the demands of the ring. George Addington, the present County Judge of Albany County, was, prior to his election as judge, the District Attorney of Albany County. On December 19, 1907, just before retiring as District Attorney, he dismissed, without explanation, 465 indictments against alleged offenders. There are now pending in Albany County upward of 850 indictments. Six hundred and sixty-one of these were found prior to the election of the present District Attorney. The law requires these indictments to be filed in the office of the clerk of the county, while the bonds for the appearance of defendants are required to be filed in the office of the clerk of the court. But the District Attorney has a different rule. All indictments and bonds are filed in his office. He ex

plains that this has been the custom in Albany County: Besides, he says, the indictments are not safe in the When asked particularly about County Clerk's office. the pigeonholing of these indictments, the District Attorney said that it was a good way to control a defendant. The votes of the 850 individuals now under indictment in Albany are sufficient to turn any election in Albany one way or another.

JUDICIAL. METHODS IN ALBANY

BLACKMAILING by indictment has been a common

thing in Albany. A certain woman who kept a disorderly house was indicted for abduction. She had been paying for protection for her house. The indictment was pigeonholed, but the woman ordered to leave town. Timothy Kerwin, a prominent member of Barnes's ring, who was introduced to the woman by a sergeant of the Albany police, and who had collected the protection money from the woman, admitted that the pigeonholing of the indictment was brought about through his friendship with George Addington, now county judge, then District Attorney. The woman was induced to deed to Kerwin valuable real estate, on the pretense that the property would be looked after during the enforced absence of the woman. She did not get the property back. Kerwin claimed that the woman owed him some money. Kerwin had endorsed the note of Addington for $500, and Addington did not dismiss this indictment with the other 465 when he went out of office.

One or two instances of how criminals are protected under the Barnes system may be cited. One "Honkus" Burns runs a disorderly dance hall in Albany. It is a fence for criminals and their loot from other parts of the State. He was running his place without a State ex

cise license. The State Excise Commissioner sent his men to close up the place. While they were confiscating the liquors, Burns walked in. At his signal the doors were locked and the lights suddenly extinguished. Liquor bottles began to fly. The excise men made for an open window. One of them was under the care of a doctor later. One hour after the place was raided it was running full blast.

Burns was charged with resisting an officer. Recorder Frost turned him loose on the ground that the excise agent had not personally gotten the order to confiscate the goods, but had sent a lawyer to get it.

ROBBING THE STATE

BURNS had a partner named "Barney" Reilly. A colored horse trader turned up in Albany. The Tenderloin gang learned that he carried several thousand dollars on his person. Reilly and another man visited the horse traders' camp on Manning Boulevard, outside the city, late one night. The neighborhood was aroused by cries of "murder." Mounted police rode up. They caught Reilly and his pal running away. They had the negro's blood and his money on them. The identification by the negro was positive. Burns was acquitted. His pull with the ring saved him. Instances like this are not uncommon in Albany.

But the criminal side of life is not the only graft that exists with the sanction of Barnes's ring. Catherine Grimes, a very old lady, died in a cheap lodging house in Albany. Although she was apparently a pauper, the house belonged to her. She left no relatives. It was discovered that she had deposited in Albany banks at the time of her death sixteen thousand dollars. Owen J. Malone, an undertaker and a prominent member of Barnes's ring, took possession of the body and the house. He got appointed administrator of the estate. The contents of the house were inventoried at $21.10. Mrs. Grimes's personal effects were listed by the administrator as "one lot of old clothing (junk) of the value of ten cents, and underwear and two towels in bureau drawer, of the value of five cents." Malone put in a bill of $1,381.56 for funeral expenses. He charged $850 for a "solid mahogany casket, lined with satin, honeycombed, and silk pillow, and oxidized extension handles, with engraved plate," and $250 for a "burglarproof metallic grave vault." He dressed the corpse in a black silk dress, for which he charged $90. A doctor, William S. Bristol, another Republican and a "friend"

