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 monop
lies 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.