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Protection And Monopoly

The more serious perversions of the economic system which we have
encountered have all been traceable to some working of the principle
of monopoly, and it is important to know whether any established
policy of governments lends force to this evil influence. Import
duties were established in America for the purpose of protecting
industries as such, and a vital question now is whether they have now
begun to protect monopolies within the industries.

A Supposed Conflict between Theory and Practice

There was a time
when theorists and practical men seemed to be in hopeless disagreement
concerning the entire subject of protection. In the view of the
practical man an economist was a person who, in his study, had reached
certain conclusions which were equally unanswerable in themselves and
irreconcilable with the facts. The expression most commonly heard in
this connection was that "theory and practice do not agree." The
doctrinarians were, in those days, unusually harmonious among
themselves, for there were comparatively few who made a vigorous
defense of protection on grounds of economic principle. The practical
world was less harmonious, since the views of different parts of it
were colored by differing interests; but the fact that science did not
fall into self-contradiction was encouraging. It was possible for the
uncompromising free-trader to think and to say that fundamental
principles were all on his side, and that the protectionist had
nothing in his favor except transient disturbances that interfered
with the perfect working of the principles.

Static Theory in Favor of Free Trade

Now, the business world
conceded too much to the free-trader when it said that he had theory
altogether in his favor. What he could truthfully claim, and what the
world could safely admit, was that he had static theory in his favor.
Static theory deals with a world which is free, not only from friction
and disturbance, but also from those elements of change and progress
which are the marked features of actual life. Stop all the changes
that are taking place in the industrial life of the world; put an end
to inventions and improvements in business organization; let there be
no moving of population to and fro, and no increase of the aggregate
population of the world; further, let there be no addition to the
wealth of the world and no change in its forms,--and you will have the
static state described in the early part of this treatise. Men would
go on making things to the end of time, using identically the same
methods that are now in vogue and getting identically the same
results, and in such an imaginary world there would be no possibility
of answering the contention of the general body of economists of a
generation ago. Free trade would be the only rational policy, and it
could be defended upon the simple ground on which division of labor in
the case of individuals is defended. One man has an aptitude for
making shoes, another for making watches, another for painting
pictures, and so on; and each one of them can gain far more by
devoting himself to his specialty and bartering off the product of it
than he can by trying to make everything for himself. Nations have
their special aptitudes and should follow them, and make all they can
out of them; and the nation which has special facilities for producing
cotton, or wheat, or petroleum, or gold and silver bullion should
devote itself to its specialties, barter off the results, and get all
manner of goods in return.

Wastes from Protection reduced by the Fact of Diversified

It is true, indeed, that a great nation like our own
makes a much better jack-of-all-trades than an individual can make. It
is far more probable that the nation as a whole can produce without
much waste all the things it wants to use than that any individual can
do so. If we have all climates from the tropical to the arctic, all
soils, and a full list of mineral deposits, why should it pay us to
confine ourselves to the making of only a few things in order to
barter them off for others? Why should we not, with our wide range of
resources, make everything?

Undoubtedly we can make almost everything if we insist upon doing it;
but there are still some things that other countries can make and sell
to us on such terms that we can do better by buying them than by
producing them ourselves. We can raise tea in the United States, but
it pays us better to make something else and barter it off for tea. A
day's labor spent in raising cotton to send away in exchange gives us
more tea than a day's labor spent in producing the latter article
directly. In a static condition we should have found in what fields it
is most profitable to employ our energies. We should be directly
making things that it would pay us best to make, and we should be
indirectly making the other things; that is, we should be producing
articles to send off in exchange for those other things. Wherever an
indirect way of acquiring a thing had proved most profitable, we
should have adopted that method, and we should always adhere to it.
Anything that forced us to make directly something which we could
secure in greater abundance by bestowing the labor that would make it
on making something else, would turn our energies in a comparatively
unproductive direction. It would inflict on us a waste and a loss--and
there are such wastes and losses inherent in the operation of the
principle of protection, and there is no contending against the
argument that demonstrates their existence. Protection and a certain
distortion of the productive system, a certain misdirection of energy,
are synonymous.

