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If the company had each year added about 15 per cent to its assets by reinvesting part of its earnings, and if the conditions of the market permitted this continued expansion, the value of the property might be supposed to increase about fourfold in the decade. As the company did in fact add to reserve in this period about twice what it paid in dividends, this quadrupling in value of the property would imply earnings of no more than about 15 per cent plus 7 or 8 per cent - total 22 or 23 per cent. If we consider the circumstances of that time, the continued growth in demand for petroleum products, especially with added impetus of the war, one need not be surprised at earnings of such a per cent on investment for one of the chief beneficiaries of that demand.

Compare the financial history of this company with that of another chief beneficiary of the development in motor devices- the Ford organization (as given in the New York Times, May 5, 1923, quoting a statement to the Massachusetts Commissioner of Corporations): 1903, assets 'less than $100,000' — 1923, assets $536,851,939. Here is an increase in assets by more than 5368 times in twenty years. If the Indiana Standard Company quadrupled its value in ten years, the same rate of increase would have meant a sixteenfold increase in twenty years to Ford's 5368. Mr. Ford, who had in fact been reported as declaring that a fair market value of his business was a billion dollars, by this estimate appears to have surpassed the growth of the tortoise-like Standard, not in the ratio of 5368 to 16, but about 10,000 to 16, or 625 to 1.

The subject of railway earnings including the whole matter of valuation - is too complicated for consideration here. The tentative valuation under the direction of the Interstate

Commerce Commission fixed the total at about $18,000,000,000. The sum of capital stock and bonded debt of all the companies was reported at less than $20,000,000,000. As the dividend and interest are clearly not high percentages of debt and share capital, there is no reason to complain of railway earnings if we accept the Commission's estimate as valid. This estimate has been frequently attacked- especially by Mr. La Follette, who was active in bringing about this work of valuation.

Dispute may be avoided by accepting an estimate which he himself has made. As governor of Wisconsin about twenty years ago he published a statement on the value of railways in his state, estimating the earnings of the Chicago and North Western, and the Chicago, Milwaukee and St. Paul, on their property in Wisconsin, at about nine per cent in each case on the value of that property. He asserted that such a rate of earnings was excessive. It should have been noted, but was not, that the year in question, 1903, was a year of exceptional prosperity for the railways of the United States, including these two companies. There had been in fact, since about 1896 or 1897, a period of increasing prosperity in the railway business. The nine-per-cent estimate referred to two exceptionally well-managed and prosperous roads, and took no account of less prosperous years. The North Western, under Marvin Hughitt, had extended its tracks across prairies where the surveyor and the man with the shovel found no towns and no farms and the Company's financial management found for the time no revenue, trusting for recompense to industry and agriculture of the road's own creation. The railway business must be regarded as an oppressive monopoly, because, as the indictment is concretely stated by one of the chief complainants, nine per

cent was earned by two prosperous roads in an exceptionally prosperous year. At that time one could easily lend at six per cent on real-estate mortgages without the railway stockholder's risk of a decline in earnings in unprosperous years.

Among all lines of business, railways have in most countries been selected as a subject of exceptional control as having a singular power to exact from the public excessive payments. An examination of the financial history of railways in all parts of the world seems rather to indicate that there is in the railway business a singular inability to obtain for that service earnings equal to those frequently realized by other investments. This characteristic disability has been so clearly recognized that capitalists have, in many countries, refused to invest in what, by the monopoly-and-extortion theory, should be an opportunity to make easy money; so that governments have found it necessary to attract capital to this line of business by subventions and guaranties of interest - not only not only in new countries as those of Latin America, but in Belgium, Prussia, Switzerland, Italy, and France, where population is dense and traffic heavy, seemingly fit subjects for the profiteer.

In the South American supplement to the London Times of September 27, 1910, it was said that the São Paulo Railway in Brazil was the most prosperous railway in South America 'if not in the world.' This marvel of a railway, carrying about half the world's coffee, was paying dividends of 14 per cent. What other industry is there in which such a return on investment would be regarded as very exceptional or even a maximum?

The Prussian state railways have been regarded as among the most successful perhaps the most successfulof European railways. In the four years

VOL. 134-NO. 5

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1910-13 their yield in excess of operating revenue over operating expenses ranged from a maximum of 7.20 per cent on the investment to a minimum of 6.39 per cent. After deducting from this miscellaneous railway expenditures and interest on the railway debt, there remained as a surplus for the public treasury 1.9 per cent (taking the four years together) on the capital invested. The French lines were well planned to avoid paralleling or wasteful construction, yet up to the end of 1908 the Government had spent in aid of private roads $785,000,000. At the end of 1913, the purchase by the state of the Western Railway system, which according to the official promise was to cost the public nothing, 'had already cost the taxpayers 944,000,000 francs,' while according to the latest official figures the deficit on the state railways amounted to 345,000,000 francs (London Economist, January 3, 1914, p. 24).

