Disarming the Trusts

THERE has recently been held in Chicago a conference on the subject of trusts. The members of it represented many sections and many interests, and the addresses that were delivered may be taken as revealing the position of the American people on the question of monopolies. In advance of the fuller expression of the popular feeling that will be given during the coming presidential canvass, this conference, perhaps, affords the best means of perceiving at a glance how the people of this country think and feel, and how they will probably act, in relation to those vast corporations that are acquiring a certain monopolistic power.

The most encouraging fact that has come to light is the existence of a limitless amount of moral earnestness, — a feeling of antagonism to real monopoly, — that is uniting people, particularly in the South and West, in a crusade that has a remote resemblance to the antislavery movement. People of this way of thinking and feeling do not usually make a deep analysis of the situation. They do not fully understand the commercial evolution that is going on in the world. In their opposition to the monopolistic action of trusts, they are likely to undervalue their productive power. The statutes that they will favor, and that they will often enact, will be sweeping prohibitions with plentiful penalties attached to them. They will be laws that cannot be enforced, and that would do harm if they were enforced. And yet, in a way, what this section of the people has to contribute toward the solution of the trust problem is worth more than is anything that other sections can contribute. A zeal that is not now according to knowledge will be pretty certain to be according to it before the struggle is over. It will, at least, begin to do something; and if what it does proves to be not the right thing, it will do something else. In the end it will solve the problem; while, on the other hand, a knowledge that is not backed by zeal will do nothing either at the outset or afterwards.

Fortunately, not all of the zeal is confined to the South and West. Agriculture develops the most powerful opposition to trusts; but all through the country capital that is not massed in colossal holdings is opposed to them. The country as a whole has little use for real monopoly, or for political parties that entangle themselves with monopolies. Success in elections is to be had only under the old banner of economic freedom.

There are two small classes of people who are predisposed to favor trusts, even though they shall prove to be real monopolies. These are, first, the revolutionary classes, — socialists, anarchists, communists, and the like ; and secondly, the workmen in a few highly organized trades, who have some inclination to favor those trusts which will exact high prices from the purchasing public, and share with their workmen the gains thus realized. Experience seems to show that a trust that has a real monopolistic power may form an alliance with its workmen, or with important classes of its workmen, against the public. In that case the laborers who benefit by the high prices that are secured are attached to the trust, though it is by a conditional and precarious friendship.

What is the attitude of the great body of the people ? Has it not taken any decided attitude ? Does it not know what it thinks and wishes ? In so far as the details of law-making are concerned, it certainly does not. It is in the inquirer’s position; and the question that it is hoping to have answered is whether it should try to frame statutes. that will crush the trusts, or should content itself with trying to regulate them, or even with letting them alone. On the more fundamental issue, as I venture to affirm, the mind of the people is made up. There is one thing that it wants and will have; and there is another thing that it fears, hates, and will repress. What it wants is productive efficiency. The people will have capital so organized that it can compete successfully with any capital in the world. What they will not have is capital so endowed with special and abnormal powers that it can do a plundering work as well as a productive one.

There are certain distinctions that the people almost never make with sufficient clearness, and that they must at some time make, if their moral earnestness is, in a practical way, to be good for much. There are three things, not at all identical, which the people, in their thought and speech, jumble together, and even attack without any discrimination. They are, first, capital as such; secondly, centralization ; and thirdly, monopoly. When a general attack is pending, the word that is used, in blanket fashion, to cover them all is “ monopoly.” Whenever the anti-monopoly movement takes the shape of an assault on all bondholders or stockholders, it is clear that the first discrimination has not been made. Capital as such is confounded with capital endowed with pernicious powers.

This, fortunately, is not the attitude of the people in general. It was not the attitude of those representatives of the people who were recently gathered at the Chicago conference. There are persons who have a quarrel with bondholders and stockholders as such, because they are opposed to the men who have something. They are, however, in a very small minority. It is only in the heat of a contest that an attack on monopoly becomes, to any important extent, an actual attack on capital.

An attack on monopoly easily becomes an attack on centralization. Clear discrimination is rare in this connection. To many people the massing of capital seems necessarily to make it monopolistic. If it does so, then there is no distinction in fact between highly centralized capital and monopoly. We cannot have capital in very big masses without being “ in the grip of an octopus ” or “ enslaved,” as some of our friends from the West and South think that we already are.

