is necessarily a monopoly. A Congressional Committee, who reported on the application of a rival gas company which proposed to lay mains in the city of Washington, declared that "it is bad policy to permit more than one gas company in the same part of the city." One of the best informed men in the gas business says: "The business is almost outside of the domain of rules governing other enterprises. Competition is so deadly to it that it is impossible for rival companies to occupy the same street without ruin to both, or without consolidation with its attendant double investment, and cheap light is thus rendered an impossibility."

Hon. T. M. Cooley says:

"The supply of public conveniences to a city is usually a monopoly, and the protection of the public against excessive charges is to be found first in the municipal power of control. Except in the very large cities, public policy requires that for supplying light and water there should be but one corporation, because one can perform the service at lower rates than two or more, and in the long run will be sure to do so. In some kinds of business competition will keep corporations within bounds in their charges; in others it will not. When it will not, it may become necessary to legislate upon profits."

Considering it determined, therefore, that the gas industry is a monopoly, let us inquire something of the manner in which this monopoly regulates the prices for its service. According to recent statistics, collected from 683 gas companies in the United States, 148 companies charge $2 per thousand cubic feet, and 145 companies charge $2.50 per thousand. It is thus seen that rates have been fixed to make "even figures," something which does not occur when margins of profit are reduced by competition. The complete table shows this fact more fully as follows:

7companiescharge$1.00perthousandcubicfeet.
32""1.50""""
24""1.75""""
148""2.00""""
57""2.25""""
145""2.50""""
20""2.75""""
86""3.00""""
25""3.50""""
19""4.00""""
120companieschargevariousother prices per thousand cubic feet.

According to the same authority these companies in 1886 produced 23,050,706,000 cubic feet of gas, for which they received $40,744,673, an average price per M. of $1.76 71⁄100. According to the statement of good authorities, gas can be manufactured at a cost of 50 to 75 cents per M. in this country. Prof. James, in his work before quoted, says: "In England at the present time gas is manufactured at a net cost of 30 cents per thousand feet; some works in New England now manufacture it for 38 cents per thousand feet to the holder." The President of the American Gas-Light Association is quoted as stating in an address before the Association that the cost of the gas delivered to consumers by the South Metropolitan Company of London in 1883 was 39.65 cents per thousand, and figuring by the relative cost of coal and labor there and here, he stated that gas could be delivered in New York at a cost of 65 cents per thousand. In Germany the price of gas to consumers varies from 61 cents in Cologne to $1.02 in Berlin. Very recent improvements in processes have greatly cheapened the cost of manufacture. Mr. Henry Woodall, the engineer of the Leeds, England, gas-works, states that coal-gas costs in the holder 22 cents per thousand. Of nineteen companies doing business in principal English cities, the average rate charged consumers is 52½ cents, and the average cost of manufacture is 37⅓ cents.

The history of the gas monopoly is repeating itself in the matter of electric lighting. The smaller cities of the country, in their haste to "boom," are ready to grant a liberal franchise to the first firm or company which offers to supply an electric-lighting system, trusting to future competition to regulate prices, a resource that must prove of no avail. Nor are the men in power in our larger cities any wiser. The city of New York is taking every means to encourage the operation of rival electric-light companies, and is letting yearly contracts for street-lighting to the lowest bidder. It is true that competition is active just now, but it requires no far-seeing eye to discern the inevitable combination and consolidation among the companies.

Again, not only is competition of this sort sure to fail, but the attempt to establish it is very harmful. To say nothing of the expense and waste of wealth which is involved when rival companies are allowed to stretch their wires and establish their extensive central stations in the same district, it is everywhere acknowledged that the multiplication of wires overhead is a crying evil and danger. Are we to double and treble it, then, by permitting rival companies to place their wires wherever they please? It is evident that the temporary rivalry which we obtain in this way is bought at much too great a cost. What is true of electric street light wires is equally true of the vastly greater multitude of wires which belong to our rapidly growing system of domestic lighting, and the telegraph, telephone, and messenger service. Surely no man knoweth the beginning or the end of the network which is woven over our heads, and which, besides all the useful wires already enumerated, is full of "dead" wires, many of them strung by defunct or irresponsible companies, who would never have been allowed to obstruct the streets if they had not been "competing" for the business. Can there be any doubt that it is the height of folly to continue this work, and that the only rational way of entrusting electric service to incorporated companies is to permit but a single company to operate in a district and control prices by some other means than competition?

We have the beginnings of other monopolies in our city economies which are destined to become much more important, but to which we need only refer.

Steam for supplying heat and power is beginning to be distributed from great central stations, through mains laid underground, to all parts of the surrounding district. The necessity for frequent repairs and stoppage of leaks renders it necessary to break the pavement and dig down to the mains much oftener than is required for any other of our underground furniture. Nothing would seem more evident than that the number of these pipes to be laid should be the fewest consistent with the proper supply of the district, yet it is a fact that for a time two competing steam companies were permitted to run riot in the streets of lower New York, until the weaker one succumbed "to over-pressure." Yet it is scarcely to be doubted, that if another rival company were to ask for a permit to operate in the district now monopolized by the New York Steam Company, public opinion would tend to favor the granting of the permit "because it would give more competition." It is to be hoped that before these great systems for the distribution from central stations of various necessities reach much greater proportions, the public will become educated enough to perceive the folly of attempting to regulate them by competition.

The necessity for this will be more, rather than less, apparent with the use of underground instead of overhead wires. The cost of placing wires in subways is far beyond the cost of stringing them on poles, and if we are obliged to build our subways large enough to accommodate all the rival wires which may be offered, we have a herculean task upon our hands.

The great question of the monopoly of land can be merely touched in this connection. While the fact that land is natural wealth must be freely acknowledged, it is only where population is most dense that any great monopoly appears in its ownership. The principle is well established, indeed, that private ownership of land cannot stand in the way of the public good. When a railway is to be built, any man who refuses to sell right of way to the railway company at a reasonable price may have it judicially condemned and taken from him. We have already noted in the chapter on railway monopolies the injustice of permitting a single person or corporation to control and own any especially necessary means of communication, as a mountain pass or a long and expensive bridge, and the same principle is apparent in connection with the railway terminals in our large cities. The enormous expense attendant upon securing right of way for an entrance to the heart of the city, makes it a very difficult matter for any new company to obtain a terminus there, except by securing running rights over the tracks of an older company. To give to any single corporation the sole control of the entrance to a city and permit it to charge what toll it pleases for trains that pass through it, evidently places the city at the mercy of a monopoly. Practically the case is not so bad as this, as most large cities have means of water communication, and the railroads are run to the heart of the city through the public streets. But the time is fast approaching when these city grade crossings will be done away with, and in every city of importance the railways will enter the city on elevated viaducts terminating in a single union depot. Evidently it is contrary to the public welfare to sink more capital in these expensive structures than is necessary; and in general, several companies will use a single structure for entrance and exit. It is evident that the control of these terminals, if vested in a single company, may give rise to just the abuse we have set forth; and that the city itself should retain enough control over its railway terminals and freight-transfer lines to ensure that no single carrier or combination shall monopolize them.

In the last analysis it is evident that the monopoly of entrance to a city is really a monopoly in land, or, we might more properly say, in space. We are fortunate in this country in having millions of acres of land still awaiting cultivation; and while it is not intended here to defend the policy of giving away the estate of the public which our government has pursued, there is no danger for a long time to come that an actual monopoly will exist in agricultural lands. The price of land used for business purposes in a city, however, depends almost wholly upon its location. The price at which a single block of land near Wall Street, in New York City, was recently sold was so great that, at the same price, the value of a square mile would be equal to half the whole estimated wealth of every sort in the United States.

Now the question must occur to every thinking man, by what right does the owner of this property receive this enormous wealth? To make the case of those who advocate the public control of the gifts of Nature more clear, let us consider a special case. Suppose a man in an Eastern city chanced to come into possession two-score years ago of a tract of land in what is now Kansas City. We may suppose that he got it by inheritance, or through some chance, and that, except to pay the taxes upon it, he has never given farther attention to it. During all the years of the city's rapid growth he pays no attention to his land and takes no part in furthering the growth of the city. At last, at the height of the real-estate boom, he sells the land, and, whereas it cost him in the first instance a merely nominal sum, perhaps $100, he sells it now for $100,000. This value it has, not because of itself, as is the case with farming lands, but because of its situation in reference to the community around it. In other words, practically the whole value of this land has been given it by the people who have come and built this city around it. It is their labor that has given this property its value, and, in equity, the value should be theirs. A more detailed statement of the arguments for the public control of land incomes cannot be given here. What we are concerned with here is the extent to which land is subject to a monopoly. It appears too evident to require further discussion that, as a general rule, agricultural lands in every section of the country are competing to a greater or less extent with lands in every other section, and that the lands used for business purposes in the cities compete likewise, each city with others neighboring and of similar size, while lands in the same city similarly situated compete with each other.

VI.
MONOPOLIES IN TRADE.

We have now examined the various forces which are destroying competition in the production of goods in our factories, and of raw material from our mines; in the transportation of these goods in their various journeys between the producer and the consumer, and in the supply of the especial needs of the dwellers in our cities.

It is an old and well-worn adage that "competition is the life of trade"; and if this be true, we shall certainly not expect to find the men who are earning their living by the purchase and sale of goods endeavoring to take away the life of their business by restraining or destroying competition. At first sight it seems as if it would be a difficult matter in any case to destroy competition in trade. The buyer and seller of merchandise has no exclusive control over natural wealth; no mine or necessary channel of transportation is under his direction; nor does he in his trade produce any thing, as does the manufacturer. He only serves the public by acting the part of a reservoir to equalize and facilitate the flow between the consumers and producers; and if necessity requires, the two can deal directly with each other and leave him out altogether. But in dealing with the question of monopolies we must not conclude that the absolute control of supply is at all necessary to the existence of a monopoly. While there are monopolies, as we have seen, which have the keys to some of the necessities of civilized life, there are others which control merely some easier means for their production, carriage, or distribution; and to this latter class belong the principal monopolies in trade. To be sure that this constitutes a monopoly, we have but to turn to the case of the mountain pass mentioned in a former chapter. The use of that particular pass for transporting goods is only an easier means of transportation than the detour to some other pass or by some other route; and the degree of power of the monopoly depends directly on the amount which is saved by the use of its facilities. So with the monopolies in trade. Brokers and jobbers and retail merchants form a channel through which trade is accustomed to pass, and through which it can pass more readily than by any new one.

It is to be noted that under modern conditions the power of middle-men has been greatly reduced from what it was formerly. As we have already seen, manufacturing was then carried on only in families and small workshops, and the mines which were worked were principally in the hands of the king. The merchants were the wealthy men of olden time. They controlled largely the transportation facilities of that day; and while, as we have already noted, the commerce which then existed was but a trifle compared with the present, the principal exchange being in local communities, yet the trade in all articles which were imported, and all domestic commerce between points any great distance apart was in the hands of the merchants.

It is natural, therefore, that we find monopolies in trade to have been among the first which existed and to have been of importance and power when manufacturers' trusts were not dreamed of. The guilds which flourished near the close of the Middle Ages, while not devoted to the establishment of a monopoly, did nevertheless aim, in some cases at least, to hinder competition from those outside their guild.

But turning to the present, let us examine the conditions under which competition in trade is checked to-day. Let us take, first, the case of retail trade in any of the thousands of country villages and petty trade centres in the land. The history of the life of the country store-keeper is a constant succession of combinations and agreements with his rivals, interleaved with periods of "running," when, in a fit of spite, he sells kerosene and sugar below cost, and, to make future prices seem consistent, marks down new calico as "shop-worn—for half price." It is true the sum involved in each case is a petty one, but when we consider the enormous volume of goods which is distributed through these channels, the total effect of the monopoly in raising the cost of goods to the consumer must approach that effected by monopolies of much wider fame. But perhaps it may not seem evident that this is a monopoly of the same nature (not of the same degree) as a manufacturers' trust or a railroad pool. It certainly seems to be true that the merchant has a right to do as he chooses with his own property; and that if he and his neighbor over the way agree to charge uniform prices for their goods, it is no one's business but their own. And, indeed, we are not yet ready to take up the question of right and wrong in this matter. That the act is essentially a "combination in restriction of competition," however, is self-evident. The degree of this monopoly may vary widely. If the merchants who effect this combination raise their prices far above what will secure them a fair profit on the capital invested in their business, and if it is difficult for their customers to reach any other source of supply outside of the combination, the monopoly will have considerable power. On the other hand, if the stores of another village are easy of access, or if the merchants who form the combination fix their prices at no exorbitant point, the effect of the monopoly may be very slight indeed.

We find this class of trade monopolies most powerful and effective on the frontier. Wherever railroad communication is easy and cheap the tradesmen of different towns—between whom combinations are seldom formed—compete with each other. The extension of postal, express, and railway-freight facilities to all parts of the country, too, have made it possible for country buyers to purchase in the cities, if necessary. Thus the railways have been a chief instrument in lessening the power of this species of monopoly in country retail trade, which was of great power and importance a half century ago.

