various uses of our natural resources are so closely connected that they should be coördinated and should be treated as part of one coherent plan and not in haphazard and piece-meal fashion....

We are coming to recognize as never before the right of the Nation to guard its own future in the essential matter of natural resources. In the past we have admitted the right of the individual to injure the future of the Republic for his own present profit. In fact there has been a good deal of a demand for unrestricted individualism. . . . The time has come for a change. As a people we have the right and the duty . . . to protect ourselves and our children against the wasteful development of our natural resources, whether that waste is caused by the actual destruction of such resources or by making them impossible of development hereafter. . . .

Finally, let us remember that the conservation of our natural resources, though the gravest problem of today, is yet but part of another and greater problem to which this Nation is not yet awake, but to which it will awake in time, and with which it must hereafter grapple if it is to live- the problem of national efficiency, the patriotic duty of assuring the safety and continuance of the Nation. When the People of the United States consciously undertake to raise themselves as citizens, and the Nation and the States in their several spheres, to the highest pitch of excellence in private, State, and national life, and to do this because it is the first of all the duties of true patriotism, then and not till then the future of this Nation, in quality and in time, will be assured.

119. The trusts:

PRESENT-DAY PROBLEMS

An Industrial Commission of eighteen members was causes and appointed by act of Congress, June 18, 1898, "to investi

remedies

[610]

gate questions pertaining to immigration, to labor, to agriculture, to manufacturing, to business, and to report to Congress and suggest such legislation as it may deem best upon these subjects." On December 4, 1901, the commission submitted to Congress a report of a thousand pages

on industrial corporations, chiefly composed of the testimony of officers of the trusts before the commission. From a summary of the evidence prefixed to the report the following paragraphs are taken :

It is clearly the opinion of most of those associated with industrial combinations that the chief cause of their formation has been excessive competition. Naturally all business men desire to make profits, and they find their profits falling off first through the pressure of lowering prices of their competitors. The desire to lessen too vigorous competition naturally brings them together. . . .

One or two of the witnesses considered the protective tariff as the chief cause of the trusts. They urged that high tariff duties, by shutting out foreign competition, make it easier for our manufacturers to combine to control prices, and they think that the experience of the last few years justifies the assertion. Likewise, they say, through the high profits that come from the exclusion of foreign competition by the tariff, capital has been attracted into industries here to so great an extent and with the expectation of so high profits, that home competition has been unduly stimulated, thereby leading to the formation of combinations.

Some other witnesses believe that the tariff, while not the most important cause, has, nevertheless, some influence toward encouraging combinations; while one witness, Mr. LaTaste, believes that the monopoly of natural opportunities, under our present system of taxation, is to be considered the fundamental

cause.

Nearly all of the witnesses who have considered excessive competition as the chief cause do not agree that the tariff is to be looked on as a cause, nor as a rule do they concede that those engaged in the organization of combinations have any intention of securing a complete monopoly. It is, of course, true that the restriction of competition is a step towards monopoly, but competition has not been suppressed entirely, and they do not believe that monopoly has been or can be secured. In most cases they would deny that a monopoly was in any respect desirable....

In case of the newer combinations in the United States1 it has been found that practically all the important ones are put into the form of a single large corporation. In many cases the new corporation buys the individual plants which it seems desirable to combine and thus becomes a single owner of all the establishments. In other cases, and this is perhaps true especially with reference to the largest combinations, the stock of the constituent members is all bought by the single unifying company. The constituent companies then retain their organization intact, being controlled simply by the central corporation, as a stockholder, which can elect directors and officers at will and thus guide the management absolutely....

It is quite a general custom for a syndicate to be organized of individuals, bankers and others, who furnish whatever cash may be needed to purchase the different plants entering the combination, and who agree to take a certain proportion, if not all, of the new stock which is not taken by the vendors of the plants and by the public. . . .

