risen above that figure. Iron tankage of the capacity of 3,000,000 barrels was erected during these months, and fifty three miles of pipe laid in a territory of twelve square miles. Had the National Transit company, with its $30,000,000 of invested capital, not been in control, it may be seriously doubted whether local enterprise could ever have effected so remarkable an extension of pipe lines in so short a time.

Associated with its advantages in transportation is the advantage the Standard Oil company has in distributing its refineries in strategic locations. Not only is a saving in transportation charges thus effected, but advantages accruing from cheaper land, labor, and fuel, are also secured. To gain this economy, the Standard Oil company spent millions in new plants near New York and Philadelphia. It bought the entire output of the refineries in the newly discovered oil region in Colorado, and secured control in 1898 of 75 per cent of the refining business in Canada; and for the same purpose it has recently rebuilt refineries in Pennsylvania, in order to profit by the cheapened fuel.

The vexed question of the effect of the Standard Oil combination on the price of refined oil will probably never be settled. Opponents of the Standard Oil company declare that the Standard has not reduced the price of refined oil as compared with crude oil to any such degree as would be the case under open competition. The effect of the combination, they point out, is to be gauged only from the margin between the prices of refined and crude oil; and the reduction of this margin, though steady, is, in their opinion, by no means commensurate with the improvements in the processes of refining. In reply, Mr. Archbold of the Standard Oil company has declared that his company is unable permanently to exact excessive prices. Temporarily, it might have such power; but, if it used this power arbitrarily, it would provoke heavier competition. There is, he admits, a certain amount of monopolistic power, coming from the aggregation of capital itself, which keeps prices higher than they would be under severe competition; but, at present, this power and its effect upon prices are very slight, and the lessened cost of doing business on a large scale more than compensates in lowered prices for the slight

monopolistic power of getting higher prices. Perhaps the most significant criticism which the independent refiners pass upon the price which the Standard Oil company gets for its oil is that the improved methods of utilizing by-products in recent years have made by-products as remunerative as the refined oil itself; and yet the margin of price between refined oil and crude oil during this period has only slightly decreased. The statement has frequently been made that the Standard has reduced its prices in the territory of its competitors, and maintained prices at more profitable rates as non-competitive points. Such a practice, as an instance of ordinary business competition, is not extraordinary. A similar charge could be brought against most large businesses; and, as those who bring the charge seldom take into account the varying cost of transportation to markets of varying means of communication, small probative value can be attached to their bare statement of difference in price. Of more serious nature are the charges that the Standard Oil company suborns the employees of its competitors to secure information as to their shipments and customers, and that it resorts to unfair tests and adulteration of its oils and to the copying of brands with the design to deceive purchasers. On all these points the evidence is at best vague and inconclusive. The officials of the Standard Oil company testify that it is their practice to ask their salesmen to keep their eyes open, and to inform the company as to those from whom different dealers are buying; but they flatly deny the charge of suborning the employees of their rivals, and very conclusively explain away the charge of fraud in the copying of brands and in the tests and adulteration of their products. The energy of the Standard Oil company, in developing new departments of the industry, and its enterprise in undertaking the production of all the chemicals and materials incidental to the process of refining, has been recognized, even by independent refiners, as truly great, and quite beyond what smaller competitors could have attempted. The leading by-products are gasoline, naphtha, paraffin, lubricating oils, and vaseline products. In addition to these, fully 200 other by-products are extracted and used for medical purposes and for aniline dyes. To

utilize all these by-products requires the greatest specialization of methods, encouragement of invention, investment of capital and extension of plant. A refinery of a capitalization of $500,000 cannot realize such economies. The undoubtedly large profit accruing to the Standard Oil company from the utilization of by-products is owing entirely to its superior mechanical efficiency and organization.

Aggregation of capital has brought to the Standard Oil company its greatest advantage in the development of foreign trade. In its contest on the continent, and especially in Russia, with the great oil interests of the Rothschilds, of the Nobel Brothers, and of prominent England capitalists, its success has been entirely due to its great capitalization. Since 1871 the export of petroleum products has increased seven times, and of the present exports the Standard Oil company ships 90 per cent. In Russia the competition between the Standard and the Nobel Brothers is keen. The price of Russian crude oil is lower than that of American oil; and the Nobels are at present shipping it in tank steamers to India, China, and Japan. To meet this competition, the Standard Oil company has established agencies all over the world, and has built bulk tankships for transporting its product. With the exception of the trade in the far east, where Russian competition is especially keen, the export price of oil has always been kept above the American price.

The present position of the Standard Oil company is one of abundant prosperity and power. It is opposed by a combination-the Pure Oil company-which works in harmony with an independent seaboard pipe line-the United States Pipe Line--and with 66 independent refineries. The Standard controls 90 per cent of the export trade and 80 per cent of the domestic trade. By its control of the pipe line situation it has become quite independent of the railroads. By its preponderant purchases of crude oil it has been able to steady and roughly direct the course of prices of petroleum. By its advantages in locating its refineries near their several markets and in utilizing by-products it has effected enormous economies in transportation and manufacture, and increased its dividend from 12 per cent in 1892, when the Standard Oil

trust was dissolved, to 48 per cent in 1901. The power of the Standard Oil company is tremendous, but it is only such power as naturally accrues to so large an aggregation of capital; and in the persistence with which competition against it has continued, in the quickness with which that competition increases when opportunity for profit under existing prices appears, and in the ever present possibility of competition which meets the Standard Oil company in the direction of every part of its policy, lie the safeguards against the abuse of this great power.

THE RIGHT OF CONGRESS TO CONTROL THE

TRUSTS.

BY PHILANDER C. KNOX.

[Philander C. Knox, United States senator from Pennsylvania; born Brownsville, Pa., May 4, 1853; graduated Mount Union college, O., 1872; three years later admitted to bar, and in 1876 appointed United States district attorney for the western district of Pennsylvania; since 1877 has practiced law with James H. Reed, under the firm name of Knox & Reed, devoting attention especially to corporation law; appointed attorney general of United States April 9, 1901, by President McKinley; elected senator from Pennsylvania, 1904.]

The people by common consent have denominated the great industrial and other corporations now controlling many branches of commercial business, trusts. The technical accuracy of the term is unimportant, but indeed it is much more apt than might be supposed, when it is recalled that the essential difference between the old industrial trusts and the great corporations owning and controlling subsidiary ones is that in respect to the former the shares of independent corporations agreeing to act in harmony were lodged with a trustee who received the separate earnings and distributed them among the holders of trust certificates, while as to the latter, a corporation is created to take over the title to the stock or properties of the constituent companies and issue its own shares as the evidence of interest in the combination. The corporation owner of corporations invokes specific legal authority from the legislature of the state under which it is created.

President Roosevelt, in his first message to congress, said: There is a widespread, settled conviction in the minds of the American people that these trusts are, in many of their features and tendencies, hurtful to the general welfare. This springs from no spirit of envy or uncharitableness, nor lack of pride in the great industrial achievements that have placed the country at the head of the nations struggling for commercial supremacy. It does not rest upon a lack of intelligent appreciation of the necessity of meeting changing and changed