[iCimiHtsnUiH.'iitiHfmi! '^linWSOl^^ v/.9i)3AINnwv '^c/Aav«HnA>^' 'C/AHVJI , CO ■■■ ■ ■^ J" ^lUBRARYO? ^IUBRARY(?/ Cntf^ j.OFCAUF0% ^OFCAllFOff^ >&Aava8niJ^ .^WEUNIVERJ/A %OJnVDJO=^ '^tfOJIWDJO'^ ^J:ifl]DKVSO\^ .^EUNIVER% ^TiUONVMll^ ^\WEIJNIV!R%. ^lOSANCEUf^ iWEUNIVERS/A ^lOSANCEl^^ o '^rju'wv.w^ ■V/OHAIMn.lUM^ -s^lUBR u7 ^i^nDNvsoi'^ "^/yaaAWii-jftV^ '^.^ojnvjjo^ AOFCAllF0«t> ^OFCAl ^ ^iUBRARYO^ ^UIBRARYQ^ ^OFCAilF0% ^OFCAUFORij^ '^>&Ajiva8ni'<^ ^AMvaani^ ^\WEIINIVER% .5.WEUNIVER% "^UDWSOl^ iVlOSAI "^/SaJAII "^/SMMI .5J(\EUNIVERS"/A avIOSANCEI^ ^t-UBRARYO^ v^illBR '^i'ii33Mvsoi=<^ ^aaAiNaiwv** 05, >— ' » ^ c? 5-> ^(?AHvaan'# "^^^Anvjiaiii^ i3 i — '» I- £? Jt?Aava8ii# - _ ^ o ,^WE•UNIVER% ^iosAi«:fii^>. 3 3 ■^/Sa3AINn-3WV^ o %a3MNn3WV AWEUNIVERJ/a ^TilJONVSOl'^ ^lOSANCElf/^ o ^ ■V/5a3/MN(13WV* -^vMllBRARYOc. ^lUBRARYQr .H ^ d jm^ ■dr. iV? yt J yMM' i< ^^OJIIVJJO'^ ^^OJIIVJJO'^ \WEUNIVERSyA %i3nw?;ni^ ^lOSANCflfj;> o -< AOFCAllFOftk, .^;OFCA11FO%, ^sMUBRARY6k %OJI1V3JO^ 4^1UBRARYQa § 1 ir-^ ^ '%OJI1V3JO>' .^WEUNIVERS/A o "^J^13DNVSm=^ ^lOSANCElfj^ o %a3AINf)-3WV ^^OFCAIIFO/?^^ ^•OFCAIIFOR^ \WEUUIVER5/A ^lOSANCElfj^ o ' >&Aavaaii# ^^Aavaaiiii^ r~ 38 TRUSTS AND THE PUBLIC railroad axles was from 15 to 18 cents a gallon in 1875 ; it is now sold at from 7 to 9 cents. The production of paraffine wax since 1870 has been increased from 6,000 to over 20,000 tons a year, and the price has been reduced from 9 to 5 cents a pound. The manu- facture of these by-products has involved the use of large quantities of sulphuric acid, which the trust de- cided to manufacture for its own use, and, through improved processes, has reduced its price from 1^ cents a pound to 8 cents a hundred pounds. It has thus not only greatly reduced the price of its main product but it has converted mere waste into numerous by-products every one of which has been greatly improved in quality and lowered in price. The cost of cotton-seed oil, sugar, and the transportation and telegraph service, under the control of the most conspicuous trusts and combinations, has fallen in a similar ratio. There has indeed been a general cheapening of com- modities during the last fifty years, but facts every- where show that the fall in prices has been greatest in those industries where capital is most concentrated ; for instance, articles produced by hand-labor are not cheaper, but in most cases dearer, than they were half a century ago,— witness art-engraving, sculpture, wood and stone carving, brick-laying, mason-work, etc. ; and, with the exception of wheat and a few other articles the price of farm, garden, and dairy products is higher now than in the first quarter of the century. It is in manufactured products that the great reduction in price has taken place. This is because in manufactur- ing industries only have large capitals and labor-sav- ing machinery been employed. The reason the jjrice of hand-labor products has increased is that wages THE ECONOMIC ERRORS OF TRUSTS 39 have risen with the general rise of civilization, and none of the labor has been saved by the use of ma- chinery. In agricultural industries machinery has been introduced only to a limited extent, and hence has not lessened the cost of production perceptibly more than the rise of wages has increased it ; and agricultural prices have remained practically static. In manufac- turing, through the extensive use of capital, the cost of production has been reduced by improved machinery very much more than it has been increased by the rise in wages, hence the marked lowering of prices. This distinction is equally marked in different lines of manu- facture, the economy in production and the fall of prices being greatest where the largest capitals and best methods are employed. ]^othiug better measures the real cheapening of products than the purchasing power of daily wages. We have elsewhere ^ furnished statistics of wages and prices which show that from 1860 to 1885 the purchasing power, in two hundred staple articles, of the average weekly wages in twenty mechan- ical industries increased a little over fifty per cent. Applying the same test to the production of cotton-seed oil, petroleum, and sugar, and to railroad and telegraph service, which are in the hands of the largest combina- tions, we find that from 1860 to 1890 the average pur- chasing power of the same wages was increased 236 per cent., or more than four times as much as those of the non-trust corporations, as shown in the following table. Judged by the standard of eflBciency of service and cheapness of product, as here shown, trusts are mani- festly a superior form of industrial organization : 1 Principles of Social Economics, p. 408. 40 TRUSTS AND THE PUBLIC Purchasing power of weekly wages in I860 1890 Percentage of increase Cotton-seed oil Suo'ar refined 18.02 gals. 90.09 lbs. 530.00 " 654.00 " 822.00 '« 1309.00 " 8.25 " 107.89 " 29.93 gals. 152.00 lbs. 1317.00 " 1530.00 " 1976.00 " 2822.00 " 31.66 " 1086.89 " 66 67 Freight, New York to Chicago : First class 148 Second class Third class Fovirth class Telegraph messages . . Petroleum, refined . . . 133 176 115 283 907 Average percentage of increase. .236 Of course, all trusts have not made so good a show- ing as these, which we have cited because they are among the oldest and largest concerns of their kind, and are, moreover, legitimate economic organizations. Their success demonstrates the correctness of the prin- ciple of capitalistic concentration, and shows that prop- erly conducted trusts are truly beneficial to society. There are economic and uneconomic trusts, just as there are the genuine and the spurious in every walk of life. Economic trusts are those which, like the Stand- ard Oil Company, the Western Union Telegraph Com- pany, the American Sugar Refining Company, and the great railroad systems, have used their consolidated capital to acquire profits through economies in pro- duction, and have shared the gain with the community by giving lower prices and better service. All such contribute to the permanent improvement of society. There are combinations, however, that have as- sumed the name without the virtue, and have used their organization to benefit their promoters at the ex- pense of the public. Although it is true that this stand- and-deliver method cannot succeed permanently, it can THE ECONOMIC ERRORS OF TRUSTS 4I and does inflict injury for a time. Such is the history of " corners." Several so-called trusts have endeavored to employ this method, conspicuously the copper trust, which, instead of trying to increase its profits by im- proving the methods of producing copper, has tried to lock up the copper of all the world, and then to exact exorbitant prices or to deprive the community of the use of the metal. But, like Keene Avith his w^heat corner, and the Panama conspiracy it overreached its mark and collapsed, bringing ruin in its fall to many of its projectors. Several other combinations have tried to do substantially the same thing on a smaller scale. It is this uneconomic use of large capitals, this at- tempt of a few industrial pirates to exact large profits from the community by raising prices, that has brought trusts into general disrepute. Of course, it would be absurd to condemn legitimate industrial organizations for the misconduct of uneconomic combinations ; nevertheless, it should be remembered that public opinion is not discriminating ; it is likely to judge a class by its known specimens, and is much more likely to remember those who injure than those who benefit. The prevalent feeling against capitalists in general is encouraged by the direct abuse of successful business men by political editors, reflected and intensified in the fairyland socialism portraj^ed by all grades of fiction writers from Bellamy to Howells. Strictly speaking, therefore, although much of the opposition to trusts in particular and to capital in general is irrational, it has really been created by the uneconomic conduct of capitalists themselves. The chief reason for this is that capitalists, like laborers, are ignorant 42 TRUSTS AND THE PUBLIC of the subject of industrial economics. For the same reason that they mistakenly believe in cheap-labor pro- duction, they delude themselves with the idea that they can establish a profitable business by imposing upon the community ; consequently they have suc- ceeded in arousing the hostility of both laborers and the general public. A little more in this direction, and they will be handicapped by a network of socialistic, restrictive legislation. The political atmosphere is already surcharged with threatening rumors. The Sherman anti-trust law and the various laws against trusts, under which the Standard Oil trust has been forced to disband, foreshadow what is likely to come. Schemes for graduated taxation of incomes, to con- fiscate large f ortimes and make millionaires impossible, are being seriously considered by politicians, who, be it remembered, always stand ready to do whatever the people, wisely or unwisely, desire to have done. This would be a serious blow to industrial progress, and it would be a blow from which large capitalists would suffer most. The true remedy for the existing hostility to trusts and large organizations is in the hands of capitalists themselves. If they would disarm popular opposition, they must avoid furnishing superficial revolutionists with an excuse for creating public opinion against them by refusing all aid, either of money or influence, to uneconomic enterprises. If our great capitalists w^ould resolutely take this high economic position, the smaller ones would be compelled to do likewise, and the present universal distrust of capitalistic movement would soon be superseded by universal confidence. It is to be hoped that the piano and typewriter trusts THE ECONOMIC ERRORS OF TRUSTS 43 now forming and other projected combinations will act upon this principle, and thus help to create public con- fidence in the progress of our present industrial sys- tem, instead of furnishing additional arguments for its destruction. The error of trusts, then, is not the extent of their concentration of capital or their industrial supremacy ; it is their failure to recognize the economic law of their existence, namely, that an increased concentration of capital and commercial power in feioer hands is justi- fiable only on the condition of improved service to the community, either in hetter quality or lower price of what is furnished. Profits are the legitimate reward of capitalistic enterprise, but they must be obtained by exploiting nature through improved methods, not by exploiting the community through higher prices. If capitalists imagine that any amount of accumulated wealth can enable them to def}^ this essential condition, they are wofuUy mistaken, and sooner or later they will have to pay the penalty, either by arrest of their progress or by entire dispossession of their present industrial opportunities. III. INTEGEITY OF E;C0N0MIC LITERATURE* Public opinion, like public taste, appears periodically to run mad on special topics. The subject upon which popular madness is most pronounced at present is ac- cumulated capital. The chief characteristic of the last half century's industrial development has been the con- centration of productive processes, the aggregation, of large capital, and consequently the appearance of millionaire capitalists. ^Notwithstanding that these large fortunes are chiefly invested in productive enterprises, earning profit only when they are working for the public by cheapening wealth, the fact that the large concerns succeed, while small ones decline, has given rise to the tacit assump- tion that large capital necessarily implies business dis- honesty and public disadvantage for private gain. There is a certain naturalness in this feeling, since those who fail are ever prone to ascribe their failures to somebody else rather than to themselves. It was this feeling that inspired the hand-loom weavers in the beginning of the century to organize mobs to smash the power-looms. The small manufacturers assumed the same injured attitude towards corporations. Small farmers have the same dislike of large farmers. And under the same notion, trade unionists have ever op- posed new inventions. * Published in the Social Economist of July 1895. 44 INTEGRITY OF ECONOMIC LITERATURE 45 This feeling has been made a basis of a general doc- trine that profits are robbery, and hence that large capitalists are social robbers. The advocates of social- ism, populism, single -tax nationalism, and free trade have all tried to make headway by appealing to and inflaming this sentiment. Iconoclastic propagandas on these lines have been so successful that to attack mil- lionaire capitalists is now something of a fad. Under the influence of this prejudice against capital, dema- gogical misrepresentation is easily palmed off for honest statement and interest in public welfare, undermining the integrity of economic literature. The latest and worst specimen of this class of litera- ture is " "Wealth Against Commonwealth," by Mr. Henry D. Lloyd of Chicago. This is a book of over five hundred pages, purporting to expose the dishonest means by which large corporations have crushed honest business men and defrauded the public. The real aim of the book, however, is to traduce the Standard Oil Company. Mr. Lloyd makes great show of getting his facts from official reports of legislative investiga- tions and court proceedings, to which he makes fre- quent reference in foot-notes. This gives the book a seeming authority, and the writer's frequent outbursts of patriotic sentiment lend to it a color of sincerity and public interest. This apparent genuineness is further enhanced by a very liberal use of quotation marks, together with the fact that the book bears the imprint of such a reputable house as Harper Bros. On the assumption that a respectable publisher and aver- age literary integrity are proof against deliberate mis- representation, several high-minded journals have hailed it as an important contribution to economic literature. 46 TRUSTS AND THE PUBLIC As an instance of this, The Outlook^ edited by tlie Rev. Dr. Lj^nian Abbott, who is preeminently zealous in the work of moral reform though somewhat ragged on economics, introduces " Wealth Against Common- wealth " to its readers with the statement that it " is the most powerful book on economics that has appeared in this country since Henry George's ' Progress and Poverty,' .... The real greatness of Mr. Lloyd's work lies in its clear massing of evidence unearthed from the records of courts and official investigations, proving to the most sceptical the enormity and persist- ency of the criminal operations by which the wealth of the Standard Oil Company has been amassed. It is the plain, straightforward recital of these facts which brings conviction and arouses indignation." After a column of this kind of preface, Dr. Abbott says : " To indicate its character, it is better for us to summarize a chapter than to summarize the book. In reading, for example, the story of George Rice, we are more impressed with the meaning of rebates than when we are told the Pennsylvania Railroad paid in this way more than a million a year into the treasury of the Standard Oil Company ; " and then he prints the greater part of one of Mr. Lloyd's three chapters devoted to Mr. Rice's experience in refining oil at Marietta, Ohio, and, as might be expected, concludes by declaring : " The remedy for the evils plainly lies, not in the public control of oil refineries, but in the public control of the public highways." Dr. Abbott is perfectly right in regarding this blood-curdling chapter as typical of the whole book. It is indeed typical in its inflammatory style ; its violent misrepresentation through garbled statenients in quota- INTEGRITY OF ECONOMIC LITERATURE 47 tion marks ; and the utter suppression of evidence on the other side. We have taken the pains to go through the public documents referred to in this book, and it may be said that there is scarcely an honest quotation in it. Indeed, there seems to be as much downright dishonesty in the quotations from public documents and display of foot-notes as there is demagogy in the high-wrought and indignant perorations. The dis- honest}'' does not consist in misquotations but in partial and unfair quotations and in always quoting from the testimony of those against the Standard Oil Company to the utter suppression of all rebuttal. It is just about as fair and honest as it "would be for an author to write a book on the American tariff and take all his evidence from the speeches of the demo- crats in the last (53d) congress. He would get plenty of testimony against the tariff, but it would be made up, for the most part, of reckless and unscrupulous statements — partly true and largely false, and always unreliable — inspired chiefly by party hatred, political ambition and personal interest. This is exactly the character of much of the evidence given before political investigating committees. The greater part of the testimony against the Standard Oil Company is given by persons who failed through being unable to com- pete with the Standard and were, in fact, in the posi- tion of complainants. While the testimony from both sides was taken by the commission, Mr. Lloyd quotes from the testimony of the complainant and never from that of the defend- ant, as if the statements of complainants were always the verified and undisputed truth in the case. Wher- ever in cases of litigation the decision of th© court was 48 TRUSTS AND THE PUBLIC in favor of the Standard, he assumes without any evidence whatever that the verdict was due to a corrupt court purchased by the Standard Oil Company. There is throughout the book great vigor of statement, apparent earnestness of purpose, and an intense, lurid high-wrought style with an utter absence of the spirit of fairness and of literary and economic integrity. Between the lines and on the lines, the book bears all the marks of the special pleader who is more intent on winning his case than on telling the truth or promoting a public reform. A few instances will suffice to show the character of the book. After devoting less than forty pages to other trusts, to give a pretense of general discussion of the subject, be begins his attack upon the Standard Oil Company by describing the character and organization of the " South Improvement Company." He says (p. 46) : " By this contract the railroads had agreed with this company of citizens as follows : 1. To double freight rates. 2. Not to charge them the increase, 3. To give them the increase collected from all competitors. 4. To make any other changes of rates necessary to guarantee their success in business. 5. To destroy their competitors by high freight rates. 6. To spy out the details of their competitors' business. The increase in rates in some cases was to be more than double. These higher rates were to be ostensibly charged to all shippers, including the thirteen members of the South Improvement Com- pany ; but that fraternity only did not have to pay them j-early. All, or nearly all, the increase it jsaid was to be paid back again — a "rebate." The increase paid by everyone else — "on all transported by other parties " — was not paid back. It was to be kept, but not by the railroads. These were to hand that, too, over to the South Improvement Company. This secret arrangement made the actual rate of the South Im- INTEGRITY OF ECONOMIC LITERATURE 49 provement Company much lower, sometimes half, sometimes less than half, what all others paid. The railroad officials were not to collect these enhanced freight rates from the unsuspecting subjects of his "contract" to turn them into the treasury of the railroads. They were to give them over to the gentlemen who called themselves " South Improvement Company." The "principle" was that the railroad was not to get the benefit of the additional charge it made to the people. No matter how high the railroads put the rates to the community, not the rail- road but the improvement company was to get the gain. The railroads bound themselves to charge everyone else the highest nominal rates mentioned. " They shall not be less," was the stipulation. They might be more up to any point ; but less they must not be. The rate for carrying petroleum to Cleveland to be refined was to be advanced, for instance, to 80 cents a barrel. When paid by the South Improvement Company, 40 cents of the 80 were to be refunded to it ; when paid by anyone else, the 40 cents were not merely not to be refunded, but to be paid over to his com- petitor, this aspiring self -improvement company. The chai'ge on refined oil to Boston was increased to $3.07; and, in the same way, the South Improvement Company was to get back a rebate of $1.32 on every barrel it sent to Boston, and on every barrel anyone else sent. The South Improvement Company was to receive sums ranging from 40 cents to $1.33, and averaging a dollar a barrel on all shipments, whether made by itself or others. This would give the company an income of a dollar a day on every one of the 18,000 barrels then being produced daily, whether its members drilled for it, or piped it, or stored it, or refined it, or not." IS'ow, when Mr. Lloyd wrote this, and there is a whole chapter of twenty-two pages devoted to it, be- sides repeated references throughout the whole book, he knew that this so-called South Improvement Com- pany was a myth — that it never had any real existence. He knew that it never produced, refined, bought, sold or transported a gallon of oil, nor did a dollar's worth of business of any kind whatever. In short he knew 4 50 TRUSTS AND THE PUBLIC that it was nothing more nor less than a projected scheme which was never born. Consequently, all this effort to create the impression that it compelled rail- roads to double freight charges on all the competitors of the South Improvement Company, and pay to it the booty, which amounted to a tax on its competitors of $18,000 a day for the permission to do business, is equal to outright misrepresentation. It would be just as true to say that because a number of persons met in a hotel and agreed that they would raise the price of food so high that a million people would die of starvation, they actually caused the death of a million people, when neither the rise of price, the starvation, nor deaths occurred. It is also assumed that the Standard Oil Company is responsible for all that the Improvement Company is alleged to have contemplated, whereas the evidence shows no connection between them further than that certain members of the Standard Company subscribed for stock in the Improvement Company, as likewise did many of the Standard Company's most bitter opponents, while other prominent members of the Standard Com- pany were among those who procured the death of the South Improvement Company. Throughout the entire five hundred j3ages constant reference is made to this South Improvement Company as if it actually had done all this statement says it in- tended to do. Such is the kind of economic history Mr. Lloyd is trying to make. The scandalous South Improvement Comj^any story has already found its way into serious economic literature in England. In his " Evolution of Modern Capitalism," published in the Contemporary Science Series, Mr. Hobson reproduces INTEGRITY OF ECONOMIC LITERATURE 5 1 this whole story, together with numerous other mis- statements of fact gathered from similar sources, all of which are presented in the most serious manner as if they were verified data. "Were the evil influence of such misrepresentation limited to its original utterance, this might be a small affair ; but when it is reproduced in permanent and otherwise reliable literature it is quoted as authorita- tive matter and thus becomes a means of polluting the stream of economic knowledge at its very source. His next chapter, entitled : " You Are Not to Eefine," is devoted to working up to white heat the case of a ruined widow. It is narrated under such headings as " The Widow's Cruse," " By the Agent's Conscience," " Judgment-Day Law," etc. This is a case, Mr. Lloyd tells us, of "one of the pioneer manufacturers of Cleveland. He was a prominent member of the First Presbyterian Church, was at onetime President of the Young Men's Christian Association, and was active in all enterprises of a religious and benevolent character." He began refining petroleum in 1860, and continued in the business until his death in 1874. After his death his wife continued the business. She is reported as saying : "My husband went into debt just before his death for the first time in his life. For the interests of my fatherless children, as well as myself, I thought it my duty to continue the business. I took seventy- five thousand of the hundred thousand of stock and continued from that time, 1874, until November, 1878, making handsome profits," which, Mr. Lloyd says, were " about twenty-five thousand a year." He then describes a plot on the part of the Standard Oil Company to ruin the widow, in comparison with 52 TRUSTS AND THE PUBLIC which the methods of the Inquisition were mild and humane. She tinally sold her interest in the works and good- will for $60,000, agreeing not to re-enter the business in competition, which is the usual custom when selling business good-will. She was evidently made to believe soon afterwards that she had sold for too little, whereupon she wrote a long letter to the president of the trust charging him with wronging her and warning him that he would have to account for this at the Judgment T>b,j. It appears that $60,000 was about three times what it would cost to construct new and better facilities than her factories furnished. The upshot of the whole business was that the trust offered to return her property if she would return the money, or offered to sell her one, two or three hun- dred shares of the stock at the price that had been paid her for it — all of which she declined. Yet, in the face of the fact that she could have her property back — which is not usual in business trans- actions, if there is any profit in keeping it — or that she could have shares in the stock under the new manage- ment, where the business was expected to be more profitable, or actually receive for her property three times what it would cost to replace it, Mr. Lloyd devotes a whole chapter to a most heartrending description of how this widow was robbed and wronged. In order to give a semblance of basis for his case, he says : " The cost of the work is not the standard of value in such transactions." He assumes that be- cause at one time this woman's property yielded a profit of $25,000 a year, its value should still have been estimated on an earning capacity of that amount. But why, then, did she refuse to take it back ? The INTEGRITY OF ECONOMIC LITERATURE 53 fact is that the property had passed its large profit- making stage, and was rapidly being superseded by improved methods which would soon reduce its value to that of old iron, which is commonl}^ the case with factories of all kinds. She evidently knew this and preferred the money to the factory. From all the facts given in this nameless widow's case, it is clearl}^ making " much ado about nothing." The whole chapter is a frantic attempt to play upon sentiment by weaving a malicious and virtually lying threat through the whole statement, wdth the obvious purpose of creating a false impression. There is noth- ino; in the case to show that the woman w^as wronged, except the vicious inferences of the WTi<"er. On the contrary many of the facts tend to show that she was generously treated ; that what she obtained for her plant was largely gain, since,if she had not sold it, it would soon have become valueless through the supe- rior methods employed by the new competing concerns. Another instance of martyrdom to w^hich Mr. Lloyd devotes a sixteen-page chapter with the suggestive title : " I Want to Make Oil" is the case of Mr. Yan Syckel, an inventor. This story is a duplicate of hun- dreds and perhaps thousands of cases of inventors — except that few are told with such harassing and wrath-inspiring force as is this one. It is a general characteristic of inventors that they are greatly lack- ing in executive ability or practical sense. While they originate the abstract idea, they very seldom complete the process. Before an invention can become usable, it generally has to be vary much improved ; indeed, it has practically to be evolved by an indefinite number of experiments and, not infrequently, after years of 54 TRUSTS AND THE PUBLIC trial and an expenditure of thousands upon thousands of dollars, it just fails. It would probably be a moderate estimate to say that hundreds, perhaps thousands, of such inventions fail for every one that is reduced to practical use. In every instance the inventor, even though he is paid a salary for several years, while developing his inven- tion, believes that he is swindled out of a fortune- making discovery ; whereas, it is more frequently true that thousands of dollars have been wasted to give him an opportunity to develop a failure. Of course, this is the only way that inventions can be developed, but the fact remains that not one per cent, of inventions are a success. A statement recently appeared in the public print to the effect that the Western Union Telegraph Company made a business of " gobbling up," through purchase, of course, all inventions in telegraphy, and that they then stowed them away or destroyed them for the purpose of preventing the inventors from realizing a fortune out of their discoveries and heading off .suc- cessful competitors. One would think the obvious absurdity of such a statement would prevent its passing the blue pencil of any sane editor. Nothing but insanity could prompt such action. The Western Union could have no motive for suppressing or destroy- ing an invention that had any economic merit. Indeed, it spends thousands of dollars every year to discover new devices which shall enable it to reduce the cost of doing its business, as do all large corporations and not a few individual concerns. Now, Mr. Lloyd's story of Mr. Van Syckel is pre- cisely of this kind. It recites what doubtless Mr. Yau INTEGRITY OF ECONOMIC LITERATURE 55 Syckel believed, mz. : that he discovered a continuous process of distilling oil — an improvement that would be a saving of from thirty to thirty-five per cent, of labor and cost in the process of distilling. According to Mr. Lloyd's story, the new process was demonstrated to be a complete success, and yet the Standard Oil Company, after having paid Yan Syckel "$125 a month while he was testing and improving the inven- tion and $75 a month afterwards, deliberately sup- pressed the invention ; would neither use it nor permit anybody else to use it, nor pay Yan Syckel for it." This is conduct which nobody but malicious idiots could be guilty of, and only an infatuated fanatic could expect intelligent people to believe such a tale. If that invention had been a success, nothing would induce the Standard Oil Company to refrain from using it. Whatever else may be said of the members of the Standard Oil Company, they were never sus- pected of throwing away the possibility of increased profits for a sentiment. They may have been heartless, but they never before were charged with being idiots. Nothing can be more conclusive proof of the fallacy of this story than the fact that no such process is in use anywhere in the world. The Standard Oil Company would doubtless give half a million dollars to-morrow for such an invention, and yet, in order to make out that the Standard Oil Company exists chiefly for evil, Mr. Lloyd asks the public to believe that, solely to injure a poor old inventor, it is suppressing a discovery by which it could make millions. And the most sur- prising part of it all is that such a respectable house as Harper Bros, could be induced to publish such stuff as sane literature, and such men as the Eev. Lyman 56 TRUSTS AND THE PUBLIC Abbott can swallow it all without a question as if it were rational and verified truth. We now come to the " Rice " or " Marietta " case, which operated so effectually upon the heart-strings of the editor of The Outlook. Mr. Lloyd has laid himself out to make the reader's blood boil with indignation in this instance. He has given three whole chapters to it which bristle throughout with insinuating quota- tion marks, so used as to misrepresent by what they omit. In Mr. Lloyd's hands the " Eice " case is really a fine piece of revolution-creating literature. It is well calculated to incite the mob to a rich-killing or mansion-sacking crusade. After describing Mr. Eice as coming from the " Green Mountains of Yermont " and entering " the oil business when he and it were young," and build- ing up " a new industry and a new place," he devotes eight pages to showing how the plot to ruin him was worked, and says (page 206) : " The railroad over which he ran his tank-car doubled his freight to 35 cents a barrel, from 17|-. That was not all. The same railroad brought oil to the com- bination's Marietta refineries at 10 cents a barrel, while they charged him 35. That was not all. The railroad paid over to the combination 25 cents out of every 35 cents he paid for freight. If he had done all the oil busi- ness at Marietta, and his rival had put out all its fires and let its works stand empty, it would still have made 25 cents a barrel on the whole output." ]^o one could read this without being inspired by the feeling it is intended to convey, viz. : that it was a high-handed outrage which would justify summary treatment, and when one learns from a most passionate INTEGRITY OF ECONOMIC LITERATURE 57 portrayal, much of which is repeated several times in different forms, that by this means an honest, enter- prising man, whose success his daughters helped to secure by working in the business with him, was finally ruined and his family wrecked, it is difficult to suppress the impulse to inaugurate lynch law, but if we read the report of testimony taken by the Fiftieth Congress, in which the whole case is printed, we find that much more inflammation is imparted to it by Mr. Lloyd than by the facts. Briefly stated, the facts are these 1 : Mr. Eice was an oil refiner in Marietta, the market for which was Cleveland, Ohio. The oil was partly taken through pipe lines and partly by rail. The railroad agreed to charge for the entire distance, including pipe lines, 35 cents a barrel for shipment, 25 cents of which was to be paid to the owners of the pipe line for its portion of the service ; the railroad to have 10 for its. Consequently, all oil shipped from Marietta to Cleve- land was charged 35 cents a barrel, subject to the above divisions between the owners of the pipe line and the owners of the railroads. This applied to all shippers, one of whom was Mr. Eice. Now, the Standard Oil Company owned the pipe line, hence it paid only the 10 cents which belonged to the railroad for its portion of the service. There had been considerable friction be- tween Mr. Eice and the Standard Oil Company, and he had laid a pipe line of his own, and therefore did not ship through the pipes of the Standard. This arrangement for 35 cents a barrel was originally made for all oil that came from Marietta, regardless of whether it used 1 Testimony taken by the House of Representatives, 1888 ; pp. 374-5. 5* TRUSTS AND THE PUBLIC the Standard pipe line or not, so that Mr. Eice ^Yas charged the 35 cents a barrel although he sent it to the railroad through his own pipe line. That is to say, he was charged 35 cents, though he used the railroad service only ; the 25 cents for pipe line service went to the Standard just the same as if his oil had gone through their line. This was an obvious hardship. Still, it was of the same character as many other transportation arrange- ments, such as the long and short haul principle where- by shippers for the shorter distance pay more for the same amount of freight than shippers for a longer dis- tance, and there are conditions under which this is dis- tinctly economic and justifiable. All the elevated, cable cars and electric railroads in New York and other large cities are run on the same principle. They charge as much to ride a block as to ride five miles. This seems to be something of an American idea. In Lon- don, for instance, the underground railroads and the busses everywhere have different rates for different distances. "We do not cite this, however, to justify the treat- ment of Mr. Eice, but only to show that it was not an entirely new and novel method of making transporta- tion charges. If this arrangement liad been made per- manent and had resulted in Mr. Eice's ruin it would go far to justify Mr. Llo^'d's position, regardless of the fact that it was a practise commonly adopted in rail- roading. But the truth is that the arrangement was a temporary affair lasting only a very short time. It was made by an agent of the pipe line company, and when brought to the attention of the company's coun- selit was, under his advice, discontinued, and, what is of INTEGRITY OF ECONOMIC LITERATURE 59 still more importance, the whole amomitof this charge for pipe line service which Mr. Kice did not receive was less than $250 and every ■penny of it was returned to him, so that Mr. Rice finally lost nothing by this so-called over-charge. These facts are nowhere mentioned by Mr. Lloyd, although he spreads the discussion of the case over three whole chapters. Everything he says regarding the matter is intended to convey the idea that Mr. Rice paid 35 cents a barrel while the Standard Oil Company only paid 10 cents and the extra 25 cents went into the pockets of the Standard Oil Company, and that this continued until Mr. Rice was ruined by the process. Such a statement of the case is equivalent to positive misrepresentation, especially when accompanied by pages upon pages of inflammatory insinuations, charg- ing it all to the mythical South Improvement Company. We have no idea that the members of the Standard Oil Company, individually or collectively, are very much better or worse than other people. Their meth- ods have been the methods of business men generally. Self-interest and not the golden rule has doubtless been their chief inspirer. Nor have we any desire to hold them up as models except to the extent that they have introduced improvements into productive processes and business methods. J^or are we in the least op- posed to the full exposure of any economic mistakes they have made or social wrongs they may have com- mitted. It is only by the exposure of the Avrong that the right can be permanently established. But what we are particularly interested in is the integrity of economic literature. 60 TRUSTS AND THE PUBLIC We protest against the wholesale misrepresentations of industrial facts and the poisoning of economic mo- tives merely to gratify the ravings of fanatical opposi- tion to aggregated capital ; and we specially protest against such wholesale libels passing for reliable econo- mic information. It is more important to maintain the integrity of economic literature than to overthrow the largest trust that ever existed. Such books as " Wealth Against Commonwealth " are calculated to do more to inv^alidate history and cor- rupt the morals of public thought and action than could a hundred trusts. If the channels of information are to be polluted with impunity by wholesale misrepre- sentation of industrial data, then the integrity "^of our economic information, the validity of our industrial history and social literature, are destroyed. lY. AEE LUXUKIES WASTED WEALTH?"^ The public mind at the present time is in something of a fever of opposition to wealth. The great object seems to be to find some way of suppressing wealth or punishing those who have any. If the rich devote their "wealth to productive enterprise, we call for legislation to suppress them lest they should make any profits. "We are having a flood of legislation against trusts, and a trust is anything that is large and successful and makes any profits, or introduces any improvements into the business. A bill is pending in Massachusetts, for in- stance, imposing a penalty of from $100 to $5,000 fine, or imprisonment for a year, or both, upon any person who, going into business, lessens competition and drives others out, and the parties driven out also have right of damages against their successful competitors. On the other hand, if the rich spend their money socially, we raise a great cry throughout the country about their criminal extravagance, and the ministers and sentimentalists are all up in arms. If, finally, they go abroad and take their millions with them, we assail them as being mean and unpatriotic, while if they simply hoard up their wealth and do nothing with it * Lecture delivered in New York City, Feb. 3, 1897. 61 62 TRUSTS AND THE PUBLIC we denounce them as misers. It would seem that the only thing for a rich man to do is to get rid of his wealth as soon as possible and reduce himself to the same state of poverty that the poor enjoy and find so satisfactory and desirable. Then, and then only, it seems, will they be able to stand high in the public favor. The Bradley Martin ball is one of the prominent in- cidents that is calling forth a good deal of discussion on this subject of wealth. Is this affair to be regarded as a social calamity, and ought public sentiment and legislation to be invoked to put a stop to it, or is there another side to it, and are we entitled to pass judg- ment upon a whole series of public and social institu- tions because there are a few butterflies here and there who do not know how to exercise good taste in their expenditures, and exhibit an abnormal desire for mere vain display ? Yery much of this sort of opposition looks like turn- ing back to the conditions against which the world has been struggling for centuries. For instance, the N'ew York Press this morning made a great uproar because a man in overalls was not allowed to go into the Met- ropolitan Museum. Of course he was not, nor should he have been. To make that sort of thing respectable throughout the community would be the worst possi- ble thing that could be done for the workingraan. Laborers when they visit places of that nature ought to observe the same decencies and civilized customs that are observed by the rest of the public, for they will then insist upon wages sufficient to enable them to meet those requirements. Let it be established that overalls are good enough to go to museums in, and ARE LUXURIES WASTED WEALTH? 