Page:Cambridge Modern History Volume 7.djvu/752

 720 Causes and results of capital combination. [ISDO- of the original properties have received only bonds and preferred stock, the total issue of common stock being distributed between promoters and underwriters. The dangers of over-capitalisation for stock-jobbing purposes, to any class except the more foolish speculators, have been exaggerated; but the practice explains in no small degree the rush to effect combinations of an unstable nature at a time of speculative activity. So far as this has been the chief factor, the movement is necessarily of a temporary nature ; and one of the most encouraging signs in the whole situation has been the comparative conservatism, after the first outburst, of both the banks and the public in the matter of taking up securities of so uncertain a nature. The extravagant hopes that have been capitalised in the form of " watered " stock have been largely discounted by the investors. A more serious question, however, arises in the case of the combi- nations which stand on a solid foundation. Their advantages have been frequently explained the reduction of cost by production on a large scale, the saving effected by the utilisation of by-products and by the production of many articles formerly purchased in the market, the possibility of obtaining the highest skill in management, the elimination of the expenses incurred in competing for the market, the employment of the best experts, the ability to withstand temporary reverses, and many others. There is a limit to the size of an industrial undertaking necessary to secure the maximum economy and efficiency; and it is possible that some of the present organisations have reached a point at which the difficulties of management outweigh the above-mentioned advantages. In the main, however, the facts seem to bear out the claim of the large combinations to superiority in production ; and probably a considerable share of the total increase in the export of manufactures is due to the reduction in cost which they effect, and to the energy which they have shown in seeking foreign markets. In view of these facts, a certain section of the public feels perfectly satisfied with what they consider a trust-made prosperity. But, even if it be granted that the Trusts have been able to cheapen the cost of production, their advantage to the public depends on the use made of this power. A reduction in prices is not, as a rule, the fruit of monopoly. As a matter of fact, many so-called Trusts are merely combinations of a certain number of companies, which mark a tendency to consolidation, but do not in any sense control the market for their products. For that reason any list of Trusts is misleading when given as showing the extent of monopoly. They frequently have to meet the fiercest form of competition, that of a rival combination. In certain cases, however, a sufficient control of the supply, say from 75 to 90 per cent., has been secured to make possible the dictation of prices within limits. The limits are set by potential competition and the diminution in demand as the price rises. There are doubtless cases