CHAPTER XXX

"TO GET ALL WE CAN"

Are the combinations, trusts, syndicates of modern industry organized scarcity or organized plenty? Dearness or cheapness? "They are doing their work cheaper," said one of the oil combination of himself and his associates, "than any rival organization can afford to do it, and that is their policy, and by that only will they survive."[605]

"We think our American petroleum is a very cheap light. It is our pleasure to try to make it so," said its head.[606]

"Our object has always been to reduce rates, and cheapen the product, and increase its consumption by making the lowest price possible to the consumer," said another.[607]

Even if this were true-- But is it true?

The then president of the United Pipe Lines of the oil combination, who was also president of a subordinate corporation, was a witness in 1879 in the suit brought by the Commonwealth of Pennsylvania. His refinery, he stated, did nothing but make the oil. "It is taken and sold by another organization"--the oil combination. "We agree to take the same prices that they take for their oil. It is kind of pooled--the sale of the oil." The "agreement," he said, is "simply to hold up the price of refined oil, ... to get all we can for it ... under some arrangement by which they keep the price up to make a profit." Not only was the price fixed under the agreement "to get all we can," but the combination, as at Cleveland,[608] fixed the amount to be produced. The subordinate company was allowed to have nothing to do with the business--except to do the work, and to do only as much as its superior chose to permit. Other refiners, in the same investigation, were shown to be sufferers from the same kind of "grip." Asked what other concerns besides his of Oil City were in this arrangement, he named the principal ones of Titusville, Pittsburg, Philadelphia, and New York.

"These companies were all acting in concert, were they?"

"So far as sales of refined oil were concerned, I think they were."

Capitalists are usually supposed to be hard of heart and head, suspicious, great sticklers for "black and white," and careful to have all that is due them "nominated in the bond." This arrangement, by which this witness and his associates put themselves entirely at the disposal of others--as to how much they should manufacture, what freight they should pay, what price they should receive, etc.--was not in writing.

"It is a verbal one."[609]

The purchase of the refineries at Baltimore by the oil combination in 1877, under the name of the Baltimore United Oil Company, was immediately followed by an advance in price. The Baltimore _Sun_, in December, 1877, said: "The combination has already begun to exert its influence on the market. Oil for home consumption was yesterday quoted at 14 cents, having raised from 11-1/2 cents, the quotation on Wednesday. The combination will not make contracts ahead, which might be interpreted to mean an intended advance in price." In Buffalo the manager of one of the properties of the oil combination said in evidence: "My son is on a committee, he told me, that regulates the price of oil."[610] While the trust had the trade of Buffalo to itself, it held the price of oil at a high rate. "In Buffalo there were then no rival works," said State's Attorney Quinby to the jury who were trying its representatives for conspiracy against a competing refinery, "and we were paying for kerosene 18 cents a gallon. To-day, with the little Buffalo company in the market making kerosene, you can get it for 6 cents a gallon."

This Buffalo competitor was a very modest affair, insignificant in capital and resources, but it cut down the price of oil as far away as Boston. It established there an agent who "went around" and "cut the prices down," and then the agent of the combination "went around and cut the prices further," as its Boston employé described it. He was instructed, he said, "to follow them down, ... only not to sell at a loss." Before this competitor came he had been selling oil as high as 20 cents a gallon. "We got the price down to 18 cents, and got down then, I believe, to 8 cents, so that I have been selling them since then at 8 cents."[611] Eight cents, then, was not at a loss--since he had been told "not to sell at a loss"--and yet these passionate pilgrims of cheapness had been making the Boston buyer pay 20 cents! "I have been selling since at 8 cents," he says. This testimony was given in 1886; the reduction to 8 cents from 20 was made in 1882. Four years' consumption of this oil had been given to the buyer in Boston at 8 cents a gallon instead of 20, in consequence of the entrance of so insignificant a competitor.

When a member of the trust was testifying before the New York courts, he referred to the competition of the independent of Marietta as "his power for evil." Asked to define what he meant by his phrase "power for evil," he said, "It was to make prices that would be vexatious and harassing." He was asked if it harassed the oil trust, and the corporations connected with it, to have prices in any part of the country lower than they fixed.

"Lower than a reasonable basis."

