Total number of persons engaged in manufacturing, mining, trade, and transportation (occupations more or less monopolized)5,647,368Total number of persons engaged in agriculture and in furnishing professional and personal services (occupations not monopolized)11,744,821
Thus at the greatest estimate we can make of the number benefited by monopolies, for each man who is gaining by them, two are having their income reduced. If we take the estimate previously made, that the utmost number of persons who can possibly be reaping benefit by ownership of the especially profitable monopolies, trusts, transportation lines, mines, etc., is one million, we have opposed over sixteen millions of the community who are being taxed by their operation. Let a sharpdistinction be drawn at this point, however. The above comparison is to be confined to the things between which it is made, and not confused with others to which it has no reference. It is not a comparison of the sort which social agitators are fond of making between the great numbers of the working classes and the relative scarcity of the wealthy. Except so far as the operation of profitable monopolies by the few tends to bring about this unequal distribution of wealth, that is a matter with which we have nothing now to do.
There is one point in this connection, however, which it is well to make plain, as it concerns a class of people which is not included in either of the four divisions that we have already described—those who live on the income of their property.
We have before alluded to the fact that in the popular speech "capitalist" and "monopolist" are often used interchangeably. If we carefully consider the real status of the capitalist, however, we find that of the three requisites of production—labor, capital, and natural agents—capital is the requisite which is most perfectly secured from the control of monopoly. The rate of interest for the use of capital is regulated so perfectly by the law of supply and demand, that all the anti-usury laws which have ever been enacted have been able to accomplish but little in enabling the borrower to secure loans at a less rate than that prescribed by competition. The reason for this is plain on consideration. The total supply of accumulated wealth of the whole civilized world is engaged in this competition, and the millions of wealth which are added every day are new contestants in the market. Competition in other products is held in local bounds by the cost of shipment over long distances; butwealth in the form of value can be transferred quickly and easily to any part of the civilized world where a market awaits it. Every person who earns money or owns property is a potential competitor, in that he can be made to lend his capital for great enough inducements. Under the pressure of this competition, the price for the use of capital—the rate of interest—has steadily fallen; and the enormous production of wealth of which our industrial resources are now capable is such that the fall is certain to continue, and a very few years will see loans at 2 per cent. as common as those at 4 per cent. are to-day. Combination to restrict competition among those who loan capital for investment is an utter impossibility. The number of people with money to loan, or with property on which they can raise money for that purpose, if they wish, is too large a proportion of the population to be ever brought into a combination to restrict competition. The stringency which sometimes occurs in the money market need not be cited as a contradiction of this statement. That is a matter which has only to do with the currency. The broad fact, and it is a most important one, is that capital, a necessary agent of production, can never be monopolized.
We have now examined all the important occupations in which men engage for the purpose of gain; and we have found that while certain large classes of men still have the returns for their industry fixed by the laws of competition, other large and important classes have been able to check and limit competition, so that their returns from their work are constantly increased; while others still, are in possession of certain agents, so necessary to the community and so rare, that a price can be exacted for their use greatly in excess of the original cost to their owners. Some of the effects of this state of affairs it is easy to perceive. We have, indeed, pointed out for each monopoly described some of the especial abuses to which it gives rise; and it is plain enough that the general tendency is, first, to greatly enrich the possessors of the strongest monopolies at the expense of all other men; second, to give a certain degree of advantage to the possessors of minor monopolies,—as, for instance, monopolies in articles which are luxuries, and can easily be dispensed with; and third, to seriously injure all those engaged in occupations in which the price of the product is still fixed by competition.
Every one will agree that this is an evil state of affairs. It is not just that my neighbor, who owns a mine or arailroad, should ask me what he pleases for coal, or for carriage of my produce to market; while I, being a farmer, must sell the products of my labor at a price determined by competition with the products of ten thousand other farms. No one can deny at this day that it is contrary to the principles of justice to give to the men in any one occupation or calling an advantage over those in any other, except in just the degree that one occupation is more beneficial to the world than another. The question then arises, how may we best remedy this state of affairs? Shall our panacea be to do away with all monopolies, and put every industry back upon the competitive system? If so, by what means are we to apply this remedy? Or shall we go to the other extreme and adopt the antipodal doctrine to the foregoing, that competition is an evil which ought to be done away with; and then proceed to abolish competition in every trade and occupation where it still exists, if we can find any possible means of accomplishing such a task.
The investigation we have already pursued gives us no answer to these questions. We have thus far studied facts, and made little attempt to deduce from them general truths. We are now informed as to the widespread growth of monopoly; and we have paid some attention to the injustice and wrong to which it gives rise, in order that we may understand the urgent necessity for finding the right remedies, and finding them at once. Our study is henceforth to be devoted to this end. How shall we go about it? In the first place, it is evident that we might make a far wider and more detailed investigation of existing monopolies, and still be no nearer our desired end. We might study the facts concerning each especial railroad monopoly in the country, for instance, withoutreaching any valuable conclusion with regard to the proper method of restricting railroad monopolies in general. But if we were to take the monopoly exercised by a single railroad company, and study the principles on which it is founded and the laws by which it is governed, we might then be able to state something of value in reference to proper methods for its control. Evidently, then, principles rather than facts are to be the chief subjects of our future discussion, although, of course, we can only discover these principles by investigating the facts already found, together with others which may come to our notice.
Our very first and most obvious generalization from the facts which we have studied is, that in all the monopolies we have considered, the inherent principle is the same, and the effect on the community is of the same sort. Therefore, instead of hunting for separate remedies for railroad monopolies and trusts and labor monopolies, we will see what the general problem of monopoly is, and what is the general nature of the remedy that should be applied; the details applicable to each case will, of course, be different; but the underlying principle must be the same.
But if we examine our problem a little more closely we see that the wordmonopolyseems to be only a negative, expressing the fact thatcompetitionis absent. We will therefore direct our studies to competition itself, and will consider first its action as the basis of our social system.
In the most primitive condition of man which we can imagine, each person provided for his or her own need. The competition which then existed was not competition, in the sense which we use the word in this volume, butwas a struggle for existence and a gratification of the baser desires, of the same sort as that which now prevails in the brute creation, resulting in a "survival of the fittest." With the introduction of the family relation, the principle of the "division of labor" was utilized, the female doing the hard and menial work, while the male devoted himself to hunting and fishing, or subsisting on the results of his helpmate's industry. As men's wants increased and they became more industrious in supplying them, this division of labor was extended. The man most skilful in fishing neglected the use of the bow and spear, and his surplus of fish he exchanged with his neighbor for the fruit of the chase. The very same principle applied to different tribes brought about the first commerce. A pastoral tribe, with large flocks and herds, exchanged their surplus products with less civilized tribes who continued to live by the chase, or with a more civilized people who had begun to till the soil.
