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“The last four concerns belong to an earlier period, but the total aggregation of capital which they help to swell to £91,946,680 is probably understated. Several of the trusts have recently absorbed other businesses and issued more debenture stock. The list could also be extended. I have stopped at well-organized combinationsconcrete examples of the trust type. There is, for instance, the National Telephone Company, with its £7,000,000 capital, but it is just about to lose its monopoly. The British Lustreing Syndicate, formed to work patents applied to the textile industry, is a monopoly to keep up prices. There is a strong combination of Scotch paraffinoil companies; the Edinburgh distillers' companies with 10 firms absorbed. The Lace Curtain Manufacturers' Association has been registered with a capital of £2,000,000, and the Lace Dressers and Finishers' Association, with £1,000,000 capital, but not yet launched.”

DUBLIC SENTIMENT REGARDING COMBINATIONS.

Not until the last two or three years has there seemed to be any sentiment hostile to these large combinations of capital. There has been, of course, for many years more or less hostility on the part of some of the poorer classes against wealth and wealthy men, as such. There has been perhaps also some feeling against the corporate form of industry, as that seemed to some to increase the power of wealth; but there has been practically no feeling against the organization of combinations among different corporations until lately. Even this feeling does not distinguish at all between combinations of the type which are called trusts in the United States and other large corporations or private business firms.

Fear of political influence. This feeling has found expression principally in charges that have been made against members of Parliament and members of the ministry, voters thinking that they have been biased in their opinions on matters of legislation coming before Parliament because they have held directorships in corporations. For some years one has been able to notice attacks of this kind in the newspapers; and of late in the attacks made particularly upon Mr. Joseph Chamberlain, the secretary of state for the colonies, the feeling has been very pronounced. For example, in a dispatch from London, dated November 17, 1900, printed in the New York Times of the following day, there appears the statement that the Liberals ‘are making no little capital (of) the extraordinary number of directorships in private companies held by Government officers. Of the 20 cabinet ministers, 13 are directors, while between all the 36 ministers, 27 directorships are held. The list commences with Lord Salisbury, who assists in the management of an insurance company, and includes Lord Selborne, who is both First Lord of the Admiralty and a director of the Peninsular and Oriental Steamship Company, and Gerald Balfour, who unites a directorship in the Aluminum Company with the presidency of the Board of Trade, and many other incongruous associations, several of the companies being financially discredited.” Of course, too much emphasis ought not to be laid upon charges of this kind made by an opposition party, but there can be little doubt that, without any direct charges of corruption being made, there has been a feeling that many men influential in English politics were likely to have their feelings too strongly enlisted on the side of the greater corporations through the positions which they held in them. The increase of the tendency toward combinations does not seem, however, to have been made to any noteworthy extent a political issue in any case; and the strong feeling on the subject which has been manifested for some years in the United States seems to have found only a very faint echo in England.

REASONS FOR COMBINATION.

(a) Ruinous competition.—Beyond question the influence that has been most prominent in bringing about the later combinations among capitalists, particularly in manufacturing industries, has been the desire to escape the results of competition, which is considered by the manufacturers as unreasonable and destructive. Representatives of several of the leading combinations in various lines of industry at once spoke of this as the prime cause in bringing about the consolidation. They called attention to the fact that, particularly in lines of industry where much capital was invested, competition was likely to become unreasonably severe and to be carried out to the extent of ruin for some manufacturers, and of very low profits, if not the entire loss of profits, for all the others. The most emphatic specific statements that have been made along this line, perhaps, are to be found in articles written and published by Mr. E. J. Smith of Birmingham, the organizer of the combination in the metallic bedstead trade, formed some 10 years ago, and of some other later ones, especially in the lines of electrical fittings, china furniture, the fender trade, thé

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metal railing trade, the gas tube trade, and others. The plan of combination of Mr. Smith is materially different from that followed by other manufacturers in England, and for that matter from the combinations in any other part of the world; but they all agree upon the evil that comes from too severe competition. In speaking of the combinations which he has organized and the reason for their formation, Mr. Smith says that

“The idea sprang from the conviction that the traders in this country, in many industries, were working without profit for want of a mutual understanding. At its installation it (the bedstead combination) proclaimed as the first article of its creed that no one ought to manufacture and sell an article without making a profit on the transaction. No one has ever yet been bold enough to attack this premise. It is a crusade of intelligence against ignorance; of enlightenment against prejudice. It is the outcome of a resolve to trade on fair and just principles, notwithstanding the wish of a few to do exactly the opposite.

