305. ISOLATION THE MENACE OF RURAL LIFE.—Isolation may be said to be the menace of rural life, as congestion is the menace of urban life. In many out-of-the-way rural districts isolation has resulted in moral inertia and intellectual dullness. Isolation has weighed particularly hard upon the farmer's wife. Often she is called upon, not only to rear a large family, but to cook and keep house for hired men, raise poultry and garden stuff, and even to help in the fields during the harvest season. In spite of this deadening routine, she has had fewer chances than the farmer to go to town, to meet people, or otherwise to secure a share of social life.
306. COMMUNITY SPIRIT IN THE COUNTRY.—In view of the injurious effects of rural isolation, it is encouraging to note the beginnings of a genuine community spirit in country districts. To a considerable extent this development is the result of improved means of transportation and communication. The coming of the automobile, the telephone, and the trolley, the development of the rural free delivery, the parcel post, and the agricultural press,—all these factors have been important. The farmer has been enabled to share more and more in the benefits of city life without leaving the farm. Even more important, perhaps, improved methods of transportation and communication have stimulated social intercourse among farmers. Co÷peration in church and school work has been encouraged. Clubs and community centers are more practicable where farmers make use of the automobile and the telephone. The fair and the festival are also proving to be admirable methods of developing the co÷perative spirit in rural life.
The growing realization among students of rural life that a strong and constructive community spirit is not only desirable but possible, is encouraging an interest in rural problems. The development of such a spirit must ultimately stimulate a healthy social life in the country, with a resultant increase in health and prosperity, not only for the farmer but for the nation as a whole.
1. What is the significance of rural life?
2. What is the nature of the rural problem?
3. Why is the rural problem of recent origin?
4. What is meant by the cityward drift?
5. To what extent is this drift desirable? To what extent is it undesirable?
6. What can be said as to the "back to the land" movement?
7. How does the Department of Agriculture help the farmer?
8. What is the object of the Federal Farm Loan Act?
9. Why is the marketing of farm products a problem?
10. What are some suggestions for solving this problem?
11. Discuss the recent improvement in rural health.
12. In what way is rural health still in an unsatisfactory condition?
13. What is the purpose of consolidating the rural schools?
14. What can be said as to the condition of the rural church?
15. What is the effect of isolation upon farm life?
16. What has been the effect of improved means of transportation and communication upon community spirit in rural districts?
1. Williamson,Readings in American Democracy, chapter xxv.
Or all of the following:
2. Butterfield,The Farmer and the New Day, chapter iii.
3. Carney,Country Life and the Country School,chapter i.
4. Carver,Rural Economics,chapter vi.
5. Ely,Principles of Economics,chapter xxxix.
1. In what way is the rural problem threefold? (Butterfield, pages 30- 31)
2. What changes have taken place since 1850 with regard to the size of American farms? (Ely, pages 596-603.)
3. What problem arises in connection with the control of land in this country? (Butterfield, pages 40-41.)
4. Is absentee landlordism a danger in American rural life? (Ely, page 605.)
5. How could farm management in this country be improved? (Butterfield, pages 42-45.)
6. Discuss co÷peration among Danish farmers. (Carver, pages 357-358.)
7. Discuss agricultural credit in Europe. (Ely, pages 611-613.)
8. In what way is rural local government a problem? (Butterfield, page 47.)
9. Name an important defect of the rural church. (Carver, pages 343- 344.)
10. What are the chief organizations which are aiding in the reconstruction of the rural community? (Carney, page 13.)
11. What is the importance of community building in the country? (Carney, pages 9-10.)
12. What is the importance of federating all of the social organizations of a rural community? (Carney, page 16.)
1. Nature of the cityward drift in your section.
2. Extent to which there is a "back to the land" movement in your section.
3. Work of the Federal Farm Loan Bank of your district. If possible, interview a farmer as to the advantages and disadvantages of the Federal Farm Loan system.
4. Work of the agricultural college in your state.
5. Use of the automobile by farmers in your locality.
6. Food markets in your neighborhood.
7. Draw up a program for reducing the cost of food distribution in your section. (Consult King,Lower Living Costs in Cities, chapter xiii.)
8. Transportation in rural districts. (Vogt,Introduction to Rural Sociology, chapter iv; Gillette,Constructive Rural Sociology, chapter ix; Waugh,Rural Improvement, chapter iii.)
9. The marketing of farm products. (Weld,The Marketing of FarmProducts; Annals, vol. xlviii, pages 91-238; King,Lower LivingCosts in Cities, chapter x; Harris,Co÷peration, the Hope of theConsumer, chapter iii.)
10. Tenancy. (Annals, vol. xl, pages 29-40; Vogt,Introduction to Rural Sociology, chapter v.)
11. Rural hygiene. (Ogden,Rural Hygiene; Gillette,Constructive Rural Sociology, chapter xi; Vogt,Introduction to Rural Sociology, chapters vii and viii.)
12. Immigrant communities in the country. (Annals, vol. xl, pages 69-80.)
13. Rural housing. (Annals, vol. li, pages 110-116; Waugh,Rural Improvement, chapter x.)
14. The country town. (Anderson,The Country Town.)
15. The rural school. (Bailey,The Training of Farmers, pages 173- 194; Vogt,Introduction to Rural Sociology, chapter xv; Galpin,Rural Life, chapter vii; King,Education for Social Efficiency, chapters iii and iv; Butterfield,The Farmer and the New Day, chapter vii.)
16. The country church. (Butterfield,The Country Church and the Rural Problem; Gill and Pinchot,The Country Church; Carney,Country Life and the Country School, chapter iii; Gillette,Constructive Rural Sociology, chapter xv; Vogt,Introduction to Rural Sociology, chapters xvii and xviii; Galpin,Rural Life, chapter xi;Annals, vol. xl, pages 131-139.)
17. The Grange. (Carney,Country Life and the Country School, chapter iv.)
18. The farmer in politics. (Vogt,Introduction to Rural Sociology, chapter xii.)
19. Clubs and organizations in rural districts. (Gillette,Constructive Rural Sociology, chapter xiii; Waugh,Rural Improvement, chapter v; Galpin,Rural Life, chapters viii, x; Vogt,Introduction to Rural Sociology, chapter xiv;Annals, vol. xl, pages 175-190.)