It is plain that these were first steps in civilization. Man, so long as he supplies only such of his wants as he can supply with the labor of his unaided hands, must remain in a half-fed, half-clothed, and untaught condition, because his strength and skill, when diverted in the many directions which his wants require, are not enough to enable him, even when he spends all his time at work, to supply himself with more than the barest necessaries of life. It would be interesting to trace the development of this principle of action through its various stages down to the present time, when we see men everywhere working at various trades and occupations, and always to supply some want of their fellow-men. Every person in the community is absolutely dependent upon a multitude of others, most of whom he knows nothing of, forthe supply of almost all his wants. Human society is thus growing more and more interwoven and interdependent. The motto of the Knights of Labor is a true one, apart from the altruism involved in it. "An injury to oneisthe concern of all," because the mass of humanity is connected and woven together by such strong ties of self-interest, as well as fraternity, that a calamity to any class or country is felt in some degree throughout the civilized world. This is vastly more true now than it was a half-century ago. Under such conditions as existed then, the doctrine oflaissez-faire, that the government should confine itself to the prevention of violence and crime and the maintenance of national honor and integrity, letting alone the industries of the country to develop and operate according to natural laws, was not liable to do harm. But the conditions now are wholly changed. The interdependence of the community involves a moral inter-responsibility, and the time has come when we must recognize this by making it a legal responsibility as well.
We are now ready to consider in detail this inter-relationship of society, and to examine the natural laws which govern it. We have already stated the fact that, broadly speaking, each man is engaged in supplying the wants of his fellow men, because in that way better than in any other he can supply his own wants. We shall find this an easy matter to understand if we conceive that every man puts the products of his labor, of whatever sort it be, into a common public stock (offers it for sale), and takes out of this common stock (buys) the various articles which he wants. He does the first simply that he may do the second, not because he desires to benefit his fellow-men. The money which he receives (as wedo not propose to consider here any questions regarding the currency) we may regard as simply a certificate that he has done a certain amount of work for the world, the measure of which is the number of dollars he receives; and on presentation of that certificate, he can obtain other articles which he desires.
We have next to consider the fact that there is a great variation in the amount which a man can take out from this common stock. One man is able to provide himself from the common stock with a host of luxuries, while another may only take out a scant supply of the barest necessaries of life. If this distribution operated with perfect equity, a man would be permitted to take out of this common stock exactly in proportion to the benefit which the world at large received from that which he put in. No human judgment, however, is competent to fix, with even an approach to precision, the relative actual benefit which each member of society renders to his fellow-men as a whole. But our social system effects that for us better than it could be fixed by any arbitrary human judgment. This it does by a law known as the law of supply and demand. Instead of the actual benefit, this law takes what people choose to consider as benefit, which is the granting of their desires, whether they desire things hurtful or beneficial. It is these desires for things which others can produce which constitute demand. It is to be borne in mind that this is a broad term, and includes not only desires for food, clothing, and actual things, but for service of every sort, in short, demand is the desire for any thing whatever for which people are willing to pay money. But when there is this demand—this willingness to pay money for any article—people begin at once to supply it, becausethe money they receive allows them to take goods which they wish from the common stock. Evidently, if there is an unlimited supply of any thing, people will not pay money for it. People will not pay money for fresh air to breathe when they are out-of-doors, and the supply is unlimited; but when indoors, the supply may be limited, and they will spend money to have ventilators and air-pipes built to supply them with fresh air. Or take the contrary case: The supply of some commodity, say flour, falls very short. Evidently less flour must be used by the world than was used in the years of a more plentiful wheat harvest. But no one will wish to be the one to go without, and most people will pay a little more rather than do so. Therefore the price rises.
The competition which we have chiefly considered is the rivalry which exists between the men who supply the same sort of goods; but there is a rivalry among buyers as well. Speaking generally, every buyer is trying to purchase for as little as possible, and every seller is trying to dispose of his goods or services to the world for as much as possible, which each has a perfect right to do.
We have already seen that prices vary with the relative proportion between supply and demand, rising as demand rises or supply fails, and falling as supply increases or demand falls off. But to complete the wonderful perfection of the mechanism, the reciprocal relation is introduced, so that supply and demand vary with price. If the price rises, fewer people can afford to buy and more will be anxious to sell; while if the price falls, more people will wish to buy and fewer people will be willing to sell.
We can now easily see why some men are able to take out from the world's common stock of product so largean amount, while most men can take but a meagre allowance. By the law of supply and demand the price is far higher for the service which one man renders to the world than another. Let us take the operation of a large machine shop, for instance. Only one superintendent is needed, and he should be a man who has devoted much time to mastering all the details of the business, and is experienced and competent to so govern the work that a large product will be turned out at a small expense. There is a demand in the country, let us say, for 5,000 such men; but out of the 5,000 who are filling such places, there are perhaps 50 who seem almost faultless in their skill and industry, there are 500 who are with one or two exceptional faults, almost equally efficient, there are 3,000 who are fairly good men, and the rest may be classed as those who hold their positions because better men for the place cannot be had. So with the skilled machinists, the relation of supply and demand is such that the price of their labor is kept up to perhaps $4.00 per day. But of common laborers the supply is so related to demand that the price of their work is very low. Thus the three classes take very unequal amounts from the common stock. The superintendent, perhaps, is able to take five thousand dollars' worth of goods each year. The skilled workman can spend perhaps one thousand five hundred dollars, while the laborer can spend but five or six hundred dollars. Thus the men who secure the greatest amount of wealth in return for their services to the world, secure it because people are willing to pay it rather than pay less for men of less ability. This is not the same as rewarding a man according to the actual benefit which he does to the community, but it is an approach to it; and it seems to be as close an approach as is possible by human methods.
This social system is not the creation of any man or set of men, but has grown of itself out of the tendency among men to secure the things they wish for with the least exertion. And its theoretical working is marvellously perfect. Any thing which men desire sufficiently to exert themselves to secure it, can be bought with a small part of the time and labor, measured in money, which would be required if each made it for himself. Not only this, but the aim of every man is to do the greatest service to the world and best meet its desires, thus securing in return the greatest rewards for himself. Rivalry among purchasers constantly tends to increase the rewards of the producers, while competition among the latter tends toward the furnishing of a better article at a smaller price. These two forces hold each other in stable equilibrium, for a variation tends always to bring things back to their normal condition.
Let us look more closely at the theory of the competition among producers. We see that, speaking broadly, all occupations are competing with each other. If changes in the supply or demand raise the rewards in any calling, men will leave other work to engage in it. Men by the pressure of competition are forced to seek out the easiest and most direct methods, and to learn how to secure the greatest results with the least expenditure of labor and material.