“The truth is we must go back to the old Christian teaching of the mediæval moralists who condemned underselling, and did not believe in bargains as we now use the term. They held and thought that everything had a justum pretium, and that anything less or more must be unfair to somebody. We are told by the highest authority to do unto others as we would have others do unto us—to trade, buy, or sell according to the Golden Rule of justice all round.'' 2

From the point of view of good morals, all of the members of the combinations seem to agree with Mr. Smith, although comparatively few of them put the matter from the moral point of view. They simply say that competition was unjustly severe, ruinous, and they have organized their combination to prevent this cutthroat competition. In other words, this means, of course, that they were seeking for what one might fairly call more or less complete monopolistic power, inasmuch as any checking of competition is so far a step toward monopoly.

On the other hand, one may agree, as we shall see later, with the statements of most of them, that by these combinations in England competition has not been entirely eliminated, but that there is enough to prevent any very large amount of extortion on the part of the combinations, even if extortion were contemplated.

(6) Economies. --The prevention of competition comes in part, of course, directly from amalgamation, but if the expectation is to eliminate competition and prevent new competitors from entering the field, it is essential that through the combination various savings be made which will enable the new organization to put goods upon the market without any material increase in price, if not even at a lower price. Most of the prospectuses of the combinations lay great stress upon the various economies that can be made through the proposed organization. Most of these questions will be taken up practically in connection with the actual effects that have been observed of the workings of the combinations. It will perhaps suffice here merely to enumerate some of these savings.

When several manufacturing establishments in different sections of the country are united under one management, it is possible to effect a large saving in cross freights by shipping to each customer goods from the establishment nearest him.

Most of the large combinations buy all supplies through one office, then have them distributed to the different establishments needing them. A single large purchaser can in this way usually secure prices better than can any one large or small single establishment.

Usually much can be saved in the way of traveling men, of advertising, etc., in the cost of selling goods.

Frequently, too, through the uniting into one hand of various parties which have before been competing, material savings can be made from the extension of the most valuable patents to use in all establishments and the practical suppression of those of less value.

Through the better organization of the work, material savings in wages, especially of superintendents and of traveling men, are frequently made.

This better organization frequently prevents delays for changing of machinery and enables the management to secure more continuous use of different plants by the proper distribution of orders among them.

(c) Control over workmen.-In several cases it is doubtless true that employers, especially those who have had trouble with their workmen, have been induced to enter the combinations largely because they believed that such a combination could handle much more effectively strikes and other methods of compulsion employed by the workmen. In case the workingmen of any establishment of a combination threaten a strike, the directors say that it is entirely possible for them to close those mills and

1 The New Trades Combination Movement, p. 6.
2 Ibid, p. 92.

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transfer the orders to others. The workingmen, knowing this fact, are more likely to be tractable, or, as the employer would put it, reasonable, than if this power were not in the hands of the employer. Furthermore, the consolidation lishments, with the resulting concentration of large capital in practically one hand, gives the combination a backbone of resistance or of aggressive power in dealing with such a situation that is not possessed and can not well be possessed by any single establishment which forms but one of a group of competitors. In the case of many competing establishments, a strike in one or two would often result to the advantage of the competitors, putting a larger amount of business into their hands. Such a strike might, in consequence, not be unwelcome to some competing establishments, so long as they felt that their own relations with their workmen were not likely to be disturbed thereby. Such a feeling, of course, is entirely eliminated in the case of the combination which controls practically an entire line of business; the solidarity of interests among the employers is complete. The possibility of securing this power, and in consequence this element of safety in continuous manufacturing work, has, beyond question, been in certain instances a contributing cause to the formation of the combinations. It is reported by Mr. Donald that after the last strike of the engineers the leading engineering firms throughout England entered into an agreement to act together against trade-union labor, although they did not seem at that time to have made any combination for other purposes. Several instances were given personally by prominent members of different consolidations of the latest type of similar purposes and feelings on the part of manufacturers who had joined their combinations.

(d) Profits of the promoter.—Within the last twoor three years, since the formation of combinations has become quite common in England, the hope of large profit on the part of the promoter has doubtless brought about the formation of some of the combinations. When the manufacturers themselves would probably not have taken the initiative, the promoter, seeing the opportunity, has entered the field, and through his persuasive power, has succeeded in convincing the manufacturers that combination would be to their advantage. This may fairly be recognized as a cause of combination in England, although, as far as the evidence goes, the profits of the promoter have been, relatively speaking, much less than in the United States.

EXTENT AND FORMS OF COMBINATIONS.