63 they will soon be good enough to go to church in, and to the opera in, and everywhere in, and we shall have really very little need of decent clothes at all, and our wages and civilization, following along that same line of ideas, will eventually get down to the overalls level. "We do not want to turn back to any one-suit-of-clothes state of civilization. It has taken centuries for the workingman to assert and establish a standard of living that shall demand something better than that, and the superficial clamorers who are insisting upon the social recognition of overalls as good enough for all places and occasions are really the worst enemies the working- men have. What we want is that laborers shall insist upon clothing fit for such places, and insist upon wages sufficient to buy such clothing. "We do not want five- cent dinners, and bean-pod soup at two cents, and over- alls on Sunday, and we will not have them. As early as the fourteenth century the struggle over this question began. The workingraen in England made their first efforts for an increase of wages, and they were at once legislated against. They were not to ask for more pa}^, and it was prescribed very care- fully what they were to eat and wear and have in their houses. They should not wear clothes that cost more than eight pence a yard, and should have practically no meat, and should piece out, from time to time, with the " offal from the master's table," and so on. And later on, when people began to have windows and chimneys in their houses, the laborers were denounced as inexcusably extravagant and as enemies of the prog- ress of the realm, because they too began to want windows, and doors on hinges, and objected to having the smoke go out through the door instead of up a 64 TRUSTS AND THE PUBLIC chimney. Of course the laborers finally won their struggle, and little by little gained the privilege of eat- ing and dressing and living as they chose. Things seem to have undergone a remarkable turn-about since then. 'Now it is the laborers themselves v^ho are dic- tating what shall be eaten and worn by the rich, and how they shall conduct themselves. Having struggled for centuries against just this sort of interference with personal liberty, they are now endeavoring to apply it in turn to the very classes whom they were once de- nouncing for trying to inflict it upon them. They were right, of course, in insisting upon windows and chimneys and such food and clothing as they liked and could get, on the ground of personal liberty, but per- sonal liberty to-day, it appears, has no application to fancy balls. After about four centuries of this struggle on the part of the wage-workers, came Adam Smith with his gospel that the secret of social progress is parsimony ; — use as little and save as much as possible. He thought it was prodigality for a workingman to burn a candle after eight o'clock at night, and on the other hand that a rich man was a very bad thing to have in any town. That idea of parsimony has permeated English econom- ic thought down almost to the present day, and work- men have taken it on, to the extent of holding the idiotic doctrine that everybody who consumes more than they do is inflicting an injury upon society. About a week ago the New York Journal inter- viewed the secretary of the United Garment Workers' Union, and Prof. Felix Adler, on the subject of this ball. The labor leader said that luxuries meant wealth wasted, and Prof. Adler said that the laboring men ARE LUXURIES WASTED WEALTH? 6$ ■would not get any real benefit from the ball. As you know, I regard almost every thing affecting the welfare of the community as turning upon the way it affects the laborers. If balls were bad things for the laborers I should be opposed to them ; if they are good for them, I favor the balls. There was a time, as I have said, when the laborers did not have chimneys or windows in their houses, no furniture, practically no decent clothing, and lived upon bread and herring and barley beer, and got six- pence a day wages. ISTow, how have the things come into existence that furnish the appointments of the homes occupied by the average citizen of to-day in the more advanced countries ? Has it been by anything the workingmen have done ? Have they introduced any such industries as silk weaving, for instance ? Not so. There never would have been silk enough made to go into one dress of a mechanic's wife if silk had not been first used by kings and the aristocracy and those who were willing to pay the great sums necessary in the first instance to have it made. It was then the ex- ceptional social need, and it was called extravagance, just as Adam Smith called burning a candle after eight o'clock extravagance for the workingman. After the yery rich begin to have these things and pay the high prices necessary to get them, then the next below begin to contrive so as to get some them- selves, and finally there is enough demand to establish a small permanent business, and as a result the price falls a little. Then a still wider circle of consumers come in and begin to use the once unapproachable luxury, and this permits in turn still lower prices, and by the repetition of this process it finally gets down to 5 66 TRUSTS AND THE PUBLIC the level of all of us, and the articles are produced in immense factories by the best and cheapest machine methods, and at the minimum cost. It is in this way that we have come into the enjoyment of practically everything we have outside of the crudest necessities. Those of you who are familiar with European cities know that when the court is away from London or Berlin business goes into mourning, laborers are out of work, and everything is stagnant. Why ? Because when the court goes to London the aristocracy goes there and what is called the London season sets in, and that not only puts in circulation several millions of dollars, but gives employment to thousands and makes all the difference between panic-stricken London and prosperous London, and it is panic-stricken London that tells its story in Whitechapel and the East End. If the garment makers' secretary I have mentioned understood the first principles of the situation he would know that variation of social taste is the very life of his industry. Take China. They have had no change in the cut of their smock for a thousand years. ■ l^o- body needs to have a new coat because coats are made to last a lifetime, and very often the same coat will be willed from father to son, and finally worn out by him as a night-shirt. I tell you, any country in which one coat will last a lifetime is a country having neither taste, high social standard, high wages, intelligence, nor freedom. The opera is in town, and that, too, is called a waste. Will the workingmen and mechanics go ? Of course not. Thej^, at least, will waste nothing on it. It has to be supported by the comparatively rich. Now, suppose you suppressed the opera as an extrava- ARK LUXURIES WASTED WEALTH? 6/ gance. You would suppress the highest development of music, and help to take out perhaps the most refin- ing, softening and cultivating force in civilization. As a result of the opera we have thousands of musicians preparing for that work and falling a little short, and we get the benefit of them in concerts and churches and in our homes. Music becomes a common accom- plishment. The opera is one of the contributions that the rich make to society, not intentionally as such, of course, but the social law is stronger than their de- sires. I am willing that they should be foolish, per- haps, for a while, because they cannot stop the rest of us from getting the benefit of what they introduce. I say, therefore, that there is no greater error than to describe luxuries as wasted wealth. There is hardly a single thing that has become the customary neces- sity of civilization that was not once a luxury — an ex- travagance converted into a necessity by common social use. Diogenes, you know, when he saw the shepherd boy scooping up water in his hand, said: " What an economy that is ; what need have we of cups when nature has already given us hands to drink from!" So it is. Just think of the number of thing-s we could get along without. If we would only get along without cups and what cups imply, we could close up all the factories in the United States and ef- fectually turn back the dial of civilization to the pre- Mosaic type. The fact is, every comfort and con- venience we have acquired, over and above what is represented by Diogenes' shepherd boy, has been a luxury, relatively to what was before, and in that development we have simply the record of man's growth out of barbarism into civilization and enlight- 68 TRUSTS AND THE PUBLIC enment. It is these very luxuries converted into neces- sities that make the difference between the American laborer's standard of living and that of the Chinaman or African. If these luxuries had been nipped in the bud there would be no difference now between iNew York and Poland, To-day's luxuries are to-morrow's necessities, if society progresses. It is only in that way that the advantages of civilization can ever be extended to the working people. They are now en- joying, in common use, comforts and refinements that to their fathers would have been unthought-of extrav- agance. Henry II. slept on a bed of rushes, but we would have a half-dozen revolutions before we would get anywhere near that condition again. The dif- ference between rushes and beds is the result of the conversion, through several centuries, of what were then luxuries into what are now necessities for all. In 1875 I -was called to a factory town in Connecti- cut where there was a strike in progress. I found in operation there the " truck " system, under which the corporation kept a store with all the supplies it thought its employees should have, and had a record of the wages in one book and purchases in the other, managing generally so that the two about balanced. At that time, many of the employees had not drawn a cent in wages for months, thanks to truck-system bookkeeping. They had a church there, and pew rent was regularly charged up on the books, also. In my interview with the employer he complained a great deal about the growing extravagance of his employees. There had lately been a great strike in Fall River, and his employees were all happy and contented until they heard of that strike. As soon as Fall River people ARE LUXURIES WASTED WEALTH? 69 began to come there, and labor agitators began hold- ing meetings, trouble began. The men began spend- ing their money on railroad fare to attend meetings, and the women wanted to go to town every week at least, and bought frivolous things that they never used to want, and the result was that they were strik- ing against a 10 per cent, reduction with which they would have been perfectly contented if they had never heard of cities at all. All their notions and ex- travagances were so much pure waste, said the man- ager. It was not waste at all. Anything that adds a new thought or a new comfort or a new entertainment or refinement to human life is a positive gain, and not a waste. All new things are not good, but in the pro- cess of using we eliminate the vicious and keep the good. Kewly discovered articles of food sometimes contain poison, but do we on that account abandon them and go back to the coarser diet ? Not at all. "We call in chemistry to purify the new thing and make it fit for permanent use. If the laboring class could have been kept wearing sheepskins, they would have been earning 10 cents a day now instead of $2 or $3, and we should have had a 10-cent-a-day civiliza- tion. There is no greater mistake- than for the work- ing class to set themselves against the social innova- tions at the top of societ}^, because there is not a single thing that is introduced there that does not percolate down. We see an example in the case of the servant girls, who are complained of because they are getting so particular about their privileges and exemptions and so on, and because of their extravagance in dress, and bad taste, and all that. In reality that 70 TRUSTS AND THE PUBLIC is the hopeful side. It means the beginning of better conditions and less hard work, more freedom and more civilization, for the servant girl class. Their taste is poor, but do you expect them to wait until they have become artists before they wear bonnets ? That is the beginning of their education. If it is true that they put on gloves over dirty hands, all right, they have got the gloves on at least, and that does three things, hides the dirt, starts a glove factory, and starts the person wearing the gloves into the society of others who wear gloves, and they notice that these others have clean hands, and finally begin to wash their own. The truth is, all social refinement begins with more or less of artificial veneering, but finally it penetrates the character and results in genuineness. Cleanliness is not the first sign of civilization that gets into the slums. If you put in bath tubs too early they may be used for coal bins, as has been found from actual experience. Of course the Bradley Martin ball is not being got- ten up as a philanthropic enterprise, and we need not expect it to be. It is surprising, but true, that the bulk of the best things we have were not introduced from the best motives. If we were never to have a railroad until those who built it did so for philan- thropic motives, none would ever be built. They are built because we ride and pay fare. We can get rail- roads simply by making them profitable to the pro- jectors by riding on and using them. Personally, I expect that this ball is a sort of social butterfly affair. The Bradley Martins made a great effort to get a daughter married to a foreign prince, and that meant that they would spend their money abroad. "We do ARE LUXURIES WASTED WEALTH? 71 not want that. What this country needs is that our wealth should be spent here. I do not Avant any per- son who can afford to live better than I can to come down to my level. I want all the rest of you to help me get up to his level, and the more there are like him the better my chance of success in that line. I do not like to see American capitalists spending their money abroad, and changing their citizenship because they cannot get the sort of social life here that they want. But, if we are going to assail and punish them every time they endeavor to introduce new social life here, we can hardly blame them much for going where it already exists. What we ought to do is to encour- age the growth of a cultivated class here, who shall expend their millions in beautifying our own country with great parks and estates, and in establishing a social standard that shall act as a constant incentive to all that is below. If you can make it impossible for millionaires to live here, you can succeed in keep- ing back the growth of American civilization. You can make it certain that whatever we have in the higher forms of social, musical, artistic and literary life, w^ill be of the second rate order, because we shall have no class able to pay for the best. What we want is to encourage our own wealthy classes to expend their riches here, so that in satisfying their own de- sires they shall at the same time, in spite of them- selves perhaps, be promoting in the highest and most efficient sense American art, architecture and science, and American social life. V. LAKGE AGGKEGATIONS OF CAPITAL* Ake large aggregations of capital necessary to modern progress ? The only point of view from which this question can properly be considered is the welfare of the community. There are two ways in which the productive machinery of society can promote public welfare. One is by improving the quality of wealth produced, and the other by lessening its cost to the public. Whether the instruments of production should be owned by the public as demanded by socialism, or be held in small quantities, as under the domestic methods which prevailed before the Hargreaves, Ark- wright, Crompton and Cartwright inventions of the eighteenth century, or by increasingly large corporate concerns, as to-day, turns entirely upon which of these forms of industrial organization will most efiBciently furnish the community with consumable wealth, in respect to both quality and price. The owners of capital or productive instruments have absolutely no claim upon the public consideration on any other grounds than efficiency of service to the public, as creators of wealth. Capital should be regarded as a tool, and as a tool only ; and the use of any tool is jus- tifiable only so long as it will do its work as well as or better than other tools that are available. ♦Published in the New York Independent, of March 4, 1897, and reprinted in Gimton's Magazine of May 1897. 72 LARGE AGGREGATIONS OF CAPITAL 73 The history of concentrated capital is manifestly the history of productive economy and eflBciency. Nearly all the great productive economies giving superior quality and reduced prices have been confined to those industries w^here corporate capital and factory methods have been employed. Take, for instance, cotton, silk, woolen and other fabrics. Common cotton cloth, which as late as 1830 cost seventeen cents a yard, is now quoted at less than four cents ; and so along the whole line. Products of iron, steel and wood have been re- duced solely by these processes from 30 to 60 and in some instances 80 per cent., which means that the public have received, in each instance, a superior prod- uct for this constantly diminishing price. If we turn to the class of industries in which capital has not been concentrated, or only to a slight extent, we find that the reverse is true, and prices have not lessened with the progress of society. The great era of machine methods in this country is since 1860. According to the senate report, which was so comprehensive and exhaustive, there were fifty- eight classes of products the prices of which had in- creased since 1860. Some had risen 100 per cent., and a very large number from 30 to TO per cent. With one or two exceptions they were all agricultural or raw material products, in which the concentration of capital and the use of machinery had been very slight. On the other hand, the tables give 140 groups of manufac- tured products in which capital is considerably con- centrated and machinery used extensively, and in all prices had fallen from 6 to 40 per cent. The fall in the prices of products produced by capitalistic methods was enough greater than the rise in the prices where 74 TRUSTS AND THE PUBLIC hand labor and small capital were used to make an average fall in prices of about 4 per cent., and a rise in wages of 68 per cent. That is to sa}^ through the processes of capitalistic methods, from 1860 to 1891, the purchasing power of a day's work was increased slightly over 72 per cent., which is only another way of saying that concentrated capital increased the public welfare 21 per cent, every ten years since 1860. Every step in the industrial progress of society has had to encounter a popular opposition. There seems to be an indefinite impression abroad that the corpo- ration has more of the element of conspiracy in it than the individual or firm type ; hence, that the aggrega- tion of capital in the United States is more inimical to public welfare than in other countries. This, however, is psychological rather than economic. Corporations, while not peculiar to the United States, are more prev- alent here than elsewhere for definitely good and suffi- cient economic reasons. In Europe the progress has been sufficiently slow so that native capital could accu- mulate fast enough to keep up with the demands of industrial growth. In this country the case has been quite different. For reasons it is not necessary to enu- merate here our industrial development has been so rapid and colossal that we were wholly unable to create the individual capital necessary to supply the needs of industr3\ Consequently the corporate means of capital- izing was evolved, so that European wealth as well as the scattered pennies of our own people could be utilized to make possible the great railroad and other undertakings in this country, which have no parallel in any other part of the world. Had we been com- pelled to wait for the development of individual capital LARGE AGGREGATIONS OF CAPITAL 75 in the non-corporate form, this development would probably have been delayed half a century. Corpora- tions, therefore, are peculiarly American institutions, not because they contain any inferior element, but be- cause they are the utilization of the cooperative spirit made necessary by our exceptionally rapid industrial progress. It is the universal testimony of history that the ag- gregation of capital is indispensable to modern prog- ress. There is no phase of industrial progress which has taken place without it. In those countries where the least concentration of capital has occurred, civili- zation is most backward and progress most sluggish. So, too, of industries. Those industries in the most advanced countries which have participated least in the concentration of capital have made the least prog- ress. Their progress has been less, both in the use of wealth-cheapening methods and in the social effect upon the population. There is no phase of industrial life anywhere, in any country, that does not reveal this characteristic, — witness the southern states. During the last twenty years, however, a new phase of the corporate form of industrial organization has appeared, viz., the trust. Properly speaking, the trust is simply a larger form of corporation. It is the integration of smaller corporations into one enterprise, in the same way that the corporation was the integra- tion of individuals into one enterprise. It is against this last form that public suspicion is now directed, and legislation in many of the states is being asked for and enacted. It is important in this connection to say that trusts proper, i. e., the concentration of capital into productive corporations, are not to be confounded 76 TRUSTS AND THE PUBLIC « with mere trade agreements, like the steel combine, the nail combine, the copper combine, wheat corners, etc., whose only effect is to put up or keep up prices. Such combines are not an increased concentration of productive power, but only an increased unanimity among the sellers of products to keep up or put up prices. Among hona fide trusts, which are genuine integra- tions of capital into larger concerns for productive purposes, the opposite effect has been produced, viz., an improvement in the product and a lowering of the price. In speaking, therefore, of the large accumu- lations of capital, I wish always to be understood to mean large concentration of capital into one manage- ment for productive purposes. Among the conspicu- ous examples of this kind of aggregation are the Standard Oil trust, the sugar trust, and the cotton-seed oil trust. Of a similar nature are the great railroad and telegraph corporations ^ Without going into further details, it is manifest that in every line of production where the aggregation of capital has increased, for permanent productive pur- poses, the effect has been to improve the quality of the commodity or service and reduce the price to the public. But there are many other asj^ects of the subject in which the public is interested, besides the matter of prices and quality of commodities. Among these are the efifect on wages and the permanency of employ- ment. 1 The data which here followed is omitted because it appears in other of the papers in this volume, particularly Nos. I, XVI, and XVII. LARGE AGGREGATIONS OF CAPITAL 'Jf With reference to wages the question is quite simple. It is such a well known fact as only barely to need stating, that these large concerns never tend to lower the wages in the industries in which they operate, but on the contrary always pay the highest prevailing wages. In all the industries where great concentration of capital has taken place the wages have increased, except in particular instances where, through the intro- duction of machinery, a new class of labor has been emplo3''ed, as substituting women for men and young people for adults, which has been something of a fea- ture throughout the whole factory system. It is by this process that so many new occujDations have been opened to women. The question of permanent employment is scarcely less important than that of wages. Indeed, the uncer- tainty of employment is one of the most baneful effects of modern industry. The introduction of new machin- ery and the tendency to overproduce and so glut the market and finally compel temporary suspension has been one of the constant sources of industrial and social perturbation. The tendency of the concentration of productive capital is one of the most effective, if not the only, means of remedying this constant social cala- mity. In the first place, the larger the investment of capital the greater the loss from any interruption of productive activity. The expenses are so enormous that a short stoppage in many instances would more than neutralize the profits of a whole year. Conse- quently, the larger the concern the greater the effort accurately to adjust its productive capacity to the market demand for its product, so as to avoid loss from interruption. Industrial depression can never be elimi- 78 TRUSTS AND THE PUBLIC nated until the relation of productive enterprise to consumption is reduced to some degree of intelligent precision, which the small go-as-you-please producer can never do. The essential economic features of large aggrega- tions of capital, then, are: (1) That by the use of larger and superior methods they improve the quality and re- duce the price of commodities : (2) They are more favor- able than smaller concerns to an increase in Avages : (3) By introducing scientific precision into industry, they tend to increase the permanence of employment and re- duce the tendency to industrial depression. Manifestly, therefore, the tendency to large aggregations of cap- ital in productive enterprise is economically sound, socially advantageous, and necessary to modern prog- ress. We now come to the second part of the question under discussion, viz. : Under what limitations this capitalistic aggregation should go on. The limitations to economic development should always be economic rather than political or statutory. Statutory restric- tions to the use of capital involve arbitrary and usually harmful hindrance to the free mobility of economic forces. These restrictions are usually the result of an adverse public sentiment, created by the failure of the captains of industry to recognize their true economic relation to the community. The concentration of cap- ital, like the concentration of all power in society, in- volves the surrender of a certain amount of productive individuality in the community. This can never be justifiable, nor will it permanently be tolerated, unless it results in giving to the community a full equivalent in greater economic advantages. LARGE AGGREGATIONS OF CAPITAL 79 The economic law of permanent productive integra- tion is that increased concentration of capital and power in fewer hands is economically justifiable and socially tolerable only on the condition of improved services to the community, in better quality or lower prices of what is furnished. Profits are the legitimate reward of capitalistic enterprise ; but they should always be obtained by exploiting nature through im- proved methods, and never by exploiting the com- munity through higher prices. The failure of cap- italists to recognize this principle as the inexorable economic law of their existence is sure to bring social antagonism which will result in some form of arbi- trary, uneconomic restrictions, detrimental alike to capital and the community. Capitalists who imagine that any amount of accumulated wealth can enable them to defy this social law are greatly mistaken, and sooner or later will have to pay the penalty by the arrest of their progress, if not by the entire disposses- sion of their present industrial opportunities. The present anti-trust movement throughout the country is the result of a disregard by capitalists of this economic law of productive integration. The un- economic combines already referred to, which are a constant violation of this principle, coupled with other political and social disturbances, have tended to create a public sentiment against accumulated capital, ^^er se. As is always the case in social revolts, the genuine are arraigned with the spurious and all are put under the ban. Any legal restrictions, in the sense of limiting the amount of capital used by a single concern, would be a fatal obstruction to economic progress. Instead of 80 TRUSTS AND THE PUBLIC applying arbitrary limitation to the aggregation of capital, the real reforms to be sought are in the educa- tion of the capitalist and the public in regard to the true relation of capital to the community. TI. FACTS FKOM THE OIL REGIONS * Pkobably there is no concern in the world which is the subject of so much suspicion, and psychological as well as industrial antagonism, as the Standard Oil Company. People who know nothing whatever of the oil business, of the industry, history, methods or results of the company, feel perfectly competent to pass judgment, always of course against the trust. This company seems to occupy very much the same position in the industrial sentiment of the community that Satan does in the atmosphere of theology. It is regarded as the evil genius, which is the cause of all the bad and none of the good in the oil industry. We have had occasion several times to discuss at length the economic effects of the Standard Oil Com- pany on the petroleum industry. Heretofore, how- ever, we have considered the question only on the side of the manufactured article — refined oil — the reason for this being that public discussion has been devoted mostly to that side of the subject. The law-suits, legislative investigations, and practically all anti-trust schemes and literature, have been directed against the " monopoly " in oil refining. It would be a mistake to assume, however, that * Published in Otintori's Magazine of September 1897. 6 81 82 TRUSTS AND THE PUBLIC the Standard Oil Company has no enemies among the producers. One has only to go into the oil regions and spend a little time among the people in the land of derricks to learn that the crushing hand of the trust is also upon every producer of crude petroleum ; that every man who has a well on his farm, in his back 3^ard, or at his front door, is being robbed day and night and Sundays by the Standard Oil Company. At first it is difficult to resist the impression that there must be considerable truth in this universal indictment. Such places as Allentown, Bolivar and Richburg, ]^. Y., show all the symptoms of industrial despair and social decline. Most of the buildings were never touched by a paint brush and there are almost none that ever had the freshening influence of a second coat. Dirt, neglect, broken windows, depleted door- steps, moral inertia, and an utter lack of social life and personal energy, characterize the entire region. It looks as if the hard hand of adversity had visited every household, and all this is attributed to the Standard Oil Company, and generally believed by the public. The facts connected with the production of crude petroleum, which are little known to the public, represent an extraordinary set of industrial conditions. Through its immense development, the Standard Oil Company has become practically the only purchaser of crude oil. In some of the oil fields, conspicuously those of Allegany county. New York, it has not only become the purchaser of the product but it has finally become the practical surety of every small-well owner, so that they are not undersold or driven out of business by more successful competitors. But for the FACTS FROM THE OIL REGIONS 83 influence exercised by the Standard Oil Company, fully a quarter and probably a half of the smaller-well owners in the Allegany field would long ago have been forced out of business, and the income from their one, two, three- barrel a day wells been entirely cut off. The oil producing industry is unique. There is noth- ing like it in any other line of human effort. With the exception of sinking the well and finding the oil, it affords an almost automatic income without effort, responsibility, or hardly any care. All an oil producer has to do is simply to furnish the well and the Stand- ard Oil Company will do all the rest. The trust owns the pipe lines that convey the oil from the wells to the refineries. When a producer sinks a well and finds oil, all he has to do is to notify the company and it will lay the pipe connecting it with his tank, bear all the expense of transportation, and take all the product whether it needs it or not. The well owner simply has a tank into which he pumps his oil, and as fast as he pumps it he can let it into the trust pipes and draw his money. The trust sustains about the same relation to the well owner that the government would to the silver-mine owner under the free coinage of silver, namely, takes all the product, regardless of how much it is or whether it is needed, and pays " spot cash " for it. There is no other industry in the world where the pro- ducers have such absolutely unlimited market, such ease of sale and such complete guarantee against loss. No agents or drummers are needed ; not even skill in bar- gaining is necessary. The most ignorant well owner can sell his product and get the same price for it as the most' skilful operator. In fact, the trust completely protects them from all the risks of ordinary commerce 84 TRUSTS AND THE PUBLIC and assumes all the reponsibility of the entire industry itself. The producers, strange to say, seem to be about as ignorant of the economics of the oil business as is an ordinary city merchant, imagining that they are robbed by the arbitrary fixing of the price of the oil ; they insist that the price is fixed by the trust at whatever point it pleases. As a matter of fact, nothing of the kind occurs. If such were the case, it is needless to say that the trust would put the price verj'' much lower than it is ; prac- tically give nothing for the oil. Crude oil has been as high as six dollars a barrel. Since the trust was organ- ized the price has been nearly four dollars, frequently between two and three dollars a barrel. Why does the trust give nearly three dollars a barrel atone time and less than seventy cents at another ? Why does it not give seventy cents all the time ? The simple an- swer is that it cannot get the supply at that price. Despite the trust and all its monopolistic powers, the price of crude oil is governed by economic conditions over which neither the well-owners nor the trust have arbitrary control. Of course, the conditions are dif- ferent from those in any other industry because the Standard Oil Company assumes a responsibility which is assumed by the purchasers of no other commodity. In no other industry are there either individual or col- lective interests which stand ready under all circum- stances to take the entire product, regardless of the market demand. This the Standard Oil Company does, and when there is more than is needed it stores it, and in so doing it relieves the well owners of all contingent responsibility. If this were not done, when- ever there was more oil produced than was required FACTS FROM THE OIL REGIONS 8$ the well owners would have to store it or sell at a sufficiently lower price to pay some one else to store it. In that case the price would be governed by the cost of the dearest portion that the market, under those competitive conditions, would take, and when it was too much some would remain unsold. This competitive element being taken out of the market by the Standard Oil Company standing ready to take the entire product causes the economic forces affecting prices to operate in a different way. Under the present arrangement, the trust cannot refuse to buy when it does not need, hence, when the supply is greater than the demand and stock is being accumu- lated, the trust materially lowers the price it will give; that is to say, it will still take all the product but at a lower price ; and, if the demand is pressing hard against the supply, it will pay higher prices so as to induce greater risk in sinking new wells to furnish an adequate supply. The trust stands in relation to crude oil very much as the Bank of England does to gold. When it needs a greater supply of gold it raises the rate of discount ; and when there is more than is needed it lowers the rate of discount, but it always takes all that comes. It is thus easy to see that such an excess of suppl}'- would involve a great loss in stor- age, consequently the Standard offers a lower price. This is not due to anything the trust does or can do ; it is due to the prolific output of the West Virginia field. The new wells in West Virginia are each yielding from one hundred to six hundred barrels a day. Under the ordinary competitive conditions of purchase, with such an output, only what is needed being taken and the dealers fixing the price, a very large number of single- 86 TRUSTS AND THE PUBLIC barrel vrells in Allegany would go out of use because the more prolific wells could supply the whole demand and could lower the price sufficiently to undersell the producers with the small wells. But, since the Standard will take all that is produced, the single-barrel wells can sell their product the same as the six hundred- barrel wells. In other words, the small producers cannot be crowded out by competition, so that in reality it is not the trust that is now fixing the price of oil at seventy-three cents ^ but the prolific wells of Virginia. Thus the law of cost of production oper- ates, despite the seeming monopoly of the purchaser, and operates the same on crude oil as on silver or wheat or any other product. From this there is no final escape, but the well owners in the Allegany fields imagine that because oil was once three and four dollars a barrel and is now only seventy-three cents, there- fore the trust has arbitrarily reduced the price b}'" that amount. They seem to know nothing of the economic effect of the "West Yirginia oil fields on the price of their product. Instead of the trust being the enemy, con- sciously or otherwise, of the smaller-well owners in Al- legany, it is in reality their best and almost only friend, for if the trust were out of the way and free competi- tive conditions prevailed many of the small-well owners would be driven entirely from the field. For instance, if the one-barrel-well owners had to furnish storage for their own product, transport it themselves and then run the risk of selling it in competition with owners of the more prolific wells, the cost of handling their small amount would be more than the price that they could 1 At present, August 1889, the price of crude oil has gone up to $1.27 per barrel. FACTS FROM THE OIL REGIONS 87 get for it. It is only because the trust furnishes all the storage and transportation, and stands ready at all times to buy all the product that these small-well owners can furnish, that they are able to stay in the field at all. As a matter of fact, they are a surplus quantity which competition would drive out ; nothing but the economic paternalism of the trust keeps them in existence. Yet curiously enough, it is the small- well owners and not the large ones who think the trust is robbing them. It is not at all clear, however, that this is a good thing. It is quite certain that in the natural order of competitive evolution a large number of the small- well owners would be rendered economically useless and be eliminated. They would be compelled either to move into the new fields and be a part of the live, ac- tive movement, or disappear, but for this somewhat ab- normal method of the trust in buying all the product, whether needed or not. It probably would be better for society if they were gradually eliminated by the competitive process, as they would be from farming, manufacture, commerce or any other industry, than to be perpetuated by uneconomic conditions. The effect of this is clearly seen in the social condi- tion of these economic back-numbers. Under the pres- ent system of a guaranteed market for the whole prod- uct, oil production is reduced to an almost automatic process. The owner, for instance, of a one-barrel well is as completely assured of remaining in the market as the owner of a six hundred-barrel well. The one-bar- rel well will yield nearly three hundred, dollars a year. This income being guaranteed by the trust against all competition, the owner is relieved from all economic re- 88 TRUSTS AND THE PUBLIC sponsibility and resigns himself to a mode of life that will eke out existence on this small income. Whatever else may be said against the Standard Oil Company, it cannot be charged with crowding out the small producers. On the contrary, it is the only power that perpetuates their existence. "Were they exposed to the full force of competition, they would soon be annihilated or compelled to keep pace in the thrifty march of progress. Allen town, Bolivar and Richburg are monuments of industrial sloth and social indifference which are the result of the perpetuation of uneconomic misfits. The effect is bad alike on the individual and the community, without in the least benefiting the industry. The real trouble with oil producers is that they have been shielded by the trust from the normal competitive influence of industrial evolution. The only remedy for their condition is to apply the same concentration of capital to oil ownership that has taken place in the refining. Instead of the Standard Oil Company giving place to a multitude of small refiners, the true movement would be for the trust or some other similarly large concern to concentrate and organize under one or a few large companies the entire crude oil industry. Then the shiftless hangers- on would be forced into the column of w^age workers and the energy and discipline of progressive influences would spur them on to some degree of industrial and social activity. Small-well owners at present are really in the hand labor era of industr}^, and are lag- ging behind in the general progress of society through the barbarizing influences that crude life and hand methods always entail. YII. TKUSTS VERSUS THE TOWN* Editor Gunton's Magazine : The unequivocal industrial tendency to-day is toward the so-called trust. Newspaper notices give almost daily evidence of this fact, and the sharp competition for the world's markets by American manufacturers makes a closer division of labor and a larger invest- ment of capital of first necessity. The most natural thing to do is to form a trust and thereby secure both. That the trust idea is commercially successful needs no demonstration. In fact, where feasible at all, it is the only way open to large success. There is no gain- saying the fact that it is based on the true economic principle and has therefore come to stay, and is the legitimate outcome of its predecessor, the factory system. It is also peculiarly American, and is more nearly an industrial democracy than any other form of commercial institutions. It is democratic because it represents the investments of many, and the many elect the officers who are in control and who for in efficiency or malfeasance may be removed from office. It is democratic because it does not promise any hered- itary descent in the control of affairs. * Letter from correspondent, and editorial comment, published in Gunton's Magazine of September 1898. 