Chapter XV: Preface: To the Seventh Volume (14)

The state of public feeling in Colombia became further
complicated, no doubt, when, early in January, 1909, a
tripartite treaty was negotiated, with Panama and the United
States, for the settlement of questions connected with the
secession of Panama in 1903. Panama, in this treaty, agreed to
pay Colombia the sum of $3,500,000, as her share of the
Colombian public debt, receiving recognition of her
independence in return. The treaty was submitted to the
Colombian Congress by President Reyes on the 24th of February,
with a special message of recommendation; but public feeling
was said to be bitterly against it, for the reasons that no
wrongfulness in the transaction was recognized and the
indemnity was insufficient. Disturbances which broke out at
Bogota and in the provinces about the middle of March were
attributed mostly to this cause of discontent. For some reason
of discouragement or disgust, the President was reported to
have resigned his office on the 13th, but was persuaded to
resume it next day.

It was now decided to suspend consideration of the tripartite
treaty, until it could be submitted to an elected National
Congress, the election for which would be held on the 20th of
the coming July. In June, a few weeks before the appointed
election, President Reyes made a sudden departure for Europe.
Rumors that he had gone because tired of political strife and
would not return were contradicted by the Colombian Consul at
New York, in a published note which said: "His departure, the
causes of which are well known throughout Colombia, was due to
the fact that after five years’ strenuous labor he desired a
rest, and last March to the National Assembly expressed his
desire to retire temporarily from the Presidency, but, owing
to the opposition of public sentiment and the strong desire of
the people to have him remain, he determined not to leave the
Presidency until elections to the coming Congress had been
made. To this Congress, about to be convened, and in which all
parties are represented, President Reyes confides many of the
cares of government, left by law under his jurisdiction until
Congress should assemble, and withdraws, temporarily only,
from the discharge of his Presidential duties, leaving in his
stead General Jorge Holguin, his most intimate friend and
former minister of war, who will continue to pursue in all
matters the same policy as that adopted by his predecessor.
General Reyes during his stay in Europe, whence he has gone,
will perfect plans for developing railroad and other
industries in Colombia. There is absolute peace and
tranquillity in all parts of the country."

But the "absolute peace and tranquillity" of the country was
shaken in the first week of July by a revolutionary outbreak
at Barranquilla, soon suppressed, and the resignation of
President Reyes was received soon thereafter, from abroad. The
election of his successor now devolved on the new National
Congress, elected by the people on the 20th of July. It gave
the office, for the remainder of the unfinished term (which
expires August 7, 1910) to Señor Gonzales Valencia, who had
been proclaimed by the Barranquilla revolutionists the month
before, though he disavowed their movement.

COLONIAL CONFERENCES, British.

See (in this Volume)
BRITISH EMPIRE.

COLONIAL DOMINION, The passing of the age of.

See (in this Volume)
WORLD MOVEMENTS.

COLONIZATION: The colonizable regions of Africa.

See (in this Volume)
AFRICA.

COLORADOS.

See (in this Volume)
PARAGUAY: A. D. 1902.

COLUMBIA UNIVERSITY:
Interchange of Professors with German and Scandinavian
universities.

See (in this Volume)
EDUCATION: INTERNATIONAL INTERCHANGES.

COMBES, Justin Louis Émile:
Head of French Ministry.

See (in this Volume)
FRANCE: A. D. 1902 (April-October;
also 1903, and 1905-1906.

COMBES, Justin Louis Émile:
Vindication under scandalous charges.

See (in this Volume)
FRANCE: A. D. 1904 (JUNE-JULY).

--------COMBINATIONS, INDUSTRIAL AND COMMERCIAL: Start------

COMBINATIONS: AUSTRALIA: A. D. 1909.
Decision of the Federal High Court on the Anti-Trust Law.
Prosecutions by the Government.

"The first case brought under the Federal Anti-Trust Law ended
in June last in a decision of the High Court to the effect
that two important sections of the Act were ultra vires, as
the Constitution only empowered the Commonwealth to regulate
foreign and inter-State trade and gave it no authority to
interfere with trade within a State. The Federal Government is
now instituting proceedings against 27 firms which are alleged
to belong to a coal combine trading with other countries and
among the States of the Commonwealth. Each firm has been
called upon to answer certain questions under the Act in
question."

_Reuter Telegram,
Melbourne, September 27, 1909._

{113}

COMBINATIONS: Canada: A. D. 1909.
Merger of Dominion Iron, Steel, and Coal Companies.
Cement Combination.

The following is a Press despatch from Halifax, Nova Scotia,
November 13, 1909:

"The formation of the Canada Steel Corporation, the proposed
$70,000,000 merger of the Dominion Iron and Steel Company and
the Dominion Coal Company, was made possible by the agreement
of James Ross of Montreal, president of the Dominion Coal
Company, to transfer to a syndicate of Toronto capitalists a
portion of his holdings of the coal company stock. Final
arrangements regarding the stock transfer will be made here
to-day. President Ross owns coal company stock of a par value
of $5,000,000, and, although he does not dispose of all this,
he is to transfer enough to give control of the coal company
to the Toronto capitalists, who have already acquired a
controlling interest in the steel company. The plants of the
Dominion Iron and Steel Company and the Dominion Coal Company
are in Cape Breton, where they give employment to thousands of
men, and where they have caused little fishing villages to
spring up into flourishing cities."

Announcement of the completion of the merger was made in
December.

COMBINATIONS: CANADA: A. D. 1910.
Anti-Trust Bill in the Dominion Parliament.

