INFLUENCES WHICH PERVERT THE FORCES OF PROGRESS

Thus far we have been dealing with what we have called natural forces. The phenomena which we have studied have not been caused by any conscious and purposeful action of the people as a whole. They have not been brought about by the power of governments nor by anything which savors of what is called collectivism. Individuals have done what they would, seeking to promote their own interests under conditions of great freedom, and the effect has been a system of social industry which is highly productive, progressive, and generally honest. Production has constantly increased, and the product has been shared under the influence of a law which, if freedom were quite complete and competition perfect, would give to each producer what he contributes to the aggregate output of the great social workshop. We have claimed that, in the world as it is, influenced by a great number of disturbing forces, these fundamental laws still act and tend to bring about the condition of productiveness, progress, and honesty which is their natural result. If the actual condition falls short of this, the fact is mainly due to curtailments of freedom and interferences with the competition which is the result of freedom.

Influences which retard Static Adjustments. - Throughout the study we have paid due attention to those ordinary elements of “economic friction” which all theoretical writers have recognized and which practical writers have put quite in the foreground; and we have discovered that, while they are influences to be taken account of in any statement of principles, they in no wise invalidate principles themselves. For the most part they are influences which retard those movements which bring about static adjustments. An invention cheapens the production of some article and at once the natural or static standard of its price falls; but the actual price goes down more slowly, and in the interim the producer who has the efficient method gathers in the fruit of it as a profit. The retarding influence is a fact that should be as fully recognized in a statement of the law of profit as any other. The existence of it is an element in the theory of entrepreneur’s profit. Improvements which reduce the cost of goods enhance the product of labor, and this sets a higher standard for wages than the one that has thus far ruled; but a delay occurs before the pay of workmen rises to the new standard. Adjustments have to be made which require time, and these are as obviously elements that must be incorporated into an economic theory as any with which it has to deal.

Influences which resist Dynamic Movements. - If there is anything which, without impairing the motive powers of economic progress, puts an obstacle in the way of the movement, it has to be treated like one of these elements of friction to which we have just referred. In our discussion of the growth of population, the increase of wealth, the improvement of method, etc., we have paid attention to resisting forces as well as others, and have tried to determine what is the resultant of all of them. The forces of resistance have their place in a statement of dynamic laws.

An Influence that perverts the Forces of Progress. - We have to deal, not only with such retarding influences, but with a positive perversion of the force that makes for progress. Everywhere we have perceived that competition - the healthful rivalry in serving the public - is essential in order that the best methods and the most effective organization should be selected for survival, and that industry should show a perpetual increase in productive power. In our study of the question whether improved method and improved organization tend to promote or to check further improvement, we have found that these beneficent changes are naturally self-perpetuating, so long as the universal spring of progress, competition, continues. A proviso has perforce been inserted into our optimistic forecast as to the economic future of the world - if nothing suppresses competition, progress will continue forever.

Monopoly and Economic Progress. - The very antithesis of competition is monopoly, and it is this which, according to the common view, has already seated itself in the places of greatest economic power. “Competition is excellent, but dead,” said a socialist in a recent discussion; and the statement expresses what many believe. There is in many quarters an impression that monopoly will dominate the economic life of the twentieth century as competition has dominated that of the nineteenth. If the impression is true, farewell to the progress which in the past century has been so rapid and inspiring. The dazzling visions of the future which technical gains have excited must be changed to an anticipation as dismal as anything ever suggested by the Political Economy of the classical days - that of a power of repression checking the upward movement of humanity and in the end forcing it downward. No description could exaggerate the evil which is in store for a society given hopelessly over to a regime of private monopoly. Under this comprehensive name we shall group the most important of the agencies which not merely resist, but positively vitiate, the action of natural economic law. Monopoly checks progress in production and infuses into distribution an element of robbery. It perverts the forces which tend to secure to individuals all that they produce. It makes prices and wages abnormal and distorts the form of the industrial mechanism. In the study of this perverting influence we shall include an inquiry as to the means of removing it and restoring industry to its normal condition. We shall find that this can be done - that competition can be liberated, though the liberation can be accomplished only by difficult action on the part of the state.