89 90 TRUSTS AND THE PUBLIC But while we may not ignore this tendency or fail to admit the logic of this is trend, we must look with apprehension on its effect upon the many manufactur- ing hamlets with which the country is dotted and which so greatly aid the agricultural interests of our eastern and middle states. The trust necessarily seeks a commercial and financial center, a large and wealthy city where it is daily in touch with the pulse of trade and finance. It means, then, abandonment of the smaller factories in the rural towns and withdrawal of the employees who are the tenants of the houses of which the town is built, patrons of the local stores, and consumers of the products of the local farms, leaving the thrifty manufacturing village an empty distributing point for rural necessities which are obviously sold to the farmers at a higher price, while their product is bought at a much lower price on account of the transportation charges anticipated to get it to the consumer. That this is appreciated by the people is evident from the fact that much investigation into and legis- lation against trusts is engaging their representatives in the legislatures of the various states, but the im- mediate effect *will not be fully appreciated by those most interested until too late. The trust not only produces an article for less cost than the small manu- facturer but it goes farther. It seeks to reduce the cost of distribution by omitting the jobber and in many instances the retail dealer, and selling through its own channels directly to the consumer wherever possible, thus saving to itself the profits of both. By the change then not only the farmer but the country merchant, the country bank, and the village property TRUSTS VERSUS THE TOWN 9I holder are all alike menaced. Farmers of the eastern and middle states have known something of the reduc- tion in land values produced by the opening and oper- ating of large tracts of farm lands in a large way in the West and South-West, and the cheapened product therefrom, aided by the improved and cheapened transportation, but such reduction is onlj'- a frac- tion of what is to come with the industrial chansfes now in progress. Those towns which are the happy possessors of from six to twenty thriving manufacto- ries employing from 50 to 200 or 300 hands each should guard them jealousl}^ and the farmers who have derived thrift therefrom should lend their aid so far as may be to their maintenance. These factories not only make a profitable home market, give value to real estate and thrift and population to a town, but the}^ also pay a large percentage of the taxes, which would not be not- ably lessened by their loss but would have to be added to the burdens of others. How far-reachins: the change wull be time will tell, but its effect cannot be doubted. The town has a fight for self-preservation against the trust, and should be fully awake to the menace of what will come if it loses in the contest. C. D. Chambeelin. Mr. Chamberlin raises a good point and one that deserves serious consideration. What he says in re- gard to the inevitable industrial tendency towards trusts, and the advantages to come from that move- ment, is quite in accord with the views of this maga- zine ; nevertheless, it is of great importance that the growth of towns and cities all through the country, par- ticularly in the great rural sections, shall steadily pro- 92 TRUSTS AND THE PUBLIC ceed, because it is from these centers that the moving forces of progressive civilization radiate. Conse- quently, if it were true, as Mr. Chamberlin thinks, that the smaller towns and cities are being killed off by the growth of trusts, a serious problem would be presented and some legislative restriction of the trust movement might be justifiable. The question should be looked into thoroughly and discussed with entire fairness. There is no doubt that the last two decades have witnessed the relative decline of a certain class of small towns in the old-settled portions of the country, chiefly the East. Neither is there any doubt that much of this is chargeable to the modern tendency towards con- centration. The beginning of this change was wrought by the railroads. "Wherever and as fast as steam transportation took the place of wagons or stages in any given section of the country, the fate of all manu- facturing towns not on the line of the road was sealed. Manufacturing, therefore, tended more and more to localize itself along the railroads and the non-railroad towns relapsed into agricultural communities. The next step was a natural continuation of the same move- ment. Certain kinds of industries can be conducted much more economically and profitably in large estab- lishments than in small ; hence, many of the small concerns of this class, even though located on railway lines, found it difficult to compete with the more exten- sive plants that had naturally grow^n up in the larger towns and cities, and thus were gradually compelled either to withdraw from busmess or consolidate and go to larger towns themselves. It is quite true, therefore, that certain lines of industry have been steadily center- ing in the large towns and cities. TRUSTS VERSUS THE TOWN 93 But is this movement chargeable especially to the trust? ISTot at all. It is due to the general concen- trating tendency of which trusts are merely one phase. In fact, the trust integration seldom takes place until after the industries affected by it have already migrated from the villages to the large towns. The railroads and competition of larger concerns were and are re- sponsible for that movement, while the trust is simply an organization of already established concerns and often does not involve changing the location of fac- tories at all. In some cases of course it means closing up the smaller and extending the larger plants, but clearly this is simply a continuation of the earlier movement and is chargeable, not specifically to the trust, but to the entire general trend to which we have referred. The problem therefore becomes a much broader one than that merely of " Trusts versus the Town." It expands into the larger question of whether or not the whole modern trend of industry is hinder- ing the multiplication and growth of towns and cities throughout the country. So far from that being true, the facts show that the trend is exactly the other way. According to the Eleventh Census, the number of cities in the United States increased from 141 in 1860 to 448 in 1890, and of these new communities 187, or 60 per cent., were places of between 8,000 and 20,000 population — hardly more than large towns. The greatest gain of all was in towns of between 8,000 and 12,000 population ; these increased from 62 to 176 in the three decades. Cities of from 12,000 to 20,000 population increased from 34 to 107 ; 20,000 to 40,000, from 23 to 91, and so on. There was only one city of between 500,000 and 1,000,- 94 TRUSTS AND THE PUBLIC 000 population in 1860, and one in 1890. Not until 1880 were there any cities of over 1,000,000 ; there was one of that class in 1880, three in 1890. It is clear, therefore, that the growth in the number of small towns and cities has been pronounced, and that, instead of the small localities being killed off by the larger, it is among these very towns of from 8,000 to 12,000 inhabitants that the principal gain has taken place. The total increase of 307 consisted, of course, of small places which passed from below to above the 8,000 mark during the three decades. All this occurred, it should be remembered, during the period of most marked concentration in industry. If, however, the growth of railroads and concentra- tion of industry has resulted in the decline of a certain class of small towns, how can this general increase be explained ? Chiefly, we believe, by the fact that prac- tically all the decline has been in the case of towns of insignificant population — say of less than 3,000 or 4,000 — and this has been much more than offset by the mul- tiplication and growth of towns of 5,000 to 10,000 and upwards. Thus, if the little industries of a group of small villages should gradually center in one of those villages, the latter would soon become a large town and be included in the census list, while before none of these places would have been recorded either as towns or cities. Hence, in the older sections of the country, for each new town added to the list of places exceeding 8,000 inhabitants there may be two or three or more smaller places left in a static or declining condition. The census statistics for places of from 1,000 to 2,500 population confirm the statement as to the stagnation or decline of very small towns in eastern states. TRUSTS VERSUS THE TOWN 95 Throughout the West the case is different. There small towns and large (except the " boom towns " of a few years ago) are steadily growing. Most of these places have come into existence since the new conditions of concentrated industry were established and hence are making use of instead of suffering by these conditions. Only such industries as are capable of success in rela- tively small places are being located in the towns of the West, and that region is not being built up with thousands of little agricultural communities, as was done in the East before the modern industrial era came in. Thus, while some of the small towns of the West may, hereafter, recede before their stronger neighbors, the movement cannot possibly be so Avidespread and significant as it has been throughout the old states of New England and the Atlantic seaboard. There is every indication, however, that towns of 5,000 to 10,000 and upwards will continue to thrive and increase in number. In the first place, while many lines of industry must be carried on, nowadays, in large establishments, it does not follow that such con- cerns will tend to locate themselves in very large cities ; indeed, to avoid heavy taxation and rent they tend more and more to seek towns and cities of moderate size. Good railroad facilities make this possible, and thus we see that while railroads were at first the means of drawing village industries into larger towns, they are now becoming the strongest force to keep such in- dustries from going into the great cities. Moreover, the economic tendency is and w^ill be more and more for manufacturing industries to locate themselves near the sources of raw material, because transportation of finished commodities is relatively much more econom- 96 TRUSTS AND THE PUBLIC ical than of bulky raw products containing a great amount of waste. This means that manufacturing will steadily diffuse itself throughout the country, accord- ing to the geographical distribution of natural re- sources ; while the very large cities will become more exclusively mercantile, commercial, financial and general distributive centers. Look wherever we will the facts confirm this theory. Most of the manufacturing in New England, of cot- ton and woolen goods, boots and shoes, paper, cutlery, bicycles, etc., except in Massachusetts and Rhode Island, is carried on in towns of from 5,000 to 25,000 inhabitants ; and, in the two excepted states even, in places of less than 50,000 or 75,000. The cotton in- dustry is going South, near the raw cotton ; woolen manufacture will eventually move westward, near the raw wool ; in both cases establishing industrial com- munities in those sections. Iron is manufactured near the iron mines, furniture (very much of it) near the forests of Michigan, fiour near the wheatfields of Minnesota, raw sugar on the plantations. In time, most of the refining of sugar Avill undoubtedly be done near the sources of its production. Another important fact. New industries are con- tinually coming into existence, and the vast majority of these establish themselves in relatively small towns or cities, because they cannot begin on a sufficiently large scale to command success in a large city. Some of these may finally move to the cities, but, with the progress of invention, still other enterprises are continually being established, and may be counted upon as a permanent reliance of the small town. Thus from every point of view the steady multiplica- TRUSTS VERSUS THE TOWN 97 tion and prosperity of most towns and cities of from 5,000 and 10,000 population upwards, seems to be as- sured. Villages, especially in the East, which have not reached that point and cannot reach it, will prob- ably remain static or decline. Since their places are being taken by an increasing number of larger centers, this decline of small villages need not necessarily be considered a calamity. From a sentimental or a local standpoint it may perhaps be deplored, but the nation's interest is not in the mere preservation of little cross- roads hamlets but in the increase and distribution of communities sufficiently large and complex to exert a genuine socializing influence on its inhabitants and the surrounding country. It is hardly possible to get much of this influence in a place of less than 10,000 inhabitants ; with a smaller number there is not enough complexity of interests, variety of ideas and social intercourse, nor a sufficient basis for first-class educational facilities and public improvements. The drawing together of industries, therefore, in such a way as to increase the number of moderately large towns and small cities is an advantage to the whole country, even if the small villages do cease to be centers of industry and trade. But it is not to be assumed that the small villages will be entirely wiped out, even though many of them may lose a part of their population. Certain kinds of industries will always be found in these small villages, such as lumber and planing mills, grist mills, barrel factories, cheese and fruit-canning factories, creameries, carriage shops, and repairing establishments of various kinds. Many of these villages, also, will probably be transformed into residence places, educational centers 98 TRUSTS AND THE PUBLIC and summer resorts, — witness the fine old towns of New England. Others will form the nuclei oi future agricultural towns, in which the farmers will live and go out to their work every day. Improvement of country roads and more general use of farm machin- ery, permitting shorter hours of labor, will contribute to this result ; eventually, the trolley will probably be used for this purpose, just as it is now employed to take cit}^ workers into suburban districts at night. The modern trend of industry is producing two dis- tinct results — cheaper wealth and higher wages; in other words, increased consuming power of the masses of the people. This increased consuming power means a larger effective demand for the products of industry — hence more factories and more factory towns. Trusts do not affect new industries at first, and many kinds of manufacturing are never reached by the trust at all, because no economy w^ould result. These com- binations occur in certain kinds of long-established in- dustries, but the factories themselves, even when con- solidated in a few great plants, are not necessarily located in large cities. High taxes and remoteness from raw materials operate against that movement. There is no ground for supposing that trusts are prov- ing or will prove inimical to the small towns and cities of the country. On the contrary, the concentration tendency, with the natural balancing checks we have mentioned, is directly contributing to the increase of that class of communities whose influence is a power- ful stimulative factor in the social progress of the nation. YIII. THE STATE'S EELATION TO CAPITAL* The lack of general recognition on the part of capi- talists of the legitimacy of organized labor is the cause of much antagonism between labor and the employing class. Laborers act unwisely sometimes, and their occasional unwisdom is made to stand for their entire conduct, and this mistaken attitude towards the labor- ing class as a distinct element in the community is developing a severe and dangerously acrimonious class feeling between the laborers and their employers. This extends to practically every class in the com- munity, and not the least to the professional classes, who are governed largely by abstract ideas and senti- ments, and hence a social atmosphere antagonistic to capital is created by the mistaken attitude of capitalists themselves toward the labor question. The opposition to labor organizations by the employ- ing class is largely due to the failure of the employing class and of public educators correctly to understand the new conditions created by the revolutionary industrial progress that has taken place during the last half cen- tury. "What is true of capital towards labor in this respect is eminently true of labor and the community towards capital. The conditions which have so altered * Lecture delivered in New York City, October 18, 1898. 99 lOO TRUSTS AND THE PUBLIC the character of industry during the last fifty years, and particularly during the last twenty-five years, have created as much of a revolution in the conditions and character of capitalist enterprise as it has in laborers' conditions. Forty years ago a capitalist with one hundred thousand dollars was nearly at the top of the ladder of industrial enterprise, and was among the leaders of the best methods and most efficient tj'^pe of organization ; but, with the development of new devices and the application of new inventions, machinery has undero-one such an enormous chano;e that the methods of twenty years ago are effete and impotent for aught but loss to-day, and real organization of productive industrial methods has become absolutely necessary to ordinary success. A hundred thousand dollars is scarcely enough to run a small mercantile establish- ment now. Nothing short of millions is adequate to efficient productive enterprise in most of the great established industries of the country. This large capi- tal and organization is made necessary by the intricacy of the new devices. The new methods which work so much more efficiently and cheaply than the old are available only when production can be maintained on a large scale. The improved features involve speciali- zation of each department, interdependent with other departments, so that unless the whole can be conducted on a colossal scale the advantages of the new devices cannot be obtained. It is on the plan that to carry a small number of people a railroad would be dearer and more expensive than a stage coach ; yet, when hun- dreds of thousands ride every day, the Manhattan Railroad can carry us ten miles for five cents, and tho surface railroad even a greater distance; whereas, if THE STATE S RELATION TO CAPITAL lOI only those \y1io had incomes of .ten, to twenty ttiousand a year should ride they could go the .same distance cheaper in a coach and four. It ii, only n*hsn the ser- vice can be utilized by the millions' that th6 rOsuitG are cheaper by the new than by the old methods. This revolution has entered almost every domain of industr}^ It is very natural that in this transition and reorganization the small concerns and individual en- terprises conducted on the old and highly expensive methods should have to succumb. They are superseded by the new in exactly the same manner that the hand loom was superseded by the power loom, the stage coach by the railroad, the tallow candle by gas, and now by electricity. This is inevitable, but it always follows, and probably always will, that the defeated complain ; that those who cannot keep up with the rest complain at the unfairness of the others for going so fast. There is nothing unnatural in this ; indeed, it is in the nature of things. The consequence is that in the last quarter of a century this superseding of one type by another and supplanting of one method of production by an- other has produced a great deal of this resentment in the community. The feeling of hardship among those who are thus being displaced is not that the successful men are capitalists, because it is a case of capitalist superseding capitalist. It is just the same among laborers. The hand-loom weavers smashed the ma- chines and mobbed their fellow laborers who used the power looms ; — not because they were capitalists, or of another class, for they were all weavers, but one was using new methods which seemed to be endanger- ing the possibility of survival of the old. This tendency of concentration and integration of 102 TRUSTS AND THE PUBLIC capital to bear hard on the smaller concerns is not be- cause, they are- v-E,s2atia]ly different but because the new capitalist is superseding the old capitalist. In each csLsei'lie.r.e is a.tt^ridency to cry out : '^ Unfairness," and sometimes there is unfairness. The wail of com- plaint from this class of defeated competitors has taken form in an appeal to the public for raising the hand of the state against the growth of capitalist aggregations. The cry of monopoly, which is always a note of alarm, is vigorously utilized, and the public is asked to use the political power of the state to suppress this ever increas- ing capitalist tendency. "With the feeling that exists towards capitalists and the employing class, particu- larly among the laborers, a ready ear is offered to every such complaint. The history of the last ten years shows that the legislation in almost every state in the Union has a very strong anti-capital flavor. It is almost a com- monplace that a person to run for public office must be against trusts, or must in some w^ay or another ex- press his willingness to enact legislation to repress the action of large corporations. Only last evening Tam- many Hall held its great send-off meeting in the guber- natorial campaign of this state, and it brought upon the platform, for the purpose of oratorical and political effect, ex-Governor Campbell, of Ohio. Mr. Campbell proclaimed, loudly and with seeming seriousness, that the republican party was the party of trusts, the party of large corporations, and appealed to the voters to sustain the democratic nominees because they were opposed to corporate enterprises. An}?^ one who knows Mr. Campbell knows that this was political gush, mere demagogy — a specimen of the worst kind of political THE state's relation TO CAPITAL IO3 humbug. Mr. Campbell is one of the conspicuous in- stances of a man ^Yho makes his living largely by organ- izing new corporations. He gets big bonuses and large fees and what are called " ground-floor interests " in large corporations for the service he renders in or- ganizing these institutions. When, therefore, be ap- peals to the voters of New Tork city and state to sup- port a certain party because it is the enemy of these organizations, he is a mere public humbug. He does not believe what he says, but he talks to stimulate public prejudice on the subject, merely for the purpose of catching votes for the immediately ensuing election. This is dangerous business, but it is becoming more and more general. The people who indulge in this sort of talk act largely upon the belief that all that is necessary is to humbug the people during the cam- paign, and then ignore them after the election is over. They hope to avoid carrying out their promises by the practise of the doctrine that platforms are made to get in on, not to stand on. But this dishonesty, which much of it is, takes real hold. Though Mi\ Campbell does not believe the stuff that he talked, many of his au- dience did. The people are more honest than the dema- gogues, and take them at their word. They believe in this anti-capitalist idea, because it has become a part of this kind of irresponsible public propaganda. The consequence is that when such a man as Mr, Campbell is elected governor he cannot altogether withstand the demands of the legislators whom his audiences have elected, and, though he may not believe in it, he is forced to acquiesce in repressive legislation against capital and thus handicap the industrial development of the country. Not to do this creates a furious agitation. 104 TRUSTS AND THE PUBLIC The press, a certain portion of which is as demagog- ical as are the Crokers and Campbells, appeals to the laborers and to every victim of social misfortune on the same line, until the atmosphere becomes sur- charged with a sort of quasi-socialism. This leads to a perversion of the action of the state towards capital, which some day may be found to have so completely harassed the action of capital that our industrial progress will be seriously retarded and perhaps even brought to a halt. A conspicuous in- stance of the way in which this perverted public opinion is created is the case of the Standard Oil Company. That is the largest and perhaps the most successful trust in the country. It has been eminently success- ful in improving the quality and cheapening the cost of the commodity it produces. In doing this, as is generally the case, it has been exceptionally prosper- ous, as it should be. That form of enterprise which does things best and does them cheapest ought to be most successful, else improvements would not go on ; and that which does things the poorest and charges the most for the same product ought not to succeed, since to do so would practically be to put a premium on incapacity and put improvement to a disadvantage. The Standard Oil Company has been the object of more abuse and legislative attack, because of its con- spicuous success, than any other corporation. Legis- lation has been introduced in the United States con- gress to check what is called " trust organization." Even Senator Sherman was caught by the clamor and became the instrument of this sentiment, and intro- duced what is known as the " Sherman Anti-trust Law." Several states have enacted lefi-islation for the THE state's relation TO CAPITAL 105 object of crippling or forcing the Standard Oil organ- ization into dissolution, for no other reason than that the clamor against it has entered into the domain of politics and affected the political opinion of the com- munity. Last week a public hearing was held at the New Amsterdam Hotel in New York City, in the case of the State of Ohio against the Standard Oil Company. As a result of the sentiment to which I have referred, Ohio passed a law demanding that the Standard Oil Com- pany of Ohio sever its connection with the Standard Oil trust, and, as the process of dissolution has not been complete, the anti-capital agitators operating in politics in Ohio sent a special delegation representing the Su- preme Court of Ohio to conduct an investigation into the subject in this city. I attended one of these public hearings and met a man by the name of George Rice, from Marietta; in the company of the counsel for the State of Ohio. Upon my asking for the room where the hearing was to be conducted, the counsel for Ohio asked if I represented any paper. I said no, I represented Gunto7i's Magazine. " Oh yes," said Mr. Rice, " that magazine has been saying hard things about me." And then, as I suppose is typical of the character of the man, he broke out into a line of pro- fane abuse which cannot be repeated here. I told him that I had said in the magazine that I believed him to be a bold blackmailer ; I still believed it, and had come specially to hear what he could say on the stand. To my surprise, this man of more than six feet suddenly be- came calm and docile and proceeded to assure me that he was in the habit of telling the truth ! During the conversation I reminded him of the fact that he had I06 TRUSTS AND THE PUBLIC for years been making a business of pursuing the Stand- ard Oil Company to compel it to give him half a mil- lion dollars for property that nobody would give him twenty-five thousand for, and that because they would not buy at his absurd price he had been pursuing them in all legal and political wa3^s for fifteen or twenty years. He promised to call at my office with the evi- dence which should convince me of his innocence, but he has not done so. A few days after, in the line of his usual methods, he got himself interviewed by the Kew York World, which published his statement with a half-page picture in last Sunday's edition, printing part of his interview in full faced black type, and embellishing the story with adjectives and emphasis, presenting him to the public as a martyr of this cruel system of large or- ganizations, and particularly of the Standard Oil Com- pany. Now, the public has no benefit to derive from cor- porations unfairly getting the upper hand of competi- tors by uneconomic methods, but, on the other hand, it has no interest in coddling and encouraging blackmailers to beset successful business men and, in case of failure, to threaten them with adverse legislation or with ad- verse judicial decisions. This Rice case is perhaps one of the most conspicuous of its kind in the country, and has been made the most of, and since it is now re- vamped by other "yellow" journals as well as the" World, I think it is worth while here to say a little specifically on its merits. I do not wish to imply that there are many George Eices, but inasmuch as this is made a basis of almost national appeal to the public to legislate against corporations and against capital, on THE STATE S RELATION TO CAPITAL 10/ the ground of this man's innocent "martyrdom," it may be well to puncture a little of the fraud and hum- bug connected with his particular case. I will take only a few of his statements in this inter- view. Of course, his general assertion is that the railroads are all in league with the Standard Oil Com- pany to crush such as he. It is a little peculiar, any- how, that the whole organized railroad capital in the community should go into a conspiracy against such p^n innocent and harmless creature as Mr. Rice rep- resents himself to be. His first specific indictment is that the railroads carry oil for the Standard Oil Company cheaper than they will for him. This is done, he says, by the rail- roads refusing to furnish tank cars and compelling jobbers to ship in barrels or box cars, while the Standard Oil Company has built tank cars for itself, which the railroads haul for nothing. That is to say, when the independent shippers send oil to the Pacific seaboard they are charged $105, he says, to return the empty cjdinder tank car from the Pacific to the Mis- souri River. These tank cars of the Standard Oil Company, he says, are returned for nothing, thus giv- ing the trust an advantage of $100 a car over such as he. This sounds plausible, and it would be a hardship if it were true. But the facts in the case are that there is only one railroad in the country that will build tank cars, because their business will not warrant the investment. That road is the Pennsylvania. The Pennsylvania Railroad has a terminus in the oil fields and at the seaboards, and therefore has more through traffic of that kind than any other road, and can afford to invest in tank cars. The Pennsylvania Railroad Io8 TRUSTS AND THE PUBLIC supplies these cars to every independent producer on exactly the same terms that it furnishes them to the Standard Oil Company, and Mr. Eice does not venture to state to the contrary. But Mr. Eice refused to take advantage of this, and never built an}^ tank cars him- self. He continued the old crude method of shipping in barrels, and was therefore naturally at a disadvan- tage with those who shipped in tank cars, just the same as the manufacturer who insists upon using old effete machinery will be at a disadvantage with the one who uses the new, most modern inventions. The Standard Oil Company has done another thing. It has had many of its own tank cars so constructed that they can be used to transport freight on their return, thus being able to earn something both wa}'s. "When the rail- roads can use the tank cars to bring return freight, the Standard Oil Company is not charged for the haul- ing. "Why should it be ? But when they are brought back empty it has to pay exactly the same as anybody else ; so that Mr. Eice's statement on that point is simply false. It is simply a sour-minded misrepre- sentation of the facts in the case. The next point he makes is that the railroads make vile discriminations in favor of the Standard Oil Company and permit it to ship oil in small quantities at the rate that is charged for full cars, which privilege it does not extend to other shippers. On this point Mr. Eice says : " Yet another thing helped to ruin me. The rail- roads allowed the trust to deliver its oil in less than carload quantities at the same rates as for full car- loads. They allowed the trust to stop its cars, whether carrying oil in bulk or barrels, at different stations and take it off in small quantities without paying the THE state's relation TO CAPITAL IO9 higher rates which independent competitors were ahvaj'^s charged for small quantities thus delivered. Of course, against such discriminations as these the independent competitor of moderate capital could not contend. He was driven to the wall every time, as I was." Here is another instance that, if true, would indeed be grossly unfair. But the facts in this case, as Mr. Rice well knows, do not sustain his statement. He has been before the Inter-State Commerce Commission with this complaint ; it was thoroughly investigated and proven not to be true in a single instance. The decision on this point is reported in the case of E-ice versus Railroad Companies, Fifth Inter-State Com- merce Commission Report, page 6G0. Here is what the Commission says on the point : " The third ground of complaint appears to be wholly unfounded. There is no evidence that ' favored * shippers have secured carload rates on less than car- load shipments, by being permitted to remove portions of the contents of cars at intermediate stations be- tu'^een the points of shipment and of destination. The verified answers of the defendants explicitly deny that an}" such discriminations have occurred and that denial is fortified by the positive testimony of their witnesses. The petitioner did not appear at the hearing, though duly notified thereof, and has offered no proof in sup- port of the information and belief upon which his allegations were made. As to these charges the com- plaint must be dismissed." Thus you see this man Rice labored to get this com- plaint before the Inter-State Commerce Commission, and then, after being duly notified, had not the cour- no TRUSTS AND THE PUBLIC age to appear, and the thing was thoroughly investi- gated and his allegations proved to be untrue in every particular. Yet in the face of this decision he expresses himself before the public in this specially imposing interview, and asserts that this thing is still true. He repeats what he knows, and what the Inter-State Com- merce Commission has declared, to be absolutely and unqualifiedl}" unfounded. I ouffht to have said that his statement that the Standard Oil Company gets its empty tank cars re- turned free has also been the subject of investigation by the Inter-State Commerce Commission, and in that case again the charge was found to be wholly unsup- ported. Rice could give no evidence of the truth of his affirmation, yet he repeats it in this demagogical way as if it were a verified fact, when he knows it is a literally false statement. A.nother statement that Mr. Eice made in this inter- view was regarding the so-called " South Improvement Company," and that there may be no mistake I will read what he says : — " To understand the growth of this crushing mo- nopoly you need to go back to the foundation of it. In January, 1872, the trunk lines of railroads made a contract with a corporation called ' The South Im- provement Company,' which was only another name for the Standard Oil Company, under which the Stand- ard Oil Company was allowed the most outrageous discriminating freight rates. It seems incredible that these contracts should have been made. They not only gave the Standard Oil Company heavy rebates on their own shipments of oil, but gave them rebates on the shipments of their competitors. At that time the THE state's relation TO CAPITAL III Standard Oil Company only had 10 per cent, of the petroleum industry of the country, while their com- petitors had 90 per cent. The rebates allowed to the Standard people were from 40 cents to $1.06 per barrel on crude petroleum, and from 50 cents to $1,32 per barrel on refined petroleum. Thus the Standard Oil Company received nine times as much for rebates on the shipments of its competitors as it did on its own." This is a fair sample of what might properly be characterized as the villainy of this man's method of procedure. You remember that a few years ago (1894) a man named Lloyd published a book called " Wealth against Commonwealth," and he made a statement similar to this. I investigated the matter at the time and found out (and have since discovered that Mr. Lloyd knew it) that this " South Improvement Com- pany " never had any existence at all ; that it was a pure myth. All there was of it was that a few men met together and got up a scheme which was so bad that they never dared for one moment to try to put it into practise. This man Rice speaks of it, Mr. Lloyd spoke of it, and hundreds of other people who hear these statements continue to speak of it as though it were a honafide company which actuall}^ did business with the railroads and got these fabulous rebates. Now, Mr. Rice knows, or he ought to know before he speaks as a martyr authority on the subject, that this so-called " South Improvement Company " never did a dollar's worth of business in the world, and therefore not one penny of these rebates was ever paid, because the whole thing was a still-born affair ; yet he repeats that lie as if it were veritable truth to-day. Undoubtedly, in the seventies, the railroads did give 112 TRUSTS AND THE PUBLIC rebates to tlie Standard Oil Company, but in no such vra^y as the mythical contract of the South Improve- ment Company indicates. In talking about rebates it should be remembered that at that time it was the habit of all railroads to give rebates to large shippers. It was not peculiar to the Standard Oil Company, nor to any other large shipper. They gave rebates in the same way and for the same reason that purchasers of large quantities can always get a better price than the purchasers of small quantities. The Standard Oil Company was a very large shipper, and the railroads wanted its trade, and they bid, just as paper manu- facturers or producers in any line will bid, for the trade of a very large customer and one whose payment is prompt and sure. It is on the same principle as the long and short- haul matter, in the case of railroads. Anybody who knows anything of railroading knows that if the same rate were paid per mile for all freight on long dis- tances, on many of the roads a large portion of their territory would be absolutely excluded from reaching the market. It is not only customary, but it is de- finitely economic and good business, for a railroad to take freight under some circumstances at less than it would actually cost if the investment and rolling stock were all considered. "When a road is equipped, all its fixed costs are substantially the same to do a small business as to do a large one. Indeed, traffic obtained in this way frequently enables a road to lower freight on its whole business ; yet those who do not get the lower, or long-haul, rates think they are injured and cry out against it. As a matter of fact they are benefited, because without the long-haul business the THE state's relation TO CAPITAL II 3 rates on the short-haul would have to be higher in order to make the road pay at all. That is the secret of all rebates for large business, or great discounts for large orders and cash payments. There is nothing ex- ceptional in the rebate idea for large business. It is as old and as permanent as business itself. Another statement that this man makes is in re- gard to a railroad scheme for carrying oil from Macks- burg to Marietta. On this point he says — I again use his own words : — " To show )'ou how the rebate system worked in my own case, let me say that in 18S5 I was charged 35 cents a barrel for carrying oil from Macksburg to Marietta, a distance of twenty-five miles, while the Standard Oil Company paid only 10 cents a barrel for the same distance. More than this, out of the 35 cents a barrel that I paid the trust actually received 25 cents. In other "words, the trust received about two-thirds of all the money I paid for freight." This, you observe, he presents as one of the things that helped to ruin him. The facts in this case have been brought out fully in the public hearings and in the courts, but Mr. Rice knows that the average reader of newspapers has not read these investigations and court reports, and therefore he feels perfectly safe to go on making a repeated announcement of this alleged piece of infam}'. The facts in this case are these : At the time to "svhicli he refers the railroad company men- tioned was, I believe, in the hands of a receiver. Some local agent of the Standard Oil Company made a con- tract with the railroad Avith some such features as Mr. Kice here describes, though not exactly, but at any rate the contract was an outrageous one. The agreement 8 114 TRUSTS AND THE PUBLIC was enforced immediately, before it was submitted to the trust at all. As soon as it reached headquarters it was seen to be obviously not merely unfair but illegal, and was revoked and the transaction stopped; and what is more, every dollar of over charge that had heen collected loas returned. Mr. Rice, by reason of that transaction, had paid in overcharge (all this was brought- out in the public hearings) something over two hundred dollars, and it was all returned to him ; so that, bad as the contract was, Mr. Rice never lost a penny by it. For him to present that as one of the ways by which he was ruined only reveals the character of the man. I refer to this particular case, as I said, because it is just now being made a conspicuous illustration of the heartless, crushing and deadening influence of great corporations, particularly the Standard Oil Company, and this man is paraded as a typical victim. But, it may be asked, what motive has he for doing all this ? This is a very proper question. The motive has been thoroughly revealed in the various attempts Mr. Rice has made in trying to get decisions and legislation against the Standard Oil Company. The secret of it is that he wants to blackmail the Standard Oil Com- pany out of a half a million of dollars. The simple facts on that aspect of the case, which 1 repeated to Mr. Rice's face and which he has not kept his promise to furnish the evidence against, are about like this : He was a small refiner in Marietta. He did not keep up with the current of improvements and made up his mind that he would sell his plant instead of adopting the new methods, such as building tank cars, and other improvements. He decided that he would try to force the Standard Oil Company to buy his prop- THE state's relation TO CAPITAL II5 erty at a fabulous price. The property was worth at one time perhaps about twenty-iive thousand dollars, but with the neglect and lack of up-to-date appliances is worth practically nothing to-day. He went to the Standard Oil Company (and this has been in evidence in the courts) and wanted to sell out for a half a million of dollars. They declined to buy. One would think that if a person had a piece of property to sell and he tried to sell it to a party and they declined to buy, he would go and search other purchasers, or use the prop- erty himself. But no ; this man made up his mind that he would make them buy, and if they would not buy he would make it cost them a good deal more than half a million, and it is for not buying it at this price that he has pursued them and devoted as much energy to trying to compel, by fair means or foul, the Standard Oil Company to give him half a million dollars for his plant, as would, by application to his industry, have probably earned him twice that amount. It often hap- pens that lazy people will put forth more energy not to do a thing than is required to do it. This appears to be Mr. Rice's case. He has pursued the Standard Com- pany during all these years, and accompanied his prop- ositions with threats that if they did not come to terms he would instigate hostile legislation, efe. I exposed this matter two or three years ago in an interview given the Boston Herald, in reply to an interview on the subject by Mr. Lloyd, to whom I have already re- ferred. Since that time this man Rice has repeated his propositions to the Standard Oil Company, directly and indirectly, several times. He is getting very cun- ning, to be sure, and refuses to put much in writing. Sometimes he has sent irresponsible brokers, with whom, Il6 TRUSTS AND THE PUBLIC doubtless, he promised to divide the spoils. Sometimes he has succeeded in getting a reputable lawyer to ap- proach the trust with his proposition. Recently he did this, and the company refused to talk unless the lawyer could furnish written authority for his action, and he did so, and, when asked what Mr. Rice had to sell or deliver for the five hundred thousand dollars he was demanding as a stand-up price, he gave a schedule of property worth less than ten thousand dollars, but frankly said that the greater part of the value he had to deliver was the withdrawal of litigation, the stop- ping of further annoyance, and the heading off of an adverse decision by the Inter-State Commerce Commis- sion. Rice actually attempted to trade by this black- mailing method upon his power to influence legislation and the decisions of the Inter-State Commerce Com- mission. 