Chapter IV: Part 4

In the chapter on monopolies of mineral wealth it was stated that the French copper syndicate is not a "trust," but a "corner." It has not been common to consider "corners" as a species of monopoly, except as they have, like the latter, acquired a bad reputation with the general public from their effect in raising the price of the necessaries of life. But if we look at the matter carefully, it becomes plain that the aim of the maker of corners is the same exactly as that of the organizer of trusts,--to kill competition. The difference lies in the fact that the "corner" is a temporary monopoly, while the trust is a permanent one. The man who forms a corner in, let us say, wheat, first purchases or secures the control of the whole available supply of wheat, or as near the whole supply as he can. In addition to this he purchases more than is really within reach of the market, by buying "futures," or making contracts with others who agree to deliver him wheat at some future time. Of course he aims to secure the greater part of his wheat quietly, at low figures; but after he deems that the supply is nearly within his control, he spreads the news that there is a "corner" in the market, and buys openly all the wheat he can, offering larger and larger prices, until he raises the price sufficiently high to suit him. Now the men who have contracted to deliver wheat to him at this date are at his mercy. They must buy their wheat of him at whatever price he chooses to ask, and deliver it as soon as purchased, in order to fulfil their contracts. Meanwhile mills must be kept in operation, and the millers have to pay an increased price for wheat; they charge the bakers a higher price for flour, and the bakers raise the price of bread. Thus is told by the hungry mouths in the poor man's home, the last act in the tragedy of the "corner."

Fourier tells of an event in his early life which made a lasting impression on him. While in the employ of a mercantile firm at Marseilles, his employers engaged in a speculation in rice. They purchased almost all the available supply and held it at high prices during the prevalence of a famine. Some cargoes which were stored on shipboard rotted, and Fourier had to superintend the work of throwing the wasted grain, for the want of which people had been dying like dogs, into the sea. The "corners" of the present day are no less productive of discontent with the existing state of society than were those of Fourier's time.

But, returning to our subject, it should be said that the "corner," generally speaking, does much less injury to the public than is commonly supposed. As we have shown, the manipulators of the corner make their chief profits from other speculators who operate on the opposing side of the market; and it is but a small part of their gains which is taken from the consumers. The effect on the consumer of the abnormal rise in price caused by the corner is sometimes quite made up for by the abnormal fall which occurs when the corner breaks. Generally, however, the drop in prices will be slower to reach down to the final consumer, past the middlemen, than will the higher prices. The corner makers also are apt, if they are shrewd and successful, to make the total of their sales for the current supply yield them a profit. Thus suppose that the normal price of wheat is 70 cents per bushel, and that the syndicate secures control of five million bushels at the normal price. If while it keeps the price up it sells two million bushels at $1.20 per bushel, it can afford to get rid of the rest of its stock at an average price as low even as 50 cents per bushel, and still make four hundred thousand dollars' profit.

The operations of corner makers are confined principally to goods which are dealt in upon commercial exchanges. One evident reason for this is that the vast purchases and sales, which are necessary in the formation of a corner are impossible without the facilities afforded by an exchange. It must be said, too, that the plain truth is that our principal commercial exchanges, while they do serve certain useful purposes, are yet practically devoted chiefly to speculation. This, simmered down to its essence, means that the business of the speculators is to bet on the future prices of the articles dealt in,--a game in which the largest players are able to influence prices to accord with their bets, and hence have their "lamb" opponents at an obvious disadvantage. The evil of this sort of commercial gambling is recognized by practical men of every class; but its cure is yet to be effected.

A sort of business allied both to trade and transportation is the business of storage or warehousing, and this has recently shown some interesting cases of monopoly.

The owners of warehouses along the Brooklyn waterfront combined their business in January, 1888, and doubled their rates for storage. In the testimony of one of the members of this trust, before the New York Legislative Committee, he said: "We want to destroy competition all we can. It is a bad thing." The owners of grain elevators at Buffalo, N. Y., have long combined to exact higher prices for the transfer of grain than would have prevailed were free competition the rule. At the session of 1887 the New York Legislature took the bull by the horns and enacted a law fixing a maximum rate for elevator charges; a statute which was based on the popular demand for its enactment, but is hard to accord with the principles of a free government.

There are a number of lines of business auxiliary to trade in which competition is more or less restricted by the fact that the amount of capital controlled and the prestige of the established firms renders it a difficult and risky matter to start a new and competing firm. The insurer of property or life, if he be wise, will demand financial stability as a first requisite for the company in which he takes a policy. The companies engaged in the business of fire insurance have long been trying to agree on some uniform standard of rates and the avoidance of all competition with each other. These combinations, however, are apt to be broken, as soon as formed, by the weaker companies, whose financial condition operates to prevent them from getting their share of the business under uniform rates. Even when this rate-cutting is stopped, there is still competition to be met from the various small mutual companies, who are necessarily outside the combination.