Of retail trade in the cities, it is not necessary to speak at length. Combination here has seldom been found practicable because of the great number of competing units. There is, however, a noticeable tendency of late to the concentration of the trade in large establishments, which by their prestige and capital are able to take away business from their smaller competitors. It does not seem likely, however, that this movement will result in any very injurious monopoly among city retailers.

The wholesale trade is on quite a different basis from the retail. The number of competitors being so much less, combination is vastly easier. The tendency toward it has been greatly fostered and strengthened by the formation of trusts among the producers. These combinations made the manufacturer more independent in his treatment of jobbers, and disposed him to cut their profits to the lowest point. Naturally these men combined to resist this encroachment on their income. They refused to handle any goods for less than a certain minimum commission. It might be possible in many cases for manufacturers to sell directly to the retail traders, but in general the difficulty of changing old commercial channels is such that the friction and expense is less if the goods are permitted to pass through the wholesaler's hands. It is to be noted that one cause for ill-feeling between manufacturer and wholesaler is the fact that before the days of trusts the latter often reaped much greater proportionate profits than the producer himself. But in time this cause of dissension will be forgotten, and the trust and the wholesalers' association will work in harmony.

The point of greatest interest in this is the fact that combinations among this first class of middlemen are fostered and made possible by the combination of producers. Nor does the series end here necessarily. The increased price which the retail dealers are obliged to pay for the goods, with the fact that others are making larger profits, makes them eager to do the same; and by the aid and co-operation of the wholesale merchants they may be able to do much toward checking competition among themselves and increasing their profits. Thus by the operation of the combination at the fountain-head among the producers, there is a tendency to check competition all along the line, and grant to each handler of the goods between producer and consumer an abnormal profit. An excellent example of this is found in the sugar trade. The wholesale Grocers' Guild of Canada, which includes 96 per cent. of the Dominion's wholesale traders, entered into a compact with the Canadian sugar refiners, who agreed that dealers outside of the guild should be charged 30 cents per 100 pounds more for sugar than those who were in the guild. In November, 1887, fourteen members of the guild were expelled and were compelled to pay the higher price. The executive committee of the guild fixed the selling price for the retail dealers. The guild was so successful with sugar that it extended its operations to starch, baking powder, and tobacco, fixing prices for those goods as well. The committee of the Dominion Parliament, appointed to investigate the guild, reported that it was a combination obnoxious to public interest, because it limited competition, advanced prices, and treated with gross injustice those in the trade who were not its members. In New York State there are two associations of wholesale grocers which are working to prevent competition in the sugar trade. They have fixed a uniform price for sugar, and have tried to make arrangements with the managers of the sugar trust by which that organization shall discriminate against all grocers who are not members of the association by refusing to sell them sugar or charging them a higher price. In some other sections an attempt has been, or is being, made by which the retail grocer sells only at certain fixed prices determined by a committee of the wholesalers who issue each week a card of rates. It is urged in defense of the movement that sugar has been sold at an actual loss by both the wholesale and retail trade for a very long time. The Grocers' Association, at its first meeting, passed a resolution declaring that it was opposed to combinations for the purpose of extorting unreasonable profits from the public, and that all that was sought was to prevent the evil of handling certain staples below the cost of doing the business. But if we inquire why these staples have been handled at a loss, the answer is, because of the strong competition which has prevailed. The organization, then, is a combination to limit competition, to suppress it, in fact, and the difference between its purpose and work and that of the Sugar Trust is a difference of degree and not of kind. The reason for its moderate demands may be because grocers are more liberal-hearted than refiners, or because they understand that their power over the trade is more limited than those who control the original product, so that an attempt to exact too large profits would offer a tempting premium to competitors of the Association.

Another staple article of consumption in which combinations are known to exist is meat. It is affirmed that a combine of buyers and slaughterers controls the markets of Chicago and Kansas City, and both depresses the price paid for cattle in the market, and raises the price of beef to the retail dealer. This monopoly proved so oppressive, and attracted so much attention, that in February, 1889, Gov. Humphrey of Kansas, called a convention of delegates from the legislatures of ten different States and Territories to devise a system of legislation, to be recommended for adoption by the several States, which should destroy the power of the combination.

One of the combinations investigated by the New York State Committee appointed to investigate trusts and similar organizations, was an association of the retail butchers, and the brokers buying sheep, lambs, calves, etc., from the farmers. The purpose of the association is to prevent competition among its members and keep control of prices in its own hands by charging a higher price to outsiders than to members of the association. The ultimate effect is to increase profits by paying less for the animals and getting higher prices for the meat sold.

We might go on at indefinite length to examine the various monopolies of this sort, but it does not seem necessary. The salient fact which is evident to any one at all conversant with business affairs is, that in almost every line of trade the restriction of competition is in force to a greater or less extent. Those monopolies are strongest, indeed, which have control of production; but in so far as they can control the market, the men engaged in buying and selling are equally ready to create minor monopolies, and an acquaintance with the general markets convinces one that these monopolies are numerous enough to have a very important effect in increasing the cost of goods to the consumer.

We are accustomed to think of competition as a force which always tends to keep prices down, and of a monopoly as always raising prices; but it should be understood that this is true only of the competition and monopolies among sellers of goods. It must be remembered that the competition among buyers, is a force which acts in the opposite direction and tends to raise prices; and that it is quite possible to have combinations among buyers to restrict competition and keep prices down. Of course, where the buyer is the final consumer, this is almost impossible, for the great number of competitors forbids any permanent combination. Also where the product concerned is a manufactured article or a mineral product, the mining or manufacturing company or firm will generally have capital enough and business ability enough to defeat any attempt of the wholesale merchants to combine to reduce the prices paid for their output. This he can easily do by selling to retail dealers direct. But in the case of products gathered from the farmers the case is different, and the producer can less easily protect himself against combinations among buyers to fix the price he shall receive. The power and extent of these monopolies varies with the distance of the farmer from markets, and also, it must be said, with the intelligence and shrewdness of the farmer. In districts remote from railways and markets the farmers are often dependent on the travelling buyers for a chance to sell their cattle or produce. In a thinly settled region there may be no more than two or three times in a season when a farmer will have an opportunity to dispose of his surplus products; and, realizing his necessity, he is apt to be beaten down to a much lower price than the buyer would have given if other buyers had been competing with him to secure the goods. In the chief markets, too, there is often a combination of buyers formed to keep down prices. The combine of cattle-buyers in Kansas City and Chicago has just been noted. The New York Legislative Committee discovered that a milk trust had control of the supply of milk for New York City, fixing the price paid to the farmer at three cents per quart, and the selling price at 7 or 8 cents per quart. According to the suit brought by the Attorney-General of Louisiana against the Cotton-Seed Oil Trust, that monopoly has reduced the price paid to the planters for seed from $7 to $4 per ton. As the total amount of cotton seed which it purchases is about 700,000 tons a year, it is evident that this feature of the combination alone puts into the pockets of the owners of the Trust over two million dollars per annum, over and above the profits made through its control of the cotton-seed oil market. Evidently the combinations which lower prices by restricting competition among purchasers are not to be overlooked because of unimportance.

In the chapter on monopolies of mineral wealth it was stated that the French copper syndicate is not a "trust," but a "corner." It has not been common to consider "corners" as a species of monopoly, except as they have, like the latter, acquired a bad reputation with the general public from their effect in raising the price of the necessaries of life. But if we look at the matter carefully, it becomes plain that the aim of the maker of corners is the same exactly as that of the organizer of trusts,—to kill competition. The difference lies in the fact that the "corner" is a temporary monopoly, while the trust is a permanent one. The man who forms a corner in, let us say, wheat, first purchases or secures the control of the whole available supply of wheat, or as near the whole supply as he can. In addition to this he purchases more than is really within reach of the market, by buying "futures," or making contracts with others who agree to deliver him wheat at some future time. Of course he aims to secure the greater part of his wheat quietly, at low figures; but after he deems that the supply is nearly within his control, he spreads the news that there is a "corner" in the market, and buys openly all the wheat he can, offering larger and larger prices, until he raises the price sufficiently high to suit him. Now the men who have contracted to deliver wheat to him at this date are at his mercy. They must buy their wheat of him at whatever price he chooses to ask, and deliver it as soon as purchased, in order to fulfil their contracts. Meanwhile mills must be kept in operation, and the millers have to pay an increased price for wheat; they charge the bakers a higher price for flour, and the bakers raise the price of bread. Thus is told by the hungry mouths in the poor man's home, the last act in the tragedy of the "corner."

Fourier tells of an event in his early life which made a lasting impression on him. While in the employ of a mercantile firm at Marseilles, his employers engaged in a speculation in rice. They purchased almost all the available supply and held it at high prices during the prevalence of a famine. Some cargoes which were stored on shipboard rotted, and Fourier had to superintend the work of throwing the wasted grain, for the want of which people had been dying like dogs, into the sea. The "corners" of the present day are no less productive of discontent with the existing state of society than were those of Fourier's time.

But, returning to our subject, it should be said that the "corner," generally speaking, does much less injury to the public than is commonly supposed. As we have shown, the manipulators of the corner make their chief profits from other speculators who operate on the opposing side of the market; and it is but a small part of their gains which is taken from the consumers. The effect on the consumer of the abnormal rise in price caused by the corner is sometimes quite made up for by the abnormal fall which occurs when the corner breaks. Generally, however, the drop in prices will be slower to reach down to the final consumer, past the middlemen, than will the higher prices. The corner makers also are apt, if they are shrewd and successful, to make the total of their sales for the current supply yield them a profit. Thus suppose that the normal price of wheat is 70 cents per bushel, and that the syndicate secures control of five million bushels at the normal price. If while it keeps the price up it sells two million bushels at $1.20 per bushel, it can afford to get rid of the rest of its stock at an average price as low even as 50 cents per bushel, and still make four hundred thousand dollars' profit.

The operations of corner makers are confined principally to goods which are dealt in upon commercial exchanges. One evident reason for this is that the vast purchases and sales, which are necessary in the formation of a corner are impossible without the facilities afforded by an exchange. It must be said, too, that the plain truth is that our principal commercial exchanges, while they do serve certain useful purposes, are yet practically devoted chiefly to speculation. This, simmered down to its essence, means that the business of the speculators is to bet on the future prices of the articles dealt in,—a game in which the largest players are able to influence prices to accord with their bets, and hence have their "lamb" opponents at an obvious disadvantage. The evil of this sort of commercial gambling is recognized by practical men of every class; but its cure is yet to be effected.

A sort of business allied both to trade and transportation is the business of storage or warehousing, and this has recently shown some interesting cases of monopoly.

The owners of warehouses along the Brooklyn waterfront combined their business in January, 1888, and doubled their rates for storage. In the testimony of one of the members of this trust, before the New York Legislative Committee, he said: "We want to destroy competition all we can. It is a bad thing." The owners of grain elevators at Buffalo, N. Y., have long combined to exact higher prices for the transfer of grain than would have prevailed were free competition the rule. At the session of 1887 the New York Legislature took the bull by the horns and enacted a law fixing a maximum rate for elevator charges; a statute which was based on the popular demand for its enactment, but is hard to accord with the principles of a free government.

There are a number of lines of business auxiliary to trade in which competition is more or less restricted by the fact that the amount of capital controlled and the prestige of the established firms renders it a difficult and risky matter to start a new and competing firm. The insurer of property or life, if he be wise, will demand financial stability as a first requisite for the company in which he takes a policy. The companies engaged in the business of fire insurance have long been trying to agree on some uniform standard of rates and the avoidance of all competition with each other. These combinations, however, are apt to be broken, as soon as formed, by the weaker companies, whose financial condition operates to prevent them from getting their share of the business under uniform rates. Even when this rate-cutting is stopped, there is still competition to be met from the various small mutual companies, who are necessarily outside the combination.

Banks are a necessity to the carrying on of modern commerce, and they have great power over the financial affairs of the business men of the community which they serve. As a general rule, however, they are largely owned by the merchants and others who patronize them, and the instances of this power being abused are, therefore, not common. It is to be remembered, in discussing this, as in other monopolies, that the power of a monopoly depends entirely upon its degree. A bank, trust company, or real-estate guaranty company which has a great capital, an established reputation for safety and conservatism, sole control of many special facilities, and conveniences for obtaining and dispatching business, has a real monopoly, whose degree varies with the tendency people have to patronize it instead of some weaker competitor, if one exists. There is no evil effect from the monopoly upon the community, unless it takes advantage of its power to charge a sum greater than their real worth for the services it renders, or uses it to discriminate to the injury of special persons or places.

In closing our discussion of the monopolies in trade, there is an important point to be noted. In the lines of industry considered in the preceding chapter, the monopoly was easy of maintenance because it held full control of the source of production, or of some necessary channel through which commerce must pass. No gift of nature assists to maintain a monopoly in trade. It must be wholly artificial, and it relies for its strength simply on the adherence of its members to their agreement to maintain prices. Its degree of power can never be great, compared with monopolies which control the original sources of production; for if it is attempted to put up prices inordinately, competition will start up outside of the combination, or the consumer will be led to deal directly with the producer.