1 did not intend to dwell so long upon this case, but it is being made so much of and is so scandalous that I could not refrain from speaking of it. It is not an average case, I am glad to say, but it is at least a- case ■which shows the lengths to which a perverted senti- ment against capital may go. The encouragement that this man has received b}?" demagogical newspapers and public clamor is the thing which alone has sustained him in his highwayman methods. It is time that public sentiment w^as aroused on this subject. We are in danger of suffering quite as much from this false and pernicious attitude, and the conse- quent legislation, as we are from the rash conduct of illy-informed and demagogicallv-led labor mobs. Labor has its legitimate rights, and the state has a true func- tion and duty towards laborers, as I have said, which THE STATES RELATION TO CAPITAL 11/ is educational and protective. The protection should ahva3^s be in the rigid guarding of every right laborers have acquired, and in the maximum assistance to every new opportunity, social, industrial and political, that the laborers can, either individually or in their organ- ized capacity, take advantage of. In reference to capi- tal the same is true. There are capitalists who will wantonly oppress labor and who will wantonly, if needs be, corrupt the state. But this is not the general char- acter of American business men, any more than dema- gogy is the general character of American laborers. There is no one thing that is more dangerous to pub- lic welfare than this unwholesome, chiefly unfounded, and perverted antagonism to the legitimate develop- ment of capital into corporate forms and large enter- prises. The state should permit the free movement of this tendency, for it is through this progress alone that the community, of which laborers constitute a large majority, get the real benefits of modern civilization ; — the cheaper wealth, the shorter working day, the new devices for domestic and social improvement, the great public expenditures, improvements in domestic architecture, and so on, all of Avhich are the outcome of capitalistic development. Take away concentration of capital, so that millions cannot be devoted to experimen- tation, as now ; give us small concerns with a few hundred thousand dollars capital, and we are at once put back to the relatively simple life and plodding methods of fifty years ago. Take away concentrated capital and we take the very life-blood of industrial, social and political progress out of the community. The improved efficiency and organization of productive forces are essential to modern progress. What we Il8 TRUSTS AND THE PUBLIC want, and what the state must be utilized to give us, is protection and freedom for the productive forces of society, because it is only by this superior application of capital that any increased contribution to the community's aggregate wealth can come, and it is on this increased contribution to the aggregate wealth of the community that the only hope of the laborers for betterment of their condition really rests. At the same time let us see to it that labor has the encouragement of the state in every legitimate means that it can devise to take an increasing portion of the products of this capital and transfer it to the wage-earners and the public. The true way in which this can be done (and must be done if it is done at all) is not by legislation against capital, not by socialization of industry, not by public control, but by increasing the social and political influences by which wages shall be increased, hours of labor reduced, and public im- provements made. It is only by these means that the laborers can get an addition to their income or a con- tribution to superior social conditions. But in order that the condition of the laborers may be improved in these ways, that their organized efforts may be efficient in demanding higher wages, better social conditions, greater freedom and opportunity, we must at the same time protect and encourage the possibilities of the source from which this wealth is to be taken, viz., capitalistic production. Any organized effort to use the state against the free development and ap- plication of science and organization to industry is a movement against public welfare, against the laborer, against progress and against civilization. IX. THE STATE'S EELATION TO LABOK * In discussing the relation of the state to labor, it is not a question of whether the state can do this or that, but whether it ought to do this or that, i^A the ought to do and wisdom of doing must not and cannot be determined by mere feeling, or the seeming immediate necessity or local emergency. It should be governed by the general principle of what in the light of eco- nomic science and experience is most likely in the long run to promote the welfare of the laboring class. As I have frequently remarked, the functions of the state are primarily protective, educational and judiciary ; that is, to protect the interests and rights of society, to adjudicate competing claims between parties, and to promote in all the ways feasible the educational influences and opportunities among the people, with the view of developing a more intelligent standard of citizenship and a broader social character in the com- munity. In this respect the duty of the state, it will be seen, is not directly to do for the people, as, for instance, in giving employment and running industries and owning property or conducting in any way profit- making enterprises ; but rather to exercise its supreme authority in the direction of guarding and increasing * Lecture delivered in New York City, October 11th, 1898. 119 I20 TRUSTS AND THE PUBLIC the opportunities for self -improvement in every domain of life among the citizens. This, in a simple society, may involve very little state action, but as society grows in complexity and diversity the number of ways in which the state can act in fulfilling its educa- tional functions steadily multiplies, and the multiplica- tion of these activities may seem at first sight like making the state more paternal, when in reality it is only extending the action of the state to new protect- ive needs or educational opportunities which the new conditions and interests have created. This is conspicuously the case in reference to the labor question. "When industry was conducted by simple methods, and the majority of the people worked for themselves or were employed in simple industries like agriculture and hand manufacture, the 23roblems were simple and the functions of the state in relation to labor were very meager. They consisted chiefly of providing for the care of paupers, insane, and otherwise helpless members of the community ; in the normal conditions of employment there was little for the state to do, because there was but little complexity and few new interests and problems. "With the growth of modern industry, however, since the completion of the factory system, this has radically changed. In no sphere of society has the expansion and multi- plication of interests and problems been so great as among the wage class. This is very natural. The development of steam, and of capitalistic methods of industry, revolutionized the entire type of industry, methods of working, and social life of the laboring class. It transformed the laborer from an individual producer to a fractional economic automaton. It made the THE state's relation TO LABOR 121 shoemaker into a peg driver, a sole cutter, or any one of more than sixty sub-divisions of shoeraaking. It did tiie same with the weaver and spinner and every mechanic emploj^ed in complex machine-using manu- facture. This is not to be lamented. It is not something which should be got rid of, or against which society should be organized and public sentiment inflamed and the hand of the state adversely raised ; but it is a fact to be recognized, it is the process by which modern civilization has come. It is the process by which western civilization must be taken to the East. It is the process, in short, by which barbarism shall be eliminated and an ever higher and higher civilization ushered in and established. Consequently, it is a fact to be recognized and reckoned with, and not fought and denounced. By " recognition " of this fact in its full significance I mean more than merely to know that it is here ; I mean, recognize it as being here to stay, and being here as in reality the only means of promoting a higher state of civilization. Consequently this should not be in any sense made the basis of any policy of subver- sion or overthrow, but should be recognized and studied solely with the view of adapting society to it. To resist it is like resisting the law of gravita- tion. This means that we must recognize as a thing inevi- tably to be counted with that the laboring class as a class has ceased to be composed of what we like to call independent individuals. The laborer is not economi- cally an individual. He has not the freedom to make 122 TRUSTS AND THE PUBLIC individual contracts. He cannot, if he would, go to an employer and stipulate for himself alone the wages he shall have, the hours of labor he shall work, and the specific conditions under which he shall work. The capitalist could not, if he w^ould, grant or concede special contracts with each individual laborer on these matters. The very nature of employment has made it impossible. The great factory methods have made the organization of production inevitable, by which all laborers in a given industry must work under common conditions as to hours of labor, w^ages and sanitary conditions of various kinds. This is no longer at the individual option of either the employer or the laborer. Then it is useless, it is futile, it is false, longer to talk of the laborer as having the right, even relatively, to make individual contracts regarding all these primary conditions of earning a living. This has necessarily reduced the laborers to an in- dustrial group or class. Bricklayers are a group. They must act in common or not at all. Carpenters, w^eavers, shoemakers, tailors, are groups ; they are parts of an industrial man, not complete industrial in- dividuals. They never can be that without returning to the simple methods of hand labor and relative bar- barism. It is not important that they should be indus- trial individuals, but it is important that the fact that they are not should be recognized, and therefore that the individualist idea be not urged against them when they are naturally acting in groups. In acting in groups and organized unions they do a great many things "which are indefensible, as do all groups. In that sense they are not exceptions. All social organizations make mistakes, have bad leaders, ignorant representatives, THE state's relation TO LABOR 1 23 demagogues, — in short, unscrupulous and inefficient members who sometimes get to the front. This is true of church organizations, social organizations, political organizations, and so on. Our political bossism, against which public warfare is now so rife, is a conspicuous instance of the kind. In dealing with this particular phase of the labor question, which is a pressing one because it comes up most frequently, we make the max- imum amount of mistakes. The reasoning on the sub- ject by populists, legislators and most economists is painful in its lack of recognition of the fact that the defects of the labor movement are defects of a natural movement. The tendency all the time is to insist that the movement is unnatural. Here the economic text- books are as much to blame as any other kind of con- tribution to public sentiment on the subject. It is quite common for economists and for editors, theorists and intelligent leaders of public opinion to censure the labor movement because its promoters are only a part of the whole labor body. In a work on The Political Economy of Natural Law, the author, Henry Wood, takes great pains to show that the despotism and oppressive features of the trade union movement consist in the fact that its mem- bership never includes more than a small minority of the whole wage class for which it pretends to speak. I men- tion this because this writer states what has almost be- come hackneyed, — as though it were a conclusive answer to the claim of the legitimacy of organized labor. Trade unions, on this theory, have no right to speak for the laboring class unless their membership includes at least a majority of the class. On this principle there is not a political party, nor a church, nor an organization of any 124 TRUSTS AND THE PUBLIC kind that would have a right to speak. If Tre say that trade unions do not represent the interests and sentiments of their class, because their membership roll does not contain a majority of the members of the class, we might say that the churches do not represent the Christian sentiment of the community, for surely it is true that the membership roll of the churches does not include anywhere near a majority of the whole community. We might say that the republican or democratic party does not represent the republicans and democrats in any community because the membership roll of the organization does not contain a majority of the voters of that political faith in that community. By that test there could be no party, for in no district, certainly in no crowded district, does the party organ- ization include a majority of the party voters in that community. This argument is contrary to all human experience in group action. Representation seldom includes a majority of the whole, never the whole. The truth is that represen- tation in voluntary organizations includes the active spirits who voice the sentiments silently acquiesced in by the rest. The idea that the organization does not represent a body because its membership rolls do not include the majority of those interested has no experience whatever to rest upon. It is a sophistical quibble. It is the invention of the sophist in special pleading against the laborers, and is applied to no other form of social or economic or political organiza- tion. It is wholly unwarranted, and in justice to the laborers it should be discarded. In no other form of organization that I know of do we exact perfection on the penalty of disorganization. We do not think of THE state's relation TO LABOR 12$ asking, for instance, that political organizations and political parties shall be renounced and abolished because they occasionally run into corruption, as in the case of Tammany, and develop objectionable bosses here and there, in the form of leaders. Not at all. Nobody asks that the Christian Church should be abolished because now and then a vestryman or a minister conducts himself in a manner unbecoming a Christian. No. In all other spheres the idea is ac- cepted that there must be reforms, that the methods must be improved, that the membership be elevated, that the leadership be purified. But the defects in labor organizations are all cited to show the unnatural- ness and the unfeasibility of the organization itself. In short, the shortcomings are cited to show that unions jper se are an injury. It must be admitted that there is a tendency to out- grow this narrow view of the subject ; that in spite of all this kind of reasoning the unions stay, working- men organize, and go on as if nothing had been said at all. The very fact of their existence and increasing influence is forcing itself upon public recognition ; but so long as in theory we hold the idea that these organ- izations are bad, unnatural, uneconomic, and contrary to the best interests of society and the best interests of the laborers themselves, we shall continue to re- gard them from the wrong point of view, — from the point of view of suppressing rather than improving them. So long as we do that, we encourage the hos- tile attitude of the employing class and the hostile attitude of the representatives of society towards this great movement, and hostility always tends to pervert any real, helpful reform attitude. So long as we think 126 TRUSTS AND THE PUBLIC a thing is bad we see only bad in it, and seek to abol- ish it instead of recognizing that in itself, at the core, it is all right and only needs improving in its methods and character. This makes all the difference in how we see and therefore how we treat the subject. This very mistake has more to do with the angry conflicts between organized labor and organized capi- tal than any other one thing. It begets the spirit among the laborers on the one hand that the capitalist is an arrogant monopolistic oppressor, and on the other hand it begets the feeling and idea among employers that the laborers are ignorant, gullible weaklings, led by the nose by a few idle and design- ing demagogues who seek only to stir up strife that they may have an easy living, with prominence and good pay. It is peculiar that labor struggles are becoming more and more struggles over the rights of unions and recognition of unions than over strictly economic propositions. The great Carnegie conflict, which con- stitutes such a sad page in the industrial history of Pennsylvania, was largely a war on this point. The great fight in Australia a few years ago was also a real war, not over wages, but over recognition. In writing of the leaders of the strike at the Broken Hill Mines in Australia, the economist to whom I refer quotes this description of the leaders who had been sent to jail because of their part in the strike : " The leaders, who are now serving sentences in jail, showed themselves to be professional agitators pure and simple. Possessed of the gift of fluent speech, these men, not miners by calling at all, had foisted themselves upon the workers' associations, and by the THE state's relation TO LABOR 12/ rhetorical trick of inflaming envious passions and stir- ring up strife between the employers and the employed, had soon attained to positions of personal ascendency, the toleration of which among large bodies of fairly- educated, self-respecting workingmen is almost incred- ible. The strike was the very opportunity^ desired by the leaders. At one bound they became persons of public importance, issuing fierce manifestoes, having their speeches telegraphed across a great continent, visiting their pickets like generals in the field, being huzzaed by the mob as they passed along the streets, and generally living in a constant vapor-bath of self- esteem and servile flattery. All these are simply the necessary preliminaries to securing a seat in Parlia- ment, and what to a man of the working classes is a very large income, $300 per annum, with no real hard work to do, with free railway traveling and invi- tations to official dinners." I refer to this simply to show the spirit in which, this movement is viewed. It is unquestionably true that what the author says applies to some individual cases in the labor movement. It applies to quite as large, and I think a very much larger, number in pol- itics. There are more demagogues on the stump at every election in the interest of regular political work in any one state than the whole labor movement of the United States together ever had at one time, or perhaps in its whole history. This is the spirit of unfairness, of hostility, not the spirit of understanding and recog- nizing the true inwardness of the case. It is this very spirit which makes the demagogues. It is this very spirit of hostility against organization jper se that makes the laborers cling together and follow the 128 TRUSTS AND THE PUBLIC demagogues, because they are at least on their side. We put up with everj^thing in the face of the enemy, and to the extent that the employing class and the literary representatives of the employing class exhibit this spirit they make the laborers feel that the employ- ers are their enemies. This is all a mistake, as I have said a great many times ; and if I had the power I would write it on the sky, that no man should escape reading it, because it is fundamental. It has to do with the spirit of the great labor conflict, and, as I have said, the labor movement as a movement is inevitable in the nature of our present industrial society, and therefore it must of necessity be organized in order to be orderly, and if it must be organized and orderly then its organization and its organized representatives must be recognized ; recognized as respectable, recognized as legitimate del- egates of their class, of their industry, just as much as the governor of a state is the representative of the people for the time being, though sometimes he is a fool and sometimes a demagogue and a humbug. The hope of getting a better governor is to appeal to the good sense of the people who elect him, and suggest a better one. The hope of getting better representatives among the labor organizations is, first, to get the con- fidence of the great mass of the laborers that we are not hostile to them and their organization as such, and then to encourage them to act through representatives, and point out that the more intelligent and capable their representatives the better will their interests be guarded, and the more frequently will they succeed in getting their rational demands conceded without the tumult and loss and disadvantages of strikes. THE state's relation TO LABOR 1 29 It should be a part of sound political doctrine then, to recognize this general condition, and by that I mean not so much that laws are needed, but that it should go without question that the rights of organized labor are to be recognized and treated with just as much as the individual rights of citizens ; that this shall be a part of our political thinking, and that our legislatures, no matter of what party, and our governors or other executives, shall act upon this general assumption. With this attitude once established the question is : What then ought the state to do ? What can it do in the line of its legitimate, permanent functions ? It is not my purpose here to name a specific platform, for that is an ever-varying thing; but it is rather to outline what I regard as the field of the state's action. There are certain kinds of things that the community can do and must do, in view of the fact that laborers have lost the right, by the very force of industrial evolution, to act individually. They must now be treated collectively, and there are a great many things that can be exacted collectively as well by the laborers through their organizations as they can by the state through political institutions. Here we come to the sort of objections that have become classic in the litera- ture of political economy. The assumption is gener- ally made, or at least too generalh^ in the spirit to which I have referred, that the individual is the only proper person to contract for all his industrial con- ditions. This is put forth as a conclusive reason against all industrial legislation directly affecting the laboring class. Take the conspicuous case, for instance, of the hours of labor. The writer to whom I have referred lays 9 I30 TRUSTS AND THE PUBLIC down this proposition as an axiom : — " Business pros- pers in the absence of legal interference, except to simply provide for justice and freedom." He gives as an illustration — and I quote this because it is typical of much of the respectable literature on the subject, — the case of the right of the laborer to be unhampered by legislation. Time, he says, is the laborer's capital, it is the one thing which the laborers have as much of as the rich. Now, that is the very reason it is not capital. To say the poor have as much capital as the rich is to say something worse than silly. Capital is wealth, and any sort of hair-splitting and quibbling which calls a thing capital which the poor have as much of as the rich is mere talk without meaning. The poor have as much sunshine as the rich ; sometimes they have more than they need, — they are forced to stay in it too long. Shall we say then that the poor are as well off as the rich because, of the very indispensable re- quirements of life — air and sunshine, — they have as much ? The occupant of the East Side tenement has as much time as Rockefeller. Here is a specimen of that kind of reasoning : — " Time is the one thing that all share alike. Unlike nearly everything else, the poor have the same amount as the rich. It is, in fact, the capital of the laboring man. By Natural Law, he has his full time to dispose of as he may think best. But when he asks for an artificial law, which forcibly, under all circumstances, will deprive him of the use of a portion of his own productive power, as by an ' eight-hour law,' he di- minishes by so much his available reserve and renders himself poorer. This is the real sum and substance THE state's relation TO LABOR 13I of restrictive legislation regarding hours of labor, whenever applied to adults." I would not quote this merely because it is in a book on Tlie Political Economy of Natural Law, if it did not reflect so completely a general attitude and argu- ment presented on the subject of the state's duty to labor. In Massachusetts, for instance, the most ad- vanced state in the Union on that subject, the Ark- wright Club, which is a club of New England manu- facturers, has recently issued a pamphlet prepared by S. I^. D. North, Secretary of the Wool Manufacturers' Association, especially to show the injury to labor of the shortening of the working day. One would think that experience would count, but it seems not to count against a stereotyped habit of thinking. For nearly one hundred years the world has been experimenting on this very subject. It be- gan in England in 1802. Ever since then all civilized countries, not excluding Kussia, have done something in the direction of shortening the working day by legislative enactment, and in no case has the experi- ment diminished " by so much " the laborer's " avail- able reserve," as the writer I have been quoting puts it, and rendered him poorer. In other words, in no instance has the laborer been poorer or in any way injured. On the contrary, the whole history of the subject is the history of an improvement in the laborer's condition, in his wages, in his social life and habits, in his intelligence, in his quality of citizenship and per- sonal manhood. The assumption that time is the laborer's capital is mere sophistry. As a matter of fact, the laborer has very little capital. The laborer has labor to sell, and the estab- 132 TRUSTS AND THE PUBLIC lished rule, over which he has little control, by which that labor is sold is just the same rule as that by which hats, coats, iron, lead, leather or cloth are sold, viz. : on the basis of marginal cost, and the cost to the laborer is not the hours there are in each revolution of the earth, it is not the twenty -four hours at his dis- posal, but the cost is the social expense of his living. It makes no difference whether he has eight hours' service to sell each day or eighteen. If a group of laborers can live, without social ostracism, on twenty cents a day, then twenty cents a day is what they will command, and no more. If, through social education and opportunity and personal development, the social life which their surroundings demand cannot be sup- plied for less than two dollars a day, they will get two dollars, whether they have eight hours or eight- een. It is not true, in short, and never was, that a man's wages increase in proportion to the number of hours' labor he can sell each day. On the contrary, they often increase as the hours diminish ; not be- cause they diminish, however, but because he is a more valuable social unit. IS'ow, the duty of the state is to contribute everything which well help make the laborer a more valuable social factor in the community. Whatever contributes to that is for the public welfare, as well as for the welfare of the individual laborer himself. The state is interested in producing a high type of citizenship, because a high type of citizenship gives the best security to all in- stitutions of society. It gives the highest type of civilized culture, and the least possible need of repress- ive institutions. The state, I repeat, is interested in producing a high type of manhood. Whatever will THE state's relation TO LABOR 1 33 contribute to that will contribute to the welfare of all classes in the community. There are many things that the laborers can do to promote this. They can organize. They can demand from their employers and from the community many things by voluntary effort, by organized demand. There are many things, however, that they cannot do, neither individually nor in their voluntary organiza- tions, as well as the state can do these things for them. It is these particular things, or this class of things, that it is the state's duty to furnish. They are always in the line of, as 1 have said, opportunity. The instance just referred to, of shortening the hours of labor, is one of the most conspicuous of this kind. "Why ? Why should the state care about how long the laborers work % Because that has a great deal to do with the possible social life of the laborers, and thus it has a great deal to do with their opportunities for education, for culture, for in- dividual expansion ; in a word, with their possibilities of social improvement. The conditions under which laborers work, the sanitary conditions, the protection of machinery, are of great social as well as health pro- tective importance. To see that these conditions are wholesome, cheerful, encouraging, is a part of the pro- tective function of the public. It cannot always be demanded by the laborers themselves ; they cannot always reach this through their organizations. Then how can it and should it be reached ? Through their action at the ballot box. There are many reasons why this is a legitimate part of the duty or function of the state with regard to labor. In the first place, employers are not, in the nature of things, likely to see these necessities. They 134 TRUSTS AND THE PUBLIC come in their waj^ The things that they see are the economies, the conditions that make for profits, and for successful conducting of the business. That which aflPects the mere personality of the laborers, the social conveniences, the psychological influences surrounding laborers, is least likely to impress the employers. These things are observed more frequently by people who have better and higher ideas of life and possible social conditions. To the employers, at first, all such changes, like shortening the hours of labor, boxing of machinery, furnishing fire-escapes and adding expen- sive appointments to the workshop, all mean increased outlay, and this increases, at least for the time, the cost of production. If one manufacturer, as the result of a strike, is forced, for instance, to make a large out- lay for things which do not immediately contribute to an increased product, it has the effect of temporarily putting him at a disadvantage in competing with his neighbors who are getting along without these outlays. That is the first circumstance which brings resistance on the part of the employer. But when the state says : " You shall have fire-escapes at every window or on every floor, you shall have certain methods of ventila- tion, even though it involves a great cost, you shall have all machinery guarded, no matter if it costs ten per cent, more," and so on, it says it to them all. It says, these are the conditions under which this industry shall be conducted. That puts no one employer to a disadvantage with his competitors. If every manu- facturing concern, for instance, is restricted to eight or nine instead of ten or eleven or twelve hours a day, no one manufacturer is at a disadvantage on that account. If every corporation is compelled to spend ten or THE state's relation TO LABOR 1 35 twenty thousand dollars for improvements and con- veniences in the workshops, it is at no special disad- vantage because all its competitors have to do the same. This is not interfering with the freedom of in- dustry. It is not affecting the opportunities of the employer. It is simply determining the plane on which business shall be conducted and competition take place. It simply saj^s : " On this civilized plane only shall this class of business be conducted in this com- munity." This includes, too, all the protective legisla- tion of the factory acts, employers' liability acts, etc.^ which have been developed to perfection in England and ought to be enacted in every state in this country where factory methods prevail. The same principle comes right into our city life. Take the sweatshop, for instance. There we have a system of employment which is at once undermining the health and stultifying the social life of the workers, besides creating a repressing influence on all legiti- mate workshop production. The theory that every individual has a right to dispose of his own labor in his own way, and make whatever use of his time and under whatever conditions he pleases, provided he does not interfere with the rights of other people, is capable of a great deal of sophistical application. It is used in defense of the sweatshop system. This system con- verts the homes of our laborers into workshops, and somebody says : "Who has the right to interfere and say what a man shall do in his own home ? Long ago civilization decided that the state has the right to in- terfere with what shall be done anywhere and every- where. The state already says that certain kinds of plumbing and ventilation shall exist in every city home. 136 TRUSTS AND THE PUBLIC Why should not a person be permitted to live without ventilation and plumbing in his house, and without any modern sanitary appointments at all, if he chooses ? The answer is, because it is inimical to the welfare of society, and no one individual, because of his low de- sires or meager wants or traditional barbarism, can be permitted to live under conditions which jeopardize directly or indirectly the health and well-being of other members of the community. There are hun- dreds of families who would be perfectly willing if they had the smallpox to go right on sending other members of their family to school or to the workshop, or visit their neighbors and have their neighbors visit them, and they growl because necessity says they shall be quarantined. But the point is now reached at which everybody demands that quarantine shall be enforced. What does that mean ? It means that the liberty of these poeple shall stop short at that point ; that the highest civilization guarantees the greatest freedom for all, and in guaranteeing that liberty it restricts the liberty of anybody to do that which shall interfere with the welfare of all. The sweatshop is clearly a case of social injur}^ The conditions under which manufacture is conducted in these dens, as I have said, are detrimental to the health as well as depressing to the social condition of the entire class. As a matter of public policy it is the duty of the state to interfere in behalf of the laboring class. Why ? Because the laborers cannot interfere for themselves. The laborers cannot make a personal appeal to these ignorant Poles who huddle in tenement houses and live and work and eat and sleep on the benches with their tailoring. They cannot enforce a THE state's relation TO LABOR 1 37 reform because they have no legal right to enforce in- dustrial and social conditions upon others. It is the state only that can intervene, and it is clearly the state's duty to do so. This is a part of the protective function of the state, the same as it is a part of the duty of the state to en- force educational conditions upon the children of the community. Why should the state insist upon educa- tion ? Because education is a part of the preparation for good citizenship, and individual initiative is not strong enough, voluntary organization is not adequate to give it ; the state alone is the power which can enforce this educational and therefore protective influ- ence. The relation of the state to labor, then, is not only very important but it is not unclear or difficult to un- derstand, if we will recognize a few fundamental facts regarding it. First, that much can be done by laborers to improve their condition by voluntary association, and it is the duty, therefore, of the public and of the state to recognize the legitimacy of that association. Second, that there are a large number of things which the laborers cannot do individually, because of their changed industrial condition ; and which they cannot do by voluntary association because of their limited in- fluence and lack of authority ; and which, therefore, must be done by the state. These needs are constantly arising. They cannot be particularized at any given time as permanently including the whole docket. They are constantly arising as new conditions are created, but the general duty is very clear, and it is that the state should constantly exercise its influence and author- ity in determining the conditions under which industries 138 TRUSTS AND THE PUBLIC shall be conducted, contracts be made, and laborers, as well as everybody else, live. This is a wide field to cover, though the principle of action is simple. It is a wide field because the expe- riences are constantly increasing and interests con- stantly multiplying in which the capitalist employer, in the effort to compete and develop new methods and get the maximum product, tends to ignore the need of improvements in the industrial or labor side of these new conditions. It is therefore of paramount impor- tance to the public policy of the countrj'^ that this ra- tional and permanent relation of the state to labor be recognized as a part of our political system and as a part of the necessary function of government ; so that it shall nob be opposed on abstract principle, as econo- mists and employers are in the habit of doing, but that the question shall ever be, will it produce the effect de- sired ? Is the reform a needed one ? Is it along the line of guarding the opportunities for and possibilities of gradual self-improvement for the laborers ? If it is, no considerations of individual capital should stand in the way, and if we always make the conditions gen- eral, as the state must, capital is not injured by the ac- tion, because, as I hava said before, whatever affects everybody is not a relative disadvantage to anybody. That is why it is important that so many of these re- forms, which are perfectly feasible, perfectly rational, and indispensable to the progress of society, must be made by the state, because the state alone can make them general, and it is their general application that eliminates all individual disadvantage. If this policy were intelligently recognized and adopted it would do more than almost anything else to THE state's relation TO LABOR 1 39 eliminate the irregularity and unreason from the often impetuous demands of labor. When the legit- imacy of the principle is recognized, discussion of the details can proceed with reason and sense. Knowledge of the case must then be insisted upon for the repre- sentatives of labor, and this will make necessary more intelligent leaders on the labor side. When it is a rec- osrnized fact that the state has a legitimate function in relation to labor ; that the principle of these demands is not denied, but that it is only a question of the facts in the case, then there is no longer any ex- cuse on the part of the laborers to cry " enemy " at every capitalist, and there is less room for demagogues to inflame the masses with charges of capitalistic hos- tility. The laborers then would find that their cause rested not upon mere antagonism to capital, but upon proving the merits of the case, and this would send home each time the necessity of intelligent conception and un- understanding of their own condition. They would learn from time to time that their cause was lost by the ignorance or incapacity of their representatives, and not by an}^ general antagonism of the legislatures or the community on the subject. Thus, competency instead of demagogy would become the required quality in labor representatives, and this would tend rapidly to lift the discussion of labor problems from the plane of physical combat to that of intelligent, economic con- troversy. X. THE EKA OF TRUSTS * It is manifest, even to casual observers, that we are entering upon an industrial era of trusts. Within a year, and especially during the last six months, the ten- dency towards reorganization and consolidation of a number of smaller industries into large ones has amounted almost to a stampede, l^othing like it was ever known before since the origin of the factory sys- tem. If this movement continues during the present year at anything like the rate it has been going the last six months, the leading industries of this country will have taken on the trust form of organization. Whether this movement will be permanent or will arouse public opposition which will bi'ing its defeat through legisla- tive restriction, will depend almost entirely upon the wisdom of the capitalists themselves. The movement itself is an entirely natural one and is wholly in line with economic progress, provided it is not uneconomically directed. If these re-organizations are conducted on sound business principles, as in the adoption of new machinery, viz. : to create profits by the introduction of economies in administration and sharing these profits with the community through a reasonable lowering of prices, there will be no serious 1 Published in Ounton's Magazine of March, 1899. 