Banks are a necessity to the carrying on of modern commerce, and they have great power over the financial affairs of the business men of the community which they serve. As a general rule, however, they are largely owned by the merchants and others who patronize them, and the instances of this power being abused are, therefore, not common. It is to be remembered, in discussing this, as in other monopolies, that the power of a monopoly depends entirely upon its degree. A bank, trust company, or real-estate guaranty company which has a great capital, an established reputation for safety and conservatism, sole control of many special facilities, and conveniences for obtaining and dispatching business, has a real monopoly, whose degree varies with the tendency people have to patronize it instead of some weaker competitor, if one exists. There is no evil effect from the monopoly upon the community, unless it takes advantage of its power to charge a sum greater than their real worth for the services it renders, or uses it to discriminate to the injury of special persons or places.

In closing our discussion of the monopolies in trade, there is an important point to be noted. In the lines of industry considered in the preceding chapter, the monopoly was easy of maintenance because it held full control of the source of production, or of some necessary channel through which commerce must pass. No gift of nature assists to maintain a monopoly in trade. It must be wholly artificial, and it relies for its strength simply on the adherence of its members to their agreement to maintain prices. Its degree of power can never be great, compared with monopolies which control the original sources of production; for if it is attempted to put up prices inordinately, competition will start up outside of the combination, or the consumer will be led to deal directly with the producer.

Because of this weakness, the temptation is great for these monopolies to strengthen themselves in ways quite indefensible on any score. The alliance of trade monopolies with trusts, in order to strengthen themselves, we have already considered. But the trust which makes such an alliance must plead guilty to the charge of _discrimination_ as well as _monopoly_. It is bad enough to raise the prices of the necessaries of life, and force the whole community to pay the tax; but it is worse to add to this the crime of discrimination against certain persons in the community, at the instance of a minor monopoly.

But the trade monopoly does not confine its sins to tempting the stronger monopoly to practise discriminations. It practises discrimination itself in some very ugly forms. A combination among manufacturers of railway car-springs, which wished to ruin an independent competitor, not only agreed with the American Steel Association that the independent company should be charged $10 per ton more for steel than the members of the combine, but raised a fund to be used as follows: When the independent company made a bid on a contract for springs, one of the members of the trust was authorized to underbid at a price which would incur a loss, which was to be paid for out of the fund. In this way the competing company was to be driven out of business. It is often argued that combinations to advance prices can never exist long, because of the premium which the advanced price puts upon the entrance to the field of new competitors; but the weapons which this trust used to ruin an old and strong competitor are even more effectual against a new-comer; and the knowledge that they are to meet such a warfare is apt to deter new competitors from entering the field.

The boycott was once deemed rather a degrading weapon of warfare; but now the term has grown to be a familiar one in trade circles. Even the great railway companies do not scruple to use the boycott in fighting their battles. One might imagine that both the thing and the name filled a long felt want.

VII.

MONOPOLIES DEPENDING ON THE GOVERNMENT.

The fact has been already referred to that the principal monopolies which existed previous to the present century were those created by government. In the days when governments were less strong than now, and less able to raise money by such taxes as they chose to assess, it was a very convenient way to replenish the king's exchequer to sell the monopoly of a certain trade to some rich merchant. Nor was the establishment of these monopolies entirely without just reason. In those days of scarce and timid capital, inducements had to be held out to encourage the establishment of new enterprises. An instance of this, familiar to every one, was the grant to the owners of the first steamboat of the sole right to navigate the Hudson River by steam for a term of years. In the early history of the nation and in colonial days, government grants to establish local monopolies were very common. In this, however, we only followed the example of the mother country, which had long granted limited monopolies in trade and transportation as a means of encouraging new enterprises and the investment of capital.

The monopolies of the present day which are properly considered as government monopolies are of two classes. The essential principle on which all are based is that their establishment is for the common benefit, real or supposed; but the first class--to which belong the patents and copyrights--are also justified on the ground that the brain worker should be protected in his right to reap the just profits from his labor.

