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in the dye-vat, washing-bowl, and powdering-tub. They share with the butler in his box; they have marked and sealed us from head to foot; they will not bate us a pin.

d) The Inexpediency of Monopolys

BY ADAM SMITH

Though some exclusive privileges arise from nature, they are generally the creatures of the civil law. Such are monopolies and all privileges of corporations, which, though they might once be conducive to the interest of the country, are now prejudicial to it. The riches of the country consist in the plenty and cheapness of provisions, but their effect is to make everything dear. When a number of butchers have the sole privilege of selling meat, they may agree to make the price what they please, and we must buy from them whether it be good or bad. Even this privilege is not of advantage to the butchers themselves, because the other trades are also formed into corporations, and if they sell beef dear they must buy bread dear. But the great loss is to the public, to whom all things are rendered less comeatable, and all sorts of work worse done; towns are not well inhabited, and the suburbs are increased.

e) Monopoly Indefensible'

A private monopoly is indefensible and intolerable. We therefore favor the vigorous enforcement of the criminal as well as the civil law against trusts and trust officials and demand the enactment of such additional legislation as may be necessary to make it impossible for a private monopoly to exist in the United States.

201. Monopoly, the Result of Natural Growth10

BY GEORGE GUNTON

Many people talk about trusts as if they were a sudden creation, the product of a conspiracy against the public. Nothing could be farther from the truth than this view. The history of trusts is

Adapted from Lectures on Justice, Police, Revenue and Arms, 129–130; edited by Edwin Cannan (1763).

'From the national platform of the Democratic party, adopted at Baltimore, July 3, 1912.

10Adapted from Trusts and the Public, 32–34. Copyright by D. Appleton & Co. (1899).

simply the history of the continuous and almost imperceptible tendency in progressive society toward a greater centralization of capital which the most highly developed labor-saving methods of production make necessary. The impeachment of trusts as economic institutions is therefore the impeachment of the concentration of capital, without which, it is needless to say, our great railroad, telegraph, and factory systems would have been impossible. Very few of the industries which use the most approved methods and have contributed most to cheapening the multitude of products can now be conducted with a capital of less than a million dollars; many of them require tens and even hundreds of millions. A hundred or even fifty years ago, a millionaire might have been regarded with as much apprehension as is a hundred-millionaire today; indeed, he would have sustained about the same relation to the productive needs and methods of the community. The truth is that in this case, as in the growth of all social institutions, the new form came because it was necessary. The small English water-wheel factory on the river bank, in the eighteenth century, came because the isolated hand-loom and spinning-wheel did not permit the utilization of the most economic methods after the spinning-jenny and spinningframe were invented. The steam-driven factory in thickly populated centers came in the first quarter of the nineteenth century because the water-wheel shops were incapable of employing the best methods after the invention of steam and the power-loom had been completed. If these had not been capable of lessening the cost of production and so rendering a general benefit to the community, they could not have succeeded, as there would have been no demand for their products. So, again, by the middle of the century, when machinery had been still further improved, partnership organization of industry became necessary because single individuals were not rich enough to furnish plants sufficiently large to employ profitably the most improved methods.

With the cheapening of products and the increased consumption which followed the use of these successive improvements, and the consequent social advance of the community, a revolution in the methods of distribution and international communication became necessary. Inventions multiplied, which so enlarged the industrial world as to render corporations necessary in order to obtain the best economic results. Modern trusts are but a single step farther in the same direction. They are simply the organization of corporations in the same way that corporations were the organization of individual capitalists.

Trusts, instead of being sudden monopolistic creations that have been sprung on the community by a few designing conspirators, are but the last link in an industrial chain more than a century long; they are no more revolutionary than any one of the previous links, and less so than some of the earlier ones. Each one of these links in the great chain of industrial evolution came and stayed only because it was more profitable than its predecessors to those who employed it, lessened the cost of production, and served the community more cheaply. Had it not done this, it could not have sustained itself in competition with the old methods.

202. Monopoly, the Result of Artificial Conditions11

BY WOODROW WILSON

Gentlemen say, they have been saying for a long time, that trusts are inevitable. They say that the particular kind of combinations that are now controlling our economic development came into existence naturally and were inevitable; and that, therefore, we have to accept them as unavoidable and administer our development through them. They take the analogy of the railways. The railways were clearly inevitable if we were to have transportation, but railways after they are once built stay put. You can't transfer a railroad at convenience; and you can't shut up one part of it and work another part. It is in the nature of what economists, those tedious persons, call natural monopolies; simply because the circumstances of their use are so stiff that you can't alter them.

