Problems of Poverty Part 9

In some cases these public works exist side by side in compet.i.tion with private enterprise; as, for example, in the carriage of parcels, life insurance, banking, and the various minor branches of post-office work, in medical attendance, and the maintenance of national education, and of places of amus.e.m.e.nt and recreation. In other cases it claims an absolute monopoly, and shuts off entirely private enterprise, as in the conveyance of letters and telegrams, and the local industries connected with the production and distribution of gas and water. The extent and complexity of that portion of our State and munic.i.p.al machinery which is engaged in productive work will be understood from the following description--

"Besides our international relations, and the army, navy, police, and the courts of justice, the community now carries on for itself, in some part or another of these islands, the post-office, telegraphs, carriage of small commodities, coinage, surveys the regulation of the currency and note issue, the provision of weights and measures, the making, sweeping, lighting, and repairing of streets, roads, and bridges, life insurance, the grant of annuities, shipbuilding, stockbroking, banking, farming, and money-lending. It provides for many of us from birth to burial--midwifery, nursery, education, board and lodging, vaccination, medical attendance, medicine, public worship, amus.e.m.e.nts, and interment.

It furnishes and maintains its own museums, parks, art galleries, libraries, concert-halls, roads, bridges, markets, slaughterhouses, fire-engines, lighthouses, pilots, ferries, surf-boats, steam-tugs, life-boats, cemeteries, public baths, washhouses, pounds, harbours, piers, wharves, hospitals, dispensaries, gas-works, water-works, tramways, telegraph-cables, allotments, cow-meadows, artisans'

dwellings, schools, churches, and reading-rooms. It carries on and publishes its own researches in geology, meteorology, statistics, zoology, geography, and even theology. In our colonies the English Government further allows and encourages the communities to provide for themselves railways, ca.n.a.ls, p.a.w.nbroking, theatres, forestry, cinchona farms, irrigation, leper villages, casinos, bathing establishments, and immigration, and to deal in ballast, guano, quinine, opium, salt, and what not. Every one of these functions, with those of the army, navy, police, and courts of justice, were at one time left to private enterprise, and were a source of legitimate individual investment of capital."[37]

Some of the utilities and conveniences thus supplied by public capital and public labour are old-established wants, but many are new wants, and the marked tendency of public bodies to undertake the provision of the new necessaries and conveniences which grow up with civilization is a phenomenon which deserves close attention.

-- 5. Motives of "Socialistic Legislation."--Stated in general terms, this socialistic tendency may be described as a movement for the control and administration by the public of all works engaged in satisfying common general needs of life, which are liable, if trusted to private enterprise, to become monopolies.

Articles which everybody needs, the consumption or use of which is fairly regular, and where there is danger of insufficient or injurious compet.i.tion, if the provision be left to private firms, are constantly pa.s.sing, and will pa.s.s more and more quickly, under public control. The work of protection against direct injuries to person and property has in all civilized countries been recognized as a dangerous monoply if left to private enterprise. Hence military, naval, police, and judicial work is first "socialized," and in modern life a large number of subsidiary works for the protection of the life and wealth of the community are added to these first public duties. Roads, bridges, and a large part of the machinery of communication or conveyance are soon found to be capable of abuse if left to private ownership; hence the post and telegraph is generally State-owned, and in most countries the railways.

There is for the same reason a strong movement towards the munic.i.p.al ownership of tramways, gas-and water-works, and all such works as are a.s.sociated with monopoly of land, and are not open to adequate compet.i.tion. In England everywhere these works are subject to public control, and the tendency is for this control, which implies part ownership, to develop into full ownership. Nearly half the gas-consumers in this country are already supplied by public works. One hundred and two munic.i.p.alities own electric plant, forty-five own their tramway systems, one hundred and ninety-three their water supplies, at the close of 1902.

The receipts of local authorities from rates and other sources, including productive undertakings, had increased from seventy millions sterling to one hundred and forty-five millions between 1890-1 and 1901-2. Art galleries, free libraries, schools of technical education, are beginning to spring up on all sides. Munic.i.p.al lodging-houses are in working at London, Glasgow, and several other large towns.