It is this principle which lies at the very root of our industrial development. Men have so striven to meet each other's competition and outstrip each other in the production of superior goods at low prices, that the cost of the staple articles of consumption, measuring by the labor required to produce them now and the labor required by the clumsy tools and hand work of a centuryago, is from a tenth to a hundredth of the cost in those days. It must be remembered, too, that this system of competition is in accordance with the sense of inalienable personal rights which is implanted in the breast of every man. The work of my hands and brain are my own. In disposing of it for a price, I have a right which none may deny to obtain such a sum as I can induce any one to pay me. If I choose to sell it for less than my neighbor, it is my right. In short, the open market is open to all; and every man has a right to sell there his labor, his skill, or his goods, of whatever sort he can produce, at such a price as he can obtain. The same is true of the buyer. I have arightto go into the open market and secure such goods as any one wishes to sell me at the lowest price for which he will part with them. A curious illustration of this sense of personal right is the custom duties on imported goods. It is an evidence of this inherent feeling of a natural right that both public opinion and the law hold that it is a much less serious crime to smuggle than to steal. There are a dozen people who would smuggle, if tempted to do so, to one who would steal. Another illustration is the opposition shown to sumptuary laws on the same grounds.
It is to be said that the fact that competition lies at the foundation of our industrial civilization, tersely expressed in the saying, "Competition is the life of trade," has long been known, and, to a certain extent, appreciated. The common law, based on the decisions of men most eminent for wise insight and sound judgment, has always held that combinations to restrict competition and establish a monopoly were contrary to public policy, and the protection of the law has invariably been refused, whether they were combinations of labor or of capitalized industries.The establishment of labor combinations, indeed, was long a criminal offence, as we have pointed out more fully in the chapter devoted to that subject. It must be said, too, that the principle has come to be generally, though rather blindly, understood by the masses of men. It is recognized, though perhaps not very clearly, that competition lowers the prices of goods, and that this benefits every consumer. Let a proposition to build a competing railroad line, or a competing electric-light plant be submitted to popular approval, and, under the impression that they are benefiting themselves, hard-working men will cheerfully assume heavy burdens of taxation to aid the new enterprise. So blind and unreasoning indeed, is this popular abiding faith in the merits of competition, that it has been responsible for some of the greatest wastes of wealth in unproductive enterprises that have ever been known.
We have now examined the theory of universal competition as commonly accepted at the present day, and it is rightly considered a fundamental principle of society. It is the practice of most economic writers of the orthodox school to lay great stress on the importance of this fundamental principle, and enlarge upon its various manifestations. The many attempts to limit and destroy competition, which we have studied, they consider merely as abnormal manifestations which are opposed to law, and so not worth while considering very fully. But we have seen clearly to what extent the destruction of competition has gone on; and, with this knowledge, the question almost inevitably occurs to us: Is not this decay and death of competition, this attempt to suppress it under certain conditions, too wide and general a movement to be treated as merely a troublesome excrescence?Is it not likely that there are certain fixed laws regarding competition which determine its action and operation, and sometimes its death? If this be so, it is of the highest importance that we find and study these laws; and to that purpose we will devote the following chapter.
Thus far in our study, we have assumed that we knew what competition was. Now, however, as we are to study it scientifically, we are in need of an exact definition, that we may know just what the term includes. Prof. Sturtevant, in his "Economics," says: "Competition is that law of human nature by which every man who makes an exchange will seek to obtain as much as he can of the wealth of another for a given amount of his own wealth." Simmer this down to its essence, and we have simply:Competition is selfishness.To the other evident faults of the definition we need not allude. It is a much more satisfactory definition which Webster's Dictionary gives us, for it includes the idea that competition necessitates two or more parties to exercise it: "Competition is the act of seeking the same object that another is seeking." But this is too broad a definition for our purpose. It takes in competitions for fame, social standing, etc., with which we have nothing to do.
Failing to find a satisfactory definition, let us make one, as follows:Competition is that force of rivalry between buyers or between sellers which tends to make the former give a greater price for the commodity they wish to secure, and tends to make the latter offer better commodities for a less price.
That competitionisa force, even in the popular estimation, is evidenced by such common expressions as "the pressure of competition," "a strong competition," and indeed, "the force of competition." But these very expressions show us as well, what we have already found to be true in the preceding chapters, that it is not a constant force but a variable one. What, then, are the laws of its variation?
Let us see what we can learn by a study of three typical examples of the force of competition. Let us take first the business of growing corn. There are perhaps three million farmers in the United States engaged in producing corn, and each one of these competes with all the others. Is this doubted? We have defined competition as a rivalry that tends to make the sellers offer better goods for a less price. Now at first sight it may seem that there is no rivalry at all. Neighboring farmers work together in all harmony; and no man thinks that because his neighbors have raised a large crop of corn, he is in any way injured. And yet thistendencyto give better goods and lower prices exists and is plainly felt. Suppose a new and superior variety of corn were introduced, which buyers preferred. Some farmers would at once begin to raise it, so that they might be more sure of a market and perhaps of a better price, and other farmers would be obliged to follow suit to meet the competition. Again, consider that the supply and demand adjust themselves to each other through competition. For suppose, at the ruling price, the demand to be less than the supply; then to increase the demand, the price must fall; and the cause of the fall in price is simply that the farmers compete with each other for the market, and lower their prices in order to secure a salefor their crops. Note, however, that the rivalry in this case never becomes a personal one. Each farmer recognizes that an increased supply lessens the price for his goods; but his neighbor's extra acreage is such a drop in the bucket, that he never thinks of it as being really a rival of his own crop.
Take as a second example, the wholesale paper trade. Here are perhaps three hundred men, each knowing personally many of his competitors and probably hating some of them cordially. Each striving to secure for himself all the trade possible, and to gain, if he can, his rivals' customers. He sends out his salesmen with instructions to, "Sell goods! For the best prices you can get, but sell them, anyhow." These "drummers" are sharp, active business men, they might well be employed in directing some productive process; but they go out and spend their time in inducing customers by all the means in their power to buy their goods. They spend money in various "treats" to secure the good-fellowship of the man with whom it is desired to trade, and use his time as well as their own. Another item of expense is for advertising and for keeping the firm name prominently before the purchasing public. All these things cost money, as any wholesale merchant engaged in a business where there is sharp competition can testify. It may be thought that a firm which would have the courage to do away with all these expenses and give the money thus saved to their patrons in reduced prices and better goods, would be able to keep its trade and even gain over its competitors. But it is hardly so; most men are more likely to be wheedled into taking slightly inferior goods at a slightly greater price.
Another matter to be considered in this connection isthe variation in price. In the case of the producers of corn, we saw that prices were practically uniform at any given place, being fixed by the ratio of supply and demand in the chief markets of the world. But in making sales of paper, the sharp, close-dealing buyer is generally able to secure a better price than a buyer not posted in regard to the condition of the paper trade.