(a) Extent.—For a long time there have existed in England, as in other countries, agreements regarding prices and regarding methods of doing business among local dealers and manufacturers, in order that competition might not become too severe. At the present time some very efficient agreements that seem to be only local in their

scope exist in certain localities for the control of local markets. In London, for example, according to Robert Donald, the leading coal merchants have combined to fix prices and decide at the coal exchange when prices shall rise or fall. He asserts likewise that the flour mills have a small association for fixing the price of flour used by the West End bakers.

Of late years there has existed in London also among the dealers in bacon, especially regarding those grades which come from Ireland and Denmark, a ring which has largely controlled the bacon supply. They have even gone so far as to attempt to compel certain large customers to buy from them, refusing to sell anything to such customers unless they would agree to take their entire supply from the ring. In one noteworthy case, that of the Cooperative Wholesale Union, that organization, in order to escape from such domination, being provided with sufficient capital, established its own factories in Denmark, whence it has been able to draw a large part of its needed supply, and in this way to keep control of its own business free from the domination of the bacon ring.

Several of the late combinations, even those of considerable strength, are largely local, so far at least as their work is concerned, although they may be of national or even of international importance as regards the extent of their influence. For example, the Bradford Dyers' Association is made up of dyers located in the neighborhood of Bradford and Leeds. The Bleachers' Association is formed of firms most of which are located in the immediate neighborhood of Manchester, although there were brought into the combination also some Scotch and Irish firms. The Bradford Coal Merchants and Consumers' Association, Limited, is one whose market and business is largely local.

Even though the establishments are situated near together in most cases, these larger associations, as, for example, the Fine Cotton Spinners and Doublers’ Association, Limited, the Associated Portland Cement Manufacturers, Limited, the Calico

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Printers' Association, Limited, and others, have a business international in its scope; while some of them even, as, for example, the English Sewing Cotton Company, are practically international organizations. The thread firms organized into this company have several of them been known for their products the world over. The greatest of them all, J. & P. Coats, while not formally entering the combination, are still large stockholders in it, and, so far as their goods are concerned, they have a permanent working agreement with the Sewing Cotton Company. This latter company also was chiefly instrumental in forming the American Thread Company in the United States, which it virtually controls. The directors own substantially all of the common stock of the American Thread Company, whereas certain directors of the American Thread Company and managers and employees in the American mills have bought a very large block of the common stock of the English company. These relationships, of course, taken in connection with the agreements with the Coats people, have practically made an international combination, which to a very great extent supplies the world with sewing cotton.

(b) Pools and agreements. --Short of an organization into a single great corporation or trust, there are pools and agreements of various sorts found in England, as in most other countries, which often exercise power almost as complete as that of a single corporation. Attention has just been called to the fact that the combinations are sometimes merely local in scope, while sometimes they are international in influ

These forms of agreements just referred to would apply and do apply to al! of the grades of combinations however wide their scope. For example, in the case of the thread companies the agreement of the English Sewing Cotton Company with the J. & P. Coats Company is of the general nature of a division of the market and an agreement not to cut prices, although, as we have seen, the community of interest through reciprocal holding of stock makes it certain that these agreements will be kept. Agreements among wholesale and retail chemists prevent cutting in the prices of drugs; agreements among fire insurance companies, both in England, the United States, and Canada, have been formed to fix substantially the rates for fire insurance. Attention has earlier been called to agreements on prices of coal. Railroads have for a long time had a substantial agreement regarding rates; and of late the great combination among the two leading South African trading companies has apparently fixed the rates for all freights to South Africa. It is probably true that these agreements most frequently deal with questions of prices, either in the way

of division of territory or of fixing a minimum price, below which no one shall sell. These latter plans take a somewhat peculiar form in the E. J. Smith combinations, which will be described later, in that the agreement provides that no sales shall be made below a certain percentage fixed above the cost of manufacture, the costs of manufacture being in every case carefully worked out. In this agreement the prices of the different establishments need not be exactly the same under all circumstances, although they probably in most cases would be; but they must not go below a profitable rate to the manufacturer who is producing at the greatest cost.

(c) Corporations.—Of late years by far the most important form of combination in England is that of the single great corporation. England, instead of following the lead of the other European nations, has followed rather that of the United States. Finding that the lowest forms of agreements, such as those just referred to, do not provide a sufficient degree of control over the constituent members, find ng also that they do not enable the combination to make some of the greatest savings in many lines of industry, such as come from the consolidation of plants and the closing of those least favorably situated, all of the manufacturing plants are brought into one great corporation, with an absolute power of control. To this class of combinations belong most of the later ones which have been formed, such as the Bradford Dyers' Association, Limited; the Calico Printers' Association, Limited; the Associated Portland Cement Manufacturers (1900), Limited; the English Sewing Cotton Company, Limited; the British Oil and Cake Mills, Limited; the Yorkshire Wool Combers' Association, Limited; the Wall Paper Manufacturers, Limited; the Fine Cotton Spinners' and Doublers' Association, Limited, as well as several others. In these cases the establishments of the different uniting firms are valued by appraisers and bought up by the central company, which thus becomes the sole owner and manager of the various establishments and directs thereafter the work of all in unity. The manner in which these companies are organized and the results of the combination will be discussed in a later section. There is nothing especially distinctive in the form from that of the later American combinations which in like manner, as for example, the American Sugar Refining Company, have bought up the plants of different companies in order to unite them. The custom of organizing a single parent corporation to buy up and hold the stocks of various subordinate corporations does not seem to be the plan followed to any noteworthy extent in England, although it is at times true that various subordinate companies are formed to take charge of special parts of the