In every one of these cases, two forces are at work together, the pressure of an urgent public need, and the perception that private enterprise cannot be trusted to satisfy their need on account of the danger of monopoly. How far or how fast this State or munic.i.p.al limitation of private enterprise and a.s.sumption of public enterprise will proceed, it is not possible to predict. Everything depends on the two following considerations--

First, the tendency of present private industries concerned with the supply of common wants of life to develop into dangerous monopolies by the decay of effective compet.i.tion. If the forces at work in the United States for the establishment of syndicates, trusts, and other forms of monopoly, show themselves equally strong in England, the inevitable result will be an acceleration of State and munic.i.p.al socialism.

Secondly, the capacity shown by our munic.i.p.al and other public bodies for the effective management of such commercial enterprises as they are at present engaged in.

Reviewing then the ma.s.s of restrictive, regulative, and prohibitive legislation, largely the growth of the last half century, and the application of the State and munic.i.p.al machinery to various kinds of commercial undertakings in the interest of the community, we find it implies a considerable and growing restriction of the sphere of private enterprise.

-- 6. The "Socialism" of Taxation--But there is another form of State interference which is more direct and significant than any of these. One of the largest State works is that of public education. Now the cost of this is in large measure defrayed by rate and tax, the bulk of which, in this case, is paid by those who do not get for themselves or for their children any direct return. The State-a.s.sisted education is said to tax A for the benefit of B. Nor is this a solitary instance; it belongs to the very essence of the modern socialistic movement. There is a strong movement, independent too of political partisanship, to cast, or to appear to cast, the burden of taxation more heavily upon the wealthier cla.s.ses in order to relieve the poor. It is enough to allude to the income tax and the Poor Law. These are socialistic measures of the purest kind, and are directly open to that objection which is commonly raised against theoretic socialism, that it designs "to take from the rich in order to give to the poor." The growing public opinion in favour of graduated income tax, and the higher duty upon legacies and rich man's luxuries, are based on a direct approval of this simple policy of taking from the rich and giving to the poor.

The advocates of these measures urge this claim on grounds of public expediency, and those whose money is taken for the benefit of their poorer brethren, though they grumble, do not seriously impugn the right of the State to levy taxes in what way seems best. Whether we regard the whole movement from the taxation standpoint, or from the standpoint of benefits received, we shall perceive that it really means a direct and growing pressure brought to bear upon the rich for the benefit of the poor. A consideration of all the various cla.s.ses of socialistic legislation and taxation to which we have referred, will show that we are constantly engaged more and more in the practical a.s.sertion and embodiment of the three following principles--

1. That the individual is often too weak or ignorant to protect himself in contract or bargain, and requires public protection.

2. That considerations of public interest are held to justify a growing interference with "rights of property."

3. That the State or munic.i.p.ality may enlarge their functions in any direction and to any extent, provided a clear public interest is subserved.

-- 7. Relation of Theoretic Socialism to Socialistic Legislation.--Now it has been convenient in speaking of this growth of State and munic.i.p.al action to use the term Socialism. But we ought to be clear as to the application of this term. Although Sir William Harcourt declared, "We are all socialists to-day," the sober, practical man who is responsible for these "socialistic" measures, smiles at the saying, and regards it as a rhetorical exaggeration. He knows well enough that he and his fellow-workers are guided by no theory of the proper limits of government, and are animated by no desire to curtail the use of private property. The practical politician in this country is beckoned forward by no large, bright ideal; no abstract consideration of justice or social expediency supplies him with any motive force. The presence of close detailed circ.u.mstance, some local, concrete want to be supplied, some distinct tangible grievance to be redressed, some calculable immediate economy to be effected, such are the only conscious motives which push him forward along the path we have described. An alarming outbreak of disease registered in a high local death-rate presses the question of sanitary reform, and gives prominence to the housing of the working-cla.s.ses. The bad quality of gas, and the knowledge that the local gas company, having reached the limit of their legal dividend, are squandering the surplus on high salaries and expensive offices, leads to the munic.i.p.alization of the gas-works. The demand made upon the ratepayers of Bury to expend; 60,000 on sewage-works, a large proportion of which would go to increase the ground value of Lord Derby's property, leads them to realize the justice and expediency of a system of taxation of ground values which shall prevent the rich landlord from pocketing the contribution of the poor ratepayer. So too among those directly responsible for State legislation, it is the force of public opinion built out of small local concrete grievances acting in coalition with a growing sentiment in favour of securing better material conditions for the poor, that drafts these socialistic bills, and gets them registered as Acts of Parliament.

