Problems in American Democracy Part 47

7. Use of the school as a social center in your community.

8. The meaning of education. (Butler, _The Meaning of Education_; Henderson, _What is it to be Educated?_ Hadley, _The Education of the American Citizen_; Baldwin, _The Relation of Education to Citizenship_.)

9. The beginnings of American education. (Cubberley, _Public Education in the United States_, chapter ii.)

10. The reorganization of elementary education. (Cubberley, _Public Education in the United States_, chapter x.)

11. Education through play. (Curtis, _Education through Play_.)

12. The use of leisure time. (_Annals_, vol. lxvii, pages 115-122.)

13. Wider use of the school plant. (Cubberley, _Public Education in the United States_, chapter xiii; _Annals_, vol. lxvii, pages 170-202.

Perry, _Wider Use of the School Plant_.)

14. The relation of the school to the community. (Dewey, _Schools of To-morrow_, chapter vii.)

15. Physical education. (Sargent, _Physical Education_.)

16. The education of Helen Keller. (Keller, _The Story of My Life_.

See also an encyclopedia.)

17. The education of the crippled child. (Hall and Buck, _Handicrafts for the Handicapped_.)

18. Education for efficiency. (Eliot, _Education for Efficiency_; Davenport, _Education for Efficiency_.)

19. Vocational education. (Taylor, _A Handbook of Vocational Guidance_; Bloomfield, _The Vocational Guidance of Youth_; Leake, _Industrial Education, Its Problems, Methods and Danger_.)

20. Choosing a vocation. (Parsons, _Choosing a Vocation_.)

21. The United States Bureau of Education and the immigrant; (_Annals_, vol. lxvii, pages 273-283.)

22. Education and social progress. (Ellwood, _Sociology and Modern Social Problems_, chapter xvi.)

FOR CLa.s.sROOM DISCUSSION

23. Do grammar school graduates who fail to enter high school stop their education at this point because of poverty, because of the attraction of industry, or because of dissatisfaction with school?

24. The question of free text books.

25. The question of uniform text books throughout your state.

26. At what point in the school curriculum should vocational education be begun?

27 How are ancient languages, ancient history and the fine arts helpful in daily life?

28. The question of a more intensive use of your school building as a social center.

PART IV--AMERICAN POLITICAL PROBLEMS

A. SOME ECONOMIC FUNCTIONS OF GOVERNMENT

CHAPTER XXVII

PUBLIC INTEREST IN BUSINESS: REGULATION

322. NECESSITY OF PUBLIC INTEREST IN BUSINESS.--Although individuals carry on business primarily for their own ends, the economic activities of men affect not only themselves, but the community as well. If every individual voluntarily confined his attention to those forms of business which strengthened the community as well as adding to his own prosperity, there would be little need for laws regulating the conduct of business. But because experience has shown that some persons will seek to benefit themselves in ways that react to the injury of the community, it becomes necessary for law to adjust private and public interests. A community cannot remain indifferent to the economic activities of its citizens. Public interest in business is a fundamental necessity, if the community is to be safeguarded against the abuses of free enterprise.

323. NATURE OF PUBLIC INTEREST IN BUSINESS.--In general, the object of laws regulating business is either to encourage helpful business methods, or to discourage harmful business methods. A good deal of legislation has been designed positively to encourage helpful business methods, yet it remains true that the most significant of our industrial laws have been aimed primarily at the discouragement of harmful business. A fundamental American ideal is to insure to the individual as much freedom of action as is consistent with the public interest. Thus we believe that if harmful business is controlled or suppressed, private initiative may be trusted to develop helpful business methods, without the aid of fostering legislation. In this and the following chapter, therefore, we may confine our attention to legislation designed to suppress harmful business methods.

324. THE NATURE OF MONOPOLY.--We may begin the discussion by inquiring into the nature and significance of monopoly.

Under openly compet.i.tive conditions the free play of supply and demand between a number of producers and a number of prospective consumers fixes the price of a commodity. In such cases consumers are protected against exorbitant prices by the fact that rival producers will underbid each other in the effort to sell their goods.

But if the supply of a good, say wheat, is not in the hands of several rival producers, but is under the control of a unified group of persons, compet.i.tion between the owners of the wheat is suppressed sufficiently to enable this unified group more nearly to dictate the price for which wheat shall sell. In such a case a monopoly is said to exist. Complete control of the supply of a commodity is rare, even for short periods, but modern business offers many instances of enterprises which are more or less monopolistic in character.

The essential danger of monopoly is that those who have secured control of the available supply of a commodity will use that control to benefit themselves at the expense of the public. By combining their individual businesses, producers who were formerly rivals may secure the chief advantage of large-scale management. That is to say, the cost of production per unit may be decreased, because several combined plants might be operated more economically than several independent concerns. If the cost of production _is_ decreased the combining producers can afford to lower the price of their product. But if they are practically in control of the entire supply, they will not lower the price unless it serves their interests to do so. Indeed it is more likely that they will take advantage of their monopoly to raise the price.

325. TYPES OF MONOPOLY.--Monopolies are variously cla.s.sified, but for our purpose they may be called either _natural_ or _unnatural_.

