least a year and often more. The capital required to supply this demand not only did not exist in these new states, but it could be supplied to only a limited extent from older slave states, since slavery prevented that accumulation of capital which would have taken place in a free community possessing the same favorable economic conditions.

The planters of this region had therefore to attract capital from the north and from Europe; and for this purpose the credit of individual planters or of such corporations as could be formed in a new country was as inadequate as it was in northern states to secure funds for canals and railways. Nothing was left but to make use of public credit to supply this deficiency; and every new slave state in the south from Florida to Arkansas established one or more banks and supplied all or nearly all of their capital by a sale of state bonds. Many of the banks were known as "property banks," and were designed especially to furnish loans to planters The business of all of them consisted in providing the capital for producing and marketing the cotton and sugar of this region. Thus in the southwest, where nature already provided an adequate system of transportation, the state banking enterprises formed the counterpart of the internal improvement movement of the north and east,

CONCENTRATION OF INDUSTRY IN THE UNITED

STATES.

BY J. A. HOBSON.

[J. A. Hobson, one of the most eminent of English economists; born Derby, England, July 6, 1858; educated at Lincoln college, Oxford; classical master at Faversham and Exeter, 1880-87; lecturer in economics for the university extension department of Oxford university, 1887-97; contributor to the leading British and American economic reviews, and author of Economics of Distribution, International Trade, Problem of the Unemployed.]

If by capitalism we understand industry involving large capital, owned or controlled by a few men and worked for private profit, there is a sense in which the United States must rank as the first capitalist nation in the world. It is not indeed the case that so large a proportion of her material wealth or of her industrial population is engaged in those manufacturing and transport industries which are distinctly capitalistic, as in Great Britain, Holland, and Belgium, or perhaps even Germany. Agriculture is still her most important single branch of industry; farm property still largely exceeds in value the aggregate of her manufacturing establishments, while 36 per cent of her occupied population are employed in agriculture as compared with 24 per cent in manufacturing and mechanical pursuits. Even if we turn to the statistics of manufactures, the enormous growth of concentrated capitalism in America is not at first apparent, for the increase in the actual number of separate businesses in almost all industries is very large. It is indeed quite evident that small competing businesses occupy a very great part of the manufacturing field. A closer inspection of the situation, however, shows that, though the number of businesses is growing, the total capital engaged in the trade is growing far more rapidly.

This first proof of concentration is corroborated by many other evidences, which sustain the popular belief that a large proportion of the business in an increasing number of industries is passing into the control of a very small number of cor

porations. The growing power, and even a large measure of real monopoly on the part of these corporations, is, of course, quite consistent with the maintenance of keen and cut throat competition over the greater part of the industrial field. Though a larger absolute number of industries are being subjected to the concentrative process, and are passing into the form popularly known as trusts, there is no a priori reason to suppose that there is a universal or even a general trend of industry in this direction. The facts and figures indeed point the other way; sound considerations of economy keep many trades and manufactures in small or moderate sizes, and prevent their merging. The former advance towards capitalistic control of agriculture in large bonanza farms has yielded to decentralizing forces; every important trust, by the very success of its economy of capital and labor, liberates large masses of industrial energy to apply themselves to new experimental industries for the supply of new wants. America exhibits a constant crop of these new enterprises, some of which eventually develop into trusts or are absorbed as subsidiary processes under trusts, but the great majority of them at any given time are small struggling businesses dependent upon individual enterprise.

But while the present and probable future scope of concentrated capitalism is exaggerated in the public mind, these trusts and corporations form a great power and a great peril in American life. They have thrived most in some of the great manufactures engaged in supplying common goods for the necessary consumption of the people, such as oil, sugar, thread or tobacco; or in controlling the produce markets in grain, meat, and dairy products; in the development of iron and coal, the prime necessaries of general industry; and in the great transport industries which mean so much more to the American than to the inhabitants of smaller and older countries with less need for transport and more facilities of roads. The really formidable aspect of trusts and potent organizations of capital is their prevalence in just those industries engaged in supplying common goods and services required by all, necessaries or prime conveniences of life. They are not, of course, confined to these industries; there are plenty of small

trusts in specialties or luxuries which thrive on a patent or a private reputation, or because they have organized a limited market. Chewing gum, playing cards, and certain sorts of biscuits and confectionery serve for modern instances in America. But the real issue of American capitalism is to be fought round the gigantic impersonalities of the great corporations in the staple manufactures, the railroads, the mining industry, and in finance. To clear the ground we may brush aside the legal technicalities connected with the term "trust." The fictitious corporation constituted by a number of business concerns entrusting their control to trustees, pooling their profits and distributing them in accordance with the value of trust certificates based on a previous valuation of the several concerns, was declared illegal in the case of the Standard Oil trust, and is no longer adopted as a method of monopoly by manufacturing firms; though a variant of this trust in the shape of a corporation formed to hold securities in other corporations has just been broken in the railroad world by the judgment of the United States District court in pronouncing illegal the Northern Securities corporation. What we are concerned with is not the form but the substance of the power of these corporations which have destroyed or abridged free competition in important industries. We first need to ascertain the origin and economic bases of this power wielded by the oil and sugar trusts, the steel corporation, the great transcontinental railroads, and the banking and insurance companies which are the financial replica of this gigantic power.

We must note the important part played by machinery in this growth of capitalism. The development of complex machinery in the substitution of mechanical for human power is indeed the essence of capitalism, for it involves the relative increase in the part played by capital as compared with labor. Now America has been conspicuous for carrying the application of labor saving machinery farther and faster than any other country. Absorbed until two generations ago chiefly in exploring and opening up the vast natural resources which a series of territorial accessions placed in their hands, and impeded later by the havoc and disorder of the civil war, America was late in betaking herself seriously to modern methods of

manufacture. But her advance was very rapid; the resourcefulness bred of an adventurous career manifested itself in remarkable mechanical inventiveness, and in quickness to seize and improve the best European inventions; no trade or individual traditions blinded their eyes, they had no old plant or machinery to consider, but began with the latest and the best; the high wages of manual labor were a stronger stimulus to substitute machines than any European nation felt; no federal restrictions and little effective state control were allowed to hamper the full economy of the machine and the factory system; the preternaturally rapid development of the railroad system by European capital opened up to them the vast and varied natural resources of their country. Employer and workman were subjected to a keener stimulus of gain than ever prevailed in England, even during the rise of Lancashire, and this stimulus was mainly directed to the improvement of machinery. Lastly, the tariff greatly facilitated the rise of the manufactures, and, by securing the American manufacturer against foreign competition, has proved specially efficacious in feeding infant industries into giants and enabling them to exercise a giant's tyranny. The size of the American market has commonly sufficed to support the fullest economies of large scale production with the best plant and the most complete division of labor, while the possession of almost complete security against outside competition has enabled a corporation, which has once secured supremacy in the domestic market, to save most of the expenses of competition, and to mature its plans for conquering foreign markets. The abnormally high profits which a tariff enables such a trust to earn in its domestic sales may certainly be used to enable it to undersell foreigners in their markets, the export trade being of the nature of bounty fed or by-products which it is profitable to sell for whatever price they will fetch. This phase of the trust economy deserves fuller discussion than I can here afford to give; but it is certainly the case that this power of "dumping" goods in foreign markets at below cost price is an important international implication of the trust.

These manufacturing trusts do not, however, stand alone; closely linked with them, both in industrial working and in