The effect of a copyright is simply to make it possible for an author to receive some recompense from his work. He can only do this by selling it in printed form to those who may wish to buy; but if there were no copyright, any printer might sell duplicates of the book as soon as it was issued, and could sell them at a much less price than the original edition, as the book would have cost him nothing to prepare. The practical result would thus be that few could afford to spend study and research in writing books, and the volumes which would be printed would be apt to be only those of so cheap and worthless a sort that no one would take the trouble to copy them. The monopoly produced by a copyright takes nothing from the public which it previously enjoyed. The writer of a book creates something which did not before exist; and if people do not wish to buy that which he has created, they are at perfect liberty not to do so. The monopoly relates only to the production and sale of that particular book. Others are at liberty to write similar books upon the same subject, which will compete with the first; and the same information may be given in different words without infringing the copyright.

It seems clear enough, then, that the monopoly which occurs in the use of a copyright, is of an entirely different sort from the monopolies which we have previously considered. Competition is not destroyed by it, and its only effect upon the public relates to an entirely new production, which is not a necessity, and which the public could not have had an opportunity to enjoy if the copyright law had not made it possible for the author to write the book with the prospect of being repaid for his labor by the sale of the printed volume.

As already stated, the granting of patents is based on the same principle as the granting of copyrights. A clause of the Constitution empowers the general government to grant to authors and inventors for limited periods the exclusive right to their respective writings and discoveries.

If we judge the granting of patents by the aims and intentions which are held in the theory of the law, we must conclude that it is a highly wise, just, and beneficial act. The man who invents a new machine or device which benefits the public by making easier or cheaper some industrial operation, performs a valuable service to the world. But he can receive no reward for this service, if any one is at liberty to make and sell the new machine he has invented; and unless the patent laws gave him the power to repay himself for the labor and expense of planning and designing his new device, it is altogether probable that he would not spend his time in inventing.

The wealth which a valuable patent promises has been a great incentive to the work of inventors, and has undoubtedly been a chief cause of the great mechanical advancement of the last half century. But the state of mechanical science has greatly changed from what it was when the clause of the Constitution was penned which speaks of inventions as "discoveries." The trained mechanical designer now perfects a machine to do a given work, with almost the same certainty that it will be successful in its operation that he would feel if the machine were an old and familiar one. The successful inventor is no longer an alchemist groping in the dark. His task is simply to accomplish certain results with certain known means at his disposal and certain well-understood scientific principles to guide him in his work. But this statement, too, must be qualified. There are still inventions made which are the result of a happy inspiration as well as of direct design. Not all the principles of mechanical science and the modes of reaching desired ends are yet known or appreciated by even the best mechanical engineers. There is still room for inventors whose rights should be protected. The interpreters of our patent laws have always held the theory that the use of a natural agent or principle could not be the subject of a patent. This is undoubtedly wise and just. The distinction should always be sharply drawn between those existing forces of nature which are as truly common property as air and sunlight, and the tool or device invented to aid in their use.

Again, it is a notorious fact that the great multiplicity of inventions has made the search to determine the novelty of any article submitted for a patent for the most part a farce. No one is competent nowadays to say surely of any ordinary mechanical device that it is absolutely new. The bulky volumes of Patent-Office reports are for the most part a hodge-podge of crude ideas, repeated over and over again under different names, with just enough valuable matter, in the shape of the inventions of practical mechanical designers and educated inventors, to save the volumes from being an entire waste of paper and ink. Space, however, will not permit us to discuss at length the faults of our patent system. The important point for us to notice is that the patent system establishes certain monopolies, and that these monopolies are not always harmless. Patents are given to "promote the useful arts," but the inventor whom they are supposed to encourage reaps but a small share of the profits of his inventions. Valuable improvements soon fall into the hands of large companies, who are able to defend them in the courts, and reap all possible profits by their use.

Again, patents sometimes aid in the formation of trusts and combinations. Two or three firms may control all the valuable patents in connection with some important industry. If they agree to combine their interests and work in harmony, they are far stronger than an ordinary trust, because the patents they hold prevent outside competition. It was pointed out in the opening chapter how the control of patents was sometimes a feature helping to induce the formation of trusts. The Standard Oil Trust had its origin in the superiority which one firm gained over its competitors through the control of an important patent. The envelope trust, which, at this date, has raised the price of envelopes about twenty per cent., owes its chief strength to its control of patents on the machines for making the envelopes. Instances innumerable could be given where a few manufacturers, who by their ownership of patents controlled the whole field, have ended a fierce competition by consolidating or agreeing to work together harmoniously in the matter of selling-prices. Very many of these are monopolies in trade or monopolies in manufacturing, and as such have already been considered in the preceding chapters; but it is proper here to point out the part which our patent system has taken in their formation, and the fact that it is due to their control of patents that many of the existing combinations owe their security against outside competition.