The Argument for Protection Dynamic

Now an intelligent argument in
favor of protection begins at this point. It accepts the whole static
argument in favor of free trade, and its own assertion begins with a
"nevertheless." It claims that in spite of what is thus conceded,
protection is justifiable, since, in the end, it will pay,
notwithstanding the wastes that attend it. The argument for protection
is entirely a dynamic one. It is based on the fact of progress and
admits that it could make no case for itself under the conditions of a
static state. If every country had certain special facilities for
producing particular things, and if its state in this respect were
destined to remain forever unchanged, it could, to the end of time,
make itself richer by depending for many things on its neighbors than
it could by depending for those things immediately on itself. The fact
is, however, that a nation like our own abounds in undeveloped and
even unknown resources which, when brought to the light, may take
precedence of many of those which are known and utilized. If our
country from end to end were like Cape Nome, and as rich in gold as
the richest part of that remote region, and if it were certain that
the deposits of gold would never be exhausted and would employ the
whole energy of our people, it is clear that we should have one staple
occupation and should depend upon the rest of the world for almost
every sort of portable commodity. We should be stopped from
manufacturing by the great productivity of labor in placer mining. So
long as men could make ten dollars a day by washing out gold from the
sands, there would be no use in setting them at work making two
dollars a day as weavers or shoemakers or what not. By buying our
cloth with gold dust we could get far more of it than we could if we
took the men out of the mine and set them to making the stuff itself.
But--and here is the proviso that makes the supposition correspond
with the fact--if, besides the placers, we had deep mines of other
metals than gold, if we had oil and lumber and loam of every variety,
and if we had people with undeveloped mechanical aptitudes, it might
be that we should do well to develop these latent energies even in a
wasteful way. The condition that would fully establish the similarity
between the supposed case and the actual one is that the placer
deposits should be, as placers are, sure to be exhausted by continued
working, and that producing other things than gold should tend to
become, with time, a more and more fruitful process. We can justify
the attitude of the country that taxes itself at an early date for the
sake of testing and developing the latent aptitudes of its land and
its people. At the outset it will thereby sustain a loss, because at
the outset it can gain more goods by the indirect method of exchange
than it can by production; but there may easily come a time when it
can gain more by the direct method. If we learn to make things more
economically than we could originally make them, if we hit upon cheap
sources of motive power and of raw material, and especially if we
devise machinery that works rapidly and accurately and greatly
multiplies the product of a man's working day, we shall reach a
condition in which, instead of a loss incidental to the early years of
manufacturing, we shall have an increasing gain that will continue to
the end of time. It may be, further, that without protection and the
burdensome tax which it did undoubtedly impose upon us, we should have
had to wait far too long for this gain to accrue and should have
sacrificed the benefits that come from a long interval of diversified
and fruitful industry.

In short, the static argument for free trade is unanswerable and the
dynamic argument for protection, when intelligently stated, is equally
so. The two arguments do not meet and refute each other, but are
mutually consistent. It is possible to ridicule the argument for
protection under the name of the "infant industry" argument, and it is
possible for the policy it upholds to continue long after this
argument has ceased to be valid. The overgrown infant will have
sacrificed his claim for coddling, but that will not prove that there
was never a time when he needed it.

The Policy demanded in View of Facts Static and Dynamic

Now, there
is an argument for tariff reduction which accepts both the static
argument for free trade and the dynamic argument for protection. In
fact, it bases itself on the protectionist's modern and intelligent
claim. To advance in any form the infant industry argument is to admit
that the policy advocated is temporary. Protective duties are, in
fact, self-testing. They reveal in their very working whether they
were originally justifiable or not. The ground on which they were
imposed is that they would develop latent resources--that they would
enable labor to produce as much by making a class of articles formerly
produced in foreign countries as it could produce by engaging in
industries already established and exchanging their products for the
former articles. If that time should come, the industry that had to
grow up originally under the protection of a duty would become so
fruitful that it could dispense with the duty. Taxes of this kind tend
to become inoperative, provided always that the latent resources for
economical production really exist.