The comparatively Narrow Field of Present Action by the State. - Economic theory has always recognized the existence and the restraining action of the civil law, which has prohibited many things which the selfishness of individuals would have prompted them to do. Certain officers of the state constitute, as we saw in an early chapter, one generic class of laborers, one of whose functions it is to retain in a state of appropriation things on which other men have conferred utility - that is, to protect property, and so to cooeperate in the creation of wealth. In a few directions they render services which private employers might render in a less effective way. The state, through its special servants, educates children and youth, guards the public health, encourages inventions, stimulates certain kinds of production, collects statistics, carries letters and parcels, provides currency, improves rivers and harbors, preserves forests, constructs reservoirs for irrigation, and digs canals and tunnels for transportation. In these ways and in others it enters the field of positive production; but in the main it leaves that field to be occupied by private employers of labor and capital. Business is still individualistic, since those who initiate enterprises and control them are either natural persons or those artificial and legal persons, the corporations.

The Growing Field of Action by Corporations. - Until recently there has been comparatively little production in the hands of corporations great enough to be exempt from the same economic laws which apply to a blacksmith, a carpenter, or a tailor. Individual enterprise and generally free competition have prevailed. The state has not checked them and the great aggregations of capital to which we give the name “trusts” have not, in this earlier period, been present in force enough to check them. The field for business enterprise has been open to individuals, partnerships, and corporations; they have entered it fearlessly, and a free-for-all competition has resulted. This free action is in process of being repressed by chartered bodies of capitalists, the great corporations, whom the law still treats somewhat as though in its collective entirety each one were an individual. They are building up a semi-public power - a quasi-state within the general state - and besides vitiating the action of economic laws, are perverting governments. They trench on the freedom on which economic laws are postulated and on civic freedom also.

How Corporations pervert the Action of Economic Laws. - Whatever interferes with individual enterprise interferes with the action of the laws of value, wages, and interest, and distorts the very structure of society. Prices do not conform to the standards of cost, wages do not conform to the standard of final productivity of labor, and interest does not conform to the marginal product of capital. The system of industrial groups and subgroups is thrown out of balance by putting too much labor and capital at certain points and too little at others. Profits become, not altogether a temporary premium for improvement, - the reward for giving to humanity a dynamic impulse, - but partly the spoils of men whose influence is hostile to progress. Under a regime of trusts the outlook for the future of labor is clouded, since the rate of technical progress is not what it would be under the spontaneous action of many competitors. The gain in productive power which the strenuous race for perfection insures is retarded, and may conceivably be brought to a standstill, by the advent of corporations largely exempt from such competition. There is threatened a blight on the future of labor, since the standard of wages, set by the productivity of labor, does not rise as it should, and the actual rate of wages lags behind the standard by an unnaturally long interval. There is too much difference between what labor produces and what it ought to produce, and there is an abnormally great difference between what it actually produces and what it gets.

The Fields for Monopolies of Different Kinds. - Monopoly is thus a general perverter of the industrial system; but there are two kinds of monopoly, of which only one stands condemned upon its face as the enemy of humanity. For a state monopoly there is always something to be said. Even socialism - the ownership of all capital, and the management of all industry by governments - is making in these days a plea for itself that wins many adherents, and the demand that a few particular industries be socialized appeals to many more. The municipal ownership of lighting plants, street railways and the like, and the ownership of railroads, telegraph lines, and some mines by the state are insistently demanded and may possibly be secured. We can fairly assume that, within the period of time that falls within the purview of this work, general socialism will not be introduced. In a few limited fields the people may accept governmental monopolies, but private monopolies are the thing we have chiefly to deal with; and it is to them, if they remain unchecked, that we shall have to attribute a disastrous change in that generally honest and progressive system of industry which has evolved under the spur of private enterprise.