Probably the public was never so forcibly reminded of the defects of our patent system by any other means as it has been by the operation of the Bell Telephone monopoly. The purpose in granting patents is to aid in the establishment of new lines of industrial activity, secure to the inventor the right to reap a reward for his work, and encourage other inventors to persevere in their search for new improvements. All these things are effected by the monopoly which is held by the Bell Telephone Company; but they are effected at a cost to the users of the telephone under which they have grown very restive. Passing by the statement that the patents which the Bell company holds were illegally procured in the first place, through the inventor having had access to the secret records in the Patent Office of other inventions for which a patent had been asked at about the same time as his own, it is an undisputed fact that the Bell company holds the monopoly of communication by electric telephone in this country. They have managed this monopoly with great skill. While the instrument was yet in its introductory stage, and when every smart town felt obliged to start a telephone exchange or fall behind the times, prices were kept low; but when once the telephone became a business necessity and its benefits were well known, rates of rental were advanced to the point where the greatest possible profits would accrue to the Bell company's stockholders. This was excellent generalship. The same principle is applied in many other lines of business; and it was only because the company held a monopoly of a most valuable industry, that it proved so immensely profitable here. But other acts of the company, it is alleged, while within the letter of the law, are yet clearly infringements on the just rights of the public. It is charged that the company has purposely refrained from putting into practical use any of the many improvements which have been made in the telephone during the past few years, but at the same time has quietly secured their control. By skilfully managing "interferences" of one patent against another, and by amending and altering the various specifications, it contrives to delay as long as possible the issue of the patents upon these inventions. By means of these improvements, which it purposes to introduce as its present patents expire, it proposes to continue its monopoly for many years to come. It is very likely that this attempt will succeed.

We have already seen the folly of establishing competing electric light companies, and the attempt to establish rival telephone exchanges is just as sure to result ultimately in a heavy additional tax on the public. Then, too, the monopoly has grown so wealthy and powerful through its enormous profits that it will be very loth to release its hold, even when it is no longer protected by patents. Rival companies which may be established then, it will seek to crush by a fierce competition; and it will be quite likely to succeed. But in so far as it is not protected by patents, it is properly to be considered with other municipal monopolies, in which class we have already referred to it.

The course pursued by the Bell Telephone Company has at least proved that our whole patent system demands a thorough and radical revision. The inventor should certainly be protected, but not to the public hurt.

The second class of monopolies which the government establishes or aids in establishing because it is deemed to be for the public welfare that they exist, are, first, those private industries which receive aid from the government, either directly by subsidies or indirectly by the taxation of the goods of foreign competitors; and second, those branches of industry which are carried on by the government itself.

The question concerning the granting of subsidies is principally a past issue. A century ago many new enterprises in all lines of industry looked to the government for aid. In those days, when capital was scarce and when investors hesitated at risk, it was perhaps wise to grant the help of the public treasury to aid the establishment of young industries; but nowadays, when millions of capital are ready to seize every opportunity for profitable investment, it is recognized that subsidies by the general government are no longer needed. The days of subsidy granting ended none too soon. The people of the United States gave away millions of acres of their fertile lands and other millions of hard-earned dollars to aid in the building of the railroad lines of the West; and a great part of the wealth thus lavished has been gathered into the coffers of a few dozen men. The monopolies created by these subsidies have been largely shorn of their power; but while they reigned supreme, their profits were gathered with no halting hand.

There is only one direction in which we still hear the granting of subsidies by the general government strongly advocated; that is in the direction of establishing steamship lines to foreign ports. It would be apart from the scope of our subject to discuss the wisdom or folly of such a proceeding farther than to note the fact that it establishes a monopoly.

Take, let us say, the case of a steamer line between New York and Buenos Ayres. It is plain in the first place that the government aid will only be granted if there is not business enough to induce private parties to take up the enterprise. But as we suppose that there was not business enough in the first place to support one steamer line unaided, it is certain that none will undertake to establish a rival line to compete with that already sure of profits by reason of the government aid. Hence this line will have a monopoly of the trade; and unless some proper restrictions as to rates accompany the subsidy, the monopoly may lay an extortionate tax on the public who patronize it.