of Malone's, presented a bill for $1,966 for six years' services, although another physician, who had been paid for his services during the lifetime of his patient, testified that he had attended Mrs. Grimes during the same period. A tenant of Mrs. Grimes presented a bill for an even $1,000, although she had paid her monthly rental to Mrs. Grimes regularly without deduction. The tenant testified for the doctor and the doctor testified for the tenant. Malone paid George Addington, now Barnes's county judge, for legal services, $750. He paid John J. McCall, another lawyer and prominent member of Barnes's ring, $5,700 for some other legal services. He paid another lawyer and member of the same ring $250 for looking after the interests of "unknown infants." A Deputy Attorney General, who appeared on behalf of the State, was allowed, contrary to law, $2,200 for his services, although drawing a salary from the State at the same time. This Deputy Attorney General made no objec tion to the bills. If he had, he would not have received his $2,200. And Barnes's judge allowed these claims. Fe did reduce the bill of the tenant of Mrs. Grimes $500, though why, unless she was a woman and did not have any political influence, or unless there was not enough to go round among the lawyers, does not appear.

One or two instances out of dozens of direct political graft may be cited. Thomas J. Cowell and George Cowell, stationers, furnish the stationery supplies to the city of Albany. One of their graft methods is to render bills for stationery for the individual aldermen, which are audited and paid by the city. No stationery is furnished. Instead, the amount of the bill is distributed in cash to each alderman, share and share alike.

THE

MUNICIPAL GRAFT

HE law requires that all work done and supplies furnished to cities of the second class, in amounts over $250, shall be awarded, after public bidding, to the lowest bidder. This might exclude some of the ring, who are usually not cheap. Work and materials were, therefore, ordered, aggregating thousands of dollars annually, by dividing up the work and material in job lots, the bills presented all being under $250. These orders for the same kind of work or materials are all given to the same persons. If the city bought $20,000 worth of horse feed, it bought the feed in lots less than $250, on orders given to the same firm. Five thousand dollars' worth of pig lead was bought in twenty lots of $250 each. Under this arrangement, there is no limit to (Continued on page 32;

11

W

MARK

HEN Wilson got the Democratic nomination at Baltimore the bosses there assembled had been intimidated by Bryan and by the threat of Roosevelt to run on a third ticket. The bosses were defeated but not eliminated, and with the characteristic efficiency of bosses they went home to make a virtue of adversity and, so to speak, to "cash in" on Wilson. They reasoned that in their heavy Democratic strongholds, like New York City and parts of Chicago, with so popular a candidate as Wilson at the head of the ticket, a "yellow dog" could win in the minor positions. It would be a good year for rewarding heelers. And the bosses have been making their nominations accordingly. Two conspicuous examples of this have occurred in New York and Brooklyn. One of the

Redfield of Brooklyn. Although he has been in Congress and in public life only a year and a half, he has made himself a national figure. His speech on the tariff was one of the best two delivered on the Democratic side-many consider it, because of its direct and practical character, the most convincing. He is an efficient campaigner; in getting himself elected to Congress he turned a Republican majority of 5,800 into a Democratic majority of 3,600. Having been a successful manufacturer himself, he was peculiarly adapted to convert business men such as traditionally form the backbone of the Republican party. So fully is this recognized that the Democratic National Committee solicited and secured his promise to spend this fall continuously on the stump from Maine to Missouri in behalf of Wilson, making it impossible for him to make a campaign in his own behalf for reelection.

himself

of his speeches, especially in vituperation, which is responsible for most of the criticism heard of a record otherwise very good. His intelligence is advanced enough to grasp, for example, the fact that waterpower grabs are to-day just what the big railroad land grabs were a generation ago; Rainey was the leader of the fight against these dam-bill grabs, a fight which was all the more creditable to him in that many other Democrats were opposed to him.

Another Illinois Democrat who has been among the first to grasp the principle of conservation is James M. Graham of Springfield. Graham has in a 'conspicuous degree the quality of sound sense, together with great industry.

James R. Mann of Chicago is the Republican leader. If he were not handicapped by the necessities of that official position he would probably be recognized as a fairly

conservation and fights hard for it is Martin D. Foster of Olney. He helped powerfully in some of the most important contests of the present session.

Lynden Evans is one of the very best types. He has served only one term, and is one of the most respected of the new members. He is a man of high ideals and cultivation, and has the rare quality of courage to fight openly for an unpopular cause. He ought to stay in Congress.

Cannon's teeth are pulled. The Danville folks ought to keep him at home if they have a conspicuously better man to send; otherwise they might return him as a harmless example of a past age in politics. There are men of less than eighteen months' service in Congress who have more power than Uncle Joe with his forty years. Members who were born after Uncle Joe served his first term, after 1873, that is to say, are among those now in the saddle.

