worked out a plan for the reorganization of same reason that the bonds issued by various the American Tobacco Company, which public service corporations which are apwould have received, and deserved, less criti- proved by the Public Service Commissions of cism than the solution finally announced. some of the states have a wider market and a The assumptions behind this bill are of readier sale. course that the Sherman Act can be made effective, and that we are too ignorant of the facts to attempt more definite legislation at present. It leaves the question whether it is possible to retain competition in all lines to the future. It lays out a program, comprehensive so far as it goes, and undoubtedly effective to a degree, and leaves further action to the time, when the results of the Commission's activities will furnish more exact knowledge than is now available. On the other hand the effect of this bill on the corporation, should it become a law, might be beneficial in many cases. The preparation of the figures required by the Commission would force the officers and directors to scrutinize with care their system of accounts. There is a strong suspicion that many of the plants of certain great combinations are neither well equipped nor efficient. It is also believed that several of the combinations cannot manufacture so cheaply as some of their independent rivals. The reports to the Commission would show the truth. What of a Federal License? The different plans suggested for a Federal license add to the activities of the Commission (more or less the same as described above), the duty of licensing corporations engaged in interstate commerce. These plans differ chiefly on the question of making the application for license permissive or mandatory. In one case the license is a reward of merit for the "good trust." Those corporations above a certain size which can satisfy the Commission that they are organized in accordance with the law, that they do not prey upon producers of raw material, competitors or the public, are to have the privilege of adding "United States Registered" or similar words to their title. Upon proof of improper conduct the Commission is authorized to revoke the license. The advocates of the plan claim that the possession of a Federal license would soon be highly prized and would in time be regarded as a necessity, since the public, feeling that the possession of a license gave some assurance of fair dealing, would give the preference to the registered corporation; that the obligations of this class would bring a higher The advocates of requiring a Federal license would bar from interstate commerce all corporations to which the Commission refused a license. Such a plan is not, in fact, essentially different from Federal incorporation, or from regulation, to which we now come. Senator Cummins' Plan for Regulation The wisdom of preserving competition is not a debatable question to Senator Cummins. His mind is settled upon that point, and his plan is based upon the intention of preventing any corporation from obtaining control of any field. His bill, introduced the same day as Senator Newlands', provides for a commission organized much as that advocated by the latter, but with greater powers. While believing firmly in the Sherman Act he feels that it is not, as it stands, sufficiently definite, and that to wait until a consistent body of law is developed by the decisions of the Supreme Court would be fatal. Therefore the greater part of his bill is devoted to what may be described as an amplification of the Sherman Act. The Commission is charged with the duty of preventing any corporation from employing sufficient capital to destroy effective competition. Every corporation engaged in interstate commerce with capital of $5,000,ooo or over is made subject to the control of the Commission. No man may be director in two corporations in the same line, nor are dummy directors permitted. The "holding company" is declared illegal and, in fact, no corporation may own stock in another corporation. No officer or director of a company with a capital stock of $10,000,000 or more may be an officer or director of a bank. Not only must there be no holding companies, but also the ownership of common carriers or any interest in the same is forbidden. Discrimination in prices is forbidden except for carload lots, or where charges are paid by the manufacturer, these may be added to the fixed price. The Position of the Citizen The chief question of the citizen about any of these plans is whether it will work. With sympathy, but he realizes that men are only on passes. The Commission has not taken human. This bill imposes upon a new com- the railroads entirely out of politics, but their mission more difficult tasks than have been political power has been reduced, partly begiven to the Interstate Commerce Commis- cause of the work of the Commission, partly sion after twenty-five years of experience, and for other reasons. calls for an exercise of discretion and judgment which would tax the ablest