The relation of the tariff to monopolies is one which deserves the careful attention of every thinking man. Let us, in discussing this question, lay aside all prejudice and preconceived ideas for or against the protective tariff system and consider candidly what are the actual facts of the case. It is evident, in the first place, that the purpose of the tariff tax which the government levies on goods imported from abroad is to _keep out foreign competition from our markets_. The imported goods cost more by the amount of the tariff than they otherwise would; and the American producer, if he makes equally desirable goods and does not raise his selling price above that at which imported goods can be bought, is secure against foreign competition. But we have already learned that monopoly is simply the absence of competition; and inasmuch as the tariff checks or shuts out foreign competition, it has a _tendency_ toward the establishment of monopoly. But this tendency may not result in the establishment of any monopoly. There is a tariff on potatoes, but there is no monopoly in their production. Evidently the tariff cannot create a monopoly; it only makes its establishment more easy by narrowing the field of competition to the producers of this single country. If we turn back over the list of monopolies we have studied, to find those which the tariff has any effect in aiding to establish, we shall find none till we reach the first two chapters. The monopolies in mineral products and manufactured goods, known generally by the name of trusts, it is self-evident are largely dependent upon the tariff. If they raise their price above a certain point, people will buy goods of foreign production instead. This point--the price at which foreign goods can be profitably sold--depends on the rate of the tariff, on the cost of production in foreign countries, and the cost of their carriage here.

Of the various trusts, it is evident that only those would be effected by the removal or reduction of the tariff whose products are now covered by it. Thus the Standard Oil Trust and the Cotton-Seed Oil Trust would not be injured by any reduction in the tariff. As a matter of fact, however, nearly all of the trusts have to do with manufactured goods which are covered by the tariff, and the two exceptions already named are about the only ones.

The trusts in manufactured products, broadly speaking, then, are all dependent on the tariff. Here is a strange condition of affairs. In the early history of this nation, the people of this country, represented by their popular government, were appealed to by the men engaged in manufacturing after this fashion: "We cannot make the things you need as cheaply as the manufacturers in foreign countries. They are wealthy and we are poor. They have their mills already in operation, we have ours to build. The capital we borrow bears a rate of interest double that which the foreign mill-owner has to pay. The labor we must employ is not yet trained as is theirs, and it must receive far higher wages. Therefore we ask that you aid us in establishing our industries by paying us higher prices for our goods than those for which you could purchase the same goods of foreign manufacture. In order that every one shall be obliged to do this, and that all may contribute equally to our support, we ask you to pass laws laying a tax on all imported goods which compete with ours, whereby none shall be able to buy them at a cheaper price than we can afford to sell our own goods."

And the people replied: "While we recognize the fact that we must pay an increased price for your goods compared with that which is asked for goods from foreign mills, and are thus taxing ourselves for your benefit, yet we see how desirable it is that our industries should be diversified and that we should not be dependent on foreign nations for the necessaries and comforts of life. Thus _for a season_ we will grant your petition and tax ourselves to establish you in your business."

Such was the spirit of the movement that inaugurated the protective tariff. One other great argument for its establishment, which was believed by the people and was assented to by the manufacturers, was as follows: "Our natural advantages for engaging in manufacturing are beyond those of any other nation. Our workmen are more skillful, intelligent, and ingenious; our capitalists are more enterprising. At the same time there are many difficulties to be overcome in establishing a manufacturing business in a new country. Some assistance is needed at the outset to tide it past the critical period. Now, if we can give our manufacturers a start and enable them to establish themselves, they will improve all these natural advantages which we possess; and with the abundance of raw material in our mines and farms and forests, with our ingenuity and Yankee enterprise and skill, who can doubt that our manufacturers, once established, can produce goods more cheaply than they could ever be brought across from foreign countries? This protection from foreign competition will be a great incentive to the establishment of manufacturing enterprises. Everywhere mills and factories will spring up; a brisk home competition will be created; and that will finally reduce prices lower than they could ever go if we remained dependent on foreign countries for our manufactured goods."

It was a wise and well-founded plan, and only as to its final result did it fail. The protective tariff did make manufacturing more profitable than any other business, and mills and factories of every sort have sprung up in all parts of the country. But the expected extreme competition which was to reduce manufacturers' profits and the price of manufactured goods to a basis in accordance with the profits in agricultural and other branches of industry has been long delayed. The wonderful development of the country has kept up prices and profits, and has furnished a market for our manufacturers which has long kept in advance of their capacity to supply it. At last, however, the result which was expected by the founders of the protective tariff has come to pass. Our domestic mills and factories have a capacity beyond the present demand for their products. The home competition which was predicted has come; and if it had operated to reduce prices as was expected, there would now be employment for all our mills, for it is an axiom that every reduction in price increases the demand.

But the manufacturers who had been making enormous profits of ten, twenty, and thirty per cent. on their capital for these many years, were far from willing to accept calmly the situation and reduce their profits to a reasonable figure. They have tried combinations of many sorts to keep up prices, and at last have found in the trust a strong and effective means of killing home competition and keeping up their profits, if they choose, to the highest point which the tariff permits.