As competition becomes more intense, its burdens become more heavy to carry. Perhaps two of the largest houses in the trade, who are able to force prices lowest, come to a sort of tacit understanding that their salesmen "will respect each others rights a little and not force prices down beyond all reason." It is plain thatherethe foundation is laid for the establishment of a monopoly. Yet the agreement certainly seems to be nothing more than these two firms have a right to make. Its result is seen, however, in a slight increase in the price their customers have to pay. Soon the tacit agreement becomes a formal one. Then other firms are taken in. The first seed has borne fruit. The combination grows larger and stronger. The number of producing units is growing less. Finally it includes practically all the paper manufacturers in the country. Whoever wants paper must buy of the combination, there is no other source of supply. Competition is dead.
If the combination is strong enough and is managed well enough, it may be permanent; and prices of paper will be regulated by other laws than the law of competition. But suppose that the number of paper makers is so great and that they are so widely scattered that the combination proves difficult to maintain; local jealousies creep in, and charges are made of partiality on the part of the managers. The combination finallybreaks up. Can we expect a perfect return to the old system of free competition? When men have once reaped the enormous returns that are yielded by the control of a monopoly, the ordinary profits of business seem tame and dull. There will surely be attempts to form the monopoly anew on a stronger and more permanent basis; and even if these attempts do succeed in producing only short-lived monopolies, the effect will be to keep the whole trade and all dependent upon it in a state of disquiet and uncertainty. Prices will swing up and down very suddenly between wide limits; and it is everywhere recognized thatstability in priceis a most important element in inducing general prosperity. A perusal of the trade journals for the years 1887 and 1888 will convince one of the truth that when a combination is once formed, its members are loth to try competition again. A considerable number of combinations which were formed in 1887 were soon broken up, often from the strength of old feuds and jealousies. But in almost every case they have been formed anew on a stronger basis after a short experience of competition.
This matter of the variation in price is a very important one, and it has an important influence in checking business prosperity. Men are far less apt to engage in an enterprise, if they cannot calculate closely on prices and profits. But the main point, after all, is the waste which is due to competition. It is for the interest of the public at large that the papermakers should devote all the energies which they give to their business to making the best quality of each grade of paper with the least possible waste of labor and material.
Take for a third example two railway lines doing business between the same points. We have fully pointedout the practical working of this sort of competition in the chapter devoted to railways. It is plain that the general effect is a fluctuation of rates between wide limits, an enormous waste of capital and labor, and ultimately, the permanent death of competition by the consolidation of the two lines.
In comparing now the above three cases, the most noticeable difference in the conditions is in thenumber of competing units. There were in the first example three million competitors; in the second, three hundred; and in the last, but two.
The first difference in the competition which existed is in intensity. In the case of the producers of corn, competition was so mild that its very existence was doubted. In the case of the papermakers it was vastly more intense, so that it caused those engaged in it to take steps to restrict and finally abolish it. In the case of the railroads it was still more intense, so that it was not able to survive any length of time, but had to suffer either a temporary or permanent death very soon. Let us state, therefore, as the first law of competition, this:In any given industry the intensity of competition tends to vary inversely as the number of competing units.
We also saw that among the producers of corn there was virtually no waste of energy from competition. Among the paper makers there was a large waste. And in the case of the railroads, the whole capital invested in the rival railroad, as well as the expense of operating it, was probably a total waste. Let us state, then, for a second law of competition:In any given industry the waste due to competition tends to vary directly as the intensity.As an additional example to prove the truth of these laws, take the competition which exists between buyers. Inthe case of ordinary retail trade the number of buyers is very great, and the competition between them is so moderate that we hardly remember that it exists. It is difficult to see how there could be any waste from this competition among buyers, at least of any amount. Expressed in the language of the laws we have found: The number of competing units is so great that competition is neither intense nor wasteful.
From these two laws and a study of the examples we have given, it is easy to deduce a third. We have seen that when competition became very wasteful, monopoly arose; indeed, we have noted the working of this law all through our investigation. The principal cause assigned for the formation of the linseed-oil trust was the waste which intense competition had caused. The third law is, then:In any given industry the tendency toward the death of competition (monopoly) varies directly with the waste due to competition.
We might now combine these three laws to deduce the fourth law, which is:In any given industry the tendency toward the death of competition (monopoly) varies inversely with the number of competing units.But this law is also proved independently. Look back over all the monopolies we have studied, and it will be seen that one of the most important conditions of their success was the small number of competitors. Fifty men could be brought together and organized, and made to bury their feuds and rivalries, when with a thousand the combination would have been impossible. We have seen, in the case of the farmers, how their great number alone has prevented them from forming combinations to restrict the competition among themselves.
It should be said that these laws, like all other laws ofeconomics, are not to be taken in a narrow mathematical sense. We cannot study causes and effects dependent on the caprice of men's desires and wills with the minute exactness with which we solve numerical problems. Taken in the broad sense, however, the study we have made in the preceding chapters is sufficient proof of their truth.
The common expressions of trade afford still further evidence. We often hear the expression: "A healthy competition." But the very existence of the phrase implies that there may be an unhealthy competition, and if so, what is it? Is it not that competition whose intensity is so great that it causes a large waste of capital and labor in work other than production; whose intensity is so great that, like an animal or a machine working under too great a load, it labors intermittently,—now acting with great intensity and forcing prices far below their normal plane, now pausing in a reaction, when a temporary combination is formed, and allowing prices to spring back as far above the point indicated by the relation of supply and demand; and finally reaching the natural end for unhealthiness—death. In fact, a recent economic writer declares that especially intense competition should be called war, as, indeed, it frequently is called, rather than competition.
Looking about us for other causes of variation in the intensity of competition we discover a fifth law:The intensity of competition tends to vary directly in proportion to the amount of capital required for the operation of each competing unit, especially when the interest on the capital invested forms a large proportion of the cost of production.Take, for example, the case of a railway line. All the capital invested in it is wasted unless the road is in operation.Hence it will be better to operate the road, so long as receipts are any thing more than the expense of operation, than to abandon it. An enterprise in which no capital is invested will cease operations when receipts do not exceed its expenditure and there is no prospect of betterment. But in the total expense of operating a railroad, a large item is the interest on the capital invested, which is as truly a part of the total cost of carrying the traffic as is the daily labor expended in keeping the road in good repair. (In railway bookkeeping only an arbitrary line can ever be drawn between capital account and operating expenses.) Now, in order to pay operating expenses and fixed charges, railways must secure traffic. We suppose that they are doing this by competition, and that they have not yet combined to form a monopoly. Let us suppose that this competition cuts down receipts to a point where they are just sufficient to pay the whole cost of carriage. In an enterprise in which no capital was invested some of the competitors would be sure to fall out when profits disappeared; but here there is no such chance of relief; and though the competition keeps on until the receipts are only enough to pay the operating expenses, still the road is not abandoned because then the capital invested, in it would be a complete loss. Changes in productive processes often lessen the demand for a line of goods; but the owners of the capital invested in factories and machines for making these goods may often cause them to be continued in operation at a loss rather than lose all that they have invested, and because they hope for better days and a renewal of the demand.