There is one great question of fact pending: Does centralization carried to great lengths necessarily involve monopoly? If so, the people are perfectly right in jumbling the two together, and attacking them both with all the energy of which they are capable. Monopoly is unendurable. If we cannot exterminate it or reduce it to harmless dimensions, we shall begin even to listen to the seductions of the socialists. We shall think better than we ever thought before of the plan of letting the trusts do their utmost, to the end that, as soon as one vast network of them shall have full possession of the industrial field, we shall seize its whole capital and use it for the benefit of the people.

Is this the only alternative ? It is so if centralization and monopoly are practically the same thing, and if the centralizing tendency cannot be stopped. If they are not the same, then we may have centralization without having monopoly. We may get the good that there is in the trust, and cast away the evil. We may save all the productive energy that vast capitals involve, and make ourselves victorious competitors in the struggle for the traffic of the world. We may enable ourselves to undersell every one else, not because our workmen will take low wages, but because, thanks to our big shops and our automatic machines, they produce more than any other workmen. If America is, as it seems to be, the natural home of the trust, and if we can draw the fangs of the monster and tame him to good uses, we can get all that it is possible to get out of material civilization. We can be commercially dominant and the leaders in economic progress. We can win the prizes that leadership brings, — and there is no measuring the value of those prizes; for wealth honestly gained and honestly dispersed among the people means a high level of life, intellectual and moral as well as physical.

Momentous beyond the power of language to measure is the question whether centralization may be allowed to go to the utmost lengths without fastening on the people the intolerable burden of monopoly. Answer this question in one way, and you will probably be a socialist, and certainly you ought to be one. Answer it in another way, and yon will be an “individualist,” though that is an inexact term for indicating the development for which you hope. You will believe, however, in freedom of individual action, in competition, in the right of contract; in short, in the things that have made our civilization thus far what it is. You will keep your optimism in either case, for you will be sure that, in the end, we shall get out of our troubles and dangers ; but if you think that the only thing that can save us is the seizing of all capital by the state, then the economic millennium, the vision of which will cheer you in the dark days before it can be realized, will be a time of fraternal sharing of everything, of the keeping of a common purse for humanity, and of a forced equality that will leave little chance for liberty. If, on the other hand, you think that competition and private initiative can save us, if only they have a fair trial, what you will see before you is an endless era of progress insured by old and familiar forces. You will see the wealth-creating power of the social organism always growing, wages always rising, wealth often massed, indeed, in great corporate capitals, but also divided, in its ownership, into a myriad of holdings scattered widely among the people. You will see workers acquiring capital, while still earning wages in the mill ; and, as an outcome not so remote as a Philistine view would make it, you may see production moving so steadily that the bonds of great corporations, and even the stocks, may become common and safe forms of investment of workmen’s savings. Not indeed without very intelligent action on the part of the government, and therefore not without much experimenting, will all this come. But it will come ultimately. And the guarantee of this fact is the overwhelming probability that socialism will never come to stay. If it shall be tried in one of our states or in one country of Europe, the results of the experiment will cause it to be rejected both there and elsewhere

The practical thing to be decided, therefore, is what a state can do to open the rift between centralization and monopoly, — to enable the mills to produce and to sell as cheaply as the biggest establishments can do, but to stop the extortion that trusts practice, and ward off the greater extortion that they threaten to practice.

What is the kind of legislation that a government needs to enact, if it will pluck the flower of commercial success from a very thorny and dangerous bush ? The key to the solution of this problem is afforded by the natural forces that are already curbing the great corporations. We have only to act according to nature. We must do what a skillful physician does when he wishes his patient to get well, and must remove the obstructions that prevent nature from doing its healing work. Great corporations would never be monopolies if competition were not abnormally fettered, and if individual action had a fair field and no favor.

When prices are unduly high, owing to the grasping policy of some trust, what happens ? New competition usually appears in tile field. Capital is seeking outlets ; and it has become hard to find them. Readily, and sometimes almost recklessly, does it build new mills and begin to compete with trusts, when these consolidated companies do not know enough to proceed on a conservative plan. Let any combination of producers raise the prices beyond a certain limit, and it will encounter this difficulty. The new mills that will spring into existence will break down prices ; and the fear of these new mills, without their actual coming, is often enough to keep prices from rising to an extortionate height. The mill that has never been built is already a power in the market; for if it surely will be built under certain conditions, the effect of this certainty is to keep prices down.