Two Modes of Approaching a Monopolistic Condition. - The approach to monopoly may be extensive or intensive. A fairly complete monopoly may be established in some part of the industrial field, and the area of its operations may then be extended. Smelters of iron and steel, after attaining an exclusive possession of their original fields of production, may become carriers, producers of ore, makers of wire, plate, and structural steel, and builders of ships, bridges, etc.

On the other hand, a great corporation may have, at the outset, but little monopolistic power, and it may then acquire more and more of it within the original field of its operations. It may at first make competition difficult and crush a few of its rivals, and then, as its power increases, it may make competition nearly impossible in the greater part of its field and drive away nearly all the rivals who remain. It is necessary to form a more accurate idea than the one which is commonly prevalent of what actual monopolies are, of what they really do, of what they would do if they were quite free to work their will, and of what they will do, on the other hand, if they are effectively controlled by the sovereign state. Regulation of monopolies we must have; that is not a debatable question. The sovereignty of the state will be preserved in industry and elsewhere, and it is perfectly safe to assert that only by new and untried modes of asserting that sovereignty can industry hereafter be in any sense natural, rewarding labor as it should, insuring progress, and holding before the eyes of all classes the prospect of a bright and assured future. We are dependent on action by the state for results and prospects which we formerly secured without it; but though we are forced to ride roughshod over laissez-faire theories, we do so in order to gain the end which those theories had in view, namely, a system actuated by the vivifying power of competition, with all that that signifies of present and future good.

The Nature of a True Monopoly. - The exclusive privilege of making and selling a product is a monopoly in its completest form. This means, not only that there is only one establishment which is actually creating the product, but there is only one which is able to do so. This one can produce as much or as little as it pleases, and it can raise the price of what it sells without having in view any other consideration than its own interest.

The Possibility of the Form of Monopoly without the Power of It. - A business, however, may have the form of a monopoly, but not its genuine power. It may consolidate into one great corporation all the producers of an article who send their goods into a general market, and if no rivals of this corporation then appear, the public is forced to buy from it whatever it needs of the particular kind of goods which it makes. Consumers of A’’’ of our table may find that they can get none of it except from a single company. Yet the price may conceivably be a normal one. It may stand not much above the cost of production to the monopoly itself. If it does so, it is because a higher price would invite competition. The great company prefers to sell all the goods that are required at a moderate price rather than to invite rivals into its territory. This is a monopoly in form but not in fact, for it is shorn of its injurious power; and the thing that holds it firmly in check is potential competition. The fact that a rival can appear and will appear if the price goes above the reasonable level at which it stands, induces the corporation to produce goods enough to keep the price at that level. Under such a nearly ideal condition the public would get the full benefit of the economy which very large production gives, notwithstanding that no actual competition would go on. Prices would still hover near the low level of cost. The most economical state conceivable is one in which, in many lines of business, a single great corporation should produce all the goods and sell them at a price so slightly above their cost as to afford no incentive to any other producer to come into the field. Since the first trusts were formed the efficiency of potential competition has been so constantly displayed that there is no danger that this regulator of prices will ever be disregarded. Trusts have learned by experience that too great an increase in the prices of their products “builds mills.” It causes new producers who were only potentially in the field actually to come into it and to begin to make goods. To forestall this, the trusts have learned to pursue a more conservative policy and to content themselves with smaller additions to the prices of their wares. If it were not for this regulative work of the potential competitor, we should have a regime of monopoly with its unendurable evils; and if, on the other hand, the regulator were as efficient as it should be, we should have a natural system in which complete freedom would rule. The limitless difference between these conditions measures the importance of potential competition.

Cost of Production in Independent Mills a Standard of Price. - A consolidated company will ultimately have a real but small advantage over a rival in the cost of producing and selling its goods; but at present the advantage is often with the rival. His plant is often superior to many of those operated by the trust. When the combination brings its mills to a maximum of efficiency and then reaps the further advantage which consolidation itself insures, it will be able to make a small profit while selling goods at what they cost in the mills of its rival. This cost which a potential competitor will incur if he actually comes into the field sets the natural standard of price in the new regime of seeming monopoly; and it will be seen that if this natural price really ruled, the monopoly would have only a formal existence. It would be shorn of its power to tax the public.