For the sixth law of competition we have:In any given industry the tendency toward the death of competition(monopoly) varies directly with the amount of capital required for each competing unit.This law is proven in part by the preceding laws; for when a large capital is required for each competing unit, the number of competitors will be small and the tendency toward monopoly will be strong; but it may also be proven independently. Business men, before they form a combination, are certain to ask whether new competitors are likely to enter the field against the combination. Now, as we have seen in very many cases in the preceding chapters, when there is a great amount of capital required, new competitors will be very unlikely to enter the field. If there is but little capital required, they will be very apt to do so, being tempted by the prospect of large profits at the monopoly's prices. But they know that the combination will concentrate its strength to fight them in every way; and if they must invest a great deal of money in buildings, plant, etc., to start operations, they will be apt to think twice before they take the field against the combination.
The seventh law of competition is:In any given industry in which natural agents are necessary, the tendency toward the inequality of competition (monopoly) tends to vary directly with the scarcity of available like natural agents.
The influence of limited natural agents in promoting the growth of monopolies is a matter of the greatest importance. That the law is true, is evident upon slight investigation. For if some especial gift of Nature is a necessity to any industry, and those who are engaged in that industry can secure all the available gifts of Nature of that sort, there is no opportunity for new competitors to enter the field.
It is to be noted that in this seventh law we have used in apposition with the term monopoly, the term "inequality of competition" instead of "death of competition," as inthe preceding laws. We are now in need of a definition of the term monopoly. Webster defines it as "the sole control over the sale of any line of goods"; Prof. Newcomb says "a monopoly is the ownership or command by one or a limited number of persons of some requisite of production which is not solely a product of human labor"; Sturtevant says "a monopoly is such a control of the supply of any desirable object as will enable the holder to determine its price without appeal to competition." To the first definition we object that it is both narrow and indefinite. The second seems to omit such important classes of monopolies as the combinations to limit competition; and Sturtevant's definition is unscientific in this: Hardly any monopoly exists whose holders can without limit determine the price of its product. If the price continues to rise, competition in some form will appear. Take, for example, the business of transporting goods from New York to San Francisco; if all the railway lines combine to form a monopoly, the competition of ocean steamers via Panama would eventually stop the rise in rates, if no other outside competition stopped it before. The owners of a rich mine have a real monopoly, though they cannot raise the price above a certain point without being undersold by the owners of poorer mines or those more remote from market. Consideration of these facts lead us to construct the following definition:A monopoly in any industry consists in the control of some advantage over existing or possible competitors by which greater profits can be secured than these competitors can make.For the law of monopolies we have:The degree of a monopoly depends upon the amount of advantage which is held over existing or possible competitors.When the advantage of the monopoly is so great that no other competitor will try to do business in competitionwith it, we may rightly say that competition is dead. The great share of the monopolies which are based on this seventh law of competition, those due to the control of natural agents, only restrict competition by the attainment of an advantage over their competitors, and do not destroy it.
The principal natural agents which are necessary to production, and whose supply may be so limited to cause an appreciable monopoly, are: (1) Land for agricultural purposes; (2) land for purposes of manufacture or commerce; (3) transportation routes, such as mountain passes, room for railway tracks in a city street, or for gas-and water-pipes beneath its surface; (4) natural deposits of minerals and metals; (5) sources of water supply or water power. (The latter is unimportant now compared with a score of years ago, because of the lessened cost of its competitor, steam.)
Let us be especially careful not to confound this seventh law of competition with a certain doctrine which is now receiving more and more credence, which is, in brief, that the private ownership of the gifts of Nature used in production should be abolished. The grounds in opposition to this doctrine we will discuss in a later chapter. The law we have stated says nothing of the right or wrong of the private ownership of the gifts of Nature. What it does say is, that when any of these are limited in amount, those who control them are given an advantage over other would-be competitors, which constitutes a monopoly.
In considering the natural agents enumerated above, we can easily see the truth of the law. Agricultural lands, the most important of natural agents, are in this country so abundant that their rental is entirely fixed by competition. In England, where they are so much more limited in area, rent is fixed by custom. As regards landfor purposes of manufacture or commerce, we have already pointed out the cases in which monopolies are prominent, as also for transportation routes. As regards mineral wealth, deposits of iron are so numerous and widespread that no monopoly has ever yet succeeded in controlling competition in the manufacture of pig-iron to any great extent. But the rarer metals, like copper, tin, nickel, and others, are largely controlled by monopolies.
Now, while this seventh law says nothing as to the right or wrong, the expediency or inexpediency of the private ownership of natural wealth, it does follow from it that this private ownership generally constitutes a monopoly, as we have defined it. For of no class of natural agents is it true that their richness and availability are absolutely equal. Those competitors who have the richest and best natural resources to work with have an advantage over their competitors which is essentially a monopoly. Thus the owners of fertile lands near a large city have an advantage over the owners of less fertile lands far removed from markets, which is of a monopolistic nature. If any one doubts this, let him say how this case is logically different from that of the ownership of a mine of native copper so near to New York City that the cost of laying it down in the market there will be half what it is from any existing mine; or, for a second case, take the New York Central railway, which has the control of such a valuable pathway between the Mississippi Valley and the Atlantic seaboard that it has an advantage over all competitors in the business of transportation between those points.
We have now to turn our attention to other variations in competition besides the variation in intensity. We need to distinguish the different species of competition. That competition which is in daily operation in mostbranches of industry we may callactualcompetition. That competition which would spring up in any industry in case an increase in profits called it out, we may callpotentialcompetition. The third class is instanced in the letting to the highest bidder a franchise for city water or gas-works, or street-car lines. Here competition acts at a single time to fix the price for perhaps twenty years. We may call this, for want of a better name,franchisecompetition. It possesses the evident advantage that it avoids both the waste of competition and the fluctuation of prices. It has the disadvantage that, unless the owners of the franchise are held strictly to their contract, quality is apt to be sacrificed; also that if the purchase is for a term of years, cheapening in processes may result in undue profits to the franchise holders. The discussion of this matter, however, does not properly belong to this chapter.
Arranging in their logical order the laws of competition which we have found, we have the following diagram:
In any given industry the tendency toward monopoly increases:(1.) As the waste due to competition increases.The waste of competition increases in proportion to its intensity.(1.) The intensity of competition increases as the number of competing units decreases.(2.) The intensity of competition increases with the amount of capital required for each competing unit.(2.) As the number of competing units decreases.(3.) As the amount of capital required for each competing unit increases.(4.) As the number of available natural agents decreases.