"What they consider a reasonable basis?"

"Yes."[612]

That we can understand. But we cannot understand what the president of the trust meant when he said, "We like competition," for that would imply a natural proclivity for fellowship with the power of evil.

"Who fixes the price of oil in New York?" was asked of one of the witnesses before the Interstate Commerce Commission at Washington. That was done, he said, by the selling agent of the oil combination. He "has the price marked in the New York Produce Exchange daily--the price at which they will sell oil."[613] When the vice-president of the company representing the trust in St. Louis and the Southwest was on the stand before the Interstate Commerce Commission, he was asked what was the price of oil in the territory in which he was operating. The price of oil in tank-cars, in Arkansas, he said, "is now and has been during about three years or more--since Mr. Rice commenced shipping by water to Little Rock--10 cents per gallon. The average price, independent of competition, which I suppose is what you want, in the State of Texas is about 13 cents per gallon in bulk, covering the whole State of Texas. The average price per barrel would be about 17 cents, and the average price in cases about 20 cents."[614]

"Since Mr. Rice commenced shipping by water to Little Rock;" "the average price independent of competition in Texas"--these are telltale phrases. Where the combination was "independent of competition" the price was one-third greater.

The committee of Congress which investigated trusts in 1889 gathered a great deal of sworn evidence--the details of which remained uncontradicted, and which were met only by general statements like those quoted at the head of this chapter--showing how extortionate prices had been charged until competition appeared, that in all cases a war of extermination had been made upon those competitors, and that when their business was destroyed prices were put up again. Losses in competitive wars were merely investments from which to draw dividends in perpetuity. The "cheapness" of the combination followed the cheapness of competitors, and was merely a feint, one of the approaches in a siege to overcome the inner citadel of cheapness, a strategic cheapness to-day on which to build dearness forever. This battle of prices is shown in a table covering fifty towns in Texas, Mississippi, Louisiana, Alabama, Tennessee, Georgia, Kentucky, for three to five years. The appearance of competitive oil, for instance, cut the prices of oil from 15 cents a gallon down to 10 in Paris, Texas; from 25 to 15 in Calvert, Texas; from 22 cents to 10 in Austin, Texas; from 16 to 5 in Little Rock, Arkansas--evidently a war price; from 16 to 8-1/2 in Huntsville, Alabama; from 16 to 8 in Memphis, Tennessee, and so on.[615] The committee of Congress submit pages of evidence of the reimposition of high prices the moment competition was killed off. If the combination found a rival dealer out of oil for only a day it "popped the prices up 3-1/2 cents."[616] "One day," wrote one of the dealers, "oil is up to 20 cents and over, and when any person attempts to import here, other than the vassals 'of the oil combination,' it is put down to 7 cents a gallon."[617]

Prices were frequently put higher after the war than before. In the debate in the Canadian Parliament last year on the proposal to reduce the Canadian tariff, supported by a strong lobby from the American oil trust, it was shown by affidavits that at Selma, Alabama, oil was reduced during the "war" against outside refiners to 8 from 15 cents. After "competition was overcome," in the language of the South Improvement Company contract, the price was put up, not to 15 cents where it had been, but to 25 cents. In the same debate a large number of affidavits were exhibited showing how the price charged by the oil trust in America varied in places near each other in arbitrary and extraordinary ways, as 7 cents a gallon at Port Huron, Michigan, and 14-1/2 cents at Bay City, only a few miles distant. Under the rule of the trust prices are on a mechanical basis everywhere, from the retail markets to the seaboard, where the refined, the manufactured article, is quoted at a lower price than the crude, its raw material.[618]

In the report of the tenth United States census in 1886, on the necessaries of life, the retail price of kerosene is given for thirty-five places. At a few of these there was competition; there the price was 12-1/2 to 15 cents a gallon. At all other points it ranged from 20 to 25 cents. Such a tax on the 400,000,000 gallons of oil consumed in this country is the only kind of income-tax that is "American."

Application was made in May, 1894, by the Central Labor Union of New York City to the Attorney-General of the State to vacate the charter of the principal corporation in the oil trust. In the argument to support it, it was shown that New York consumers were then paying twice as much for their lamp-oil as the people of Philadelphia, and three times as much as the foreign consumer buying in New York for export.