Some years ago a man who had retired from the business of making spool
silk remarked that, in his judgment, a duty of three per cent on
imported silk of this kind would enable the American mills to hold
full possession of their own market. The difference between what it
cost the foreigner to make the silk and what it cost the American to
make it was, as he thought, not over three per cent. If he was right
in his estimate, almost all of the actual duty might have been
abolished without crushing the American manufacturer. Americans had
developed a sufficient aptitude for making spool silk to be able to
get nearly as much of it by turning their labor in that direction as
they could by turning their labor in any other direction and
exchanging the product for foreign silk. We must originally have lost
much by forcing ourselves directly to make the silk, for, at the
outset, we could not make it as economically as we could make an
article which we could exchange for it. At the time of which we are
speaking we could make it with almost no waste, and the case
illustrates a general fact with regard to duties upon articles in the
making of which we are originally at a disadvantage but are afterward
at no disadvantage at all. When our original disadvantage has been
quite overcome, the duty becomes inoperative. Whether we keep it or
throw it off will make no difference to the American manufacturer or
to the American consumer--provided always that competition is free
and active. If it is not so, there is a very different story to tell.

Importance of Changes in the Relative Productivity of Different

Instead of getting from the soil gold dust to barter for
merchandise, we have been getting a product that is not so greatly
unlike it. For grains of gold read kernels of wheat, and the statement
will tell what a large portion of our country has produced and
exported. The productivity of wheat raising has made it uneconomical,
in certain extensive regions, to engage in other occupations; but as
the fertility of the wheat lands has declined, and as the productive
power of labor in other directions has increased, we have reached a
point at which it is just as natural to make things for which we
formerly bartered wheat as it is to produce the grain itself. The
decline in the fertility of agricultural lands and the increase in the
productive power of labor devoted to making steel appear to have made
the manufacturer of the latter article as independent as is the raiser
of cereals. Originally it was necessary to protect iron and steel
industries from competition in order to secure the establishment of
them at an early day. Now it is apparently not necessary to continue
the protection. Labor in making steel will give us as many tons of it
in a year as the same labor would give us if spent in the raising of
wheat to be exchanged for foreign steel. The duty on steel, if this is
the case, has become inoperative, in the sense that it no longer acts
to save from destruction the steel-making industry. It is perniciously
operative in another direction, for it is an essential protector of a
quasi-monopoly in the industry; and this illustrates what often
happens in cases in which the infant industry argument proves to be
well grounded. The argument predicts for the newly established
industry a great future development and a time of ultimate
independence. Protection undertakes to nurse it through its period of
helplessness and dependence into a time when it can stand on its own
feet and maintain itself against rivals. If that period comes,--and
the history of the United States shows that in many cases it has
come,--you can throw off the entire duty, if you will, and, unless the
price of the article has been artificially sustained by something
besides the duty, our manufacturers will not lose possession of their

An essential condition of realizing the happy predictions of the
protectionists is that competition among American producers should be
unimpeded. If that were so, goods would, as they said, be sold, in the
end, at prices fixed by the costs of production, including the normal
rate of interest on the capital employed. Manufacturers may originally
get large profits, as an offset for such risks as they take in doing
pioneer work; but afterward they will get interest on their capital
and a good personal return for directing their business, but nothing
more. If they sell goods at prices which yield only such returns as
this, they will, when the industry is on its feet, sell them as
cheaply as the foreigner would do. The high duty, if it still
continues, may make it doubly difficult for the foreigner to come into
our market; but with goods selling at natural cost or cost prices he
would not come into it in any case, and the duty might be abolished
with entire impunity.