In any given industry the tendency toward monopoly increases:
(1.) As the waste due to competition increases.The waste of competition increases in proportion to its intensity.(1.) The intensity of competition increases as the number of competing units decreases.(2.) The intensity of competition increases with the amount of capital required for each competing unit.(2.) As the number of competing units decreases.(3.) As the amount of capital required for each competing unit increases.(4.) As the number of available natural agents decreases.
(1.) As the waste due to competition increases.
The waste of competition increases in proportion to its intensity.(1.) The intensity of competition increases as the number of competing units decreases.(2.) The intensity of competition increases with the amount of capital required for each competing unit.
The waste of competition increases in proportion to its intensity.
(1.) The intensity of competition increases as the number of competing units decreases.(2.) The intensity of competition increases with the amount of capital required for each competing unit.
(1.) The intensity of competition increases as the number of competing units decreases.
(2.) The intensity of competition increases with the amount of capital required for each competing unit.
(2.) As the number of competing units decreases.
(3.) As the amount of capital required for each competing unit increases.
(4.) As the number of available natural agents decreases.
The preceding diagram sets plainly before us the three great salient causes from which have grown the long list of monopolies under which our civilization labors. First, the supply of natural agents of which new competitors in any industry may avail themselves has been largely exhausted, or has been gathered up by existing monopolies to render their position more secure; the world has not the natural resources to develop that she had a century ago. Second, the concentration of all the productive industries, except agriculture, into great establishments, while it has enormously lessened the cost of production, has so reduced the number of competing units that a monopoly is the inevitable final result. Last, the enormous capital required for the establishment and maintenance of new competing units tends to fortify the monopoly in its position and render the escape of the public from its grasp practically impossible. These terse statements contain exactly the kernel of potent truth for which we are seeking;MONOPOLIES OF EVERY SORT ARE AN INEVITABLE RESULT FROM CERTAIN CONDITIONS OF MODERN CIVILIZATION.
The vital importance of this truth cannot be over-estimated. For so long as we refuse to recognize it, so long as we attempt to stop the present evils of monopoly by trying to add a feebleoneto the number of competing units, or by trying to legislate against special monopolies, we are only building a temporary dam to shut out a flood which can only be controlled at the fountain head.
The facts of history testify to the truth of this law. Monopolies were never so abundant as to-day, never so powerful, never so threatening; and with unimportant exceptions they have all sprung up with our modern industrial development. The last fifteen years have seen agreater industrial advancement than did the thirty preceding, but they have also witnessed a more than proportionate growth of monopolies. How worse than foolish, then, is the short-sightedness that ascribes monopolies to the personal wickedness of the men who form them. It is as foolish to decry the wickedness of trust makers as it is to curse the schemes of labor monopolists. Each is working unconsciously in obedience to a natural law; and the only reason that almost every man is not engaged in forming or maintaining a similar monopoly is that he is not placed in similar circumstances. Away, then, with the pessimism which declares that the prevalence of monopolies evidences the decay of the nobler aspirations of humanity. The monopolies of to-day are a natural outgrowth of the laws of modern competition, and they are as actually a result of the application of steam, electricity, and machinery to the service of man, as are our factories and railways. Great evils though they may have become, there is naught of evil omen in them to make us fear for the ultimate welfare of our liberties.
To the practical mind, however, the question at once occurs, what light have we gained toward the proper method of counteracting this evil? Can it be true that the conditions of modern civilization necessitates our subjection to monopolies, and that all our vaunted progress in the arts of peace only brings us nearer to an inevitable and deplorable end, in which a few holders of the strongest monopolies shall ride rough shod over the industrial liberties of the vast mass of humanity? Were this true, perhaps we had better take a step backward; relinquish the factory for the workshop, the railway for the stage-coach. "Better it is to be of an humble spirit with the lowly, than to divide spoil with the proud."But the law we have found commits us to no such fate. We cannot, indeed, abolish the causes of monopolies. We cannot create new gifts of Nature, and it would be nonsense to attempt to bring about an increase in the number of competing units and a decrease in the capitalization of each by exchanging our factories and works of to-day for the workshops of our grandfathers. But while monopolies are inevitable, oursubjectionto them is not inevitable; and when the public once comes to fully understand thatthe remedy for the evils of monopoly is not abolition, but control, we shall have taken a great step toward the settlement of our existing social evils. To discuss the details of the remedy, so far as it can be done in a volume of this sort, belongs properly to a later chapter. Before undertaking it, however, it seems well to devote some further attention to the evils which the attempt to abolish monopolies and adhere to the ideal system of universal competition has brought upon us, and to make, also, some further study of the general evils due to monopoly.
It is a strange thing when we come to analyze the various social evils which demand our attention, and which every true man longs to cure, to find how great a proportion can be traced back to the one great evil of faulty competition. As a preliminary to a survey of these evils, in order that we may understand the necessity that all good men and true should exert themselves in applying the remedy, let us see just what conditions of our industrial society we should seek to work toward. What is the theoretical perfection of human industry?
Probably all thinking men, whatever their belief and practice, will acquiesce in the proposition that the end we should aim to secure is "the largest good to the greatest number." As we are discussing here only economic questions, this means that the end to be sought is that the largest number of people should have secured to them the greatest possible amount of the necessaries and comforts of life; or, more simply, that the total of human happiness to be derived from the world's production of wealth should be the greatest possible. Now for our present purpose we may assume that since all men desire wealth, the greater its production, the greater will be the numberof human desires gratified. From this it follows that our social organization should be such as to increase to the greatest possible degree the world's stock of wealth.
There is no easier or safer way of studying questions of economics than to consider the community as a unit, and see what is for the interest of the people as a whole; what conduces most to the "common wealth"; and if we do this, whenever the question concerns production alone, the task is simple, because the interests of the people as a whole are judged in the same way as the interests of a single person. Whatever tends to increase the total amount of wealth in the world, therefore, benefits the community as a whole; and whatever diminishes the supply is an injury. All work of every sort which tends to aid in the economical production of wealth and its transfer to the consumer is a benefit to the community; and any thing which destroys wealth, lessens its production, or hinders men from exerting themselves to produce it, is an economic injury.
