finance, are certain other forms of advanced capitalistic structure, commonly enjoying ampler and more secure monopoly, and supported more directly by privilege. The political development of America has left to private enterprise many of the most important industries which in civilized European states have come under the direct administration of the state or the municipality. Almost all the supply of ordinary municipal services, with the exception of water, still remains in the hands of private companies, and the rapid development of these services, especially those connected with electric traction, lighting, and telephones, has yielded huge elements of monopoly profit, which American cities are just beginning to learn how to tax, and which have formed useful feeders for great national manufacturing trusts, such as the Westinghouse Electric company. More important still are the railroad, telegraph and express companies, performing, as private monopolies for profit, most of those transport services which have in Europe and in our colonies been undertaken by the state.

The railroad system is the first of two distinctive features which mark America as the stronghold of unrestrained capitalism. It is not merely that it represents the largest and most complicated organization of private capital in the modern world. Still more important is the fact that this railroad system is the pillar of the whole fabric of capitalism, which is rightly regarded as monopolistic in character and anti-social in the economic and political power it wields.

The more closely I have reflected on American conditions the more strongly I am convinced that the railroad is the true center of gravity in the economic system of America. It is the railroad, more than the tariff, which in point of fact has been "the mother of trusts." This is sufficiently illustrated both from the early history of the Standard Oil company and of the Carnegie Steel company, which was the nucleus of the American Steel corporation; here, as in so many other instances, discrimination in railway rates and secret rebates have been the prime condition of early success. In such a country as America railroad transport has always been the most critical stage in that series of processes by which the raw material

must pass to the manufacturer, and from the manufacturer or wholesale merchant to the retailer and the consuming public. There may be other opportunities of cornering supplies, but the industrial stream most commonly is narrowed in the transport stage; if, then, effective competition can there be stopped, the profits of the producer can be sucked by paying low prices for his goods while the consumer is squeezed by high prices for his commodities, and these gains can be shared by the railroads with any industrial confederates with whom they are in league. The power of the railroad over the greater part of the republic to make or mar cities, industries, the welfare of entire states, has been too notorious to require discussion. The very self-sufficiency of America, the pride of her economic policy, has fed the railway power, increasing the part played by land transit, diminishing the part played by ocean carriage in her distribution of raw materials and commodities. So far as internal traffic is concerned, the Mississippi and, during a portion of the year, the northern chain of lakes, afford the only check upon the control of the railroads over the grain and meat traffic from the west and the middle states to the thickly peopled east, the distribution of manufactured goods from the northeastern states over the whole continent, and the carriage of coal and iron from the mines to the manufacturing centers. Corners in grain and in cattle can be formed or broken only by the active agency of the railroads, as is proved by recent cases in the courts. The anthracite coal mines of Pennsylvania are absolutely owned or fully controlled by the seven railroads which traverse the district, and which for this purpose are operated as a single system; the greater part of the soft coal mines are similarly held by other non-competing roads, and the silver and copper mines of Colorado, Nevada, Montana, are little more than annexes of the railroads. While, with the mining and manufacturing development of America, the railroads have assumed an absolutely more important part in the economic life of the nation, this power itself is rapidly concentrating into a few large units. So far as the most important traffic is concerned, that between the middle west and the eastern states, this tendency has gone so far already that three groups, fairly

stable in their composition, have been formed controlling nearly all the roads between Chicago and the coast, and from Chicago stretching out their tentacles through those great mining and agricultural states which are destined in the early future to become the center of industry and population in the United States.

This railroad concentration which is proceeding apace all over the continent is not merely an instinctive movement for self-protection and monopoly on the part of the railroad managers. It represents the first fruits of that domination of the financier over industry which is the second distinctive characteristic of American capitalism. Everywhere advancing, this active control of the financier over industry in general has proceeded further in America than elsewhere, partly because conditions are more favorable to bold speculative coups, partly because business life there has evolved and brought to the front a bolder and more imaginative type of financier.

