probable that a reduction from present rates would enhance profits. There is a fair and normal value at which supply and demand meet, to the mutual advantage of producer and consumer. Even great corporations often mistake their true interest, and only learn by slow educational experience that their own advantage coincides with that of the public. If the price of telegraphic service were lowered one-half, only the same plant and but little more help would be required. The business might increase fivefold, and telegrams become almost as common as communications by mail. Doubtless the company would serve itself in serving the public. The working of the same law is seen in the immense increase of railroad freights, made possible by rates so low that they would have been pronounced ruinous by experts ten years ago. Those combinations popularly known as corners deserve attention because their power for harm is so generally overrated. But while the public has little to fear from them, they are both demoralizing and disastrous to the great majority of their promoters. Where one party must lose in order that another may gain, the transaction is abnormal. Ideal commerce presupposes that both parties are gainers. No possible corner in any product can more than locally and temporarily affect the bone fide consumer. In a successful corner — - which is exceptional the "short seller" is the sufferer. The ambition to "control" some product, and the insane desire to acquire unearned wealth quickly, lead many unscrupulous business men to forget the great equalizing power of rapid transportation, instantaneous communication, and the general forecast of future conditions, all of which, more than at any previous time, render attempts to corner any product extra hazardous. Speculation in "futures" is the great bane of the modern business world; and yet it is impracticable to legislate against it, because genuine and speculative transactions shade into each other by indistinguishable degrees. Such legislation would also impair the freedom of individual contract, which should be sacredly preserved. Here, as elsewhere, a line must be drawn between a normal transaction and its possible abuses. The simple fact that a transaction is in a "future" is, in itself, no evidence that it is artificial or even speculative. As illustrative of the principles of a corner, let us outline a conventional one in Chicago. Pork is selling in April for twelve dollars per barrel. There is a fair stock on hand, and many believe that in the meantime prices for July delivery will decline somewhat. They are therefore willing to sell the July "future" for twelve dollars, or even a little less, though they may not have a barrel on hand at the time of sale. They expect to buy for less before July, and thereby make a profit at the time of delivery. These are "short sellers;" and they furnish the opportunity for a corner, and have an equal responsibility for it. Another party believe that natural conditions favor somewhat higher prices, and that by buying freely they can still more enhance them. They form a syndicate to "run a corner." They very quietly proceed, through their brokers, to buy up, not only the real pork on hand, but also that "sold short," or pork to be. Both parties furnish guaranty funds called "margins" for the faithful fulfilment of contracts. The syndicate gradually advance the price by their purchases. Though they may lose something in the end on the actual pork, they expect to make a great deal more out of the short sellers. They crowd up the price by fractions to fifteen, sixteen, and finally to seventeen dollars before the end of July. Heavier "margins" are constantly required. The contest is wholly outside of natural conditions. The combination proceed confidently, and believe their adversaries are at their mercy. During May, June, and July, pork, naturally worth twelve dollars, brings much more, and it "pours in " unexpectedly from all directions. The syndicate must take care of it, for to retreat would involve great loss. Stocks in neighboring cities must be reckoned with, for they all gravitate towards an inflated market. It is all piled up; for so long as artificial prices are current, dealers and consumers in the East and Europe refrain from buying. The only market for the syndicate consists in the probable demand from the short sellers to fill their outstanding contracts. The operation becomes gigantic, and all available funds are exhausted in margins, and more called for. Collapse follows, and pork falls five dollars, or thereabouts, in a single day. The combination began with great means and expectations, but miscalculated silent forces. The illustrative supposition just outlined was substantially paralleled by the veritable failure of a real pork corner in Chicago in the summer of 1893. The principles involved in all corners being practically identical, one typical case will suffice for a class. Something more than mere magnitude must be alleged against combinations of capital to condemn them. The difficulty is not with the principle of combination, but in the abuses and excrescences that come through human avarice. The great enterprises which form an important part of our complex civilization cannot be carried forward without the herculean forces of combined capital. They are an embodiment on a grand scale of the law of co-operation. But any combination, whether or not it be called a trust, cannot violate Natural Law with impunity. If the transgression be of great magnitude the inevitable punishment will be in proportion. Retribution is inherent. The economic, no less than the physical law of gravitation is never suspended. If any combination lacks organic unity its days are numbered. Any trust forcing artificial values soon galvanizes into life new and menacing competition on all sides. Trust combinations have been nearly or quite as common in England, Germany, and France as in the United States. So far as they embody the abuses of combination they are the outcome of cupidity and ignorance. The trust has been a popular and demagogic "bogy," but it need not be feared except by the limited number who dabble in its stock. Its bitter penalties are stored up within its own boundaries. So soon as moral and economic education becomes more general, it will be conceded that value is conferred only by inherent quality, and that combinations whether of capital or laborare utterly incapable of its creation. Impersonal conditions, and not combined dictation or coercion, form the basis of how much a thing is wanted. Attraction, repulsion, and cohesion are as regnant in the world of economics as in that of matter. |