A strongly constructed measure for controlling and regulating
commercial and industrial combinations, to check restraints of
trade and undue enhancement of prices, was brought into the
Dominion House of Commons on the 18th of January, 1910, by the
Minister of Labor, Mr. Mackenzie King, and its passage was
said to be assured. Mr King’s explanation of the Bill, as
summarized for the Associated Press, was as follows:

"The Bill, Mr. King stated, was not designed to interfere with
trade, but to protect the public from the operation of
monopolies. The bill provides that if six or more persons show
prima facie evidence to a superior court judge that a combine
exists, which has unduly enhanced the price of a manufactured
article, unduly limited the production of any commodity, or
unduly restricted trade in any way, the judge shall order the
minister of labor to have an investigation made. This shall be
done by a board of three, one member to be appointed by those
who complain, one by those complained against, and a chairman
by the first two, and if they fail to select the judge who has
heard the complaint shall act.

"This board has the full powers of a court to compel the
attendance of witnesses and the production of evidence. The
board must report to the minister and he must give the report
the fullest publicity.

"Two remedies are provided where a combination is reported to
exist. The government may withdraw the tariff protection from
the articles produced by the combine and bring the
manufacturers into competition with the world.

"The other remedy is a provision that if the combine persists
in its course after ten days there shall be a fine of $1,000 a
day imposed until the abuse is remedied. There is also
provision that when a patentee makes use of the protection of
the patent act to restrict trade or unduly enhance prices his
patent may be revoked.

"The act provides for its expeditious and thorough
enforcement, and all expenses of investigation are to be borne
by the government.

"Where question is raised as to the scope of the
investigation, the board shall make it as thorough and
complete as public interest requires. Boards are to conduct
their investigations in public and the decision of two members
shall be the decision of the board. Whenever the minister of
labor believes that counsel should aid the investigation, the
board may retain the services of a lawyer upon the consent of
the minister of justice. Witnesses are to be allowed the same
fees and traveling expenses allowed at the present in civil
suits. With the consent of the minister of labor a board may
employ experts to examine books and to report upon technical
questions."

COMBINATIONS: GERMANY:
Corporation Reform as the Germans have handled it.

"Thirty years ago the German people went through corporation
experiences much like our own. There, as here, the
corporation, as originally designed, was a mere shell. There,
as here, under the shelter of that shell, the property of the
country was being transferred from the German people at large,
even the little they had, to the few. There, thirty years ago,
as here now, great corporate scandals were exposed. And there,
as here, the human nature that is everywhere behind
civilization eventually began to recoil. It began there before
it began here, only because conditions reached a climax there
earlier than here, and because we as a people were too
prosperous and too busy to look even a little way beneath the
surface of things.

"But when the work of reform did come there, it was a genuine
reform. It did not content itself with indiscriminate
denunciation, or with mere lawsuits. Nor did it die out,
leaving the door still open to every character of corporation
the cunning of men might conceive. Before a corporation can be
organized in that country, it must prove, as in a court
proceeding, its rightful title to a corporate existence. In
the same way it must establish the amount and the character of
the capitalization it is allowed to put out. When property is
turned in, its value must be judicially ascertained. Upon
officers and directors is not conferred supreme power; in the
German corporation the shareholders’ meeting is the
counterpart of our New England town meetings—a genuine
assembly intended to do something more than pass resolutions
of approval. And every violation of trust, not merely to the
public, but to the shareholder as well, is quickly punished
with punishment that smarts. There is in the German
corporation no room for one to do, with impunity, in his
capacity as a corporation officer or promoter, what if done
individually would land him in the penitentiary."

_Judge Peter S. Grosscup,
The Corporation and the People
(The Outlook, January 12, 1907)._

COMBINATIONS: The Cartels.
Industrial combinations, quite as effective as the Trusts of
the United States, have been created in Germany on a wholly
different plan. The constituent organizations in them, of
capital and industry, are simply knitted or tied together by
hard and fast agreements, instead of being fused into huge
corporations, as the Trusts are. For the kind of covenant
which unites them a military term has been borrowed, and they
are called Cartels. The difference between the Cartel and
the Trust is described by a Scottish writer, D. H. Macgregor,
in his work on Industrial Combinations, as follows:

{114}

"The Cartel is an agreement for a time, the Trust is a
permanent structure; the former is therefore a factor in
industry full of speculative possibilities, both as regards
its actual operation, and because the 'residual' competition
of parties who break away at the end of the period is
considerably to be feared. … The principle of the pure Cartel
is compensatory action. It is an organization in which certain
producers deal with themselves, and exist for that purpose in
a double relation; they are producers of goods, and purchasers
of their own produce. What they stand to lose in one aspect
they stand to gain in the other. …

"The operation is broadly as follows. The members of the
Cartel, meeting as producers in general assembly, determine a
price for their product which covers cost of production, being
in fact practically a competitive price. This is the base or
normal price (_Richtpreis_). Thus they assure themselves, in
this capacity, of adequate remuneration. They then sell to the
Syndicate, that is to themselves as members of the Syndicate,
for what is called the ‘taking over’ or ‘accounting’ price
(_Verrechnungspreis_) which is usually on the average higher
than the base price, so that they have now created for
themselves as producers a ‘Cartel advantage.’ The Syndicate
then resells to the consumer, for a price which will be as
high as it can get, but which varies with the competition to
be met in different parts of the market; this price
(_Verkaufspreis_) may not in some cases be so high as the
taking-over price, or may not exceed it by more than the
margin necessary to cover the Syndicate’s expenses of
management. … It is the Syndicate which figures in the public
eye; and while it itself offers no sign of monopoly profit it
shelters the companies which gain by its handling of their
goods. It conceals monopoly dividends."