What, then, are we to say of the condition known as over-production? Is it not a fact that some lines of industry are so overdone that the production is far in excess of the demand, and is not this an evil rather than a benefit? Do not periods of business depression occur when all industries stagnate for want of a market for their goods? The true answer to this question is: Over-production is not a fault ofproduction, but ofdistribution. It is true that, in special industries, a surplus of production sometimes occurs, due to over-stimulation, or too rapid growth; but over-production as commonly spoken of, refers to a general state of trade, in which demand for all sorts of goods seems to fall far below the market supply. But this lack of demand is not due to lack ofdesire. The desires of men are always in excess of their abilities to supply them; it follows, therefore, that the condition known as over-production consists in a lack ofabilityto purchase goods rather than in a lack ofdesireto purchase them. This lack of ability has evidently to do with the distribution of wealth rather than its production.
While it is easy to formulate laws to govern the theoretically perfect production of wealth, to whose justice all men will consent, we cannot go far in the details of the ideal distribution of wealth without reaching points upon which the views of different parties are diametrically opposed. Some foundation principles, however, let us state, believing that in their truth the great majority of men will concur.
In the chapter on the theory of competition we saw that, if we conceived the results of the labor of the whole community to be placed in a common storehouse and gave to each man the right to draw from it an amount just equal to the benefit derived from the goods which he had placed within it, the ideal of a perfect system of distribution of wealth would be realized. No human judgment, however, is, or ever can be, competent to measure the exact industrial benefits which each person confers upon the community at large. We must inevitably permit men to measure the result of their own work by securing for it such an amount of the results of others' work as they can induce them to give in exchange. But while we cannot measure exactly the benefit which each person confers, we can see cases in which the reward received is manifestly out of all proportion to the benefit conferred. Consider the fortunes which have been accumulated by some of our Midases of the present decade.It is quite certain that the benefits which Cornelius Vanderbilt, for instance, conferred on the community by his enterprise and business sagacity, by his work in opening new fields of industry, forming new channels for commerce, etc., were so valuable that he honestly earned the right to enjoy a large fortune. It is equally certain that a great part of his gains had nothing whatever to do with any benefit conferred upon the community, and that the fortune of $100,000,000 or so which he accumulated was an example of inequitable distribution of the products of the world's industry. Stating this in the form of a general principle, we should say:The amount of wealth which any man receives should bear some approximate relation to the benefit which he confers upon the world.
We have already stated that, by the law of supply and demand, the rewards of each worker are regulated in theory even more perfectly in accordance with our ideas of liberty than they could be on the basis of actual benefit conferred. For it is inconceivable that people would submit to pay for what was beneficial to them instead of what they desired. A man who prefers to purchase wines instead of books with his surplus money would think it a great injustice if he were prevented from doing as he preferred with his own. But so long as every one is at liberty to use his income in buying whatever he desires most,demand—the willingness to pay money for the gratification of the desire—will exist, and so long as demand exists it will be met by a supply, furnished by those who are desirous of money and what it will bring. It is inconceivable, then, that any juster arrangement than this law of supply and demand can ever be practicable for regulating the compensation of each individual. The man who can drive a locomotive will receive largerwages than the man who shovels the earth to form its pathway, because the supply of men competent to drive an engine is small in proportion to the number of men who are wanted for that work, while almost any man can shovel dirt. Let us state, then, for our second principle:The amount of wealth which any man receives should depend on the ratio between the demand which exists for his services and the supply of those able to render like service.Farther than these statements of the ideal principles governing the economical production and equitable distribution of wealth we need not go at present.
Let us turn now to examine the result of a violation of these principles in some of the crying evils of the present day which are wholly or in part due to the growth of monopoly and the waste of competition.
Every candid man will acknowledge that the enormous congestion of wealth in a few hands which exists to-day is a danger to be feared. We have had it constantly dinned in our ears that in this free land the ups and downs of fortune were such that the rich man of to-day was apt to be the beggar to-morrow; also that almost invariably a rich man's sons were reckless spendthrifts. These things, aided by the abolition of primogeniture and entails, it was said, were to prevent the growth of a moneyed aristocracy in this country. The propounders of this amiable theory never explained how the community received reparation for the destruction of wealth which the spendthrift sons were to carry on; but so long as the theory has failed to work in practice, that does not matter so much.
A few years ago it was a favorite occupation of newspaper paragraphers to estimate the Gould and Vanderbilt fortunes; but lately they seem to have given them upas beyond the limits of even their robust guessing abilities. Some idea of the latter's fortune may be gained, however, by realizing the fact that the Vanderbilt railway system now has a total extent of nearly 12,000 miles, the total value of which can hardly be less than one thousand millions of dollars. Probably not less than half of the securities of these companies are owned by the Vanderbilt family, and it is well known that their investments are by no means confined to railways. The important fact is, that this fortune grows so fast now that it is sure to increase; and will double itself every fifteen or twenty years, because all that its owners can spend is but a drop in the bucket toward using up their income. But this fortune, while the largest which is still under one name, is but one of many enormous ones. The names of Gould, Flagler, Astor, Rockefeller, Stanford, Huntington, and a host of others follow close after the Vanderbilts. In the days of our grandfathers, millionaires were no more plentiful than hundred-millionaires are to-day.
We have next to show the present and prospective evils which result from this congestion of wealth. The first and most obvious one is its injury to the remainder of the people of the country, by the diversion from them of wealth which they have rightfully earned and which they would receive were it not for the tax of monopoly. It is obvious that a certain amount of wealth is annually produced by the industry of the country from which the whole wants of the country must be supplied. This amount may be greater, indeed, when a Gould or a Flagler or a Crocker directs the enterprise; but for the most part it is indisputable that the owners of these colossal fortunes have made them, not by any stimulusof the production of wealth by their owners, but by a diversion of the produced wealth in the general distribution from others' pockets to their own. In short, all other men are poorer that these many times millionaires may be richer. To show how these fortunes have in many cases been obtained, I cannot do better than to quote a writer not at all likely to err by undue severity to our millionaires, as he is himself the president of a railway system a thousand miles in extent:
The great majority of the phenomenal fortunes of the day are the result of what may be called lucky gambling.... Man is a gambling animal by nature, and modern methods have enormously developed both its facilities and its temptations and have opened large fields in which gambling is not held to be disreputable.Under such stimulus is it wonderful that its growth has been phenomenal? Wall street is its head-quarters, and millions upon millions of dollars are accumulated there to meet the wants of the players. Railroad stocks are its favorite cards to bet upon, for their valuation is liable to constant fluctuation on account of weather, crops, new combinations, wars, strikes, deaths, and legislation. They can also be easily affected by personal manipulations.... Money makes money, and money in great masses has its attractive power increased. The aspect of phenomenal fortunes, therefore, is a social problem of some importance. Their manner of growth and their manner of use are to be observed, and what restrictions, if any, should be placed on their accumulation should be considered.[5]
The great majority of the phenomenal fortunes of the day are the result of what may be called lucky gambling.... Man is a gambling animal by nature, and modern methods have enormously developed both its facilities and its temptations and have opened large fields in which gambling is not held to be disreputable.