But the student of history must not be deceived into thinking that principles and abstract theories are not operative forces because they appear to be subordinated to the pressure of small local or temporal expediencies. Underneath these detailed actions, which seem in large measure the product of chance, or of the selfish or sentimental effort of some individual or party, the historian is able to trace the underworking of some large principle which furnishes the key to the real logic of events. The spirit of democracy has played a very small part in the conscious effort of the democratic workers. But the inductive study of modern history shows it as a force dominating the course of events, directing and "operating" the _minor_ forces which worked unconsciously in the fulfilment of its purpose. So it is with this spirit of socialism. The professed socialist is a rare, perhaps an unnecessary, person, who wishes to instruct and generally succeeds in scaring humanity by bringing out into the light of conscious day the dim principle which is working at the back of the course of events. Since this conscious socialism is not an industrial force of any great influence in England, it is not here necessary to discuss the claim of the theoretic socialist to provide a solution for the problem of poverty. But it is of importance for us to recognize clearly the nature of the interpretation theoretic socialists place upon the order of events set forth in this chapter, for this interpretation throws considerable light on the industrial condition of labour.

We see that the land nationalizer claims to remove, and the land reformer in general to abate, the evil of poverty by securing for those dependent on the fluctuating value and uncertain tenure of wage-labour an equal share in those land-values, the product of nature and social activity, which are at present monopolized by a few. Now the quality of monopoly which the land nationalizer finds in land, the professed socialist finds also in all forms of capital. The more discreet and thoughtful socialist in England at least does not deny that the special material forms of capital, and the services they render, may be in part due to the former activity of their present owners, or of those from whom their present owners have legitimately acquired them; but he affirms that a large part of the value of these forms of capital, and of the interest obtained for their use, is due to a monopoly of certain opportunities and powers which are social property just as much as land is. The following statement by one of the ablest exponents of this doctrine will explain what this claim signifies--

"We claim an equal right to this 'inheritance of mankind,' which by our inst.i.tutions a minority is at present enabled to monopolize, and which it does monopolize and use in order to extort thereby an unearned increment; and this inheritance is true capital. We mean thereby the principle, potentiality, embodied in the axe, the spade, the plough, the steam-engine, tools of all kinds, books or pictures, bequeathed by thinkers, writers, inventors, discoverers, and other labourers of the past, a social growth to which all individual claims have lapsed by death, but from the advantages of which the ma.s.ses are virtually shut out for lack of means. The very best definition of government, even that of to-day, is that it is the agency of society which procures t.i.tle to this treasure, stores it up, guards and gives access to it to every one, and of which all must make the best use, first and foremost by education."

The conscious socialist is he who, recognizing in theory the nature of this social property inherent in all forms of capital, aims consciously at getting possession or control of it for society, in order to solve the problem of poverty by making the wage-earner not only a joint-owner of the social property in land but also in capital.