THE NEEDED KIND
ILLIAM KENT of California voted

W twice for the bill reducing the tariff

on wool. This bill, according to many statisticians, would have resulted, if Taft had not vetoed it, in reducing the woolen tariff from eleven cents to three cents a pound. Since Congressman Kent himself raises about 200,000 pounds of wool annually, the direct effect on his own pocketbook is obvious. The generation just coming into power in Congress, among whom Kent is one, believes in voting on measures with regard to the country only, and without regard to the personal interests or privileges of themselves or anyone else.

THE POST OFFICE DEFICIT HE Wareham, Mass., "Courier" printed this:

that the Democratic boss in Brooklyn would make it as easy as possible to reelect a man so valuable to the party. But the boss had higher personal considerations. In redistricting, a part of Redfield's old district, a part with a heavy Democratic vote, was given to a nominee who is a clerk in the boss's office. Another part, also heavily Democratic, was given to a business man who is a large importer of chemicals, and who, therefore, in debates on the tariff, will be subject to the same sort of criticism as is Lippitt on the Republican side. Redfield was assigned to a district with a Republican majority of 10,500. It was so hopeless that Redfield declined the nomination, and one of the three or four most promising first-term Democrats will not have a second term.

non's time, Mann has fought the Republican machine with energy and intelligence, and has done many conspicuously independent things. No one ever impeached his integrity, his intelligence is high, and in the majority of matters his sympathies are progressive. His chief defect is a kind of petty, nagging partisanship, a willingness to take advantage of parliamentary situations for party gain regardless of merit.

The two Illinois members who most surely deserve defeat are William A. Rodenberg of East St. Louis and William McKinley of Champaign. Rodenberg is intelligent, Rodenberg is intelligent, knows the difference between right and wrong, cynically chooses the wrong and follows it with ability and energy. McKinley is wholly lacking in the qualities that should attend a lawmaker. His success in politics is due to his money and a sort of cheap ability that makes what politicians call a “buttonhole artist"; his presence does not add to the tone of the House.

Gallagher is a Chicago Democrat who deserves the confidence of his constituents. He has intelligence, has worked hard, is universally liked, and has fought corporate grabs throughout. He aided with great strength in the fight against the waterpower bills. Another Illinois Democratic member who has grasped the principle of

"Over fifty sacks of mail have been received at this office the past week, constituting public documents franked by Senator Boies Penrose of Pennsylvania to a man who lives on the Marion R. F. D. route. Assuming that the sacks contained matter to be used in the Presidential campaign, it is to be concluded that this section will have plenty of reading matter soon."

In October, 1904, Penrose was working for Standard Oil; who is he working for now? Liberal permission to Senators and Congressmen to use the mails without charge has many elements both of right and desirability, but the privilege is shamelessly abused. No accurate readjustment of the cost of carrying the mails can be made until the Post Office Department determines, through a proper system of accounting, which it does not now have, exactly what is the cost of the burden of carrying the franked mail of Congressmen and other public officials. For example, the Hon. William A. Rodenberg of East St. Louis, Ill., has lately franked 250,000 copies of an attack on the pure food law to physicians and others throughout the country, with no relation to the boundaries of his own district. That is a contribution of $5,000 to the postal deficit; if the average is anything like. that, the total loss caused by the franking privilege must run into many millions.

By

LOUIS D. BRANDEIS

L

EADERS of the new party argue that industrial monopolies should be legalized, lest we lose the efficiency of largescale production and distribution. No argument could be more misleading. The issue of competition versus monopoly presents no such alternative as "Shall we have small concerns or large?" "Shall we have ill-equipped plants or well-equipped?"

In the first place, neither the Sherman law nor any of the proposed perfecting amendments (La Follette-Lenroot bill or Stanley bill) contain any prohibition of mere size. Under them a business may grow as large as it will or can-without any restriction or

without any presumption arising against it. It is only when a monopoly is attempted, or when a business, instead of being allowed to grow large, is made large by combining competing businesses in restraint of trade, that the Sherman law and the proposed perfecting amendments can have any application. And even then the Sherman law and the proposed amendments would not necessarily restrict size. They merely declare that if there has been such a combination in restraint of trade the combiners have the burden of showing that it was reasonable, or, in other words, consistent with the public welfare; and that if such a combination controls more than 30 per cent of the country's business, it will, in the absence of explanation, be deemed unreasonable.