Because of this weakness, the temptation is great for these monopolies to strengthen themselves in ways quite indefensible on any score. The alliance of trade monopolies with trusts, in order to strengthen themselves, we have already considered. But the trust which makes such an alliance must plead guilty to the charge of discrimination as well as monopoly. It is bad enough to raise the prices of the necessaries of life, and force the whole community to pay the tax; but it is worse to add to this the crime of discrimination against certain persons in the community, at the instance of a minor monopoly.

But the trade monopoly does not confine its sins to tempting the stronger monopoly to practise discriminations. It practises discrimination itself in some very ugly forms. A combination among manufacturers of railway car-springs, which wished to ruin an independent competitor, not only agreed with the American Steel Association that the independent company should be charged $10 per ton more for steel than the members of the combine, but raised a fund to be used as follows: When the independent company made a bid on a contract for springs, one of the members of the trust was authorized to underbid at a price which would incur a loss, which was to be paid for out of the fund. In this way the competing company was to be driven out of business. It is often argued that combinations to advance prices can never exist long, because of the premium which the advanced price puts upon the entrance to the field of new competitors; but the weapons which this trust used to ruin an old and strong competitor are even more effectual against a new-comer; and the knowledge that they are to meet such a warfare is apt to deter new competitors from entering the field.

The boycott was once deemed rather a degrading weapon of warfare; but now the term has grown to be a familiar one in trade circles. Even the great railway companies do not scruple to use the boycott in fighting their battles. One might imagine that both the thing and the name filled a long felt want.

VII.
MONOPOLIES DEPENDING ON THE GOVERNMENT.

The fact has been already referred to that the principal monopolies which existed previous to the present century were those created by government. In the days when governments were less strong than now, and less able to raise money by such taxes as they chose to assess, it was a very convenient way to replenish the king's exchequer to sell the monopoly of a certain trade to some rich merchant. Nor was the establishment of these monopolies entirely without just reason. In those days of scarce and timid capital, inducements had to be held out to encourage the establishment of new enterprises. An instance of this, familiar to every one, was the grant to the owners of the first steamboat of the sole right to navigate the Hudson River by steam for a term of years. In the early history of the nation and in colonial days, government grants to establish local monopolies were very common. In this, however, we only followed the example of the mother country, which had long granted limited monopolies in trade and transportation as a means of encouraging new enterprises and the investment of capital.

The monopolies of the present day which are properly considered as government monopolies are of two classes. The essential principle on which all are based is that their establishment is for the common benefit, real or supposed; but the first class—to which belong the patents and copyrights—are also justified on the ground that the brain worker should be protected in his right to reap the just profits from his labor.

The effect of a copyright is simply to make it possible for an author to receive some recompense from his work. He can only do this by selling it in printed form to those who may wish to buy; but if there were no copyright, any printer might sell duplicates of the book as soon as it was issued, and could sell them at a much less price than the original edition, as the book would have cost him nothing to prepare. The practical result would thus be that few could afford to spend study and research in writing books, and the volumes which would be printed would be apt to be only those of so cheap and worthless a sort that no one would take the trouble to copy them. The monopoly produced by a copyright takes nothing from the public which it previously enjoyed. The writer of a book creates something which did not before exist; and if people do not wish to buy that which he has created, they are at perfect liberty not to do so. The monopoly relates only to the production and sale of that particular book. Others are at liberty to write similar books upon the same subject, which will compete with the first; and the same information may be given in different words without infringing the copyright.

It seems clear enough, then, that the monopoly which occurs in the use of a copyright, is of an entirely different sort from the monopolies which we have previously considered. Competition is not destroyed by it, and its only effect upon the public relates to an entirely new production, which is not a necessity, and which the public could not have had an opportunity to enjoy if the copyright law had not made it possible for the author to write the book with the prospect of being repaid for his labor by the sale of the printed volume.

As already stated, the granting of patents is based on the same principle as the granting of copyrights. A clause of the Constitution empowers the general government to grant to authors and inventors for limited periods the exclusive right to their respective writings and discoveries.

If we judge the granting of patents by the aims and intentions which are held in the theory of the law, we must conclude that it is a highly wise, just, and beneficial act. The man who invents a new machine or device which benefits the public by making easier or cheaper some industrial operation, performs a valuable service to the world. But he can receive no reward for this service, if any one is at liberty to make and sell the new machine he has invented; and unless the patent laws gave him the power to repay himself for the labor and expense of planning and designing his new device, it is altogether probable that he would not spend his time in inventing.

The wealth which a valuable patent promises has been a great incentive to the work of inventors, and has undoubtedly been a chief cause of the great mechanical advancement of the last half century. But the state of mechanical science has greatly changed from what it was when the clause of the Constitution was penned which speaks of inventions as "discoveries." The trained mechanical designer now perfects a machine to do a given work, with almost the same certainty that it will be successful in its operation that he would feel if the machine were an old and familiar one. The successful inventor is no longer an alchemist groping in the dark. His task is simply to accomplish certain results with certain known means at his disposal and certain well-understood scientific principles to guide him in his work. But this statement, too, must be qualified. There are still inventions made which are the result of a happy inspiration as well as of direct design. Not all the principles of mechanical science and the modes of reaching desired ends are yet known or appreciated by even the best mechanical engineers. There is still room for inventors whose rights should be protected. The interpreters of our patent laws have always held the theory that the use of a natural agent or principle could not be the subject of a patent. This is undoubtedly wise and just. The distinction should always be sharply drawn between those existing forces of nature which are as truly common property as air and sunlight, and the tool or device invented to aid in their use.

Again, it is a notorious fact that the great multiplicity of inventions has made the search to determine the novelty of any article submitted for a patent for the most part a farce. No one is competent nowadays to say surely of any ordinary mechanical device that it is absolutely new. The bulky volumes of Patent-Office reports are for the most part a hodge-podge of crude ideas, repeated over and over again under different names, with just enough valuable matter, in the shape of the inventions of practical mechanical designers and educated inventors, to save the volumes from being an entire waste of paper and ink. Space, however, will not permit us to discuss at length the faults of our patent system. The important point for us to notice is that the patent system establishes certain monopolies, and that these monopolies are not always harmless. Patents are given to "promote the useful arts," but the inventor whom they are supposed to encourage reaps but a small share of the profits of his inventions. Valuable improvements soon fall into the hands of large companies, who are able to defend them in the courts, and reap all possible profits by their use.

Again, patents sometimes aid in the formation of trusts and combinations. Two or three firms may control all the valuable patents in connection with some important industry. If they agree to combine their interests and work in harmony, they are far stronger than an ordinary trust, because the patents they hold prevent outside competition. It was pointed out in the opening chapter how the control of patents was sometimes a feature helping to induce the formation of trusts. The Standard Oil Trust had its origin in the superiority which one firm gained over its competitors through the control of an important patent. The envelope trust, which, at this date, has raised the price of envelopes about twenty per cent., owes its chief strength to its control of patents on the machines for making the envelopes. Instances innumerable could be given where a few manufacturers, who by their ownership of patents controlled the whole field, have ended a fierce competition by consolidating or agreeing to work together harmoniously in the matter of selling-prices. Very many of these are monopolies in trade or monopolies in manufacturing, and as such have already been considered in the preceding chapters; but it is proper here to point out the part which our patent system has taken in their formation, and the fact that it is due to their control of patents that many of the existing combinations owe their security against outside competition.

Probably the public was never so forcibly reminded of the defects of our patent system by any other means as it has been by the operation of the Bell Telephone monopoly. The purpose in granting patents is to aid in the establishment of new lines of industrial activity, secure to the inventor the right to reap a reward for his work, and encourage other inventors to persevere in their search for new improvements. All these things are effected by the monopoly which is held by the Bell Telephone Company; but they are effected at a cost to the users of the telephone under which they have grown very restive. Passing by the statement that the patents which the Bell company holds were illegally procured in the first place, through the inventor having had access to the secret records in the Patent Office of other inventions for which a patent had been asked at about the same time as his own, it is an undisputed fact that the Bell company holds the monopoly of communication by electric telephone in this country. They have managed this monopoly with great skill. While the instrument was yet in its introductory stage, and when every smart town felt obliged to start a telephone exchange or fall behind the times, prices were kept low; but when once the telephone became a business necessity and its benefits were well known, rates of rental were advanced to the point where the greatest possible profits would accrue to the Bell company's stockholders. This was excellent generalship. The same principle is applied in many other lines of business; and it was only because the company held a monopoly of a most valuable industry, that it proved so immensely profitable here. But other acts of the company, it is alleged, while within the letter of the law, are yet clearly infringements on the just rights of the public. It is charged that the company has purposely refrained from putting into practical use any of the many improvements which have been made in the telephone during the past few years, but at the same time has quietly secured their control. By skilfully managing "interferences" of one patent against another, and by amending and altering the various specifications, it contrives to delay as long as possible the issue of the patents upon these inventions. By means of these improvements, which it purposes to introduce as its present patents expire, it proposes to continue its monopoly for many years to come. It is very likely that this attempt will succeed.

We have already seen the folly of establishing competing electric light companies, and the attempt to establish rival telephone exchanges is just as sure to result ultimately in a heavy additional tax on the public. Then, too, the monopoly has grown so wealthy and powerful through its enormous profits that it will be very loth to release its hold, even when it is no longer protected by patents. Rival companies which may be established then, it will seek to crush by a fierce competition; and it will be quite likely to succeed. But in so far as it is not protected by patents, it is properly to be considered with other municipal monopolies, in which class we have already referred to it.

The course pursued by the Bell Telephone Company has at least proved that our whole patent system demands a thorough and radical revision. The inventor should certainly be protected, but not to the public hurt.

The second class of monopolies which the government establishes or aids in establishing because it is deemed to be for the public welfare that they exist, are, first, those private industries which receive aid from the government, either directly by subsidies or indirectly by the taxation of the goods of foreign competitors; and second, those branches of industry which are carried on by the government itself.

The question concerning the granting of subsidies is principally a past issue. A century ago many new enterprises in all lines of industry looked to the government for aid. In those days, when capital was scarce and when investors hesitated at risk, it was perhaps wise to grant the help of the public treasury to aid the establishment of young industries; but nowadays, when millions of capital are ready to seize every opportunity for profitable investment, it is recognized that subsidies by the general government are no longer needed. The days of subsidy granting ended none too soon. The people of the United States gave away millions of acres of their fertile lands and other millions of hard-earned dollars to aid in the building of the railroad lines of the West; and a great part of the wealth thus lavished has been gathered into the coffers of a few dozen men. The monopolies created by these subsidies have been largely shorn of their power; but while they reigned supreme, their profits were gathered with no halting hand.

There is only one direction in which we still hear the granting of subsidies by the general government strongly advocated; that is in the direction of establishing steamship lines to foreign ports. It would be apart from the scope of our subject to discuss the wisdom or folly of such a proceeding farther than to note the fact that it establishes a monopoly.

Take, let us say, the case of a steamer line between New York and Buenos Ayres. It is plain in the first place that the government aid will only be granted if there is not business enough to induce private parties to take up the enterprise. But as we suppose that there was not business enough in the first place to support one steamer line unaided, it is certain that none will undertake to establish a rival line to compete with that already sure of profits by reason of the government aid. Hence this line will have a monopoly of the trade; and unless some proper restrictions as to rates accompany the subsidy, the monopoly may lay an extortionate tax on the public who patronize it.

The relation of the tariff to monopolies is one which deserves the careful attention of every thinking man. Let us, in discussing this question, lay aside all prejudice and preconceived ideas for or against the protective tariff system and consider candidly what are the actual facts of the case. It is evident, in the first place, that the purpose of the tariff tax which the government levies on goods imported from abroad is to keep out foreign competition from our markets. The imported goods cost more by the amount of the tariff than they otherwise would; and the American producer, if he makes equally desirable goods and does not raise his selling price above that at which imported goods can be bought, is secure against foreign competition. But we have already learned that monopoly is simply the absence of competition; and inasmuch as the tariff checks or shuts out foreign competition, it has a tendency toward the establishment of monopoly. But this tendency may not result in the establishment of any monopoly. There is a tariff on potatoes, but there is no monopoly in their production. Evidently the tariff cannot create a monopoly; it only makes its establishment more easy by narrowing the field of competition to the producers of this single country. If we turn back over the list of monopolies we have studied, to find those which the tariff has any effect in aiding to establish, we shall find none till we reach the first two chapters. The monopolies in mineral products and manufactured goods, known generally by the name of trusts, it is self-evident are largely dependent upon the tariff. If they raise their price above a certain point, people will buy goods of foreign production instead. This point—the price at which foreign goods can be profitably sold—depends on the rate of the tariff, on the cost of production in foreign countries, and the cost of their carriage here.