There are, indeed, some questions which arise as to occasional
unloading of extensive stocks in foreign markets, and protection has
been called for to prevent the foreigner from making America his
"dumping ground." This process works in both ways: the American can
dump his surplus products into foreign territory as well as the
foreigner can into American territory. Not much attention need be paid
to this particular phase of the subject. Conservatism will probably
suffice, for a long time, to retain in force a somewhat higher duty
than is called for on general grounds. In the main the fact is as
stated: if the protected infant has the capacity for growth that was
attributed to him when the course of nursing, coddling, training, and
patient waiting was entered upon, he will announce that fact after a
term of years by showing his inherent strength and proving that these
fostering practices are no longer necessary. They are then needed only
to aid a monopolistic power within the industry.

The Protection of Industries distinguished from the Protection of

It appears, then, that duties have two distinct
functions. One is to protect from foreign competition an industry as
such--to shield every producer, whether he is working independently or
in a pool or trust. The other function is to protect a trust in the
industry--to enable a great combination working within the limits of
the United States to keep that great field to itself and still charge
abnormally high prices for its products. In fact, a distinguishable
part of a duty usually performs the former of these functions, and
another distinguishable part performs the latter. If the natural price
of an article is based on the cost of making it in the United States,
and if that is twenty per cent higher than the cost in a foreign
country, a duty of twenty per cent will place the American product and
the foreign product on an equality. The American maker will not be
driven from his market until he begins to charge an abnormally high
price. If he does that, the foreigner will come in. Suppose, then,
that the duty is forty per cent. Twenty per cent may be needed to
enable the American manufacturer to hold his own as against the
foreigner. Provided he exacts from consumers of his goods only the
natural returns which business yields, year in and year out, he can
sell all that his mills produce with no danger that the foreigner will
supplant him. The other twenty per cent of duty enables him to add a
monopolistic profit to his prices. He can raise them by about that
amount above what is natural before the foreigner will begin to make
him trouble.

We have seen what ways the trust has of stifling competition within
the limits of our own country. There are the favors which it is able
to get from the railroads, and there is the practice of selling its
goods in some one locality at a cut-throat rate whenever a competitor
appears in that locality. There is the so-called factors' agreement,
which often forces merchants to buy goods of a certain class
exclusively from the trust. By these means and others the trust makes
it perilous to build a mill for the purpose of competing with it. If,
indeed, it makes its prices very high, some bold adventurer will build
such a mill and take the chances that this entails; but if the trust
stops short of offering such a tempting lure in the way of high
prices, it can keep the field to itself. If the extra duty of twenty
per cent--the unnecessary portion of the whole duty of forty per
cent--did not exist, nothing of this sort would be possible. The trust
would have to sell at a normal price in order to keep out the
foreigner, and so would its independent competitor. Both the
combination and its rivals could make their goods and sell them in
security. The industry, as such, is protected by the duty of twenty
per cent, and it is the additional duty which is the protector of
monopoly--the enabling cause of the grab which the trust can make from
the pockets of the consuming public.

In practice one would not try to make the figures quite as exact as is
implied in the statement that just twenty per cent of duty is needed
to protect the industry as such from the foreigner, and that just
another twenty per cent acts as a maker of a monopolistic price. It
would be impracticable to fix the duty in such a way as exactly to
meet the need of protection. Owing to fluctuations in values, the duty
might be made slightly higher than is necessary under normal
conditions. All these things would have to be considered by a
competent tariff commission. The figures we here use are illustrative
only; but the principle is as clear as anything in economics.
Protecting an industry, as such, is one thing; it means that Americans
shall be enabled to hold possession of their market, provided they
charge prices for their goods which yield a fair profit only.
Protecting a monopoly in the industry is another thing; it means that
foreign competition is to be cut off even when the American producer
charges unnatural prices. It means that the trust shall be enabled to
sell a portion of its goods abroad at one price and the remainder at
home at a much higher price. It means that the trust is to be shielded
from all competition, except that which may come from audacious rivals
at home who are willing to brave the perils of entering the American
field provided that the prices which here rule afford profit enough to
justify the risk.