Under such stimulus is it wonderful that its growth has been phenomenal? Wall street is its head-quarters, and millions upon millions of dollars are accumulated there to meet the wants of the players. Railroad stocks are its favorite cards to bet upon, for their valuation is liable to constant fluctuation on account of weather, crops, new combinations, wars, strikes, deaths, and legislation. They can also be easily affected by personal manipulations.... Money makes money, and money in great masses has its attractive power increased. The aspect of phenomenal fortunes, therefore, is a social problem of some importance. Their manner of growth and their manner of use are to be observed, and what restrictions, if any, should be placed on their accumulation should be considered.[5]
The fact pointed out by General Alexander in the above quotation is one which is far too lightly appreciated. The evils of railway management by which the owners of the stocks and bonds of the company are victimized to enrich stock speculators are much too complex and numerous to be described here. The state of affairs can be briefly summed up, however, with the statementthat our present system of conducting corporate enterprises results inevitably in the gravitation of their ownership into the hands of the holders of large fortunes. The railways of the country are an instance in point. Time was when the stocks and bonds of railways were owned by people of small means all over the country. But after many severe lessons in the shape of stocks wiped out, and bond interest scaled down, these small holders were taught the folly of investing their savings in business over which they had practically no control, and thus placing them at the mercy of irresponsible corporate officers. Broadly speaking, the railway property of the country is owned by men worth their millions; and the small holdings are being rapidly absorbed every day. But the case is not true of railways alone. Telegraph lines, telephone, and electric light plants, our mines, and to a large extent our factories, which were once held by private owners, are now controlled by corporations whose shares are quoted on the exchanges and are consequently subject to a forced variation, dictated according as "bull" or "bear" has theascendancy. And when the ownership of a property is once brought into this channel, it is no longer a suitable investment for the man of small means. It is the prey of men who practically make bets as to what its future price will be, and manipulate the price, if possible, to win their bets. If it is ever again held for investment simply, it is when it is locked in the safe of some modern Crœsus.
We have shown now the extent to which the congestion of wealth has gone. We have shown that other men are poorer that these men may be richer. We have explained that these great fortunes have been made, not by legitimateenterprise, but largely by "lucky gambling." And finally we have seen how the transfer of each enterprise to the control of stock speculators adds it eventually to some already overgrown fortune. The connection with the subject of the present volume is obvious. The cotton-seed oil mills of the South, once held by private owners, are now in the hands of a trust whose certificates are quoted on the stock-exchanges, and are held only by men of large capital, or by stock gamblers. This is a typical example of the change which is everywhere occurring. Private enterprise gives way to the stock company, and that in turn gives way to the trust. The salient fact, then, we may express in similar terms to those of our first law of competition, as follows:The congestion of wealth tends to increase inversely with the number of competing units.
The facts we have stated make it impossible for the greater monopolies to defend themselves, on the ground that their profits inure to the benefit of any great number of people. But this is not an innocuous state of affairs. It is one of serious injustice and evil. The workman who struggles hard to save a hundred dollars a year can receive only a paltry three dollars and a half of interest or less, if he deposits it in a saving-bank. But the capitalist who is clearing a hundred thousand a year may make twice or thrice that interest from his investments. In short, the charge is: That monopoly and intense competition, with the variation in price which they cause, have shut out the small capitalists of the country from the ownership of the most profitable sorts of property; and by confining them to other lines, have decreased their possible income from their investments.
A further evil resulting from the congestion of wealthis what is commonly spoken of as over-production. We are confronted of late years with the strange spectacle of factories and mills shut down for months at a time, of markets which, at various times, are glutted with every sort of commodity. All sorts of causes are given; all sorts of remedies are suggested and tried. Where is the true one? With the exception of a few special cases, the fault is not that there are no people who want the goods. Probably ninety-nine families out of every hundred would buy more if they had the money to buy with. In many cases the lack of money to buy with is due to the fact that the bread-winners are out of employment because of the glutted markets and idle mills. In this way the evil tends to perpetuate itself and grow worse. Now combine this fact with the fact that the holders of monopolies are in the receipt of incomes so great that, in many cases, they are quite unable to spend them. Also, that this income is largely locked up to wait the chance of profitable investment, or is used in speculation. Is it not obvious, now, that the reason why people cannot afford to purchase the goods, with which the storehouses are glutted, is that too large a proportion of profits has been diverted to swell fortunes already enormous? Have we not in this way accounted for a large amount, at least, of the over-production which is throwing out of employment thousands of workmen, rendering useless a vast amount of valuable capital, and affecting from time to time the business of the whole country with a veritable paralysis?
The facts bear out this theory. For, at many times when producers in every industry are complaining of dull times because people who buy have no money to spend, there is an abundance of money to be had for investment.Fortunately, the evil seen from this aspect must, to a certain extent, be but a temporary one, and will tend to work its own cure. For as the world's stock of invested wealth continues to grow, there is less opportunity for its profitable investment in improving undeveloped natural resources. The greater portion of our wealth we save and invest, the faster will the rate of interest tend downward. But, as this occurs, the operators of mills and mines have to pay less out of their receipts as interest on their borrowed capital, and can, therefore, pay more to their workmen.
There is another way in which monopoly works to cause over-production, with its attendant evils. Suppose a trust is formed in some manufacturing industry, where the working capacity is just equal to supplying the demand. The first work of the trust is to raise the prices perhaps 20, 30, or 40 per cent. Of course this causes a falling off in the demand, and the trust has to shut down some of its mills to ward off over-production. The true cause of over-production in this case is, that the prices are not in equilibrium with the relation between supply and demand. Let prices come down, and the demand will increase. The working of this special case gives us an idea of the way in which general over-production is caused. For it is well known that monopolies have raised the prices and reduced the consumption not of one, but of hundreds of articles. If the men who are made idle by the over-production in these industries flock into other occupations to secure work, they reduce wages there; so that, in any case, their purchasing power is reduced, and this tends to perpetuate and increase the evil. Of course it is not pretended to claim that all industrial depressions have been due to over-production,or the local congestion of the world's income. But that a large part of it may be justly laid to this cause, seems to be beyond question.
We have shown that the congestion of wealth is very largely due to the growth of monopoly, and we have discussed the more immediate evils that result from this congestion of wealth. But when we attempt to describe the evils and abuses which follow close after, as a result of the power which monopoly has placed in the hands of a few, we may well pause at the task. The whole array of perplexing social problems comes before us, and we realize more and more what a curse monopoly has become. The philanthropist tells us that poverty, and all the distresses that follow in its wake, are largely due to the fact that our workingmen under present conditionsmustlive from hand to mouth,mustrely on charity for aid in every emergency, andmust, therefore, decrease in manliness and self-reliance and the ambition to better themselves, as the practical impossibility of success is comprehended.