_D. H. Macgregor,
Industrial Combination
(G. Bell & Sons, London, 1906)._

COMBINATIONS: The Coal and Coke Cartels.
Their influence.

An elaborate history and description of the "Monopolistic
Combinations in the German Coal Industry," by Francis Walker,
was published for the American Economic Association in 1904.
These are treated as representative, because, says Mr. Walker,
"the most important and fundamental of all German castellated
industries" are those in mining and metallurgy. He traces
their development from a beginning in 1858, when an
association of the mining interests of the mining district of
Dormund was founded. In part, his conclusions as to the effect
of the coal cartels are as follows:

"The German coal cartels have not had an injurious influence,
in general, on the production of coal. More particularly they
cannot be accused, justly, of unduly limiting production among
themselves. Nor have they attempted to accomplish the same end
by crushing outside competition, by unfair methods. It would
be preposterous to say that they have hindered technical
progress. The cost of production, on the other hand, probably
has been somewhat increased by the preservation of weak and
costly mines through participation in the cartels. In regard
to prices, the policy of the coal cartels, on the whole, has
been moderate, taking circumstances into consideration, while
the policy of the coke cartel may be fairly pronounced
extortionate. The prices of coal have been more stable than
they would have been under free competition; during the
_hausse_ they were not screwed up so high as they might
easily have been, but, on the other hand, they have not
declined so quickly with the _baisse_. The like may be said of
the coke prices, but, at the same time, they were exorbitant
considered from the point of view of costs and profits. … The
_déroute_ of the iron industry was not due to the coal or
coke cartels in any important degree, i. e., even with low
prices, disaster to the iron industry would have been
inevitable. No other industry was affected so much as iron,
and it is at least very questionable whether the cartels in
general (excluding the coal cartels in particular) are to be
blamed for the crisis. … That they are to be blamed for the
ill-judged over-development of certain industries, which was
apparently the real cause of the crisis, does not seem to be a
just conclusion. On the other hand, the cartels may be
accused, with more probability of truth, of retarding the
convalescence of German industry by not reducing prices, and
if this is true, the coal and coke cartels are specially to
blame."

F. Walker,
Monopolistic Combinations in the German Coal Industry
(American Economic Association), 1904.

COMBINATIONS: Growing magnitude of companies.
Industrial concentration.

"The tendency to industrial concentration is shown by the
returns of public companies, which point to the growing
domination of large undertakings. Of 4,749 registered public
companies in 1895, 13.6 per cent. had a share capital not
exceeding £5,000, but in 1906, of 5,000 such companies, only
9.6 per cent. had a capital of that amount; the companies with
a capital of from £5,000 to £12,500 decreased from 14.0 to
10.4 per cent., and those with a capital of from £12,500 to
£25,000 decreased from 16.9 to 14.2 per cent. On the other
hand the companies with a capital of from £25,000 to £50,000
increased from 20.7 to 21.3 percent.; those with a capital of
from £50,000 to £250,000 increased from 28.5 to 35.0 per
cent.; those with a capital of from £250,000 to £500,000
increased from 3.4 to 5.4 per cent., and those with a capital
exceeding £500,000 increased from 2.9 to 4.1 per cent. In 1896
there were only two companies with a capital exceeding five
millions; in 1906 there were nine such companies, and their
combined capital was over seventy millions, having been more
than doubled since 1896. In spite of this tendency towards the
concentration of capital and the multiplication of large
undertakings, however, Germany is still an interesting
illustration of an industrial country which has not yet
entirely gone over to the factory system of production. The
handicrafts, the characteristic feature of which is the small,
independent master-workman, surrounded by his handful of
journeymen and apprentices, contend tenaciously, yet
unfortunately with only partial success, against the on-coming
tide of ‘great capitalism’ (private joint stock, and
cooperative), and the house industries continue to afford
employment to a multitude of workers of both sexes, estimated
at half a million."

_William H. Dawson,
The Evolution of Modern Germany,
pages 59-60 (Unwin, London; Scribner's, New York, 1909)._

{115}

"Among the home interests of the country nothing loomed up so
large last year [1904] as the subject of industrial
combinations. The process of consolidating industries and
banks into powerful organizations again made gigantic strides;
and the public mind, dazed and disquieted, is wondering what
will be its final outcome. All the largest steel manufacturers
have united in an association that shall have complete control
of the steel and iron products of the country; and it is
already effecting agreements with manufacturers of other
countries for parceling out the world’s markets. At the same
time the Coal Syndicate was reorganized to include all the
independent producers of the West; and in connection with it,
a great shipping and selling company was formed for the
purpose of controlling the retail trade and eliminating
recalcitrant dealers. These steel and coal combinations are
working in complete harmony, and no independent manufacturer
can exist against their will.

"In that great industrial region many large iron companies had
come into possession of coal mines. In order to induce these
to put their mines into the Syndicate, they were given the
right to produce, over and above their allotments, all the
coal that they might need for their own furnaces. A new
impetus was thus given to the process of consolidation. Strong
coal companies hastened to absorb iron establishments, in
order to earn larger profits by consuming their own coal in
indefinite quantities. Furthermore, as the allotments were
fixed absolutely for a long period, the strongest companies
proceeded to buy weaker, less economically worked collieries,
in order to shut them down and produce their allotments
elsewhere at lower cost. This movement assumed large
proportions. Miners by the thousand had to betake themselves
to other parts of the country, and entire communities were
threatened with depopulation. Industrial towns held
indignation meetings, to protest, and to demand the
nationalization of the mines; and excited operatives are still
holding conferences to discuss a general strike. The
Government has sent a commission to inquire into the movement;
and the Minister of Commerce has urged the coal magnates to
proceed as mildly as possible.