20. The Country Life movement. (Bailey,The Country Life Movement in the United States; Carney,Country Life and the Country School, chapter xiii; Gillette,Constructive Rural Sociology, chapter viii.)
21. The relative advantages of life in the city and life in the country.
22. Should immigrants be encouraged to settle in rural districts?
23. Advantages and disadvantages of tenancy from the standpoint of the rural community.
24. To what extent should country people copy the social institutions of the city rather than develop institutions of their own?
307. THE MEANING OF EDUCATION.—A half century ago education might have been defined as the process of acquiring certain types of book knowledge which contributed to the culture of the individual. More recently the concept of education has been broadened and deepened. Present-day education aims not only to add to the culture of the individual, but to vitalize the community as well. Education is no longer limited to the schoolroom, but includes all agencies and activities which in any way help toward a fuller and more responsible citizenship. Education is no longer confined to infancy and youth, but is a life-long process. Our educational system no longer assumes that the needs and capacities of all pupils are similar, but attempts so to diversify training that each individual will be enabled to develop his peculiar powers and to contribute to American life in the manner best suited to his individual ability. Taken in its widest sense, education has seven great objectives. These are health, command of fundamental processes (such as reading, writing, and arithmetic), worthy home- membership, vocation, citizenship, worthy use of leisure, and ethical character. [Footnote: These objectives have been formulated by the National Commission on the Reorganization of Secondary Education.]
308. EDUCATION AND DEMOCRACY.—Two centuries ago the education of the masses was politically a matter of small concern, for most governments were conducted by a narrowly restricted class. But in a democracy education is fundamental. The idea that the masses should govern themselves is an appealing one, but before self-government is safe a comprehensive educational system must have made substantial inroads upon illiteracy and ignorance. Not only must the citizen of a democracy be individually capable, but his capacity to co÷perate with his fellows must be large. Under an undemocratic government the people rely upon their rulers; in a democracy they must rely upon their own joint efforts. From both an individual and a social standpoint, therefore, democracy demands more of its educational system than does any other form of government.
309. DEVELOPMENT OF EDUCATION IN THE UNITED STATES.—Education was an important concern in most of the American colonies, and especially so in New England. After 1800 the common school system was extended rapidly, the district school passing westward with the pioneer movement. Educational facilities continued to expand and to diversify until at the end of the Civil War period there were more than seven million children in the elementary schools of this country. The period following the Civil War also saw the beginnings of the high school, a characteristic American educational institution which arose to take the place of the older Latin grammar schools and the private academies. Normal schools for the training of teachers, and colleges and universities for higher education, developed rapidly after 1880. Today there are more than three quarters of a million teachers in the United States, instructing more than 25,000,000 students in institutions ranging from kindergarten and elementary schools to colleges and universities.
310. MERITS OF OUR EDUCATIONAL SYSTEM.—The merits of our educational system are of great significance. We are definitely committed to the ideal of an educated citizenry. It has been the policy of the several states to establish and maintain free public schools. School attendance is compulsory, on full or part time, for children up to a certain age, the age varying from state to state. No public school is sectarian, the freedom of religious thought and action guaranteed by the Federal Constitution having been continued into our public school system. The public schools stimulate democratic tendencies by bringing together large masses of children from all walks of life. Our school system likewise has an Americanizing influence upon a large number of foreigners because their children study in our public schools and then carry into their homes the influence of the school. Within the last quarter of a century our schools have greatly extended their functions, becoming, in many cases, genuine community centers.
311. FINANCIANG THE SCHOOLS.—The substantial advances made in American education during the last century are a cause for congratulation. At the same time, our standards of education are rising so rapidly that a number of educational problems are becoming acute.
An important problem has to do with the financial support of our rapidly expanding school system. In many states the schools are inadequately supported by the tax payers. In some of these states the public schools are not readily accessible to large numbers of children, while in the schools that are accessible the equipment is often inadequate to the demands made upon it. In many states teachers still receive insufficient salaries.
Our schools ought not to suffer from lack of funds. Ours is the richest country in the world, and our school system is one of the most vital and fundamental of our institutions. Often the failure of taxpayers properly to support the schools is due to either or both of the following causes: First, failure to appreciate the importance of education; second, the lack of accessible wealth as a basis of taxation. The first objection must be met by so perfecting our educational system that taxpayers will be convinced that money invested in schools means large profits in the form of a more efficient and prosperous citizenship. The second objection calls for the reform of our taxation system.
312. CONTROL OF EDUCATION IN THE UNITED STATES.—In the United States education is a state rather than a national function. There is no Federal administration of schools, each state having its independent system. Each state has a system of elementary education, and nearly every state has a secondary or high school system. Nearly all of the states also have state universities in which instruction is either free or is available at a nominal charge. The public schools are supported chiefly by local taxes and are controlled mainly by the local authorities. In most states local outlays are supplemented, to a greater or less degree, by state contributions. State support is almost always accompanied by a measure of state control, though the extent of this control varies widely among the several states.
313. THE QUESTION OF UNIFORM STANDARDS.—To what extent should there be uniformity within our school system? We have no national system of education, and the lack of co÷rdination between the educational systems of the several states has many undesirable features. Educational standards vary widely from state to state, and often from county to county within the same state. The confusion growing out of this situation has given rise to the demand for the systematization or standardization of our school facilities.
The question is a difficult one. Most authorities believe that education ought not to be centralized under the Federal government, but ought, rather, to remain a state function. But even though it is not desirable to allow the Federal government to take over the chief educational powers of the state, it is believed by many that some national agency might render valuable service in co÷rdinating the educational programs of the several states. At present many educators feel that the Federal government should insist upon minimum standards in education in the various states of the Union.
Standardization within each state is considered desirable by most authorities. All of the educational facilities of a given commonwealth probably ought to be co÷rdinated under some supervising state agency. The administrative ideal in state education is so to systematize the schools of the state that they will be bound together by a common purpose, guided by the same set of established principles, and directed toward the same social ends.