140 THE ERA OF TRUSTS I4I danger of political molestation. But if the re-organiz- ation becomes a speculative game to take advantage of an industrial sentiment for the purpose of monopolizing certain lines of industry and " gouging " the public by putting up prices, to pay dividends on abnormal capi- talization for promoters' bonuses, a social opposition which will take on a political form is pretty certain to arise. There is already an antagonism to trusts, from sheer economic prejudice, largely born of socialistic an- tagonism to capital and partly stimulated by popular aversion to the new ; but, on the whole, thus far trusts have been fairly economic in their polic3\ In a few in- stances they have departed from business principles and tried to establish uneconomic monopolies, and in every such instance they have come to grief. But this un- wholesome effort has created an unfavorable impression in the public mind. All the trusts and large concentra- tions which have become permanently established have contributed very largely to the improvement of the products they furnish, and greatly reduced the price. It is characteristic of all these large concerns, which have followed sound business principles and shared their profits with the public by reducing the cost of the pro- duct, that they are in the long run the most successful establishments. Moreover, these concerns are rapidly outgrowing public antagonism. But, on the other hand, a number of the industries now going through the process of reorganization are following the speculative, monopolistic, rather than the economic method of pro- cedure. They are using the concentration of the indus- try as a means not only to lessen the expense of pro- duction but also to put up the price of the product to the community. I^Tow, this is not merely uneconomic 142 TRUSTS AND THE PUBLIC but it is against the public welfare and will not long be tolerated — and it should not. The result of this policy, if it is pursued, will be to array the public through the legislatures against the trust movement altogether, and thus work great injury to the community in general. "With the return of prosperity the universal impulse is again to make profits. Confidence has everywhere been revived. The demand for goods is rapidly in- creasing. New investments to supply anticipated de- mands are being freely made. In short, all the signs point to another era of prosperity. But the people have become accustomed to the low prices established during the era of depression, and it is more than prob- able that any attempt to reestablish former profits by reinaugurating former prices would greatly check, if it did not destroy, the present business boom. Profits once lost by falling prices, except under the sudden pressure of war or depreciated currency, can never be permanently reestablished by raising prices, but must necessarily come through new profit-creating methods, either in the form of improved machinery or more economic type of organization. Though not much understood, this fact is universally felt throughout the industrial world. It is true throughout society that every class or group has to suffer for the sins of its most injudicious or hot-headed members. Trade unionists as a class labor under suspicion and distrust, and encounter con- siderable open opposition, because of the foolish and ignorant acts of a few hot-headed leaders who become conspicuous at the moment of a strike. So it is with capitalists. A few mean, unreasoning, and perhaps unthinking capitalists, who are only up to the level of THE ERA OF TRUSTS I43 making business a grand game of grab, bring discredit in the popular mind upon the whole employing class. Laborers and their sympathizers in the community follow the same rule that employers do toward labor unions, and judge the whole class by their worst speci- mens. This is true of the public's attitude towards all new movements, and the present trust movement will be no exception. If a few concerns are unfortunate enough to be under a leadership sufficiently short- sighted to take advantage of the temporary oppor- tunity the new organization affords to tax the public by increased prices, there is sure to be a vigorous crusade against the new movement. It will not be confined to the few indiscreet concerns that have not learned to recognize the highest business success, but it will be directed against capital and large organiza- tions in general. The tin-plate trust is one of these offensive examples.^ This is an industry which practically could not have existed in this country but for the legislative aid of the public. Until the tariff — a very high one at first — was placed upon foreign tin, the tin-plate industry had no existence in the United States. It has been born and nurtured by the protective aid the public has given it. Its very existence is due to the good will and political good sense of the United States. The tin-plate trust is one of the " fool examples " of using the trust organization to put up the price. Of course it would be unwise for the public to hamper a really helpful industrial movement because speculative" grab- 1 In this connection see Chapter XII., " The Tin-Plate Trust." 144 TRUSTS AND THE PUBLIC bers" get temporary possession; nor should a few- mistakes of this kind be permitted to be used effec- tively against the protective tariff as a general policy. Nevertheless it would be perfectly safe and the part of good policy for congress to pass a law empowering and instructing the secretary of the treasury to with- draw the protective duty from all products the prices of which are raised by trust organizations. In short, the moment a trust organization raises the price of a product enjoying any degree of protective duty, it should thenceforth be put uj^on the free list and be- come subject at once to world competition. If the organizers of trusts in any line have not economic sense and public spirit enough to refrain from using their concentrated power to tax the public by increas- ing prices, tlie public should at once withdraw any protective advantage it has given to that industry. The primary object of protection is to make it possible to stimulate the development of domestic industries ; but when industries have become established and proceed to take advantage of this protection for monopolistic, price-raising purposes, they should at once be thrown on their own competitive resources. This woukl be in harmony with strictly economic policy, and might have a wholesome effect upon the movement of trust reorganization. We should utilize the coming period of prosperity to give to capital liberal profits, to laborers higher wages, and to the public better and cheaper goods. If the benefits of the trust era are thus distributed it will be an era of permanent advance in public welfare and social harmony as well as in economic organization. XI. MACHINERY Al^D LABOR DISPLACEMENT * In taking up the question of machineiy and labor displacement, I want to discuss it with entire frank- ness, and as fully as the time will permit. In the first place we might as well recognize the painful fact that the ignorance on this subject is not all on the side of the laborers. The capitalists in the main do not dis- play more information and general familiarity with this topic than do the laborers. The capitalists know that finally, under pressure of competition, to join larger organizations is their only salvation. They know that this is beneficial to them, because it saves their life, in- dustrially ; and therefore they think that everybody who does not know that is to be designated with a very short name. On the other hand, the laborers know something. They know that in this struggle they come up against a great many unforeseen hardships. They know that it is necessary for them very frequently to organize, and through their organizations do a great many things that seem very irrational to the commu- nity, and they conclude that if the employers cannot see the wisdom of this they must be very ignorant and are equally entitled to be dismissed with a short name. The fact is, and it is a painful one but very vital, that * Lecture delivered in New York City, April 18th, 1899. lo 145 146 TRUSTS AND THE PUBLIC neither party seems to understand the position of the other, nor their relation to the general situation. The question that I want to consider is the increas- ing organization tendency of capital and the actual ef- fect upon the community, including the laborers and consumers, of this labor-displacing and industry re-ad- justing movement. First of all, let us inquire for a minute or two into the actual relation of capital and labor to the commu- nity. Capital must be definitely recognized as capital. It is not a person. It has neither flesh nor blood, soul nor conscience. It is a thing. It is capital, to be used by the capitalist. The public interest in the use of this tool — capital — is not in its ownership but in its products. Labor is not a tool. Labor is the service of individ- uals, and represents the great mass of the community. Therefore labor and laborers cannot be considered under any circumstances as the equivalent of tools. In labor is embodied the conditions of civilization. There- fore, while capital as a tool should be secured as cheaply as possible, and used as long as possible, and thrown away as soon as it ceases to be economic, labor can- not be so treated. Labor must be treated in the pro- ductive process not as an instrument but as a social factor. The community, which includes capitalists, laborers and all other elements, has also a stake in this movement. It is quite clear that neither labor nor capital will put forth its best effort and serve the community at its maximum efficiency without a stimulating reward. The reward of the capitalist is profit — an increased incre- ment of wealth. The reward of laborers as laborers is wages. The interest of the community in the gen- MACHINERY AND LABOR DISPLACEMENT I47 eral result (which includes, as I have said, capitalists and laborers and all other social units) is in the quality and price of the products. So there Ave have the three forms in which the benefits, if any, accruing from cap- italistic production are distributed to the community ; profits, wages, and diminishing prices. The capitalists and laborers, therefore, each have two forms of partak- ing in the results of this movement ; capitalists in prof- its, and in declining prices to the extent of their own consumption ; laborers in wages and declining prices, and the rest of the community only in the declining prices or cheapening of wealth. It is commonly assumed both by capitalists and laborers that they should have all the gain there is from the application of new methods to productive enterprises. The capitalist pays for the new machine, perhaps pays a royalty to the inventor ; and, with his narrow view, thinks that all the advantage accruing from that machine therefore belongs to him. If the machine will produce twice as much for the same in- vestment as could be produced before, he thinks that is the equitable reward for his ingenuity in knowing enough to buy the new machine. The laborer, on the other hand, who works the machine and finds that it will produce twice as much in an hour as the old machine that he used, imagines that he is the one entitled to all this increased product. He says — not theoretically but actually — : " I produced twice as much to-day as I did ten or twenty years ago, or as my father did working at the same industry, and I only get ten per cent, more in wages. I am robbed of the other ninety per cent, which I produce." This is not merely in the abstract ; it is the concrete statement that 148 TRUSTS AND THE PUBLIC goes the round and has been going the round for fifty years, — in fact, ever since machinery began to be intro- duced. A few years ago the cotton operatives of Lanca- shire sent a deputation to London to interview a parlia- mentary committee upon this subject, and they pointed out that their product had been increased several hun- dred-fold while their wages had risen only about fifty per cent., — and even so able a statistician as Mr. Giffen, then president of the British Statistical Society, ad- mitted the gist if not the extent of their complaint, and said : — " It may be admitted, to begin with, that there is apparent foundation for some of the com- plaints. AYorkmen in particular industries do not get a reward at all in proportion to the increase of produc- tion in those employments. The illustration of a cotton mill is familiar. A single attendant on a number of machines will ' produce ' as much in an hour as for- merly in a year or two, but his wages are only double — or perhaps not quite double — what they Avere when he produced so much less." "When a statistician and economist like Mr. Giffen admits this, it is not surprising that the laborers should insist upon it as a matter of fact. However, tliis is not merely an unjust and unreasonable complaint, but what the laborers expect in this particular is absolutely impossible. Economically it cannot be, and morally it ought not to be. So long as it is insisted that the laborer who uses the new machine is entitled to all the increased product of the machine ; or, on the other hand, so long as the capitalist imagines that because he bought the new machine he is entitled to all the increased product of it, there never can be any rational attitude on this subject. As a matter of fact, both of MACHINERY AND LABOR DISPLACEMENT 149 these claims, as I said, are economically and morally erroneous. In the first place, what has the capitalist done to cause this immense increase of jn'oduction by this new machine? He simply invested the money in it when it became clear that the investment would yield a larger return than an investment in any other line he knew about. He did nothing to bring the invention into existence or to create the social conditions that made its utility possible. He acted upon it wholly and absolutely as an investment. On the other hand, what did the laborer do ? Just nothing at all. He did not even make the investment. The chief thing he did was to resist its introduction, make it seem to be as inefficient as possible, and for a long time declare that it was no good, that it would not do the work, even spoiling the work deliberately in order to discredit the new machine. The laborer may be said absolutely to contribute nothing at all to the new process, but rather to act consciously as an im- pediment to its success. Why should either one of these two, then, run away with all the advantage ? Certainly they should not. What relation has the community to the matter ? The community — and both capitalist and laborer are included in this — furnishes the great background for making this improvement possible. Civilization, with its growing and diversified demands, furnishes the in- creased consumption, the market, which makes a greater aggregate production profitable. This is the great so- cial fact which society in its aggregate furnishes, and it constitutes at once the opportunity and the incentive for the new machinery or new organization which I50 TRUSTS AND THE PUBLIC creates the larger output. Therefore the community has a greater claim, and in fact the greatest claim, upon the fruits of this improvement. The capitalist, of course, will have, in his special form of profits, a part of this gain. This he gets by investing in the new instrument before all his competitors have got it. The laborers as laborers have no special claim upon it other than the claim their social standard gives them for higher wages, but as a part of the whole commu- nity they have a claim upon it in the form of reduced prices. Now, if the capitalist should take it all in profits, or the laborers who work these particular machines should take it all in increased wages, or even if the particular capitalists and laborers (say in the cotton factories or shoe factories) should take all the advantage of these machines, then the community which had really made it possible — all the other capitalists and laborers and all others — would get none of the advantages. That would be neither good economics nor good ethics. The mason and the bricklayer, the architect and the builder, the painter and designer, all are as much en- titled to the benefits of an invention in the production of shoes or of cotton cloth as the people who happen to work the machines w^hich create the economy. If this were not so, then that great class in the commu- nity, including most of the agriculturists and all the industries where new machinery is not adopted, Avould get none of the benefits of the great productive im- provements due to the advance of society. If this were possible, progress itself would be arrested ; because if they could get none of the advantages of the appli- cation of science to production they would not and could MACHINERY AND LABOR DISPLACEMENT 151 not become a part of the great increased consuming force of the community. If the brickhiyers and agricultural laborers and those who work in non-machine-using industries could not participate in the increased con- sumption of machine products the market would be so small that the improved machines could not be used. If nobody used cotton cloth but those who made it, it would have to be made by hand, as it was in India hundreds of years ago. The fact that society in its aggregate develops the intelligence and inventive im- pulse, and second that it also furnishes the consuming capacity or market demand, are the two great facts that make the use of machinery possible ; and thus it is obvious that the products of industrial improvements should be distributed throughout the community. They should not, and cannot without injury to the community, be monopolized either by the particular capitalist or the particular laborers who use the im- proved methods. Clearly, then, the laborer who makes twenty times as many shoes in a day as his grandfather did, and the weaver who weaves five hundred times as many yards of cloth as his grandfather did at the hand loom, can- not and ouo^ht not to ffet five hundred times as much. His rise of wages represents his direct demand upon the sources of production, as reflected in his increased standard of living. The increased profits, which are only temporary, are the special reward of the capitalist for his investment in the new machine ; but, in the nature of economic law, the tendency of this increased production due to the new machines is to set the em- ployers competing one with another for the market demand for these goods, and in this competition the 152 TRUSTS AND THE PUBLIC price is lowered. By this lowering of the price the whole community shares the advantage. That part of the improvement which goes to increase profits stays with the capitalist only so long as he can keep his lead ; that jDart which goes to increase wages stays with the laborer, and he keeps it forever ; and that part which comes in reduced prices comes to the bricklayer and carpenter and printer and agriculturist and, in short, to the entire community, and so the benefits of progress in this direction are distributed throughout society. That is, in fact, the most equitable adjustment of the matter. I mention this simply to call attention to the un- reasonableness and injustice, as Avell as uneconomic character, of the demand that all of this gain belongs to the particular people who happen to use the new instruments. In truth, the benefit belongs to all the influences which produced the new instrument, and the chief of these is society in its market capacit}''. Where society is simple and non-expensive, as in China, this new increment does not arise. The capitalist will not invest his money in a new invention. Why ? Because he cannot sell its product. If he does invest he will lose by it. Society furnishes him no market background, no demand for the results, and conse- quently his profits do not come. The reason is not that the laborers are not so willing, or that the capital- ists are not so willing, in China as in England or the United States, to increase their output ; but it is the fact that society in its aggregate demand does not furnish the opportunit}'' and incentive. It is this fact, that the greater part of the increased product of civilization goes to the public in lower prices MACHINERY AND LABOR DISPLACEMENT 1 53 rather than in permanently increased profits or very high wages in special industries, that constitutes the great equitable element in economic distribution. As I said, the capitalist gets his large profit at first, in proportion as he anticipates his competitors in intro- ducing the improved instrument ; but as fast as his competitors adopt the same methods he has to sur- render his great profits to the community in the lower prices and create a new margin by another improve- ment. So that, the profits of the capitalist from any given improvement are temporary. They are large at first, but necessarily tend to diminish through compe- tition until they reach the vanishing point. Almost every industry where much machinery is employed has gone through this process several times during the last half century. In the various departments of iron and steel manufacture, and of furniture and clothing, this cycle has been traversed several times. In the production of cotton cloth the cycle has been traversed probably some five or six times since 1830. The high- profit man who was using the best machinery in 1830 became the low-profit man before 1815, and so on in each round of competition until the cotton cloth that was sold in 1830 at seventeen cents a yard is now sold for about three or four cents a yard or less. That dif- ference between seventeen cents and four cents has been given to the public in lower prices. The aggregate profit in 1830 was not greater than — perhaps not so great as — in 1899, but the new machines one after another have created new margins of profits, and as soon as each new machine came into general use the profit disappeared and passed to the public. In that way it occurs in all progressive society that profits from new 154 TRUSTS AND THE PUBLIC machines are not permanent but temporary, and their duration depends on the rate of the progress of im- provement. In some industries the profits last only a few years, when a new invention comes along and transfers them to the public. On the wage side, however, the process of gain is permanent. While increased profits are temporary, in- creased wages are everlasting. Wages recede only with the collapse of society, because higher wages come not by the temporary advantage of a new instrument but by the permanent elevation of the social standard of the laborers. So that, every addition to wages — I mean every general addition— is a permanent addition to the welfare of the wage class. Strikes, and even revolution and political disruption, will set in before wages can be permanently pushed back very far. Indeed, this republic could not stand if by any process wages should be put back to the standard of 1830 or 1840. But the income of capital can be pushed back two or three times in a decade if new improvements in production are constantly introduced. The capital- ists realize a part of this general trend, and the laborers realize another part, but neither seem fully to realize the general trend for both. As I have said a great many times, the movement of advancing wages, lowering prices, and shortening hours of labor, is the movement of civilization. There can be no real progress without it. On the other hand, it is equally true that this movement in wages and prices by which the laborers get the only advan- tage they ever get, and the community gets its share of progress, is impossible unless capitalistic economy in the process of production also takes place. While MACHINERY AND LABOR DISPLACEMENT 1 55 it is true to a large extent that rising wages are the cause of lowering prices, in that the increased wages lead to increased expenditures which in turn furnish the market basis for the use of better methods and larger production, yet the increased wages and lower- ing prices cannot come permanently without being accompanied by improved methods of production in some direction. This is the point where the working- men, and the public for that matter, are confused. This improvement in the process of production comes in two ways ; one by more perfect organization, the other by more perfect machines. It is a peculiar feature in the history of industrial progress that both these movements have always met with popular opposi- tion. From time immemorial every effort to introduce a capitalistic economy in production, either by better organization (which means larger concerns) or better machinery, has always been regarded by the laborers, and usually by the public, as hostile to popular wel- fare. Even Mill once went so far as to say : " It is doubtful if improved machinery has lightened the toil of a single laborer.'' This feeling, Avhich among the laborers becomes a conviction, is so general that it forms a popular belief, almost universally accepted and relied upon. It may really be called an economic superstition. There is reason for this, or it could not exist. The reason is, of course, that the immediate effect of all new inventions is some displacement. For instance, improved organization — and by improved of course I mean more economic organization, of the kind that saves waste or accomplishes a great deal more with less effort, — must necessarily, in order to be worth while, 156 TRUSTS AND THE PUBLIC do the same or more work with fewer people. The very fact that this occurs involves some displacement. The large concerns displace some of the smaller shops ; that is to say, small shops which wasted a great deal of energy and expense in doing very little, and con- sequently charged the public a higher price. When a larger concern does the same work more efficiently and less expensively, the small concern nec- essarily is compelled to do one of two things — either reorganize itself and become a part of a larger con- cern, or else leave the business. It is this displacement which creates the friction. The person who is displaced thinks the whole world is being displaced the same as he is. Moreover, he thinks that the displacement is a permanent misfor- tune, seeing onl}' just what affects himself personally ; and he raises a cry against the movement which is doing the displacing. The general idea that capital is selfish and grasping and that the weak man is the victim lends itself to the sentiment that this displace- ment is working an injury to society. What takes place with reference to displacement of small concerns takes place in the case of laborers by the introduction of new machines. The. new ma- chine must displace or it can never accomplish any economy, it cannot create a larger profit, it cannot furnish lower prices, and it cannot yield higher wages or shorter hours. It is the very displacement that is the test of the efficiency or the degree of economy which a new device will introduce. Is this displace- ment permanent ; is it a permanent evil, or is it only temporary? It is quite clear that the workingmen have always believed — and there are many others who MACHINERY AND LABOR DISPLACEMENT 1 5/ share this belief — that the evil is permanent ; that it is a real affliction upon the laboring class and con- sequently upon the community, introtluced by capital for its own selfisji ends. The history of industrial advance is also the history of resistance to innova- tions. When the first inventions of the factory sys- tem were introduced, before the middle of the eight- eenth centur}^, Crompton and Ilargreaves and Ark- wright were mobbed by their fellow hand-workers for having introduced the machines. In 1779 mobs marched from town to town in England and broke the new machines, and still later they did the same by tlie power loom. The ruins of some of the old fac- tories in which the power looms were broken and other machinery demolished still remain in England as a monument to this opposition to the first introduc- tion of steam-driven machinery. There has probably never been a really efficient labor-saving machine introduced since the power loom which has not met with this opposition. The trade unions, which are the great stronghold and social weapon of the laboring class, practically make it a part of their creed to oppose the introduc- tion of new machines. Many have been the strikes against the introduction of new machines into the workshop. The opposition of the laborers has not been because they disliked the new machine but be- cause they saw that it discharged some laborers and believed that it permanently displaced them, so as to increase the ranks of enforced idleness. They see the local fact, which is temporary, and they treat it as a general and permanent fact. They see the laborer discharged, and they do not see any power associated 158 TRUSTS AND THE PUBLIC with the cause which discharged him that tends to furnish him another job. It is not to be denied that the new machine dis- charges labor, displaces a portion of the employed force, or else enlarges the production with the same labor force, which is economically the same thing. It would not be labor-saving if it did not do that. But if it did only that it would not be a permanent benefit. If the laborers were correct in the belief that the introduction of labor-saving machines per- manently increases enforced idleness, they would be entirely right in regarding new machinery as detri- mental to the laborer's interest. But, is it not easy to see that if new machines contributed directly to the aggregate of permanent enforced idleness in pro- portion as they created economy in the cost of pro- duction, the consuming power of the community would diminish directly as improved machinery is used? The idler cannot buy, and this would be practically a diminution of the consumption directly as it increased the economy. In other words, it would be a means of producing more but of directly destroying the power to consume. If this were true, it is obvious that the market would begin to diminish as soon as the production increased, which would soon de- stroy the value of all the new machines by intro- ducing an industrial depression and glutted market. So that, the machines would not be a permanent ben- efit; prices could not be economically lowered, and wages could not rise. None of our industrial prog- ress could have taken place if improved machinery meant permanent increase of idleness. In order to make this point clear, however, it is necessary to look MACHINERY AND LABOR DISPLACEMENT 1 59 at the concrete facts. General inferences are too vague for the man who is discharged, and this is becoming more and more an important question in society. For example, in the mercantile world, small shopkeepers are laboring under exactly this same superstition regarding larger concerns, especially de- partment stores ; in manufacture, the small manufac- turers are oppressed with this superstition regarding large corporations and trusts ; and in all the lines of progressive industry where machinery is used the laborers are suffering from the same misapprehension. At this time this subject has a special bearing on the condition of 'New England. JSTew England was the first seat of the cotton industry in this country. It developed, first, small water wheels, then larger cotton factories with modern methods, and ultimately all the processes to which I have referred that have lowered the price of cotton cloth from seventeen to three cents a yard. Now a migration of the industry has set in, and the manufacture of coarser cotton goods (and ultimately the finer will follow suit) is going South. There is nothing unnatural in this. It is the migration of an industry towards its most natural point. Modern cotton manufacture did not begin in ISTew England. It began in old England, in Lancashire, the farthest removed from any source of raw material. It began in England because England was the most advanced in industrial civilization. The inventions of the factory system took place in Lan- cashire. Consequently, cotton manufacture had its first half centur}^ of development in England. It then began to migrate from old England to New England. "With the political encouragement which the pro- l6o TRUSTS AND THE PUBLIC tective tariff gave, still higher types of machinery and forms of organization were developed in New Eng- land. Prices were lowered, wages were increased, and hours of labor shortened ; and, lastly, the industry is now rapidly migrating from New England to the southern states, — another transition. This makes the problem a very very important one for the eastern states. In the new mills in the South, largely built by northern capital, the best machinery and appointments are introduced. Wages are very much lower, hours of labor are very much longer, and consequently severe competition between New England and the southern states has arisen. Those who can sell, quality being the same, at the lowest price will have the business, and the New England manufacturers found them- selves with a higher cost of production than in the South. They did as capitalists always do, tried to overcome the dijEficulty at the point of least resist- ance, — which was to lower wages. Temporarily they succeeded in doing that, but the forces of civilization are ever constant, and with the return of prosperity in the nation the laborers' standard of living reasserted itself, and through their organizations they demand a return of their former pay. This, a few weeks ago, was granted. There was some talk among the em- ployers that they were handicapped by the short-hour legislation of Massachusetts and the other New Eng- land states, but civilization has written its word on that subject. It is as impossible permanently to lower wages and return to the eleven or twelve hour system as it would be to brush back the tides of the ocean. Progress has accomplished these things. The manu- facturers of New England cannot hold their compet- MACHINERY AND LABOR DISPLACEMENT l6l itive position by turning back the dial of progress. That they cannot and should not do, — better retire from business. But to retire from business would be to inflict catastrophe upon a great section of the American people. The sudden collapse of the cotton industry in ]^ew England would be a calamity to civilization. There is only one way in which this calamity can be avoided ; the same way that previous readjustments have been accomplished, by the introduction of su- perior methods. The science and skill of the more advanced civilization must be the means of its defense against the new and less developed. The South can- not be beaten by a return to barbarism. When it comes to barbarism the South can win. The East, like all civilization, must protect itself industrially by rising to still higher productive methods. As is usually the case when all other methods fail, capital is turning to this mode of relief. It being im- possible permanentl}'' to reduce wages or to lengthen working hours, an appeal to inventive genius has been made and certain radically improved machines which have been in process of development for several years, particularly in the weaving department, have at last been completed. A new loom, manufactured by the Drapers, of Hopedale, Mass., is being introduced. This is an immense labor-savino- device in the art of weavino-. The advantage of it is that one weaver can mind more than double the number of looms that he can by the old method, — eight looms being the maximum at present, while with the new system twenty looms can be minded by a single weaver, as I saw a week ago. Here the manufacturers are making a virtue of II l62 TRUSTS AND THE PUBLIC necessity and doing wliat science, progress, and self- preservation for themselves and for the New England cotton manufacturing community for some time to come has made necessary. The operatives, through their unions, oppose and practically refuse to use the new looms, or to mind more of the new looms than they did of the old. Of course, if the weaver refuses to mind more than eight looms, then there is not a saving but a loss by introducing them, because they cost very much more than the old ones. If the laborers persist in this, they of course will succeed in doing one of two things, either stop the improvement and therefore prevent the development of the only method New England has of successfully competing with the South, thus permanently forcing New Eng- land into the position of a defeated industry, or else — what is even worse — force the introduction of an in- ferior population that will work for less wages and use the new looms too. The reason assigned for this oppoBition is that it will discharge the weavers, that it wi)l lead to displace- ment of a large portion of the operatives ; — the samQ motive that caused resistance to the first power loom, to the printing press, the type-setting machine, and in fact to new machinery in every department of manu- facture. Of course, they believe that this displace, ment will be permanent. Although this oppositioi? has been presented to ever}^ innovation of the kind and has been shown by experience to be erroneous, yet it still asserts itself. At first it would seem the height of stupidity, and yet, if we turn to the employers, who ought to be more intelligent, we find they act exactly the same on MACHINERY AND LABOR DISPLACEMENT 163 certain subjects ; for instance, the hours of labor. From the time of the introduction of the first law in England to shorten the hours of labor, in 1802, to the very last in Massachusetts, in 1894, to reduce the hours to fifty-eight a Aveek, the employers have repeated without variation, just as a parrot calls off the sound it has learned to make, the prediction that if the work- ing day Avere shortened wages would be lowered ; and yet in not a single instance has that ever occurred. On the contrary, either because of it or in spite of it, wages have risen as the hours of labor have diminished. This is the unbroken record of nearly a hundred years, and yet in the South, where they are asking only for a ten-hour law (which the English operatives got in 1817) the professors of political economy and the eloquent portray ers of history repeat the statement that this means a reduction of the wages of the laborers. If we could trace the history of every manufactur- ing industry where machinery is used it would be easy to see that in nearly every case, and I know of no ex- ceptions, where labor-saving machinery has been introduced, while it did cause a displacement, that dis- placement was always a re-arrangement and not a permanent discharge. On the contrary, with the re- arrangement there always has come a large increase in the number of laborers employed in that industry. Instead of permanently diminishing the number of laborers it has always increased the number of em- ployees in that industry, and concurrently given rise to a number of new industries. Take for instance the printing press, as represented in the almost automatic modern Hoe press, by which 164 TRUSTS AND THE PUBLIC nearly all our great daily newspapers are now printed ; the machine that takes a roll of paper and sends it flying through the rollers, printing it on both sides, cutting it off in proper lengths, folding it in sheets and putting in the supplements, and delivering at the other end ready for the news carrier, — a huge mech- anism that seems almost to have human intelligence and is more than human in its accuracy. This has so reduced the cost of printing that one press to-day will print more papers than five thousand pressmen could print on the primitive single press, and yet, strange to say, there are more printers than ever before. Why ? Because this press, together with type-setting ma- chines, has so reduced the cost of printing that the daily paper can be sold for a penny and books can be sold for ten cents, giving them enormous circula- tions. The market for all printed matter has been so widened that there are not only several times more printers but the number employed in the manufacture of paper, in binding, and in the various tributary in- dustries connected wath the building of presses and- the equipping of printing offices has doubled and trebled. It has, as I said, both increased the employment for printers and created several new tributary industries in which highly skilled and well-paid labor is employed. If we could go through manufacturing industries in general we would find a similar experience in nearly all cases. The facts in the following table are taken from the United States Census of 1890. It