work, and at times the work of the different establishments is to a certain extent kept independent, probably more so than is ordinarily the case with the American combinations.

(d) The E. J. Smith combinations.—Some 10 years ago, Mr. E. J. Smith, manufacturer of brass bedsteads at Birmingham, feeling, as did others in that line of trade, the pressure of unregulated competition, conceived the idea of a combination among the manufacturers which would do away with the ruinous competition and insure to the employers, as he believed, a reasonable degree of profit. The plan is, on the whole, so different from that followed by others, and has been so widely discussed, that it merits special attention even though at the present time there is a revolt against the combination on the part of some of its former members, and though, in the judgment of some, the movement is likely to prove ultimately a failure.

Mr. Smith believes, in the first place, that the basis upon which prices should be fixed is that of cost. It is not the intention to deprive any manufacturer entering the combination of the full power of control over his establishment so far as the immediate management of his works is concerned, but it is made certain that he shall not cut prices at the expense of his competitors and himself beyond a reasonable return upon his capital invested.

In the first place, the cost of production for an industry has to be determined. The different manufacturers meet, and taking up a general itemized plan which shall cover each special part of the manufacture, raw materials, labor, interest, etc., each item is agreed upon and a certain minimum cost is fixed. Of course some of the manufacturers have bought under contract or otherwise at lower rates than others. Likewise some will be found to have a somewhat lower labor cost in special departments than others. But after full discussion and a complete showing of the situation in each establishment, a certain minimum cost for the trade is fixed upon. In addition to that, there must be included in the items of cost interest on capital invested, rent on buildings or land used, salaries of managers, even though the managers are themselves the capitalists, and these salaries are to be reckoned at the same rates that skilled managers would receive if they were hired from the outside. In addition to these costs, it has been usual to include also on the side of the capitalist a certain amount which is due him owing the necessity for his keeping up his standard of living. It is recognized that a man of means, in order to hold his social position, must live somewhat more expensively than a laborer, and in determining the salaries that shall be allowed for superintendents, this fact has in most cases been taken into account. If, for example (of course I am not giving actual figures), it should be found in a certain establishment that the amount of interest to be allowed on capital would be, say £500, and if the amount allowed in salaries to the managing capitalists should be also £500, it might be that the allowance which would be made him in addition, in order to compensate for his added cost of living, might be as much as £75 or £100. In the case of the bedstead combination there has been made out a most elaborate table covering each special item that can be found in any part of bedstead manufacturing—a sketch which covers many printed pages—and each manufacturer is compelled to fill out his costs on the plan of this table.

Each manufacturer then agrees that in selling his goods he will not sell below a certain fixed percentage on his cost. He may sell as much above that as he is able to get. It results from this, of course, that, as long as any sales are made, the man who manufactures at the greatest cost will be receiving a fair return on his investment, while the men who from their favorable situation or their greater skill in management can produce cheaper will be enabled to secure a much higher rate of profit without fear of cutthroat competition. If they wish to extend their trade at the expense of the other members of the combination, they of course are at liberty to do so as long as they do not go below the fixed percentage upon his cost of manufacture. The different manufacturers, of course, being so closely associated and giving their costs of manufacture to one another, can see wherein their own weaknesses lie, and can in this way learn to remedy the evil. The result is, according to Mr. Smith, that the general level of efficiency of the whole industry is decidedly elevated. The most skillful manufacturer can better afford to let his better methods be known to his fellow-members in the combination, even though they are going to profit thereby, than to have to fight them off by a competition so severe that his own profits woulá

Experience seems to have shown that only a comparatively few of the manufacturers have really been accustomed to work out their own costs of manufacture in such detail that they know absolutely where their profits and losses lie. In far too many cases they are in the habit of reckoning only the most important items of costs and lumping the others at something of a guess. In consequence, the lowest competitive prices are often made by the poorer manufacturers through ignorance. Similar experiences are common also in this country.

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