In the second place, it may safely be asserted that in America there is no line of business in which all or most concerns ог plants must be concentrated in order to attain the size of greatest efficiency. For, while a business may be too small to be efficient, efficiency does not grow indefinitely with increasing size. There is in every line of business a unit of greatest efficiency. What the size of that unit is cannot be determined in advance by a general rule. It will vary in different lines of business and with different concerns in the same line. It will vary with the same concern at different times because of different conditions. What the most efficient size is can be learned definitely only by experience. The unit of greatest efficiency is reached when the disadvantages of size counterbalance the advantages.

The unit of greatest efficiency is exceeded when the disadvantages of size outweigh the advantages. For a unit of business may be too large to be efficient as well as too small. And in no American industry is monopoly an essential condition of the greatest efficiency.

The history of American trusts makes this clear. That history shows:

First-No conspicuous American trust owes its existence to the desire for increased efficiency. "Expected economies from combination" figure largely in promoters' prospectuses; but they have never been a compelling motive in the formation of any trust. On the contrary, the purpose of combining has often been to curb efficiency or even to preserve incfficiency, thus frustrating the natural law of survival of the fittest.

Second-No conspicuously profitable trust owes its profits largely to superior efficiency. Some trusts have been very efficient, as have some independent concerns; but conspicuous profits have been secured mainly through control of the market-through the power of monopoly to fix prices-through this exercise of the taxing power.

Third-No conspicuous trust has been efficient enough to maintain long as against the independents its proportion of the business of the country without continuing to buy up, from time to time, its successful competitors.

These three propositions are, also, true of most of the lesser trusts. If there is any exception, the explanation will, doubtless, be found in extraordinary ability on the part of the managers or unusual trade conditions.

And this further proposition may be added: Fourth-Most of the trusts which did not secure monopolistic position have failed to show marked success or efficiency, as compared with independent competing concerns.

THE ELIMINATION OF EFFICIENT ANDREW CARNEGIE

known-Andrew Carnegie. The huge price paid for his company was merely the bribe required to induce him to refrain from exercising his extraordinary ability to make steel cheaply. Carnegie could make and sell steel several dollars a ton cheaper than any other concern. Because his competitors were unable to rise to his remarkable efficiency, his business career was killed; and the American people were deprived of his ability-his genius-to produce steel cheaply. As the Stanley Investigating Committee found, the acquisition of the Carnegie Company by the promoters of the Steel Trust was "not the purchase of a mill, but the retirement of

a man."

That finding is amply sustained by the evidence. The commissioner of the Steel Plate Association, Mr. Temple, testified:

"They had to buy the Carnegie Steel Company. Mr. Carnegie, with his then plant and his organization and his natural resources, was in a position where he could dominate the entire situation; and had the United States Steel Corporation not have been formed about the time it was some ten years ago-the steel business not only of America but of the world to-day would be dominated by Andrew Carnegie.

CARNEGIE'S REWARD FOR RETIRING WAS $250,000,000

GEORGE W. PERKINS, himself a director of the

Steel Trust and now chairman also of the Executive Committee of the New Party, through whose firm (J. P. Morgan & Co.) the bribe to Carnegie was paid, confirms Temple's statement:

"The situation was very critical. If the Steel Corporation had not been organized, or something had not been done to correct a very serious condition at that time, in my judgment by this time Mr. Carnegie would have personally owned the major part of the steel industry of this country. . . ."

And Herbert Knox Smith, Commissioner of Corporations, after elaborate investigation, declared:

"The conclusion is inevitable, therefore, that the price paid for the Carnegie Company was largely determined by fear on the part of the organizers of the Steel Corporation of the competition of that concern. Mr. Carnegie's name in the steel industry had long been synonymous with aggressive competition, and there can be little doubt that the huge price paid for the Carnegie concern was, in considerable measure, for the specific purpose of eliminating a troublesome competitor, and

Mr. Carnegie in particular. This, it may be noted, was the interpretation generally placed upon the transaction in trade and financial circles at the time."