In other words, it signifies that the community refuses to sanction any absolute property on the part of any of its members, recognizing that a large portion of the value of each individual's work is due, not to his solitary efforts, but to the a.s.sistance lent by the community, which has educated and secured for the individual the skill which he puts in his work; has allowed him to make use of certain pieces of the material universe which belongs to society; has protected him in the performance of his work; and lastly, by providing him a market of exchange, has given a social value to his product which cannot be attributed to his individual efforts. In recognition of the co-operation of society in all production of wealth, the community claims the right to impose such conditions upon the individual as may secure for it a share in that social value it has by its presence and activity a.s.sisted to create. The claim of the theoretic socialist is that society by taxing or placing other conditions upon the individual as capitalist or workman is only interfering to secure her own. Since it is not possible to make any satisfactory estimate of the proportion of any value produced which is due to the individual efforts, and to society respectively, there can be no limit a.s.signed to the right of society to increase its claim save the limit imposed by expediency. It will not be for the interest of society to make so large a claim by way of regulation, restriction, or taxation, as shall prevent the individual from applying his best efforts to the work of production, whether his function consists in the application of capital or of labour. The claims of many theoretic socialists transcend this statement, and claim for society a full control of all the instruments of production. But it is not necessary to discuss this wider claim, for the narrower one is held sufficient to justify and explain those slow legislative movements which come under the head of practical socialism, as ill.u.s.trated in modern English history.

Now while this conscious socialism has no large hold in England, it is necessary to admit that the doctrine just quoted does furnish in some measure an explanation of the unconscious socialism traceable in much of the legislation of this century. When it is said that "we are all socialists to-day," what is meant is, that we are all engaged in the active promotion or approval of legislation which can only be explained as a gradual unconscious recognition of the existence of a social property in capital which it is held politic to secure for the public use.

The increasing restrictions on free use of capital, the monopoly of certain branches of industry by the State and the munic.i.p.ality, the growing tendency to take money from the rich by taxation, can be explained, reconciled, and justified on no other principle than the recognition that a certain share of the value of these forms of wealth is due to the community which has a.s.sisted and co-operated with the individual owner in its creation. Whether the socialistic legislation which, stronger than all traditions of party politics, is constantly imposing new limitations upon the private use of capital, is desirable or not, is not the question with which we are concerned. It is the fact that is important. Society is constantly engaged in endeavouring, feebly, slowly, and blindly, to relieve the stress of poverty, and the industrial weakness of low-skilled labour, by laying hands upon certain functions and certain portions of wealth formerly left to private individuals, and claiming them as social functions and social wealth to be administered for the social welfare. This is the past and present contribution of "socialistic legislation" towards a solution of the problem of poverty, and it seems not unlikely that the claims of society upon these forms of social property will be larger and more systematically enforced in the future.

Chapter XI.

The Industrial Outlook of Low-Skilled Labour.

-- 1. The Concentration of Capital.--It must be remembered that we have been concerned with what is only a portion of the great industrial movement of to-day. Perhaps it may serve to make the industrial position of the poor low-skilled workers more distinct if we attempt to set this portion in its true relation to the larger Labour Problem, by giving a brief outline of the size and relation of the main industrial forces of the day.

If we look at the two great industrial factors, Capital and Labour, we see a corresponding change taking place in each. This change signifies a constant endeavour to escape the rigour of compet.i.tion by a co-operation which grows ever closer towards fusion of interests previously separate.