It is not to be argued that the manufacturers were especially worse than the general run of men in taking this action. It is the most natural thing in the world that a man who has all his life been used to making enormous profits in his business should come to think that he had an inalienable right to make them; and that when competition became so sharp that he had to lower his prices, it was due to an unnatural condition of affairs glibly designated as "over-production," for which the trust was an appropriate and wise remedy.

It is thus plain how, in a secondary way, the tariff is a cause of the trusts. The fat profits which the former gave have made men covetous enough to engage in the latter.

We are, perhaps, not yet prepared to discuss the question of the proper remedies for trusts; but it is too obvious to call for comment that an easy and most effective remedy is to cut away the protection from foreign competition, under which they flourish, and let them sink or swim as they best can. At the least it will be wise to reduce their protection to a point where any attempt to tax the nation of consumers and reap exorbitant profits by putting up prices so that profits of twenty-five per cent. or more can be reaped, will be counteracted by foreign competition.

It is only fair to point out at the same time that this remedy is far from being a panacea against all trusts and monopolies. The monopolies in the peculiar products of this country will be unaffected by it, and the combinations which embrace the whole globe in their plan of operations are quite beyond its power. The copper syndicate and the salt trust, and according to Mr. Carnegie a steel rail trust, are the only actual examples of international combinations which have ever been attempted, and it will probably be many years yet before the constant movement towards Tennyson's "Federation of the World" permits the general formation of effective industrial combinations which shall embrace all commercial nations.

We have finally to consider the monopolies carried on directly by the government. The carriage of the mails is the most important monopoly carried on by the government, and we may find some facts of interest by enquiring the reasons why it is for the public welfare that it should be so conducted rather than by private enterprise. In the first place, if it were left to private enterprise to furnish us with postal facilities, the postal service would be much more limited than now; many places of small importance being left without postal facilities or charged a much higher rate for service than now. On the other hand--and this is an important point--there would, perhaps, be in and between the large cities competition between different companies; in which case there would be duplicate sets of postal facilities, including buildings, mail-boxes, furniture, and employees of every grade. It is plain that all this would be a waste. One set of facilities is better for the public than two or three or more, and is ample to carry all the mails. To put another set of men at the work that others are already able to do, is to waste just so much of the working force of the world, as well as the capital necessary to furnish tools and buildings for its use. The matter of rates, too, would vary with the competition. One could never be sure what his postage bill for the coming year was to be. The receipts of the companies would be uncertain, and they would be obliged to pay a high rate of interest on the capital invested in their plant, thus making it necessary for them to charge high rates for their service. The intense competition between rival companies would lead to the bankruptcy of the weaker, and the final result would be the establishment of a single corporation in the control of the whole system. Rates would then be put up to the point where the greatest profit would accrue to the corporation.

Under the existing system, then, we save in cost of service over competing systems under private direction, in that the existing facilities are all made use of. There is no waste by setting two men to do the work of one, or by renting two offices to do the business which one could accommodate, neither is any energy wasted in soliciting business. The capital invested by the government in its plant for carrying on the postal service would bear interest, if the money were borrowed, of not more than two or three per cent. But if a private company borrowed money to carry a similar business, they would have to pay five to seven per cent., which they would have to make up for by charging a higher rate of postage.

Other monopolies which have been carried on by the government are the business of transportation, and the provision of roads, bridges, and canals therefor; monopolies in mining; and in the case of municipal governments, as already noted, the supply of water, gas, and electric service, and street railway transportation.

VIII.

MONOPOLIES IN THE LABOR MARKET.

It should be said at the outset of this chapter that, in a very true sense, practically all men are laborers. That into which a man puts his energy and by which he earns his living, is his labor, whether it be work of the hand or the head. But the labor we are to consider in this chapter is that of the men who work for wages; and we will also make the arbitrary distinction that it is that of the men who work for wages in some branch of manufacturing, mining, trade, or transportation, the great divisions of modern industry which we have thus far considered.