I admit the popularity of the theory that the trusts have come about through the natural development of business conditions in the United States, and that it is a mistake to try to oppose the processes by which they have been built up, because those processes belong to the very nature of business in our time, and that therefore the only thing we can do is to accept them as inevitable arrangements and make the best out of it that we can by regulation.

I answer, nevertheless, that this attitude rests upon a confusion of thought. Big business is no doubt to a large extent necessary and natural. The development of business is inevitable, and, let me add, is probably desirable. But that is a very different matter from the development of trusts, because the trusts have not grown. They have been artificially created; they have been put together, not by natural processes, but by the will, the deliberate planning will, of men who were more powerful than their neighbors in the "Adapted from The New Freedom, 163–169. Copyright by Doubleday, Page & Co. (1912).

business world, and who wished to make their power secure against competition. The trusts do not belong to the period of infant industries. They are not the products of the time, that old laborious time, when the great continent we live on was undeveloped, the young nation struggling to find itself and get upon its feet amidst older and more experienced competitors. They belong to a very recent and very sophisticated age, when men knew what they wanted and knew how to get it by the favor of the government.

Did you ever look into the way a trust was made? It is very natural, in one sense, in the same sense in which human greed is natural. If I haven't efficiency enough to beat my rivals, then the thing I am inclined to do is to get together with my rivals and say: "Don't let's cut each other's throats; let's combine and determine prices for ourselves; determine the output, and thereby determine the prices; and dominate and control the market." That is very natural. That has been done ever since freebooting was established. That has been done ever since power was used to establish control. The reason that the masters of combination have sought to shut out competition is that the basis of control under competition is brains and efficiency. I admit that any large corporation built up by the legitimate processes of business, by economy, by efficiency, is natural; and I am not afraid of it, no matter how big it grows. It can stay big only by doing its work more thoroughly than anybody else. And there is a point of bigness where you pass the limit of efficiency and get into the region of clumsiness and unwieldiness. You can make your combine so extensive that you can't digest it into a single system; you can get so many parts that you can't assemble them as you would an effective piece of machinery. The point of efficiency is overstepped in the natural process of development oftentimes, and it has been overstepped many times in the artificial and deliberate formation of trusts.

A trust is formed in this way: a few gentlemen "promote" it— that is to say, they get it up, being given enormous fees for their kindness, which fees are loaded on to the undertaking in the form of securities of one kind or another. The argument of the promoters is, not that every one who comes into the combination can carry on his business more efficiently than he did before; the argument is: we will assign to you as your share in the pool twice, three times, four times, or five times what you could have sold your business for to an individual competitor who would have to run it on an economic and competitive basis. We can afford to buy it at such a figure because we are shutting out competition.

Talk of that as sound business? Talk of that as inevitable? It is based upon nothing except power. It is not based upon efficiency. It is no wonder that the big trusts are not prospering in proportion to such competitors as they still have in such parts of their business. as competitors have access to; they are prospering freely only in those fields to which competition has no access. Read the statistics of the Steel Trust, if you don't believe it. Read the statistics of any trust. They are constantly nervous about competition, and they are constantly buying up new competitors in order to narrow the field. The United States Steel Corporation is gaining in its supremacy in the American market only with regard to the cruder manufactures of iron and steel, but wherever, as in the field of more advanced manufactures of iron and steel, it has important competitors, its portion of the product is not increasing, but is decreasing, and its competitors, where they have a foothold, are often more efficient than it is.

Why? Why, with unlimited capital and innumerable mines and plants everywhere in the United States, can't they beat the other fellows in the market? Partly because they are carrying too much. Partly because they are unwieldy. Their organization is imperfect. They bought up inefficient plants along with efficient, and they have got to carry what they have paid for, even if they have to shut some of the plants up in order to make any interest on the investments; or, rather, not interest on their investments, because that is an incorrect word, on their alleged capitalization. Here we have a lot of giants staggering along under an almost intolerable weight of artificial burdens, which they have put on their own backs, and constantly looking about lest some little pigmy with a round stone in a sling may come out and slay them.

B.

CONDITIONS OF MONOPOLIZATION

203. The Failure of Competition12

BY HENRY W. MACKOSTY

Modern industry is essentially speculative in character. It has been said, "It is for the prospective, not for the actually existing, demand that a producer has chiefly to provide. Our warehouses and shops overflow with goods that have been produced before being sold, and with a view to their being sold. They have been produced to meet the prospective demand, and to measure that accurately is 19 Adapted from Trusts and the State, 103–119. Published by E. P. Dutton & Co. (1901).

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