Look first at Capital. We saw how the application of machinery and mechanical power to productive industries replaced the independent citizen, or small capitalist, who worked with a handful of a.s.sistants, by the mill and factory owner with his numerous "hands." The economic use of machinery led to production on a larger scale. But new, complex, and expensive machinery is continually being invented, which, for those who can afford to purchase and use it, represents a fresh economy in production, and enables them both to produce larger quant.i.ties of goods more rapidly, and to get rid of them by underselling those of their trade compet.i.tors who are working with old-fashioned and less effective machinery. As this process is continually going on, it signifies a constant advantage which the owner of a large business capital has over the owner of a smaller capital. In earlier times, when trade was more localized, and the small manufacturer or merchant had his steady customers, and stood on a slowly and carefully acquired reputation, it was not so easy for a new compet.i.tor to take his trade by the offer of some small additional advantage. But the opening up of wider communication by cheap postage, the newspaper, the railway, the telegraph, the general and rapid knowledge of prices, the enormous growth of touting and advertising, have broken up the local and personal character of commerce, and tend to make the whole world one complete and even arena of compet.i.tion. Thus the fortunate possessor of some commercial advantage, however trifling, which enables him to produce more cheaply or sell more effectively than his fellows, can rapidly acquire their trade, unless they are able to avail themselves of the new machinery, or special skill, or other economy which he possesses. This consideration enables the large capitalist in all businesses where large capital contains these advantages, or the owner of some large natural monopoly, who can most cheaply extract large quant.i.ties of raw material, to crush in free compet.i.tion the smaller businesses. In proportion as business is becoming wider and more cosmopolitan, these natural advantages of large capital over small are able to a.s.sert themselves more and more effectively. In certain branches of trade, which have not yet been taken over by elaborate machinery, or where everything depends upon the personal activity and intelligence, and the detailed supervision of a fully interested owner, the small capitalist may still hold his own, as in certain branches of retail trade. But the general movement is in favour of large businesses. Everywhere the big business is swallowing up the smaller, and in its turn is liable to be swallowed by a bigger one. In manufacture, where the cosmopolitan character is strongest, and where machinery plays so large a part, the movement towards vast businesses is most marked; each year makes it more rapid, and more general. But in wholesale and retail distribution, though somewhat slower, the tendency is the same. Even in agriculture, where close personal care and the limitations of a local market temper the larger tendency, the recent annals of Western America and Australia supply startling evidence of the concentrative force of machinery. The meaning of this movement in capital must not be mistaken. It is not merely that among competing businesses, the larger showing themselves the stronger survive, and the smaller, out-competed disappear. This of course often happens. The big screw-manufacturer able to provide some new labour-saving machinery, to advertise more effectively, or even to sell at a loss for a period of time, can drown his weaker compet.i.tors and take their trade. The small tradesman can no longer hold his own in the fight with the universal provider, or the co-operative store.

But this destruction of the small business, though an essential factor in the movement, is not perhaps the most important aspect. The industrial superiority of the large business over the small makes for the concentration both of small capitals and of business ability. The monster millionaire, who owns the whole or the bulk of his great business, is after all a very rare specimen. The typical business form of to-day is the joint stock company. This simply means that a number of capitalists, who might otherwise have been competing with one another on a small scale of business, recognizing the advantage of size, agree to ma.s.s their capital into one large lump, and to entrust its manipulation to the best business ability they can muster among them, or procure from outside. This process in its simplest form is seen in the amalgamation of existing and competing businesses, notable examples of which have recently occurred in the London publishing trade. But the ordinary Company, whether it grows by the expansion of some large existent business, or, like most railways or other new enterprises, is formed out of money subscribed in order to form a business, represents the same concentrating tendency. These share-owners put their capital together into one concern, in order to reap some advantage which they think they would not reap if they placed the capital in small competing businesses.

But though it has been calculated that about one-third of English commerce is now in the hands of joint stock companies, this by no means exhausts the significance of the centralizing force in capital. Almost all large businesses, and many small businesses, are recognized to be conducted largely with borrowed capitals. The owners of these debentures are in fact joint capitalists with the nominal owner of the business.

They prefer to lend their capital, because they hope to enjoy a portion of the gain and security which belongs to a large business as compared with a small one. Along with this coming together of small capitals to make a large capital, there is a constant centralization and organization of business ability. It is not uncommon for the owner of a small and therefore failing business to accept a salaried post in the office of some great business firm. So too we find the son of a small tradesman, recognizing the hopelessness of maintaining his father's business, takes his place behind the counter of some monster house.

