Chapter 1
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MONOPOLIES AND THE PEOPLE
BY CHARLES WHITING BAKER, C. E. ASSOCIATE EDITOR OF "THE ENGINEERING NEWS"
NEW YORK & LONDON G. P. PUTNAM'S SONS The Knickerbocker Press 1889
COPYRIGHT BY G. P. PUTNAM'S SONS 1889
The Knickerbocker Press Electrotyped and Printed by G. P. Putnam's Sons
TO ALL THOSE WHO LOVE TRUTH AND JUSTICE AND EQUITY, WHO VALUE OUR HERITAGE OF LIBERTY AND PEACEFUL FRATERNITY, AND WHO ARE WILLING TO UNITE IN UPHOLDING AND DEFENDING THE COMMONWEALTH--THAT PRESERVER AND PROTECTOR OF THE RIGHTS OF THE WHOLE PEOPLE--THE AUTHOR DEDICATES THIS WORK.
PREFACE.
In the following pages it has been my endeavor to present, first, the results of a careful and impartial investigation into the present and prospective status of the monopolies in every industry; and, second, to discuss in all fairness the questions in regard to these monopolies--their cause, growth, future prospects, evils, and remedies--which every thinking man is to-day asking.
The first part of this task, the presentation of facts with regard to existing monopolies, may seem to the well informed reader to be imperfectly done, because of the host of powerful and important monopolies of every sort that are not so much as mentioned. But I have deemed it most important that the broad facts concerning monopolies should be widely known; and I have, therefore, aimed to present these facts in a readable and concise way, although, in so doing, only a few of the important monopolies in each industry could be even mentioned. It is to be hoped that no one will underrate the importance of the problem of monopoly, or question the conclusions which I have reached, because of these omissions. To any such readers who may not be satisfied from the facts hereafter given that monopolies are the salient feature of our present industrial situation, and, moreover, that they have come to stay, I would recommend a careful perusal of the financial and trade journals for a few months.
Wherever possible I have presented actual statistics bearing on the question at issue; but as regards trusts, monopolies in trade, mining, labor, and in fact nearly all monopolies, there are no statistics to be had. Nor can any be obtained, for it would be absurd for the government to collect statistics of the operation of that which it pronounces illegal but makes no effort to punish.
It may increase the respect of some readers for the conclusions I have reached, to know that it was a practical acquaintance with monopolies rather than any study of economic theories which led me to undertake the present work; that, at the time I undertook it, I was wholly undecided as to the proper remedies for monopolies, and was quite willing to believe, if the facts had proved it to me, that they were destined to work their own cure; and that the rapid growth and increase of monopolies in very many industries, in the few months since these chapters were written, have furnished fresh evidence that my conclusions have not been amiss.
Finally, I wish to place all emphasis on the fact that all the great movements toward genuine reform must go hand in hand. The cause of the people is one cause, and those who work for honest officers in our government, pure elections, the suppression of crime and pauperism, the mental and moral elevation of men and women, are striking harder blows at monopolies than they may realize. But if they desire to hasten the day of their success, they must bring the great masses of the people to comprehend that these movements aim at nothing less than their complete deliverance; and that the reformers who labor so earnestly to make our government purer and its people nobler, heartily desire also to cure the evils of monopoly, and to serve the cause of the people in its every form.
CHARLES WHITING BAKER.
TRIBUNE BUILDING, New York City. June, 1889.
TABLE OF CONTENTS.
I. THE PROBLEM PRESENTED 1 A new use for the word "Trust," 1 The people's knowledge of trusts, 2 Remedies for trusts, 2, 3 Trusts a species of monopoly, 3 The problems which monopoly presents, 4 An impartial investigation necessary, 4 The question to be discussed from different standpoints, 5 A scientific method for solving the problem, 5.
II. TRUSTS AND MONOPOLIES IN MANUFACTURING INDUSTRIES 7 Definition of a trust, 7 The first trusts and their successors, 8 Description of the organization of the linseed-oil trust by one of its founders, 9 The action of trust-makers perfectly natural, 14 Actual effect of trusts upon the public, 15 Profits of the linseed-oil trust, 16 Decreased market for goods controlled by trusts, 17 Control of the labor market by trusts, 17 The causes which have produced trusts, 18 Production on a large scale the most economical, 20 The Standard Oil Trust's defence of its work, 21 Its profits, and the cause of its low prices, 22 Industries in which trusts have been formed, 23 Andrew Carnegie's views of trusts, 24 The trust at once a benefit and a curse, 25.
III. MONOPOLIES OF MINERAL WEALTH 26 Mining, the first monopolized industry, 26 Monopolies in iron-ore production, 27 Monopolies in other metals, 28 The French Copper Syndicate, 29 The effect of its action on consumers of copper, 31 Profits of the richest copper mines, 32 Anthracite-coal production, 33 The anthracite-coal pool, 34 Coal monopolies in the West and South, 36 Monopolies in petroleum and natural gas, 40 Other monopolies of this class, 41.