"This powerful concentric movement of industries has taken a
strong hold upon the thoughts of people and Government alike.
The public is deeply concerned at the growth of private
monopolies, and many persons who had hitherto favored letting
economic development take its own course now call for drastic
measures of prevention and repression. Country squires of the
most conservative type advocate the nationalization of all
coal deposits; and it is already asserted that a majority of
the Prussian Diet would vote for such a measure. This
convergence of the views of extreme Conservatism and radical
Socialism is certainly one of the oddest results of the
movement under discussion,—and one of the most instructive.
The natural trend of events is unquestionably in the direction
of some form of socialism. The Social Democracy clearly
perceives this, and so hails every industrial consolidation as
but another milestone on the way to state collectivism."

_W. C. Dreher,
Recent Events in Germany
(Atlantic Monthly, March, 1905)._

COMBINATIONS: International:
Of Transatlantic Shipping Companies.
Agreements with the British Government.

Announcement was made in October, 1902, of the incorporation
on the 1st of that month, under a New Jersey charter, of the
International Mercantile Marine Company, with a capital of
$120,000,000, and an issue of 4½ per cent. bonds to the amount
of $75,000,000. The combination included the American, the Red
Star, the White, the Atlantic Transport, the Leyland and the
Dominion lines. Both American and British capitalists were
represented in the board of directors, the former in the
majority. Several partners in the firm of J. Pierpont Morgan &
Company were included, and Mr. Morgan was understood to be the
architect of the combination; but he did not appear personally
in its organization.

The first step towards such a shipping combination had been
taken sixteen years before, when the British Inman steamship
line was taken over by the International Navigation Company,
made up of Americans, at the head of whom was Mr. Clement A.
Griscom, of Philadelphia. "The British Government promptly
withdrew the liberal subsidy which it had been paying to the
Inman liners; but Mr. Griscom and his comrades brought the
_New York_ and _Paris_ beneath the Stars and
Stripes, built the St. Louis and _St. Paul_, secured a
subsidy from the United States and gave the first-class
British lines a most formidable competitor. Indeed, commercial
rivalry in high grade ships on the North Atlantic soon became
too keen to permit of reasonable dividends and Mr. Griscom
found British ship-owners in a responsive mood when he
broached anew the great idea of an international combination.

"This union was made all the easier by the fact that meanwhile
another important British steamship concern, the Leyland line,
had been acquired by Mr. J. Pierpont Morgan in the spring of
1901. This line, itself the fruit of several consolidations,
controlled the largest British tonnage in the North Atlantic
trade. It owned no fast mail ships, no greyhounds. But it did
possess forty or fifty good, useful steamships of moderate
speed, many of them of large tonnage, and fit for passengers
as well as freight. The main Leyland service lay between
Boston or New York on this side, and Liverpool or London on
the other, and the business of the company had been so
profitable for a long term of years that its shares were
quoted at a handsome premium. Mr. Morgan paid a generous price
for his maritime investment. It is said that he gave £14 10s.
for each £10 share, or a bonus of 45 per cent. But amazement
at Mr. Morgan’s ‘liberality’ ceased when the next stage in the
great, far-sighted negotiation was unfolded.

"This was the dramatic uniting of the Leyland line with the
American and Red Star lines of the International Navigation
Company, and the Atlantic Transport line, another British
steam fleet owned by American capital. Later still it
transpired that the famous White Star line of fast mail,
passenger, and freight ships and the smaller but excellent
Dominion line were embraced in the huge consolidation. The
White Star was one of the two lines—the Cunard was the
other—which performed the British mail service between
Queenstown and New York. Its fleet included the great liners
_Oceanic_ and _Celtic_, the swift _Teutonic_
and _Majestic_, and the favorite _Britannic_ and
_Germanic_ which had held ocean records in their day,
together with a considerable number of large and efficient
freighters. The American purchase of the White Star line was
long disputed, and when it was finally confirmed, something
like consternation seized the British press and people, for
the White Star fleet had been regarded as distinctively a
British institution as the Bank of England. Its fast ships
received not only the mail pay of the post-office, but the
subventions of the Admiralty, and were enrolled on the
‘merchant cruiser’ list."

Winthrop L. Marvin,
The Great Ship "Combine"
(American Review of Reviews, December, 1902).

{116}

The anxieties with which the combination was regarded at first
in Great Britain were allayed materially by Mr. G. Balfour,
President of the Board of Trade, who made public, in a speech
at Sheffield, the terms of an arrangement that had been made
by the Government with the Cunard Company, on one hand, and
the Combination on the other. The Cunard Company, he said,
"pledged themselves to remain in every respect a British
company, managed by British directors—the shares not to be
transferred to any but British subjects. Their ships were to
be officered by British officers. They also engaged to
construct two vessels of twenty-four to twenty-five knots
which, as well as the entire Cunard fleet, the Admiralty would
have the right to charter or purchase at any time on terms
fixed in the agreement. The money for the construction of the
fast steamers would be advanced to the company at the rate of
2¾ per cent. interest, while in lieu of the present Admiralty
subvention—£28,000 a year for the contingent use of three
ships—the company would receive £150,000 a year. With Mr.
Pierpont Morgan, the head of the Shipping Combination, who had
shown the utmost readiness to meet the wishes of His Majesty’s
Government, it had been agreed that the British companies in
the Combination should remain British, not merely in name but
in reality. The majority of their directors were to be British
subjects. All their ships now flying the British flag were to
continue to fly it, and at least one-half of those hereafter
to be built for the Combination would likewise fly British
colours, be commanded by British officers, and manned in
reasonable proportion by British sailors. On the other hand,
the combined companies would continue to be treated, as
heretofore, on a footing of equality with other British
companies in respect of any services, whether postal, or
military, or naval, which His Majesty’s Government might
require from the British mercantile marine. It had been
further stipulated that in the event of the Combination
pursuing a policy hostile to our mercantile marine or to
British trade, the King’s Government should have the right to
terminate the agreement."