The price paid for the Carnegie Company, about April 1, 1901, was $492,006,160 in United States Steel Corporation securities of the then market value of $447,416,640 in cash. The value of the actual assets of the Carnegie Company on December 31, 1899, as sworn to by Carnegie, had been only $75,610,104.06. The total assets of the concern on March 1, 1900, as shown by the balance sheet, were only $101,416,802.43. And Commissioner Herbert Knox Smith, making a very generous estimate of the net value of the tangible assets of the Carnegie Company on April 1, 1901, fixes it at only $197,563,000. The bribe paid to eliminate Carnegie's efficiency was thus at least $250,000,000. It was paid, as the Stanley Committee finds, to prevent a contest "between fabricators of steel and fabricators of securities; between makers of billets and of bonds." It was paid

to save the huge paper values which George W. Perkins and others had recently created by combining into eight grossly overcapitalized corporations a large part of the steel mills of America. No wonder that J. P. Morgan & Co. were panic-stricken at the rumor that Carnegie was to build a tube mill which might reduce the cost of making tubes $10 a ton, when those bankers had recently combined seventeen tube mills (mostly old) of the aggregate value of $19,000,000, had capitalized them at $80,000,000 and taken $20,000,000 of the securities for themselves as promotion fees. The seven other similar consolidations of steel plants floated about the same time had an aggregate capitalization of $437,825,800, of which $43,306,811 was taken by the promoters for their fees.

As Commissioner Herbert Knox Smith reported to the President:

"A steel war might have meant the sudden end of the extraordinary period of speculative activity and profit. On the other hand, an averting of this war, and the coalition of the various great consolidations, if successfully financed, would be a tremendous "bull" argument. It would afford its promoters an opportunity for enormous stock-market profits through the sale of securities."

PROFITS THROUGH CONTROL, NOT EFFICIENCY

SO CARNEGIE was eliminated; and efficiency in steel making was sacrificed in the interest of Wall Street; the United States Steel Corporation was formed; and J. P. Morgan & Company and their associates took for their services as promoters the additional sum of $62,500,000 in cash values.

The second proposition-that conspicuous trust profits are due mainly to monopoly control of the market-is supported by abundant evidence equally conclusive.

The Standard Oil Trust stood preeminent as an excessive profit taker.

When Commissioner Herbert Knox Smith made his report to President Roosevelt in 1907, the trust had for a generation controlled about 87 per cent of the oil business of America. It had throughout that period been managed by men of unusual ability. And yet Commissioner Smith reports:

"The conclusion is, therefore, irresistible that the real source of the Standard's power is not superior efficiency, but unfair and illegitimate practices. . . .

"Considering all the branches of the oil industry together, the difference in cost between the Standard and the independent concerns is not great...

"It is true that, taken as a whole, the Standard Oil Company is a more efficient industrial machine than any one of its competitors. Nevertheless, careful estimates based upon data submitted by a number of independent concerns as to the cost of pipe-line transportation, refining, and distributing oil, as compared with the Standard's cost for these operations, indicate that the total difference in efficiency between the Standard and the independent concerns is not

very great. . . .

"The difference between the operating cost of a number of Standard refineries and a number of independent refineries was shown to be substantially nothing. It is possible, however, that some of the larger Standard refineries are able to reduce their costs a little further and that there may be some difference in the amount required for profit per gallon. The Standard may also be able to

It

NEX

THE TOBACCO TRUST UNDER SCRUTINY

TEXT to the Standard Oil, the Tobacco Trust is, perhaps, the most prominent of the excessive profit takers. A single one of its many constituent companies, W. Duke's Sons & Co., "valued in 1885, under competition, at $250,000," yielded to its owners "up to 1908, in securities, dividends, and interest" $39,000,000, or 156 times the value of this particular business in 1885. In 1908 (the latest year reported on by Commissioner Herbert Knox Smith) the profits of the Tobacco Trust equaled 39.5 per cent of its total tangible assets. But there are many different departments of the tobacco business; and the rate of profit was by no means the same in all in any one year. And in the same department the profits varied greatly during a series of years. In 1908, for instance, the profits of the cigar department were only 4 per cent on the value of the tangible assets, while the profits of the subsidiary smoking tobacco companies were 103.5 per cent of the value of the tangible assets. What was the explanation of this great variation in profits? The company was efficiently managed. The same able men supervised all of the departments. The same huge resources and trade influence were at the service of each of the departments. Commissioner Smith's elaborate investigation solves the riddle. It brings out clearly the following features:

"Very high rates of earnings on the actual investment in most departments.