jurists and economists. The Commission has decided many cases (though often overuled by the courts), but the injustices it has prevented are many times as numerous as those it has corrected. A very large majority of the complaints have been redressed without formal action, and the very existence of a body to which appeal was possible has made the necessity for appeal less frequent. Publicity has been effective, for The License plan is chiefly advocated by those who are directly interested in "big business" and while the Citizen is not unduly suspicious, he is afraid that in the present state of our knowledge, the Federal seal of approval will come to mean little more than "U. S. Inspected and Passed" in the packing no railroad manager any more than an inindustry, and largely for the same reason- dividual wishes the reputation of being an too much work for the inspectors. Discover- extortioner. ing facts and approving practices are two entirely distinct things. At the present time what the Citizen demands most insistently is knowledge. All that the muckrakers have said cannot be true, and yet he knows that all is not well. He believes that a Commission of Investigation and Publication will work, because he has before him the success of a commission which has proved its ability to use broader powers than he is disposed to grant to the new body. A Lesson from Ancient History There are, according to the estimate of the Commissioner of Corporation, somewhere between 325 and 500 corporations doing a business of more than $5,000,000 a year. The task of supervising these would be less difficult than the task the Interstate Commerce Commission has performed. It is amusing and interesting to read now the prophecies of failure given elsewhere in this article, which were made only twenty-five years ago. What Will You Do with the Information Publish it, is the answer. The ease and Forty years ago the railroad question was rapidity of communication and transportathe vital economic problem. Rebates to fa- tion have made possible the phenomenal vored shippers were so common that a promi- growth of capital and also its concentration. nent railroad man said, "Only the unwary It is proposed to use these same modern paid tariff rates." The shipper without in- agencies to restrain the modern Midas, when fluence often paid a freight rate, one fourth he forgets that he has grown wealthy and or even one half greater than that paid by his powerful only through the permission of competitor. One town was favored at the Society. expense of another, the railroad was in poli Such Great Forces ? tics all the time, and "the public be damned" What Can Publicity Accomplish Against was the ruling policy. Twenty-five years ago the Interstate Commerce Commission was formed and, after a period of weakness, its powers have been increased until it is now a singularly strong and effective body. No one in his senses would claim for a moment that it has been entirely successful, but, on the other hand, no one except an antediluvian would deny that the Publicity it has caused has been beneficial to the railroad, the shipper and the public alike. The Commission has not entirely stopped rebating, but rebating has become the exception and not the rule. Freight discriminations exist, but they are growing fewer. The Citizen who buys a ticket may help to pay for a certain amount of free transportation, but Light is one of the strongest preventives of crime. Increasing the illumination will do more to reform a street than doubling the force of policemen. A light hung in front of a safe is better protection than a watchman, for all the passers-by are transformed into watchmen. So it is the obscurity with which the transactions of our great corporations are covered that allows those acts of which the Citizen justly complains. Aroused and informed Public Opinion is a force which is almost irresistible. As a witness before the Senate Committee aptly said, "No one except a fool disregards public opinion." It forced Elizabeth to revoke the charters of many monopolies she had granted, it States into the war with Spain, it forced the settlement of the recent textile strike in New England. There are hundreds, even thousands, of such cases in history. Where the great mass of the people has had no direct voice in the government, wise rulers have always made concessions to public feeling. The influence of this force is shown in our everyday life. Many men lead decent lives from no higher motives than the desire for the approbation of their fellows. Other thousands abstain from open evil from fear of public censure alone. This has always been true of individuals and now the corporation has fallen into line. It also seeks to gain approbation and to avoid blame, and is showing a new deference to the opinion of its patrons. Instances could be multiplied from the daily papers. A few years ago the Long Island Railroad wished to raise its rates. It bought columns of the newspapers to explain the financial reasons which made such action necessary. The