The real and serious difficulty is the fact that the curbing influence of this latent competition cannot always be depended on to prevent a real and considerable extortion. There is often a considerable range within which trusts can raise prices without calling potential competition into a positive activity. The possible competitor does not become a real one, by any means, as promptly as he should. The trouble is, that he has not a fair chance for his life when he actually appears on the scene. He is in very great danger of being crushed by the trust, by virtue of certain abnormal things that the trust is now allowed to do. If the great company could not do these abnormal things, the new competitor would be safe. He would appear promptly, whenever profits should become high enough to call for him. The possibility of his coming would hold prices at a natural level. The trust would benefit the people by its economies, and would not trouble them by its exactions.

Potential competition is certainly a real force. Experience has proved this a hundred times, in the short period within which modern trusts have existed. It is, however, a force that can be easily obstructed. Capital is proverbially timid ; and here is a case where it has to be bold, if it is to do what the public needs to have it do. Our system of laws now permits overgrown capitals to bully small ones. The big company has a right to beat the little one in an honest race for cheapness in making and selling goods ; but it has no right to foul its competitor and disable it by an underhanded blow ; and this is exactly what great trusts are doing. Where a state needs to secure a delicate action by a highly sensitive agent, its clumsy laws and clumsier policing allow that agent to receive rough handling when it comes into the field, or to be so terrorized in advance that it often does not come at all.

The fact is that a trust is allowed to do things that are out of harmony with the spirit of the law, — things that it could not do if the law were accomplishing even the single task that a narrow Spencerian policy demands of it, namely, the protection of property. There are actions that have in them the essence of robbery, though they lie altogether outside of the scope of statutes heretofore enacted. It is not so clear that they are outside of the scope of common law ; but they are not actually suppressed by it. I may be a manufacturer outside of the trust, selling my product in a limited section of the country. A trust may sell goods in my particular field for less than it costs to produce them; and if, while it thus loses money in my territory, it can make money in twenty other places, there is no doubt as to the way in which the struggle between it and myself will result. If, on the other hand, in older to get away my trade, it were obliged to reduce prices everywhere below the cost of production, there is no reason to suppose that it could hold out in competition any longer than I could. A trust would never think of lowering prices in a ruinous way all over the country, for the purpose of crushing out competition in one corner of the country.

It is commonly supposed that mere size gives corporations a competing advantage ; but this is an inaccurate supposition. A concern with a capital of twenty million dollars cannot lose a million a year any more safely than one with a capital of twenty thousand dollars can lose a thousand a year. If the losses that a corporation sustains by cutthroat competition are in proportion to the amount of its capital, it is not necessarily a dangerous competitor. As a practical fact, a new mill, equipped with most recent and perfect machinery, is often a stronger competitor than a trust that is encumbered with antiquated plants.

Quite akin to that predatory competition which lowers prices in one corner of the country and sustains them elsewhere, for the purpose of ruining somebody whose market is in that limited region, is the kind that lowers prices on particular grades or qualities of goods which happen to be made by a competing concern, and sustains prices on all other grades and qualities. The discrimination may be, not between one locality and another, but between a type of goods made by some one whose production is highly specialized and other types. It is easy for the trust, if it makes many kinds of goods, to crush a competitor who makes only one.

Closely affiliated with these methods of price discrimination is another that has been much used, namely, a kind of “ factors’ agreement.” The trust may make with merchants who sell its goods a contract that compels them not only to keep prices at the level which the trust prescribes, but to handle no goods of a general class other than those which the trust makes. Under these circumstances the new competitor has hard work to find a market; for unless the wholesale merchants are willing to give up handling any of the goods manufactured by the trust, they are unable to buy from him. If then this producer betakes himself directly to the retailer, the trust may still pursue him and deprive the retailer of the privilege of handling any of its products unless he too refuse to buy and sell competing goods. The factors’ agreement may take the shape, not of absolutely refusing to sell to merchants who handle goods made outside of the trust, but that of refusing to give to those who sell competing goods the full discounts that are given to those who do not sell them.