The trust, notwithstanding its powers of "producing the very best oil at the lowest possible price," compels dealers to sign away their rights to buy oil where they can buy it the cheapest or best. When opposition is encountered from any of the retailers in a town the plan of campaign of its "war" is very simple. Some one is found who is willing for hire to sell his oils at a cut price until the rest are made sick enough to surrender. Then contracts are made with all the dealers, binding them to buy of no one else, and prices are put up to a point at which a handsome profit is assured. After this competitors can find no dealer through whom to sell, and the consumer can get no oil but that of the monopoly. Price and quality are both thenceforth such as the combination chooses to make them. There are bargains in oil, but one party makes both sides of them. "We do not wish to ruin you without giving you another chance," said an agent of the combination gently to a merchant who persisted in selling opposition oil. "Look at this map; we have the country divided into districts. If you insist on war we will cut the prices in your territory to any necessary extent to destroy you, but we lose nothing. We simply make a corresponding advance in some other district. You lose everything. We cannot by any possibility lose anything."

Only by thus contracting themselves out of their rights could these "free" merchants get oil with which to supply their customers. "Their agent," wrote a dealer of Hot Springs, Arkansas, "has made threats to some of our merchants that they must or shall buy oil from them and no one else, or if otherwise they would come here and ruin them--by fair means if they could, by underhand ways if necessary." Another firm in Pine Bluff, Arkansas, wrote that the agent of the combination had called upon them and several of the other large dealers to make a "contract, ... and, failing to do so, in a short time he threatens opening a retail house," as at Columbus.[619] Another wrote, December 13, 1886, from Navasota that the monopoly "will not sell unless you sign an obligation to buy from them and them only."[620]

This maintenance of prices until some "power for evil" appears with lower rates, then wars to kill, and raising of prices if the war ends in victory--these phenomena of cheapness continue to date. Many chapters could be filled with accounts of these wars of which record has been kept. To merely name the battle-fields would require pages. When the combination, through its agents, attacked Toledo in the courts for undertaking the municipal supply of natural gas, it "urged," as it is quoted in the language of the decision, "that the main object and primary purpose of the act is to enable the city to supply its individual inhabitants with fuel for private use and consumption at a cheaper rate than they can obtain it from other sources." The act of the Legislature gave Toledo "a power for evil." At Denver oil was sold at 25 cents a gallon until an independent company began refining the petroleum which abounds in the Rocky Mountain basin. During the Colorado war of 1892 all the familiar tactics--cut rates, espionage, and all--were employed. This continued after the dissolution of the trust as before, showing that its change of name and form meant no real change. In Pueblo and Colorado Springs the price was put down to 5 cents a gallon from 25 cents. In Denver the price was made 7 cents. Spotters followed the wagons of the independent company to spy out its customers, and get them, by threats or bribes, to sign away their right to buy where they could buy cheapest. The comments of the local press did credit to the inspiriting mountain air of the American Switzerland. The complaint recently filed with the Interstate Commerce Commission by a dealer of the Pacific coast charges that, among other discriminations injurious to the public, the rates between the Pacific coast and Colorado were so manipulated that the oil found in the Rocky Mountains and refined in Colorado could not be shipped to California and the other Pacific states. Consumers there had to buy the oil of the trust hauled all the way from Cleveland or Chicago. When an independent refiner ran the blockade into New York, in 1892, and began selling to the people from tank wagons, the price fell in New York, Brooklyn, and Jersey City from 8 and 8-1/2 to 4 and 4-1/2 cents. The St. Louis _Chronicle_ of May 19, 1892, reports a reduction of the price of the best grade of oil to 5 cents a gallon--"the fortieth reduction," it says, made since an independent company "entered the field three years ago, at which time the price was 14-1/2 cents," as it would be still but for competition.

War has been made on poor men, paralytics, boys, cripples, widows, any one who had the "business that belongs to us." An instance taken from abroad will be the last. The combination between the American and the Scotch refiners, formed several years ago, fixed the price of the principal product, scale, at threepence a pound in 1892. The break-up in that year was followed at once by a decline from threepence to twopence. This is a saving to the public of $1,000,000 a year. "All the relative products," says the London _Economist_, November 12, 1892, "have practically collapsed in value." Candles, for instance, declined 20 cents a dozen, "and the finer qualities were sold at the same rate as the commoner sorts."