Almost all these monopolies employ large amounts of capital in carrying on their business; and in the popular speech, "monopolist" and "capitalist" are often used interchangeably. It is a very common belief that monopolies are confined to the capitalized industries of production, transportation, and trade, which we have already considered; but we are now confronted by the fact that the wage-workers in the various trades of the country are engaged in exactly the same monopolistic schemes, in which they have exactly the same ends in view as have the monopolists who combine millions of dollars' worth of capital to effect their purposes. On the one hand we have the Standard Oil Trust and the Railroad pools and the hundreds of other capitalistic combinations striving to benefit the producer at the expense of the consumer; while among those whose only capital is their strength and skill, we find the workers in all the various trades, and even some of the lower grades of laborers firmly banded together with the avowed purpose of raising their wages above those which they would receive if competition alone determined the rate. And they are successful, too. Notwithstanding the fact that they deal with tens of thousands of producing units where the combiner of capitalized interests deals with tens, the success achieved by the combinations of labor is quite comparable with that reached by combinations of capital. It speaks volumes for the intelligence and ability of the wage-workers of the present day--yes, and for the growth of the spirit of fraternity; that in the advancement of what they deem a just and righteous cause, they should voluntarily put themselves under discipline and endure patiently the untold hardships of uncounted strikes, often brought on in the unselfish work of aiding their brother laborers against what they deem a common enemy.

The modes in which the combinations of skilled laborers attain their desired ends are akin to those which obtain in a well organized manufacturers' trust. The former allow only a certain number of apprentices to learn their trade. The latter permit the establishment of only such additional mills as shall not unduly increase the market supply. The former fix a standard scale of wages below which no member of the union shall work; the latter fix a minimum price for the goods sold in the market. If there are more laborers in the union than can be employed at the advanced rate of wages, some must be idle. If there are more mills in the trust than the lessened demand for the goods will keep busy, some must be shut down. The trade-union boycotts competing workmen outside its ranks, and stigmatizes them as "scabs." The trusts endeavor to punish every outside manufacturer, sometimes by forcing upon him such a competition as shall cause his ruin; sometimes by means as illegal and criminal as are the riotous acts of a mob of hungry workmen, and far less defensible. But let us not yet bring up the question of relative blame. The main point which must impress every candid observer is that the means employed for the monopolies of capital and the monopolies of labor are identical in principle and motive. Nor are we confined to manufacturers' trusts to show that the spirit of rule or ruin characterizes capital as well as labor. Railroad monopolies, in the words of the president of one of the greatest corporations of the country, "strive eagerly to protect themselves while entirely indifferent as to what shall befall their rivals." How many weak corporations have been deliberately ruined by the cut rates of stronger competitors? If the laborer has "scab" in his vocabulary, has not the railroad manager his "scalper" and "guerilla"?

The close relationship, viewed in many different aspects, of the monopolies of labor and the monopolies in production generally has hardly received the notice its importance deserves. Still, it is an evidence that people are thinking of and discussing the matter when such a writer as W. D. Howells, who is popularly supposed to cater to the tastes of those who have very little in common with the laboring classes, puts into the mouth of one of his characters a defence of workingmen for executing a boycott on a non-union workingman, on the ground that they "did only once just what the big manufacturing trusts do every day."

Perhaps it was never so forcibly realized how thoroughly effective these labor combinations have become, and how completely they hold the country at their mercy, as in the strike of the locomotive engineers on the Chicago, Burlington and Quincy Railroad system in March, 1888. Here were, perhaps two thirds of the men in the country qualified for the responsible and onerous work of running a locomotive engine, firmly banded together to advance their own interests and secure assent to their demands. Granted the will, the courage, the discipline, and it was possible, yes, easy, for them to have obliged the railroads to raise the wages of every engineer in the brotherhood to $10.00 per day, for on a refusal they could have enforced the extreme penalty of bringing down a total paralysis upon the business of the country. It speaks volumes for the good sense, the honesty and moderation of the men and their leaders, that, notwithstanding the fact that their demands were not immoderate, and that the failure which came permanently deprived of a remunerative position a thousand members of their brotherhood, they refrained from the extreme to which they might easily have gone, and permitted themselves to be defeated, when they had the power to have forced a different result.