shows the number of laborers emploj^ed in sixty-four industries in 1880 and 1890, and the annual wages in those years. The last two columns show the amount and per cent. of increase in wages. MACHINERY AND LABOR DISPLACEMENT 165 INDUSTRY Boot and shoe cut stock. . . Boot and shoe uppers Boots and shoes, factory product Boots and shoes, rubber. . . Boxes, cigar Boxes, fancy and pai>er. . . Boxes, wooden packing. . . Brass castings and brass finishings Brassware Cigar molds Clay and pottery products Clothing, inen's Clothing, women's, factory product Cordage and twine Cotton goods Dentists' materials Electrical apparatus and supplies Envelopes Foundry and machine shop products Furniture, including cabi- net making, repairing and upholstering Gas and lamp fixtures . . . Glass cutting, staining and ornamenting Gloves and mittens Gold and silver reducing and refining, not from the ore , Hats and caps, not includ ing wool hats House furnishing goods not elsewhere specified Instruments, professional and scientific Iron and steel nails and spikes, cut and wi-ought, including wire nails Iron and steel pipe, wrought Iron work, architectural and ornamental NUMBER OP EMPLOYEES 1880 2,885 437 111,152 4,662 2,365 9,678 7,722 6.237 1,142 76 10,221 160,813 25,192 5.435 185,472 490 1,271 1,204 145,351 52,087 3,069 1,586 7,697 304 17,240 592 1,099 2,910 5,210 1,934 1890 YEARLY WAGES 5,503 1,708 139,333 9,264 5,537 19,954 13,922 11,903 7,518 142 20 296 343,857 42.008 12,799 221,585 1,314 9,485 2,501 247,754 78,667 5,530 3,794 8,669 966 37,193 3,667 2,371 17,116 12,064 18,672 $254 '$422 389 525 1880 1890 386 315 316 245 358 437 360 421 352 285 264 286 245 485 537 385 453 417 478 445 215 587 384 366 535 431 343 436 476 428 385 344 465 581 539 474 499 456 447 354 313 714 565 423 598 547 649 658 358 Sj gl W fc ' go« §168 66.1 136| 34.9 90 23.3 113| 35.8 691 21.8 518 485 677 456 484 640 99 107 144 179 53 147 171 183 68 68 229 28 138 145 130 171 213 143 798 211 35.9 40.4 29.8 32.9 49.7 12.5 41.7 60.0 69.3 23.7 27.7 47.2 5.3 48.4 33.0 31.1 35.7 47.8 66.5 134 119 142 25 141 304 34.8 33.5 36.5 5.8 41.1 46.7 1 66 TRUSTS AND THE PUBLIC INDUSTRY. Jewelry and instrument cases Jute and jute goods Leather goods , . . Leather, patent and enameled Lithographing and engrav' ing Lock and gunsmithing. . . . Mattresses and spring beds Millinery and lace goods. . Musical instruments, pianos and materials. . . . Oil, cottonseed and cake . Oil, lubricating Plumbing and gas fitting.. Printing and publishing. . . Printing materials Pulp, wood Rubber and elastic goods.. Shirts Showcases Silk and silk goods Silversmithing Silverware Sporting goods Stationery goods not else- where specified Steam fittings and heating apparatus Stereotyping and electro typing Tools not elsewhere speci- fied Trunks and valises Type founding Umbrellas and canes. . . . Watch and clock materials Watch cases Watch, clock and jewelry repairing Watches Wirework, including wire rope and cable * Decrease. NUMBER OF EMPLOYEES 1880 138 525 1,036 22 4,322 1890 6,575 3,319 413 9,684 58,478 191 1,209 6,268 25,687 692 31,337 131 1,029 1,401 3,117 2,474 642 3,151 4,534 1,986 3,608 278 1,758 1.657 3,346 1,038 1,212 3,074 2,087 10,590 2,560 2,3941 7,337 6,555 11,827 13,057 6.301 1,072 42,513 165,227 866 2,830 9,802 32,750 1,500 50,913 314 2.306 2,199 4,790 11,779 1,475 7,095 6,785 2,172 6,863 563 3,869 8,647 6,675 YEARLY WAGES 1880 1890 270 443 581 533 415 362 253 709 265 503 492 522 517 367 366 210 475 291 585 656 293 372 527 486 472 394 482 321 309 555 523 511 4,459 7,917 383 503 120 31.3 1566 323 476 648 674 586 498 461 715 302 817 676 635 561 434 460 326 584 386 807 701 401 473 644 724 584 517 645 466 519 547 637 552 197 53 33 67 131 171 136 208 6 37 314 184 113 44 67 94 116 109 95 222 45 108 101 117 38 112 123 163 145 210 114 41 MACHINERY AND LABOR DISPLACEMENT 167 From this table it will be seen that in every indus- try, instead of the number of laborers practically having diminished, without exception it has largely increased, and this not by increased competition and lowering of wages but always with increased wages. In other words, the labor displacement has not only not been permanent, but the demand for labor in each industry has been increased and wages advanced. Cotton manufacture is no exception to this rule. The table just cited gives the comparison only from 1880 to 1890, but if we either follow the investigation farther back, or bring it down to the present, we find that the same general tendency continues. For in- stance, in 1831 there were only 62,208 laborers em- ployed in cotton manufacture in this country, and these were in small factories with old-fashioned looms, without a weft fork or stop action of any kind, and the operatives could only mind two looms. With the improvements of machinery, Tvhich have always been displacing laborers or else doing more work with the same number of laborers, the number of operatives in that industry, instead of diminishing, has constantly in- creased. In 1850 it rose to 92,286 ; in 1860 to 122,028 ; in 1870 to 135,369 ; in 1880 to 185,472 ; in 1890 to 221,585, and the number is still larger now, but the facts for the whole country have not been recently collected. During the process of this displacement, from 1830 to 1880, the number of spindles operated by each laborer increased nearly three times, the prod- uct per spindle increased one-fourth, (which shows that they went very much faster), the product per dollar invested was doubled, the cost or price of cot- ton cloth to the community was reduced about sixty l68 TRUSTS AND THE PUBLIC per cent., the consumption of cotton cloth by the com- munity per capita of the population increased over one hundred per cent., and wages more than doubled. According to the Massachusetts Labor Report for 1885 (page 187), the general wages of mill operatives in Maine, New Hampshire, Massachusetts, Rhode Island and Connecticut from 1831 to 1880 rose 115 per cent. From 1880 to 1890 the same tendency has continued ; looms have been speeded, mules have been lengthened, ring frames have been substituted for mules, the tendency of displacement has gone on, and yet the number of operatives has not diminished, but has largely increased, and wages in the entire cotton industry have risen, according to the census, more than twenty-five per cent If we take the report of the most extensive investi- gation into wages and prices that has ever been made at any time in any country, — the United States Senate Report of 1893, — similar facts are revealed. This report shows that in the industry where the least labor-displacing machinery was introduced, such as agriculture, stock raising, etc., prices have risen, in a number of instances 100 per cent, and very generally from 30 to YO per cent. ; while on the other hand the tables give 140 groups of manufactured products in the making of which labor-displacing machinery has largely been introduced, and in all of these prices have fallen, varying from 6 to 40 per cent., and some as much as 70 per cent. "What is also quite marked is the fact that in these industries where labor-displacing machinery and organization have been introduced, not only have prices fallen but the number of laborers employed has increased and wages have greatly risen. MACHINERY AND LABOR DISPLACEMENT 169 This report shows that the average wages from 1860 to 1891 rose 68 per cent, (from 1840 to 1890 wages rose 204 per cent.) and the pm^chasing power of a day's work increased slightly over Y2 per cent. In other words, through this very labor-displacing process, in lessening the cost of production, increasing the number of employments, lowering the price of the product, and increasing wages, the purchasing power of labor, which really represents the social welfare of the laborer, increased 24 per cent, every ten years from 1860 to 1890. The farther we pursue the history of this develop- ment the clearer it becomes that the introduction of labor-displacing machinery does not tend to increase enforced idleness, but on the contrary it is a tem- porary displacement and not a permanent discharge of labor that takes place. The economic reason for this I have already explained, — the growing market for products, enlarging the demand for labor. It is, therefore, the height of unwisdom — in fact it is direct resistance to progress and social improvement — to oppose the introduction of improved machinery. In the case of New England such action would be specially injurious, because the cotton industry in 'New England is in an exceptionally critical condition by virtue of the migratory character of the industry, to which I have referred. If the laborers resist the introduction of new looms, they will stop the possibility of the in- dustry in New England holding its own with the South. This must necessarily cause a fiercer struggle between the laborers and the corporations, which will result either, as I have said, in New England largely losing the business or the laborers moving away and I/O TRUSTS AND THE PUBLIC an inferior class coming, or else another reduction of wages and another protracted strike, which is only another way of destroying the industry and disrupting New England labor conditions. If, on the other hand, the laborers would welcome the new machines the capitalists would save probabl}'' half the cost of weaving. The new looms require a larger investment than the old, but, if the laborers operate sixteen to twenty instead of from six to eight, the cost of weaving would be reduced at least fifty per cent, after allowing for the fact that a little more ex- pensive cotton would have to be used with the new device. This would create a profit margin for the corporations, and they would naturally, if the laborers intelligently make the demand (and they ought to), be willing to give a part of this to the laborers. A con- cession that could easily be given by the corporations would amount to from $1.00 to $2.00 a week more than they can get with the present looms, and with the new devices the working of the sixteen or eighteen looms will be about as easy as the six or eight. The result would be a net increase of wages for the labor- ers of fully another ten per cent. This can be secured with little or no difficulty if the new machines are used. Moreover, there are many other rearrange- ments that can be made and would more readily be made if the operatives would consent to it, in the dif- ferent departments of the mills, by which more machinery could be minded by a sub-division of the work such that less ground had to be traversed in doing the same thing. If this also were permitted without resistance, something of a rise of wages, which would simply be a division with the laborers of the economy MACHINERY AND LABOR DISPLACEMENT 171 secured, could be obtained in nearly all the depart- ments of the mills. If labor organizations mean anything they mean uniting the strength and educating the intelligence of the laboring people. They should not be less intelli- gent and less informed than the capitalists or the com- munity. Their welfare is the welfare of the com- munity, the increase of their income can only be asso- ciated with increase of productive power and perma- nence of industrial success. In all the methods that promote this end it is the interest of the laborers and the community, as much as of the capitalists, intelli- gently to cooperate ; but of course always cooperate on the condition that the laborers share in the gain. Instead, therefore, of opposing the introduction of new machines, it is the laborer's interest always and everywhere to encourage their introduction, but always to see to it that though the price per unit of work is lessened the aggregate amount the laborer receives for a day's work is increased with the use of every new device. If the laborers will take the attitude of de- manding a share in the increased product, instead of preventing the introduction of the machines by which it is to come, they will not only promote industrial de- velopment but greatly accelerate the movement which gives them higher wages, shorter hours, cheaper wealth and altogether more intelligent, harmonious re- lations with the community and the employing class. The following is one of the questions asked at the close of this lecture, and the reply thereto : Question. Suppose you were a member of one of the trade unions in the N'ew England factory towns, 1/2 TRUSTS AND THE PUBLIC and this proposition came up very definitely of what action should be taken about the new machines, when it was known that they would throw out one-third to one- half of the members of the union while those remain- ing were to get more pay. If you were one of those who were going to be retained at higher pay, how could you vote for what you knew was going to throw out half of the others entirely ? Answer. That is a very practical question, yet it is one with which the individual operatives have to deal. If I were a member of the union I should endeavor to get my organization to control and modify, as far as possible, this readjustment. If opposing the introduc- tion of the new machines would in any way be a bene- fit I might favor that, but since it clearly is not and the improved machinery will come in any event, and if re- sisted will bring greater catastrophe when it does come, direct opposition is clearly a futile thing. As a member of the union, therefore, I would not advocate that. Since the new machines must be adopted as the only means of escaping the crushing competition which would force the displacement of factories, and perhaps another effort to reduce wages or else the introduc- tion of a cheaper class of labor from Canada or Europe, I would endeavor to use the power of organ- ization to mitigate the personal hardships of the re- adjustments. The laborers ought first to decide that they will accept the new machines, and then enter into a rational understanding with the corporations as to the amount of increase of aggregate wages the new machines would yield. Then, all who were employed upon the new looms should be expected to pay a MACHINERY AND LABOR DISPLACEMENT 173 special assessment into the union, constituting perhaps half or a certain proportion of their increase, as an out-of-work fund to be used in aiding dislocated weav- ers to obtain new situations in other places, or in new mills now being erected either in Massachusetts or elsewhere. It must be remembered that the introduction of the new machines is not coming in a night. Only some of the mills will adopt the new looms at first. Many will postpone it because they are not ready to make the in- creased investment, and so the transition will come somewhat gradually ; and if the unions would use a part of the increased wages obtained by the new machines to aid their fellow-members in relocating either in other places or industries, the direct hardship of -the readjustment would be greatly lessened. Another thing I should advocate if I were a member of the union would be the speedy adoption of effective restriction of immigration, so that corporations could not have the opportunity of bringing in new immi- grants for the purpose of this readjusting operation, but that all the new mills which are erected should at least perform the function of absorbing the labor being displaced in the transition. I would also advocate the enlisting of trade unions throughout the country in an active movement for reducing the hours of labor in the South to the level of those in Massachusetts, so that the long-hour workday should not present a bar- rier to the emigration of laborers from New England to the southern states. In both these movements the operatives might fairly expect to have the cooperation and financial aid of the employers. XII. THE TIN-PLATE TRUST* The manufacture of tin plate is one of the recent industries which have been brought into existence in this country exclusively by a protective tariff. Prior to 1890 there was not a pound of tin plate manufac- tured in this country. We imported all our supply, free of duty. Under the McKinley Law (1890) a duty of 2^ cents a pound was placed upon manufactured tin plates. This immediately had the effect of establishing the industry in this country, and we now produce our entire supply, foreigners being unable to compete with American producers in the American market. The product since July 1st, 1891, has been as follows : July 1 to December 31, 1891, (half year) 2,236,743 January 1 to December 31, 1892 42,119,192 January 1 to December 31, 1893 123,606,707 January 1 to December 31, 1894 166,343,409 January 1 to December 31, 1895 225,004,869 January 1 to December 31, 1896 369,229,796 January 1 to December 31, 1897 574,759,628 January 1 to December 31, 1898 732,290,285 Total product for 7|- years. . . .2,235,590,629 * Published in Cfunton's Magazine of May 1899. 174 THE TIN-PLATE TRUST 175 Before tlie McKinley Law was passed, when tin- plate was on the free list, it cost $5.10 per box. After the industry got well under way in this country the price rapidly fell, at one time touching $2.Y5 a box. In 1894 the Wilson Bill reduced the tariff on tin-plate to 1-^ cents. Under the Dingley Bill, of 1897, the tariff was raised to 1|- cents, but the price did not rise. Indeed, it has remained so low that no foreign tin can come in. In the fall of 1898 the price in hundred-pound boxes was $3.00 a box. This price was regarded as very low, yielding very little profit for the best concerns and none at all for poorer ones, and a loss for some of the poorest. Competition among the various factories that the tariff had called into existence was so severe that steps were taken to reorganize the industry into a trust, by which all the factories became parts of one concern. Almost immediately after the trust was organized the price of tin-plates went up from $3.00 to $4.00 a box. This very naturally caused consternation among the consumers and a feeling of indignation in the com- munity that the trust Avas using the power of its new organization to impose upon the public, and, instead of giving the consumers a part of the benefit of the econ- omy created by the larger organization, that it was acting the part of a monopoly and charging one-third more, merely for its profits. In the March issue of this magazine, in an article " The Era of Trusts," attention was called to this fact. It was suggested that if the managers of the tin-plate trust had no better appreciation of the treatment that industry had received at the hands of the public in the form of a protective tariff, upon which its very exist- ence depended, than to use its organization to tax the 1/6 TRUSTS AND THE PUBLIC community by monopoly prices, its products should at once be put upon the free list ; and, in fact, that con- gress should jDass a law empowering the secretary of the treasury to put upon the free list the products of an}^ trust that uses its reorganization to put up prices. In nearly all cases where legitimate trusts have been organized and great economies accomplished, the man- agement has had the good sense to lower the price and so give the community a share of the advantages due to the superior methods of organization. Hence the fact that the tin-plate trust was an exception to this and put the price up over 30 per cent, seemed to be an example of bad business policy. Subsequent investigation into the facts of the case, however, shows that the managers of the tin-plate in- dustry are not quite so unwise as this rise in price would seem to indicate. Of course, in passing upon all such cases we should be careful to hold the trust responsible only for what it does. It has frequently happened when the price of petroleum has tilted upwards that the trust has been condemned as the greedy cause, whereas a little investigation would show that it was due to a rise in crude oil. The same has more than once been true of sugar. This happens to be true at least in part of tin plate. It should be remembered that the tin plate manufac- turers, now the trust, simply buy the pig tin and the steel bars. They roll the bars into plates, and other- wise prepare them, and put on the tin coating. In other words, pig tin and steel bars are their raw ma- terials, both of which they buy. Pig tin is all im- ported, duty free, and steel bars are largely manu- factured here. THE TIN-PLATE TRUST 1 7/ Pig tin has risen from 12f cents to 25 cents a pound, or over 96 per cent. The price of steel billets, out of which the plates are made, has risen from $14.50 to $25.00 a ton, or 72.4 per cent. Allowing about 5 per cent, for waste in converting the billets into plates, this is equivalent to a rise of $10.50 on 1,900 pounds. Therefore, the price of the 2^ pounds of pig tin used in the manufacture of 100 pounds of j)lates has risen 30.6 cents, and the price of the steel billets used in 100 pounds of tin plate has risen 54.8 cents, making a rise in the cost of the two elements of raw material of 85.4 cents per box of tin plate. Eefore the rise, the steel billets used in making a box of tin plate cost 74.1 cents, and the pig tin cost 31.9 cents, or just $1.06 per box. Therefore the rise in raw materials in a hundred-pound box has been 80 per cent. When the price of the finished plates was $3.00, the remaining $1.94 above the cost of raw materials was made up of labor, fuel and miscellaneous expenses. The fuel cost is about 5 cents per box of tin, and if w^e allow an equal amount for taxes and insurance respectively, which is moi'e than ample, 20 cents for fixed salaries — a very high estimate indeed — , and 9 cents for depreciation and incidental expenses not enumerated, the remaining $1.50 represents labor cost, — including the salaries of clerks, etc. On this there has been a rise of 11 per cent., or 16^ cents per box. Adding this to the 85.4 cents rise in the price of raw materials ifiakes a total rise of $1.02 a box in the cost of manufacture, due to the rise of wages and in the price of raw materials. Of course, the $3.00 a box for which the tin plates 12 178 TRUSTS AND THE PUBLIC were sold in 1898 did not all represent cost of produc- tion to the most successful factories. There were a few of the best concerns that were making a profit when business was at its Avorst and prices at their lowest ; but with the poorer mills, or those producing at the greatest cost, all of the $3.00 represented cost of production. They Avere receiving no profits, and some of them were working at a loss. This is always the case in competitive business, but it was especially the case during 1896, 1897 and 1898. That is to say, under all normal competitive conditions those pro- ducing at the greatest cost work without profit, and their cost is correctly reflected in the selling price. Usually these producers are comparatively few, but in 1896, 1897 and 1898 they were numerous ; some of the poorest, as just observed, being compelled to work at a loss. Since these dearest producers always de- termine the market price it is perfectly correct to estimate the $3.00 as representing the cost of pro- ducing the plate, not including any profit, as those whose cost really determine the price received no profit. Strictly speaking, then, the rise in wages and raw material in the manufacture of tin-plate has been slightly more, or at least fully equal to, the increase in the price since the trust was organized. The in- creased economies of the trust probably amount to more than this. They have probably converted what was a loss to some, no profit to many, and a small profit to only a few into a more liberal profit for all, and it may fairly be expected that the trust will share this undivided profit with the community before long in a further reduction of prices. "We are gl'd, THE TIN-PLATE TRUST 1 79 however, to be able to believe that whatever increased profit the trust is now making it is not getting it out of the rise of price. It is worth noting in this connection that the price of tin-plate, with the increase of 11 per cent, in wages, is still $1.10 a box less than it was w^hen we relied on foreign supply for all our tin-plate under free importation. What has really been accomplished is this : the tin-plate industry has been transferred to this country, whatever profits there are now go to American investors, the wages expended in that in- dustry are distributed to American laborers, these wages have been increased since the trust was organ- ized 11 per cent., the producers are undoubtedly making a good profit, and still the product is sold to American consumers at $1.10 a box, or 22 per cent, less than before the tariff was adopted and the trust organized. XIII. THE TETHER OF LAEGE FORTUNES* The retirement of Mr. Andrew Carnegie from busi- ness, with the announcement that he intends to devote the remainder of his life to giving away his fortune of $150,000,000, has given rise to a good deal of discus- sion of millionaires and their fortunes. Mr. Carnegie has some rather unique characteristics. For a time he took considerable pains to announce in different ways that it is very unfortunate for a young man to be born with a fortune, and that it is not creditable for a man to die rich, because by so doing he really handicaps his sons or other relatives to whom the fortune passes. Since the advent of his little daughter, however, this particular phase of his philosophy of wealth has been less emphasized, and it would almost seem as if the little girl were in some danger of be- ing terribly handicapped. Tet, as a part of that idea and not inconsistent with it, Mr. Carnegie is credited with announcing that in retiring from the cares of business he is going to devote himself to becoming a public benefactor, in giv- ing away his immense fortune. To perform this task wisely may indeed be quite as difficult as it was to earn it. In accumulating a fortune by successfully * Published in Gunton's Magazine of June 1899. 180 THE TETHER OF LARGE FORTUNES l8l conducting productive enterprise, a person is sure to benefit the community in ways that are economic and permanent, because the helpful influences which arise from productive industry operate silently and uncon- sciously through the distributive forces of society. Millions of new wealth may thus be created and dis- tributed in wages and profits and other forms of earn- ings which are sure to find healthful lodgment through- out the community. But when a single individual undertakes to make a business of distributing a hundred or more millions, there is danger of considerable waste- ful misplacement. Yet this step of Mr. Carnegie's has met with a good deal of approval, and, but for the misfortune of the Homestead affair, which will prob- ably never be entirely erased from his shield, Mr. Carnegie would receive well-nigh universal applause. There is a very strong feeling abroad, and it seems to be growing, that capitalists, and especially multi-mil- lionaires, are a menace to public welfare, in grabbing the world's wealth to the impoverishment of the great mass of the community. Hence Mr. Carnegie's new departure — for it is about the first case of the kind that ever occurred — is regarded as an example to be emulated. It is quite an open question whether, if all million- aires .should follow Mr. Carnegie's example, they would really render better service to the public. He made a very sensible remark on this subject when he said the reason so few rich men retire from business is that while they have plenty to retire from they have little to retire to. In other words, their lives have been so absorbed in the pursuits of industry, out of which their fortunes have been made, that there is not enough in l82 TRUSTS AND THE PUBLIC other walks of life to attract them, or even to make life tolerable to them if they should leave business altogether. This is very true. The men of great busi- ness affairs are tied to their business long after they have made adequate fortunes, because they cannot leave it. Life would be a burden to them if they did. In short, to continue in business is the only way for them to make life worth living. This brings up a side of the life of great business men and millionaires that is generally overlooked by those who insist that the industrial magnates who con- trol great enterprises are " gobbling all the benefits of civilization." A little consideration of this side of the problem reveals the fact that, after all, even million- aires can only really take unto themselves the amount of wealth that their social life and character can absorb. Yer}^ few of them can actually absorb more than $25,000 a year. They may spend $100,000, but they give it largely to other people ; the rest of the income from their millions goes directly or indirectly to society. As the capitalist cannot use by his own social absorp- tion but a small portion of his fortune, the rest must be invested productively or it is in danger of slipping from him. In reality, both the millionaire and his wealth, outside of the little he can absorb socially, are devoted in spite of themselves to the service of the public. By virtue of a life habit, acquired in the creation of his fortune, he has become tethered to the service of production. lie has become so closel}'" tethered to business that he does not even take on so much of the socializing influence of civilization, does not really absorb so much of the progress of society, does not, therefore, enjoy so much of the mellowing THE TETHER OF LARGE FORTUNES I 83 and sweetening influences of culture, as many others who have not a hundredth or a thousandth part of his wealth. In short, there are even whole classes who get far more of the best results of the wealth of modern society than do the capitalist millionaires themselves, who have become the closely tethered servants, not to say slaves, of productive fortunes. It may be said with some truth that in many in- stances these servants of fortunes are really dwarfed on the best side of their nature, and in not a few in- stances have become indifferent to the great ethical and social movements which are making; for a higher type of human life. This is frequently made a subject of criticism. They are denounced as mean and selfish, illiberal and oppressive. But it is more correct to re- gard them as victims of an exacting industrial life. By their very superior capacity as industrial organ- izers, developers of the world's resources, by which wealth is made cheaper and more abundant and the whole standard of life raised, they have become tethered to a duty from which they cannot escape. The notion that millionaires monopolize the enjoyment of their millions is wholly unwarranted. They really get the benefit only of a diminishing proportion of an increasing product. In proportion as their fortune in- creases their exclusive enjoyment of it becomes rela- tively smaller. Whatever else may be said, it is obvious that the great millionaire capitalists of modern times are drudges to their fortunes, and indirectly to the community. From an immediate moral point of view it may seem to be a misfortune that the class who contribute most to the possibility of civilization should thus be l84 TRUSTS AND THE PUBLIC dwarfed by the process, but this seems to have been inevitable under the circumstances. Thus far it appears to have been an inexorable edict of evolution that the efficient few should render exceptional service for the benefit of the less efficient many. In no other way could modern progress have been possible. The application of science through the use of machinery, which periodically has involved the reorganization of industry into larger and more economical concerns, has necessarily brought with it more and more exact- ing demands upon the managing captains. This movement toward greater productive efficiency, which every hour is increasing the world's wealth, has prac- tically involved forcing successful capitalists into a business groove, which is the dwarfing process com- plained of. It is a rare exception to find a man really broad, generous, public-spirited and well rounded-out at the same time that he is building up his fortune. His sons may be broader, more liberal and highly cul- tivated ; the community is progressing, but he is im- mersed in the responsibility of successfully conducting an enterprise which makes this very broadening prog- ress possible for others. The capitalist is not only a servant in the highest sense to civilization, but his very service so shapes his habits and desires as to make it more difficult for him to escape than to continue the drudgery. It is very doubtful if one per cent, of capitalists to-day could retire from business at sixty-five without being less useful and less happy than they would be by continuing in the harness. Of course, if industrial progress had this effect upon all the community it would be disastrous indeed. It THE TETHER OF LARGE FORTUNES 185 would neutralize its own benefits. But, fortunately, in this case as in the case of labor displacement, the sacrifice of personal disadvantage is limited to a few and the benefits are extended to the many, so that the great mass whose tastes, habits and life create the standard of civilization and the environment for each individual are helped by the process. It is true that this warping or dwarfing influence is a feature almost peculiar to modern industry. At least, it has very much increased with the growth of modern methods. The farther back we go the more we find the condition where the employer was an easy-going, paternal kind of ma,n, largely a public character, the mayor of the town, the adviser of the widow, and a sort of godfather to the community, and if we go still farther back, where there were practicall}^ no employers and everybody worked for himself, this element did not exist but barbarism was the lot of all. Neither was there any dislocation of laborers in that primitive simple state. Both these phases of seeming sacrifice have come with the colossal movement of progress. It is fortunate for society that this whole movement is concentrating the dwarfing responsibilities for the wealth-getting efforts of the world to a smaller and smaller proportion of society and distributing the results to an ever increasing number. For instance, the wage and salary S3^stem, which is a part of this progress, harnesses a constantly increas- ing proportion of the workers as simple productive au- tomatons, where their hours are prescribed, their wages fixed, the quality of their efforts specialized almost to the point of monotony. In proportion as their duties become automatic they become unexacting, and to that 1 86 TRUSTS AND THE PUBLIC extent the nervous force and vital energies of the people are reserved to be let loose in the sphere of social activities in which the gratifications of the higher side of life come. In the lines where this reaches its highest perfection, the drudgery or exacting side of earning a living is measured by the hours of daily ap- jDlication. In proportion as these can be shortened, the world of social expansion and rounded human cul- tivation is enlarged. Thus, by this process, the mil- lions are being more and more relieved from the bur- densome narrow rut of life by being made irresponsible parts of the semi-automatic whole, for the successful management of which a smaller and smaller number, relatively, become responsible. Of course, in the philosophic consideration of the case the question arises, will this always be necessary ? "Will progress always demand the sacrifice of the most painstaking experts in the productive life? It would seem not. The tendency of this movement is mani- festly to organize, systematize and centralize, so that ultimately a large amount of automatic momentum will be established, and this will bring relief even to those at the helm. When the machinery and organ- ization in an industry has reached approximate per- fection, or a stage where great revolutions are no longer possible, what has heretofore required practi- cal genius to direct becomes an established order, each part of which almost takes care of itself. When the presence or direction of no given individual is indis- pensable to the movement of the whole, when the death of the guiding genius would not disrupt the working of the concern ; when that ])oint is reached — and it has already been reached in some industries — THE TETHER OF LARGE FORTUNES 1 8/ the capitalist or the great captain of industry will become more perfunctory, less tightly tethered to duty, and in common with the rest of the commu- nity may take on more of the broader and refining side of life and be less immersed in the drudgery of business. But in the evolutionary process which is now going on they are the drudges of industry. In a broad view of the subject, therefore, great capitalists in pursuing a seemingly narrow life, absorbed by business and dominated by margins and markets, are rendering the best service to society of which they are capable, and the fact that they appear to find the highest gratifica- tion in the pursuit of industry is in this age at least to the greatest advantage of civilization. It is a misfortune that the function of the capitalist class is so much misunderstood. It leads to a great deal of adverse criticism of their conduct, and tends to sour them towards public interests. They are made to feel that they are hunted and censured for their suc- cess. They are kept constantly under the harrow of public criticism and censure, which tends to make their social life even less attractive and endurable than it otherwise would be, and here the capitalists as a class help to intensify this social antagonism by too frequently ignoring and defying public sentiment. They must learn that, right or wrong, the public is master ; that public opinion is the opinion that rules and will rule ; and that it is a part of good economic investment, a part of wise industrial statesmanship, to devote a part of the earnings of their enterprises to the education of the people, to a broader and more philo- sophic understanding of the capitalist's relation to 1 88 TRUSTS AND THE PUBLIC society and society's relation to capitalistic enter- prises. It would be a mistake if the capitalists should evolve the theory that the true way is to ignore the public till they get rich and then retire to spend their riches for public purposes. By this process they would succeed in being disliked as capitalists and doubted as philanthropists. The true function of a capitalist is to be a success- ful organizer and director of industry, and devote a part of the proceeds to movements of education and public improvement as he goes along. In that way his contributions are likely to be good investments, involv- ing little waste and producing the maximum results. In most cases it is safe to say that the great fortune would do more good to be left in productive enter- prises than to be distributed in great lumps in any lines of philanthropj^ What is needed is that the people should understand the function of the capitalist, and that the capitalist should understand the need of more liberal public improvements. In this way an alto- gether more harmonious relation between capital and the community would be evolved, and the capitalist do his best work for civilization, make his best contribu- tions to public improvement, and get a larger and larger personal advantage out of pursuing an impor- tant, and what has hitherto been an exhausting, life of business drudgery. XIY. POWERS AND PERILS OF THE NEW TRUSTS * Ten or a dozen years have now elapsed since the trust movement in this country began to assume really formidable proportions ; yet the material conditions of the people gradually improve, and the republic still endures. Probably no great natural movement or tendency in the world's history ever brought out such •widespread protests and dire prophecies of disaster as this modern tendency of capitalistic combination. It has been declaimed against, preached against, flayed in the press, denounced in all political platforms, and attacked by professors of political economy with all their resources of scholarly exposition, showing the industrial despotism and thraldom of the masses that was sure to come, and uttering solemn warnings. " Combinations in restraint of trade " have been out- lawed by nearly every state in the Union, and even by national legislation as far as it could be made to apply to the subject. Yet the trusts march on, and the laws step one side, because in not one case out of a hundred is it possible to show that they are combina- tions " in restraint of trade " ; until, it is estimated, about four billion dollars of the capital invested in productive industry in this country has now come * Published in Guntori's Magazine of June 1899. 189 190 TRUSTS AND THE PUBLIC under some form of trust organization, and more than one and one-half billions of this during the last five months. Is it not a little strange that, in spite of all this, the long promised cataclysm has not yet arrived, — in fact, seems farther off than ever? Was there ever any- thing so remarkable in the world's industrial history as this tremendous, silent revolution that has been going on right under our e3'^es, yet so smoothly and naturally as to create hardly a ripple of disturbance in the great economic round of daily production and consumption? The average man would hardly have had cause to suspect what was taking place, but for the deluge of newspaper warnings. True, as the con- solidation went on, some factories, generally the poorer ones, were closed down ; but that had happened over and over again in the natural course of free competi- tion. Again, employees were discharged in many instances, but that too was no novelty. It had alwaj^s occurred whenever a concern failed or a plant sus- pended operations because of inability to keep in the race. The laborers under such circumstances have always had to seek employment in other establish- ments; some of them, perhaps, remaining in idleness until the growth of business created new demands for labor. Hard as it is, there has been relatively no more difficulty about this readjusting process in recent years than formerly ; in fact, at present the percentage of non-employment is very small indeed, and the question is chiefly one of finding the right sort of men for the different kinds of work to be done. As to ruin of small competitors, it has actually been a great cause of complaint against many recent trusts that they POWERS AND PERILS OF THE NEW TRUSTS I9I have taken in and saved groups of old and poor con- cerns that would shortly have gone to the wall any- way, making the productive part of the trust carry the burden of these unprofitable plants. Neither in respect to small industries nor their em- ployees, therefore, have the trusts brought any new and unusual hardships. From the community's stand- point, it is notable that during the past year the growth of trusts and revival of business prosperity have come along hand in hand. "Whether there be any connection between the two or not, it is clear that the one has in no way had the effect of preventing or destroying the other. This has become so conspicuous, staring everybody in the face, that public sentiment in many quarters is changing towards the whole problem. Old standard newspapers, the very ones that have persistently at- tacked the trust movement for years, are coming to discuss the matter in a markedly different spirit. Lec- turers on the subject need not now quite exhaust the dictionary of vituperation in order to get a hearing. Still, opposition has by no means died out. No poli- tical party as yet dares descend to mildness even, in its references to trusts. " Down with them ! " is to be the chief rallying cry next year of one of the great political parties at least, and the other will meet this b}^ trying to show that it (the party) has done more to stamp out trusts than has its opponent. Each party must be a St. George to some dragon, and what more convenient dragon is at hand than the trust ? What would a political speech amount to without some hideous oppressor writhing on the rack, and the orator turning the screw ? 