formation of the United States Steel corporation, with its billion, one hundred million, dollar capitalization.

With the formation of this corporation the evolution in the organization of the iron and steel industry entered upon its third, and as yet final, phase. It constitutes, if the expression may be permitted, combination carried to its second power, being, as it were, a combination of combinations. That in character it is essentially different from previous combinations, which had in view merely the concentration of industries for the purpose of controlling production and prices, is manifest in the view of the conditions leading to its foundation. The motives that were at work were purely those for bringing about an integration of related interests. It must be remembered that the companies which were united were not essentially competing concerns, as regards the disposition of their products. Had the motive been primarily one to lessen competition, the union would have taken place along different lines. The insistence that Mr. Schwab lays upon this point, in his testimony before the industrial commission, must be taken as a sincere expression of opinion, and not one dictated by business policy.

Mr. Schwab, moreover, has brought out this point with great clearness. "The iron industry," he says, "was kept back in this country for many years, because there was no connection between the various industries on which it depended. The ore deposits were owned by one set of men. The coal deposits were owned by another set. The coke was made in a hundred different places, scattered throughout several states, under different management. The mills and furnaces, in turn, were owned separately; and, when these mills and furnaces, having bought their iron here and their coke there and their other products elsewhere, finally produced their iron and steel, there were still other processes that the product had to go through before it could be finally landed in the market. Everything was disconnected and disjointed. It was not until the whole process was welded into a continuous chain under one management that the American iron industry began to make its giant strides which have now carried it into a position where it dominates the whole world."

If there was any doubt in this matter, one has but to follow the subsequent policy of this corporation to have a verification of the position that has been taken. The new corporation has spared no expense or effort to acquire certain properties, such, for example, as ore deposits and facilities for lake transportation, which were essential for the complete rounding out of the scheme of controlling all of the factors entering into the production of finished articles from the raw materials. It is strictly in line with the same policy that the American Bridge company and the Shelby Tube works were acquired, as through them the products of its other departments can be directly marketed as finished products.

On the other hand, the corporation has looked with perfect equanimity upon the building up of other strong properties in fields in which it already had a sufficient number of mills, such as is seen in the combination of steel properties under the control of the Pennsylvania railroad, the Colorado Iron and Fuel company, the Republic Iron and Steel company, and scores of others that might be mentioned. Were the crushing out of competition in view, these would be the properties that would have been sought.

In our account of the formation of this corporation we have spoken as if it were a union of concerns, each having its special field of operations. To this, however, there was one important exception. The Carnegie company occupied a unique position in the iron and steel trade in the United States. It was, in the first place, much the most important concern in the trade. Roughly speaking, it made from 25 to 30 per cent of the finished iron and steel product in the country. It mined all the ore that it used, or over four million tons annually, and owned a large percentage of what is known as the old range ores. It did not sell any ore to outside parties, believing it to be the better policy to preserve it for its own

It transported a large percentage of it in its own boats over the lakes, and carried a large percentage of it on its own railroad to its Pittsburg works, where it manufactured a greater variety of steel articles than almost any other manufacturing concern. It made almost everything pertaining to the iron and steel trade. In structural materials of all descrip

tions it made 50 per cent, in rails 30 per cent, and in armor 50 per cent of the production of the country.

It was in the theory or principle of its organization, however, that the Carnegie company was unique. With an insight into the requirements of a scientific organization of the iron and steel industry that amounted to genius, Mr. Carnegie had twenty-five years before his competitors begun the organization of his undertaking upon the principle of the accurate integration of all the branches of the industry under a unified control. He was thus working out in theory and practice a plan of organization which the great steel corporation was to adopt in toto. Mr. Schwab, the president of the company, gave an exceedingly interesting account, in his testimony before the industrial commission, of the development of the Carnegie company and its policy. He said in part:

"The original Carnegie Steel company was a partnership. When it went into the mining of ores, it formed a separate organization for that purpose, and so with almost every other branch of its business. Its shipping industry on the lakes (the Bessemer Steamship company) was a separate organization; the railroad (the Bessemer & Lake Erie railroad, running from Conneaut harbor to the works in Pittsburg, about one hundred and fifty six miles) was a separate organization; its coke interest, limestone interest, all those various companies numbering some twenty six or twenty seven, were all separate organizations. But the controlling interest of each was held by the Carnegie people. In fact, Mr. Carnegie himself retained a controlling interest in all, owning something over 50 per cent in each of the companies.