314. SCHOOL ATTENDANCE.—A serious defect of our educational system arises in connection with school attendance. In many states the school attendance laws are laxly enforced. It is claimed that at no one time is more than three fourths of our school population enrolled in the schools. Of those who do comply with the school attendance laws, there is a considerable percentage which cannot acquire an adequate education within the limits of the compulsory school period. Only about one third of the pupils who enter the first year of the elementary school reach the four-year high school, and only about one in nine is graduated. Of those who enter high school, about one third leave before the beginning of the second year, about one half are gone before the beginning of the third year, and fewer than one third are graduated.
Within the last decade there has been a marked tendency among the several states to enforce school attendance laws more strictly. No less encouraging is the growing belief among educators that the school attendance period ought so to be adjusted that every child will be guaranteed the working essentials of an education. There is grave doubt as to the wisdom of raising the minimum age at which children may withdraw from school, but at least greater efforts ought to be made to keep children in school at least for part-time schooling beyond the present compulsory period. As will be pointed out presently, much is already being done in this direction.
315. EDUCATION AS PREPARATION FOR DAILIY LIFE.—It is sometimes said that our educational system neglects practical activities for subjects that have no immediate connection with the problems of daily life. Many citizens have thoughtlessly condemned the whole program of education because they have observed that particular schools have allowed pupils to go forth with a fund of miscellaneous knowledge which neither helps them to get a better living, nor aids them in performing the duties of citizenship. On the basis of these and allied considerations, there is a growing demand that education be made more "practical."
There is much to be said for and against this attitude. Some enthusiasts are apparently carrying the demand for "practical" education too far. The growing importance in our industrial life of efficiency and practical training should not blind us to the fact that education is cultural as well as occupational or vocational. The education of an individual is not estimated alone by the degree to which he succeeds in practical affairs, but as well by the extent to which he shows evidence of training in the appreciation of moral, artistic, and literary values. It is sometimes difficult to see that the study of literature, ancient languages, and similar subjects is preparation for life, and yet wise training in these fields may prove as important as studies which aid more directly and immediately in getting a living.
On the other hand, our educational system must take note of the growing importance of industrial activities. Since education is preparation for life, the school must accommodate itself to the changes which are now taking place in our economic and social organization. As modern society becomes more complex, more tinged with industrial elements, more a matter of co÷peration and interdependence, education must become more highly evolved, more attentive to vocational needs, and more emphatic in the stress which it lays upon the actual duties of citizenship.
The more complex the needs of daily life, therefore, the greater the necessity of shifting emphasis in education. But in thus shifting the emphasis in education we must be careful not to disturb the balance between cultural and "practical" subjects. To discriminate between what should be taught and what should be omitted from the curriculum, to retain the finest elements of our cultural studies, but at the same time to fit our citizens to meet the demands of office, shop, and factory,—these are the tasks of the educator.
316. VOCATIONAL EDUCATION.—Vocational training is one of the most significant developments in modern education. This type of education is designed to train the young person to earn a good living in that branch of work for which he seems best fitted. Some of the supporters of vocational education believe that this specialized form of training ought to be commenced very early and in connection with the regular curriculum. Others think that vocational education should not be attempted until the child has been given enough generalized training to enable him properly to perform the fundamental duties of citizenship.
But whatever its relation to the curriculum, vocational education is of great significance. If combined with vocational guidance it not only prevents the boy or girl from aimlessly drifting into an unskilled occupation, but it singles out for special attention children who show special aptitude for particular trades and professions. Vocational education for the blind, the deaf, the crippled, and the otherwise disabled is social service of the finest and most constructive type.
317. FEDERAL ENCOURAGEMENT OF VOCATIONAL EDUCATION.—In February, 1917, Congress passed the Smith-Hughes Act, establishing a Federal Board for Vocational Education. This board promotes vocational education in co÷peration with the several states, and administers the Federal aid granted to the states under the Act. Each state accepting the provisions of the Act must provide a state board to control a system of vocational schools. Evening, part-time, and continuation schools offer instruction in agriculture, industry, commerce, transportation, and the professions. Each state must also agree to appropriate, either through the state or locally, an amount of money for teachers' salaries, equivalent to the sum received from the Federal board. Such states must also agree to provide proper buildings and meet the running expenses of the system. In the first year under this Act, the Federal appropriations amounted to more than a million and a half dollars. This sum is to be increased annually until the year 1925-1926, when the states will receive $7,000,000 from the Federal government in support of vocational education.
318. LIMITATIONS OF THE CONVENTIONAL SCHOOL TERM.—A few decades ago, the typical school in an American city offered instruction to certain classes of young people between nine o'clock in the morning and three or four o'clock in the afternoon, for from 150 to 180 days a year. During the rest of the time the schoolhouse was idle.
This policy greatly restricted the education of important groups of people. Adult immigrants were barred from the elementary public schools. Persons desiring educational guidance in special fields often found that the school offered them no help. Cripples, men and women employed in the daytime, and other individuals who found it impossible or inconvenient to attend school during the conventional time limits, were restricted in educational opportunity. Many boys and girls who drop out of school because of the necessity of going to work, do so before their education has been completed. For most of these classes, the inability to take advantage of the regular school term has meant the denial of adequate education.
319. WIDER USE OF THE SCHOOL PLANT.—Recently the "wider use of the school plant" movement is helping these classes to secure or continue their education. For unassimilated immigrants, day and evening courses in citizenship are now provided in many cities and towns. In many cities vacation schools have been established for the convenience of children who have failed in their studies, or who are able and willing to make unusual progress in various subjects. For those who work by day there is often a chance to go to school by night. For those who find it inexpedient to leave their homes, there are, in many places, travelling libraries and correspondence courses. In some western states the farmer now has an opportunity of taking extension courses from the State university during those seasons in which his work is lightest. For pupils who are under the necessity of partially or entirely supporting themselves, some cities now have part-time or all- around-the-year schools.