IV. MONOPOLIES OF TRANSPORTATION AND COMMUNICATION 42 Transportation only a necessity in modern times, 42 The importance of railway traffic, 43 Railway transportation a vital necessity, 43 Shipping points where competition exists very few, 44 Consolidation and its benefits, 45 Intensity of competition in railway traffic on trunk lines, 47 Its inevitable effect, 48 The necessity of pools or traffic agreements, 49 Their history, 50 The Interstate Commerce law, 51 The effect of stimulating competition, 52 The evils charged to railway monopolies, 52 Evils due to wasteful competition, 53 Monopolies in other forms of transportation, 54 Monopolies on natural highways, 56 Monopolies of bridges, 56 The telegraph monopoly, 56.
V. MUNICIPAL MONOPOLIES 59 City dwellers dependent upon monopolies, 59 Suburban passenger traffic, 59 Street-railway monopolies, 60 Water-supply monopolies, 61 Competition and monopoly in gas supply, 62 T. M. Cooley on municipal monopolies, 64 Prices, cost, and profits of gas supply, 64 Monopolies in electric lighting and in telegraph, telephone, and messenger service, 66 Other monopolies beneath city pavements, 67 Monopolies in railway terminals, 68 Monopoly in real estate, 69.
VI. MONOPOLIES IN TRADE 71 Absolute control not essential to a monopoly, 71 History of trade monopolies, 72 Monopolies in country retail trade, 73 In city retail trade, 74 In wholesale trade, 75 Co-operation of trusts and trade monopolies, 75 Monopolies in the grocery trade, 76 Monopolies in meat, 77 A general view, 78 Monopolies among purchasers, 78 "Corners" and monopolies, 80 Commercial exchanges and speculation, 82 Warehouse monopolies, 82 Insurance monopolies, 83 Trade monopolies artificial, 84 Their unjust acts, 85
VII. MONOPOLIES DEPENDING ON THE GOVERNMENT 87 Government monopolies in ancient times, 87 Government monopolies established for the benefit of the people, 88 Copyrights, 88 Patents, 89 Evils arising from the patent system, 90 Monopolies based on patents, 91 The Bell telephone monopoly, 92 Government subsidies, 94 Relation of the tariff to monopolies, 95 Origin of the protective tariff, 96 The tariff a secondary cause of trusts, 98 Reductions in the tariff as a remedy for trusts, 99 Monopolies carried on directly by Government, 100.
VIII. MONOPOLIES IN THE LABOR MARKET 102 Classes of labor considered, 102 Monopolies of capital and monopolies of labor compared, 103 Locomotive engineers' strike on the Chicago, Burlington, and Quincy Railway, 105 Effect of labor monopolies upon the people, 105 The history of labor, 107 The first trade-unions, 108 Laws against them, 109 Labor organizations from the laborer's standpoint, 110 "An injury to one the concern of all," 110 Preserving the self-respect of the laborer, 111 Repeal of unjust laws, 113 A defence for the action of labor monopolies, 114 The underlying cause of labor monopolies, 116 Limits to the power of labor monopolies, 118.
IX. MONOPOLIES AND COMPETITION IN OTHER INDUSTRIES 119 Occupations of the people, 119 Proportion of the people in any way benefited by monopolies 120 Proportion deriving the principal profits from monopolies, 122 Monopolies in the professions, 123 Monopolies among the servant classes, 124 Agricultural industry, 125 Can monopolies be established there? 126 A proposed farmers' trust, 127 The Grange and the Farmers' Alliance, 128 Killing the competition of oleomargarine, 129 Monopolies among agricultural laborers, 130 Proportion of the people benefited and proportion injured by monopolies, 130 Monopolies in the use of capital impossible, 131.
X. THE THEORY OF UNIVERSAL COMPETITION 133 The general effect of monopolies, 133 Two sorts of remedies suggested, 134 Study of the laws of competition necessary, 135 The growth of civilized society outlined, 136 The interdependence of modern society, 137 The theory of civilized industry, 137 Supply and demand and the unequal rewards of men's industry, 138 The theoretical perfection of our social system, 141 "Competition the life of trade," 142 The orthodox school of political economy, 143.
XI. THE LAWS OF MODERN COMPETITION 145 Competition defined, 145 Competition in corn-raising, 146 In paper-making, 147 In railway traffic, 149 The laws governing competition deduced, 150 Monopoly defined, 155 Natural agents in production, 156 Different classes of competition, 157 The three salient causes of monopoly, 159 The proper remedy for monopoly, 160.
XII. THE EVILS DUE TO MONOPOLY AND INTENSE COMPETITION 162 The theoretical perfection of human industry, 162 Over-production not a fault of production, 163 The ideal distribution of wealth, 164 The law of supply and demand, 165 Evils due to monopoly: the congestion of wealth, 166 How great fortunes are made, 168 Monopolized industries and speculation, 169 How monopolies reduce the income of small capitalists, 170 Monopolies the cause of over-production, 171 Monopolies and poverty, 173 The Church and the laboring classes, 173 Intemperance, 174 Reforms must go hand in hand, 174 How monopolies keep men in idleness, 175 The waste of competition, 176 Waste due to parallel railway lines, 177 The waste of competition and financial crises, 178 Wasteful competition in other industries, 179 Waste by strikes of labor monopolies, 180 False remedies for the disease, 181.