Organized workers in many trades have the power to force wages much higher than they have done. Would that the Sugar Refineries Company, and some other monopolies of production, were as moderate in their demands upon the public as are the workingmen. But though their demands are in one sense moderate, it is yet true that in so far as they exceed the amount which the laborer would receive when the market for labor is open to free competition, they are the direct result of the artificial monopoly which the laborers have created by their combination, and, in effect, levy a tax upon the community. To illustrate: let us suppose that if every man were permitted to follow the trade of bricklaying who wished to do so, the equilibrium between supply and demand would be found at a rate of wages of $3.00 per day. At that rate, if the price rose, more men would wish to follow the trade and at the same time less people could afford to build houses, thus raising the supply above the demand. If the price fell, some of the men would prefer to work at some other trade and more people would conclude they could afford to build houses. But when the rate, which, without prejudice, we call the natural rate, is at $3.00 per day, suppose the men belonging to the trade form a union and resolve to charge $5.00 a day for their work. Then it is very evident that the cost of building is increased, and every one has to pay more for construction and ask a higher rent to repay himself afterward. Evidently, then, by this action of the bricklayers every man in the trade receives $2.00 more per day for each day's work, which must be paid, directly by their employers, but indirectly by the whole community. It would be easy to prove that the tax on the community when the wages are raised in any trade, affects the whole public as well as those directly employing the workers in that trade; but it seems too plain to require proof. The main point we now wish to show, is that any increase in the wages of labor over that received under ordinary competition must be paid by the community, just as much as any increase in the price of coal, iron, copper, wood, wheat, or any other commodity must be paid by consumers at large. Nor does the injury to the community stop here, by any means. We saw that the advance of prices by the linseed oil trust was an injury to all those who, on that account, were obliged to forego painting; and that it thus caused a further injury to painters, paint-makers, and even those employed in the building trade. But the increase in the price of the bricklayers' work has results no less important. Not only is injury done to those who build and have to pay more for their buildings, but many are prevented from building on account of the increased cost. If we argue according to a prevalent method, we may say that this reduced activity in the building trade will cause stagnation among allied trades with corresponding loss of employment. Again, as a less number of houses are built, and those which are built are more expensive, rents are certain to rise, which means that the poor man must pay out a still greater part of his earnings for his shelter, or else must put up with poorer and meaner quarters.

It is a strange thing to trace, in connection with this, the history of labor, and see how recent it is that the natural right of a man to sell his services for such a price as he could obtain has been acknowledged. History shows that until modern times, compulsory personal servitude has been in every age and country the lot of a large part of the human race. And when wages began to be paid for service, conditions were not much improved. In England, in the fourteenth century, in the reign of Edward III., a pestilence seriously depopulated the country, and reduced the supply of laborers so much that it was not equal to the demand for labor, and wages began to rise. Laws were therefore enacted that each able-bodied man and woman in the realm, not over three score, "not living in merchandise, nor exercising any craft, nor having of his own whereof to live, nor land about whose tillage he might employ himself, nor serving any other," should be bound to serve at the wages accustomed to be given five years previously. No persons were allowed to pay an advance on these wages, on pain of forfeiting to the Crown double what they had paid. Previous to the fifteenth century, workmen in various occupations were impressed into the service of the king at wages regardless of their will as to the terms and place of employment. Indeed, all through the fifteenth and sixteenth centuries, there were continual attempts to fix the rate of wages arbitrarily by law, and also the hours of labor. These, by one old statute, were decreed to last from 5 A.M. to 7 or 8 P.M.

These acts, and others of similar nature, were intended for the subjugation of laborers and the benefit of the employers of labor. It is only since the era of popular government that legislation for an opposite purpose has come in vogue. Gradually the right of the workingman to have the price of his labor fixed as is the price of other commodities, by the law of supply and demand, came to be recognized, although the progress was pitifully slow. The old ideas of the relation between "master" and "servant" were very tenacious of life, and the substitution of the terms "workman" and "employer" is a change which has taken place in England during the present generation.

It was the petty tyranny and the grinding extortion which the laborers had begun to feel, even though they were far better paid and better treated than their fathers, that caused the formation of the original trade unions. Laborers saw that each was helpless alone, but that combined they were a power which their employers need not despise. The old craft guilds furnished them an example of effective combination among those engaged in the same trade; and as men everywhere in every age, when a common danger or misfortune has confronted them, have come together for mutual help and defence, these ignorant laborers, in violation of stringent statutes, but following blindly their human instincts of self-defence, came together and organized the first trade unions.

The common law has always held trade unions to be "illegal combinations in restraint of trade." Between the reigns of Edward I. and George IV., the common law was affirmed and made more effective by the passage of over thirty acts of Parliament, all intended to abolish the trade unions. In 1800 a stringent law was passed, by which all persons combining to advance their wages or decrease the quantity of their work, or in any way affect or control those who carried on the business in which they were employed, might be committed to jail by a justice for not more than three months, or to work in the house of correction for not more than two months. Not till 1824 was an act passed slightly ameliorating this stringent law, and even then the trade unions remained for the most part secret organizations. At last, in 1871 and 1876, laws were passed under which no person can be prosecuted for conspiracy to commit an act which would not be criminal if committed by him singly; and the trade unions, thus legalized, were taken in common with other benefit societies under the protection of the law.

We have already pointed out the main fact that the chief end and aim of the trade unions is the advancement of wages by securing a monopoly of the supply of labor in some particular trade. It is now fair to explain, as we have for other monopolies, the labor monopoly from the standpoint of the laborer himself.