It was then found that this partnership had grown so large and the business was of such a varied character, there were so many companies to control and so many partnerships holding varied interests, that for the sake of harmony among our partners it was decided to put all in the control of one corporation, to be known as the Carnegie company. One of the chief reasons for that was Mr. Carnegie's idea that a partner in the coke interest, for example, should not have a greater interest in coke than he had in steel, as it might affect the contracts between the two companies; or that a partner should

not have a greater interest in shipping than in the steel company. So he put these interests all into one company, so that each partner's interest was as a whole."

Something of a diversion has been made in order to give this account of the Carnegie company, because it constitutes such an important step in the evolution of the iron and steel industry in this country, because it affords an unusually definite presentation of the reasons dictating the consolidation of allied interests into a single corporation, and because it undoubtedly pointed the way and furnished the model for its great successor, the United States Steel corporation.

Returning now to a consideration of this latter combination, it is, of course, too early to attempt a forecast of what its ultimate influence will be upon the industry and upon the public welfare. If our position in the matter, however, is correct, there seems to be no reason to apprehend anything like an effective monopoly of the trade being organized by the corporation. Practically, all of the testimony before the industrial commission, including that given by independent operators, was against any such idea. There are now, as we have seen, a large number of plants outside of the corporation; and the building of new mills seems, if anything, to have been stimulated by the events of recent years. It is, of course, quite possible, if other iron and steel companies pursue the same policy of building up self-contained organizations, as indeed a number of them are already doing, that the time will come when the competition between them and the steel corporation will be a serious matter. When that time arrives, the old tendency of combination to restrict competition will again become dominant.

The formation of the United States Steel corporation is by no means an isolated example of integration on an extensive scale in this country. In the transportation industry can be found evidences of the working of the force of integration in a great variety of ways. Several of them have been mentioned in the preceding paragraph. Of others, the most important is that whereby a close community of interests is being established between railroad and ocean transportation. The purchase of the Leyland line by J. P. Morgan & Co. was for the

purpose of permitting a closer relationship between the business of the railways bringing freight to the seaboard and its subsequent carriage to foreign parts. Another example in which this purpose of bringing together related interests rather than concentration in a distinct field is peculiarly manifested may be found in the control recently obtained by the Standard Oil company of the American Linseed Oil company. The Standard was already in control, through its directors, of the National Lead company. There were thus brought under the same general management, or at least under sufficient control to insure that they would work in harmony with each other, the concern having the larger proportion of the output of linseed oil in the United States, and the company controlling the greater part of the production of white lead, or the product in which linseed oil finds its chief employment. There are also strong indications that the Union Lead and Oil company and other concerns will also be taken in, and all run in relation to each other.

Still another example of the bringing together under one management of all the different branches of a trade, which has taken place during the past year, is the merging of the American Tobacco company, which had the largest production of cigarettes in the country, the Continental Tobacco company, the leading manufacturers of chewing and smoking tobacco, the American Snuff company, the most important of the snuff concerns, the American Cigar company, the International Cigar Machine company, and the Havana American company in a single corporation, the Consolidated Tobacco company. The magnitude of this combination may be seen from the fact that the capitalization of the companies taken was over two hundred million dollars. It will scarcely be necessary to multiply examples further. If a careful analysis of all the recent important considerations be made, it will be seen that in almost all cases the essential purpose in view has been the merging of related interests rather than the taking over of distinctly competitive concerns.

Of integration in the distributive branch of industry, the chief example is, of course, that of the familiar department store. Here, however, the real forces of integration are not