-- 2. How Compet.i.tion affects Capital.--Now the force which brings about all these movements is the force of compet.i.tion. Every increase of knowledge, every improvement of communication, every breakdown of international or local barriers, increases the advantage of the big business, and makes the struggle for existence among small businesses more keen and more hopeless. It is the desire to escape from the heavy and hara.s.sing strain of trade compet.i.tion, which practically drives small businesses to suspend their mutual hostilities, and to combine. It is true that most of the large private businesses or joint stock companies are not formed by this direct process of pacification. But for all that, their _raison d'etre_ is found in the desire to escape the friction and waste of compet.i.tion which would take place if each shareholder set up business separately on his own account. We shall not be surprised that the compet.i.tion of small businesses has given way before co-operation, when we perceive the force and fierceness of the compet.i.tion between the larger consolidated ma.s.ses of capital. With the development of the arts of advertising, touting, adulteration, political jobbery, and speculation, acting over an ever-widening area of compet.i.tion, the fight between the large joint stock businesses grows always more cruel and complex. Business failures tend to become more frequent and more disastrous. A recent French economist reckons that ten out of every hundred who enter business succeed, fifty vegetate, and forty go into bankruptcy. In America, where internal compet.i.tion is still keener and speculation more rife, it has been lately calculated that ninety-five per cent, of those who enter business "fail of success." Just as in the growth of political society the private individual has given up the right of private war to the State, with the result that as States grow stronger and better organized, the war between them becomes fiercer and more destructive, so is it with the concentration of capital. The small capitalist, seeking to avoid the strain of personal compet.i.tion, amalgamates with others, and the compet.i.tion between these ma.s.ses of capital waxes every day fiercer. We have no accurate data for measuring the diminution of the number of separate compet.i.tors which has attended the growing concentration of capital, but we know that the average magnitude of a successful business is continually increasing. The following figures ill.u.s.trate the meaning of this movement from the American cotton trade, which is not one of the industries most susceptible to the concentrative pressure. "It will be seen that in 756 large establishments in 1880, in which the aggregate capital invested was five times as great as that in the 801 establishments in 1830, the capital invested per spindle was one-third less, the number of spindles operated by each labourer nearly three times as large, the product per spindle one-fourth greater, the product per dollar invested twice as large, the price of the cotton cloth nearly sixty per cent, less, the consumption _per capita _of the population over one hundred per cent greater, and the wages more than double. What is true of this industry is true of all industries where the concentration of capital has taken place."[38]

It is needless to add that these large works are conducted, not by single owners, but in nearly all cases by the managers of a.s.sociated capitals. Regarded from the large standpoint of industrial development, all these phenomena denote a change in the sphere of compet.i.tion. From the compet.i.tion of private capitals owned by individuals we have pa.s.sed to the compet.i.tion of a.s.sociated capitals. The question now arises, "Will not the same forces, which, in order to avoid the waste and destruction of ever keener compet.i.tion, compelled the private capitalists to suspension of hostility and to combination, act upon the larger ma.s.ses of a.s.sociated capital?" The answer is already working itself clearly out in industrial history. The concentrative adhesive forces are everywhere driving the competing ma.s.ses of capital to seek safety, and escape waste and destruction, by welding themselves into still larger ma.s.ses, renouncing the compet.i.tion with one another in order to compete more successfully with other large bodies. Thus, wherever these forces are in free operation, the number of competing firms is continually growing less; the surviving compet.i.tors have crushed or absorbed their weaker rivals, and have grown big by feeding on their carcases.

But the struggle between these few big survivors becomes more fierce than ever. Fitted out with enormous capital, provided with the latest, most complex, and most expensive machinery, producing with a reckless disregard for one another or the wants of the consuming public, advertising on a prodigious scale in order to force new markets, or steal the markets of one another, they are constantly driven to lower their prices in order to effect sales; profits are driven to a minimum; all the business energy at their command is absorbed by the strain of the fight; any unforeseen fluctuations in the market brings on a crisis, ruins the weaker combatants, and causes heavy losses all round. In trades where the concentrative process has proceeded furthest this warfare is naturally fiercest. But as the number of competing units grows smaller, arbitration or union becomes more feasible. Close and successful united action among a large number of scattered compet.i.tors of different scales of importance, such as exist during the earlier stage of capitalism, would be impossible. But where the number is small, combination presents itself as possible, and in so much as the compet.i.tion is fiercer, the direct motive to such combination is stronger. Hence we find that attempts are made to relieve the strain among the largest businesses. The fiercest combatants weary of incessant war and patch up treaties. The weapon of capitalist warfare is the power of under-selling--"cutting prices." The most powerful firms consent to sheathe this weapon, i.e. agree not to undersell one another, but to adopt a common scale of prices. This action, in direct restraint of compet.i.tion, corresponds to the action of a trades union, and is attained by many trades whose capital is not large or business highly developed. Neither does it imply close union of friendly relations between the combining parties. It is a policy dictated by the barest instinct of self-preservation. We see it regularly applied in certain local trades, especially in the production and distribution of perishable commodities. Our bakers, butchers, dairy-men, are everywhere in a constant state of suspended hostility, each endeavouring indeed to get the largest trade for himself, but abiding generally by a common scale of prices. Wherever the local merchants are not easily able to be interfered with by outsiders, as in the coal-trade, they form a more or less closely compacted ring for the maintenance of common terms, raising and lowering prices by agreement. The possibility of successfully maintaining these compacts depends on the ability to resist outside pressure, the element of monopoly in the trade. When this power is strong, a local ring of competing tradesmen may succeed in maintaining enormous prices. To take a humble example--In many a remote Swiss village, rapidly grown into a fashionable resort, the local washerwomen are able to charge prices twice as high as those paid in London, probably four times as high as the normal price of the neighbourhood.