COMBINATIONS: United States: A. D. 1900.
Definition of the term Industrial Combination formulated
at the Census Bureau.
Statistics as collected in 1900.

"The officials of the Census Office, in order to prevent
misconceptions and insure consistency in the plan and system
of tabulation, formulated the following definition of the term
‘industrial combination’:

"‘For the purpose of the Census, the rule has been adopted to
consider no aggregation of mills an industrial combination,
unless it consists of a number of formerly independent mills
which have been brought together into one company under a
charter obtained for that purpose. We therefore exclude from
this category many large establishments comprising a number of
mills, which have grown up, not by combination with other
mills, but by the erection of new plants or the purchase of
old ones.’ …

"So far as can be ascertained from the data in the Census
Office, the number of these industrial consolidations is 183.
They control 2203 separate plants, scattered throughout the
United States, 2029 being active and 174 idle during the
census year. For 56 of the idle plants no returns could be
obtained, making the total number of reporting plants 2147.
The 183 combinations extend to almost all lines of industry,
producing articles of luxury, materials essential to the
upbuilding and growth of the country, and even the very
necessities of life. Fully 50 per cent. of these combinations
were chartered just prior to or during the census year; and it
is noteworthy that the epidemic of industrial consolidation,
as far as the so-called monopolies are concerned, has been
practically confined to the past four years. It is evident,
therefore, that the disease—if it be regarded as such—has
spread very rapidly.

"Naturally enough, iron and steel, with 69 combinations, heads
the list. The number of reporting plants engaged in this
industry is 469, and the capital invested, consisting of land,
buildings, machinery, tools and implements, and cash and
sundries, is valued at $348,000,000."

_W. R. Merriam,
"Trusts" in the Light of Census Returns
(Atlantic Monthly, March, 1902)._

COMBINATIONS: A. D. 1901-1903.
The question of Federal Control and Regulation.
Urgency of President Roosevelt for effective legislation.

In his first Message to Congress, three months after his
succession to the Presidency, President Roosevelt expressed
his mind frankly and clearly on the then increasing demand in
the country for more stringent measures of government, to
control and regulate the exercise of the power which great
aggregations of incorporated capital have created in recent
times. In part, he then said:

"The tremendous and highly complex industrial development
which went on with ever accelerated rapidity during the latter
half of the nineteenth century brings us face to face, at the
beginning of the twentieth, with very serious social problems.
The old laws, and the old customs which had almost the binding
force of law, were once quite sufficient to regulate the
accumulation and distribution of wealth. Since the industrial
changes which have so enormously increased the productive
power of mankind, they are no longer sufficient. The growth of
cities has gone on beyond comparison faster than the growth of
the country, and the up building of the great industrial
centers has meant a startling increase, not merely in the
aggregate of wealth, but in the number of very large
individual, and especially of very large corporate, fortunes.
… The process has aroused much antagonism, a great part of
which is wholly without warrant. It is not true that as the
rich have grown richer the poor have grown poorer. On the
contrary, never before has the average man, the wage-worker,
the farmer, the small trader, been so well off as in this
country and at the present time. There have been abuses
connected with the accumulation of wealth; yet it remains true
that a fortune accumulated in legitimate business can be
accumulated by the person specially benefited only on
condition of conferring immense incidental benefits upon
others. …
{117}
The captains of industry who have driven the railway systems
across this continent, who have built up our commerce, who
have developed our manufactures, have on the whole done great
good to our people. Without them the material development of
which we are so justly proud could never have taken place. …
It cannot too often be pointed out that to strike with
ignorant violence at the interests of one set of men almost
inevitably endangers the interests of all. … Much of the
legislation directed at the trusts would have been exceedingly
mischievous had it not also been entirely ineffective. In
accordance with a well-known sociological law, the ignorant or
reckless agitator has been the really effective friend of the
evils which he has been nominally opposing.

"All this is true; and yet it is also true that there are real
and grave evils, one of the chief being over-capitalization
because of its many baleful consequences; and a resolute and
practical effort must be made to correct these evils. There is
a widespread conviction in the minds of the American people
that the great corporations known as trusts are in certain of
their features and tendencies hurtful to the general welfare.
This springs from no spirit of envy or uncharitableness, nor
lack of pride in the great industrial achievements that have
placed this country at the head of the nations struggling for
commercial supremacy. … It is based upon sincere conviction
that combination and concentration should be, not prohibited,
but supervised and within reasonable limits controlled; and in
my judgment this conviction is right. … The first essential in
determining how to deal with the great industrial combinations
is knowledge of the facts—publicity. In the interests of the
public, the Government should have the right to inspect and
examine the workings of the great corporations engaged in
interstate business. …

"When the Constitution was adopted, at the end of the
eighteenth century, no human wisdom could foretell the
sweeping changes, alike in industrial and political
conditions, which were to take place by the beginning of the
twentieth century. At that time it was accepted as a matter of
course that the several States were the proper authorities to
regulate so far as was then necessary, the comparatively
insignificant and strictly localized corporate bodies of the
day. The conditions are now wholly different and wholly
different action is called for. I believe that a law can be
framed which will enable the National Government to exercise
control along the lines above indicated; profiting by the
experience gained through the passage and administration of
the Interstate-Commerce Act. If, however, the judgment of the
Congress is that it lacks the constitutional power to pass
such an act, then a constitutional amendment should be
submitted to confer the power."