Of the various trusts, it is evident that only those would be effected by the removal or reduction of the tariff whose products are now covered by it. Thus the Standard Oil Trust and the Cotton-Seed Oil Trust would not be injured by any reduction in the tariff. As a matter of fact, however, nearly all of the trusts have to do with manufactured goods which are covered by the tariff, and the two exceptions already named are about the only ones.

The trusts in manufactured products, broadly speaking, then, are all dependent on the tariff. Here is a strange condition of affairs. In the early history of this nation, the people of this country, represented by their popular government, were appealed to by the men engaged in manufacturing after this fashion: "We cannot make the things you need as cheaply as the manufacturers in foreign countries. They are wealthy and we are poor. They have their mills already in operation, we have ours to build. The capital we borrow bears a rate of interest double that which the foreign mill-owner has to pay. The labor we must employ is not yet trained as is theirs, and it must receive far higher wages. Therefore we ask that you aid us in establishing our industries by paying us higher prices for our goods than those for which you could purchase the same goods of foreign manufacture. In order that every one shall be obliged to do this, and that all may contribute equally to our support, we ask you to pass laws laying a tax on all imported goods which compete with ours, whereby none shall be able to buy them at a cheaper price than we can afford to sell our own goods."

And the people replied: "While we recognize the fact that we must pay an increased price for your goods compared with that which is asked for goods from foreign mills, and are thus taxing ourselves for your benefit, yet we see how desirable it is that our industries should be diversified and that we should not be dependent on foreign nations for the necessaries and comforts of life. Thus for a season we will grant your petition and tax ourselves to establish you in your business."

Such was the spirit of the movement that inaugurated the protective tariff. One other great argument for its establishment, which was believed by the people and was assented to by the manufacturers, was as follows: "Our natural advantages for engaging in manufacturing are beyond those of any other nation. Our workmen are more skillful, intelligent, and ingenious; our capitalists are more enterprising. At the same time there are many difficulties to be overcome in establishing a manufacturing business in a new country. Some assistance is needed at the outset to tide it past the critical period. Now, if we can give our manufacturers a start and enable them to establish themselves, they will improve all these natural advantages which we possess; and with the abundance of raw material in our mines and farms and forests, with our ingenuity and Yankee enterprise and skill, who can doubt that our manufacturers, once established, can produce goods more cheaply than they could ever be brought across from foreign countries? This protection from foreign competition will be a great incentive to the establishment of manufacturing enterprises. Everywhere mills and factories will spring up; a brisk home competition will be created; and that will finally reduce prices lower than they could ever go if we remained dependent on foreign countries for our manufactured goods."

It was a wise and well-founded plan, and only as to its final result did it fail. The protective tariff did make manufacturing more profitable than any other business, and mills and factories of every sort have sprung up in all parts of the country. But the expected extreme competition which was to reduce manufacturers' profits and the price of manufactured goods to a basis in accordance with the profits in agricultural and other branches of industry has been long delayed. The wonderful development of the country has kept up prices and profits, and has furnished a market for our manufacturers which has long kept in advance of their capacity to supply it. At last, however, the result which was expected by the founders of the protective tariff has come to pass. Our domestic mills and factories have a capacity beyond the present demand for their products. The home competition which was predicted has come; and if it had operated to reduce prices as was expected, there would now be employment for all our mills, for it is an axiom that every reduction in price increases the demand.

But the manufacturers who had been making enormous profits of ten, twenty, and thirty per cent. on their capital for these many years, were far from willing to accept calmly the situation and reduce their profits to a reasonable figure. They have tried combinations of many sorts to keep up prices, and at last have found in the trust a strong and effective means of killing home competition and keeping up their profits, if they choose, to the highest point which the tariff permits.

It is not to be argued that the manufacturers were especially worse than the general run of men in taking this action. It is the most natural thing in the world that a man who has all his life been used to making enormous profits in his business should come to think that he had an inalienable right to make them; and that when competition became so sharp that he had to lower his prices, it was due to an unnatural condition of affairs glibly designated as "over-production," for which the trust was an appropriate and wise remedy.

It is thus plain how, in a secondary way, the tariff is a cause of the trusts. The fat profits which the former gave have made men covetous enough to engage in the latter.

We are, perhaps, not yet prepared to discuss the question of the proper remedies for trusts; but it is too obvious to call for comment that an easy and most effective remedy is to cut away the protection from foreign competition, under which they flourish, and let them sink or swim as they best can. At the least it will be wise to reduce their protection to a point where any attempt to tax the nation of consumers and reap exorbitant profits by putting up prices so that profits of twenty-five per cent. or more can be reaped, will be counteracted by foreign competition.

It is only fair to point out at the same time that this remedy is far from being a panacea against all trusts and monopolies. The monopolies in the peculiar products of this country will be unaffected by it, and the combinations which embrace the whole globe in their plan of operations are quite beyond its power. The copper syndicate and the salt trust, and according to Mr. Carnegie a steel rail trust, are the only actual examples of international combinations which have ever been attempted, and it will probably be many years yet before the constant movement towards Tennyson's "Federation of the World" permits the general formation of effective industrial combinations which shall embrace all commercial nations.

We have finally to consider the monopolies carried on directly by the government. The carriage of the mails is the most important monopoly carried on by the government, and we may find some facts of interest by enquiring the reasons why it is for the public welfare that it should be so conducted rather than by private enterprise. In the first place, if it were left to private enterprise to furnish us with postal facilities, the postal service would be much more limited than now; many places of small importance being left without postal facilities or charged a much higher rate for service than now. On the other hand—and this is an important point—there would, perhaps, be in and between the large cities competition between different companies; in which case there would be duplicate sets of postal facilities, including buildings, mail-boxes, furniture, and employees of every grade. It is plain that all this would be a waste. One set of facilities is better for the public than two or three or more, and is ample to carry all the mails. To put another set of men at the work that others are already able to do, is to waste just so much of the working force of the world, as well as the capital necessary to furnish tools and buildings for its use. The matter of rates, too, would vary with the competition. One could never be sure what his postage bill for the coming year was to be. The receipts of the companies would be uncertain, and they would be obliged to pay a high rate of interest on the capital invested in their plant, thus making it necessary for them to charge high rates for their service. The intense competition between rival companies would lead to the bankruptcy of the weaker, and the final result would be the establishment of a single corporation in the control of the whole system. Rates would then be put up to the point where the greatest profit would accrue to the corporation.

Under the existing system, then, we save in cost of service over competing systems under private direction, in that the existing facilities are all made use of. There is no waste by setting two men to do the work of one, or by renting two offices to do the business which one could accommodate, neither is any energy wasted in soliciting business. The capital invested by the government in its plant for carrying on the postal service would bear interest, if the money were borrowed, of not more than two or three per cent. But if a private company borrowed money to carry a similar business, they would have to pay five to seven per cent., which they would have to make up for by charging a higher rate of postage.

Other monopolies which have been carried on by the government are the business of transportation, and the provision of roads, bridges, and canals therefor; monopolies in mining; and in the case of municipal governments, as already noted, the supply of water, gas, and electric service, and street railway transportation.

VIII.
MONOPOLIES IN THE LABOR MARKET.

It should be said at the outset of this chapter that, in a very true sense, practically all men are laborers. That into which a man puts his energy and by which he earns his living, is his labor, whether it be work of the hand or the head. But the labor we are to consider in this chapter is that of the men who work for wages; and we will also make the arbitrary distinction that it is that of the men who work for wages in some branch of manufacturing, mining, trade, or transportation, the great divisions of modern industry which we have thus far considered.

Almost all these monopolies employ large amounts of capital in carrying on their business; and in the popular speech, "monopolist" and "capitalist" are often used interchangeably. It is a very common belief that monopolies are confined to the capitalized industries of production, transportation, and trade, which we have already considered; but we are now confronted by the fact that the wage-workers in the various trades of the country are engaged in exactly the same monopolistic schemes, in which they have exactly the same ends in view as have the monopolists who combine millions of dollars' worth of capital to effect their purposes. On the one hand we have the Standard Oil Trust and the Railroad pools and the hundreds of other capitalistic combinations striving to benefit the producer at the expense of the consumer; while among those whose only capital is their strength and skill, we find the workers in all the various trades, and even some of the lower grades of laborers firmly banded together with the avowed purpose of raising their wages above those which they would receive if competition alone determined the rate. And they are successful, too. Notwithstanding the fact that they deal with tens of thousands of producing units where the combiner of capitalized interests deals with tens, the success achieved by the combinations of labor is quite comparable with that reached by combinations of capital. It speaks volumes for the intelligence and ability of the wage-workers of the present day—yes, and for the growth of the spirit of fraternity; that in the advancement of what they deem a just and righteous cause, they should voluntarily put themselves under discipline and endure patiently the untold hardships of uncounted strikes, often brought on in the unselfish work of aiding their brother laborers against what they deem a common enemy.

The modes in which the combinations of skilled laborers attain their desired ends are akin to those which obtain in a well organized manufacturers' trust. The former allow only a certain number of apprentices to learn their trade. The latter permit the establishment of only such additional mills as shall not unduly increase the market supply. The former fix a standard scale of wages below which no member of the union shall work; the latter fix a minimum price for the goods sold in the market. If there are more laborers in the union than can be employed at the advanced rate of wages, some must be idle. If there are more mills in the trust than the lessened demand for the goods will keep busy, some must be shut down. The trade-union boycotts competing workmen outside its ranks, and stigmatizes them as "scabs." The trusts endeavor to punish every outside manufacturer, sometimes by forcing upon him such a competition as shall cause his ruin; sometimes by means as illegal and criminal as are the riotous acts of a mob of hungry workmen, and far less defensible. But let us not yet bring up the question of relative blame. The main point which must impress every candid observer is that the means employed for the monopolies of capital and the monopolies of labor are identical in principle and motive. Nor are we confined to manufacturers' trusts to show that the spirit of rule or ruin characterizes capital as well as labor. Railroad monopolies, in the words of the president of one of the greatest corporations of the country, "strive eagerly to protect themselves while entirely indifferent as to what shall befall their rivals." How many weak corporations have been deliberately ruined by the cut rates of stronger competitors? If the laborer has "scab" in his vocabulary, has not the railroad manager his "scalper" and "guerilla"?

The close relationship, viewed in many different aspects, of the monopolies of labor and the monopolies in production generally has hardly received the notice its importance deserves. Still, it is an evidence that people are thinking of and discussing the matter when such a writer as W. D. Howells, who is popularly supposed to cater to the tastes of those who have very little in common with the laboring classes, puts into the mouth of one of his characters a defence of workingmen for executing a boycott on a non-union workingman, on the ground that they "did only once just what the big manufacturing trusts do every day."

Perhaps it was never so forcibly realized how thoroughly effective these labor combinations have become, and how completely they hold the country at their mercy, as in the strike of the locomotive engineers on the Chicago, Burlington and Quincy Railroad system in March, 1888. Here were, perhaps two thirds of the men in the country qualified for the responsible and onerous work of running a locomotive engine, firmly banded together to advance their own interests and secure assent to their demands. Granted the will, the courage, the discipline, and it was possible, yes, easy, for them to have obliged the railroads to raise the wages of every engineer in the brotherhood to $10.00 per day, for on a refusal they could have enforced the extreme penalty of bringing down a total paralysis upon the business of the country. It speaks volumes for the good sense, the honesty and moderation of the men and their leaders, that, notwithstanding the fact that their demands were not immoderate, and that the failure which came permanently deprived of a remunerative position a thousand members of their brotherhood, they refrained from the extreme to which they might easily have gone, and permitted themselves to be defeated, when they had the power to have forced a different result.

Organized workers in many trades have the power to force wages much higher than they have done. Would that the Sugar Refineries Company, and some other monopolies of production, were as moderate in their demands upon the public as are the workingmen. But though their demands are in one sense moderate, it is yet true that in so far as they exceed the amount which the laborer would receive when the market for labor is open to free competition, they are the direct result of the artificial monopoly which the laborers have created by their combination, and, in effect, levy a tax upon the community. To illustrate: let us suppose that if every man were permitted to follow the trade of bricklaying who wished to do so, the equilibrium between supply and demand would be found at a rate of wages of $3.00 per day. At that rate, if the price rose, more men would wish to follow the trade and at the same time less people could afford to build houses, thus raising the supply above the demand. If the price fell, some of the men would prefer to work at some other trade and more people would conclude they could afford to build houses. But when the rate, which, without prejudice, we call the natural rate, is at $3.00 per day, suppose the men belonging to the trade form a union and resolve to charge $5.00 a day for their work. Then it is very evident that the cost of building is increased, and every one has to pay more for construction and ask a higher rent to repay himself afterward. Evidently, then, by this action of the bricklayers every man in the trade receives $2.00 more per day for each day's work, which must be paid, directly by their employers, but indirectly by the whole community. It would be easy to prove that the tax on the community when the wages are raised in any trade, affects the whole public as well as those directly employing the workers in that trade; but it seems too plain to require proof. The main point we now wish to show, is that any increase in the wages of labor over that received under ordinary competition must be paid by the community, just as much as any increase in the price of coal, iron, copper, wood, wheat, or any other commodity must be paid by consumers at large. Nor does the injury to the community stop here, by any means. We saw that the advance of prices by the linseed oil trust was an injury to all those who, on that account, were obliged to forego painting; and that it thus caused a further injury to painters, paint-makers, and even those employed in the building trade. But the increase in the price of the bricklayers' work has results no less important. Not only is injury done to those who build and have to pay more for their buildings, but many are prevented from building on account of the increased cost. If we argue according to a prevalent method, we may say that this reduced activity in the building trade will cause stagnation among allied trades with corresponding loss of employment. Again, as a less number of houses are built, and those which are built are more expensive, rents are certain to rise, which means that the poor man must pay out a still greater part of his earnings for his shelter, or else must put up with poorer and meaner quarters.

