VOL. XIX.

No. 6.

How Good

There is a great deal of fiction in the Times Come distinctions that men commonly make and Go. between what they call good times and bad times. The really good times are not always recognized or admitted until they have gone by. The times that men look upon as the beginning of a period of good times and as highly encouraging on that account are not infrequently the periods of danger, because they lead to overconfidence, rash investment, and the undue extension of credit. Such times are marked by the floating of ill-considered and over-capitalized undertakings and by speculations that are doomed to react disastrously. For several years past the farmers of the West have had good prices for their crops, and have been paying off old indebtedness and generally solidifying their positions. They had been compelled for some years previous to exercise the most rigid economy under very trying and difficult circumstances. It will be well for them to consider that these more recent seasons of good crops and good prices have constituted for them a period of reasonable prosperity. We may hope certainly that no sharp reaction is to overtake the business world at once; nevertheless this is exactly the right time to take account of stock and make ready for the worst that could possibly happen.

Advancing Prosperity

The prosperity that began with the farmers some three years ago has at length fully overtaken the merchants and manufacturers. Long-continued depression had made prices extremely low; and even with a reduced output there had been more than enough staple goods manufactured, because the purchasing power of consumers was limited. The revival of agricultural prosperity, coupled with the inducement to buy that the low prices afforded, gradually heightened the demand for all kinds of useful wares. The merchants were obliged to replenish their stocks and the idle factories began to fire up the rusty furnaces. Abundance of work for idle operatives and

artisans in its turn made these working people larger purchasers of clothing and current supplies. And so the demand increased to the extent of justifying better prices for manufactured goods, while better prices permitted the payment of normal wages.

Restored Wages.

There had been a very general re

duction of wages in all lines of manufacture. Now that the mills are busy and there is work for everybody, the old scales of wages have been very generally restored. Mills and factories are crowded with orders at remunerative prices, and employers could not afford to face protracted strikes. It is at such times that close and careful labor organization seems to be beneficial to workingmen. In very dull times, when the market is glutted with iron and steel products, for example, and prices are abnormally low, there are no means by which labor unions can secure for their members steady employment at high wages. For the employer has always the alternative of shutting down his works and going off to Europe to enjoy himself. But in lively times, like those that we find in the present season, it is profitable for employers to keep their mills running at high wages. such conditions it is easy to see that a thoroughgoing organization of labor may hold a very considerable latent power without seeming to assert itself at all. There is fierce denunciation of labor unions and their methods in some quarters, and there are even men who would be glad to suppress all labor organizations by law. tainly at times the methods of labor unions are high-handed and even tyrannical. The nonunion worker has rights, and the employer of non-union labor is entitled under the laws to protection. Labor unions have often needlessly sacrificed the sympathy of the public by their harsh treatment of men who do not belong to their organizations. But it does not follow, however, that trades unionism is not both justifi able and advantageous.

Under

Cer

The

If the organization of labor, even to Combination the extent of the complete and moof Capital. nopolistic control of a great many important trades, is defensible and is a part of the natural and unavoidable movement of economic society in our age, it may be none the less true that the combination of capital engaged in a given line of industry is also in the main trend of our economic development, and therefore not to be prevented either by denunciation or by enactments. Up to a certain point the old-fashioned competitive system was not wasteful, but, on the contrary, afforded a useful regulation of production and of price. The whole tendency, however, of business progress-especially in a country like ours where vastness of natural resources and the rapid growth of population promote the growth of small businesses into enterprises conducted on a large scale seemed to render the competitive system inadequate and wasteful.

In the case of particular enterprises Railroad protected by the patent laws, for inAmalgamation. stance, the economies of production on a large scale, and also of distribution freed from the special expenses that competition entails, were very readily apparent. In railroad management competition beyond a certain point proved to be costly for the patrons of the roads as well as disastrous for the owners. Consolidation came to be the order of the day, with the result of the evolution of a few large systems. Under the operation of these methods freight rates became lower and lower, so that the general public, far from being the victims of transporta tion monopoly, have been its most obvious beneficiaries. This remark, of course, is to be taken with many modifications when applied in a specific way. Individual patrons of railroads have suffered wrong through favoritism shown toward their business rivals. Particular communities, also, have suffered through an arrangement of rates which favored the up-building of competing centers. The railroad systems of the country have by no means been perfectly administered in this new era of consolidation. Nevertheless there are few people who would not be ready to admit that railroad service is much cheaper and better now than it ever was before in the United States, and that it is cheaper and better here than in other countries.

nature may indeed be contrary to both the letter and the spirit of the interstate commerce act; but the actual maintenance of non-competitive rates and a certain amount of coöperation in the distribution of business is not only better for the holders of railroad shares, but it is also better for the shippers of goods and the traveling public than rate-cutting, secret rebates, and the administration of railroad systems in a spirit of warfare against other systems. The fact is, of course. that the old-fashioned competitive system, carried to a logical extreme, is closely analogous to warfare; and the whole tendency of our civilization is away from Ishmaelitish methods, and is moving nobly and wholesomely in the direction of cooperative and peaceful methods. The worst about our railroad system in times past was not the danger of its drifting into monopoly, but the unnecessary and speculative construction of competing lines, the kindred evil of over capitaliza. tion, and the mischievous issues of securities that represented neither actual investment nor developed value. These methods were bad, of course, for the country at large; but probably the worst sufferers from them were not the communities through which the railroads passed, but the people who were deluded into buying the fictitious stocks and unsafe bonds.