Partial Monopolies now Common. - What we have is neither the complete monopoly nor the merely formal one, but one that has power enough to work injury and to be a menace to industry and politics. If it long perverts industry, it will be because it perverts politics - because it baffles the people in their effort to make and enforce laws which would keep the power of competition alive. In terms of our table the subgroups are coming to resemble single overgrown corporations. Each of them, where this movement is in progress, is tending toward a state where it will have a single entrepreneur - one of those overgrown corporations which resemble monopolies and are commonly termed so.

Complete monopolies, as we have said, they are not; and yet, on the other hand, they are by no means without monopolistic power. They are held somewhat in check by the potential competition we have referred to, but the check works imperfectly. At some points it restrains the corporations quite closely and gives an approach to the ideal results, in which the consolidation is very productive but not at all oppressive; while elsewhere the check has very little power, oppression prevails, and if anything holds the exactions of the corporation within bounds, it is a respect for the ultimate power of the government and an inkling of what the people may do if they are provoked to drastic action.

Two Policies open to the State. - The alternatives which are open to us are, in this view, reduced to two. Consolidation itself is inevitable. If, in any great department of production, it creates a true monopoly which cannot be otherwise controlled, the demand that the business be taken over by the government and worked for the benefit of the public will become irresistible. If it does not become a true monopoly, the business may remain in private hands. Inevitable consolidation with a choice between governmental production and private production is offered to us. We are at liberty to select the latter only if potential competition shall be made to be a satisfactory regulator of the action of the great corporations.

The Future Dependent on Keeping the Field open for Competitors. - Potential competition, on which, as it would seem, most of what is good in the present economic system depends, has also the fate of the future in its hands. Existing evils will decrease or increase according as this regulator shall work well or ill. Yet it is equally true that the government has the future in its hands, for the potential competition will be weak if the government shall do nothing to strengthen it. It is, indeed, working now, and has been working during the score of years in which great trusts have grown up; but the effects of its work have been unequal in different cases, and it is safe to say that, in the field as a whole, its efficiency has, of late, somewhat declined. With a further decline, if it shall come, prices will further rise, wages will fall, and progress will be retarded. The natural character of the dynamic movement is at stake and the continuance of so much of it as now survives and the restoration of what has been lost depend on state action.

The Impossibility of a Laissez-faire Policy. - Great indeed is the contrast between the present condition and one in which the government had little to do but to let industry alone. Letting free competitors alone was once desirable, but leaving monopolies quite to themselves is not to be thought of. It would, indeed, lead straight to socialism, under which the government would lay hands on business in so radical a way as to remove the private entrepreneurs altogether. If we should try to do nothing and persist too long in the attempt, we might find ourselves, in the end, forced to do everything. What is of the utmost importance is the kind of new work the government is called on to do. It is chiefly the work of a sovereign and not that of a producer. It is the work of a law-giving power, which declares what may and what may not be done in the field of business enterprise. It is also the work of a law-enforcing power, which makes sure that its decrees are something more than pious wishes or assertions of what is abstractly right. All of this is in harmony with the old conception of the state as the protector of property and the preserver of freedom. The people’s interests, which the monopoly threatens, have to be guarded. The right of every private competitor of a trust to enter a field of business and to call on the law for protection whenever he is in danger of being unfairly clubbed out of it, is what the state has to preserve. It is only protecting property in more subtle and difficult ways than those in which the state has always protected it. The official who restrains the plundering monopoly, preserves honest wealth, and keeps open the field for independent enterprise does on a grand scale something that is akin to the work of the watchman who patrols the street to preserve order and arrest burglars.