same course was taken by the management of the Hudson River tubes, when the fare from New Jersey to New York was increased a few months ago. Twenty years ago similar corporations would never have dreamed of paying for advertising space to placate the public. Now nearly every great corporation has a publicity agent to spread all that is favorable, and to offer a plausible explanation of occurrences which might cause unfavorable comment. So the simple publication of acts of injustice and unfairness would in many cases work their cure, just as the investigations of the Bureau of Corporations have changed the rules of the Cotton Exchanges. Herbert Knox Smith, the Commissioner of Corporations, says: his suspicious attitude which is harming him no less than its object. No one class will profit more by Publicity than the small stockholders in the large corporation. Too often the dominant interests have treated them as of no account, have concealed earnings, withheld dividends, or declared them when not earned, solely that they might juggle with the stock market. We saw the price of Standard Oil rising after dissolution had been decreed, because those on the inside withheld information until their hands were forced. The stockholders knew nothing of the affairs of the corporation except that it paid good dividends. It could have paid a higher rate. Again Publicity would bring to light the concealed corporations, largely composed of insiders, which often take the lion's share of the profits which should belong to the stockholders of the larger organization. Insiders could no longer form "construction companies" to which contracts would be let at exorbitant prices. The sling of David was an object of derision, but it prevailed against Goliath. As we have said above, the Citizen has begun to doubt the possibility of maintaining competition in all lines of business. He is forced to believe that the badly located plant with insufficient capital cannot produce cheaply, and increasing cheapness of production is necessary for economic progress, for waste is a sin. He is told that a drug store with too little capital, and lacking efficient management cannot properly serve the public. Yet the Citizen must be certain that these are really inefficient, for he is sorry to see his neighbors fail. But if under a régime of Publicity, the larger and better equipped plant, or the intelligently managed chain-store, can fairly and The report of the bureau in the transportation of honestly offer cheaper goods, or afford better petroleum published in May, 1906, effected a sweep- service, the Citizen is not a Mrs. Partington, ing decrease in the granting of railway rebates who will try to sweep back the waves of the throughout the country. Practically every railroad sea. The relatively inefficient must go, in the involved... canceled the objectionable rates within six months after the issuance of the long run, just as the hand-loom weaver dis report. appeared before the factory, and, in our own day, we are seeing the hand compositor give place to the linotype operator. Again there is another advantage. Fifty years ago the hero of the Sunday-school book The Citizen knows that savage, intolerant became a successful merchant or manufac- competition destroys the weaker and leads turer. Now suspicion is attached to wealth toward monopoly. He hopes to see the presand all the rich are classed as predatory. Too ent uncertainty replaced by an era of "toleroften the question is, "Where did he get it?" ant competition," when efficient plants will or "What does he want?" All men of wealth strive to secure the business by producing have suffered for the deeds of a few. Those better and cheaper goods, or by offering better coming through the fires of investigation service. In other words, he hopes to preserve unscathed would find the attitude of the all the economies of large-scale production The Conclusion of the Whole Matter Finally, under the reign of Publicity the real culprits will stand revealed. Those who deliberately and defiantly deny their obligation to Society and avow their motto to be "Let him get who hath the power" will no longer be protected. For them is the scourge of the law. Let us now trace again the path by which we have come. Monopoly is as old as history and practices of the modern monopolist were common to his predecessor. The old monop olist, however, seldom denied his responsibility to his creator. The modern monopolist has grown great, largely because of the privileges granted by the state. The state, then, can regulate the business as soon as it becomes of "public consequence." But in order to frame proper legislation, we must have all the facts of organization and conduct. The agency which will get these facts is a permanent commission organized for the purpose. When the monopolists find that their actions will be brought to the light, many improper practices will disappear. If they do not, we shall know how to deal with them. A CHAPTER OF ANCIENT HISTORY These extracts below on the question of establishing