Public Welfare Not Menaced.

For many years the railroad systems of the country have been going through the stage of financial reorganization as a penalty for the reckless and improper methods of the 60s and 70s. The clear tendency of the times is to knit together yet more closely the whole texture of the country's railroad system. It is not at all impossible-so swift is the movement nowadays of industrial and financial combination-that all the railroad systems of the country might, in the not very distant future, be amalgamated into one great corporate whole. Nor is it to be taken for granted without careful thought and study that such a consummation would be deplorable. The legislative power to regulate railroad rates has become established in practice and is firmly upheld by the decisions of the courts; and the State also possesses the power of taxation. It is not easy to see, therefore, how the community can be in danger of losing its liberties through the further reduction of the railroad network of the country to a complete and unified system under one harmonious control. Nor would it seem to matter very much whether this issue came about through the legalization of pooling contracts or through the actual consolidation of railroad properties. This will seem a hard saying to many readers holding the old anti-monopoly views.

Public Own

It would be so much the easier for ership a Sub- the Interstate Commerce Commission sequent Issue. to secure uniform, accurate, and intelligible railroad accounting; and with perfect publicity the rate-making and tax-levying authority of the State and nation could exercise all needful control. Under such conditions, if the time should ever come when public ownership and direct operation of the railroads should be deemed desirable, the transfer could be brought about in a very simple way on some such plan as the exchange of government bonds for railroad securities at an agreed market value. The thing to be desired is the elimination from the railroad business of all speculative elements, so that after expenses of operation and maintenance are paid, and the managers and employees receive fair salaries and wages, there should remain just enough profits to pay interest and dividends upon an honest capitalization. This process seems to be working out through natural business laws. When it is pretty well completed it will be soon enough, in the United States, to consider whether or not the State ownership of railroads is desirable; and when that time comes it may perhaps make no very great difference whether the Government of the country manages the railroads directly or whether it leaves them to be managed by a private monopoly subject to public control, regulation, and taxation.

All great transitions in the business Transitional world are fraught with many inciDisturbances. dental grievances and with much temporary inconvenience. Thus most thoughtful men would hold it to be utterly fallacious to take the ground that it can be harmful to the community to introduce labor-saving machinery. On the contrary, it is agreed by most sound thinkers that the invention and use of appliances for saving labor must inevitably add to the general prosperity, and ought therefore to be en

A CASE OF THE BIG FISH SWALLOWING THE SMALLER ONES. From the Herald (New York).

Neverthe

couraged in every possible direction. less, at the moment when the labor-saving device is introduced in any given trade, there results no little hardship to many individuals. It is similarly true in the business world that the growth of production on a large scale and a rapid extension of the sphere of combination has crowded many small capitalists, manufacturers, and traders to the wall and caused no little loss and confusion. This, however, involves no new principle. Competition has never at any stage been a merciful or considerate system of business organization; and it is by the methods of competition that the modern combination crushes out those who do not coöperate with it.

Origin of the a "Trust."

The new combination popularly called trust" is ruthless in its opposition to surviving or incipient competitors, but its methods in the main are not very different from those that a powerful business man fifty years ago would have used to break down his weaker rivals. These methods are not admirable, but it is well to remember that they belong not to the new system of cooperative capital, but to the old competitive system that the new methods are proposing to supersede. The word trust as applied to this new method of amalgamation in industrial production is not accurate or well chesen. Some years ago, it is true, the name fairly applied to several combinations. Their plan was not to consolidate what had been competing properties, but to escape the wastefulness of the competitive methods and gain numerous advantages that would accrue from union and harmony. The respective owners did not give up the ownership of their properties, but they assigned their holdings of stock to a common board of trustees, which was authorized to operate the plants as one system, although separate corporations were nominally maintained. This arrangement, which constituted a trust in the literal sense, was assailed on legal grounds and was abandoned.

The

The method that came to be subRights of stituted was that of selling the properMonopoly. ties outright to a ties outright to a new corporation. Property rights are secure under our national and State constitutions, and one of the most vital of property rights is the right to sell what one possesses. If a corporation may be formed for the purchase of one sugar refinery, it will in practice be difficult, if not impossible, to prevent its purchasing or building other sugar refineries; and there would seem no constitutional method by which its progress might not result in a monopoly. Such monopolies might, of course, purmeasures which would be harmful to the

sue

community and against which laws could properly be made. The devices of public regulation and taxation could always be brought to bear; but against the mere fact of monopoly per se there would seem to be no successful form of legal opposition. The government Patent Office every day grants control over certain inventions with the avowed object of promoting for a term of years strict monopoly. If, in some field of industry not dependent upon the protection of the patent laws, a monopoly should arise by reason of the fact that a single individual or firm or corporation had come into control of the entire production of a given article, it would not follow necessarily that there was any greater impropriety in this particular monopoly than in those especially fostered by the Government under its patent laws.