320. THE SCHOOL AS A SOCIAL CENTER.—Closely associated with the movement to extend school facilities to those who would ordinarily be debarred from them, is the movement toward making the school a social center. Many city and some rural schools now provide free to the general public lectures on science, art, literature, and business. Moving pictures, dramatics, and other forms of entertainment are becoming a regular feature of this type of school work. In many schools the gymnasiums are available to the public under reasonable restrictions. Folk singing and dancing are being encouraged in numerous schools. Schoolrooms devoted by day to regular school courses are in many places being used during the evening for the discussion of public questions. In these and other ways the school is becoming a center of life for the community. It is extending into the homes of the people and is becoming the instrument of the community rather than of a particular group.
321. EDUCATION AND SOCIAL PROGRESS.—We may sum up the problems so far discussed in this text by noting that their solution calls for three different types of treatment.
First, we must strike at the root of poverty by giving every individual just what he earns, by making it possible for every individual to earn enough to support himself and his family decently, and by teaching him to spend his income wisely and economically.
Second, wise and careful laws must be passed for the purpose of correcting and lessening the social defects of American democracy.
Third, education must be relied upon to render the individual able and willing to do his duty toward himself and his country. The boys and girls of to-day are the voters and home-makers of to-morrow, and the responsibility of preparing those boys and girls for the efficient conduct of community life rests almost entirely upon the school. Thus education is one of the most basic factors in social progress. Neither a reorganized economic system, nor the most carefully drawn laws on social questions will solve the problems of American democracy until the individual citizen is trained to a proper appreciation of his responsibilities toward himself and toward his country.
1. What is the scope of education?
2. What is the relation of education to democracy?
3. Trace briefly the development of education in this country.
4. Enumerate the chief merits of our educational system.
5. What problem arises in connection with financing the schools?
6. Explain the failure of some taxpayers properly to support the schools.
7. Discuss the control of education in this country.
8. Outline the problem of uniform educational standards.
9. To what extent is school attendance a problem?
10. What are the chief tasks of the educator?
11. Discuss the purpose of vocational education.
12. What is the nature of the Smith-Hughes act?
13. What are the limitations of the conventional school term?
14. What is meant by the "wider use of the school plant" movement?
15. To what extent is the school becoming a social center?
16. What is the relation of education to social progress?
1. Williamson,Readings in American Democracy, chapter xxvi. Or all of the following:
2. Cubberley,Changing Conceptions of Education, all.
3. Guitteau,Government and Politics in the United States, chapter xviii.
4. McMurry,How to Study, part i.
5. Perry,Wider Use of the School Plant, chapter i.
1. Discuss briefly the progress made in education since the Civil War. (Cubberley, pages 38-42.)
2. Name an important defect of our educational system as it existed in the eighties. (Perry, page 3.)
3. Discuss the development of the high school. (Guitteau, pages 174- 175.)
4. To what extent does the Federal government aid State education? (Guitteau, page 176.)
5. Compare briefly the four types of school administration. (Guitteau pages 177-180.)
6. What are the chief sources of school revenues? (Guitteau, pages 182-183.)
7. What has been the effect of immigration upon our educational system? (Cubberley, pages 14-15.)
8. What is the function of the vacation school? (Perry, pages 6-7.)
9. What is meant by the problem of leisure time? (Cubberley, page 20.)
10. Outline briefly the present tendencies in education. (Cubberley, pages 49-69-)
11. Outline the principal factors in study. (McMurry, pages 15-23.)
1. Trace the development of public school education in your state.
2. Classify the types of schools in your state.
3. Draw up a list of the more important provisions in your state constitution regarding education.
4. Sources of school revenues in your community.
5. State supervision of the public schools in your commonwealth.
6. Influence of the Smith-Hughes act upon education in your state.
7. Use of the school as a social center in your community.
8. The meaning of education. (Butler,The Meaning of Education;Henderson,What is it to be Educated?Hadley,The Education of theAmerican Citizen; Baldwin,The Relation of Education toCitizenship.)
9. The beginnings of American education. (Cubberley,Public Education in the United States, chapter ii.)
10. The reorganization of elementary education. (Cubberley,Public Education in the United States, chapter x.)
11. Education through play. (Curtis,Education through Play.)
12. The use of leisure time. (Annals, vol. lxvii, pages 115-122.)
13. Wider use of the school plant. (Cubberley,Public Education in the United States, chapter xiii;Annals, vol. lxvii, pages 170-202. Perry,Wider Use of the School Plant.)
14. The relation of the school to the community. (Dewey,Schools of To-morrow, chapter vii.)
15. Physical education. (Sargent,Physical Education.)
16. The education of Helen Keller. (Keller,The Story of My Life. See also an encyclopedia.)
17. The education of the crippled child. (Hall and Buck,Handicrafts for the Handicapped.)
18. Education for efficiency. (Eliot,Education for Efficiency; Davenport,Education for Efficiency.)
19. Vocational education. (Taylor,A Handbook of Vocational Guidance; Bloomfield,The Vocational Guidance of Youth; Leake,Industrial Education, Its Problems, Methods and Danger.)
20. Choosing a vocation. (Parsons,Choosing a Vocation.)
21. The United States Bureau of Education and the immigrant; (Annals, vol. lxvii, pages 273-283.)
22. Education and social progress. (Ellwood,Sociology and Modern Social Problems, chapter xvi.)
23. Do grammar school graduates who fail to enter high school stop their education at this point because of poverty, because of the attraction of industry, or because of dissatisfaction with school?
24. The question of free text books.
25. The question of uniform text books throughout your state.
26. At what point in the school curriculum should vocational education be begun?
27 How are ancient languages, ancient history and the fine arts helpful in daily life?
28. The question of a more intensive use of your school building as a social center.
322. NECESSITY OF PUBLIC INTEREST IN BUSINESS.—Although individuals carry on business primarily for their own ends, the economic activities of men affect not only themselves, but the community as well. If every individual voluntarily confined his attention to those forms of business which strengthened the community as well as adding to his own prosperity, there would be little need for laws regulating the conduct of business. But because experience has shown that some persons will seek to benefit themselves in ways that react to the injury of the community, it becomes necessary for law to adjust private and public interests. A community cannot remain indifferent to the economic activities of its citizens. Public interest in business is a fundamental necessity, if the community is to be safeguarded against the abuses of free enterprise.