These are the facts, to fit the phrase of one of the monopoly who described to Congress how it "bridges it to the consumer at the lowest reasonable rate." The "bridge to the consumer" spans 1872 to 1894 and Europe and America, but it is not a bridge of cheapness.[621]

To prove that oil is cheaper than it was is not to prove that it is cheap.

Anything begins to be dear the moment the power to fix the price has been allowed to vest in one. The question whether our monopolies have made things cheap or dear in the past pales before the exciting query, What will they do in the future, when their power has become still greater, or has passed by death, descent, or sale into hands less shrewd and greedier? Such power never moves backward. Says President Andrews, of Brown University, in the article quoted below: "When a commodity is turned out under such conditions, cost no longer regulates the price. This is done quite arbitrarily for a time, the seller's whim being perhaps sobered a little by his memory of old competitive rates. Slowly caprice gives way to law; but it is a new law--that of man's need. Prices go higher and higher till demand, and hence profit, begins to fall off; and they then play about the line of what the market will bear, just as they used to about that of cost. The producer can be more or less exacting, according to the nature of the product. If it is a luxury, the new law may not greatly elevate prices above the old notch. If it is a necessity, he may bleed people to death."

"At any reasonable price, say three or four times the present selling price of refined oil, it is the cheapest light in the world, and if the prices were advanced to 20 cents a gallon the sales would be as large as they are now at 7-1/2 cents," wrote Vice-president Cassatt, of the Pennsylvania Railroad, to the Pennsylvania Legislature, in 1881, opposing the Free Pipe Line bill. The possibilities here were touched upon by the New York committee of 1888: "What the trust's course would have been if, instead of increased production, it had been required to deal with the problem of a constantly diminishing or stationary volume of oil, is an interesting subject for speculation. Certain it is that the trust has the power to put up prices, even if it fails to exercise it. If, in the future, the field producing the commodity manufactured and sold by this combination of corporations shall fail to increase its present product, or shall return a diminished quantity, the oil trust will be able to fix the price of the product of its refineries in this country, if not in the world."[622]

It was not great capital which put this industry in the possession of these enthusiasts for "all the little economies." The same universal forces of cheapness which have been at work everywhere have been at work upon the cost of the instrumentalities of production, and put machinery, transportation, raw material, and market agencies within reach of moderate capital. Such great capital is wasteful capital. It operates through agents at great distances, attenuating incentives to energy and care. Many practical men, real refiners, who have been forced to give up their business to refiners of railroad privileges, have testified to the same effect as the manufacturer who said to Congress in 1872: "I believe a refinery of 100 barrels can be run cheaper than the larger establishments."[623]

If production on a natural scale, directed by the eye of the owner, were not more economical than production mobilized from the metropolis by salaried men hundreds of miles away, the independent refiners and producers of Pennsylvania, New York, and Ohio would not have been able to survive at all. It was said in one of the Buffalo papers by one of these independent refiners: "There are several well-equipped independent refineries in operation at the present time in Pennsylvania and Ohio oil-fields where the refiner has his own crude oil, his own pipe line, and produces his own natural gas for fuel purposes. It is needless to say that an experienced and skilful refiner operating under such favorable conditions can manufacture at less cost per barrel than any trust with a long list of pensioners and burdened with the control of two political parties and the maintenance of numerous city mansions, stock farms, and theological seminaries."

NOTE.--The claims of the oil combination to the credit of having cheapened oil have been subjected by competent men to statistical tests. President Andrews, of Brown University, shows that from 1861 to 1872, inclusive--_i.e._, before any combination whatever existed--the net annual percentage of decrease in the price of refining oil and carrying it to tide-water--that is, the difference between the cost of the petroleum at the wells and of the refined at New York--was 10-4332/10000 cents; from 1873 to 1881, inclusive, the trust's infirm and formative period, the decrease was 7-8897/10000 cents; from 1882 to 1887, inclusive, the years of its full maturity and vigor, the decrease was only 2-2879/10000 cents.[624]