It is a strange thing to trace, in connection with this, the history of labor, and see how recent it is that the natural right of a man to sell his services for such a price as he could obtain has been acknowledged. History shows that until modern times, compulsory personal servitude has been in every age and country the lot of a large part of the human race. And when wages began to be paid for service, conditions were not much improved. In England, in the fourteenth century, in the reign of Edward III., a pestilence seriously depopulated the country, and reduced the supply of laborers so much that it was not equal to the demand for labor, and wages began to rise. Laws were therefore enacted that each able-bodied man and woman in the realm, not over three score, "not living in merchandise, nor exercising any craft, nor having of his own whereof to live, nor land about whose tillage he might employ himself, nor serving any other," should be bound to serve at the wages accustomed to be given five years previously. No persons were allowed to pay an advance on these wages, on pain of forfeiting to the Crown double what they had paid. Previous to the fifteenth century, workmen in various occupations were impressed into the service of the king at wages regardless of their will as to the terms and place of employment. Indeed, all through the fifteenth and sixteenth centuries, there were continual attempts to fix the rate of wages arbitrarily by law, and also the hours of labor. These, by one old statute, were decreed to last from 5 A.M. to 7 or 8 P.M.

These acts, and others of similar nature, were intended for the subjugation of laborers and the benefit of the employers of labor. It is only since the era of popular government that legislation for an opposite purpose has come in vogue. Gradually the right of the workingman to have the price of his labor fixed as is the price of other commodities, by the law of supply and demand, came to be recognized, although the progress was pitifully slow. The old ideas of the relation between "master" and "servant" were very tenacious of life, and the substitution of the terms "workman" and "employer" is a change which has taken place in England during the present generation.

It was the petty tyranny and the grinding extortion which the laborers had begun to feel, even though they were far better paid and better treated than their fathers, that caused the formation of the original trade unions. Laborers saw that each was helpless alone, but that combined they were a power which their employers need not despise. The old craft guilds furnished them an example of effective combination among those engaged in the same trade; and as men everywhere in every age, when a common danger or misfortune has confronted them, have come together for mutual help and defence, these ignorant laborers, in violation of stringent statutes, but following blindly their human instincts of self-defence, came together and organized the first trade unions.

The common law has always held trade unions to be "illegal combinations in restraint of trade." Between the reigns of Edward I. and George IV., the common law was affirmed and made more effective by the passage of over thirty acts of Parliament, all intended to abolish the trade unions. In 1800 a stringent law was passed, by which all persons combining to advance their wages or decrease the quantity of their work, or in any way affect or control those who carried on the business in which they were employed, might be committed to jail by a justice for not more than three months, or to work in the house of correction for not more than two months. Not till 1824 was an act passed slightly ameliorating this stringent law, and even then the trade unions remained for the most part secret organizations. At last, in 1871 and 1876, laws were passed under which no person can be prosecuted for conspiracy to commit an act which would not be criminal if committed by him singly; and the trade unions, thus legalized, were taken in common with other benefit societies under the protection of the law.

We have already pointed out the main fact that the chief end and aim of the trade unions is the advancement of wages by securing a monopoly of the supply of labor in some particular trade. It is now fair to explain, as we have for other monopolies, the labor monopoly from the standpoint of the laborer himself.

It is a sound axiom of business that a forced sale is apt to be an unprofitable one to the seller; and that when a man's needs are so great that he is absolutely obliged to sell at any price, he is quite certain not to get the full worth of his goods. Now it is an undeniable fact that the condition of many of the wage-workers of the country approximates to this: They must have food, shelter, and clothing for themselves and their families, and the only thing they can offer in exchange for it is their labor. Suppose an honest and industrious man has some misfortune, as an accident, or illness, and loses employment. When once more able to work, he finds his old place filled and new places hard to find; but at last he finds a mercenary employer who agrees to give him half wages. Disheartened at his prospects, he thinks half a loaf is better than no bread, especially when those dearest to him are hungry, and so takes the place. But his employer takes care that his constant work shall leave him no time to hunt for a better position. Indeed, by a few judicious threats from his employer, the man may be put in terror of losing the pittance he already has, and seeing those dependent on him in absolute starvation. Such cases are amply provided for by the trade union. Ill treatment of any one of its members may be avenged by the organization as a whole, on the principle, whose spirit of fraternity and self-sacrifice all must admire, that "an injury to one is the concern of all." More than this, by means of the benefit feature of the fraternity, the member unfortunate, or in distress, is properly cared for. No member is obliged to feel, when seeking for employment, that his food or shelter is at stake if his attempts fail, and he need never be at the mercy of employers who drive sharp bargains.

It is often charged as an evil of trade-unions interfering with wages, that they tend to bring all their members to the same level, and are opposed to the payment of wages in proportion to the varying abilities of the men working at the same employment. But with unorganized labor, and employers who were none too just in their ideas, it was not uncommon to see the necessity of the laborer, or his inability to drive a good bargain, taken advantage of. Thus the workmen whose necessities were greatest, and who were the most docile and obedient, received lower wages than the men who were not particular whether they were busy or idle, and were inclined to pay more attention to their own rights and prerogatives than to the work for which they were hired. While the tendency toward non-recognition of the varying abilities and ambitions of workmen by the trade unions must be deprecated, it has largely grown from the reform of this worse abuse.

There is another benefit which the organization of labor has effected which may, perhaps, be thought an evil by some, but which every broad and generous man must gratefully recognize as a gain to the whole community; and in a self-governed nation like our own, it is a benefit whose importance it is difficult to over-estimate. This is the maintenance of the laborer's dignity and self-respect. We have but to look back to the times we have already mentioned, to see the laborer hardly better than a dog, a cringing dependent, kicked and beaten on slight pretext, and with almost every vestige of manhood worked and bullied out of him. We have come upon far happier times to-day, and there are few corners of the civilized world where conditions so evil prevail now. But without the organization of labor, the status of workingmen would be much farther removed from what is just and right than it now is. Every employer who is wise and honest, and who has the true spirit of a gentleman, will see that his workmen are treated with the respect that is their just due. Discipline there must be, but it is a wrong view of discipline that makes it consist of oaths and brutal insults delivered according to the prevalent good temper or ugliness of the overseer. Unfortunately, not every man who is placed in authority is wise, honest, and a gentleman. Bodily violence is no longer permitted by law, but too often the curses and insults which are heaped on men with no due cause are a violence which is more severe to many a man than actual cuffs and kicks. No man can take such treatment without resentment, and maintain his dignity and self-respect. Yet in how many places is petty tyranny of this sort still active, and its victims are cowed into submission for fear of taking the bread from their children's mouths.

But the member of a strong labor organization need not be cowed or tamely accept insult. He has the right to resent it, and has the power of his fraternity to support him. He knows this, and his employer knows it. Overseers, big with their importance, and inclined to show it by attacking the self-respect of the men under them are no longer in demand.

It is very unfortunate that many people misconstrue this result of the organization of labor as a move toward the abolition of all social ranks and grades. It is nothing of the kind. Social gradations cannot be created or brushed away by any legislative enactment, or the acts of any single class. The combination of the workmen to secure their right to protect themselves from insult is indeed a movement toward making them better and nobler men, just as the abolition of slavery in all its forms was a move in this direction. But no man is truly free if he is not secure in his right to immunity from personal insult as well as from bodily violence. It is not strange, however, that the workman, conscious of the strength of the fraternity behind him, sometimes grows arrogant and insolent toward those who must necessarily be in authority over him. Unaccustomed for generations past to other government than fear of one sort or other, he is all unused to self-control. But it is hardly possible that this should be a great evil. The body of workmen will, eventually, if not now, refuse to sanction and defend their members in any thing which their innate sense of justice must teach them is wrong. Few workingmen will causelessly ask their brotherhood to undertake the hardships and loss of prestige which accompany a strike. And even when insolence is shown toward employers or overseers, they have at least equal power to resent it, and are not, as was the laborer of a half-century ago, forced to submit to insults with outward humility.

We have already noticed the condition of the laws in reference to the laborer in former times: but the repeal of the laws oppressing the workman, and making him a servant to a master instead of a workman for an employer, has been largely due to the organized efforts of the trade unions. To them, also, we owe the passage of many acts like those for the guarding of machinery in factories, the restrictions upon the employment of child labor, and the proper care for the health, comfort, and convenience of employés in general. It cannot be said that the labor interests have always shown great wisdom in all their advocacy of new legislation, and too many acts, like those in reference to the employment of convict labor, show a lamentable retrogression. On the whole, however, there is every reason to believe that the general course of justice has been aided by the influence of the trade unions—something which can be said of very few special interests for whose benefit our legislatures have enacted laws.

All the above facts we must admit in defence of the organizations which have, to a large degree, killed competition in the labor market. But in defence of the especial action of the labor monopolists in forcing wages up to a point above that which competition alone would determine, there is also much to be said. Those who are unwilling to concede that there is any justice in the claim of the wage-workers that full justice is not yet awarded them, are accustomed to expand on the theme of the improved condition of the laborer over that in which he was a century ago. How this can be taken for argument is a mystery. No one thinks of disputing or diminifying the well-known fact that many workmen of to-day have more comforts than the princes of the Middle Ages. The single point in dispute is this: Of the total wealth which is being produced in the world to-day, is the laborer receiving his fair share? There are not wanting men of judgment and ability who answer this question with a decided No. And the greater share of the blame for this injustice they lay upon the monopolies which we have been discussing. They charge, and they verify their charge with ample and sound testimony, that of the wealth which the united brains, and strength, and skill of the world daily produces, the lion's share is taken by men who render the world no proportionate service. This is partly due to existing laws, which the public is not yet wise enough to better; partly to the inertia of public opinion, which is still prone to cling in many points to the idea of past generations that the workman was necessarily a slave; and partly to the narrow selfishness and grasping ambition of many men in the business world. This is not arguing for the reduction of all to a dead level, as is so often absurdly claimed. It is arguing that the inequalities which exist at the present day are not held securely in place by agreement with the inflexible laws of justice and right. Instead they are abrupt and uneven, and contrary to these laws; and there is great danger that the readjustment, which must inevitably take place to bring them in accord with these laws, will come, not as a gradual change, but as a series of terrible social catastrophes, involving us in a wreck which will require a century of civilization to repair.

Only fanatics preach absolute equality. As men differ in their ability and their power to serve the world, so is it just that the reward which the world metes out to them should differ in like proportion. But if we stretch to the utmost the benefit which we conceive the world to derive from the life of many of its men who reap the richest harvest from its production, we cannot in any way make out that their services are so valuable as to deserve such munificent reward. Indeed, it is not very far from the truth to say of some of our most wealthy men that their wealth was won instead of earned; and many place a much worse term in the place of "won."

The workman sums up his case with the argument that as he is confessedly not getting his just share of the results of his work, he is only getting his due, or part of it, if by combination with his fellows to crush out competition, he is able to put up the price of his labor above the natural rate. Finally, as a last defence for the labor monopolies, he calls attention to the trusts and pools and monopolies which are taxing him at every hand for the necessaries of life, and declares that if he, working on the same principle as the wealthy capitalists, is able to combine his tens of thousands of fellows into an effective monopoly, surely he should not be condemned for following the example of the men who are, or are supposed to be, his social, moral, and intellectual superiors.