_President’s Message to Congress,
December 3, 1901._

In the following summer, during a tour which he made through
some of the New England States the President gave prominence
to the same subject in his addresses, emphasizing the
necessity of federal legislation to arm the General Government
with more effective authority for regulating the action of
corporations engaged in interstate trade. In speaking at
Providence especially, his remarks caused a great stir of
feeling in the country, and seem to have signalled the
beginning of an open array of hostile corporate interests
against him. On that occasion he spoke partly as follows:

"Those great corporations containing some tendency to
monopoly, which we have grown to speak of rather loosely as
trusts, are the creatures of the State, and the State not only
has the right to control them, but is in duty bound to control
them wherever the need for such control is shown. There is
clearly a need of supervision—need to exercise the power of
regulation on the part of the representatives of the public,
wherever, as in our own country at the present time, business
corporations become so very strong, both for beneficent work
and for work that is not always beneficent. It is idle to say
that there is no need for such supervision. A sufficient
warrant for it is to be found over and over again in any of the
various evils resulting from the present system, or, rather,
lack of system.

"There is in our country a peculiar difficulty in the way of
exercising such supervision and control because of the
peculiar division of governmental power. When the industrial
conditions were simple, very little control was needed, and no
trouble was caused by the doubt as to where power was lodged
under the constitution. Now the conditions are complicated,
and we find it difficult to frame national legislation which
shall be adequate, while as a matter of practical experience
State action has proved entirely insufficient, and in all
human probability cannot or will not be made sufficient, to
meet the needs of the case. Some of our States have excellent
laws—laws which it would be well indeed to have enacted by
the national legislature. But the wide differences in these
laws, even between adjacent States, and the uncertainty of the
power of enforcement result practically in altogether
insufficient control.

"I believe that the nation must assume this power of control
by legislation, and if it becomes evident that the
constitution will not permit needed legislation, then by
constitutional amendment. The immediate need of dealing with
trusts is to place them under the real, not nominal, control
of some sovereign to which, as its creature, the trusts shall
owe allegiance, and in whose courts the sovereign’s orders may
with certainty be enforced. That is not the case with the
ordinary so-called 'trust’ to-day, for the trust is a large
State corporation, generally doing business in other States
also, and often with a tendency to monopoly. Such a trust is
an artificial creature not wholly responsible to or
controllable by any legislature, nor wholly subject to the
jurisdiction of any one court. Some governmental sovereign
must be given full power over these artificial and very
powerful corporate beings. In my judgment this sovereign must
be the national government. When it has been given full power,
then this full power can be used to control any evil
influence, exactly as the government is now using the power
conferred upon it under the Sherman Anti-Trust law.

"Even when the full power has been conferred it would be
highly undesirable to attempt too much or to begin by
stringent legislation. The mechanism of modern business is as
delicate and complicated as it is vast, and nothing would be
more productive of evil to all of us, and especially to those
least well off in this world’s goods, than ignorant meddling
with this mechanism, and, above all, if the meddling was done
in a spirit of class or sectional rancor.
{118}
It is desirable that this power should be possessed by the
nation, but it is quite as desirable that the power should be
exercised with moderation and self-restraint. The first
exercise of that power should be the securing of publicity
among all great corporations doing an interstate business. The
publicity, though non-inquisitorial, should be real and
thorough as to all important facts with which the public has
concern. The full light of day is a great discourager of evil.
Such publicity would by itself tend to cure the evils of which
there is just complaint, and where the alleged evils are
imaginary, it would tend to show that such is the case. When
publicity is attained it would then be possible to see what
further should be done in the way of regulation.

"Above all, it behooves us to remember not only that we ought
to try to do what we can, but that our success in doing it
depends very much upon our neither attempting nor expecting
the impossible. …

"I see no promise of a complete solution for all the problems
we group together when we speak of the trust question. But we
can make a beginning in solving these problems, and a good
beginning if only we approach the subject with a sufficiency
of resolution, of honesty and of that hard common sense which
is one of the most valuable, and, unfortunately, not one of
the most common, assets in the equipment of any people. I
think the national administration has shown its firm intention
to enforce the laws as they now stand on the statute books
without regard to persons, and I think that good has come from
this enforcement. I think, furthermore, that additional
legislation should be had, and can be had, which will enable
us to accomplish much more than has been accomplished along
these same lines."

_Theodore Roosevelt,
Address at Providence, August 23, 1902
(New York Tribune, August 24, 1902)._

In his next Message to Congress, President Roosevelt renewed
his urgency for the needed legislation. "No more important
subject can come before the Congress," he said, "than this of
the regulation of interstate business. This country cannot
afford to sit supine on the plea that under our peculiar
system of government we are helpless in the presence of the
new conditions, and unable to grapple with them or to cut out
whatever of evil has arisen in connection with them. The power
of the Congress to regulate interstate commerce is an absolute
and unqualified grant, and without limitations other than
those prescribed by the Constitution. The Congress has
constitutional authority to make all laws necessary and proper
for executing this power, and I am satisfied that this power
has not been exhausted by any legislation now on the statute
books."