A _natural_ monopoly may exist where, by the very nature of the business, compet.i.tion is either impossible or socially undesirable.

Examples of this type of monopoly are gas and water works, street railways, steam railways, and similar industries. These will be discussed in the next chapter.

Where an _unnatural_ monopoly exists, it is not because the essential character of the business renders it unfit for the compet.i.tive system, but because compet.i.tion has been artificially suppressed. The traditional example of an unnatural monopoly is that form of large- scale combination which is popularly known as a trust.

326. ORIGIN OF THE TRUST.--After the Civil War, rivalry in many industries was so intense as to lead to "cutthroat" compet.i.tion and a consequent reduction in profits. For the purpose of securing the advantages of monopoly, many previously competing businesses combined.

In 1882 John D. Rockefeller organized the Standard Oil Company, the first trust in this country. The plan drawn up by Mr. Rockefeller provided that the owners of a number of oil refineries should place their stock in the hands of a board of trustees. In exchange for this stock, the owners received trust certificates on which they were paid dividends. Having control of the stock, the trustees were enabled to manage the combining corporations as one concern, thus maintaining a unified control over supply, and opening the way to monopoly profits.

327. PRESENT MEANING OF THE TERM "TRUST."--The plan initiated by Mr.

Rockefeller was so successful that other groups of industries adopted it. After 1890 the original trust device was forbidden by statute, and the _trust proper_ declined in importance. But there continued to be a large number of industrial combinations which, under slightly different forms, have secured all of the advantages of the original trust. In some cases previously competing corporations have actually amalgamated; in still other cases, combining concerns have secured the advantages of monopoly by forming a holding company. A holding company is a corporation which is created for the express purpose of "holding"

or controlling stock in several other corporations. This the holding company does by buying a sufficient amount of the stock of the combining concerns to insure unity of management and control. Since the holding company and similar devices secure the chief advantages of the original trust, the word "trust" is now used to designate any closely knit combination which has monopolistic advantages.

328. GROWTH OF THE TRUST MOVEMENT.--The trust movement developed rapidly after 1882. There were important combinations in the oil, tin, sugar, steel, tobacco, paper, and other industries. By 1898 there had been formed some eighty trusts, with a total capitalization of about $1,000,000,000. At the beginning of 1904 the number of trusts exceeded three hundred, while their combined capital totaled more than $5,000,000,000. The largest single trust was the United States Steel Corporation, which was capitalized at almost a billion and a half dollars. At the beginning of 1911, in which year the Supreme Court of the United States ordered two important trusts to dissolve, the combined capital of the trusts was probably in excess of $6,000,000,000.

329. ABUSE OF POWER BY THE TRUSTS.--Trusts have often abused their monopolistic powers. They have often used their wealth to corrupt legislatures and to attempt to influence even the courts, in the effort to prevent laws and court decisions from restricting their monopoly. The corruption of railway corporations and of political parties has been partly due to the evil influence of the trusts.

Trusts have often crushed out independent concerns that endeavored to compete with them. This has been accomplished, partly by inducing railroads to discriminate against independent concerns and in favor of the trusts, partly by cutting prices in compet.i.tive markets until independent concerns were crushed out, and partly by the use of bribes, threats, and other unfair methods. After compet.i.tion had been suppressed, the trusts took advantage of their monopoly to raise prices on their products, thus imposing a heavy burden upon the public.

330. THE SHERMAN ANTI-TRUST ACT. (1890.)--During the eighties a number of states attempted to control the trust movement. But the Federal government has exclusive jurisdiction over interstate business, and for this reason the action of the states was limited to the control of the relatively unimportant trust business lying entirely within their respective borders. The fact that an increasing proportion of trust business was interstate in character stimulated interest in Federal anti-trust legislation, and in 1890 the Sherman Anti-trust Act was pa.s.sed. This Act declared illegal "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations."

331. FAILURE OF THE SHERMAN ACT.--For more than twenty years after its pa.s.sage, the Sherman Act did little to curb the growth of the trusts, indeed, the most marked tendency toward trust formation occurred _after_ 1890. Numerous suits were brought under the Act, but the lukewarm att.i.tude of the courts rendered difficult the administration of the law. After 1911 the courts held that the restraint of trade was illegal if "unreasonable," but few juries could be found that could agree upon the difference between a "reasonable" and an "unreasonable"

restraint of trade. Lastly, combinations which had been organized under the original trust plan were not disheartened by court decrees ordering them to dissolve, but reorganized under some device which was practically as effective as the trust plan, but which did not technically violate the Sherman act.

332. FURTHER LEGISLATION IN 1914.--Finally in 1911 the government succeeded in dissolving the Standard Oil Company and the American Tobacco Company, two of the largest trusts in the country. This success encouraged the Department of Justice to inst.i.tute other suits, and stimulated such general interest in the trust problem that in 1914 Congress pa.s.sed two new Anti-trust Acts. These were the Clayton Act and the Federal Trade Commission Act. The general effect of these laws was to strengthen anti-trust legislation by correcting some of the fundamental defects of the Sherman Act, and by still further extending the power of the Federal government over monopolistic combinations.