A Possible Field for Production by the State. - There is a possibility that in a few lines of production the American government may so far follow the route marked out by European states as to own plants and even operate them, and may do so in the interest of general competition. It may construct a few canals, with the special view to controlling charges made by railroads. It may own coal mines and either operate them or control the mode of operating them, for the purpose of curbing the exactions of monopolistic owners and securing a continuous supply of fuel. It may even own some railroads for the sake of making its control of freight charges more complete. Such actions as these may be slightly anomalous, since they break away from the policy of always regulating and never owning; nevertheless, they are a part of a general policy of regulation and a means of escape from a policy of ownership. The selling of coal by the state may help to keep independent manufacturing alive, and carrying by the state may do so in a more marked way. If so, these measures have a generally anti-socialistic effect, since they obstruct that growth of private monopoly which is the leading cause of the growth of socialism.

Evils within the Modern Corporation. - The great corporation brings with it some internal evils which might exist even if it never obtained a monopoly of its field. In this class are the injuries done by officers of the corporation to the owners of it, the stockholders. A typical plundering director has even more to answer for by reason of what he does to his own shareholders than because of what he and the corporation may succeed in doing to the public. In the actual amount of evil done, the robbing of shareholders is less important than the taxing of consumers and the depressing of wages, which occur when the effort to establish a monopoly is successful; but in the amount of iniquity and essential meanness which it implies on the part of those who practice it, it takes the first rank, and its effect in perverting the economic system cannot be overlooked. The director who buys property to unload upon his own corporation at a great advance on its cost, or who alternately depresses the business of his corporation and then restores it, in order that he may profit by the fall and the rise of the stock, not only does that which ought to confine his future labors to such as he could perform in a penitentiary, but does much to vitiate the action of the economic law which, if it worked in perfection, would give to the private capitalist a return conformable to the marginal product of the capital he owns. A sound industry requires that the state should protect property where this duty is now grossly neglected.

If more publicity will help to do this, - if lighting street lamps on a moral slum will end some of the more despicable acts committed by men who hold other men’s property in trust, - sound economics will depend in part on this measure, but it depends in part on more positive ones.

The investment of capital is discouraged and an important part of the dynamic movement is hindered wherever shareholders are made insecure; and therefore the entire relation of directors to those whose property they hold in trust needs to be supervised with far more strictness than has ever been attempted under American law. When invested capital shall be quite out of the range of buccaneers’ actions, it will produce more, increase more rapidly, and the better do its part toward maintaining the wages of labor.

Perversions of the Economic System by the Action of Promoters. - The state will be carrying out its established policy if it shall effectively control the action of promoters in their relation to prospective investors. The man who is invited to become a stockholder has a right to know the facts on which the value of the property offered to him depends. How many plants does the consolidated corporation own? How much did they cost? What is their present state of efficiency? What have been their earnings during recent years? Concerning these things and others which go to make up a correct estimate of the value of what the promoter is selling, the purchaser needs full and trustworthy information, and an obvious function of the law is to see that he gets it. That such action would guard investors’ personal rights is, of course, a reason for taking it; but the reason that here appeals to us is the fact that it would remove a second perversion of the economic system, accelerate the increase of capital, and help in securing a distribution of wealth which would be more nearly in accordance with natural law.

Perversions of the System caused by the Action of Corporations in their Entirety. - More directly within the domain of pure economics is the relation between the typical great corporation and the majority of the public which is wholly outside of it. In the common mind this relation also often appears as that of plunderers and plundered, and what it often has actually been, is a relation between corporations which have exacted a certain tribute and a body of consumers which has had to pay the tribute. Bound up with this general relation between the manufacturing corporation and the consuming public is one between it and producers of raw material which it buys and with laborers whom it hires. In this last relation what is endangered is the normal rate of pay, present and future. The type of measure which protects consumers protects the other parties who are affected by the great corporation’s policy. Workers are safe and producers of raw materials are measurably so if the power of competition in the making and selling of the goods is kept alive. If we prevent the trust from taking tribute from the purchasing public, we shall by the same means prevent it from oppressing laborers and farmers.