323. NATURE OF PUBLIC INTEREST IN BUSINESS.—In general, the object of laws regulating business is either to encourage helpful business methods, or to discourage harmful business methods. A good deal of legislation has been designed positively to encourage helpful business methods, yet it remains true that the most significant of our industrial laws have been aimed primarily at the discouragement of harmful business. A fundamental American ideal is to insure to the individual as much freedom of action as is consistent with the public interest. Thus we believe that if harmful business is controlled or suppressed, private initiative may be trusted to develop helpful business methods, without the aid of fostering legislation. In this and the following chapter, therefore, we may confine our attention to legislation designed to suppress harmful business methods.
324. THE NATURE OF MONOPOLY.—We may begin the discussion by inquiring into the nature and significance of monopoly.
Under openly competitive conditions the free play of supply and demand between a number of producers and a number of prospective consumers fixes the price of a commodity. In such cases consumers are protected against exorbitant prices by the fact that rival producers will underbid each other in the effort to sell their goods.
But if the supply of a good, say wheat, is not in the hands of several rival producers, but is under the control of a unified group of persons, competition between the owners of the wheat is suppressed sufficiently to enable this unified group more nearly to dictate the price for which wheat shall sell. In such a case a monopoly is said to exist. Complete control of the supply of a commodity is rare, even for short periods, but modern business offers many instances of enterprises which are more or less monopolistic in character.
The essential danger of monopoly is that those who have secured control of the available supply of a commodity will use that control to benefit themselves at the expense of the public. By combining their individual businesses, producers who were formerly rivals may secure the chief advantage of large-scale management. That is to say, the cost of production per unit may be decreased, because several combined plants might be operated more economically than several independent concerns. If the cost of productionisdecreased the combining producers can afford to lower the price of their product. But if they are practically in control of the entire supply, they will not lower the price unless it serves their interests to do so. Indeed it is more likely that they will take advantage of their monopoly to raise the price.
325. TYPES OF MONOPOLY.—Monopolies are variously classified, but for our purpose they may be called eithernaturalorunnatural.
Anaturalmonopoly may exist where, by the very nature of the business, competition is either impossible or socially undesirable. Examples of this type of monopoly are gas and water works, street railways, steam railways, and similar industries. These will be discussed in the next chapter.
Where anunnaturalmonopoly exists, it is not because the essential character of the business renders it unfit for the competitive system, but because competition has been artificially suppressed. The traditional example of an unnatural monopoly is that form of large- scale combination which is popularly known as a trust.
326. ORIGIN OF THE TRUST.—After the Civil War, rivalry in many industries was so intense as to lead to "cutthroat" competition and a consequent reduction in profits. For the purpose of securing the advantages of monopoly, many previously competing businesses combined. In 1882 John D. Rockefeller organized the Standard Oil Company, the first trust in this country. The plan drawn up by Mr. Rockefeller provided that the owners of a number of oil refineries should place their stock in the hands of a board of trustees. In exchange for this stock, the owners received trust certificates on which they were paid dividends. Having control of the stock, the trustees were enabled to manage the combining corporations as one concern, thus maintaining a unified control over supply, and opening the way to monopoly profits.
327. PRESENT MEANING OF THE TERM "TRUST."—The plan initiated by Mr. Rockefeller was so successful that other groups of industries adopted it. After 1890 the original trust device was forbidden by statute, and thetrust properdeclined in importance. But there continued to be a large number of industrial combinations which, under slightly different forms, have secured all of the advantages of the original trust. In some cases previously competing corporations have actually amalgamated; in still other cases, combining concerns have secured the advantages of monopoly by forming a holding company. A holding company is a corporation which is created for the express purpose of "holding" or controlling stock in several other corporations. This the holding company does by buying a sufficient amount of the stock of the combining concerns to insure unity of management and control. Since the holding company and similar devices secure the chief advantages of the original trust, the word "trust" is now used to designate any closely knit combination which has monopolistic advantages.
328. GROWTH OF THE TRUST MOVEMENT.—The trust movement developed rapidly after 1882. There were important combinations in the oil, tin, sugar, steel, tobacco, paper, and other industries. By 1898 there had been formed some eighty trusts, with a total capitalization of about $1,000,000,000. At the beginning of 1904 the number of trusts exceeded three hundred, while their combined capital totaled more than $5,000,000,000. The largest single trust was the United States Steel Corporation, which was capitalized at almost a billion and a half dollars. At the beginning of 1911, in which year the Supreme Court of the United States ordered two important trusts to dissolve, the combined capital of the trusts was probably in excess of $6,000,000,000.
329. ABUSE OF POWER BY THE TRUSTS.—Trusts have often abused their monopolistic powers. They have often used their wealth to corrupt legislatures and to attempt to influence even the courts, in the effort to prevent laws and court decisions from restricting their monopoly. The corruption of railway corporations and of political parties has been partly due to the evil influence of the trusts. Trusts have often crushed out independent concerns that endeavored to compete with them. This has been accomplished, partly by inducing railroads to discriminate against independent concerns and in favor of the trusts, partly by cutting prices in competitive markets until independent concerns were crushed out, and partly by the use of bribes, threats, and other unfair methods. After competition had been suppressed, the trusts took advantage of their monopoly to raise prices on their products, thus imposing a heavy burden upon the public.
330. THE SHERMAN ANTI-TRUST ACT. (1890.)—During the eighties a number of states attempted to control the trust movement. But the Federal government has exclusive jurisdiction over interstate business, and for this reason the action of the states was limited to the control of the relatively unimportant trust business lying entirely within their respective borders. The fact that an increasing proportion of trust business was interstate in character stimulated interest in Federal anti-trust legislation, and in 1890 the Sherman Anti-trust Act was passed. This Act declared illegal "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations."
331. FAILURE OF THE SHERMAN ACT.—For more than twenty years after its passage, the Sherman Act did little to curb the growth of the trusts, indeed, the most marked tendency toward trust formation occurredafter1890. Numerous suits were brought under the Act, but the lukewarm attitude of the courts rendered difficult the administration of the law. After 1911 the courts held that the restraint of trade was illegal if "unreasonable," but few juries could be found that could agree upon the difference between a "reasonable" and an "unreasonable" restraint of trade. Lastly, combinations which had been organized under the original trust plan were not disheartened by court decrees ordering them to dissolve, but reorganized under some device which was practically as effective as the trust plan, but which did not technically violate the Sherman act.