All these things are “ in restraint of trade,” and contrary to the public interest and to the spirit of common law. All of them, moreover, involve personal discrimination in the treatment of different customers, and could not be practiced with success without such unequal and unfair treatment. If trusts were compelled to treat all of their customers alike, none of this kind of predatory work could be done. The independent producer would have a fair field and no favor ; and that is all he needs. If that were secured, there would be in every department of industry some actual competition and a great deal of competition of the potential kind. Between them they would protect the public from extortion. Moreover, it could be shown that protecting the public from high prices shields the laborer from the lowering of wages.

There is much to be said about tariff laws and patent laws ; for it is often partly by means of them that a great corporation becomes a quasi-monopoly. The total abolition of import duties and patent laws would be a rash measure; but a reformation of these laws that would prevent them from playing into the hands of trusts would be an entirely reasonable measure. This means of curbing the power of trusts has been considerably discussed. The suppression of that favoritism which railroads show to certain producers is so obviously necessary that we have no need of discussing it. The policy that is unfamiliar to our people, and that is most promising, though, like other good things, it encounters difficulties, aims at the complete suppression of personal discrimination by the trusts themselves in their dealings with their customers. The ruinous local cutting of prices, and the ruinous cutting of the prices of particular grades of goods, for like predatory purposes, must at all hazards be stopped. The factors’ agreement that forces merchants to boycott independent producers must also be stopped. We must find or make a way to accomplish these things. It will be hard to do it; and yet it will be easier than to force a way to success in prohibitory legislation. Reforming the tariff, reforming the patent laws, controlling the common carriers, and, above all, securing uniform treatment of all customers by the trusts themselves, this combination of measures constitutes a policy in regard to trusts that, however difficult it may at first be, is possible, because it is in harmony with powerful tendencies that are already working. It appeals to a latent power of competition that even now holds trusts greatly in check. To hold them more in check, and to do it in a natural way, is to solve the problem of trusts.

A consideration which has far less weight than it should have when the evils of monopoly are in the foreground is the necessity of preserving for our country the productive power that combination gives. In the international field there is a great question to be settled: which country is to come out uppermost in the struggle which is growing fiercer and fiercer for dominance in the trade of the world ? The country that invents machinery rapidly will have an advantage over others ; and so will the one that fosters centralization by allowing corporations to become greater and still greater, so long as they do not gain the position of real monopolies. There is little doubt that the competition of nations will force every one of them, in the end, to tolerate production on the largest scale. If that is so, there are two general alternatives, and only two, open to the different countries. One and all of them must choose between some kind of state socialism, on the one hand, and the appeal to the power of competition, on the other. It looks, superficially, as if socialism might be the easier. It looks as though a nation, tired of futile attempts to regulate trusts, might find it more practicable to take possession of them. We shall see what we shall see ; for the issue must be decided experimentally. But if laws and tendencies that are now at work are a guide, it is safe to conclude that the surviving system will be the competitive one. States will do many things that they do not now do ; but they will not seize and conduct all industries. If one state were to do this, its example would deter others from following suit. If one state should keep the principle of competition alive, with all that that means in the way of progress, its example would compel others to do the same. By a law of evolution, the state where industries are centralized, but not monopolistic, will succeed in the international contest.

These are assertions that one article cannot undertake to prove ; but fortunately the experience of a comparatively few years will either confirm or refute them. The real uncertainty is not so much what will be the type of trust legislation that will prevail in the end, as how many wasteful experiments, how many disturbances and disruptions, we must experience before we get it. Shall we trust wholly to future experiment ? Shall we make, by costly blundering, a list of things that are surely not to be done, in order that, by elimination, we may ultimately get the remainder of things that are to be done ? Something of this kind we may have before us ; but there is a chance of avoiding a disastrous amount of it. We may try the right experiment early. We may use insight and perceive how nature is already working. We may liberate the competitive forces that, even now, trammeled as they are, make our state a tolerable one, and enable them to develop their full influence. The monsters that alarm us are tied by a half visible leash that we did not consciously put on them ; but it is one that we can strengthen to the point at which it will hold and tame them, and make them serve us. Success in the fierce rivalries into which nations are now entering will come to those which utilize, for all that it is worth, the power that massed capital gives, without surrendering their economic freedom.

John Bates Clark.