A Limit beyond which a Duty becomes a Supporter of Monopolies

line of cleavage runs through the greater part of the duties which
this country now imposes on foreign articles; and the fact reveals the
scientific rule for tariff reduction. Up to a certain point, according
to the traditional American view, the duty may do good. It may be
protecting an industry that is not quite an infant and yet has not
grown to its full stature nor attained to its full competing power.
Whatever may be claimed as to what ought to be done with this portion
of the duty, there is no doubt what will be done; it will be retained,
and the American people will wait with such patience as they may for
the coming of the time when the industry will be independent of all
such aid. Beyond this point a protective duty becomes a trust builder
par excellence.

Most Duties Compounds of Good and Evil

There are some industries
which are fully matured. The duties which were imposed to shield them
during their infancy are no longer necessary for that purpose. The
amount of protection that in these cases is necessary to keep the
American market for the American product is nil. The sole effect of
duties on the products of such industries is to encourage monopoly. At
the other extreme there are a few industries which have not gravitated
into the control of monopolies and which need much of the protection
that they have in order to hold their present fields. If they really
are infants and not dwarfs,--if they have the capacity to grow to full
stature and independence,--the policy of the people will undoubtedly
be to let them keep, for a considerable time, all the protection that
they now enjoy. The number of such industries as this is comparatively
small. In the case of the great majority of our duties there is one
part that protects the industry as such and another part that protects
the monopoly within it. Throw off the whole duty, and you expose the
independent rivals of the trust, as well as the trust itself, to a
foreign competition which they are hardly able to bear; but if you
throw off a part of the duty,--the part which serves to create the
monopoly,--you do not destroy and probably do not hurt the independent
producer. His position now is abnormal and perilous. He may be
continuing solely by grace of a power that could crush him any day if
it would, and its power to crush him is due to the great gains which
its position as a monopoly affords. When it wishes to crush a local
rival, it can enter his territory and, within that area, sell goods
for less than it costs to make them; and, while pursuing this
cut-throat policy, it can still make money, because it is getting high
prices in the other parts of its extensive territory. With no such
great general returns to draw on as a war fund, the trust would have
to compete with its rivals on terms which would be at least more
nearly even than they now are. It would still have weapons which it
could employ against competitors, and its capacity for fighting
unfairly would not be exhausted. Without further action on the part of
lawmakers the position of a small rival of a trust might be
unnaturally dangerous; but an essential point is that one means which
the trust adopts in order to crush him depends on the existence of
great profits in most of its territory; and these would not exist if
it were not for the unnecessary and abnormal part of the duty.

The trust wants its duty, and it wants the whole of it. It is the
perennial defender of the policy which is termed "standing pat." It
values the monopoly-making part according to the measure of the
profits which that part brings into its coffers. The trust is
powerful, as we do not need to be told, and it will find ways of
thwarting tariff reduction as it does other anti-trust legislation.
Drastic laws forced through legislatures or Congress during
ebullitions of popular wrath--laws which demand so much in the way of
trust breaking that they will never be enforced and never ought to
be--have not, thus far, been prevented. Such "bulls against the comet"
have been issued frequently enough, but serious legislation, based on
sound principles, will encounter graver difficulties. There are
difficulties before our people even where they see clearly what they
want and are trying to get it; but where they do not see what they
want, the case is hopeless. The trust-making part of protective duties
has an effect about which there is no uncertainty, and if the American
people discover this fact, they will not have reached their goal, but
the laborious route that leads to it will at least lie distinctly
before them.

