The Society of To-morrow: A Forecast of Its Political and Economic Organisation
Part III, Note B
Syndicates Restricting Competition, or "Trusts"
The New York Journal of Commerce recently estimated the capital engaged in "Trusts," at $3,500,000,000, or about 50 per cent. of the entire capital of the United States. The books "Autour du Monde Milliardaire Américain," by MM. Johanez, and "Les Industries Monopolisées—(Trusts)—aux Etats Unis," by M. Paul de Rousiers, agree in identifying the chief cause of the erection and multiplication of these monopolies with the protectionist tariff maintained by the United States.
"A champion of Trusts, Mr. Gunton," writes M. Paul de Rousiers, "argues in his 'Economic and Social Aspects of Trusts' that trusts do not destroy potential competition—that is, the possibility of competition. No one, for example, hinders a man from offering the American public better oil than that of the Standard Oil Company and at a lower rate. This is, however, untrue, for the protectionist tariff closes the American markets to outside competition in such a way that potential competition is non-existent. Many refiners, were it not for the tariff, could retail better and cheaper sugar than that of the Sugar Trust. Nor is this the sole result of these tariffs, for, besides closing the market to direct competition, they shut out those goods which could indirectly affect Trust products. The Standard Oil Trust's monopoly would be threatened by the discovery of an illuminant costing less than petroleum, but a product competing with sugar in its own province could be shut out by a new duty. The process can be seen in action in every protectionist country. Provence protects its oil by imposing a duty on earth-nuts, and Normandy protects butter by taxing margarine.
"...This much is, however, true. Although, dealing in a market protected by duties, the Trusts cannot hold prices at more than a certain premium above that which would maintain were the markets subject to the free action of the law of competition."
M. Paul de Rousiers proposes the following remedies against the Trusts:—
"Directly the formation of Trusts is not induced by the natural action of economic forces; as soon as they depend on artificial protection, the most effective method of attack is to simply reduce the number and force of these protective accidents to the greatest possible extent. We can attack artificial conditions, but are impotent when opposing natural conditions. It is, therefore, not only more profitable, but likewise more easy, to attack artifice rather than nature.
"America has hitherto pursued the exactly reverse method, blaming economic forces tending to concentrate industry, and joining issue by means of anti-Trust legislation, a series of entirely artificial measures. Thus there is to be no understanding between competing companies, no agreement as to rates between railway companies, &c. The results have been pitiful—a violent restriction of fruitful initiative, and no sort of guarantee to the public against the Trust operations of private undertakings. The American courts have given their opinion that this class of legislation is entirely unserviceable. It does not touch the root of the evil, enlarges, in place of restraining, artificial conditions, and finally regulates and complicates matters whose supreme needs are simplification and the removal of restrictions.
"Even those Trusts, which demand control as dealing with public services, have been left untouched and undistinguished from others, whence further confusion of public and private interests.
"Trusts, dealing in public services, will completely disappear so soon as American administration contrives to resume a normal control of the interests with whose care it is invested. Those dealing with private industry will—with one or two exceptions—disappear when the same powers learn to refrain from interference with the natural conditions of industry and commerce, especially to cease from all protectionist legislation.
"Then, and only then, will the United States share in the knowledge, long since achieved by England, that competition is no menace to industrial concentration."
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