In the first decade of this century the Italian railways showed an annual deficit. The Swiss railways from 1903 to 1912 showed varying deficits and small surpluses with an aggregate surplus of 13,700,000 francs (1.1 per cent of the price for which the state had purchased the roads). But no reserve fund had been accumulated as required by law, and the railway debt, instead of diminishing, had increased 40 per cent in ten years, amounting December 31, 1912, to 1,426,000,000 francs, though there had been substantially no extension of the lines, but only some improvements and double track. (Revue Economique Internationale, January 1914.) The railways of Belgium have been well planned and are well located amid a dense productive population. In their whole history up to 1910 tory up to 1910-beginning as far back as 1846 · the government roads have yielded a total profit of 66,600,000 francs, amounting in the whole

long series of years to less than three per cent of the capitalization of the roads as given at about that time. (Rev. Ec. Int., July 1914.) Spanish railway companies have commonly received subventions from the state. The State Railways of Austria have never yielded enough to pay charges on capital account; the public treasury in 1913 had to supply a deficit of about $10,000,000 and somewhat larger amounts in preceding years. (Rev. Ec. Int. July 1914.) From 1908 to 1912 the Norwegian Railways yielded only about two per cent each year in excess of operating revenue over operating expenses not all of which of course is available as interest on dividends. By that test (of net operating revenue) Finland, Bulgaria, Algiers, and Tunis, were as badly off as Norway; Sweden, Hungary, and Rumania were not much better off. (British Statistical Abstract, Foreign Countries, 1914.)

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As the Lilliputians bound the sleeping Gulliver to the earth, with cords from ankle to queue, so public authority multiplies statutes and ordinances to restrain the too powerful giant, while many of the same statesmen, with a double load of anxiety, imperil their budgets in providing sustenance to save the same giant from dying of malnutrition. If the railway is 'affected with a public interest' because of an inherent tendency to monopoly and too great gains, one is justified in looking for more frequent instances of railways earning at least enough to make them independent of public charity.

It is ordinarily futile to consider whether a certain percentage of income on investment is normal, as no one can define a normal rate. In the instances before us profits have in no case been greater than those known to any person at all acquainted with such matters as not infrequently accruing

to successful companies. I can recall corporations engaged in business, unmistakably competitive, yielding 30, 60, or even 100 per cent. It seems fairly safe to say that using indefinite terms with proper interpretation wherever a man or a group has rapidly gained what would be regarded as 'a fortune' out of scant capital, the annual profits have been more than 25 per cent of assets. Mr. Roberts, of the National City Bank, in discussing the subject, refers to Senator Capper who began with invested savings and now owns 'two daily papers, six weeklies, three semimonthlies, and two monthlies, several of them of wide circulation and large earnings, with aggregate valuation of millions.' Mr. Kresge is still well under sixty and had engaged in various employments before beginning with $8000 his business which in 1923 yielded profits of $9,493,988.

The lines of business activity whose earnings the public seeks to limit are not these or the activity of the automobile millionaires, but the beef business with its humble earnings of 3.10 or 13 per cent offset by some huge deficits, the oil business with 25 per cent as an ordinary return, and the railway business which is so constituted as to be, in most of the world, a starveling. Of 10,000 corporations in the United States, with total earnings at an average for the three years 1911-12-13 of more than a halfbillion dollars, there were 2571, each of which averaged for the three years from 20 per cent to 100 per cent or more. It would be easy to add much statistical evidence that the Standard Oil earnings, if about 25 per cent, were not very exceptional.

IV

The popular belief as to monopoly is open to objection for other reasons

less obvious but quite as convincing as any to be found in tables of investment and earnings; it implies a false conception of economic society, of the economic interdependence of men, and even in some fashion of man's place in the universe.

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About eighty years ago there came to full recognition the idea that as matter has the measurable qualities of weight and extension, so the forces of inorganic nature as heat, light, and motion are measurable and indestructible; that when one form of force is converted into another, the cause is equal to the effect. The same principle seems applicable (with great caution and modification) to social forces. This at least is intelligible and obvious: that in the processes of economic life forces may in some instances be measured against each other, and those clearly small by comparison cannot prevail over those clearly greater. This fact is very commonly disregarded. The Elgin Butter Board case is an example.