The Policy demanded in the Interest of Progress

The general facts
which have here been cited call for the abolition of a certain part of
the existing duties and the retention of another part, and they make
the division between the two parts clear at least in principle. We
want to keep one part of a duty whenever it protects an industry which
is not yet mature but is on its way toward maturity. We want the
industry because it is progressive in its wealth-creating power and
will, one day, make an important addition to our national income.
It is a dynamic agent--a factor in the progress we are making toward
the unrealized goal of universal comfort. We do not want the other
part of the duty, first, because we do not want monopoly. Any feature
of our industrial system which is convicted of being simply a
monopoly-building element is condemned by that fact to extinction, if
the power of the people suffices to destroy it. Does this mean that
the consolidations themselves are thus condemned? Do we not want great
corporations with vast capitals? Assuredly we want them, for the sake
of their economy and of their capacity for greater economy. With the
element of monopoly taken out of them, they will become dynamic agents
and contributors to general progress. The part of the protective
tariff which we need to get rid of is the part that helps decisively
to put the element of monopoly into them; and in that connection the
worst charge that has to be brought against this part of the duties
remains to be stated.

Protection and Progress

Monopoly acts squarely against the
continuance of that very progress which the tariff was designed to
create. The entire defense of protection has rested on the dynamic
argument, and the sole justification of the tax which protection
originally imposed is the fact that it has given us industries which
have, in themselves, the power to become more and more productive. It
would be hard to deny that much of this increase in productive power,
which the originators of the protective system anticipated, has been
practically realized. The manufactures which have been carried through
a period of weakness have actually developed competing strength. We
have acquired the power to make things far more cheaply than any one
could formerly make them, and the cheapening process still goes on.
Our manufacturing centers are alive with machinery, much of which is
of our own devising. Thanks to the progressive character of these
industries, the waste which attended the introduction of them has been
largely atoned for. On dynamic grounds, and solely on those grounds,
has the policy of protection fairly well vindicated itself. And now we
have come to the point where that saving element in the protective
system is in danger of vanishing. Indeed, the excessive part of the
protective tariff now acts positively to check the progress that it
once initiated, for monopoly is hostile to that progress. The whole
force of the argument based on mechanical invention and the
development of latent aptitudes in our people now holds as against the
monopoly-building part of the tariff. Keep that portion of a duty
which is not needed to save an independent producer from foreign
competition, which is needed only to enable the trust to charge an
abnormal price and still keep the foreigner out of our markets, and
you build up a monopoly which is unfavorable to continued improvement
in the productive arts.

Competition is the assured guarantee of all such progress. It causes
a race of improvement in which eager rivals strive with each other to
see who can get the best result from a day's labor. It puts the
producer where he must be enterprising or drop out of the race. He
must invent machines and processes, or adopt them as others discover
them. He must organize, explore markets, and study consumers' wants.
He must keep abreast of a rapidly moving procession if he expects to
continue long to be a producer at all.