Such is the strong case which the labor organizations present in defence of the unions which they have formed to kill competition in the labor market. The investigation we have pursued in the preceding chapters enables us to add to this a statement of the case more comprehensive and striking even, than the narrower views which have preceded. In the chapter on the monopolies in trade, reference was made to the fact that the competition among purchasers tends to keep prices up, just as competition among sellers tends to keep them down. Now labor is a commodity whose price in the market is governed by the same laws of supply and demand that regulate the prices of all other things that are bought and sold. But it has this peculiar difference, that the sellers of labor are many, while the purchasers are few, as compared with the relative proportion of sellers and buyers of goods in general. Then, wherever there is little competition among purchasers of labor, we shall expect to find low wages; and where competition to secure workmen is active, high wages will be the rule. This is so obviously true, in the light of every one's experience, that we need not stop to prove it. Now, in the days when manufacturing was carried on in small workshops, there was a great number of purchasers of labor. The concentration of manufacturing in great establishments where thousands of workmen are employed has lessened the number of employers greatly; has it not also lessened competition among them? It is a well-known fact that in many great industries, as, for instance, the mining of coal or the manufacture of iron, there is one rate of wages paid all through one district, and the employers fix that rate through their associations. The makers of trusts have sometimes defended them, on the ground that they enabled the employer to pay his laborers higher wages; but it is plain that when all the firms in a trade are united in one combination, there can be no competition between them for the employment of labor. They will pay them only such wages as they choose; and the bulk of evidence seems to show that, notwithstanding the vast profits which the monopolies are reaping, they have been far from showing any general disposition to share their profits with their employés. It seems almost unquestionable that we have here the real reason for the extraordinary increase of labor monopolies within the past quarter century. This period has witnessed a rapid growth of consolidation and combination in all our industries, lessening thus the number of employers of labor. The wage-worker found himself confronted with the fact that he was soon to lose entirely the benefit of competition for the purchase of his work, and felt that his only salvation from practical slavery was to prevent the competition between himself and his comrades from forcing his wages down to the starvation point. He met the monopoly that threatened to lower his wages by forming another monopoly that could meet the first on equal terms.

We have given little space in this chapter to the consideration of the limit of the power of labor monopolies; but it is obvious that this is very clearly defined. In the first place, while there are certain attempts at combination among unskilled laborers, and those not working at trades, these attempts cannot, as a general rule, be at all successful. Any man out of employment may be a competitor for the work which they do, and it seems practically impossible that any organization can combine, under effective discipline, even a majority of the workingmen of the country not skilled in a trade. The only ways in which attempts to kill competition in unskilled labor can be successful, then, are by the use of force or the boycott, or similar means, and these can never come into vogue as permanent agents in the world's industry. The labor monopolies which exist, and which promise, if let alone, to enjoy continued success, are principally combinations of the workers in skilled trades, and certain of those employed in manufacturing, mining, trade, and transportation.

IX.
MONOPOLIES AND COMPETITION IN OTHER INDUSTRIES.

As we take a look back over the long list of monopolies which we have investigated in the preceding chapters, the natural thought is that we have considered now the greater part of the industries of the country. Certainly these occupations of manufacturing and trade and transportation, are generally considered as our important industries, and a pretty good share of our legislation and public agitation concerns itself with the welfare of these industries and with the men who are employed in them. But certain questions will naturally arise in the curious mind. Just what proportion of our total working population are employed in these industries; and of that number how many are reaping the profits of the monopoly? What are the remaining occupations of our people, and are the workers in them doing any thing to destroy competition? To the investigation of these matters we will devote the present chapter.

The United States Census Bureau classes the gainful occupations of the people in four great divisions: (1) Agriculture. (2) Professional and Personal Service. (3) Trade and Transportation. (4) Manufacturing, Mining, and Mechanical Industries. The monopolies which we have studied in the preceding chapters are all included in the last two classes. The total number of persons engaged in trade and transportation in the country in 1880 is given as 1,810,256, and the total engaged in manufacturing, mechanical, and mining operations is 3,837,112, or a total of 5,647,368 in all these occupations among which we have found monopolies to exist. Of course the great proportion of the persons included in the above number have no direct interest in the profits of the industries in whose operation they aid. It is, indeed, argued that the manufacturer, miner, or merchant who is making enormous profits, pays, therefore, larger and more generous wages; but it is urged on the other side that while this is true in isolated cases, the general rule holds good that the price of labor is governed by the law of supply and demand; and that, as already pointed out, monopoly among producers means a monopoly among purchasers of labor. Let us now, however, leave out this indirect benefit which may, or may not, accrue to the workmen in these various occupations, and find as nearly as we can the number which are, or can possibly be, directly benefited by the operation of monopolies. Let us deduct from the total of 5,647,368, such classes of persons as it is evident cannot have a direct share in the results of a monopoly and are not engaged as skilled workmen in a trade which has been organized to control competition.

We may certainly deduct the following items from the total:

Agents18,523
Clerks, salesmen, and accountants in stores445,513
Commercial travellers, hucksters, and peddlers81,649
Draymen, hackmen, teamsters, etc.177,586
Sailors, steamboat-men, canal-men, pilots, and watermen100,902
Apprentices44,170
Blacksmiths172,726
Fishermen and oystermen41,352
Lumbermen, raftsmen, and wood-choppers43,382
Photographers9,990
Saw-mill operatives77,050
Tailors, tailoresses, milliners, and dressmakers419,157
Total1,632,000

There are a great many other occupations in the list[4] from which these items are taken which might properly be included in the above, as the combination which does or can exist in them it is almost certain is of no practical importance. On the other hand, however, our total of 5,647,368 takes no account of the persons interested in trade, transportation, or manufacturing through holding the shares or bonds of incorporated companies; also the errors and omissions of the census are so great in any event that only broad and general statements can be based upon them. Deducting, then, from the total of 5,647,368 the 1,632,000, which we found to be surely not interested in monopolies, we have about four million persons as the utmost number who are benefited by the profits of the monopolies which we have thus far considered. But let us look into this a little farther. As we have already stated, the monopolies of trade are generally unable to raise prices far above their normal rate. In retail trade, especially, competition shows great tenacity of life. Also with regard to labor monopolies, it is true, as we have already stated, that the limits of their operation are pretty closely defined; even the men in the highest grades of skilled labor cannot secure for each workman by any combination more than two or three dollars per day over what he would receive under the freest competition. Let us, therefore, deduct from the preceding four millions the persons engaged in retail trade, and all skilled laborers in the various trades which we formerly included because we conceived that they might be connected with some form of labor organization, and might also obtain some benefit through the profits of their employers. But when we make these deductions we find that we have only a hundred thousand or so of our four millions left. Briefly summed up, therefore, the fact is, that the strong monopolies in manufacturing, mining, trade, and transportation are owned by a very small portion of the population. Just what this number is, it is impossible to say, for the stock and bonds of railroad companies, mining companies, and manufacturing companies are changing hands continually, and no public record is taken of their distribution and ownership. It may possibly be true, however, that one million different persons own an interest in some of the various monopolies which we have studied, excluding the monopolies in trade and labor. But even if this estimate is correct, it is a well-known fact that a few hundred immensely wealthy men hold a large share of the stock of these very profitable monopolies.

Leaving the questions which this statement opens up, for later consideration, let us consider the other classes of occupations in which men engage for the purpose of gain, and see if this far-reaching movement towards the destruction of competition has infected them, and whether it has proved, or can prove, so successful there as it has in the industries considered in preceding chapters.

The third great class of occupations, rendering professional or personal service, gives employment to over four million persons (4,074,328), and includes in its members those in widely separated ranks of society.

It is, of course, true that the competition in the professions is far more a competition of ability, real or supposed, than it is a competition of price; and the former is a competition which is never likely to be done away with. Yet in all occupations, to a greater or less degree, there tends to arise more or less competition in relation to price, and the professions are not entirely exempt. Lawyers, indeed, seem never to have felt the necessity of fixing any minimum tariff of fees; and so far as is known, clergymen have never combined to advance their salaries. But the medical profession has its well known code of ethics which debars its members from "pushing their business," and has, in certain places and times at least, prescribed a minimum tariff of fees. It should be clearly understood, however, that this is not cited with the intention of putting any aspersion upon the medical profession in any way. The services which are freely rendered to the poor, and the disgusting indecencies and insults which are thrust upon the public by some who choose to ignore this code of medical ethics, would make us ready to forgive very much worse things than a possible tendency among members of the profession to refrain from "cutting under each other" in the matter of fees.

But while the three older professions have evidently little need or disposition to combine for the purpose of increasing their income from the community, some of the newer professions occupy different ground. Architecture is coming to be a profession of no small importance. The principal architects' society, the Association of American Architects, has a regular schedule of minimum commissions below which its members are forbidden to go. Another singular case of professional combination is the Musical Protective Union, a combination of professional musicians in New York City, which fixes minimum prices that its members may charge for their services. On the whole, however, it must be said that the limitation of competition in the professional and intellectual occupations is in this country still in its infancy. In England the fixing of prices of professional service by usage is very much more common, and in many professions the check to competition thus effected is of no small importance. To the careful observer there are indications of a tendency in a similar direction in this country. Is it not more and more common in professional circles to see a slur cast on the man who will work cheaply? There is hardly an occupation or specialty which has not its Associations and its periodicals; and what is more natural than that an association for mutual benefit should come to adopt that certain method of securing mutual benefit at the expense of the public, the restraint of competition?

Examining the remaining occupations in this division, we find that those engaged in them form a large percentage of the whole population. There are of laborers whose occupation is not more definitely specified, 1,859,223. Then there are 1,075,655 domestic servants, 121,942 launderers, 77,413 hotel and restaurant employés, 24,000 soldiers, 14,000 messengers, and enough in other occupations similar to the above, in that very many persons can engage in them without special training, to make it certain that at least three fourths of the members of this division, or a little over three million persons, belong to the class of unskilled workers, among whom, as we have already seen, the attempt to limit competition and force up wages has not, and cannot possibly have, more than a limited and doubtful success. Nevertheless, to a very great extent, the unskilled laborers of the country as well as those working at minor trades are organized for mutual help and protection; and while they cannot increase much the rate of their wages without drawing a host of competitors, they can do much in the way of protecting themselves from injustice and extortion, as we have pointed out in the preceding chapter. It may be possible, indeed, that certain changes in the future, as the requirement of greater skill and efficiency in all kinds of labor, may make combinations in this class of occupations easier and more effective. Our domestic affairs, for instance, are constantly growing more complex, and require greater skill in their operation. Housekeepers are prone to think the "servant girl" problem serious and perplexing enough already. It remains to be seen what they would say if a "Cooks' Protective Union," a "Chambermaids' Sisterhood," or a "Laundresses' Amalgamated Association," should assume control of the wages and hours of labor of their domestics.

To sum up, we find that as a whole the 4,000,000 persons engaged in rendering professional and personal services are in general not increasing the cost to the public of their services by combining together to limit competition; and that so far as we can determine, it is not probable that many of them can do so in the future, even if they are so disposed.

There remains yet one important class of the community to be considered: those engaged in agriculture. Can the farmers of the country fall into line behind the manufacturers and miners and railroad owners, and force up the price of their products by killing competition, to correspond with the increased prices which are demanded in many other lines of industry? They have one thing in their favor in that the principal products of the soil are necessaries of life, which the community cannot do without whether the price be great or small, although an increase in price is sure to result in a decreased consumption.

We may best determine this question by inquiring exactly how the prices are forced up by monopolies. There can be but one way. The laws of supply and demand hold good, and it is out of the power of the producer to greatly affect the demand. It is only the supply of which he has control. From the manufacturers' trust to the laborers' union, the only way in which prices can be controlled is through a reduction in the supply of goods made or men allowed to work; and if the price were to be arbitrarily raised, the result would be the same; there would be a surplus of goods, or some unemployed workmen. In order to raise the price of his products, then, the farmer must do one of two things, which will bring in the end the same result. He must send less of his products to market—lessen the supply—or refuse to sell any thing at less than the increased price which he desires. In either case, if he plants the same acreage and gets the same yield as before, he will have a part of his crop left on his hands.

The query then comes, can it be possible for the farmers all over the country to form so perfect and well-disciplined an organization that every member shall diminish his remittances to market of grain, wool, meat, hay, or what not, enough to raise prices; or that he shall refrain from selling all these articles below a certain defined price? It must be plain to every intelligent person that it would be a practical impossibility to effect such a thing. It would be possible to bring only a small percentage of the farmers in an area 3,000 miles in length and 1,500 in width into a single organization; and it would be essential to the success of this, as of every other scheme, that no outside competition should be permitted to exist.

It may be argued that the Knights of Labor succeeded to a degree in gathering into one organization a large proportion of the workingmen in all the various trades in the country; but their members were mostly in cities, many worked together in great factories, and as regards ease of combination, they were far more easily handled than the widely scattered farmers of the country could hope to be. Besides, the Knights of Labor organization appears to be too unwieldy and cumbrous to be long successful, and internal dissension seems to have already brought it near its end. It is plain that the farmers are powerless to effect a reduction of the competition among themselves. Nor is this condition at all likely to change. Farming is unlike other modern productive industries in that the cost of production does not decrease as it is conducted on a larger scale. The most profitable farms are, and perhaps will always be, the small ones, where the details of the tillage come directly under the eye of the owner.

Such are the facts with respect to the prospect of making a monopoly of agriculture, and it would seem that they are so simple and so easily understood that no attempt would ever be made to restrict competition among farmers. It is to be recorded, however, that such attempts are being seriously made. Prominent farmers of the West in the spring of 1888 took the preliminary steps towards the formation of a farmers' trust. Conventions were held and resolutions adopted reciting that the operation of trusts in manufacturing industries and of monopolies in trade and transportation laid serious burdens on the farmers of the country; and that in order not to be left behind in the struggle for existence the farmers must combine for their own protection. Committees were appointed to work out the details of a plan of organization; but the movement seems to have lost vitality when its projectors came to study it in detail. The preceding argument fully explains the reason.

