64,660,000 gallons; of natural gas, in 1882, $215,000 value, and in 1909 $63,200,000. Phosphate rock production in 1880 was reported at 211,377 long tons; in 1910 at 2,654,988 tons; salt, in 1880 at 6,000,000 barrels ; in 1909 at 30,000,000; zinc (crude) in 1880 at 23,000 tons; in 1909 at 230,000 tons; and the value of stone in 1880 at $18,000,000; in 1909 at $71,000,000.

All these great developments in the industries of the country from 1870 to the present time are the result of natural conditions, coupled with the mental and physical activity which characterizes temperate, occidental man in all parts of the earth. With the great temperate zone`area that the United States enjoys, a location remote enough from other countries to minimize the dangers of industrial competition from abroad, a single government extending over that vast area, instead of numerous governments (as is the case in a similar area in Europe, for example), and a people moved by a common purpose and speaking a common language with all these, opportunities for the development of the industries are much more favorable than in countries having smaller areas and subjected to the competition of great masses of population separated from their own by only an imaginary line. This area and population of our own country, under a single

VOL. X-22

329

general government, has been put into close physical and business relationship by the construction of nearly 200,000 miles of railway for use in the interchange of their products and the mingling of the people. The railways in operation in the United States in 1870 covered 53,000 miles and in 1912 1912 approximately 250,000; and though we cannot measure the growth in freight or passenger movement over the entire period, it is interesting to note that the number of passengers carried by the railways of the country grew in the short period from 1890 to 1911 from 492,000,000 to 998,000,000, and the freight carried by them, from 632,000,000 short tons in 1890 to 1,826,000,000 short tons in 1911. With this development of the railways has come a great reduction in the cost of transportation, both of people and merchandise, as is illustrated by the fact that the freight rates on wheat from Chicago to New York by rail have fallen from over 33 cents per bushel in 1870 to less than 10 cents per bushel in 1910.*

ice), or a combination of banking interests seeking the control or regulation of credit or exchange. Thus, while we find that up to a certain point the two terms may be used interchangeably, the term "trust" is the more inclusive. "Trust" is the generic while industrial combination" is the specific term.

But not all industrial combinations are trusts per se, any more than all trusts are industrial combinations.*

Mr. S. C. T. Dodd, solicitor of the Standard Oil Company, says:

"The term Trust in its more confined sense embraces only a peculiar form of business association effected by stockholders of different corporations transferring their stocks to trustees. The Standard Oil Trust was formed in this way, and originated the name Trust' as applied to associations. The term Trust,' although derived as stated, has (now) obtained a wider signification, and embraces every act, agreement or combination of persons or capital believed to be done, made or formed with the intent, power or tendency to monopolize business, to restrain or interfere with competitive trade, or to fix, influence, or increase the prices of commodities." †

In short, the one characteristic which differentiates the "trust " from the mere "industrial" or other combination is the element of monopoly. When a concern or combination possesses any form of monopolistic power, or is believed to possess or be benefited by such power, it is a trust. When this element of monopoly is not present in a combination, it represents

331

a combination of capital and general executive and business ability, but does not constitute a trust.

The truth of this theory can be demonstrated in many ways. Any review or investigation of the trust movement in this country during the past half-century will show that we have" a trust question," not because men have combined their capital and their brains for the purpose of merely reducing operating costs and furnishing products to the consumer with greater efficiency and economy, but because men have combined for the purpose of acquiring or controlling some legislative or natural privilege or monopolistic element. A combination in an industry possessing no important element of monopoly, generates little public ill-feeling toward it. Thus, the department stores in the great cities are combinations of industry, but as a rule they possess no monopolistic power, and are popular with the public rather than the reverse. This is true with combinations of other retail businesses, such as the great mail-order houses, the five-and-ten cent stores, the biscuit manufacturing companies, etc. These great aggregates have been built up without special privileges or monoply. They have thrived because they have lowered costs to the consumer, and if they have capitalized themselves far beyond the amount of money originally invested, this represents the capitalization of their "efficiency" and not of some special privilege.