"A marked coincidence of low rates of earnings and

a low degree of control where the latter occurs. "A remarkable increase in the rates of earnings as the combination became more effective in its control." In 1908, when the trust earned only 4 per cent on its cigar business, it controlled only about one-eighth of the cigar business of the country. When it earned 103.5 per cent on its smoking tobacco subsidiaries, it controlled three-quarters of the smoking tobacco business of the country.

"The most striking feature of the entire preceding discussion," says Commissioner Smith in concluding, "is the almost invariable association of high rates of profit with a high degree of control, or with monopolistic conditions, and of lower rates of profit with a lesser degree of control or active competition. .

"The combination's ability to establish and maintain prices without much regard to competition in the principal branches of the business, it may be repeated, is vividly illustrated by the fact that when the internalrevenue tax on tobacco was reduced in 1901 and 1902, the combination maintained its prices at the level which had been established when the tax was increased some years earlier. As a result of this policy it appropriated practically the entire reduction in the tax as additional profit in succeeding years."

STEEL TRUST'S PROFITS FROM INEQUITABLE ALLOWANCES HAT is the kind of efficiency in which trusts particularly excel.

TH

As to the Steel Trust's extraordinary profits, the Stanley Investigating Committee finds:

"The enormous earnings of the Steel Corporation are due not to a degree of integration or efficiency not possessed by its competitors, but to the ownership of ore reserves out of all proportion to its output or requirements, and to the control and operation of common carriers, divisions of rates, and the liberal allowance obtained from other concerns through inequitable and inordinate terminal allowances."

The third proposition - that trusts are not efficient enough to hold their relative positions in the trade as compared with the independents without buying up successful competitors is also supported by abundant evidence.

The Steel Trust furnishes a striking example of this. Corporation Commissioner Herbert Knox Smith, reporting on the operations of the Steel Trust for the ten years following its formation (1901-10), says:

"Notwithstanding the great additions made by the corporation to its properties from earnings, and the acquisition of several important competing concerns [including the Tennessee Coal and Iron Company], its proportion of the business in nearly every important

product, except pig iron and steel rails, is less than it was in 1901. . . .

"This table shows that, whereas the Steel Corporation in 1910 had fully maintained the share of the country's total production of pig iron it held in 1901, its proportion of the production of nearly all steel products had declined, and in most cases sharply declined. The only important exception was steel rails The maintenance of its proportion here is chiefly due to the erection of a very large rail mill at the new Gary plant, and to the acquisition of the Tennessee Coal, Iron and Railroad Company, which had a considerable steel-rail production.

"Taking the production of steel ingots and castings as a basis, it will be seen that the Steel Corporation's percentage of the total fell from 65.7 per cent in 1901 to 54.3 per cent in 1910. This figure, perhaps, is the best single criterion by which to judge the change in the corporation's position in the steel industry from a producing standpoint. . . . It should be noted that the decline in the production shown by this comparison of 1901 and 1910 percentages was practically continuous for most products throughout the entire period."

That was the condition in 1910. A year later the Steel Trust's proportion of the production of the country had fallen below 50 per cent.

It may be doubted whether steel rails would have been an "exception" to the steady decline in the Steel Corporation's proportion of the country's business had it not been for the steel-rail pool referred to by Presi

independent concerns, there has been in several branches of the industry a constant tendency for competitors to gain business more rapidly than the combination, and thus to reduce its proportion of the output. This tendency has been overcome only by continued buying up of competitive concerns. Many weaker concerns have been virtually driven out of business or forced to sell out to the combination, either by reason of the direct competition of the latter, or as an indirect result of the vigorous competition between the combination and larger independent concerns. In the case of the larger and more powerful concerns which it acquired, however, the combination has usually secured control only by paying a high price. The immense profits of the combination have enabled it to keep up this policy. "This great disparity in size [between the factories of the combination and those of the independents] is not due to lack of enterprise or capital on the part of the independent concerns, but is essentially due to the constant transfer of the largest concerns from the ranks of the independents to those of the combination. . . ." "The output of individual concerns that remained independent, however, has increased in most instances. The resultant tendency to increase the entire independent output was offset by the combination's continued policy of buying up and absorbing the larger and more successful competitors."