It should be said, however, that coöperative associations among the farmers are growing at a rapid pace. The Grange and the Farmers' Alliance are primarily coöperative associations for the purpose of benefiting their members in the purchase of goods and in various other directions, and they are fast increasing in numbers and influence. The attempts made to benefit their members in the sale of their produce have been generally confined to protection against the "middle men." The only movement of which the author is aware for restricting production to increase price, has been in certain sections of the South, where recently a general attempt has been made to restrict the acreage planted in tobacco in the hope of raising the price.

It is a matter worthy of note here that the combined influence of the farmers of the country has recently been successful in securing legislation to defeat an important outside competitor. A few years ago some chemists found out that from a cheap substance known as beef suet, an imitation butter could be made, which was in composition and appearance the same as butter made by the ordinary process, and was exactly as nourishing a food. There has been much talk of the halcyon days to come when the progress of science will be so great that food will be made in the laboratory. Well, here was an important practical step in that direction. A cheap product worth three or four cents a pound could be easily converted by a chemical treatment into a valuable food worth three times as much, and the great profit in the business brought this substitute for butter rapidly into use. But at once an indignant protest went up from the farmers of the land. They were being ruined by the competition of the "grease butter" as they disrespectfully called it. There was something suggested about the idea that if just as good butter could be made out of the fat of the cow as out of her milk, and at half the expense, that it would be a benefit to everybody in the country who had butter to buy. But the weak protest for the protection of the general interests of the whole people was not heeded, and Congress passed a bill laying a tax on the new butter sufficient to stop the sale. Here was an evident case of killing competition for the sake of the farming interests, and the force of their unorganized sentiment alone was sufficient to secure the desired legislation. But when the farmers attempt to form a trust, they will have to kill competition among themselves instead of outside competition; and that is a different and far harder matter.

To agricultural laborers the same rule applies which we have found to govern other unskilled labor, viz.: that combination cannot effect much in raising wages. Added to this is the fact that they are widely scattered, and that a great proportion do not follow this as a steady occupation. In England, indeed, there is an agricultural laborers' union, and we may possibly come to that here. But our circumstances are widely different. The fact that in many sections the agricultural laborer is not a "hand," or an "employé," or "servant," but a "hired man," is an important one, for the difference in terms denote a vast difference in conditions. It is hardly likely that an organization of any sort is to be expected among those in this occupation.

This last division of occupations contains the most members of any of the four divisions. The farmers of the country number 4,225,945 and the farm laborers number 3,323,876. Other minor occupations of the division, as gardener, florist, etc., bring up the total engaged in agriculture to 7,670,493.

We can now make some interesting comparisons. The evident effect of monopoly is, in general, to tax the community at large for the benefit of those who own the monopoly. Let us see what proportion exists between the two classes:

Total number of persons engaged in manufacturing, mining, trade, and transportation (occupations more or less monopolized)5,647,368
Total number of persons engaged in agriculture and in furnishing professional and personal services (occupations not monopolized)11,744,821

Thus at the greatest estimate we can make of the number benefited by monopolies, for each man who is gaining by them, two are having their income reduced. If we take the estimate previously made, that the utmost number of persons who can possibly be reaping benefit by ownership of the especially profitable monopolies, trusts, transportation lines, mines, etc., is one million, we have opposed over sixteen millions of the community who are being taxed by their operation. Let a sharp distinction be drawn at this point, however. The above comparison is to be confined to the things between which it is made, and not confused with others to which it has no reference. It is not a comparison of the sort which social agitators are fond of making between the great numbers of the working classes and the relative scarcity of the wealthy. Except so far as the operation of profitable monopolies by the few tends to bring about this unequal distribution of wealth, that is a matter with which we have nothing now to do.

There is one point in this connection, however, which it is well to make plain, as it concerns a class of people which is not included in either of the four divisions that we have already described—those who live on the income of their property.

We have before alluded to the fact that in the popular speech "capitalist" and "monopolist" are often used interchangeably. If we carefully consider the real status of the capitalist, however, we find that of the three requisites of production—labor, capital, and natural agents—capital is the requisite which is most perfectly secured from the control of monopoly. The rate of interest for the use of capital is regulated so perfectly by the law of supply and demand, that all the anti-usury laws which have ever been enacted have been able to accomplish but little in enabling the borrower to secure loans at a less rate than that prescribed by competition. The reason for this is plain on consideration. The total supply of accumulated wealth of the whole civilized world is engaged in this competition, and the millions of wealth which are added every day are new contestants in the market. Competition in other products is held in local bounds by the cost of shipment over long distances; but wealth in the form of value can be transferred quickly and easily to any part of the civilized world where a market awaits it. Every person who earns money or owns property is a potential competitor, in that he can be made to lend his capital for great enough inducements. Under the pressure of this competition, the price for the use of capital—the rate of interest—has steadily fallen; and the enormous production of wealth of which our industrial resources are now capable is such that the fall is certain to continue, and a very few years will see loans at 2 per cent. as common as those at 4 per cent. are to-day. Combination to restrict competition among those who loan capital for investment is an utter impossibility. The number of people with money to loan, or with property on which they can raise money for that purpose, if they wish, is too large a proportion of the population to be ever brought into a combination to restrict competition. The stringency which sometimes occurs in the money market need not be cited as a contradiction of this statement. That is a matter which has only to do with the currency. The broad fact, and it is a most important one, is that capital, a necessary agent of production, can never be monopolized.

X.
THE THEORY OF UNIVERSAL COMPETITION.

We have now examined all the important occupations in which men engage for the purpose of gain; and we have found that while certain large classes of men still have the returns for their industry fixed by the laws of competition, other large and important classes have been able to check and limit competition, so that their returns from their work are constantly increased; while others still, are in possession of certain agents, so necessary to the community and so rare, that a price can be exacted for their use greatly in excess of the original cost to their owners. Some of the effects of this state of affairs it is easy to perceive. We have, indeed, pointed out for each monopoly described some of the especial abuses to which it gives rise; and it is plain enough that the general tendency is, first, to greatly enrich the possessors of the strongest monopolies at the expense of all other men; second, to give a certain degree of advantage to the possessors of minor monopolies,—as, for instance, monopolies in articles which are luxuries, and can easily be dispensed with; and third, to seriously injure all those engaged in occupations in which the price of the product is still fixed by competition.

Every one will agree that this is an evil state of affairs. It is not just that my neighbor, who owns a mine or a railroad, should ask me what he pleases for coal, or for carriage of my produce to market; while I, being a farmer, must sell the products of my labor at a price determined by competition with the products of ten thousand other farms. No one can deny at this day that it is contrary to the principles of justice to give to the men in any one occupation or calling an advantage over those in any other, except in just the degree that one occupation is more beneficial to the world than another. The question then arises, how may we best remedy this state of affairs? Shall our panacea be to do away with all monopolies, and put every industry back upon the competitive system? If so, by what means are we to apply this remedy? Or shall we go to the other extreme and adopt the antipodal doctrine to the foregoing, that competition is an evil which ought to be done away with; and then proceed to abolish competition in every trade and occupation where it still exists, if we can find any possible means of accomplishing such a task.

The investigation we have already pursued gives us no answer to these questions. We have thus far studied facts, and made little attempt to deduce from them general truths. We are now informed as to the widespread growth of monopoly; and we have paid some attention to the injustice and wrong to which it gives rise, in order that we may understand the urgent necessity for finding the right remedies, and finding them at once. Our study is henceforth to be devoted to this end. How shall we go about it? In the first place, it is evident that we might make a far wider and more detailed investigation of existing monopolies, and still be no nearer our desired end. We might study the facts concerning each especial railroad monopoly in the country, for instance, without reaching any valuable conclusion with regard to the proper method of restricting railroad monopolies in general. But if we were to take the monopoly exercised by a single railroad company, and study the principles on which it is founded and the laws by which it is governed, we might then be able to state something of value in reference to proper methods for its control. Evidently, then, principles rather than facts are to be the chief subjects of our future discussion, although, of course, we can only discover these principles by investigating the facts already found, together with others which may come to our notice.

Our very first and most obvious generalization from the facts which we have studied is, that in all the monopolies we have considered, the inherent principle is the same, and the effect on the community is of the same sort. Therefore, instead of hunting for separate remedies for railroad monopolies and trusts and labor monopolies, we will see what the general problem of monopoly is, and what is the general nature of the remedy that should be applied; the details applicable to each case will, of course, be different; but the underlying principle must be the same.

But if we examine our problem a little more closely we see that the word monopoly seems to be only a negative, expressing the fact that competition is absent. We will therefore direct our studies to competition itself, and will consider first its action as the basis of our social system.

In the most primitive condition of man which we can imagine, each person provided for his or her own need. The competition which then existed was not competition, in the sense which we use the word in this volume, but was a struggle for existence and a gratification of the baser desires, of the same sort as that which now prevails in the brute creation, resulting in a "survival of the fittest." With the introduction of the family relation, the principle of the "division of labor" was utilized, the female doing the hard and menial work, while the male devoted himself to hunting and fishing, or subsisting on the results of his helpmate's industry. As men's wants increased and they became more industrious in supplying them, this division of labor was extended. The man most skilful in fishing neglected the use of the bow and spear, and his surplus of fish he exchanged with his neighbor for the fruit of the chase. The very same principle applied to different tribes brought about the first commerce. A pastoral tribe, with large flocks and herds, exchanged their surplus products with less civilized tribes who continued to live by the chase, or with a more civilized people who had begun to till the soil.

It is plain that these were first steps in civilization. Man, so long as he supplies only such of his wants as he can supply with the labor of his unaided hands, must remain in a half-fed, half-clothed, and untaught condition, because his strength and skill, when diverted in the many directions which his wants require, are not enough to enable him, even when he spends all his time at work, to supply himself with more than the barest necessaries of life. It would be interesting to trace the development of this principle of action through its various stages down to the present time, when we see men everywhere working at various trades and occupations, and always to supply some want of their fellow-men. Every person in the community is absolutely dependent upon a multitude of others, most of whom he knows nothing of, for the supply of almost all his wants. Human society is thus growing more and more interwoven and interdependent. The motto of the Knights of Labor is a true one, apart from the altruism involved in it. "An injury to one is the concern of all," because the mass of humanity is connected and woven together by such strong ties of self-interest, as well as fraternity, that a calamity to any class or country is felt in some degree throughout the civilized world. This is vastly more true now than it was a half-century ago. Under such conditions as existed then, the doctrine of laissez-faire, that the government should confine itself to the prevention of violence and crime and the maintenance of national honor and integrity, letting alone the industries of the country to develop and operate according to natural laws, was not liable to do harm. But the conditions now are wholly changed. The interdependence of the community involves a moral inter-responsibility, and the time has come when we must recognize this by making it a legal responsibility as well.

We are now ready to consider in detail this inter-relationship of society, and to examine the natural laws which govern it. We have already stated the fact that, broadly speaking, each man is engaged in supplying the wants of his fellow men, because in that way better than in any other he can supply his own wants. We shall find this an easy matter to understand if we conceive that every man puts the products of his labor, of whatever sort it be, into a common public stock (offers it for sale), and takes out of this common stock (buys) the various articles which he wants. He does the first simply that he may do the second, not because he desires to benefit his fellow-men. The money which he receives (as we do not propose to consider here any questions regarding the currency) we may regard as simply a certificate that he has done a certain amount of work for the world, the measure of which is the number of dollars he receives; and on presentation of that certificate, he can obtain other articles which he desires.

We have next to consider the fact that there is a great variation in the amount which a man can take out from this common stock. One man is able to provide himself from the common stock with a host of luxuries, while another may only take out a scant supply of the barest necessaries of life. If this distribution operated with perfect equity, a man would be permitted to take out of this common stock exactly in proportion to the benefit which the world at large received from that which he put in. No human judgment, however, is competent to fix, with even an approach to precision, the relative actual benefit which each member of society renders to his fellow-men as a whole. But our social system effects that for us better than it could be fixed by any arbitrary human judgment. This it does by a law known as the law of supply and demand. Instead of the actual benefit, this law takes what people choose to consider as benefit, which is the granting of their desires, whether they desire things hurtful or beneficial. It is these desires for things which others can produce which constitute demand. It is to be borne in mind that this is a broad term, and includes not only desires for food, clothing, and actual things, but for service of every sort, in short, demand is the desire for any thing whatever for which people are willing to pay money. But when there is this demand—this willingness to pay money for any article—people begin at once to supply it, because the money they receive allows them to take goods which they wish from the common stock. Evidently, if there is an unlimited supply of any thing, people will not pay money for it. People will not pay money for fresh air to breathe when they are out-of-doors, and the supply is unlimited; but when indoors, the supply may be limited, and they will spend money to have ventilators and air-pipes built to supply them with fresh air. Or take the contrary case: The supply of some commodity, say flour, falls very short. Evidently less flour must be used by the world than was used in the years of a more plentiful wheat harvest. But no one will wish to be the one to go without, and most people will pay a little more rather than do so. Therefore the price rises.