_President’s Message to Congress,
December 2, 1902._

A year later, when the President addressed his Message to the
next Congress, at the opening of its first session, he was
able to say:

"The country is especially to be congratulated on what has
been accomplished in the direction of providing for the
exercise of supervision over the great corporations and
combinations of corporations engaged in interstate commerce.
The Congress has created the Department of Commerce and Labor,
including the Bureau of Corporations, with for the first time
authority to secure proper publicity of such proceedings of
these great corporations as the public has the right to know.
It has provided for the expediting of suits for the
enforcement of the Federal anti-trust law; and by another law
it has secured equal treatment to all producers in the
transportation of their goods, thus taking a long stride
forward in making effective the work of the Interstate
Commerce Commission."

_President’s Message to Congress,
December 1, 1903._

COMBINATIONS: A. D. 1901-1906.
A summary of governmental action against corporate
wrongdoers, by Elihu Root.
Legislation.
Litigation.
Court decisions.

"The act creating the bureau of corporations, the act
expediting the trial of trust cases, the anti-rebate act, the
act for the regulation of railroad rates, have made possible
redress which was impossible before. Under the direction of
two successive Attorney Generals of the first order of
ability, sincerity and devotion, in hundreds of courts,
incessant warfare has been waged and is being waged under the
federal laws against corporate wrongdoers.

"The Northern Securities Company, which sought to combine and
prevent competition between two great continental railroads,
has been forced to dissolve by the judgment of the Supreme
Court of the United States. The methods of the Beef Trust in
combining to suppress competition in the purchase of livestock
and the sale of meat have been tried and condemned, and the
trust has been placed under injunction to abandon these
practices by judgment of the Supreme Court. The combination of
paper manufacturers in the territory from Chicago to the Rocky
Mountains has been dissolved by the judgment of the Supreme
Court, and the combination has been abandoned, and the price
of white paper in that territory has gone down 30 per cent.
The Retail Grocers’ Association in this country has been
dissolved by decree of the court. The elevator combination in
the West has been dissolved in like manner. The salt
combination west of the Rocky Mountains has been dissolved by
decree of the court. The Wholesale Grocers’ Association in the
South, the meat combination and the lumber combination in the
West, the combination of railroads entering the city of St.
Louis to suppress competition between the bridges and ferries
reaching that city; the Drug Trust, which suppresses
competition all over the country, are being vigorously pressed
in suits brought by the federal government for their
dissolution. The salt combination has been indicted and
convicted and fined for failing to obey the judgment of
dissolution. The Beef Trust has been indicted for failing to
obey the injunction against them, and have been saved so far
only by a decision that they had secured temporary immunity by
giving evidence against themselves. One branch of the Tobacco
Trust is facing an indictment of its corporations and their
officers in the federal court in New York, and the other
branches are undergoing investigation. The lumber combination
in Oklahoma is under indictment. The Fertilizer Trust, a
combination of thirty-one corporations and twenty-five
individuals to support and fix prices, has been indicted, the
indictments have been sustained by the courts, and the
combination has been dissolved. The ice combination of the
District of Columbia is facing criminal trial. Special counsel
are investigating the coal combination, and special counsel
are investigating the Standard Oil combination.

{119}

"Three of the causes won in the Supreme Court of the United
States have furnished decisions of the utmost importance. In
the Tobacco Trust case of Hale agt. Henkel, the Supreme Court
denied the claim of the trust corporations to be exempt under
the Constitution from furnishing testimony against themselves
by the production of their books and papers before a federal
grand jury. Thus, the protection of secrecy for corporate
wrongdoing is beaten down. In the Northern Securities case the
Supreme Court held that a wrong accomplished by means of
incorporating in accordance with the express provision of the
New Jersey statute was just as much a violation of federal law
as if there had been no incorporation. Thus, the state rights
defence of protection from favoring state statutes is beaten
down. In the Beef Trust case the Supreme Court held that,
although the business of manufacture was carried on within the
limits of a single state, yet the purchase of the raw material
in different states and the sale of the finished product in
different states brought the business within the interstate
commerce clause of the Constitution and gave the federal
government authority over it. Thus, the defence that the state
alone can deal with manufacturing corporations, however
widespread their business, is beaten down.

"The obstacles to the enforcement of the federal anti-trust
act thus removed are obstacles which stood in the way of all
proceedings, and they had to be cleared away before any
proceedings of the same character against the same classes of
corporations could be successfully maintained. They have been
removed, not by newspaper headlines and denunciation, but by
skill, ability, and energy of the highest order.

"After the Elkins anti-rebate law was passed by Congress in
1903 it was supposed, and the Interstate Commerce Commission
reported, that the railroads had substantially abandoned
giving rebates. Their good resolutions do not seem, however,
to have lasted. The struggle for business enabled the shippers
soon to secure a renewal of rebates, or, by ingenious devices
advantages equivalent to rebates. Thereupon the Department of
Justice began active prosecutions for the enforcement of the
law. Fifty-three indictments have been found against hundreds
of defendants and covering many hundreds of transactions.
There have been fourteen criminal convictions. Fourteen
individuals have been fined, to the gross amount of $66,125.
Nine corporations have been fined to the amount of $253,000.
Thirty-five indictments are ready for trial in their regular
order upon the court calendar. The original statute provided
only for punishment by fine. Last winter it was amended by
providing for punishment by imprisonment, and, if the lines
imposed under the original law shall not prove to have stopped
the practice, we shall see whether fear of the penitentiary
under the amendment will not do so.

