Conservative *
necessary ; (0) ( ) n system of factors' agree
ments is established whereby consignees
of the commodity agree not to cell for
less than a prescribed price plus freight
as fixed by a so-called equality rate book ,
and not to change the schedule of prices
except as directed by the corporation ,
and if consignees keep their agreements
for a prescribed time , say three months ,
they receive a rebate ; (10) ( ) a corporation
so organized has its own legal depart
ment , central accounting department ,
with a comptroller , an auditor , and a
statistician. It has a central laboratory
if the business reqiiiros it. It has de
partments of sale , transportation , in
surance and advertising. It controls
many state companies operating mills
for converting the raw product , with
many other factories and branches for
further utilization of its products and
by-products. It owns ocean steamers
and railroads and has foreign branches.
It runs its mills in duplicate , so that , in
case of breakdown , work will not be
interrupted. It buys its raw material
by shiploads and traiuloads and whole
crops. Itself being the only market for
such raw material , it fixes the price
thereof , so as to obtain such material at
the lowest price that will induce its pro
duction. Itself being the only source of
supply of the finished product , it fixes
the price thereof , so as to obtain the
highest price consistent with a steady
demand and the prevention of competi
tion. Having the field , it keeps it. No
smaller enterprise can live without its
consent. Occasionally , for the sake of
appearances , it allows some smaller par
asitic enterprise to exist , EO as to deceive
the public with the idea that there is
competition.
Arguments For und Against Trusts.
Burke says : "The market settles and
alone can settle the price. Market is
the meeting and the conference of the
consumer and producer , where they
mutually discover each other's wants. "
But the modern incorporated trust
itself becomes the market and dictates
prices to buyers and sellers. The aim of
the trust is to produce the largest vol
ume with a steadily decreasing amount
of labor and the smallest amount of ma
terial. It is said that large investments
make large economies ; that the more
there is produced the cheaper it can bo
produced ; that the cheaper it can be
produced the cheaper it can be sold ;
that the cheaper it can be sold the more
can be sold , and that cheap plenty
makes largo consumption. The ad
vantages urged in behalf of combina
tion are :
First Economy in production ; there
fore , lower prices to consumers. But it
is alleged that the consumer does not
receive the benefit of trust economy to
which he is equitably entitled under
this argument. If the incorporated mill
ing company in your town buys your
wheat at its own price and sells you
flour at its own price , there being no
other mill , it always buys your wheat
as low as it can and sells your flour as
high as it can. It pursues the plan of
buyiii as cheap as it can and selling as
high as it can , because it is good busi
ness , and applies its profits to improving
its plant so as to pay largo dividends.
It is easy to say that the consumer gets
the benefit , but the producer and the
consumer generally get more benefit
when another miller conies to town and
begins to do business in competition.
But when the new miller and the old
milling company combine the last state
of the producer and consumer is worse
than the first , for the new miller and
the old milling company must make up
for the indiscretion of competition.
Second Another advantage is said to
bo that of a more perfect product. Thio
may bo true theoretically , but in prac
tice it is said that control of the market
permits economy in quality , which is
often taken advantage of so far as con
trol of the market will permit.
Third Another advantage is alleged
to bo better wages and more constant
employment. This is denied. It is said
that profits arising from admitted econ
omies and resulting in large dividends
on watered stock do not reach labor in
the form of high wages as a rule. It is
true that wages are generally higher
than over before , but wages paid by
trusts are not as a rule higher than "go
ing wages , " and are not as high as trust
profits might seem to warrant. While
labor has its unions , it cannot control
the law of supply and demand of labor
as the trust controls the law of supply
and demand of commodities. As to
constant employment , it can scarcely be
said that a policy which closes and ob
literates factories gives constant employ-
men to labor. It is probably true that
it gives more steady employment to the
persons employed , but one of the objects
of combinations is economy of labor
among other economies.
Fourth Stability of price to the con
sumer is urged as another advantage ,
but whether this is an advantage or not
depends on the price. A price gauged
just low enough to prevent public dis
content and just high enough to prevent
competition does not appeal to the pub
lic as an iudispeusible advantage.
Overcapitalization.
In urging advantages by reason of
combination , nothing is said of the cus
tom of overcapitalization.
A committee was appointed by the
New York assembly in 1897 to investi
gate trusts , and in that part of their
report bearing upon overcapitalization
they say :
"In ono case corporate assets acquired
by an officer of the combination for the
sum of $850,000 were capitalized over
night in the new combination by the
issue of certificates of a nominal value
of twice that amount , loss 15 per cent.
"Other corporations organized for the
distinct purpose of absorption by the
combination on the basis of a stock issue
of a nominal value of $800,000 wore sim
ultaneously recapitalized in the combi
nation by an issues of a nominal share
value of about $14,000,000.
Corporations representing in the ag
gregate share issues of loss than $7,000-
000 were recapitalized in the combina
tion by a nominal share issue of $50-
000,000 , lees a rebate of 15 per cent.
"In another case live assets were val
ued at about $5,000,000 and made the
basis of an issue of about $25,000,000 of
stock , the difference being made up in
the assumed value of 'good will , '
'brands , ' and 'trade marks. ' "
Such stock issues in many instances
represent capitalized destruction and
absorption of competing industries ; cap
italized centralization ; capitalized
"prospective earning capacity" ; capital
ized wind and capitalized water ; capital
ized live capital and capitalized dead
capital. The preferred stock pays divi
dends ; the common stock in most cases
seesaws up and down from day to day ,
subject to market caprice , till it drops
below zero uud is past resurrection.
It is perfectly apparent that if a man
draws a profit upon half of a pie ho need
not care into how many shares the pie is
divided. If each slice or share is labeled
with a value which it does not possess
but upon which he draws dividends , so
much the better for him. The stock-
issuing business consists in labeling the
pie as if it were stuffed with diamonds
and dividing it into shares. There is
only so much pie , no matter how many
shares you divide it into.
Federal and State Authority.
There are those who regard trusts as
rapacious monsters ; others who look
upon them as unavoidable and as part
of our national organic development ,
believing that they are the result of
natural forces , and , unchecked will reg
ulate themselves ; others approve of
them as results of a general tendency
toward centralization , but think they
ought to be controlled by legislation ;
the radical socialist favors trusts in so
far as they tend towart the nationaliza
tion of private property ; and the an
archist is against all organization and all
capital. On the whole , regulation by
legislation within reasonable bounds
ought to bo possible.
Corporations are creatures of law , and
legislatures which make and courts
which construe laws , it would seem ,
ought to be able to restrict , control or
annihilate creatures of law.
This sounds reasonable , but wo are
forty-five states , and at present where
one state prohibits another invites , and
so long as a single state exists from
which , by virtue of interstate comity ,
trust combinations can trade over the