Freedom with Regulation.

In a free country there must be freedom to combine and to coöperate, just as there must be freedom to compete. On the other hand, the regulation and control of monopoly is permissible and necessary, just as the regulation of competition at certain points has been found desirable. Thus in the field of competition the laws now protect the good employer from the unfair competition of bad employers by regulating the character of factories, the time conditions under which women and children are employed, and in various other ways. The tendency now shown in a number of our State Legislatures to enact laws striking directly at the formation of monopolies is readily explained, but does not indicate very mature consideration. A, who is a grocer in the town of B, would naturally be glad to be the only grocer in the town; and if he could form a part

nership with C and D, his principal competitors, and the new firm could then buy out or crowd out their smaller competitors, there would emerge a monopoly. The methods used in obtaining that monopoly might not have been very kindly or polite, but they might, nevertheless, have been strictly within the pale of the law; and it is conceivable that the monopoly might be maintained indefinitely through the economical and careful conduct of the business and through the policy of sharing with customers the benefits derived from doing business on a large scale.

of the

Monopoly

Magnitude This illustration of the grocery store applies well enough to most of the Movement. monopolies that pass nowadays under the title of "trusts." It does not follow, however, because the principle of amalgamation is the simple one of bringing rival properties under a common ownership, that the movement is any the less stupendous in its volume or revolutionary in its consequences. It is entitled to all the attention that is being drawn to it, and to a great deal more. It would be strange indeed if a movement that is changing the whole face of the business world should not be reflected in any manner in political and legislative discussions. We publish elsewhere a very interesting article on this recent enormous movement for the aggregation of capital, from the pen of Mr. Byron Holt, a careful student of the subject. At the present stage the public needs information; and the things to encourage are study and inquiry, rather than the attitude of furious hostility. The laws that have been enacted with the intention of checking the aggregation of capital have certainly had no decisive effect of that sort. The opposition to the old form of trust has simply stimulated the formation of those more complete aggregations that involve the bona fide transfer of the property to a new company that thus ab. sorbs the old corporations.

Cohesive Power of

The cordage trust was one of the earlier combinations which went to the "Trusts." pieces a time or two, and which gave the public the impression that the combination movement in itself was contrary to natural economic tendencies and might therefore be thwarted. But if the rope trust indeed was held together by ropes of sand, it was a marked exception. The industrial monopolies, for the most part, show signs of great stability. It is likely enough, of course, that where they have been recklessly and foolishly over-capitalized-with the idea that monopoly means the opportunity to advance prices and oppress the public-they will come to financial grief and be compelled to reorganize. But

reorganization in such cases means nothing very different from railroad reorganization. Where a railroad has gone into the hands of a receiver, the trains continue to run and the shippers and passengers see no difference. The reorganizaA great number of so-called trusts have been floated upon absurd over-issues of preferred and common stock, and the water" will sooner or later have to be squeezed out. It does not follow, however, that the combination will dissolve into its original elements, and that its parts will go back to the old system of competing with one another as independent concerns. The probability, on the contrary, is that the advantages of monopoly production and distribution will be firmly retained. is to be regretted that the laws in this country are not as rigid as those of some foreign countries as respects capitalization of joint stock enterprises. But the trick of over-capitalization, although intended to aid in fleecing the public by making it pay prices that would earn dividends on fictitious stock, is likely to react in the end upon the shareholders.

tion is a matter of finance.

It

The period through which we are Trusts and passing, in which the competitive Great Fortunes. economics of large production drives capital inevitably to seek the security of combination, abounds in those uncertain elements which give opportunity for the formation of immense fortunes, due rather to abnormal conditions than

to relative superiority in the management of business enterprises. This phenomenon of the rapid growth of colossal fortunes will doubtless continue until the transition is fairly complete and the great industries settle down to steady-going methods under strict public regulation. The tendency will then be for labor, on the one hand, and the State through taxation, on the other, to absorb everything except a reasonable profit upon the capital employed in the monopolized enterprises. The speculative element in the so-called "industrials" will have a tendency to disappear as in the case of the railroad systems; and it may be expected that there will come about a gradual diffusion of ownership in these great enterprises through the investment of the savings of the people in their stocks and securities, quite as in France, where the real owners of most great undertakings are working people and small investors. It is altogether too soon to say that the tendency to the accumulation of great fortunes will not be squarely offset by other and even more potent tendencies. The next census, in so far as it may carry out a special inquiry into the wealth of the country, is not likely to find that the past decade has put an increased proportion of the national wealth in the hands of the millionaires. It has certainly produced the phenomenon of a larger number of multi-millionaires. the advance in general prosperity of more than 70,000,000 people easily counterbalances the abnormal growth of individual fortunes.

But