COMBINATION WITHOUT CONTROL IS INEFFECTIVE

the close community of interest between the Steel Corporation and the railroads. As the Stanley Committee finds:

"Of the $18,417,132,238 invested in railways in the United States, the directors of the Steel Corporation

Copyright by Harris & Ewing

Louis D. Brandeis

have a voice in the directorates of or act as executive officers of railroad companies with a total capitalization and bonded indebtedness of $10,365,771,833."

The Sugar Trust, also, furnishes striking evidence of the inability of trusts to maintain their position in the trade without buying up successful competitors. In

1892, after acquiring the Spreckels Company of the

West, the Sugar Trust alone produced 90 per cent of the sugar refined in this country. It had vast resources. It had strong political affiliations. It sought by every means, fair or foul, to maintain its control. It secured discriminating rates from railroads. It cheated the Government by false weights and undervaluation. With the bankers' aid it crushed competitors through tricky control of credits. But in 1912-at the end of twenty years of oppression-its own production of refined sugar had fallen to 42 per cent of the country's production. And, in spite of buying up from time to time stock in so-called independent cane sugar companies and beet sugar companies, it controlled in 1912 (according to the statement of President Van Hise in "Concentration and Control") only 62 per cent of this country's production of refined sugar.

THE COST OF MAINTAINING A DOMINATING POSITION

THE dominating position of the Tobacco Trust was

likewise maintained only through its policy of buying up competitors, as Corporation Commissioner Herbert Knox Smith so clearly shows:

"Despite enormous expenditures for advertising and in 'schemes,' and despite frequent price cutting by means of its so-called 'fighting brands' and its bogus

upon its control of the transportation systems and other methods of unfair competition to crush competitors, is shown by Commissioner Smith to have been unable to quite maintain its relative position in the market, despite its continued buying up of competitors.

Of the truth of the fourth proposition, stated above -that most of the trusts which did not secure monopolistic positions have failed to show marked success or efficiency as compared with the independent competing concerns every reader familiar with business must be able to supply evidence. Let him who doubts examine the stock quotations of long-established industrials and look particularly at the common stock which ordinarily represents the "expected economies" or "efficiency" of combination. Take as examples:

The Upper Leather Trust (American Hide and Leather Company-a combination of twenty-one different concerns), with common at 54 and preferred at 2634.

The Sole Leather Trust (Central Leather Companya combination of over sixty tanneries), with common at 26.

The Paper Trust (International Paper Company-a combination of twenty-three news mills), with common at 10.

The Paper Bag Trust (Union Bag and Paper Company-a combination of seven different concerns), with common at 65%.

The Writing Paper Trust (American Writing Paper Company-a combination of twenty-eight different concerns), with preferred at 281⁄2 and common at 334almost below the horizon of a quotation.

But perhaps the most conspicuous industrial trust which was not able to secure control of the market is the International Mercantile Marine. That company had behind it the ability and resources of J. P. Morgan & Co., and their great influence with the railroads. It secured a working agreement with the Hamburg American, the North German Lloyd, and other com-. panies; but it could not secure control of the Atlantic trade, and in the seven years since its organization has not paid a dividend on its $100,000,000 of stock. Its common stands at 5%, its preferred at 18%, and they stood little better before the Titanic disaster. On the other hand, the $120,000,000 stock of the Pullman Company, which has like influence with the railroads but succeeded in securing a monopoly, stands at 17034.

LARGE UNIT NOT THE MOST EFFICIENT

EF FFICIENT or inefficient, every company which controls the market is a "money maker." No, the issue of "Competition versus Mon poly" cannot be distorted into the issue of "Small Concerns versus Large." The unit in business may, of course, be too small to be efficient, and the larger unit has been a common incident of monopoly. But a unit too small for efficiency is by no means a necessary incident of competition. And a unit too large to be efficient is no uncommon incident of monopoly. Man's work often outruns the capacity of the individual man; and no matter how good the organization, the capacity of an individual man usually determines the success or failure of a particular enterprise-not only financially to the owners but in service to the community. Organization can do much to make concerns more efficient. Organization can do much to make larger units possible and profitable. But the efficacy even of organization has its bounds. There is a point where the centrifugal force necessarily exceeds the centripetal. And organization can never supply the combined judgment, initiative, enterprise, and authority which must come from the chief executive officer. Nature sets a limit to his possible achievement.

As the Germans say:

"Care is taken that the trees do not scrape the skies."