Grocers or clothiers are not able to combine with the same effect, for the consumer is far less dependent on local distribution for these wares. But wherever such retail combinations are possible they are found. Among large producers and large distributing agencies the same tendency prevails, especially in cases where the market is largely local. Free compet.i.tion of prices among coal-owners or iron-masters gives way under the pressure of common interests, to a schedule of prices; competing railways come to terms. Even among large businesses which enjoy no local monopoly, there are constant endeavours to maintain a common scale of prices. This condition of loose, irregular, and partial co-operation among competing industrial units is the characteristic condition of trade in such a commercial country as England to-day. Compet.i.tors give up the combat _a outrance_, and fight with blunted lances.

-- 3. Syndicates and Trusts.--But it is of course extremely difficult to maintain these loose agreements among merchants and producers engaged in intricate and far-reaching trades. A big opportunity is constantly tempting one of them to undersell; new firms are constantly springing up with new machinery, willing to trade upon the artificially raised prices, by under-selling so as to secure a business; over-production and a glut of goods tempts weaker firms to "cut rates," and this breaks down the compact. A score of different causes interfere with these delicate combinations, and plunge the different firms into the full heat and waste of the conflict. The renewed "free compet.i.tion" proves once more fatal to the smaller businesses; the waste inflicted on the "leviathans"

who survive forms a fresh motive to a closer combination.

These new closer combinations are known by the names of Syndicate and Trust. This marks another stage in the evolution of capital. In the United States, where the growth is most clearly marked, the Standard Oil Trust forms the leading example of a successful Trust. In 1881, this Standard Oil Company having maintained for some ten years tolerably close informal relations with its leading compet.i.tors in the Eastern States, and having crushed out the smaller companies, entered into a close arrangement with the remaining compet.i.tors, with the view of a practical consolidation of the businesses into one, though the formal ident.i.ty of the several firms was still maintained. The various companies which entered into this union, comprising nearly all the chief oil-mills, submitted their businesses to valuation, and placed themselves in the hands of a board of trustees, with an absolute power to regulate the quant.i.ty of production, and if necessary to close mills, to raise and lower prices, and to work the whole number as a joint concern. Each company gave up its shares to the Trust, receiving notes of acknowledgment for the worth of the shares, and the total profits were to be divided as dividend each half-year. This Trust has continued to exist, and has now a practical monopoly of the oil trade in America, controlling, it is reckoned, more than 90 per cent. of the whole market, and regulating production and prices.