332. FURTHER LEGISLATION IN 1914.—Finally in 1911 the government succeeded in dissolving the Standard Oil Company and the American Tobacco Company, two of the largest trusts in the country. This success encouraged the Department of Justice to institute other suits, and stimulated such general interest in the trust problem that in 1914 Congress passed two new Anti-trust Acts. These were the Clayton Act and the Federal Trade Commission Act. The general effect of these laws was to strengthen anti-trust legislation by correcting some of the fundamental defects of the Sherman Act, and by still further extending the power of the Federal government over monopolistic combinations.
333. The Clayton Act of 1914.—The Clayton Act forbids "unjustifiable discriminations in the prices charged to different persons," and also prohibits the lease or sale of goods made with the understanding that the lessee or purchaser shall not patronize competing concerns. The Act specifies a number of other practices which constitute unreasonable restraints of trade. Somewhat complicated limitations are imposed upon interlocking directorates, by which is meant the practice of individuals being on the board of directors of different corporations. [FOOTNOTE: The danger of the interlocking directorate, of course, is that individuals who are directors in two or more corporations may attempt to suppress competition between those corporations. This may lead to monopoly.] The Act likewise forbids the acquisition by one corporation of stock in another corporation when the effect may be "to substantially lessen competition" between such corporations, or "to tend to create a monopoly."
334. THE FEDERAL TRADE COMMISSION ACT OF 1914.—The second of the two Acts of 1914 created a Federal Trade Commission of five members, appointed by the President. The Commission has the power to require annual or special reports from interstate corporations in such form and relating to such matters as it may prescribe. At the request of the Attorney General, the Commission must investigate and report upon any corporation alleged to be violating the anti-trust laws. The most important power of the Commission is undoubtedly that of issuing orders restraining the use of "unfair methods of competition in commerce." This clause aims at prevention rather than at punishment, and if its power is wisely used it will check monopoly in the early stages. Most authorities claim that in this regard the work of the Commission has already proved definitely helpful.
335. THE OUTLOOK.—Since 1911, and especially since the passage of the two Acts of 1914, the trust situation has materially improved. The vague and wholly inadequate powers of the old Sherman Act have been clarified and supplemented by the more specific provisions of the Clayton and Federal Trade Commission Acts. Fairly adequate machinery for the investigation and prosecution of trusts is now provided. The present laws cover not only combinations making use of the old trust device, but also combinations employing other methods of exercising monopoly control. The Federal Trade Commission Act provides for publicity, so that public opinion may have a chance to enforce the principle of fair play and open competition in business. The trust problem in the United States is not yet solved, but the careful control which we are now exercising over this type of organization justifies the belief that the trust evil will become less important as time goes on.
336. THE TRUST PROBLEM OF THE FUTURE. In connection with the matter of making anti-trust legislation more effective, a new and pressing problem is arising. This has to do with the necessity of distinguishing, first, between the legitimate and the illegitimate practices of trusts [Footnote: Large-scale combination or management allows important economies to be practiced. Plant can be used more advantageously, supervision is less costly, supplies can be purchased in large quantities and hence more cheaply, etc. The securing of these economies constitutes a legitimate feature of large-scale combination or management.]; and second, between combinations which are monopolistic and combinations in which there is no element of monopoly.
We are coming to realize a fact which in Europe has long been a matter of common knowledge, namely, that trusts are never wholly and unqualifiedly bad. The law should not aim to destroy trusts, but rather should attempt so to regulate their activities that their economical features will be preserved while their harmful practices will be suppressed. Laws should also recognize the fact that many large-scale combinations have in them no element of monopoly, and that such combinations should be exempted from anti-trust prosecution. In drawing up anti-trust legislation, prohibitions and restrictions should be as concise and as definite as possible, both in order to facilitate the execution of the law, and in order to prevent hardships being worked upon combinations which have consistently observed the rules of fair play in competitive business.
1. Why is public interest in business necessary?
2. What is the nature of public interest in business?
3. What is the nature of monopoly?
4. What are the two types of monopoly? Give an example of each.
5. Describe the origin of the trust.
6. Explain clearly the meaning of the word "trust" as it is now used.
7. During what period of our history was trust development greatest?
8. In what sense have trusts abused their power?
9. What was the purpose of the Sherman act of 1890?
10. How did the act work out in practice?
11. What important development is associated with the period 1911-1914?
12. What are the main provisions of the Clayton act?
13. What is the purpose of the Federal Trade Commission act?
14. Outline the problem of the future with respect to trusts.
1. Williamson,Readings in American Democracy, chapter xxvii.
Or all of the following:
2. Durand,The Trust Problem, chapter i.
3. Ely,Outlines of Economics, chapter xiii.
4. Fetter,Modern Economic Problems, chapter xxviii.
5. Seager,Principles of Economics, chapter xxv.
1. What are the four methods by which industrial combinations have taken place? (Fetter, pages 433-434.)
2. What are the three types of trusts? (Durand, page 9.)
3. What is a pool? (Durand, page 9.)
4. Name some of the important trusts which were formed between 1890 and 1899. (Fetter, pages 435-436.)
5. Name some of the most successful trusts. (Seager, page 456.)
6. What is the relation of trust development to the tariff? (Seager, pages 464-465.)
7. What is the evil of over-capitalization? (Seager, pages 465-466; Ely, pages 221-223.)
8. What are the chief advantages claimed for the trust? (Ely, pages 228-230; Durand, page 28.)
9. What are some of the devices used in "unfair competition"? (Ely, pages 239-240.)
10. What are the three ways of dealing with the trust evil? (Durand, pages l0-11.)
11. How has the trust evil been handled in other countries? (Ely, pages 245-246.)
12. What can be said as to the ultimate solution of the trust problem? (Durand, page 30.)
1. The chartering of corporations in your state
2. History of anti-trust legislation in your state.
3. Outline the present laws of your state relative to monopolistic combinations.
4. Trust development in your state, or in your section of the country.
5. The nature of monopoly. (Ely,Outlines of Economics,chapter xii; Seager,Principles of Economics,chapter xxiii.)
6. Causes of trust formation. (Van Hise,Concentration and Control,pages 21-25.)
7. Purposes of trust formation. (Van Hise,Concentration and Control,pages 25-31.)
8. Forms of industrial combination. (Van Hise,Concentration and Control,pages 60-72.)
9. Text of the Sherman anti-trust act. (Ripley, Trusts, Pools and Corporations,pages 484-485; Durand,The Trust Problem,appendix i.)