The New York _Daily Commercial Bulletin_ (April 4, 1892) made a similar study with similar results. It finds that under competition in the refining of oil the difference between crude at the wells and refined oil at New York was reduced from 13.45 cents per gallon in 1872 to 6.02 cents per gallon in 1881; under the reign of the trust the difference was 5.84 in 1891--greater than in 1882, when the trust began operations, when it was only 5.77. It concludes: "It has been claimed that the oil trust has been a benefit to this county; that the economies which it has introduced in the transportation and refining of oil have been shared with the consumer, and that the enormous wealth which it has accumulated during the past ten years has been widely distributed. Not one of these claims has any substantial basis in fact."

The comparisons of cheapness are made on the wholesale price at New York of "export oil"--an inferior, almost a refuse product. Its price must meet that made by the Russians. These comparisons, therefore, really shed no light on the price movements of oil going into consumption throughout the country. But the trust really gets the retail price on all its domestic output. A full statistical statement of the price movement in retail markets cannot be had; nor even of the wholesale, for the combination has lately adopted a policy of suppressing the wholesale quotations of the higher grades of oil for domestic consumption. Comparisons, therefore, built on the export price of this poor oil at New York, though good as far as they go, are of oils of a low illuminating power. Comparisons that would really show the part played by the combination as a true merchant--one who discovers and distributes abundance for all at a fair price for his service--can only be made by such illustrations as we have been giving from its utterances, plans, and actions. But for monopoly an average price of 5 cents a gallon could prevail throughout the United States, with a saving of hundreds of millions to the people.

Trust prices are artificial prices, independent of supply and demand, and in their perfection superior even to panic. This is illustrated by the comparison below, made by Mr. Byron W. Holt:

COMPARATIVE PRICES OF STAPLES DURING THE CURRENT DEPRESSION

------------------------------+---------------+-------------+------------- | | |Per cent. of |April 28, 1893 |July 20, 1894|Decline since | | |April 28, | | |1893 ------------------------------+---------------+-------------+------------- Wheat, No. 2, red | 0.76-3/8 | 0.56-1/2 | 26 Corn, No. 2, mixed | .50 | .47-1/2 | 5 Cotton, middling upland | .07-13/16 | .07-1/16 | 10 Wool, Ohio and Pennsylvania, X| .28 | .18 | 36 Pork, mess, new |21.00 |14.00 @ 14.25| 33 Butter, creamery | .30 @ 33 | .17 | 45 Sugar, raw, 96° | .03-15/16 @ 4| .03-3/16 | 18 Sugar, granulated | .05-1/16 | .04-5/16 | 15 Petroleum, refined, gal. | .0555 | .0515 | 7 Pig Iron, Bessemer, Chicago |14.50 @ 15.00 |11.25 @ 11.50| 23 Steel Rails, Chicago |30.00 @ 32.00 |25.00 @ 27.00| 16 Steel Beams, Chicago | .02 | .01-1/2 | 25 | | | | June 30, 1892 |June 30, 1894|June 30, 1892 Coal, Bituminous, Pittsburg |$ 1.07 | 0.86 | 20 Coal, Anthracite, New York | 4.15 | 4.15 | 00 ------------------------------+---------------+-------------+-------------

The prices of four of these products--granulated sugar, petroleum, steel rails, and anthracite coal--are controlled by strong trusts. These prices have declined, since the beginning of the depression--about May 1, 1893--not quite 10 per cent. Prices of the other ten products have declined 24 per cent.

Under free conditions prices of manufactured articles would decline faster than prices of farm products. Cost of production can be lowered faster in machine or factory products than in farm products. Under the influence of trusts the natural order is not only reversed, but prices of farm products have declined more than twice as fast as prices of factory or trust products. Trust influence is conspicuous in the cases of sugar and coal. The price of raw sugar, in which there is no trust, has declined 5 per cent. since June 30, 1891. The price of granulated has advanced 4 per cent. The president of the trust admitted to Congress in 1894 that it had advanced the price 3/8 of a cent a pound. Cost of refining has declined since 1891. There being no well-defined trust in bituminous coal, its price has declined 30 per cent. since 1891. The price of anthracite coal has advanced 2 per cent. in the same time, because the producers have "regulated" production.