The competition which we have chiefly considered is the rivalry which exists between the men who supply the same sort of goods; but there is a rivalry among buyers as well. Speaking generally, every buyer is trying to purchase for as little as possible, and every seller is trying to dispose of his goods or services to the world for as much as possible, which each has a perfect right to do.

We have already seen that prices vary with the relative proportion between supply and demand, rising as demand rises or supply fails, and falling as supply increases or demand falls off. But to complete the wonderful perfection of the mechanism, the reciprocal relation is introduced, so that supply and demand vary with price. If the price rises, fewer people can afford to buy and more will be anxious to sell; while if the price falls, more people will wish to buy and fewer people will be willing to sell.

We can now easily see why some men are able to take out from the world's common stock of product so large an amount, while most men can take but a meagre allowance. By the law of supply and demand the price is far higher for the service which one man renders to the world than another. Let us take the operation of a large machine shop, for instance. Only one superintendent is needed, and he should be a man who has devoted much time to mastering all the details of the business, and is experienced and competent to so govern the work that a large product will be turned out at a small expense. There is a demand in the country, let us say, for 5,000 such men; but out of the 5,000 who are filling such places, there are perhaps 50 who seem almost faultless in their skill and industry, there are 500 who are with one or two exceptional faults, almost equally efficient, there are 3,000 who are fairly good men, and the rest may be classed as those who hold their positions because better men for the place cannot be had. So with the skilled machinists, the relation of supply and demand is such that the price of their labor is kept up to perhaps $4.00 per day. But of common laborers the supply is so related to demand that the price of their work is very low. Thus the three classes take very unequal amounts from the common stock. The superintendent, perhaps, is able to take five thousand dollars' worth of goods each year. The skilled workman can spend perhaps one thousand five hundred dollars, while the laborer can spend but five or six hundred dollars. Thus the men who secure the greatest amount of wealth in return for their services to the world, secure it because people are willing to pay it rather than pay less for men of less ability. This is not the same as rewarding a man according to the actual benefit which he does to the community, but it is an approach to it; and it seems to be as close an approach as is possible by human methods.

This social system is not the creation of any man or set of men, but has grown of itself out of the tendency among men to secure the things they wish for with the least exertion. And its theoretical working is marvellously perfect. Any thing which men desire sufficiently to exert themselves to secure it, can be bought with a small part of the time and labor, measured in money, which would be required if each made it for himself. Not only this, but the aim of every man is to do the greatest service to the world and best meet its desires, thus securing in return the greatest rewards for himself. Rivalry among purchasers constantly tends to increase the rewards of the producers, while competition among the latter tends toward the furnishing of a better article at a smaller price. These two forces hold each other in stable equilibrium, for a variation tends always to bring things back to their normal condition.

Let us look more closely at the theory of the competition among producers. We see that, speaking broadly, all occupations are competing with each other. If changes in the supply or demand raise the rewards in any calling, men will leave other work to engage in it. Men by the pressure of competition are forced to seek out the easiest and most direct methods, and to learn how to secure the greatest results with the least expenditure of labor and material.

It is this principle which lies at the very root of our industrial development. Men have so striven to meet each other's competition and outstrip each other in the production of superior goods at low prices, that the cost of the staple articles of consumption, measuring by the labor required to produce them now and the labor required by the clumsy tools and hand work of a century ago, is from a tenth to a hundredth of the cost in those days. It must be remembered, too, that this system of competition is in accordance with the sense of inalienable personal rights which is implanted in the breast of every man. The work of my hands and brain are my own. In disposing of it for a price, I have a right which none may deny to obtain such a sum as I can induce any one to pay me. If I choose to sell it for less than my neighbor, it is my right. In short, the open market is open to all; and every man has a right to sell there his labor, his skill, or his goods, of whatever sort he can produce, at such a price as he can obtain. The same is true of the buyer. I have a right to go into the open market and secure such goods as any one wishes to sell me at the lowest price for which he will part with them. A curious illustration of this sense of personal right is the custom duties on imported goods. It is an evidence of this inherent feeling of a natural right that both public opinion and the law hold that it is a much less serious crime to smuggle than to steal. There are a dozen people who would smuggle, if tempted to do so, to one who would steal. Another illustration is the opposition shown to sumptuary laws on the same grounds.

It is to be said that the fact that competition lies at the foundation of our industrial civilization, tersely expressed in the saying, "Competition is the life of trade," has long been known, and, to a certain extent, appreciated. The common law, based on the decisions of men most eminent for wise insight and sound judgment, has always held that combinations to restrict competition and establish a monopoly were contrary to public policy, and the protection of the law has invariably been refused, whether they were combinations of labor or of capitalized industries. The establishment of labor combinations, indeed, was long a criminal offence, as we have pointed out more fully in the chapter devoted to that subject. It must be said, too, that the principle has come to be generally, though rather blindly, understood by the masses of men. It is recognized, though perhaps not very clearly, that competition lowers the prices of goods, and that this benefits every consumer. Let a proposition to build a competing railroad line, or a competing electric-light plant be submitted to popular approval, and, under the impression that they are benefiting themselves, hard-working men will cheerfully assume heavy burdens of taxation to aid the new enterprise. So blind and unreasoning indeed, is this popular abiding faith in the merits of competition, that it has been responsible for some of the greatest wastes of wealth in unproductive enterprises that have ever been known.

We have now examined the theory of universal competition as commonly accepted at the present day, and it is rightly considered a fundamental principle of society. It is the practice of most economic writers of the orthodox school to lay great stress on the importance of this fundamental principle, and enlarge upon its various manifestations. The many attempts to limit and destroy competition, which we have studied, they consider merely as abnormal manifestations which are opposed to law, and so not worth while considering very fully. But we have seen clearly to what extent the destruction of competition has gone on; and, with this knowledge, the question almost inevitably occurs to us: Is not this decay and death of competition, this attempt to suppress it under certain conditions, too wide and general a movement to be treated as merely a troublesome excrescence? Is it not likely that there are certain fixed laws regarding competition which determine its action and operation, and sometimes its death? If this be so, it is of the highest importance that we find and study these laws; and to that purpose we will devote the following chapter.

XI.
THE LAWS OF MODERN COMPETITION.

Thus far in our study, we have assumed that we knew what competition was. Now, however, as we are to study it scientifically, we are in need of an exact definition, that we may know just what the term includes. Prof. Sturtevant, in his "Economics," says: "Competition is that law of human nature by which every man who makes an exchange will seek to obtain as much as he can of the wealth of another for a given amount of his own wealth." Simmer this down to its essence, and we have simply: Competition is selfishness. To the other evident faults of the definition we need not allude. It is a much more satisfactory definition which Webster's Dictionary gives us, for it includes the idea that competition necessitates two or more parties to exercise it: "Competition is the act of seeking the same object that another is seeking." But this is too broad a definition for our purpose. It takes in competitions for fame, social standing, etc., with which we have nothing to do.

Failing to find a satisfactory definition, let us make one, as follows: Competition is that force of rivalry between buyers or between sellers which tends to make the former give a greater price for the commodity they wish to secure, and tends to make the latter offer better commodities for a less price.

That competition is a force, even in the popular estimation, is evidenced by such common expressions as "the pressure of competition," "a strong competition," and indeed, "the force of competition." But these very expressions show us as well, what we have already found to be true in the preceding chapters, that it is not a constant force but a variable one. What, then, are the laws of its variation?

Let us see what we can learn by a study of three typical examples of the force of competition. Let us take first the business of growing corn. There are perhaps three million farmers in the United States engaged in producing corn, and each one of these competes with all the others. Is this doubted? We have defined competition as a rivalry that tends to make the sellers offer better goods for a less price. Now at first sight it may seem that there is no rivalry at all. Neighboring farmers work together in all harmony; and no man thinks that because his neighbors have raised a large crop of corn, he is in any way injured. And yet this tendency to give better goods and lower prices exists and is plainly felt. Suppose a new and superior variety of corn were introduced, which buyers preferred. Some farmers would at once begin to raise it, so that they might be more sure of a market and perhaps of a better price, and other farmers would be obliged to follow suit to meet the competition. Again, consider that the supply and demand adjust themselves to each other through competition. For suppose, at the ruling price, the demand to be less than the supply; then to increase the demand, the price must fall; and the cause of the fall in price is simply that the farmers compete with each other for the market, and lower their prices in order to secure a sale for their crops. Note, however, that the rivalry in this case never becomes a personal one. Each farmer recognizes that an increased supply lessens the price for his goods; but his neighbor's extra acreage is such a drop in the bucket, that he never thinks of it as being really a rival of his own crop.

Take as a second example, the wholesale paper trade. Here are perhaps three hundred men, each knowing personally many of his competitors and probably hating some of them cordially. Each striving to secure for himself all the trade possible, and to gain, if he can, his rivals' customers. He sends out his salesmen with instructions to, "Sell goods! For the best prices you can get, but sell them, anyhow." These "drummers" are sharp, active business men, they might well be employed in directing some productive process; but they go out and spend their time in inducing customers by all the means in their power to buy their goods. They spend money in various "treats" to secure the good-fellowship of the man with whom it is desired to trade, and use his time as well as their own. Another item of expense is for advertising and for keeping the firm name prominently before the purchasing public. All these things cost money, as any wholesale merchant engaged in a business where there is sharp competition can testify. It may be thought that a firm which would have the courage to do away with all these expenses and give the money thus saved to their patrons in reduced prices and better goods, would be able to keep its trade and even gain over its competitors. But it is hardly so; most men are more likely to be wheedled into taking slightly inferior goods at a slightly greater price.

Another matter to be considered in this connection is the variation in price. In the case of the producers of corn, we saw that prices were practically uniform at any given place, being fixed by the ratio of supply and demand in the chief markets of the world. But in making sales of paper, the sharp, close-dealing buyer is generally able to secure a better price than a buyer not posted in regard to the condition of the paper trade.

As competition becomes more intense, its burdens become more heavy to carry. Perhaps two of the largest houses in the trade, who are able to force prices lowest, come to a sort of tacit understanding that their salesmen "will respect each others rights a little and not force prices down beyond all reason." It is plain that here the foundation is laid for the establishment of a monopoly. Yet the agreement certainly seems to be nothing more than these two firms have a right to make. Its result is seen, however, in a slight increase in the price their customers have to pay. Soon the tacit agreement becomes a formal one. Then other firms are taken in. The first seed has borne fruit. The combination grows larger and stronger. The number of producing units is growing less. Finally it includes practically all the paper manufacturers in the country. Whoever wants paper must buy of the combination, there is no other source of supply. Competition is dead.

If the combination is strong enough and is managed well enough, it may be permanent; and prices of paper will be regulated by other laws than the law of competition. But suppose that the number of paper makers is so great and that they are so widely scattered that the combination proves difficult to maintain; local jealousies creep in, and charges are made of partiality on the part of the managers. The combination finally breaks up. Can we expect a perfect return to the old system of free competition? When men have once reaped the enormous returns that are yielded by the control of a monopoly, the ordinary profits of business seem tame and dull. There will surely be attempts to form the monopoly anew on a stronger and more permanent basis; and even if these attempts do succeed in producing only short-lived monopolies, the effect will be to keep the whole trade and all dependent upon it in a state of disquiet and uncertainty. Prices will swing up and down very suddenly between wide limits; and it is everywhere recognized that stability in price is a most important element in inducing general prosperity. A perusal of the trade journals for the years 1887 and 1888 will convince one of the truth that when a combination is once formed, its members are loth to try competition again. A considerable number of combinations which were formed in 1887 were soon broken up, often from the strength of old feuds and jealousies. But in almost every case they have been formed anew on a stronger basis after a short experience of competition.

This matter of the variation in price is a very important one, and it has an important influence in checking business prosperity. Men are far less apt to engage in an enterprise, if they cannot calculate closely on prices and profits. But the main point, after all, is the waste which is due to competition. It is for the interest of the public at large that the papermakers should devote all the energies which they give to their business to making the best quality of each grade of paper with the least possible waste of labor and material.

Take for a third example two railway lines doing business between the same points. We have fully pointed out the practical working of this sort of competition in the chapter devoted to railways. It is plain that the general effect is a fluctuation of rates between wide limits, an enormous waste of capital and labor, and ultimately, the permanent death of competition by the consolidation of the two lines.

In comparing now the above three cases, the most noticeable difference in the conditions is in the number of competing units. There were in the first example three million competitors; in the second, three hundred; and in the last, but two.

The first difference in the competition which existed is in intensity. In the case of the producers of corn, competition was so mild that its very existence was doubted. In the case of the papermakers it was vastly more intense, so that it caused those engaged in it to take steps to restrict and finally abolish it. In the case of the railroads it was still more intense, so that it was not able to survive any length of time, but had to suffer either a temporary or permanent death very soon. Let us state, therefore, as the first law of competition, this: In any given industry the intensity of competition tends to vary inversely as the number of competing units.