the Interstate Commerce Commission are only a little more than twenty-five years old, but they sound as if they belonged to another age. They show better than pages of explanation could do some of the common ideas a quarter of a century ago, the arrogant individualism, the absolute lack of any conception of the rights of the public. On the other hand there is the demagogic appeal to the prejudices of the people. They are taken, either from the report of the Cullom Committee of the United States Senate 1885-86 or from the Congressional Record. John Norris, editor Philadelphia Record: A commission would be dangerous. In the first place it would bring the railroad interests into politics. It would give an almost autocratic power to some few men. to the government, any more than any and all corporations. Senator Stanford: Therefore if legislation interferes to decrease income, surely the value of the property is affected Charles E. Perkins, president of the Chi- to the extent of the diminution of the income. cago, Burlington & Quincy R. R.: This is taking property without compensation. Senator Sherman: I believe that it will be repealed within a short time. Senator Riddleberger: this bill as it stands legalizes discrimination against nine-tenths of the people of this country. I believe it is just such a bill as the railroads want. IT PANAMA "THE AWAKENING OF SOUTH AMERICA AND THE OPENING BY AGNES C. LAUT T goes without saying, when the ports of For three times the distance by water, the the Pacific Coast are spending a hundred rate is one to three. By rail, one cent buys, million dollars in preparation for the opening say, one hundred miles. By water, one cent of the Panama Canal, that they are not buys one thousand miles. That is what spending such an amount on the expectation Panama means in a saving to Prince Rupert. of the whooping boomster, on "hot air" In fact the necessity of attracting grain to and "tall talk" and street-corner prophecies. the Atlantic as against Panama has this year They have figured out the benefits from the caused a drop of a cent a bushel for lake canal in dollars and cents. ports to New York via Buffalo. One Western firm, which shipped 16,000 bushels to Liverpool via Tehuantepec, saved 8 cents a bushel as against the Montreal and New York rate. Having planned an expenditure of a hundred million on improved harbors, terminals, lowered rail grades, what return do the Pacific Coast ports expect from their investment? CANADIAN PORTS THE LUMBER PORTS Come on down to the great lumber ports Begin at the most northern Pacific trans- of Vancouver and Tacoma and Seattle. continental terminal-Prince Rupert, the What returns do they expect for the millions Western end of the Grand Trunk. The spent on harbor improvement? For ten Grand Trunk passes over as vast grain areas years there has been a fight on the lumber as the Canadian Pacific or the Great Northern. rate by rail from these points to the Atlantic The wheat crop of Alberta, Saskatchewan, seaboard. By schooner round the Horn and Manitoba has fluctuated from one hun- lumber can be sent east for from $4.50 to dred to two hundred million bushels according $5 a ton; by steamer, breaking bulk at to the season; and the Grand Trunk has a Panama, for from $5 to $8 according to the perfect right to expect the carriage of one- company. That means a car rate by waterthird this total. It must be remembered, too, 40,000 pounds to the car of from $90 to that the crop of the three Canadian provinces $100 for schooners to $100 and $160 by is likely to treble in the next ten years. Now steamer. By rail, the rate runs from $395 the Grand Trunk has announced that after to $407. That is the saving that the lumber the opening of Panama it will ship its quota shipping ports expect from Panama. of grain from the Canadian provinces via Panama. Its low mountain grades enable it to bring grain down to sea level on the Pacific cheaper than the other roads can reach Atlantic level in the East. SAN FRANCISCO'S LOSS AND GAIN On the surface, it looks as if San Francisco would be hurt by Panama. Will not all the In 1910 Montreal exported twenty million Oriental traffic which has hitherto broken bushels of grain. Supposing in ten years bulk at San Francisco to be transshipped the Grand Trunk is sending twenty million across the continent for Europe, will not all bushels by way of Panama, what will it mean this traffic sidestep San Francisco and go in the saving of freight charges to the West? direct from the Orient to Europe? It cerNo one yet knows what the Prince Rupert rate tainly will; and you may write that down as via Panama will be; but the standard com- a loss; but look at the other side of the acparison of rail versus water on wheat will do. count. California has land, space, and labor From Chicago to New York by rail the rate for twenty million people. There are less for wheat is ten cents a bushel. From New than three million people all told on the York to Liverpool the rate is three cents. Pacific Coast. Now the steerage rate from |