The commoner. (Lincoln, Neb.) 1901-1923, November 01, 1913, Page 6, Image 6

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The Commoner
iVOD. 13, NO. 31
Government Evolution and Industry The
Trust Problem
(II '
If '
An address by Josoph ID. DavieH, Commisslohor
of dorpqraUons, before the National Association
of Hardware Manufacturers, at Atlantic City,
October 31, 3 913.
Government and industrial society are both
organisms, subject to the law of evolution, which
Gladstone dpllnod as a continuous "series with
devjplopnftmV' They are Intimately related and
.connected. Economic laws in industry have
produced conditions that demanded the enact
ment of civil law; whereas civil law. on the other
hanl, has created conditions which have de
veloped now types of industry and have changed
and'.mQdiflcd economic law. Change in either
induces, and demands change in the other.
M'ddorn industrial society has changed much
more rapidly than tho development of law in
government with reference thereto. Steam,
electricity, and invention broke down tho privi-
. lotfe of both "baron" and "cild" of medioval
times, 'and opened up tho modern era. The
annihilation of space opened with great rapidity
now ileitis. A now spirit of individualism came,
and with it a Hood of now industrial energy.
Out of these conditions came the modern era
of Unprecedented organization and consolidation.
Tho old partnership, with its individual liability
of each partner, and with its limitod capital,
soon became out of tune with the great move
ments of tho time, and there was created by law
a new artificial person, tho corporation, which
insured continuity of management independent
of tho life of individuals; which enabled many
partnors to join capital in enterprises, freed from
the individual liability of tho old partnership.
Competition was alleged to be destructive, and
tho advantages of size and combination were ex
ploited; costs would be roduced, business could
bo extended, prices could bo increased; but all
animated and directed to one end, and inspired
by one motive to increase the individual profit.
The corporation Invented the "pool,'' an organ
ization of corporations to control output and
prices. The pool, in turn, gavo way to tho
trust, tho trust to the holding company, and the
holding company to common ownership in affili
ated corporations, with interlocking directorates,
which made for a concert of action quite as
effectively as a single consolidated unit.
Tho development of the last fifteen yoavs in
corporate organization is unprecedented in his-
h tory. Tho business world is organized on a dif
ferent basis than heretofore. Giant concerns
furnish our meats, sugar, Hour, woolens, kero
sene our steel, locomotives, 'plows, harvesters,
telephones, bathtubs, paper, schoolbooks, chew-
ing gum our matches, gas, breakfast foods,
bacon, bread, ice and all our long list of daily
h- needs.
Within" the last decade and a half, two hun
dred corporations have come into boing which
ow.n property of the value of $22,500,900,000.
Two hundred artificial persons, one ton-thousandth
of one per cent of the natural persons Of
this .country, own three times as much wealth as
this country owuc ' -a 1850. This sura is throe
and,, a half times the total interest-bearing debt
'M ofithe .United States. The gross income of one
o? these artificial persons is equal to the total
revenue pf the government from .internal revenue
and customs. Twenty-four of those corporations
have three and a half times the gross income of
tbp federal government.
Jflo porporation employs 21$J000 men, which
is"' more than the total population of New Hamp
shire, Vermont; Florida, North Dakota, or South
Dakota; another single corporation employs
38,000 mefi, more than the total male voting
pbtmlatiori- of the, state of Nevada; and still an
other corporation employs more men than there
are maids In the sovereign state of .Nevada.
'These facts are not cited as mi indictment
.against the men engaged in these enterprises.'
They are cited simply to show the way in which
wo are going.
., "'I'he framers of the Sherman law foresaw this
development, and sought to anticipate it. The
period of greatest development in this movement,
: however, occurred in the face of the Shermau
law and after its enactment, and prior .to 1904,
when It was first sought to be made an active
agency for government.
Events in the development of industrial evolu
tion have moved, therefore, with great rapidity
in tho last twenty years. There has come an
economic revolution. Changes of great import
ance have come into our industrial life, which
affect tho lives and purposes of many men and
Primitive men first demanded lav and its en
forcement to protect his private right in the
fruits of his industry against tho encroachments
of the unorganized' many. Conditions have now
reversed. The unorganized many are demand
ing that law shall protect their rights from the
encroachments of the organized few. The
covenant of our political faith in this govern
ment, which was conceived with tho idea that it
should be the trustee for all the men and women
who made it up, is that government itself is in
stituted among men designed to secure certain
rights to all men, and it therefore becomes in
cumbent upon a government of this kind to take
cognizance of this evolution in the industrial
world and these changed conditions, with the
result that there confronts us today the so-called
"trust problem," which is nothing more or less
than the problem of what shall be the just, fair,
and scientific attitude of government, in the
interests of society, toward industry and busi
ness in its present stage of evolution.