192 TRUSTS AND THE PUBLIC But the ojDposition is not all mere " ranting," by any means, Tiiere is a well defined feeling among a large group of people, not usually moved by mere pre- judice, that we are rapidly drifting into a condition extremely perilous to industrial and political freedom and progress, even though these results are not yet manifest. They ask, in alarm, whether we shall not soon reach a point where, all competition being killed, the trusts will throw off all restraint and manipulate prices, wages and legislation precisely to suit them- selves. They seem to see every avenue of individual effort closed, especially to men of small means, and the whole community reduced to the status of wage earners who will have no choice between serving the trusts and facing starvation. They are possessed of a dread that the outcome of all this will beone universal trust, controlling and disposing of everything like a medieval despotism. These are the powers commonly supposed to lie in the hands of the trusts, or that will lie in their hands absolutely if the movement continues much longer. 'Now let us see what ground, if any, there is for all this alarm. Are the trusts all-powerful, or likely to become so ? Before we can answer this we need, first of all, to find the source of what power they do pos- sess. It is not in any arbitrary ability permanently to raise prices, reduce wages, and control the output. Many foolish attempts have been made to do exactly these things, and, except where there was some real economic justification for the step taken, they have disastrously failed. Several wheat " corners," the whisky trust, copper trust, cordage trust, the nail and other attempted combinations in different branches POWERS AND PERILS OF THE NEW TRUSTS I93 of the iron industry, are examples of what comes of economic folly. I^ow, when these experiences are contrasted with the steady and permanent success of trusts which have adopted the opposite policy of per- manent economic improvements, reduction of prices, and fair dealing with employees, it furnishes a very powerful object lesson to new trusts. Some, of course, have not profited by it yet, but they will encounter the penalties of their predecessors unless they do. It is not surprising that this should be so. A mere trade agreement between a group of concerns does not and cannot abolish competition. " Corners " cannot succeed. They must go on buying up every new com- petitor that appears in the field, but this cannot con- tinue very long without completely destroying the profitableness of the business. It was this, chiefly, that brought about the collapse of the " corners " just enumerated. The threat of new outside competition is more con- stant and powerful to-day than ever before. 'No trust organization can safely ignore it. One of the chief reasons why it is becoming so important a factor is the rapid growth of our surplus capital. Industry has been so profitable in this country that we have gradu- ally accumulated a great fund of surplus, and, instead of trying to borrow money abroad, our capitalists are actually seeking opportunities to place foreign loans. Interest rates have steadily declined. Railroad after railroad has been going through financial reorganiza- tion, refunding its bonded indebtedness at from one to three per cent, lower rates than were previously paid. Capital, instead of being difficult to obtain, is eagerly 13 194 TRUSTS AND THE PUBLIC watching every opportunity for profitable investment. This means that nobody can have any absolute control over prices. A new method or invention in productive processes, if obtained by some actual or possible rival, is likely to undermine a trust at almost any time. Their only safety lies in maintaining the lead in in- troducing every possible improvement and economy, and thereby keeping the price on a steadily downward movement which competitors cannot follow. A mistaken policy on the part of a vast industrial concern is a far more serious matter than the common daily errors in the conduct of a small business. That it is a very serious matter to maintain the constant supremacy of these immense concerns is shown by the necessity they are under of securing as officers and managers men of the greatest energy and ability that money can find. Indeed, it is pure foil}'' to imagine that great power can exist without great responsi- bility, or can increase without making discretion and just conduct more and more essential. The great rough balance that exists everywhere in nature and keeps it right side up and in stable equilibrium oper- ates also in economics, and prevents any permanent, one-sided monopoly of power and privilege. The situation to-day in this trust matter shows how true this is. We have been so impressed by the enor- mous growth of the trusts themselves as almost to overlook a fact of equal importance, — that competi- tion also has been growing more and more keen, even though it is fighting now with larger weapons, and not with a multitude of staves and spears as under the system of small individual industry. The Standard Oil Company, perhaps, comes as near being an indus- POWERS AND PERILS OF THE NEW TRUSTS I95 trial monopoly as an}'^ concern in this country, yet it has either never cared to or never been able to obtain control of some twenty-five or thirty independent re- fining companies, more than fifteen of which have from $100,000 to $1,000,000 capital and are quoted in the standard commercial rate books as establishments of good credit. Should this companj'', through some strange freak of management, reverse its established policy and try to restore the oil prices of several years ago, there is no doubt but that capital would be put into many of these outside plants, and into new oil fields, and powerful competing industries built up. The Standard maintains its position only by keeping prices at a point so low that only a few well situated outsiders can compete. The sugar trust for several years after its formation had practically no competition. Now, however, for a year or more a fierce fight has been in progress be- tween the sugar trust and tlie Arbuckles, which seems no nearer conclusion than ever. But, it is stated on quite definite official authorit}^, that if at any time these competitors should combine there are at least two new syndicates ready and waiting to enter the field, one operating in Maryland and the other in ]^ew York. It is even more difficult to monopolize this business than the refining of petroleum. The one fact of the rapid growth of free capital seeking investment is a force, tending to keep all such indus- tries at the point of greatest efficiency and lowest prices, infinitely more powerful than all the legislation that could be devised for that purpose. Much the same situation is developing in the case of paper manufacture. About seventy -five or eighty 196 TRUSTS AND THE PUBLIC per cent, of the producing capacity of the country was brought into the recently organized paper trust, but there is already vigorous competition outside, and prospect of rapid growth of new independent con- cerns. The Neio Yorh Journal of Commerce and Com- mercial Bulletin^ a pronounced anti-trust paper, is authority for this information. According to the Shoe and Leather Reporter precisely the same condi- tion exists with reference to the leather and rubber goods trusts. " There are a number of outside com- panies," it says, " who are holding their own and maintaining a high standing in the trade." Even in lines of business that seem to be in their nature as nearly monopolistic as it is possible to be, there has recently been an unprecedented amount of competition. The severe fight among the gas com- panies in Kew York city has brought about a reduc- tion, by some of the companies, to 65 cents per thou- sand feet, and by others to 50 cents, while the uniform price before was $1.10. It is not probable that this state of affairs will continue long, because the price quoted is probably just about at the cost point of pro- duction. A consolidation may be effected and a somewhat higher uniform rate established, but it is safe to predict that never again will the former price be reached. If it gets above 85 or 90 cents, there is really nothing to prevent the entrance of still other competitors, as in the present case, anxious to share the profits at that rate. This has not been confined to New York. Other cities have recently secured considerable reduction in gas rates, and still others are considering propositions from competing com- panies to furnish gas much cheaper than at present. POWERS AND PERILS OF THE NEW TRUSTS I97 This is also true in the case of street railway trans- portation. The steady tendency is to give us better cars, faster time, and cheaper service through the increased mileage covered by a five-cent fare, and ex- tension of transfer arrangements. In New York this movement has been so extensive lately that the sub- urban movement is really taking on enormous propor- tions. Competition between the elevated and surface lires, added to the pressure of the public demand, has, within the last few months, produced most important results. The elevated railway is to change its motive power to electricit}^, equip its line with new cars and establish express train service. The Metropolitan is continually extending the area of transfers, and now the Third Avenue road has arranged a transfer system with the Manhattan Elevated, and also with the Union trolley lines in the Bronx Borough, so that it is possible to go from the City Hall to New Rochelle on Long Island Sound for eight cents. In Brooklj^n, which is the competitor of New Jersey and West- chester County for suburban business, a recent re- organization has already given more rapid and cheaper long distance service, and very soon the old engines and trains of the elevated roads are to be replaced by electric cars running on express train schedules. If, therefore, competition does remain in active op- eration in some form or other, even in such cases as these, is it not an idle fear that it can ever be abol- ished in all the open and not naturally monopolistic industries ? There is no reason whatever to suppose that the whole field can ever be monopolized in any line of industry. It may be comparatively easy to combine half or three-fourths of the large establish- 198 TRUSTS AND THE PUBLIC ments in an industry, but. it is immensely difficult to get a much, larger proportion. The difficulty doubles and trebles with every new step toward the hundred per cent, mark, until further effort becomes altogether more costly than it is worth. It is like the old catch- problem of finding how long it would take to reach the end of a road by traveling half the remaining dis- tance every hour. Progress at first is rapid, but ob- viously it is impossible ever to reach the end. But, even if the amount of actual competition is re- duced to very narrow limits, the possibility of new competition always exists ; and, as we have pointed out, its probability increases with every increase in the surplus capital of the community. This is potential competition, and as industry becomes organized on a large and finely balanced scale it is not one whit less effective than the actual. Another important point is this : — potential competition, especially with respect to small employers and wage earners, is far more merciful and humane than when the warfare is actually on. "We are forever hearing competition exalted and "glo- rified almost as a sacred institution, of inestimable benefit to the entire community, but as a matter of plain, hard experience, it is only a part of the results of competition that is really beneficial. Its actual working, as between a multitude of small rivals, is attended with all manner of heartlessness and immo- rality, failure of employers and discharge of employees. The trust movement is tending to abolish these painful features by gathering the bulk of the concerns in various industries into large and permanent organ- izations. As these become thoroughly unified, the plants they control will have to keep in operation some POWERS AND PERILS OF THE NEW TRUSTS 1 99 way or other, like railroads, however the management may change. At the same time, by the force of po- tential competition, the eagerness of idle capital, and the threat of new inventions in the hands of outside parties, we shall get the benefit of cheaper commodities the same as if the competitive struggle and slaughter were actually going on. The present movement in both these directions is tending, at least, to give us an industrial system as nearly ideal as seems within the range of economic possibility. The wage earner will not be injured. Alongside the organization of capital comes organization of labor, and this means more and more that industrial peace is absolutely necessary to the success of large concerns. As we have pointed out in another connection, the larger they become the greater the necessit}^ of smooth operation and the more disastrous is interruption or strife. A prolonged strike or shut-down would be al- most ruinous to very large concerns, while giving com- petitors a free hand in building up a rival business. This fact makes it more and more important to grant the reasonable demands of labor. Trade union or- ganization in the hands of the laborers is a more ef- fective weapon against large concerns even than against small ones, because the penalty they can inflict is im- measurably greater. Many large concerns appreciate this so keenly as to forestall trouble by voluntarily granting wage increases. This has been very con- spicuous, lately, in the case of the steel, tin-plate and leather goods trusts. Nor is the man of small capital to be crushed. He cannot, it is true, engage with much chance of success in many of the old established lines of manufacturing 200 TRUSTS AND THE PUBLIC industry, but this by no means implies that be has no opportunity for individual investment. On the con- trary, the very growth of corporations and trusts opens a broader field for a small investor than ever before. Perhaps he cannot start a plant of his own, but he can buy stock, however small the amount, in any one of hundreds or thousands of different enterprises and share in its management. These opportunities constantly in- crease. It is now possible for men of experience and peculiar skill in any special direction to gather to- gether the large or small accumulations of hundreds of other people and carry on an industry that is much more likely to be profitable to them all than if each man tried to start a small business of his own. If a man happens to be a poor manager, the fact of owning his own little establishment is of no use or advantage to him. It is much better to succeed as a joint owner, employing trained and skilled management, than to fail as the incompetent sole proprietor of one's own business. The fear that the trusts will finally control all legis- lation is equally groundless. At first, a decade or so ago, large corporations undoubtedly did exert a power- ful influence in controlling legislation in certain di- rections, but the very fact that this was done in a few instances caused so great a reaction in public sentiment that the whole tendency has been to the opposite ex- treme ever since. To-day legislatures vie with each other in passing measures restricting the powers of corporations or increasing their taxation, while it is almost impossible for these concerns to get any legis- lation definitely in their favor. It is only necessary to look over the statute books throughout the country for POWERS AND PERILS OF THE NEW TRUSTS 201 the last few years to verify this. Every year sees in- creased anxiet}^ on the part of legislators to make a record for anti-capitalist activity. There is not the least reason to suppose that this tendency will di- minish. To just the extent that trusts fail to justify themselves to the public, or attempt unscrupulous methods either in business or in legislation, political hostility to them will continue. Finally, we come to face this bugbear of a great universal trust which is to absorb everything and rule us by its own sweet will. Here again a very simple test reveals all the reasonable probabilities. Just as in the case of the permanence and stability of separate trusts, the limit to size and extension will be fixed by the test of greatest productive econom}^. If it is found that several different kinds of industries can be con- ducted jointly more economically, and hence more profitably to the owners and with lower prices to the public, consolidation will go on to that point, but no farther. If a combination is formed, in which the effort to handle two or more different kinds of indus- tries under a single management proves more wasteful and awkward than the old plan, it will break down. New competition will be invited into the field, and former conditions will return. As productive methods become more and more highly specialized, and expert management more and more a real science in each dif- ferent field, separation of very unlike industries be- comes even more necessary to good results than for- merl}^ An expert in the sugar refining business, for instance, if placed also in charge of piano making or cotton manufacturing, would probabl}^ hamper both those industries and perhaps before long render them 202 TRUSTS AND THE PUBLIC unprofitable by his bungling interference. It is nearly- impossible for one mind to be supremely expert in three or four different fields, and this simple limitation of human capacity prohibits the universal trust. ISTot even if the actual running of each business were left to special experts, and only the general business policy put in the hands of a joint committee, would success always come. Different industries require dif- ferent general business policies quite as much as dif- ferent factory management. It would be hard to imagine a more inviting field for competitors than one in which, for instance, a miscellaneous collection of industries such as oil refining, cloth manufacturing, wheat growing, stock raising, railroad managing and store-keeping were in operation under the joint di- rection of one committee of managers, each with a dif- ferent idea of business methods. Such a combination would be so grotesquely unnatural, cumbersome and inefficient that it probably could not last six months. It would be a more easy victim to innumerable outside assaults in specific lines than even the sleeping Gulliver to the Lilliputians. Indeed, it is not altogether unlikely that after a few years there may be a dividing up even of some of the trusts already organized. Senator Depew, whose op- portunities for insight into general industrial condi- tions are perhaps as broad as those of any man in the country, takes this view very strongly indeed, and even believes that we shall finally return to the condi- tions of a decade or more ago. This does not seem very probable, except in the case of useless and un- wieldy combinations; but it would undoubtedly be true of any attempt to unite a large number of wholly POWERS AND PERILS OF THE NEW TRUSTS 203 different kinds of industries under one management. Tlie grouping of each industry by itself seems to be the natural point of greatest economic efficiency ; but if, in time, a real advantage is found in still wider com- bination along certain lines, that will come. These larger trusts, however, would be subject to exactly the same perils as we have shown exist at present. The difficulty and danger of moving counter to public wel- fare increase as the trust grows and exposes fresh points of attack. The only protection to economic vulnerableness is economic wisdom. While the general trend of this whole movement affords no ground for sensational alarms as to its con- sequences, present or future, there are likely to be many serious disturbances in its progress, due to the ignorance or selfishness of individuals connected with it. This is and will be true wherever a speculative " corner " is organized to force up prices ; or wherever a set of irresponsible brokers organize a highly over- capitalized trust and sell out their holdings, leaving the concern to flounder around as best it may, and perhaps fail for want of any real economic welding force within it. This is true, too, wherever either corpora- tions or trusts try to interfere with the legitimate organization of labor or to reduce wages and exact longer hours of labor. The great duty of the hour is to discriminate be- tween the movement itself and the follies of individual bunglers. Most of the latter — " corners " for instance — bring their own economic penalties more promptly than any legislative ones that could be applied. In the case of stock watering, if the increased capital does not really represent a corresponding earning 204 TRUSTS AND THE PUBLIC capacity, failure is certain. A few more experiences of this ought to be enough to prevent either the own- ers of industries from transferring their plants or owners of capital from loaning their money in aid of un- sound reorganizations. Where capital interferes with, the right of labor to organize, the law might properly step in and provide severe penalties for any attempt to black-list or intimidate wage earners, or break up their organizations, or require them to forswear trade union membership as a condition to employment. The duty of the public lies in watching these points, not in pas- sionately opposing this great economic movement of society, which, as it gradually rids itself of error and attains its full possibilities, will give us permanent in- dustrial efficiency and security. At the same time, the trusts must learn that after all the public, as con- sumer, competitor and lawmaker, is the real and final master of the situation. Whenever the people cease to share, and share liberally, in the benefits of this move- ment, its end is come. XV. THE TAKIFF AND TRUSTS* The latest outbreak on the subject of the protective tariff and its relation to trusts was caused bj Mr, H. O. Havemeyer's testimony given before the Industrial Commission on June 14th. Almost in the opening sentences of his carefully prepared and typewritten testimony he declared that : " The mother of all trusts is the customs tariff bill." This gave a new text to the anti-trust, and particularly the anti-tariff, preach- ers throughout the country. For political purposes, the anti-trust issue was in a rather unsafe condition. To be sure, Mr. Bryan was proclaiming loud and long against trusts. He and his friends decided to make this a prominent if not the conspicuous issue of the coming presidential campaign. But he has insisted on coupling with it the free coinage of silver at 16 to 1, which is economic dynamite to the conservative men throughout the country. So that, in reality, every fresh boom for the anti- trust movement was a lift for free silver. Free traders, who generally favor sound money and even declare for the gold standard, would rather have trusts than take Bryan with IG to 1. Consequently, some of the ablest among free trade journals have defended the * Published in Gunton's Magazine of August 1899. 205 206 TRUSTS AND THE PUBLIC present administration, justified its foreign policy, and occasionally given a quasi- justification for large cor- porations, all because they are afraid of carrying grist to the Bryan mill. But Mr. Havemeyer came to their relief, in his testimony before the Industrial Commis- sion, with the declaration that : " The mother of all trusts is the customs tariff bill." This statement has been hailed as the word of a political deliverer. It has been caught up and repeated, made the subject of acres of editorials, and hundreds if not thousands of cartoons, as if it were the last word upon the subject. The usually dignified journals, which ordinarily dis- play self-possession and intelligence in discussing pub- lic questions, have fallen at the feet 3f Mr. Havemeyer as a new prophet of economics. That the yellow journals, 16-to-l advocates, populists and socialists, should make much of his utterance is not surprising, since they feed chiefly on the foam of sensation ; but to find the sober papers and magazines vying with the gutter journals in this substitution of sensation for rational discussion indicates that the stream of public opinion is being polluted at its very source. All this tends to show a dishonesty of utterance on public questions. The talk against great wealth by millionaire journalists like Bennett, Hearst and Pulit- zer, capitalists like Havemeyer, and millionaire poli- ticians like Alger and Pingree, of course is not to be taken seriously. They are performing to the galleries, they are catering to a public sentiment that has been created by systematic traducing of successful business men for political purposes. This is so general that frank, honest discussion of the public aspects of in- dustry has become diflS.cult and in many quarters im- THE TARIFF AND TRUSTS 20/ possible. Intellectual integrity in this field of public interests is rapidly being submerged and superseded by economic cant and public sensation. The extent to which this is taking place is painfully illustrated by the way in which the Havemeyer testimony is heralded and extolled by the press throughout the country. From the homage paid him immediately after his testimony before the Industrial Commission, one might think that he was a statesman or economist whose opinions on important public questions should have great weight. Yet, really, he had never been suspected of anything of the kind. He has never said or done an3"thing to entitle his opinion on matters of public concern to any special weight whatever. Mr. Havemeyer is known only as the president of the so- called "sugar trust," whose reputation is the most unsavory of any large industrial concern in this country. His trust has been notorious as a stock manipulator. It plays ducks and drakes with its own stock in the market place, making large profits out of unsuspecting investors. Under Mr. Havemeyer's leadership the sugar trust has been the most conspicu- ous as a manipulator of congress by doubtful methods. As recently as 1894, when the Wilson bill was before the United States senate, his trust was the most active factor in the lobby. He then believed that a high tariff was a very good thing, and labored long and hard to secure it for sugar. Indeed, his activity for high protection to sugar created a national scandal. Bold corruption and bribery were openly charged in the senate, and a committee was appointed to investi- gate the matter. At the hearing before this commit- 208 TRUSTS AND THE PUBLIC tee certain of Mr. Havemeyer's witnesses, conspicuous employees of the trust, were sent to jail for refusing to answer questions, which it was feared would have placed upon the sugar trust the crime of corrupting the United States senate, ^Nothing more scandalous has occurred in the public affairs of the republic. At that time the free trade journals in the land furiously denounced Mr. Havemeyer as a low, selfish monopolist, a corrupter of legislators and a debaucher of public morals. His opinion on the tariff or any other public question was then regarded by the press as of no more account than the brawlings of a cheap politician or a cunning monopolist. Nothing has oc- curred since to indicate that Mr. Havemeyer is either more intelligent, more public-spirited or more honest now than he was in 1894. But now, when he appears before the Industrial Commission and declares that the tariff is the " mother of all trusts," his utterance is hailed as from one who speaks ex cathedra. If he believes that trusts are really a bad thing, then he is a disreputable man for being at the head of one. If he does not believe that, then he is a humbug for saying what he did. If trusts are legitimate and proper con- cerns, as he afterwards endeavored to show, then it would be nothing against the tariff if it were the mother of them all. It is a public benefit to be the mother of a good thing. The fact of the matter is that Mr. Havemeyer is neither honest enough, nor economist enough, nor public-spirited enough either to know or care whether trusts are good or bad, or whether they are helped or hindered by tariffs. His talk was illogical and contradictory and very clearly a case of " sour grapes " whining. Whatever may be THE TARIFF AND TRUSTS 209 the public interest in the case, Mr. Havemeyer's state- ment on the subject is utterly worthless, both from the moral and economic point of view. The only thing of significance in the Havemeyer situation is the fact that the press, after having treated him as a conscienceless corruptionist, should pretend to attach any importance to this obviously soured utterance. This fact is alike discreditable to the press and danger- ous to the public sentiment of the nation. But how much truth is there in Mr. Havemeyer's charge that : " The mother of all trusts is the customs tariff bill ? " This is not a matter of opinion, but a question of fact, and it is the one statement in his ad- dress which is most heralded throughout the country. If Mr. Havemeyer is half as well informed on this point as those who are repeating his statement would have us believe, he knows that more than 90 per cent, of this statement is false. In the first place, there are practically no trusts in the country. Mr. Havemeyer knows that the American Sugar Refining Company, of which he is president, is not a trust. As a trust it was disorganized by law, and it is now simply a large corpo- ration. The Standard Oil trust was the first, the largest and about the last trust, since it is just now about to be reorganized into a single corporation, just like any cotton or woolen or publishing corporation. The tin-plate trust is due to the tariff only because the existence of the industry itself is due to protection. Before the tariff of 1890 there was no tin-plate manu- factured in this countr}^. The protection afforded by that measure made the investment of capital in the manufacture of tin-plate in this country possible. Through the use of modern methods and Yankee 14 2IO TRUSTS AND THE PUBLIC , industry, the American producers soon undersold the foreign producers and supplied the entire American market. As soon as it became an established industry, competition became sufficiently severe to reduce the price not only far below the foreign but below the profit-making point of all except a small proportion of the very best concerns. Reorganization for the sake of economy and efficiency became necessary in that in- dustry as it has in hundreds of others, and in fact as it always does with industrial development. What were the plants of a number of tin-plate manufacturers are now the property of one corporation. As previously explained in this magazine,^ although the price of tin- plate has been somewhat increased with the rise of ■wages and raw material, tin-plates are $1.10 a box less than when they were furnished, duty free, by English manufacturers. The existence of the industry in this country was due to the protective tariff ; but the reorganization of smaller concerns into a large one was due, not to the tariff, but to the competitive rivalry and needed econ- omy in the business. There is no other industry in the country to which Havemeyer's statement is even approximately applicable. Take the great Carnegie concern, which is as much a trust as is the Standard Oil Company or the American Sugar Refining Com- pany, or any other large corporation, called " trust," in the country. It is one of the largest iron and steel works in the world. It j)robably could not have come into existence if there had been no protective tariff for iron and steel, yet does Mr. Ilavemeyer or 1 May number, 1899. THE TARIFF AND TRUSTS 211 anybody else in his senses pretend to say that the Carnegie Company is a monster trust created by the tariff. The tariff gave the first stimulating opportu- nity to the iron and steel business, but Carnegie proved to be a superior industrial organizer. Under his leadership and management, the Carnegie corporation became a financial success. It acquired the leadership in its line in this country, and may ultimately in the whole world. It is now furnishing steel rails to foreign countries at a lower rate than the manufactur- ers of any other country. The steam and surface railroad corporations and syndicates, large telegraph companies, colossal corpo- rate concerns in every line of industry, are the result of one general cause, namely : the extraordinary indus- trial development of the country. "Wherever industrial progress is rapid and permanent large enterprises arise, and conversely where industrial development is slow and meager, small individual concerns with restricted capital, primitive methods, high prices and low wages prevail. Hence large concerns are more numerous in the United States than anywhere else, and as industry develops they are making their appearance in England, France, Germany and other countries. The simple and well-nigh obvious fact is that large corporations follow business prosperity and progress, whether under protection or free trade. Whatever contributes to in- dustrial development helps to build up large corpora- tions, and whatever will destroy business prosperity will stop the growth of so-called trusts. To say that the tariff is the mother of trusts is to say that the tariff is the mother of business prosperity, which is not wholly without truth. 212 TRUSTS AND THE PUBLIC Witness the great surface railroad corporations in l^ew York and other large cities throughout the country. They come the nearest to being monopolies of anything . in the land ; they have given and are giving cheaper and better service than was ever before rendered to the public and are making immense profits, all of which is made possible by the general prosperity of the community, without which they would not have come into existence here any more than they have in China. Only to the extent that protection has pro- moted that prosperity has it helped to bring these great corporations into existence. It is high time that at least the decent part of the American press awoke to the importance bf infusing integrity and fairness into the discussion of public questions. The political and social integrity of the nation is far more important than any party success. 'No amount of political advantages can compensate for debauching public opinion, misleading and confusing the people on great industrial questions. Tariffs and trusts should be discussed on their merits, separately. If large corporations are a menace to public welfare, let that fact be established by the data connected with corporate industry, and, if tariffs are a bad thing, let that be shown by the facts arising out of tariff legislation. But to confound the two when they have no necessary connection is demagogy, not discussion. To raise the alarm that large corporations are monopolies which oppress and rob the people, and in the same breath declare that protective tariffs are the cause of trusts, is at once to juggle with subjects and destroy popular confidence both in our political and industrial institutions. XYL CEUSADE AGAINST PEOSPEEITY.* The United States in many respects is unique, but in nothing is it so strikingly different from all other countries as in the political attitude of the people to- wards business. It is a common occurrence in repre- sentative governments for the existing ministry to be defeated through the influence of hard times. Disraeli once said that no English ministry could withstand three bad harvests. But a very poor ministry can keep power with good times. This tendency to make political confidence depend chiefly on business prosper- ity prevails in every country except the United States. By some peculiarity of temperament or psychological influence the people of the United States seem to de- light in using their political power against business development and prosperity. Several times in the midst of prosperity a political movement has arisen demanding a radical change in the fiscal or tariff po- licy, resulting in the destruction of business confidence, paralysis of industry, and sometimes a financial panic, — witness 1892-93. As the result of that we had six years of business depression and social hardship. Now, under a return to the former policy, business confidence and prosperity have returned, — and we are getting * Published in Gunton^s Magazine of September 1899. 213 214 TRUSTS AND THE PUBLIC ready to destroy it again. In 1892 the means of at- tacking business prosperity was the overthrow of the tariff, now it is the overthrow of corporations. The war cry is being raised from one end of the land to the other : " Down with trusts." This is not merely the work of a few crank reform- ers and irresponsible agitators, but it is being made the issue of a systematized political campaign, supported by numerous independent movements. Indeed, it almost seems as if the American people would soon be as mad on the trust question as the French people are on the Dreyfus question. If this movement against trusts is to take on a practical form, in common justice to the people the object should be frankly presented. Suppose the forth- coming conference of governors is a success and all the states act together, what is to be accomplished ? Of course the talk is that this great national uprising is to abolish trusts. But suppose there are no trusts. What then ? The army has been organized, the guns are loaded, and somebody must be killed to justify the effort. If there are no trusts, then of course an attack must be made upon corporations. Kow that is exactly the state of the case. There is not a trust in the United States. There never were more than about half a dozen, and they have all been dissolved and converted into large corporations. In reality, then, the war on trusts is a war on corporations pure and simple. Large corporations may be a very bad thing for the community, and if so they ought to be abolished, but an agitation for their abolition should be conducted on honest principles. It should be def- initely understood that it is a crusade against large CRUSADE AGAINST PROSPERITY 21$ corporations. To call it a crusade against trusts is to practise a fraud upon the people. At least let us have the people who are to vote these business concerns out of existence know what they are voting against. Cer- tainly before the people of this country can be ex- pected to support such a crusade they have a right to know something about what it will accomplish. First, then, are all corporations to be suppressed ? If so the proposition is very simple. Of course this can be done if the people want it, but it would stop every railroad, trolley, cable and horse-car system in the country, and would close more than ninety per cent, of the manufacturing and business concerns. In fact, nearly all businesses larger than the peanut stand would have to be dissolved and re-distributed into small efforts, about the equivalent of what existed in the walled towns in the thirteenth century. It would, in fact, wipe out about all the economic effec- tiveness the last five centuries of industrial evolution have produced. For reduction to economic simplicity and thorough abolition of monopoly this would leave little to be desired. It would accomplish the object completely, but it would reduce us to barbarism. Of course nobody wants that. Yet that is the simple case if the war is against all corporations. If it is not against all corporations, then against which is the war to be directed ? If we are not to suppress all, there must be some specific line of dis- tinction between those "to be damned " and those" to be saved." There must be some wav of distino:uishing' the sheep from the goats. "What shall it be ? It can- not be anything relating to the economic or political principle of the organization, because in these respects 2l6 TRUSTS AND THE PUBLIC they are all alike. Nor is it in the character of the industry, because the corporation principle applies to all industries. There is only one difference between them and that is the size of their capital. Well, then, where shall the line be drawn ? Shall it be at one hundred thousand, at half a million, a million, five millions, ten millions, fifty millions or a hundred mil- lions ? Where ? If the line is to be drawn anywhere, some economic or political reason must be given for drawing it there. Upon what economic principle or experience can a distinction be made ? Some of the economists who are to address the Chicago conference or the governors who are to enlighten the St. Louis con- ference are in honor bound to give this information to the people, or else abandon their movement. If there is any reason, economic, moral or political, why a cor- poration of half a million capital is a good thing and one with a million or five millions capital is bad, then a benighted world is waiting for the information. Thus far not a ray of light has ever been shed upon that point, though acres of literature on the subject have been published. How came these corporations to get so large ? Why did they organize at all ? There is one general reason and it is this : in the effort to make the most of in- vested capital, it was found by a long series of experi- ments that under certain conditions large capital could be used to greater advantage than small capital ; it could produce more at the same cost, give a larger profit, sell the products at lower prices, and give more permanent employment to labor at higher wages. Every little addition to the size of industrial concerns has been made for these reasons. As the experiments CRUSADE AGAINST PROSPERITY 21/ proved a success they were increased, and so from small individual concerns to partnerships and corpora- tions the process went on and on, and if not arbi- trarily interrupted will continue to go on just so long as it will yield these advantages. Just so long as adding another million to the plant Avill increase the earning capacity of both the old and new capital, the additions will continue to be made, and as soon as the point is reached where to increase the size only increases the unwieldiness and does not increase the economy it will stop. Clearly, then, the history of industrial growth and prosperity is the history of corporate development. Without corporations productive efficiency could not have progressed beyond the economic status of the small individual concerns of at least a century ago. A war on corporations, without some definite economic basis of discrimination, then, is simply a war on busi- ness success. That is the character of the present movement. It is based upon no principle of industrial management or public policy. It recognizes no line of distinction between the good and the bad, but it is a blind, muddled, indiscriminate agitation against cor- porate capital, which means a crusade against business prosperity. What would be accomplished if this crusade against corporations should succeed ? A few instances serve to illustrate what mio-ht be exoected. Take, for in- stance, the Standard Oil Company, which is constantly cited as a conspicuous object of attack. The petroleum industry began in 1859. From then until about 1871 illuminating oil was produced by a large number of small concerns. The oil was very poor and dangerous 2l8 TRUSTS AND THE PUBLIC to use. From 1863 inclasive, Trhen oil production was becoming an established business and full statistics are a,vailable, until 1871, the gold price fell from 30^g- cents to 21j\ cents per gallon, or 29^^ per cent. From 1871 to 1880, under the Standard Oil Company, the price fell from 21^^ to 9|^ cents, or 58 per cent., and under the " trust " it has fallen from 9} to 5^ cents, or 37_R_ per cent. The average yearly prices in gold for the whole period from 1861 to 1898 are as follows : Average Average Yearly Yearly- Price Price Year (Cents) Year (Cents) 1863 30xV 1881 8 1864 31| 1883 7| 1865 S'7j\ 1883 8^ 1866 30iV 1884 8^ 1867 20| 1885 8^ 1868 20| 1886 7^ 1869 244 1887 6| 1870 22/^ 1888 7^ 1871 21/j 1889 7i 1872 21 1890 7f 1873 16 1891 6^?5 1874 11-fV 1892 6yV 1875 llfV 1893 5i 1876 17xV 1894 5i 1877 15 1895 ■. 