The Effect on Progress of Consolidation without Monopoly

Does a
monopoly live under any such forward pressure? Certainly not. It may
make some improvements, for it can gain wealth by so doing; but it is
not forced to make them or perish. Here we encounter a wide
distinction that is in danger of being overlooked. A vast corporation
that is not a true monopoly may be eminently progressive. If it still
has to fear rivals, actual or potential, it is under the same kind of
pressure that acts upon the independent producer--pressure to
economize labor. It may be able to make even greater progress than a
smaller corporation could make, for it may be able to hire ingenious
men to devise new appliances, and it may be able to test them without
greatly trenching on its income by such experiments. When it gets a
successful machine, it may introduce it at once into many mills.
Consolidation without monopoly is favorable to progress. With the
element of monopoly infused into it, a great consolidation frees
itself from the necessity for progress, and both experience and a
priori reasoning are against the conclusion that, under such a
regime, actual progress will be rapid. The secure monopoly may
stagnate with impunity, and the reason why many corporations which
have looked like monopolies have not actually stagnated is that their
positions have not been thus secure. They have had some actual rivals
and many potential ones. The part of the protective system which tends
to make them more secure in their monopolistic position strikes at the
most vital part of the industrial system, the progress within it, the
element which adds daily to man's power to create wealth and enables
the world to sustain an increasing population in an increasing degree
of comfort. True monopoly means stagnation, oppression, and what has
been called a new feudalism, while consolidation without monopoly
means progress, freedom, and a constant approach to industrial
democracy. One of the essential means of securing this latter result
is the retention of so much protection as is needed to keep American
ingenuity and organizing power alive and active, while abolishing that
excess of it which fosters monopoly and does away with the necessity
for exercising these traits. There will be disagreement as to the
point at which the dividing line should, in particular cases, be
drawn; a protected interest will claim a duty of fifty per cent where
twenty would amply suffice and where every excess above this would be
pernicious. There should, however, be no serious disagreement as to
what we want--progress and the repression of monopoly which bars
progress; and there should be little disagreement as to the principle
to be followed in making a protective system contribute to these ends.
It must assuredly not bar out the foreigner when the American trust
has put its prices at an extortionate level and is using its power to
crush all rivalry at home. The good effect and the evil effect of an
excessive duty are quite distinct in principle, and the task that is
before us is to make them so in practice. It is to abolish the
monopoly-building part of the protective system.

The whole question of the relation of the tariff to monopoly presents
debatable points, some of which cannot here be discussed. It is by no
means claimed that an unnaturally high tariff is the sole means of
sustaining monopolies, or that the reduction of it would leave nothing
more to be done. A great corporation, as has already been said,
possesses special means of waging a predatory war against local
rivals, and its monopolistic power depends on these as well as on the
tariff. With the foreigner forced off the field the trust can use with
terrible effect these means of attack on local rivals. It is true, as
we have seen, that its monopolistic power might be greatly reduced,
without touching the tariff, by taking from it its command of freight
rates and thus destroying its power to undersell rivals by means of
the special rebates which it now receives; and its power for evil
might be reduced still more by taking from it its privilege of cutting
prices on its own goods in one locality while charging elsewhere the
high prices which the exclusion of the foreigner enables it to get.
Regulating trusts by these means only and without any change in the
protective system would require, on the part of the people, a long and
hard struggle. It would require heroic persistence in a course of
difficult administration. Success will come more quickly and easily
if, while keeping a normal amount of protection, we abolish the
abnormal part of it. The other measures for controlling trusts
harmonize with this one and will work more effectively if they are
used in combination with it. Together with this one they remove a
barrier against progress and set in action a force that promotes it.

Without going into any intricacies one can see that, with the tariff
at a normal level, the success of the trust in making money will
depend on its efficiency as a producer; and the same will be true of
its independent rivals. Again and again it will then happen that new
rivals will appear, whose mills are far more efficient than many which
the trust operates. They may even be more efficient than the best of
the mills of the great combination. American producers and foreigners
will be in eager rivalry with each other in seeking out means of
reducing costs or--what is the same thing--increasing the product of a
day's labor. Under the conditions here supposed, the trust will not be
able to exterminate a really efficient competitor, and it will feel
the stimulus of his rivalry in a way that will force it to be alert
and enterprising in seeking and using new devices for economical
production. The trust and its American competitor will alike feel the
stimulus of the foreigner's efforts to surpass them both in methods of
efficient production; and the outcome of it all will be a greater
degree of progress--a more dynamic industrial world--than there is any
hope of realizing while foreigners are excluded from our markets even
when prices are there extortionate. Prices will be extortionate so
long as the trusts are checked only by local rivals and are allowed to
club these rivals into submissiveness. Keeping the foreigner away by
competing fairly with him is what we should desire; but barring him
forcibly out, even when prices mount to extravagant levels, helps to
fasten on this country the various evils which are included under the
ill-omened term monopoly; and among the worst of these evils are a
weakening of dynamic energy and a reduction of progress.

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