Government or society is concerned with these
tremendous industrial units from several dif
ferent angles. That which confronts us im
mediately is, what effect liave these gigantic
concentrations had upon the question of repre
sentative government and its perpetuity? Is
thore danger of a state developing within a
state? Is there danger of the child becoming
groater than the parent? What Safeguards, if
any, must tho state throw about itself, so that
the powers of government may not be subverted
by reason of the greed of men and inherent
human selfishness? An investigation of the con
gress of the United States only recently con
ducted has given evidences of certain insidious
influences that attack '.he integrity of govern
The effect of those tendencies in our industrial
life jipon the lives and habits of living of men
and women who toil, and upon the standard of
living of the present generation and the standard
of health of futuro generations, is the problem
of tho department of labor.
The economic aspects of the problem, to-wit:
what is the fair, just attitude of government to
the capital invested in and the men interested
in and directing these great enterprises, as well
as to tho public at large, what shall be done to
preserve freedom of opportunity for business, is
tho problem congress will address itself to in the
immodiato future.
There aro wide variances of belief as to the
treatment of this problem. Some maintain that
the Sherman law in its present condition, with
a -few amendments, is sufficient. Others there
are who maintain that the Sherman law, oven
though-amended, is negative in its effect, 'and
not constructive in attacking the problem; that
what is needed is not only a declaration of what
can not bo done, but a definition of what can
legally be done. Some offer in solution an inter
state trado eommission, to proceed upon the
theory that monopoly should be frankly recog
nized and regulated, even to the extent of regu
lation and control of prices. Others advocate a
similar commission, whose object and purpose
however, shall not be to regulate monopoly, but
to regulate and control interstate business in
supplementing the Sherman law by aiding the
courts in the restoration of competitive condi
tions, and in giving force to the decrees of the
courts; charged with the additional power of de
fining what shall constitute fair and unfair
competition, what shall constitute reasonable
restraints of trade, and what agreements, now
apparently in violation of 'the Sherman law, are
not in fact in restraint of trade and should im
permitted, together with other similar nower
Still another plan has been suggested which
looks to keeping the control of this question
more within the province of the individual
states, by making it illegal for any corporation
to do an interstate business unless the require
ments of its charter, granted by the states re
spectively, should contain certain inhibitions
upon the activity of such corporation, looking
to the prevention of the issue -of watered stock
to the prevention of interlocking ownership and
common directorates, and other similar condi
tions which are alleged to be the operating
causes for the evils of the present condition.
But back of the immediate action to be taken
to remedy certain evils that are patent, there
lies a fundamental question of fact to be deter
mined, upon which must rest the ultimate and
correct solution of the problem and the final atti
tude of government. In the last analysis,
society is concerned with the question of which
of the two types of industrial system is the most
advantageous to the general welfare. The
question resolves itself into whether the monopo
listic system of large units or the competitive
system confers the greatest advantage upon
society. The advantages and disadvantages of
each are questions of fact, and one of the para
mount considerations therein is the question of
cost of production. The efficiency of an in
dustrial system will bo finally gauged by tho
people, in a largo measure, by the difference in
the cost of what they buy; and that system which
produces most cheaply, and does not induce
other and greater evils than those sought to be
remedied, would be regarded as the final econ
omic fact, in a large degree, by the consumer.
One of the fundamental facts, then, to be deter
mined is the question of the efilciency of the
trust, the question of whether increase of the
size of capital and organization necessarily
means a lowering in tho cost of production and
distribution to the ultimate advantage of the
peoplo who buy.
It is the contention of the -monopolistic school
of -thinkers that the economies of large-scale pro
duction do continue and increase with the size
and organization; that through the processes of
manufacture and distribution, costs are reduced
extraction of raw materials from the earth and
processes of manufacture and distribution, costs
are reduced as size is increased; that size confers
other and additional advantages in the develop
ment of foreign trade, in the encouragement of
invention, and the utilization of by-products; that
. the system of monopolistic units is therefore the
last word in the evolution of industry, and has
displaced the competitive order of things as
clearly as machinery displaced hand labor a cen
tury ago. It is contended, therefore, that tho
proper attitude of government with relation
thereto is to take such action as will insure that
the public generally shall participate in this
scientific advance In industry, even though it
must go to the length of regulating and con
trolling prices.
To attempt to do otherwise,-they claim, would
be an attempt by civil law to stop the operation
of economic forces and fundamental facts; to
stop evol ition, which it is claimed would be
as useless as an attempt to stem the tides or
to prevent the operation of some other nat
ural phenomenon. There is come truth in
this ' position; but more fallacy. Because a
condition exists is not conclusive that it is
the result of fundamental natural and econ
omic laws, or that it is right. Modern condi
tions in industry aro the result of civil laws
made by men. Economic society and its prosent
day development has been directed, -shaped and
formed by the laws of men. Property is a
creation of law. The right to take property,
the right to descent, comes only by virtue of law.
Tho form of the' law of descent may shape the
economic development of a nation. , The law of
England gave landed estates" to th'e first-born
male child. France abolished primogeniture a
hundred and twenty-five years ago, and by law
declared that property should descend to children
equally. England's present-day economic de
velopment and problem of landed estates, ab
sentee landlordism and pauperism is due in a
measure, undoubtedly, to the law of primogeni
ture. The economic prosperity of France, as
shown by the high average of individual wealth,
is the result of equal descent of property, in large