"TRUSTS" IN THE LIGHT OF CENSUS RETURNS.

BY WILLIAM R. MERRIAM.

[William Rush Merriam, statistician and financier; born Wadham's Mills, Essex county, New York, July, 1849; graduated Racine college, 1871; began his business career as a clerk in the Merchants National bank in St. Paul in 1871, became cashier, 1873, vice-president, 1880, and since 1882 president of that institution; elected member of the Minnesota legislature 1882, and speaker of that body in 1886; governor of Minnesota, 1889-1892; director of United States census, 1898 to 1903.]

Copyright 1902 by Houghton, Mifflin & Co.

The discussion concerning industrial combinations has been so active, not only through the ordinary channels of the newspaper press and the monthly magazines, but also in lectures, political speeches, and public debates, that I should feel some hesitation in touching upon this topic were it not for the fact that the manufactures division of the census office has prepared some very interesting data concerning this much agitated question. It is a source of regret that many persons, when considering the effect upon society at large of the vast aggregations of capital so common in our day, are quite apt to discuss the subject from a sentimental standpoint and without an adequate knowledge of the facts. To become hysterical over imaginary difficulties, rather than to approach an important social problem from a temperate and unbiased point of view, seems to be a common fault even with a people so practical as the Americans. The arguments advanced from either side of this controversy are entitled, however, to the fullest consideration.

Those immediately concerned in the formation of enormous corporations insist that they are simply the natural evolution of the ordinary commercial life of the nation; that they arise from perfectly natural causes; and are the logical outcome of machinery production, improved transportation facilities, plentiful capital, and of increased competition which has forced the managers of industrial enterprises to reduce the cost of production to the minimum. It is further contended that the expense of the distribution and sale of products

is much less under the industrial combination plan than under the former system, a great saving being effected in the cost of administration and general plan of operation; that such combinations, conducted under a common oversight and control, make it possible to dispense at will with the active use of those plants which, because of their geographical situation, are not best adapted for the production of the articles to be sold. Another advantage arises from the fact that the several processes involved in the production of the article in question, instead of being carried on together in each of a number of independent establishments, may be localized in separate mills. This specialization introduces a uniformity in the operations of each mill which is conducive to economy. It is urgently maintained, in view of all these considerations, that under combinations the wants of the consumer are satisfied at a lower price than under the old competitive plan.

Those who oppose the formation of industrial combinations are very strenuous in their efforts to secure such legislation as will materially restrict the operation and management of these vast corporate enterprises. They maintain that the "captains of industry," who, with their mighty power of concentrating wealth, are constantly extending the field of their operations, are a menace to society, not only in an industrial way, but also from a social standpoint. They declare that these enterprises are veritable monopolies, with the power of compelling the people to pay higher prices for the necessities of life than would obtain under the competitive system; that they stretch out their mailed hands to reach the very sources of government itself, controlling legislatures, congress, the courts, and great civic bodies; in short, that they are an incubus on the whole social structure, endangering the very existence of the republic.

There is no doubt that certain of the industrial combinations do control a large proportion of the output in their various lines of business, and that the conditions of production are such as to give them some advantage over their competitors. Their power of influencing prices is very great, and may at times be used to advance them arbitrarily, or, what is perhaps worse from an economic point of view, actually

reduce them, temporarily, below the cost of production, with a view to driving competitors out of the field. This has been a powerful factor in the development of the industrial combination. Undoubtedly it is a distinct evil. As yet, no adequate remedy has been devised to meet it. In considering this argument, however, it must be remembered that the apparent rise in prices of many of the products controlled by these combinations is the result of increased demand, due to the prosperous condition of the country rather than to any particular advantage afforded by monopoly. The ability to list upon the stock exchange of the country enormous amounts of securities for which there is an insufficient basis of value is another great evil. This invites the unwary and inexperienced to invest in stocks and bonds which have been issued upon a small proportion of actual invested capital. With these lines of popular argument clearly before us, it is interesting to observe the facts which have been developed by census investigation; for, after all, our conclusion regarding these industrial evolutions of our national life should be based upon an unprejudiced study of facts.

The officials of the census office, in order to prevent misconceptions and insure consistency in the plan and system of tabulation, formulated the following definition of the term "industrial combination":

"For the purpose of the census, the rule has been adopted to consider no aggregation of mills an industrial combination, unless it consists of a number of formerly independent mills which have been brought together into one company under a charter obtained for that purpose. We therefore exclude from this category many large establishments comprising a number of mills, which have grown up, not by combination with other mills, but by the erection of new plants or the purchase of old ones."

The word "trust," although it has the sanction of popular usage, was avoided in this definition, because, technically, it applies to only one form of industrial combination; and while this form was at one time prevalent, it has been rendered illegal by act of congress, so that the term has become a mis

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nomer. The above definition is not perhaps broad enough, as it does not recognize a class of corporations known as "holding concerns," which are organized for the purpose of acquiring the stock of other corporations, and do not directly operate plants. Several such corporations are, however, included in the data referred to later on. It may be said in passing that there are a considerable number of independent organizations, created for the purpose of selling goods at uniform prices, of which no cognizance has been taken in this article.

So far as can be ascertained from the data in the census office, the number of these industrial consolidations is 183. They control 2,203 separate plants, scattered throughout the United States, 2,029 being active and 174 idle during the census year. For 56 of the idle plants no returns could be obtained, making the total number of reporting plants 2,147. The 183 combinations extend to almost all lines of industry, producing articles of luxury, materials essential to the upbuilding and growth of the country, and even the very necessities of life. Fully 50 per cent of these combinations were chartered just prior to or during the census year; and it is noteworthy that the epidemic of industrial consolidation, as far as the so-called monopolies are concerned, has been practically confined to the past seven years. It is evident, therefore, that the disease-if it be regarded as such-has spread very rapidly.

Naturally enough, iron and steel, with 69 combinations, heads the list. The number of reporting plants engaged in this industry is 469, and the capital invested, consisting of land, buildings, machinery, tools and implements, and cash and sundries, is valued at $348,000,000. Since the census reports were received last year, there has been a reorganization of certain corporations engaged in the manufacture of iron and steel products, by which a number of them have been merged into the United States Steel corporation. The stock and bonds issued by the constituent combinations up to the time of reorganization are shown below, together with a statement of the securities issued by the United States Steel corporation:

It can readily be seen that the amount of securities issued by the steel corporation in return for the property acquired was quite liberal. Iron and steel can fairly be regarded as the predominant industry of the United States. The value of the output during the census year was something like $500,000,000. The steel concerns employed during the year 146,000 wage earners including piece workers, and paid $81,000,000 in wages, to which should be added about 6,000 officials receiving $7,500,000 in salaries. Of the total number of wage earners in the employ of industrial combinations, more than one third were engaged in the production of iron and steel. From these figures the importance of this industry can be readily inferred.

It is a matter of vital interest to wage earners and the public generally to know that 23 combinations are engaged in producing articles of food, their total annual output, $282,000,000, being second in importance to that of the iron and steel industry. The list includes such corporations as the National Biscuit company, the American Sugar Refining company, and the California Fruit Canners' association. The number of reporting plants in this industry is 277, and the capital-by which is meant land, buildings, machinery, tools, implements, cash and sundries-is valued at $247,000,000. There are 29 combinations engaged in the production of beer, liquors, and beverages. The total output is $93,000,000. These products cannot be considered as prime necessities of