Such concerns are all subject to potential competition and could not hold their patronage or their position in the community without being efficiently operated and furnishing their products to the consumer at low prices and on a purely competitive basis.

On the other hand, we find the "trust " per se, in a very different position in its relations to the general public. The vast combinations which have been built up in this country within the past 50 years, have not been raised on the competitive basis, but on that of monopoly. This is true of the steel, iron, sugar, woolen and countless other primary industries, as well as the many undertakings which are based on them. It is true of the railroads and the public utility interests as well. The vast aggregate of capitalization of "trusts"-industrial, transportation and public service -to-day capitalized far in excess of $40,000,000,000, is a capitalization not of real property, ability, energy or efficiency to any great extent, but of some form of monopoly.

In tracing the history of the rise of industrial combinations in the United States, this central fact will become clearer and clearer as we proceed.

As industrial combinations come only with production on a large scale, which, in turn, depends upon improved transportation facilities, such combinations before the Civil War could hardly assume National importance. There was very little extensive manufacturing carried on then, and the

means of transportation were still rather primitive. Hence, though we may surely speak of the rise of industrial combinations previous to the year 1865, little can be said of their development during this period.

When the United States became a nation in 1789 there was no such thing as a corporation within its domain. The nearest approach to such organized business concerns were three banks and perhaps half a dozen insurance companies. Indeed, as there was little industrial development in this country before the War of 1812 - for it was only with the termination of this war that America began definitely to look to her own manufactures there could then be no question of any industrial combinations which result from such development. Our present division of the subject therefore narrows itself down to the years between the War of 1812 and that between the States.

The development of the factory system being enormously stimulated by the outbreak of the first of these wars, establishments for the home manufacture of cotton and woolen goods, iron, glass, hardware, and various other commodities sprang up, "with mushroom rapidity," throughout the United States. The resulting rapid increase of capital naturally tended toward concentration. Small investors could no longer heat their individual irons, so to speak, in separate ovens, since machinery was rapidly becoming more and more indis

The earliest industrial combinations were all chartered separately, and not without considerable heated debate in legislatures. General corporation laws were not enacted until the second, or even the third, stage of industrial combinations was reached - somewhere about 1830. Many of the States adopted such general corporation laws, and gradually one type or another of industrial combination rapidly sprang up.

Though not unfriendly to such corporations at first, their unprecedented increase in the 30's made the Government rather uneasy. This is clearly shown by Andrew Jackson's fight on the United States Bank (in 1832), in which he foresaw so early the danger of corporate control. Between Jackson's second administration (ending in 1837) and the war over slavery, the growth of industrial corporations was much hampered by the Government's refusal to charter any combinations outside the District of Columbia or the Territories. Even so, several

333

Pacific railroads and a number of National banks were incorporated during the Civil War, when already the era of railroad consolidation was ushered in that ultimately resulted in such gigantic combinations as the New York Central, the Pennsylvania, and other great systems too well known to need enumerating. But with all these beginnings, the development of industrial combinations prior to 1865 did not reach the fourth, fifth, and sixth stages the more recent monopolistic phases of these corporations.

as

Sometime after the close of the

Civil War the word "capital " took on its present significance in the business world. Nor until the late 70's did the roots of what is known to-day "trust control" or "big business "begin to spread and get that hold in the ground which, after 40 years, has resulted in the formation of a well-night impregnable structure of capitalization and business organization extending across the continent.

It is interesting to trace the evolution of the "capitalist " or man with capital, from the earlier days of the Nineteenth century. Not until civilization began to be equipped with power-machinery and modern invention changed the whole aspect of industry and the production of wealth, do we note much change in the connotation of the word "" capitalist." Even as late as 60 years ago a "capitalist" was a man who, like George Washington, "was worth" so much in property, cash or real estate.

66