7i 1878 lOf 1896 7 1879 8^ 1897 b,% 1880 9^ 1898 , . 5^ This immense reduction of the price, besides im- provement of the quality, has been accomplished by no aid of legislation, but by the economic use of capital and unlimited scientific experiment in the process of refining and handling the oil. This would have been impossible by any small capital. The pipe line itself could not have been bui]t by individual effort or any- thing short of a colossal organization. By the increase of capital and development of new devices this con- CRUSADE AGAINST PROSPERITY 219 cern has developed an enormous industry ; from a product in 1859 of 9,500 barrels to 35,165,990 barrels in 1897. In the early seventies petroleum was discovered in Russia, and when the Standard Oil Company made its great improvements in the methods and processes of refining and completed its pipe-line transportation, at an outlay of millions of dollars in experimentation and construction, European capital organized an immense syndicate and adopted all the improved methods of the Standard Oil Company in developing the oil industry in Russia. They have increased the Russian produc- tion from 100,000 barrels in 1870 to 50,697,000 barrels in 1897, which is 15,531,010 barrels more than the total American output. The record of Russia's oil production by years, since 1870, is follows : Year Barrels Year Barrels 1870 100,000 1884 8,841,000 1871 150.000 1885 11,394.000 1873 175,000 1886 14.734.000 1873 250,000 1887 16.208,000 1874 500.000 1888 18,860,000 1875 750.000 1889 20.137,000 1876 1.000,000 1890 23,477.000 1877 1,350,000 1891 28,390.000 1878 2,000,000 1893 29,373.000 1879 3,350,000 1893 33,104,000 1880 3.455.000 1894 80.383,000 1881 3,929,000 1895 38,340,000 1883 4,911,000 1896 46.353.000 1883 5,893,000 1897 50,697,000 Thus, with the best American methods, developed at the cost of the experiments of American capital, and paying less than one-fourth American wages, and with the most fertile oil lands in the world, Russia has become an immense rival in the petroleum industry. The Russian government protects the Russian market 220 TRUSTS AND THE PUBLIC by a 200 per cent, clut}^, so that the Rassian oil com- pany has a monopoly of the Russian market. It has cheap labor a,nd American productive methods to compete against the Standard Oil Company in the rest of the world. On the other hand, by its superior economy, large capital and highly developed management, the Stand- ard Oil Company has prevented Russian oil producers from supplying the American market. By the use of immense capital and efficient management the Ameri- can producers, besides supplying the American market, in 1897 exported to the different countries of Europe, Asia and elsewhere, outside of Russia, 994,297,757 gal- lons of refined oil, which, at the low prevailing price, was equivalent to bringing $59,057,574 in gold into the country. The exports for the last ten years have been as follows : Year Gallons Dollars Year Gallons Dollars 1888 572.457,975 48,105.703 1893 871,757,017 41,117,814 1889 680,705,456 53.293,299 1894 894,162.155 40,483.088 1890 693.829,848 52.270,953 1895 853,126.130 56,223,425 1891 673,905.577 46,174,835 1896 931.785.022 62,764.278 1892 744,638,463 42,729,157 1897 994,297,757 59,057,547 Here, then, is a concern which, by the power of its large capital, gives employment to 35,000 American laborers, pays $100,000 a day in wages, and brings nearly $60,000,000 of gold into the country every year ; which would be lost to this country but for the economic energy and superiority of the Standard Oil Company. Who would be benefited if this concern were forced to disband? Small refineries, such as those now outside the Standard, could not even hold the American market, if subjected to competition CRUSADE AGAINST PROSPERITY. 221 with the Paissians, Moreover, the Standard Oil Com- pany furnishes an unlimited cash market for every barrel of petroleum produced in this country. Take the raih'oads as another instance. Next to the Standard Oil Company probably the railroads are the most conspicuous objects of attack by this new crusade. If the recommendations of Mr. Cleveland in his last message, and the program of the coming con- ference of governors in St. Louis, are to be consum- mated, then the great railroad corporations must be broken up, or confiscated by the government, which is what the socialist part of the movement most desires and really hopes for. In 1873, with the relatively small and unintegrated railroad corporations, it cost 2.21 cents a mile to ship a ton of merchandise. By the steady enlargement of sj^'stems and economizing of costs, without lowering but in many instances raising wages, the freight charge has been gradually lowered from 2.21 cents a mile in 1873 to about .75 of a cent a mile in 1898, a fall of about 64 per cent., as will be seen by the following table : Average Average rate per rate per ton per ton per Miles of mile Miles of mile Years Railroad (cents) Years Railroad (cents) 1873 70,268 2.210 1886 1B6,379 1.042 1874 72.385 2.040 1887 149,2.j7 1.034 1875 74.096 1.810 1888 156,169 0.977 1876 76,808 1.855 1889 161,353 0.970 1877 79,088 1.524 1890 166,698 0.927 1878 81,767 1.401 1891 170,769 0.929 1879 86,584 1.201 1892 175,188 0.941 1880 93,296 1.348 1893 177,465 0.893 1881 103,143 1.264 1894 179.393 0.864 1882 114,712 1.236 1895 181,021 0.839 1883 121,455 1.224 1896 182,777 0.806 1884 125.379 1.125 1897 184,428 0.798 1885 128,361 1.036 1898 186,396 0.753 222 TRUSTS AND THE PUBLIC It will be seen that during the last twenty-four years, in which the railroads have developed into larger and larger corporations, the cost of service to the public has been lessened more than one half, to say nothing of the immensely improved passenger service facilities and smoother roadbeds. The simple English of these facts is that to resolve the railroad corporations back, even into the original small concerns, which were corporations, would prob- ably be to more than double the cost of railroad ser- vice to the people. Who would be benefited by such a performance ? It would be a setback of a quarter of a century, with an injury to everybody and benefit to nobody. Are the American people ready for any such retrogressive folly? Kext to the steam railroad corporations, those most railed against are the surface railroad system syn- dicates, especially those which control the surface rail- road sj'stems in our large cities. Take New York as an example. All the surface railroading in New York city is in the hands of two companies. It was once in the hands of a dozen or more companies. Every avenue line and every crosstown line was run by a separate company. Under that regime the motive power was horses, and the public had to pay a separate five-cent fare for every car boarded. With the discovery of new motive power, trolleys, cable and lastly under, ground-conduit trolleys, larger capital was needed to get the best efi'ects from the new methods, and to-day the citizens of New York (and by the same process of nearly all the cities in the country) can ride in cars many times as commodious and wholesome, twice as fast, ten times as far, and be transferred to numerous I CRUSADE AGAINST PROSPERITY. 22$ other lines, all for one fare. Under this system of concentrated capital and management citizens of New York can now board a trolley on the New York side of Brooklyn Bridge, cross the bridge and ride some dozen miles to Coney Island, for five cents, which for- merly by any other route cost 40 and 50 cents. By an agreement between the Third Avenue Company and elevated road system, which is practically another large integration, passengers can travel from the Bat- tery to New Eochelle, a distance of twenty -five miles or more, for eight cents, — a five-cent fare and a three- cent transfer, — which by the steam railroads costs about 40 cents. The next natural step, one that will come if not arbitrarily interfered with, will be to put the entire local transit system of the metropolis, both surface and elevated, under one management. Then every road in every direction will be open to the public for a single fare, transfers being accepted from any to any other cars in the entire city. What will the new crusade do with this ? If its policy is to be carried out the great meat-pack- ing establishments of Chicago, the steel manufacturing corporations of Pittsburg, will have to be disbanded and industry relegated back to the primitive methods existing in the ante-corporation period. This would practically mean an increase of from 50 to 100 per cent, in the price of nearl}" all machine made products. Of course it will be said that this is not what is in- tended, but what has already been done justifies the belief that the madness will, if it can, go to the full length. Take for example the state of Ohio. It has practically legislated the Standard Oil Company out 224 TRUSTS AND THE PUBLIC of the state. Through a system of legal persecution, doing business in Ohio has been made intolerable and the Avorks which employed thousands of men and dis- tributed hundreds of thousands of dollars a year in Cleveland and other cities in that state are being closed and removed. It will not take much of this to bring the people of Ohio to a realizing sense of the economic madness of this policy. In Michigan also the work goes bravely on, but in even greater degree. A law was passed recently, un- der Governor Pingree's influence, making it a misde- meanor to make a contract affecting the price of any commodity for future delivery. The law says : " It shall hereafter be unlawful for two or more persons to make or enter into or execute or carry out any contracts or obligations or agreements by which they shall bind themselves to sell any commodity be- tween them so as to directly or indirectly preclude a free and unrestricted competition among themselves." The penalty for violating this law is a fine of from $50.00 to $5,000.00, or imprisonment for a term of .six months to one year, or both. iNow, if a person cannot enter into or carry out any contract or agreement binding himself to sell a commodity at a special price for any time in the future, then there is no freedom of contract whatever. Not a single large industry could be conducted successfully under such a law. It would be the entire suppression of modern methods of business. The legislators of Texas and Kentucky and other states are vying with each other as to which can pass the most effective business-killing legislation. The more this anti-trust movement is considered in the light CRUSADE AGAINST PROSPERITY 22$ of its own declarations and accomplishments, in the light of logic, common sense and economic sanity, the clearer it becomes that it is a fanatical, misguided crusade against business prosperity, public welfare and national progress. XYII. FEOM THE PUBLIC POINT OF YIEW ^ The trust question is only a new phase of an old problem — the problem of free industrial enterprise. Notwithstanding the well-known fact that the mar- velous progress of the last three-quarters of a century is mainly due to the introduction of improved methods of industry, every improvement since Wyatt's spinning frame and Hargreaves' spinning jenny has had to fight its way against the popular prejudice of the time. The hand-loom weavers marched through England and broke the power looms. Hargreaves, Arkwright and Crom]3ton were driven from their homes for inventing new methods of spinning. Now, after three-quarters of a century's experience, in which the fallacy of this policy has become notori- ous, we are face to face with another movement of the same character. The present agitation against trusts has all the characteristics of the anti-machinery riots of a century ago. It pervades the attitude of both laborers and business men alike. Workingmen give about the same reasons for opposing the introduction of new machines as did the neighbors of Crompton and Arkwright for breaking their spinning frames. The business men who twenty-five years ago were among the * Address delivered at the Chicago trust conference, Septem- ber 14, 1899. 226 FROM THE PUBLIC POINT OF VIEW 22/ hated organizers of corporations are now among the amtators against trusts. And now the movement is taking on a political form. Men of national repute, and leaders of great political parties, candidates for the highest and most responsible positions in the nation, are asking the people to reverse the policy of industrial freedom and return to the doctrine of arbi- trary paternalism, specifically to suppress large cor- porations. Are the American people ready for such a step ? There is only one point of view from which this subject can properly be considered — the interest of the public; the public as representing the consumers who are in- terested in superior commodities at low prices ; the public as representing the laborers who are interested in permanent employment and good wages ; the pub- lic as representing the farmers who are interested in cheap transportation and the advantages of the modern products of science, art and literature. It is in these aspects of the subject, and not in the confus- ing clamor and sensational subterfuge of campaign oratory, that the American people are interested. The question for this conference to ask, the question for the people of the United States to ask, is : Are trusts inimical to public welfare in all or any of these re- spects ? It must be remembered, first of all, that the trust, be it good or bad, is only one among a large number of experiments in industrial organization, which the progress of the last fifty years has evolved. One of the marked features of the economic development of the century is the radical change that has taken place in the character of competing units. Under the primi- 228 TRUSTS AND THE PUBLIC tive band labor metbod, tbe competing unit was tbe individual. Witb tbe development of factory metbods, tbe individual as a competing unit was superseded by partnersbips, because tbey could more economically employ tbe new metbods. "Witb tbe growtb of inven- tion, partnersbips were superseded by corporations. Witb tbe growing completeness of macbinery and magnitude of business, corporations grew larger and larger, until tbe corporation is now tbe prevailing industrial form in tbe most advanced countries. Nor is this limited to tbe capitalist side of industry. It is equally cbaracteristic of tbe labor side. Tbe com- peting unit in tbe labor market is no longer tbe in- dividual laborer, but tbe group, tbe union. Tbe fac- tory system has made it impossible for individual laborers to be competitors, because it is impossible for them to make individual contracts. In all matters pertaining to wages, bours of labor, conditions of work, wbetber by piece or by tbe day, it is tbe group and not tbe individual tbat is considered. Eacb fac- tory, and in most instances eacb industry, pays uniform wages, works tbe same bours, and bas substantially tbe same conditions, and wben tbey are altered for one tbey are altered for all. In sbort, the progress during tbe nineteenth century bas irrevocably established the group as tbe competing unit ; the union as the unit on tbe labor side, tbe corporation as the unit on tbe capital side. Now, the trust was one of tbe experiments in tbe evolution of this group unit. Numerous forms of organization and association were tried. Corners, associations to fix prices, were tried ; but these were uneconomic and failed, usually wrecking somebody in FROM THE PUBLIC POINT OF VIEW 229 the collapse. The trust was another form. It differed from these in that it was an attempt to integrate productive forces. Corners and trade associations were mere manipulators of prices, not producers. Trusts were hona fide producers. The difference between the trust and the ordinary- corporations is not economic, but legal. The trusts are a formal merging of a number of corporations or firms under one management, which holds the property in trust for its original owners, giving certificates for their respective claims. There have been very few hona fide trusts ; the Standard Oil trust, the sugar trust and a few others. But, through the intense popular opposition, resulting in adverse legislation, these have all disappeared. They have been disbanded and converted into simple corporations, with capital stock owned by whomsoever chooses to invest, and governed by the majority vote of the stockholders. So that, if there was anything peculiar or alarming in trusts, the evil has disappeared, because the trust is gone. In reality, then, what we have are simply corpora- tions. The whole question which this conference is called to consider is : what is the influence of larffe corporations upon public welfare ? First, then, what is the effect of large corporations upon the quality and price of the communitj-'s supply of commodities ? This question is one of fact, and can be adequately answered only by experience. The history of corporations on this point is almost too obvious to need reciting. The evidence abounds on every hand. While experience difi'ers in different in- dustries, as it necessarily must, the tendency is univer- 230 TRUSTS AND THE PUBLIC sal that with the growth of large corporations the quality of the commodities improves, and the prices fall. It was in obedience to this principle that cor- porations came into existence, A long series of ex- periments taught that under certain conditions large capital could be used to greater advantage than small capital. It could produce more at the same cost, give a larger aggregate profit, by selling the products at lower prices. As the experiments proved successful they were increased, and so from small individual con- cerns to partnerships, then to corporations, the process went on and on, and if not arbitrarily interrupted will continue to go on just so long as it will yield any ad- vantage. Just so long as adding another million to the plant will increase the earning capacity of both the old and new capital, the additions will continue to be made, and as soon as the point is reached where to increase the size fails to increase the economy, it will stop. Clearly, the history of industrial growth and prosperity is the history of corporate development. Without corporations productive efficiency could not have progressed beyond the economic status of the small individual concerns of the last century. The era of corporations in this country is since the war. It is during that period that our industrial ex- pansion has been so enormous and the great corporate interests have developed. Prices of the leading manu- factured products, mostly produced by corporations, and some of them by very large corporations, using most modern machinery, have fallen varying from 6 to 40 per cent. At the same time wages have risen, chiefly in the manufacturing and mercantile industries, 68 per cent. FROM THE PUBLIC POINT OF VIEW 23 1 While this is true of corporate industries in general, as compared with non-corporate industries, it is most markedly true of very large corporations. If we take the concerns where millions are invested by a single corporation, like the Standard Oil Company, the American Sugar Refining Company, the great rail- roads, the Carnegie Steel Company, we find that their products have undergone the greatest improvement in quality and the greatest reduction in price. Without the immensely large capitals invested by these great corporations, many of the great improvements ac- complished daring the last twenty years would have been absolutely impossible. Take for instance the Carnegie Company. Nothing short of tens of millions invested under one management could have developed the extraordinary improvements which have revolu- tionized both the quality and price of iron and steel products. With small concerns of less than a million each, that could not have been done. The same is true of our great railroad systems. I^o small or in- dividual enterprise could have given us the marvelous development in railroading of the last twenty-five years, which has constantly improved the service and so greatly reduced the cost to the public. In 18T3 it cost 2.21 cents a mile to transport a ton of freight. Through the increased investments and improved fa- cilities, the price has been gradually reduced year by year until now it only costs 75-hundredths of a cent a mile per ton. The surface railroad systems through- out this country are another illustration of what large corporations can and do accomplish. It used to cost ten cents to ride a few blocks in a dingy, dirty horse car, in any city in this country. With the develop- 232 TRUSTS AND THE PUBLIC ment of large corporations, electricity has superseded horses ; large, light and wholesome cars have replaced dingy boxes, and fares have been reduced one-half, with transfers to nearly all connecting lines, a result that could not have been accomplished under small separate concerns. Next, what is the influence of corporations upon the conditions of labor ? It is commonly asserted that large corporations tend to destroy the laborer's liberty and individuality by making him a part of a produc- tive machine. Mr. Cleveland sounded this note in his last message to congress. A little touch of fact would show this to be a pure phantom of the imagination. Nothing could be more contrarj'- to the whole history of wage labor. If there were any truth in this, we might expect to find that laborers had more freedom and greater individuality before the wage system began. Yet everybody knows that then they had neither liberty nor individuality ; that it was not until long after the wage system came that laborers acquired any liberty, political rights or social individuality. " The laborer's freedom and individuality depend upon two things — permanence of employment and good wages. Wherever the employment of labor is most permanent and wages are highest, there the laborer is most intelligent, has the greatest freedom and the strongest individual identity. Where do laborers get these conditions ? It is not where capital is small and employers are poor. On the contrary, it is where large corporations prevail that wages are highest and employment most continuous, and everybody knows it is there where the laborers are most independent. It is notorious that large corporations have the least FROM THE PUBLIC POINT OF VIEW 233 influence over the opinions and individual conduct of their laborers. Let it be known that a large corpora- tion is trying to influence the election of candidates for ofiice, and that is the signal for the -working men to vote against them. Instead of being controlled by the corporations they act almost uniforml3''on the rule of defying and opposing them. Nor is there any loss of individual liberty in becom- ing a fractional part of a large productive concern. "What society wants is not individuality as producers but individuality as citizens. What we need is that the laborer should give less and less of his personal energy to earning a living and more and more to his social and individual improvement. A permanent stipulated in- come is the first step towards real individual freedom for the laborers. Nothing is so depressing to man- hood, nothing makes the weak so cowardly, as pre- cariousness of income. The small business man who does not know from quarter to quarter, and sometimes from month to month, whether he can meet his obli- gations, is neither so brave, so intelligent nor so free a citizen as the wage laborer in the safe employ of a large corporation. As a matter of fact, the corpora- tion and banker have far more influence over the votes of small business men whom they have befriended or patronized than they have over their own laborers. A laborer's freedom does not depend upon the fact that he works for wages, but on the amount of his wages. With high wages and permanent employment the laborer's freedom and welfare are secured. The laborer has not a single inteiest, social, economic or political, in the existence of employers with small capital. 234 TRUSTS AND THE PUBLIC How do large corporations affect the interest of the farmers ? There is probably no class in the community who derive more benefit from the economic improve- ments of large corporations than the farmers. All the great improvements in tools, architecture, sanita- tion, domestic appointments, art, literature and general refinements are the products of industrial centers where large capitalistic enterprises abound. Every form of commodity outside of food which enters into the farmer's life has been immensely improved and greatly cheapened by the efforts of large corporations. Transportation, which is an important item in the farmer's economy, has been reduced 50 per cent, during the last twenty-five years. While the farmer has re- ceived all the advantages produced by large corpora- tions in lower prices of everything he buys, and lower transportation, the price of what he sells has undergone very little fall ; many of than no fall at all, and some have even risen. "What is the influence of large corporations upon business stability and prosperity? This is one of the most important features of the subject. The greatest menace to modern society is business depressions, which usually are the result of ignorant eagerness among competitors. A slight boom in business leads to a rash increase of output. Without any general knowledge of what is being done elsewhere, each hopes to fill the new void, with the result of an increase of output wholly disproportionate to the demand. For instance, the Illinois farmer, when the price of corn is high, will double his acreage for corn, and next year finds that he can hardly sell the corn at any price, and is compelled to use it for fuel. Large concerns tend to FROM THE PUBLIC POINT OF VIEW 235 remedy this evil on the same principle that they invest heavily in experimentation. They take pains to gather accm-ate information of the condition of their business throughout the world. They find it pays to be in- formed as to what next year's demand is likely to be. Their investments are so large that they could not afford seriously to miscalculate the demands of the market. With their comparatively accurate informa- tion, they adjust their production with great precision to the present and probable future demand. As a matter of fact, in lines of industry where the very largest concerns are organized there is the least per- turbation. If the raising of corn were in the hands of a few well-informed corporations instead of thousands of uninformed small farmers, the erratic ups and downs in corn-farming would be largely avoided. Industrial depressions can never be eliminated until the relation of productive enterprise to general consumption is re- duced to some degree of precision, which the small go-as-you-please producers can never do. Large corporations are superior to small concerns ; first, because by the use of large capital and superior methods they improve the quality and reduce the price of commodities ; second, they are more favorable than smaller concerns to high wages, and individual freedom of laborers ; third, by introducing scientific precision into industry they tend to increase the permanence of employment and reduce the tendency to industrial de- pressions, all of which are vital elements in the nation's prosperity and progress. In studjung the literature against large corporations one is impressed by the marked absence of careful presentation of facts and rational discussion of the 236 TRUSTS AND THE PUBLIC case. There seems to be no attempt to apply economic principles or recognize the great law of societary evolu- tion. The only hint thus far of a policy to be adopted is the proposition of Mr, Bryan, which is that congress pass a law forbidding all corporations to do business outside the state in which they are incorporated with- out a license from the federal government. It is dif- ficult to imagine a gentleman, who is about to be for the second time a candidate for the presidency of the United States, seriously making such a proposition. This is so contrary to the spirit and traditions of democ- racy, which is usually opposed to any trade restrictions whatever, and so contrary to the American idea of free intercourse between the states, and so contrary to Mr. Bryan's previous declarations, that one has difficulty in taking him seriously. If this is really the best that his mind can suggest on the subject, it is a depressing gauge of his statesmanship. It Avould hardly be pos- sible to invent a proposition that would be more fertile in creating corruption, injustice, favoritism and busi- ness demoralization. A license might be granted by one administration and refused by another, for purely political reasons, which would be equal to confiscating the property of the corporation, since it would destroy its business value. There is not a single aspect of this proposition which is not surcharged with economic and political iniquity. It partakes neither of economic sense, political wisdom, fair statesmanship, nor even party shrewdness. It is not to be assumed, however, that large corpo- rations are always wise, or good, or fair. They are born of the same spirit and partake of the same attri- butes as small business venders. Their main ambition FROM THE PUBLIC POINT OF VIEW 237 is to make profits. It is tlie duty of tlie state, tliere- fore, to see to it that the conditions shall be such as to make dishonesty, unfairness, oppressive dealing, diffi- cult and as impossible as any other offenses against the welfare of the community. This cannot be ac- complished, however, by the petty nagging and corrup- tion-creating, license-granting scheme proposed by Mr. Brj^an. The Federal government if it acts at all should act in exactly the other direction. It should surround industrial enterprise with the maximum freedom and protection to all, and no economic privilege to any. To this end it might be well for congress to enact a law empowering the government to grant national charters to corporations, which should give them the right to do business over the entire territory of the and United States, and against which no state should have the right to interfere. This would be economic, in that it would give the market of the entire country to every business enterprise. IsTational charters could have the proper qualifications subjecting the corporations to a certain supervision and compelling annual reports to be made. Second, it might also be provided that companies using a public franchise, like railroads, should not be permitted to make economic discriminations in their rates of traffic, that they should be subject to pub- lic accounting, and that all contracts with shippers should be accessible to all other shippers. The general influence of publicity and inspection by the national government, coupled with the corporation's protection in its right to do business throughout the United States, would tend to create a wholesome influence around corporate conduct. While affording corporations the full support of the national government in their busi- 238 TRUSTS AND THE PUBLIC ness rights, it would free them from the petty unecono- mic nagging of partisan legislation in the different states. It would carry out the true idea of protection — that the American market should be open to every American producer and that the interests of the labor- ers and the public be safeguarded by the national gov- ernment ; at the same time leaving the essential feat, ures of business to be determined by the free action of economic forces, which are more permanent, more sure and more equitable, than the wisest statutory enact- ment ever would be. INDEX PAGE Abbott, Rev. Dr. Lyman 46 Allegany oil field 82 Allentown, N. Y 83 Antagonism to trusts 32, 35, 42, 44, 102, 189, 206, 214, 226 Arkwright Club, Boston 131 Australia, strikes in 126 Blackmail of trusts 106, 114-116, 236 Bolivar, N. Y 82 Boston Herald, The 115 Bradley-Martin Ball 62 Bryan, W. J 205-206, 236 Business depressions ; influence of trusts on 234-235 —panic of 1892-93 213 By-products of Standard Oil Co 12, 37 Campbell, Ex-Governor 102 Capital and labor, antagonism of 99, 126 Capital of corporations, size of 33, 216 Capitalists, drudgery of 182-188 Carnegie, Andrew 180-181 Carnegie Company ; Homestead strike 126, 181 — similar to a trust 210, 231 Chamberlin, CD 91 Characteristics of trusts 2-4 Charters, national ; for trusts 237-238 Chicago conference on trusts 216, 226 Civilization, characteristics of 67-68, 154 Cleveland, ex-president ; last message of 221, 232 239 240 INDEX PAGE Competition ; effect of trusts on 6 —effect on trusts 193-199 —potential 34-25, 198-199 Concentration ; necessity of 35, 75, 100, 145, 223, 230 — of wealth in Rome 26 Consumable and productive wealth 5, 27 Consumers, rights of .149-154 Corporations, trusts changed to 214, 229 " Corners" and speculative combines.. 40-41, 75-76, 141, 192, 203, 228-229 Cotton industry ; in New England and the South 159-161 — progress of since 1830 9 — wages and employees in 167-168 Cottonseed oil prices 15 Delegates, walking 126-127 Demand, influence of 153 Democratic features of trusts 89 Depew, Senator, on trusts 203 Depressions, business ; influence of trusts on 234-335 —panic of 1893-93 213 Displacement of labor 155-173, 190 Economic literature, integrity of 60, 213, 335-236 Economic service of trusts 35-36, 73, 78, 336 Education, public ■ . 137 Employees ; number in cotton industry 9, 167 — number in petroleum industry 220 — number in 64 industries 165-166 Employment, permanence of 77, 232-233 England, government telegraph in. . . . 19-22 Errors of trusts 29, 40-43, 79, 141-144, 192-194, 203-304 Evolution of trusts 7, 33-34, 73-74, 190, 216-217, 226 Experts, industrial ; necessity of 201-203 Factory system, rise of 73, 157 Farmers, effect of trusts on 234 Federal license for trusts 236 Fortunes, large 44, 180-188 Freedom of employees 333-333 Free trade 45, 308 INDEX 241 PAGE Gas companies, competition of 196 Giffin, Sir Robert, on wages of cotton operatives 148 Gould, Jay 3 Government ; duty toward labor 118, 119-139 —duty toward trusts. ..31, 78-79, 117, 204, 215-216, 237-238 Government telegraph in England 19-23 Havemeyer, H. O., on trusts 205-313 Hobson's " Evolution of Modern Capitalism " 50 Hoe Press, the modern 163-164 Homestead strike 126, 181 Hours of labor ; effect of shorter hours 129-133 — English legislation on 131 — legislation in New England 163 Improvements ; in street railways 197, 312, 222-233, 231-233 —in oil production 12, 37, 217-219 Incentive, necessity of 146 Independent refiners of oil 107, 194-195 Individuality of laborers 232-233 Inferior methods, public's loss from 6, 215, 220 Interstate commerce commission, on Rice case 109-110 Inventions, use of 11, 53-55, 161 Labor ; displacement of 155-173, 190 —duty of state towards 118, 119-139 — duty toward new machinery 172-173 — freedom and individuality of 232-233 — is not capital 130, 146 — organization in groups 123, 128 — power of organized resistance 199 —protection of 133-139 —right of recognition 126, 128-129 —strikes 68, 126, 181, 199 — sub-division of 120-121 — walking delegates 126-127 Legislation against trusts 30, 42, 61, 224 Legislation, influence of trusts on ..25-26, 200, 207-208 License, federal, for trusts 236 Limits of trasts, natural 24, 193-204 16 242 INDEX PAOB Lloyd, Henry D 45 Long-and-short haul 58, 112 Luxuries, economic effect of 65 Machinery ; division of product 147-154 —effect on labor 145-173 — in different industries 38-39 Meat packing concerns, large capital in 223 Michigan law against trusts 224 Monopolies, are trusts monopolies ? 4 Morality in business 2, 29-30, 236-337 Newspapers, on Havemeyer testimony 206-209 North, S. N. D., on hours of labor , 131 Ohio vs. Standard Oil Company 105, 223-224 Organization ; defects of 122-123 — necessity of 228 — representative character of organizations 123-124 Paper trust, competitors of 195-196 Parsimony, economic fallacy of ... 65-68 Permanence of employment 77, 232-233 Petroleum ; American exports of 220 — employees in American oil industry 220-221 —prices of 12-14,. 218 — production by Standard Oil Co 13, 219 — Russian production of 219-220 — small producers of 83-88 Philanthropy, dangers of 181 Pingree, Governor 224 Pipe lines 13, 217-219 " Political Economy of Natural Law " 123 Political influence of trusts 25-26, 200, 207-208 Populism 45 Post-office management in U. S 22 Prices ; effect of trusts on 8, 24, 38, 73, 142, 193-199 — general movement of 38, 73, 168 — of cottonseed oil 15 — of cotton cloth 10, 153 — of iron, steel and wood 73 INDEX 243 PAGE Prices ; of petroleum 12-14, 218 — of sugar 15 —of tin-plate .' 175-179 Productive aud consumable wealth 5-27 Profits, economic necessity of 146 — hostilityto 45 -of trusts 12-13, 142 Public welfare ; effect of trusts on 227 — increase of 74, 169 Purchasing power of wages 39^0, 169 Railroads, steam ; rates on tank cars 107 — long and short haul 58, 112 —rebates to trusts 48, 56-57, 108-109, 111-113 — reductions in freight charges 16, 221, 231 Railroads, street ; future consolidation of 223 —improvement in 197, 212, 222-223, 231-232 Rebates by railroads 48, 56-57, 108-109, 111-113 Rice, George ; case of 46, 56-59, 105-116 Richburg, N. Y 82 Rise of wages 39, 77, 169 Rome, concentration of wealth in 26 Russian oil production, 219-220 Selfish motives vs. philanthropy 70 Sherman anti-trust law 42, 104 Single tax advocates 45 Small industries, effect of trusts on 82-88, 101, 199-200 Socialism 45 South Improvement Co 48, 110-111 Standard of living, effect on wages 63, 154 Standard Oil Company : effect on small producers. 82-88 — employees and wages paid 220 — exports of oil 220 — improvements introduced by . , 12, 37, 217-219 — manufacture of by-products 12, 37 —Ohio legislation against 105, 223-224 —prices of oil 12-14, 218 — production of oil 13, 219 — profits of 12-13 244 INDEX PAGE Standard Oil Company ; Rice case 46, 56-59, 105-106 — Russian competition 219-221 — South Improvement Company 48, 110-111 — Van Syckel, the inventor 53-55 —"Widow's cruse " 51-53 Street railroads ; future consolidation of , . . ^ 223 —improvements in 197, 212, 222-223, 231-232 Strikes ; effectiveness of 199 — in Australia 126 — in Connecticut 68 —the Homestead 126, 181 Sub-division of labor 120-121 Sugar, prices of 15 Sugar trust ; rivals of 195 — unsavory reputation of 207 Sweatshops 135-136 Tank cars for independent refiners 107 Tariff, protective ; and tin plate industry .143, 174-175 — Havemeyer on 205-212 — Russian duty on oil 219-220 — when to remove 144 Telegraph service ; in the United States, 16-18, 20 — in England 19 Tin plate ; prices of . . 175-179 — production of 174 Tin plate trust 143-144, 174-179, 209-210 Towns ; effect of trusts on 90-98 — future of small 97 Trusts ; antagonism to 32, 35, 42, 44, 102, 189, 206, 214 — changed to large corporations 214, 229 — charges against 4 — craze to organize in 1899 140 — democratic features of 89 — distinguishing characteristics of 2-4 —duty of state towards. .31, 78-79, 117, 204, 215-216, 237-238 — economic duty of 42-43, 142 — economic service of 35-36, 72, 78, 236 — effect on farmers ... 234 —effect on prices .8, 12-14, 15, 38, 73, 175-179, 218 INDEX 245 PAGE Trusts, effect on small industries 101. 199-200 — effect on small towns 90-98 -effect on wages 39,77,169,199 -errors of 29, 40-43, 79, 141-144, 192-194, 203-204 -evolution of 7, 33-34, 73-74, 190, 216-217, 226 —natural limits of 24, 198-204 -political influence of 25-26, 200, 207-208 — power over prices 24, 142, 193-199 -profits of 12-13,142 -the tin-plate 143-144, 174-179, 209-810 — why first developed in U. S 74, 211 United States ; popular attitude toward industry 213 — why trusts were first developed in 74, 211 Van Syckel and Standard Oil Co 53-55 Wages ; cotton operatives 10, 168 -effect of trusts on 39, 77, 169, 199 —fixed by standard of living 63, 154 — general rise of 39, 169 — in petroleum industry • • • 220 —in 64 industries 105-166 — purchasing power 39, 169 — in tin plate industry 177 "Wealth against Commonwealth " (Lloyd) 45 Wealth, productive and consumable 5-27 Western Union Telegraph Co , 16-18, 20 West Virginia oil fields 86 Wood, Henry 123 " World " New York 106 V. 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