Everywhere this process is at work. Competing firms are in every trade, where their small numbers permit, striving to come to closer terms than formerly, and either secretly or openly joining forces so as to get full control over the production or distribution of some product, in order to manipulate prices for their own profit. From railways and corn-stores down to slate-pencils, coffins, and sticking-plaster, everything is tending to fall under the power of a Trust. Many of these Trusts fail to secure the union of a sufficient proportion of the large compet.i.tors, or quarrels spring up among the combining firms, or some new firms enter into compet.i.tion too strong to be fought or bought over. In these ways a large number of the Trusts have hitherto broken down, and will doubtless continue to break down. In England, this step in capitalist evolution is only beginning to be taken. In gla.s.s, paper, salt, coal, and a few other commodities, combinations more permanent than the mere Ring or Corner, and closer than the ordinary masters' unions, have been formed. But Free Trade, which leaves us open to the less calculable and controllable element of foreign compet.i.tion, and the fact that the earlier stages of concentration of capital are not yet completed here in most trades, have hitherto r.e.t.a.r.ded the growth of the successful Trust in England. Even in America there is no case where the monopoly of a Trust reigns absolute through the whole country, though many of them enjoy a local control of production and prices which is practically unrestricted. Excepting in the case of the Standard Oil Trust, and a few less important bodies which enjoy the control of some local monopoly, such as anthracite coal, the supremacy of the leading Trust or Syndicate is brought in certain places into direct conflict with other more or less independent competing bodies. In other words, the evolution of capital, which tends ever to the establishment of compet.i.tion between a smaller number of larger ma.s.ses, has nowhere worked out the logical conclusion which means the condensation of the few large competing bodies into a single ma.s.s.

This final step, which presents a completely organized trade with the element of compet.i.tion utterly eliminated under the control of a single body of mere joint-owners of the capital engaged, must be regarded as the goal, the ideal culmination of the concentrative movement of modern capital. It is said that more than one-third of the business in the United States is already controlled by Trusts. But most of them have only in part succeeded in their effort to escape from compet.i.tion by integrating their personal interests into a single h.o.m.ogeneous ma.s.s.

Even in cases where they do rule the market untrammelled by the direct interference of any compet.i.tors, they are still deterred from a free use of their control over prices by the possibility of compet.i.tion which any full use of this control might give rise to. For it does not follow that even where a Trust holds an absolute monopoly of the market of a locality, that it will be able to maintain that monopoly were it to raise its prices beyond a certain point. In proportion, however, as experience yields a greater skill in the management of Trusts, and their growing strength enables them to more successfully defy outside attempts at compet.i.tion, their power to raise prices and increase their rates of profit would rise accordingly.

Regarding, then, the development of the capitalist system from the first establishment of the capitalist-employer as a distinct industrial cla.s.s, we trace the ma.s.sing of capital in larger and larger competing forms, the number of which represents a pyramid growing narrower as it ascends towards an ideal apex, represented by the absolute unity or ident.i.ty of interests of the capital in a given trade. In so far as the interests of different trades may clash, we might carry on this movement further, and trace the gradual agreement, integration, and fusion of the capitals represented in various trades. There is, in fact, an ever-growing understanding and union between the various forms of capital in a country. The recognition of this ultimate ident.i.ty of interest must be regarded as a constant force making for the unification of the whole capital of a country, in the same way as the common interests of directly competing capitals in the same trade leads to a union for mutual support and ultimate identification.

-- 4. Uses and Abuses of the Trust.--This, however, carries us beyond the immediate industrial outlook. The successful formation of the Trust represents the highest reach of capitalistic evolution. Although the subject is too involved for any lengthy discussion here, a few points bearing on the nature of the Trust deserve attention.

The Trust is clearly seen to be a natural step in the evolution of capital. It belongs to the industrial progress of the day, and must not be condemned as if it were a retrograde or evil thing. It is distinctly an attempt to introduce order into chaos, to save the waste of war, to organize an industry. The Trust-makers often claim that their line of action is both necessary and socially beneficial, and urge the following points--

The low rates of profit, owing to the miscalculation of compet.i.tors who establish too many factories and glut the market; the waste of energy in the work of compet.i.tion; the adulteration of goods induced by the desire to undersell; the enormous royalties which must be paid to a compet.i.tor who has secured some new invention--these and other causes necessitate some common action. By the united action of the Trust the following economic advantages are gained--

a. The saving of the labour and the waste of compet.i.tion.

b. Economy in buying and selling, in discovering and establishing new markets.

c. The maintenance of a good quality of wares without fear of being undersold.

d. Mutual guarantee and insurance against losses.