10. Early Supreme Court decisions relative to the Sherman act. (Ripley,Trusts, Pools and Corporations,pages 506-549.)
11. The Sherman act in actual operation. (Hamilton,Current Economic Problems,pages 433-441.)
12. The "rule of reason." (Ripley,Trusts, Pools and Corporations,pages 606-702.)
13. Difficulty of regulating trusts. (Durand,The Trust Problem,chapter in.)
14. Text of the Federal Trade Commission act. (Durand, TheTrust Problem,appendix in.)
15. Relation of the Federal Trade Commission to the courts. (Annals,vol. lxiii, pages 24-36.)
16. Relation of the Federal Trade Commission to our foreign trade. (Annals,vol. lxiii, pages 67-68.)
17. Alleged advantages of trusts. (Durand, TheTrust Problem,chapter iv; Van Hise,Concentration and Control,pages 8-21.)
18 Trust regulation in foreign countries. (Van Hise,Concentration and Control, chapter iv.)
19. The history of some one trust, as, for example, the American Sugar Refining Company, the United States Steel Corporation, the American Tobacco Company, or the International Harvester Company. (Consult any available literature.)
20. What is a reasonable as opposed to an unreasonable restraint of trade?
21. How is it possible to tell when combination has resulted in monopoly?
22. To what extent is the mere size of an industrial organization an indication of monopoly?
23. Does monopoly always result in a higher price being asked for the monopolized article?
337. BASIS OF NATURAL MONOPOLY.—The most important examples ofnaturalmonopoly are found in those industries which are known as public utilities. Public utilities include gas and electric light works, waterworks, telephone and telegraph plants, and electric and steam railways.
These industries are by their very nature unsuited to the competitive system. This is chiefly because they operate under the principle of decreasing cost, that is to say, the greater the volume of business handled by a single plant, the less the cost of production per unit. In order to serve 100,000 customers with gas, for example, it may be necessary to make an initial outlay of $90,000 in plant and supplies. With this identical plant, however, the gas works could really manufacture gas sufficient to serve more than 100,000. If, later, the city grows and the number of customers using gas doubles, the gas works, already having its basic plant, will not have to expend another $90,000, but only, say, an additional $30,000.
This principle has the double effect of virtually prohibiting competition and of encouraging combination. Since a street or a neighborhood can be served with water or gas more cheaply by a single plant than by several competing plants, competing plants tend to combine in order to secure the economies resulting from decreasing cost and large-scale production. On the other hand, the cost of duplicating a set of water mains or a network of street car tracks is so prohibitive as to render competition undesirable, both from the standpoint of the utility and from the standpoint of the public.
This natural tendency toward monopoly, together with the social importance of public utilities, has given rise to a demand that businesses of this type be publicly owned. The problem of public ownership may be considered under two heads: first, the municipal ownership of local utilities; and, second, the national ownership of steam railroads.
338. REGULATION OF LOCAL UTILITIES.—In many American cities it was formerly the custom of the city council to confer valuable privileges upon public service corporations on terms that did not adequately safeguard the public interest. In making such grants, called franchises, city councils often permitted private corporations the free use of the streets and other public property for long periods of time or even in perpetuity.
The abuses growing out of the careless use of the franchise granting power have recently led to a more strict supervision of franchises to public service corporations. In most cities, franchises are no longer perpetual, but are limited to a definite and rather short period, say fifty years. To an increasing extent, franchises are drawn up by experts, so that the terms of the grant will safeguard the interests of the public. In many states there are now public service commissions that have the power to regulate privately owned utilities. The chief aim of such commissions is to keep informed as to the condition of the utilities, and to fix rates and charges which the commission considers fair and reasonable.
339. ARGUMENTS FOR MUNICIPAL OWNERSHIP.—Those favoring municipal ownership, as opposed to regulation, declare that the conditions affecting rates change so rapidly that no public service commission can fix rates fairly or promptly. Public ownership would save the cost of regulation, in many cases a considerable item. It is maintained that regulation is inevitably a failure, and that in view of the social importance of public utilities, ownership is a logical and necessary step.
Important social gains are claimed for municipal ownership. It is said that where the plan has been tried, it has promoted civic interest and has enlisted a higher type of public official. If all utilities were municipally owned, state legislatures and city councils would no longer be subjected to the danger of corruption by private corporations seeking franchises. If utilities were owned by the municipality, it is claimed, service and social welfare rather than profits would become the ideal. The public plant could afford to offer lower rates, because it would not be under the necessity of earning high profits. Finally, service could be extended into outlying or sparsely settled districts which are now neglected by privately owned companies because of the high expense and small profits that would result from such extension.
340. ARGUMENTS AGAINST MUNICIPAL OWNDERSHIP.—Other students of the problem believe that public regulation of utilities is preferable to municipal ownership. Those holding this view maintain that on the whole regulation has proved satisfactory, and that ownership is therefore unnecessary.
Rather than improving the public service by enlisting a higher type of public official, it is maintained, municipal ownership would increase political corruption by enlarging the number of positions which would become the spoils of the political party in power. The periodic political changes resulting from frequent elections in cities would demoralize the administration of the utilities. Under our present system of government, municipal ownership means a lack of centralized control, a factor which would lessen administrative responsibility and encourage inefficiency.
The opponents of municipal ownership also contend that the inefficiency resulting from this form of control would increase the cost of management. This increased cost would in turn necessitate higher rates. Moreover, municipal ownership might increase enormously the indebtedness of the municipality, since either private plants would have to be purchased, or new plants erected at public expense.