Here is another: the Federal Trade Commission, in its report on the Meat Industry, alleges that the Big Packers are engaged in a conspiracy, not merely to plunder users of meat, but, since they deal in other foods (dairy products, poultry and eggs, groceries) and since these operations extend to other countries (I quote the Commission's italics from Pt. I, p. 68), 'to monopolize and divide among the several interests the distribution of the food supply not only of the United States but of all countries which produce a food surplus, and as a result of this monopolistic position... to extort excessive profits from the people not only of the United States but of a large part of the world.' They ring the changes on this idea of monopoly and conspiracy. Fortunately they give a definite measure of the extent to which the five meat com

panies have advanced toward holding the human race in their power by threat of starvation. I quote: 'Armour's drive into the rice market in a single year is perhaps the most striking instance of the potentialities in this direction.' The Commission might have added, but did not, that 16,000,000 pounds of rice is about of one per cent of the rice crop of the United States, about 7 of the international rice trade. But not all the rice was held at one time; the effect on prices must have been distributed. Moreover what was bought was also sold, and selling must tend to depress prices as much as holding raises them. In the estimation of the Commission, however, this transaction had a prodigious effect. At any rate they solemnly call attention at this point to a 65 per cent rise in the price of rice during the year in question (1917). In the seclusion of their offices the Commission had not heard that tillers of the soil by millions over almost half of the earth had been forced to abandon their fields and that most of the great nations of Europe and America were competing for the world's diminished stores of food with all the resources of all their treasuries, driven by the frenzy of hate and terror which is war; that in the merchant fleets of all nations, on the railways, the carts of Indian highways, the backs of men over trails on Chinese mountains, the staple foods were being drawn to the camps with a suction as irresistible as that which draws the waters of the Great Lakes over the precipice of Niagara. (There were people in Paris in 1793 who did not know that the monarchy had been overthrown.) The Commission had not even heard that the prices of most other commodities had risen.

The power of competition in the livestock and meat business is evident in any ordinary report of dealings in a

livestock market, notwithstanding the perpetual assertion that the 'Big Five' fix prices to the destruction of the cattle raisers. When receipts of livestock increase, prices go down; when receipts decline, prices go up. Prices have in turn an effect on receipts; high prices increase, low prices decrease shipments.

I take one such report at random the Weekly Livestock Review of the U. S. Department of Agriculture for the week ending April 7, 1923. 'Cattle receipts increased during the week as a result of price advances during the previous week. On the initial day, however, when over 23,000 cattle were offered, much of the previous week's advance was lost, but during the latter days of the week receipts were moderate, demand fairly active, and daily price gains were made on all fat steers. . . . With a decrease of approximately 23,000 hogs for the week, trade was stimulated somewhat and all grades advanced 10 cents to 15 cents. In the face of liberal receipts, coupled with a slackened demand after Easter, fat lambs slumped for the week with the bulk of offerings declining 25 cents to 40 cents.' This is typical of such reports.

On reflection it must clearly appear that the forces which centre in any market for cattle or hogs are worldwide. The competing buyers of cattle in the United States are numbered, as the Trade Commission shows, by hundreds and thousands, while beyond our borders is the competition of yet more numerous thousands of purchasers throughout the whole list of nationalities on all continents. An attempt at lowering prices by holding off from the market would give great joy to the numerous pur

chasers for export who are always present, comparing the possibilities of purchase here with possibilities of sale in the countless markets beyond seas. In Argentina alone there are half as many cattle as in the United States; in Australia there are one third as many; in Germany before the war two thirds as many; and so in France, England, and other countries of Europe and Asia. The number of cattle offered, the prices at which they are offered, the prices which consumers here or elsewhere will pay all these factors have a fixity which no little group in Chicago or elsewhere can disregard.

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In the days before the Great War, when the peasants of Russia had a good crop they bought Chinese tea, the Chinese demand for English cotton goods increased, and the English factory worker bought more beef. Rains on the Argentine pampas would lower the price of beef; a burst of flame on the surface of the sun scorching the pastures of Australia would raise the price. The economic interests and activities of all peoples, of all individuals in all nations, are so intertwined, the production, sale, and consumption of all commodities are so interrelated, that we may regard the whole process of supplying the economic needs of all mankind within the range of the world's trade as one great composite process, one complex of infinitely manifold efforts conditioned in part by factors directly human, but also conditioned by all the biological and physical factors which determine the economic fortunes of men. If the top price of steers on a certain day in Chicago is $9.45 per hundred that is not a phenomenon of Chicago; it is a cosmic fact. A little fish cannot stop a man-of-war.

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