Several of the combinations which the Industrial Commission has been lately considering are able to control very large portion of the entire output of the country, so that they have, perhaps, the power to effect [affect] prices. The National Cordage Company soon after its formation controlled probably from 60 to 70 per cent of the entire business.... The American Smelting and Refining Company before the union with the Guggenheimers controlled about 85 per cent of the entire smelting business of the country. Since that combination it has substantially all the trade.... The Pittsburg Coal Company controls the bulk of the lake trade in coal, although there is a little competition from southern Ohio and western Virginia. It is so situated that it can practically dictate the prices in its entire market. The United States Steel Corporation is made up of companies engaged in various lines of business, from mining to finishing the higher grades of steel. It is probable that at the present time it

1 That is, the trusts formed since the Republican victory of 1896 and the Spanish War: rubber, cordage, plate glass, wall paper, tobacco, sugar refining, smelting, oil, steel and iron, copper, thread, baking powder, coal, starch, biscuit, chemicals, leather, whiskey, asphalt, etc.

controls between 65 and 75 per cent of the steel industry in the United States. ... The International Paper Company produces, probably, at the present time about 1,300 tons per day out of an entire output for the United States of over 2,000 tons per day of news print paper. . . . Mr. Pitcairn, president of the Pittsburg Plate Glass Company, says that that combination produces about 72 per cent of the plate glass product of this country. . . . The National Starch Company has also a large percentage of control, amounting to probably more than 90 per cent of the box starch used and a very large percentage of starch of other kinds.... Certain local companies, such as the Brooklyn Union Gas Company, being natural monopolies, have absolute control of the markets, but their prices are determined to a considerable extent by legislation. . . .

Speaking generally, the witnesses have been of the opinion that the effect of the combinations has been to increase wages, or, at any rate, that during the last two or three years under the combinations the wages have been somewhat higher than they had been before. It is acknowledged in many of these cases that this increase has been due to the prosperous condition of the country and to the fact that there has been a strong demand for labor. In most cases in the iron and steel manufacture, as well as in several other of the most important industries, the wages are arranged after consultation with the labor unions or with committees representing the employees, and a scale is agreed upon, in many cases this being a sliding scale dependent upon the price of the product.

Most of the witnesses have recognized that there are certain disadvantages connected with most combinations.... Mr. Holt is of the opinion that the trusts form a very corrupting influence in politics, largely owing to the fact that they are protected by the tariff, and in consequence have found it advisable to send agents to Congress to dictate tariff legislation. He thinks also that they deceive the public regarding the nature of the business and of the business of the country through juggling with prices and statistics. Mr. Hillyer, as well as some other witnesses, thinks that the aggregation of power brought about through combination is a dangerous element and a menace to the political

independence of the people. Mr. Spalding endorses this opinion. He believes that it is natural for men to charge all that they can get. The combinations also, in his opinion, diminish individual effort and deprive the individual of the opportunity of rising. . . .

Of the later witnesses that have been heard, the larger number are of the opinion that comparatively few, if any, legislative remedies are needed. The witnesses whose inclinations are strongly toward free trade are of the opinion that the removal of the tariff on goods controlled by combinations would be the best... remedy. Most of the manufacturers object to having the tariff interfered with. . . .

More of the witnesses think that something could be gained in the way of greater publicity regarding the business of the combinations. For example, Mr. Campbell thinks that corporations whose stock is sold to the public on exchanges should be under Governmental control. He would be willing to have the regulation go even further than a mere publicity of accounts. Mr. White believes that the State has the right to say how the combinations should be regulated, and thinks it possible that some tax might ultimately be placed on what would be considered excessive earnings, the actual earnings to be found out by a complete system of Governmental inspection of accounts....

Some of the witnesses speak distinctly against even any special degree of publicity. Mr. Schwab, for example, thinks that ... though the stockholders are entitled to certain statements, even those should be somewhat limited.... Mr. Gunton advises that, if possible, the combinations be put under a national charter.... Mr. Hillyer 1 thinks that the Sherman law [of 1890] should be rigidly enforced, and that the tariff should be removed; that there should be Government ownership so far as municipal combinations are concerned; and, if necessary, the Government should itself ultimately go into the business of manufacturing the products manufactured by the trusts. He would be ready now to have the United States Government control the railroads, telegraphs, and long-distance telephones. . . .

1 Messrs. Hillyer and Spalding were lawyers of Atlanta, Georgia, summoned to give testimony before the Industrial Commission. They were both hostile to the trusts.