CHAPTER VII. Trusts Government Interference-Corporations and Public Discussed by HON. BURKE COCHRAN HE precise question which we have been called to consider is TH the effects produced by combinations, whether of capital or of labor, upon the general prosperity of the community. The first step towards a solution of this problem is to ascertain just what we mean by prosperity. One of the great difficulties in the way of philosophical inquiry into economic subjects is a very general tendency to use vague, sonorous and misleading phrases, which instead of making a difficult problem clearer serves to becloud it, obscuring its outlines, and magnifying its dimensions. In the controversies which have arisen over this industrial question, certain expressions have become perverted from their original significance and have acquired a strange power of provoking men to excitement, if not belligerency, so that oftentimes we find ourselves embarassed in discussing facts which concern us by words which excite us. The word "trust," for instance, a word originally of highly respectable significance, has become discredited-apparently by association with millionaires-so that its application to a business enterprise is now the signal for discarding the sober language of argument and for invoking the violent epithets of denunciation. PROSPERITY DEFINED For the purpose of establishing an intelligent basis of discussion, free from terms likely to provoke passionate declamation, I shall define prosperity as an abundance of commodities fairly distributed among those who produce them. Now, this is not to state two separate and distinct conditions, but rather two aspects of one condition. For, I hope to establish before I conclude that there cannot be abundant production of commodities without an extensive distribution of them in the form of wages wherever industry is based upon freedom. Whether that distribution be as general as we might wish, is a question which we will consider hereafter; meanwhile we can all agree that distribution can be extensive only where production is abundant. We must have commodities in existence before we can distribute them in the form of wages or of profits. If this definition of prosperity be correct, it must follow that any industrial organization or system which operates to swell the volume of production should be commended, and any that operates to restrict it should be condemned. For my part, I could never understand why a sensible man should grow excited either to approval or resentment over a combination as such. A combination may be good or bad, according to its effect. A combination for prayer is a church. All good men would subscribe to the success of it. A combination for burglary is a conspiracy. All good men call out the police to prevent it. DIVERSITY OF OPINION Whether combinations of capital operate to raise prices or to reduce them is a subject about which there has been a wide diversity of opinion, not merely in this hall, but wherever economic questions are discussed. While I am fully conscious that the movement of prices depend upon many forces, or perhaps I should rather say, upon every force-upon the fertility of the soil, upon the sun that quickens the seed, upon the rains that refresh it, upon the rivers which facilitate the transportation of the crop harvested on the surface of the earth, and of the minerals yielded from its bosomupon every element of nature as well as upon the industry of man. I think it is beyond question that some combinations of capital operate to cheapen commodities and some operate to make them dearer. I believe there is a very simple test by which we can always determine the effect on prices of any successful industrial organization, and that is to ascertain whether it flourishes through government aid or without it. You must see, that an iudustrial enterprise which dominates the market without aid from government, must do so by cheapening its product, or, as it is commonly described, by underselling competitors. An industry which at one and the same time-reduces the price of its product and swells its own profits can accomplish that result in one way, and one way only, and that is by increasing the volume of its production. On the other hand, an industry which flourishes through the aid of government, direct or indirect, cannot, in the nature of things, be a force to lower prices, because if it could dominate the market by underselling competitors in a free and open field it would not need government favor. In that case, any interference of government with its business would be an injury, not a benefit. The prosperity of an enterprise enjoying government favor, depends not on the excellence of its service, but on the inability of people to purchase elsewhere. Such a corporation, or combination, never operates to stimulate the volume of production, but always to restrict it, because a government's aid to industry is effective only when it is exercised to extort from the public a volume of profit which without it could be gained only by a larger output. Whatever may be our opinions of industrial enterprises, dominating the market by cheapening products, I believe we are unanimous in condeming as detrimental to prosperity every concern whose revenues derived from consumers forced to deal with it on its own terms are not profits earned by substantial service, but tribute exacted from a community made helpless in its hands. GOVERNMENT INTERFERENCE WITH TRADE There are three ways by which, in this country, government interferes with the trade of individuals. One is by patent laws. It is not my purpose to intensify differences of opinion among us, but to emphasize the points on which we can agree, and, if possible, to extend the field of our agreement. Questions which cannot possibly be settled or even affected by anything which this conference might do or advise, it would be utterly useless to discuss. I will not waste time, therefore, in considering the effect of exclusive patents on industrial conditions. Another method of government interference with trade is by tariff laws. Every person must concede, whether he believes in high tariff or free trade, that a protective tariff fosters combinations to control the market in one way. It restricts competition in any commodity to those producing it in this country. Under a condition of free trade every article seeking a market, wherever produced, is exposed to the competition of the whole world. Obviously the control of a market by a combination or trust is facilitated where the field of competition is artificially limited, since it is easier to combine the producers of one country than those of all countries; to that extent the tariff encourages trusts. It is proper to say, however, that according to the protectionist the exclusion of foreign competion develops a domestic competion much keener and in some mysterious way, more beneficent. I do not understand his logic, but I think that is a fair statement of his proposition. The tariff has been discussed in this country for some eight or ten years, and the question is still unsettled. As it has become a party question we cannot hope to settle it here, and therefore we will relegate it to the forum in which all political issues must be decided. GREAT CORPORATIONS EXERCISING PUBLIC FRANCHISES There is a third and very serious form of government interference with trade which I think we can discuss profitably and which in my judgment has had a wider influence in promoting industrial combinations than the tariff, I refer to special favors extended to certain industries by great corporations exercising public franchises. I call this form of discrimintation government favor, because these corporations are essentially agencies of the government although their stocks are owned by private individuals. No person can enjoy a favor at the hands of any company exercising a public franchise except at the expense of another. This is true in every instance where government extends special favor to an individual. I have said in many places, and I say it here, that government cannot at one and the same time be a fountain of generosity and of justice. Government cannot of itself create anything. It cannot by any exercise of its own powers, compel the boards that constitute this desk to become a useful article of furniture; it cannot summon the elements of this building from their original places and command them to become a durable edifice; it cannot cause two blades of grass to grow where one grew before; it cannot make a barren field fruitful. Now, if government cannot create anything it has nothing of its own to bestow on anybody. If then it undertakes to enrich one individual, the thing which it gives him it must take from another. A government cannot be just and generous at the same time, for if it be erous to one it must be oppressive to another. If it have a favorite it must have a victim, and that government only is just and beneficent which has neither favorites nor victims. Government is always just and always beneficent when it is absolutely impartial. Not merely must its own hands be impartial, but, to paraphrase Lord Bacon, the hands of its hands must be impartial; not merely must its laws be impartial, its courts impartial, its executive officers impartial, but the agencies which it empowers to discharge functions essentially public, must be impartial in their service to every human being within the limits of the state. DISCRIMINATION IS DESTRUCTIVE OF FREE COMPETION gen It must be clear that if one person obtain rates of transportation unusually favorable, in other words, if his goods be transported for less than the service costs, other men, using the same means of transportation must make good the loss. Discrimination of this character is destructive of free competition. The producer who gets the benefit of it is able to undersell his competitor, not by the superiority of his product, but by the favor of the government |