the public is indifferent and apathetic or sceptical: the charges are dismissed with "monotonous regularity."

America is far behind Britain, Germany, Italy, and Denmark in her ancient laws for the treatment of the sailor, and she will have to alter this if her forthcoming mercantile marine is to become popular.

CHAPTER XI

TRUSTS AND COMBINES

INDUSTRIAL Consolidation has been carried far and carried quickly by America. Twelve or fourteen years ago there were not a dozen business combinations in the country which might, in the American language, appropriately be termed Trusts. Now there are nearly three hundred Trusts, covering the production of almost every article of daily use, from matches to sleeping-cars, and involving billions of capital. In one year alone (1899) the industrial combinations formed represented an authorized capitalization of two billion dollars, a sum equal to all metal currency in circulation in America.1

But there has lately come a second phase in the centralizing process. Some of the larger combinations are organized for the purpose of holding the stock of other corporations. A large company buys up all the stock of several other companies, and issues its own stock substantially in exchange. The profits of the constituent companies form the fund from which the dividends of the holding company are paid. In other

1 There are in 1902 exactly 287 Trusts, with an amount in capital stock scheduled at over five billion dollars, the outstanding bonds amounting to about two billions, and the total capitalization being close on seven billion dollars, or about a third of the entire manufacturing capital of America.

cases, on the formation of a combination, the new company buys for cash or stock all of the plants of the uniting companies, and these companies are then dissolved. The former method may be described as the "Trust," and the latter as the "Combine."

The economic is the paramount phase of American life, and no economic tendency is so extraordinary, so absorbing, or so new as that which is concentrating the entire industries of the country into single corporate groups. In some departments of manufacture these are supreme and complete monopolies.

The possibilities for economy with a Trust are very great, because it dispenses with travelling salesmen and with advertising, and practises the distribution of goods from the nearest source of supply. Thus the cost is

reduced often more than one half. It is clear that the present competitive system involves most waste, and often the consumer is obliged to pay 100 per cent. over the prime cost of the article.

There are, then, great possibilities of social economy and advantages in the new system; but, on the other hand, it is also being selfishly used to make exorbitant profits and to crush competition by unfair discrimination and tyrannous practices.

Competition reduces prices, but there is a point in the reduction of price beyond which it is not possible for any of the competitors to go, unless their capital, and consequently their output, is so large that they are content with the minimum of profit or even with loss, in the hope of lessening the number of smaller competitors. A lessened output would soon restore prices to such a level as to yield the normal profits. Unless

this is achieved by the manufacturer, the glut in the market must be met by the withdrawal of a portion of his capital in the business, or to direct it into other lines of business. This was the old way. But machinery is now more costly, and possesses a more specific character, and it is not so easy to withdraw capital from an unprofitable business.

Professor Jenks of America has found that "industrial combinations have been able to control productions; in other words, to restrain competition to such an extent as to enable them materially to raise the prices of products." Another American professor, Mr. Bullock, calls attention to the contradictory assertions of the Trust magnates that "Trusts are necessary to stop competition, which has become wasteful and generally pernicious; while they contend that the spirit of the eliminated corrective agency which they call 'potential competition' is still skulking round somewhere with power to act, and that it will certainly be evoked by groans of the victimized consumer."

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There are not wanting many leading financiers who predict that a combination of industries will inevitably result in one of the greatest financial crashes ever felt in the United States, and that, too, at no very distant period.

"Combinations of all great industries are a menace to Government," declares Mr. Russell Sage. "Such combinations are not only a menace, but are the oppressors of the people. Should an era of combinations ensue, the American people will certainly revolt against them, and, if they do, there will be financial ruin such as people have never dreamed of in the history of the world. There are certain times when combinations are useful and beneficial. When several industries are

beginning business, it is well for individuals to combine for mutual protection until business is fairly on its feet. When the business is firmly established, combination should be disrupted, and the concern conducted along individual lines. The embarrassment of one individual would not then mean the wrecking of the industry.

"It is better to have such industries divided among several individuals than combined into one great corporation, the embarrassment of which would mean the ruin of all. Industries conducted along individual lines have many safeguards. Instead of but one source, each individual has several, separate and distinct from each other, to which to apply for aid during any great trouble."

The essential feature of the Trust is monopoly. Legally it is merely a large corporation, but in fact it is a compacted group of competing corporations—a giant consolidation able to control the entire output of any special manufacture and to destroy competition by temporary underselling.

It is a monopoly which "so controls business, whatever it may be, as practically to regulate competition and to fix the price of its products on the whole, with little reference to competitors, or to the cost of production, but mainly with reference to securing the greatest net results."1

1 On the other hand, the British commercial agent, Mr. Bell, has recently thrown light upon the moderation and consummate ability in dealing with human nature which characterize the policy of the greatest of the Trusts and indicate the real moral strength of the Trust system in general. "Notwithstanding the enormous demand for iron and steel, prices have been kept at a reasonable level. This has been largely due to the United States Steel Corporation, which firmly refused to raise their prices unduly."

One reason, as Mr. Bell observes, is that the Steel Corporation prefers a steady and regular trade upon a vast scale, and at a moderate profit, to the wild fluctuations of losses and gains inseparable from prices sensationally inflated and then as deeply depressed. There is also another solution of the