Why the Business of a Monopoly should never be regarded as a Private Interest. - The people are already putting behind them and ought to put completely out of sight and mind the idea that the business of a monopoly is a private enterprise which its officers have a right to manage as they please. A corporation becomes a public functionary from the time when it puts so many of its rivals out of the field that the people are dependent on it. As well might the waiter who brings food to the table claim that the act is purely his own affair and that the customers and the manager have no right of interference, however well or ill the customers may be served, as a combination of packers might claim that any important detail of their business concerns them only. The illustration is a weak one; for in the case of a trust which controls a product that is needed by the public, it is the full majesty of the people as a whole which is in danger of being set at naught. Such a company is a public servant in all essential particulars, and although it is allowed to retain a certain autonomy in the exercise of its function, that autonomy does not go to the length of liberty to wrong the public or any part of it. The preservation of a sound industrial system requires that governments shall forestall injuries which the interests of the monopolistic corporation impels it to inflict. No discontinuance of essential services, no stinting of them, and no demand for extortionate returns for them can be tolerated without a perversion of the economic system. The natural laws we have presented will work imperfectly if, for example, the danger of a coal famine shall forever impend over the public or if this fuel shall be held at an extortionate price. Workmen, indeed, have a larger stake than have others in the maintenance of a fair field for competing producers and an open market for labor, but other classes feel the vitiating of the industrial system which occurs when the fair field and the open market are absent.

Why the Motive which once favored Non-interference in Industry by the State now favors Interference. - We have said that what is needed is vigorous action by the state in keeping alive the force on which the adherents of a laissez-faire policy rested their hope of justice and prosperity. These fruits of a natural development have always depended on competition, and they still depend on it, though its power will have to be exerted in a new way. This requires a special action by the state; but in taking such action the government is conforming its policy to the essential part of the laissez-faire doctrine. It lays hands on industry to-day for the very reason which yesterday compelled it to keep them off - the necessity of preserving a beneficent rivalry in the domain of production.

America the Birthplace of Consolidated Corporations. - Consolidations of the kind that require vigorous treatment by the state have their special home in America. They have taken on a number of forms, but are coming more and more into the most efficient form they have ever assumed, that of the corporation. The holding company is the successor of the former trust. The method of union by which stockholders in several corporations surrendered their certificates of stock to a body of trustees and received in return for them what were called trust certificates, has been abandoned, and the readiness with which this has been done has been due to the fact that there are better modes of accomplishing the purpose in view. A new corporation can be formed, and, thanks to those small states which thrive by issuing letters of marque, it can be endowed with very extensive powers. It can, of course, buy or lease mills, furnaces, etc., but what it can most easily do is to own a controlling portion of the common stock of the companies which own the plants. The holding company has a sinister perfection in its mode of giving to a minority of capital the control over a majority. It is possible that the actual capital of the original corporation may be mainly a borrowed fund and may be represented by an issue of bonds, while the stockholders may have contributed little to the cost of their plants and their working capital; and yet this common stock may confer on its owners the control of the entire business. The corporation that buys a bare majority of this common stock may have an absolute power over the producing plants and their operations. If the holding company should secure much of its own capital by an issue of bonds, the amount which its own stockholders would have to contribute would be only a minute fraction of the capital placed in their hands, and yet it might insure to them the control of a domain that is nothing less than an industrial empire, if indeed they are not themselves obliged to surrender the government of it to an innermost circle composed of directors.

Earlier Forms of Union. - There are forms of union which are less complete than this and have been widely adopted. There was the original compact among rival producers to maintain fixed prices for their goods. It was a promise which every party in the transaction was bound in honor to keep, but impelled by interest to break; and it was morally certain to be broken. There was this same contract to maintain prices strengthened by a corresponding contract to hold the output of every plant within definite limits. If this second promise were kept, the first would be so, since the motive for cutting the price agreed upon was always the securing of large sales, and this was impossible without a correspondingly large production; but security was needed for the fulfillment of the second promise. This security was in due time afforded, and there was perfected a form of union which was a favorite one, since it did not merge and extinguish the original corporations, but allowed them to conduct their business as before, though with a restricted output and with prices dictated by the combinations. As a rule each of the companies paid a fine into the treasury of the pool if it produced more than the amount allotted to it, and received a bonus or subsidy if it produced less. This form has more of kinship with the Kartel of Germany than the other American forms, and it might have continued to prevail in our country if the law had treated it with toleration. It leaves the power of competition less impaired than does the consolidated corporation, of which the laws are more tolerant. By repressing those unions which can be easily defined and treated as monopolies we have called into being others which are far more monopolistic and dangerous. The economic principles on which the regulation of all such consolidations rests apply especially to the closer unions which take the corporate shape. To the extent that other forms of union have any monopolistic power the same principles apply also to them; but we shall see why it is that the pools which the law forbids have little of this power and the corporations have much of it.