XIII. AMELIORATING INFLUENCES 183 Two classes of palliatives to the evils of monopoly, 183 Reduction in price to increase demand, 184 The influence of Christianity, 185 Its promise as a remedy, 186 A social system based on nobler attributes than selfishness, 187 The tendency of modern society, 188 The possibilities of altruism, 189 Direct and indirect charities, 189 The benevolent spirit in business enterprises, 190 The proper attitude of the Church toward monopolies, 191 The fraternal spirit opposed to competition, 192 Monopolists to be judged charitably, 193 Unjust judgment of labor monopolies, 194 Enmity toward monopolists no cure for monopoly, 195.
XIV. REMEDIES FOR THE EVILS OF MONOPOLY 196 Schemes for bettering society, 196 The doctrine of individualism, 197 The doctrine of societism, 198 The defects of each when unmodified by the other, 199 Societism a necessary accompaniment of civilization, 200 The interdependence of mankind, 201 Does societism threaten liberty? 201 Government for the benefit of the whole people, 202 The dangers of government action to aid special classes, 202 Remedies for monopoly: the creation of new competitors, 204 Its practical result, 205 Remedies by prohibiting consolidations, 205 Their inevitable effect, 206 Government the only agent to prevent monopoly, 207 Why direct action by the government is impossible, 208 Indirect action and its probable results, 208 The Interstate Commerce law as an example, 209 The proper remedy for monopoly not abolition, but control, 210 The relative advantages of government and private management of industry, 211.
XV. THE SOVEREIGN RIGHTS OF THE PEOPLE AND OF THEIR REPRESENTATIVE, THE GOVERNMENT 213 Questions brought up by the preceding conclusion, 213 The rights of property holders, 214 Property in the products of labor an inherent right, 215 Property in natural agents and public franchises a matter of expediency, 216 Eminent domain over natural agents still held by the public, 217 The laws of competition applicable to determine when this right should be exercised, 220 Absolutely perfect equity impossible, 221 Does private ownership of land work injustice? 222 Fundamental difficulties in dealing with monopolies not dependent on natural agents, 223 Why a remedy for their evils is essential, 224 The basis of the people's authority over these monopolies, 225 Government regulation with private management the only feasible plan, 225.
XVI. PRACTICAL PLANS FOR THE CONTROL OF MONOPOLIES 227 Economists should unite on the principles already propounded, 227 Practical details a matter of opinion, 227 A plan for the equitable and permanent adjustment of the railway problem, 228 The ownership and operation of the railways, 229 Their securities as investments and for use in connection with the currency, 230 Readjustment of outstanding securities, 231 Lending the government's credit to private corporations, 232 How rates of fare and freight should be fixed, 233 How the incentive to economy is retained, 234 How to avoid strikes, 237 Principles to be observed in establishing government control of monopolies, 238 Plans for the control of mineral monopolies, 238 State ownership with private operation, 239 Plans for controlling municipal monopolies, 240 The control of other monopolies, 244 The dangers of special legislation, 244 Government control of manufacturing enterprises not feasible, 245 Taking trusts within the pale of the law, 247 Enforcing publicity, 247 Enforcing non-discrimination, 248 Direct action to prevent extortion by the monopoly, 251 Potential competition to prevent extortion, 252 Reform of corporation laws, 254 The contrast between this plan for controlling trusts and existing law, 255 Reductions in the tariff as a remedy for trusts, 256 Plans for the control of labor monopolies, 257 Strikes an injury to labor, 258 Removal of other monopolies as a cure, 258 What shall fix the rate of wages? 259 Cooperative ownership, 260 Fraternal benevolence most needed here, 261 A definite relation between monopolies and the people, 262 Conclusion, 263.
MONOPOLIES AND THE PEOPLE
I.
THE PROBLEM PRESENTED.
The word "trust," standing for one of the noblest faculties of the heart, has always held an honorable place in our language. It is one of the strange occurrences by which languages become indelible records of great facts in the history of the world, that this word has recently acquired a new meaning, which, to the popular ear at least, is as hateful as the old meaning is pleasant and gratifying.
Some future generation may yet be interested in searching out the fact that back in the nineteenth century the word "trust" was used to signify an obnoxious combination to restrict competition among those engaged in the same business; and that it was so called because the various members of the combination entrusted the control of their projects and business to some of their number selected as trustees. We of the present day, however, are vitally interested in a question far more important to us than the examination of a curiosity of philology. We are all of us directly affected to-day by the operation of trusts; in some cases so that we feel the effect and rebel under it; in other cases, so that we are unconscious of their influence and pay little heed to their working.