The naive theory of capitalism provides no place for the financier, save as banker or insurance broker. Investors, as business men recognizing the uses of large capital, pool their capital for some purpose which they deem profitable, elect their directors, and delegate to them certain powers of control; the directors appoint the management, and exercise a general control over the conduct of the business subject to the supreme control of the body of shareholders. Such is the democratic theory of capitalism. In practice the formation and control of these great capitalist corporations is very different, and that difference mainly consists in the injection of the power of the financier into the system of modern capitalist industry. He performs two functions, both of them necessary in the existing order. The first is the formation and reformation of corporations and the merging of smaller into larger corporations. In his capacity of dealer in profitable "notions," he takes the initiative in the capitalist movement, directing the flow of industrial energy into profitable channels. Even when the idea emanates from an industrial specialist, a business man in the narrower sense, it can only fructify in the hands of the financier, who, as promoter, contractor, and underwriter, carries it from the world of ideas into the world of

reality. For this necessary work the financier takes his payment, sometimes a reasonable fee, sometimes an extravagant sum which cripples the future of his industry derived in part from the ignorance or over-confidence of shareholders, in part from consumers in anticipation of the monopoly prices which such a corporation hopes to impose by control of markets. This is the work of the financier in construction or reconstruction, where he has no genuine continuous interest in the working of the business.

His second function is as holder of and speculator in stocks and shares. Here his legitimate or social function is that of furnishing an intelligent registration of values, scaling them up and down in accordance with the play of actual forces in the industrial world. With this legitimate work is often associated an illegitimate, anti-social process, not so much of gambling (for pure gambling, or taking chances, does not rightly belong to the class of financiers who rule in America), as of the artificial manipulation of stocks and shares, bulling and bearing, in order to make profits from forced oscillations of values. These predatory practices appear to be playing an ever larger part in the formation of recent trusts; many of these are promoted less by the industrial economies of large production, or even the calculated profits of prospective monopoly, than by the design of creating a large quantity of marketable paper, which should serve the two purposes of enabling the financial promoters to sell inflated stock to ignorant investors, and of furnishing material wherewith to bull and bear the market, and by such manipulations to fleece minor gamblers.

At various eras in the world's history supreme power has passed into the hands of a little group of financiers, but never has that power been greater, more strongly rooted in actual control of industry, or more strongly concentrated in an able personnel, than in the America of to-day. Had I space, I ought to trace the origin of this financial control in the peculiar monetary history of the United States, and the combination of economic and political forces which have raised a few great banking and insurance houses to a pinnacle of power. The consolidation of the banking and insurance business has

already gone far towards the establishment of a single great monetary power outside and beyond the effective control of the government, but usurping some of the functions of the state. The most salient fact to-day in America is the financial control of the chief means of transport by land and sea, the mining industry, and the manufacturing trusts by several small groups of men, partly bankers who have entered industry, partly industrial magnates who have entered the wider world of finance. It is impossible to ascertain, or accurately to designate, the relations between these little groups of potentates-sometimes engaged in fighting one another in Wall street or in the courts for the control of a system of railways, sometimes united for a common swoop upon the products of small investors, sometimes in mixed relations of friendship or hostility over a corner in the produce markets. Industry in America no longer belongs to industrialists but to financiers. In the railroad world Morgan and Rockefeller and Havemeyer are in joint control with more distinctively railroad men like Hill and Harriman, and the forces are commonly described by the name of some great Wall street general. So important is the financial side of the great manufacturing businesses that their chiefs inevitably drift into the larger financial world, so that the owners of the standard oil, the steel, the sugar and other trusts are continually associated with fresh alien enterprises.

While the identification of the great financiers of Wall street with the control of the railroad system of America is the most fundamental fact, the growing prominence of transport and finance enables these groups to exercise a general control over great organized industry. Everywhere this consolidation of financial control is accompanied by a centralization of business management. It is not indeed strictly true that capital is passing into fewer hands, for in America as here the structure of the corporation lends itself to a multiplication of investors, and in some corporations a new labor policy is projected along this line. But while the number of capitalists, or investors, is increasing, the control and probably the ownership of the bulk of capital is passing into fewer hands. For the great financiers are becoming to a larger extent than