"Under this statute also it was necessary to sweep away
defences which stood as barriers to general prosecution, and
in the New York, New Haven & Hartford Railroad case, decided
by the Supreme Court February 19 of this year, and the
Milwaukee Refrigerator Transit case, decided in the Seventh
Circuit on May 31 of this year, the courts have held that the
substance and not the form is to control in the application of
the statute, and that, however the transaction may be
disguised, an unlawful discrimination can be reached and
punished. The way is therefore cleared for all other
prosecutions.

"The Railroad Rates act, which was the subject of such excited
discussion during the last session of Congress, has already
justified itself. Since the passage of the act, less than five
months ago, there have been more voluntary reductions of rates
by our railroads than during the entire nineteen years of the
previous life of the Interstate Commerce Commission. On the
single day of the 29th of August, 1906, two days before the
act went into force, over five thousand notices of voluntary
reduction of rates were filed with the Interstate Commerce
Commission by the railroads of the United States."

_Elihu Root,
Speech at Utica, November 1, 1906
(New York Tribune, November 2, 1906)._

COMBINATIONS: A. D. 1903-1906.
The "Beef Trust" suits and investigations.
The United States v. Swift & Co. et al.
Commissioner Garfield’s investigation.
Indictment of Armour & Co. and others.
Immunity decision of Judge Humphrey.
Fines for receiving rebates from railways.

In the case known as that of the United States v. Swift &
Company et al., the defendants were seven corporations, one
copartnership, and twenty-three other persons (commonly styled
"the Beef Trust"), charged with violations of the anti-trust
law, by combination in restraint of the trade which they
conducted, namely, the buying of live stock, slaughtering the
same in different states and selling the meats thus produced.
It was affirmed by the Government that they, together,
controlled about sixty per cent. of the total Volume of that
trade in the country, and that if the alleged combination
among them did not exist they "would be and remain in
competition with each other"; but that by such "unlawful
combination and conspiracy" they were directing and requiring
their agents
(1) not to bid against one another in the live-stock markets
of the different States;
(2) to bid up prices for a few days so as to induce cattlemen
to send their stock to the stock-yards;
(3) to fix prices at which they would sell, and hence, when
necessary, to restrict shipments of meat;
(4) to establish a uniform rule of credit to dealers and to
keep a blacklist;
(5) to make uniform and improper charges for cartage; and
(6) to obtain less than lawful rates from the railways to the
exclusion of all competitors.

The case, on motion for injunction, was tried first in the
Circuit Court of the Northern District of Illinois, Judge
Peter S. Grosscup. The Opinion of the Court, given April 18,
1903, held that, under the definition of the term by the
Supreme Court in the Trans-Missouri Freight Association Case
(see, in this Volume, Railways: United States: A. D.
1890-1902), "there can be no doubt that the agreement of the
defendants to refrain from bidding against each other in the
purchase of cattle is combination in restraint of trade: so
also their agreement to bid up prices to stimulate shipments,
intending to cease from bidding when the shipments have
arrived.
{120}
The same result," continued the judge, "follows when we turn
to the combination of defendants to fix prices upon and
restrict the quantities of meat shipped to their agents or
their customers. Such agreements can be nothing less than
restriction upon competition, and, therefore, combination in
restraint of trade; and thus viewed, the petition, as an
entirety, makes out a case under the Sherman Act. … The
demurrer is overruled, and the motion for preliminary
injunction granted."

On appeal, the case went to the Supreme Court, where it was
argued in January, 1905, and decided on the 30th of the same
month. The Opinion of the Court, rendered by Justice Holmes,
with no dissent, affirmed, but modified, the decree of
injunction issued by Judge Grosscup; the aim of the
modifications being to give more definiteness to the decree.
"The defendants," said Justice Holmes, for example, "cannot be
ordered to compete, but they properly can be forbidden to give
directions or to make agreements not to compete. The
injunction follows the charge. No objection was made on the
ground that it is not confined to the places specified in the
bill. It seems to us, however, that it ought to set forth more
exactly the transactions in which such directions and
agreements are forbidden. The trade in fresh meat referred to
should be defined somewhat as it is in the bill, and the sales
of stock should be confined to sales of stock at the
stock-yards named, which stock is sent from other States to
the stock-yards for sale or is bought at those yards for
transport to another State."

_Federal Anti-Trust Decisions, 1900-1906,
Volume 2, prepared and edited by James A. Finch,
by direction of the Attorney-General
(Washington: Government Printing Office, 1907)._

COMBINATIONS:
Investigation by the Commissioner of Corporations.

On the 7th of March, 1904, the House of Representatives
adopted a resolution requesting the Secretary of Commerce and
Labor to "investigate the causes of the low prices of beef
cattle in the United States since July 1st, 1903, and the
unusually large margins between the prices of beef cattle and
the selling prices of fresh beef, and whether the said
conditions have resulted in whole or in part from any
contract, combination, in the form of trust or otherwise, or
conspiracy, in restraint of commerce among the several States
and Territories or with foreign countries; also, whether said
prices have been controlled in whole or in part by any
corporation, joint stock company, or corporate combination
engaged in commerce among the several States or with foreign
nations; and, if so, to investigate the organization,
capitalization, profits, conduct and management of the
business of such corporations, companies, and corporate
combinations, and to make early report of his findings
according to law."