The Condition which precludes True Monopoly. - A monopoly grows up when a company keeps such perfect guard over its economic field that new rivals cannot enter without exposing themselves to peril. As we have seen, it is not always necessary that the rival company should be formed. It is enough that it should be able to be formed and to enter the field with safety. In that case it will actually appear if an inducement is offered. Such an inducement is always afforded when the trust puts an unnaturally high price on its product - a price above that standard set by the cost of production which would rule in a normal market.

Specific Means of Repressing Competition. - In practice a condition is created in which the new competitors are reluctant to appear; for the consolidated company has dangerous weapons with which it can assail them. It can often secure specially low rates for the transportation of its products, and this is sometimes enough to make the competitor’s prospect hopeless. Further, the “trust” - with or without the aid offered by the special and low freight charges - can enter the particular corner of the field where a small rival is operating, sell goods for less than they cost, and drive off the rival, while maintaining itself by the high prices it exacts everywhere else. Again, it may reduce the price of one variety of goods, which a particular competitor is making, and crush him, while it makes a profit on all other varieties of goods. Still again, it may resort to the “factor’s agreement,” by refusing to sell at the usual wholesalers’ rate any of its own products to a merchant who handles products of its rivals. If some of its goods are of a kind that the merchant must have, this measure brings him to terms, causes him to refuse to handle independent products, and makes it difficult for the rival producer to reach the public with his tender of goods. The trust can organize special corporations for making war on competitors while itself evading responsibility. A bogus company which, in an aggravated case, is a rogue’s alias for a parent corporation, may be formed for the purpose of more safely doing various kinds of predatory work.

The Economic Necessity of Doing what is legally Difficult. - From the point of view of an economic theorist it is enough to show that the practices which cut off the potential competitor from a safe entrance into the field of production so pervert the economic system as to hold in abeyance its most fundamental force, that of competition. They vitiate the action of every law which depends on competition. Value, wages, interest, profits, and the very structure of society feel the perverting effect of this repression of the force that under normal conditions serves to adjust them. From a practical point of view it is enough to show that the existence of such practices - if the monopolies that grow out of them shall continue and increase - present to the people the alternative of accepting an economic state which is unendurable, or accomplishing, in a legal way, what many already pronounce impossible. For the purpose of this treatise it suffices to point to the fact that few attempts worth mentioning have been made to suppress any of these practices except the first - that of favoritism in connection with freight charges - and that in the case of this practice only a beginning of serious effort has been made. While there is some excuse for abandoning a purpose when long and determined effort to execute it has failed, there is no possible excuse for concluding, in advance of such effort, that a systematic policy which gives a promise of saving us from an intolerable outcome is impracticable. All the props of monopoly should be taken away and not one merely, and before this shall be tried radical measures will not be in order. Socialism will not be fairly before the people’s parliament till it shall come as the only escape from a condition of private monopoly. What economic law clearly shows is that monopoly will not come if the practices on which it depends shall be suppressed, and the people may be trusted to determine whether the suppression is or is not possible. That they may decide this question the issue that depends on it must be brought before them; and all that falls within the sphere of the economist is the stating of the effects of monopoly, the causes of its existence, and the public action that if taken will remove these causes. The preservation of a normal system of industry and a normal division of its products requires the suppression of all those practices of great corporations on which their monopolistic power depends.