341. EXTENT OF MUNICIPAL OWNERSHIP.—Some cities have tried municipal ownership and have abandoned the scheme as unworkable. In some instances this failure has been due to the inherent difficulties of the case, in other instances the inefficiency of the city administration has prevented success. In still other cities ownership of various utilities has proved markedly successful.
Most American cities now own their own waterworks, and about one third of them own their own gas or electric light plants. A few cities own either a part or the whole of their street railways. Municipal ownership of public utilities is still in its infancy, but the movement is growing.
342. CONDITIONS OF MUNICIPAL OWNERSHIP.—Past experience indicates several mistakes to be avoided in any future consideration of the problem of municipal ownership.
The terms upon which the city purchases a utility ought not to be so severe as to discourage the future development of new utilities by private enterprise.
Public ownership is practicable only when the utility has passed the experimental stage, for governmental agencies cannot effectively carry on the experiments, nor assume the risks, so essential to the development of a new enterprise.
Any discussion of public ownership ought to include a consideration of social and political factors, as well as matters which are strictly economic.
The question of municipal ownership should be decided purely on the basis of local conditions and for particular utilities. The successful ownership of street railways in one city does not necessarily mean that a second city may be equally successful in operating this utility. Nor does the successful administration of a gas works by one city necessarily mean that the same city can effectively administer its street railways.
343. DEVELOPMENT OF RAILROADS IN THE UNITED STATES.—The railroad history of the United States began when the Baltimore & Ohio was opened to traffic in 1830, but until the middle of the century transportation in this country was chiefly by wagon roads, rivers, and canals. After 1850 the westward expansion and the development of industry throughout the country greatly stimulated railway building. Encouraged by lavish land grants and other bounties extended by both state and Federal governments, railroad corporations flung a network of railroads across the continent. Local roads were transformed, by extension and consolidation, into great trunk lines embracing thousands of miles. From 9,021 in 1850 our railway mileage increased to 93,267 in 1880, to 193,345 in 1900, and to approximately 260,000 in 1922.
344. THE PRINCIPLE OF DECREASING COST.—While the rapid development of American railroads has had an inestimable effect upon our national prosperity, railway development has brought with it serious evils. In order to understand the nature of these evils, let us notice that with railroads, as with municipal utilities, the cost per unit of product or service declines with an increase in the number of units furnished. A railroad must maintain its roadbed, depots, and terminals whether one or an hundred trains are run, and whether freight or passenger cars run empty or full. Many of the railroad's operating expenses also go on regardless of the volume of business. Thus the cost of handling units of traffic declines as the volume of that traffic increases.
These circumstances influence rate-making in two ways. In the first place, railroads can afford to accept extra traffic at a relatively low rate because carrying extra traffic adds relatively little to the railroad's expenses. In the second place, rates in general cannot be definitely connected with the expense of carrying specific commodities, hence rates are often determined on the basis of expediency. This means that high rates are charged on valuable commodities because those commodities can pay high rates, while low rates are charged on cheap goods, because those goods cannot stand a high charge. This is called "charging what the traffic will bear."
345. EVILS ATTENDING RAILROAD DEVELOPMENT.—Since many of the expenses of the railroad go on regardless of the amount of traffic carried, railroads are constantly searching for extra business. Competition between railroads has tended to be very severe. Rate-wars have been common, because of the small cost of handling extra units of traffic. In the struggle for business, railroads once habitually offered low rates on competitive roads or lines, and then made up for this relatively unprofitable practice by charging high rates on non- competitive roads. The desire for extra business, together with the pressure exerted by trusts and other large shippers, encouraged railroads to make rates which discriminated between products, between localities, and even between individuals. The ruinous character of competition often led to monopolistic combinations which proceeded to charge the general public exorbitant rates, but which rendered poor service.
346. EARLY STATE LEGISLATION.—During the early stages of railroad development, the railroads were generally regarded as public benefactors for the reason that they aided materially in the settlement of the West. But after about 1870 the railroads began to be accused of abusing their position. A greater degree of legal control over the roads was demanded.
The first attempts at the regulation of railroad corporations were made by several of the states. For fifteen years various commonwealths tried to control the railroads through state railway commissions armed with extensive powers. These commissions eliminated some of the more glaring abuses of railroad combination, but for several reasons state regulation was relatively ineffective. The states had, of course, no authority over interstate business, and most railroad revenues were derived from this type of business. State laws regulating railroads were often declared unconstitutional by the courts. Lastly, powerful railroad corporations often succeeded in bribing state legislatures to refrain from taking action against them. Due to these influences, state regulation was generally conceded to be a failure.
347. FEDERAL LEGISLATION.—The failure of state laws effectively to control the railroads led to the enactment by Congress of the Interstate Commerce Act of 1887. This Federal act created an Interstate Commerce Commission of seven members, appointed by the President, and charged with the enforcement of the Act. The Act also prohibited discriminations, and forbade unjust and unreasonable rates. It required that railroads should make rates public, and that they should not change rates without due notice. Pooling was forbidden, that is to say, railroads apparently competing with one another were no longer to merge or pool their combined business with the understanding that each was to get a previously determined share of the joint profits. The objection to pooling was that it suppressed competition and encouraged monopoly.
In the years that followed, however, the Interstate Commerce Act checked railroad abuses very little. The machinery of the Act was so defective as to render difficult the successful prosecution of offenders. Railroad interests exerted an evil influence upon government officials who were attempting to enforce the Act. The administration of the law was also markedly impeded by the fact that the courts tended to interpret the Act of 1887 in such a way as to limit the powers of the Commission.
To a considerable extent discriminations and unnecessarily high rates continued until after the opening of the twentieth century. Then in 1903 the Elkins Act revived some of the waning powers of the Commission. Three years later (1906) the Hepburn Law increased the membership of the Commission, improved its machinery, and extended and reinforced its control over rates. In 1910 the Mann-Elkins Act strengthened the position of the Commission in several particulars.
In spite of this additional legislation, however, the rather sorry record of railroad regulation up to the time of the World War repeatedly raised the question of national ownership of railroads.
348. ARGUMENTS IN FAVOR OF NATIONAL OWNERSHIP OF RAILROADS.—The arguments in favor of national ownership of railroads are similar to those advanced in behalf of the municipal ownership of local utilities.