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Some of the establishments that are especially favorably situated for shipping purposes are allowed on that account a somewhat higher price than the others, the - intention being to do exact justice to each establishment, so that each shall secure its own proper share of all of the profits, these profits or losses being, of course, assigned proportionally to each one of the establishments in connection with each separate contract of sale made. Every 6 months a complete inventory of the assets and liabilities of the companies are made, the stock being valued at an average selling price, and at the end of this budget period complete settlements are made with each separate company. In the intervening tiine the settlements are merely provisional, although they are made as completely as circumstances will permit.
In order that there may be a sufficient encouragement for each establishment to do the best work possible as regards the quality of its product, a provision is made that if a purchaser insists upon having the product of a certain company and consents to pay more for it than for the product of other companies of the same class, this increase in price shall revert wholly to the company concerned on the quantities which shall have been produced there, without even any discount for general expenses being made or for the accumulation of the reserve fund just mentioned. On the other hand, it is likewise provided that, if the product of any of the companies by reason of its bad quality can not be sold except at a lower price than that obtained for the product of the same number and kinds of other companies, this abatement in price must be borne solely by the producing company: In order to avoid all possibility of dispute, and particularly of any appearance before the court, provision is made not merely for the settlement of ordinary disputes by arbitration, but it is still further provided that “the parties to this greement expressly forbid resort to the courts and the moving of an appeal from the arbitrated decisions. By an express condition they renounce henceforth the right to avail themselves of any provision of law contrary to the obligations which they accept by the present agreement.”'
Modifications of the contract can be made by a majority of five-sevenths of the votes and the company may be dissolved before the limit fixed by a vote of sixsevenths given at least one year in advance of the time of dissolution. Full details regarding the division of the property are also provided in the contract itself.
A very full statement of the form of organization of this company has been given because of the fact that it has been very successful over a period of several years, has served as the model for other companies, and it seems likely that it will serve as the model for other organizations in the future.
In addition to the formal conditions laid down in the articles of agreement, it may be worth while to note also certain private special regulations not published that have been provided by the burean, which strengthen somewhat its control over the market. For example, offers made by it or by its agents must be accepted at once by return mail or they do not become binding on the bureau. While the bureau attempts, of course, to comply as best it can with the desires of the purchasers of its product, it nevertheless is strong enough so that it has very rigid rules regarding the points of delivery, the loading and unloading of the product, etc.
It insists upon the product being paid for in negotiable paper or draft within 30 days from the end of the month of shipment without discount. Its regulations regarding discount, which will be spoken of later, are said to have modified very materially the methods of doing business in that industry.
The bureau sells only to those who intend to use its product solely for their own consumption in further manufacture, and they are not allowed to reassign it either in whole or in part without the consent of the bureau.
In 1891 there was an agreement made for a short time between the iron bureau at Paris and 6 producers of iron which was to last for something over two years, but with the exception of the fact that it was much more restricted in its operations, the general plan of organization was the same as that of the Longwy bureau just described.
(d) La Société Générale des Papeteries du Limousin.-The paper factories of Limousin ? have a combination that is considerably more centralized than is that of the Longwy bureau. This organization was formed in the beginning of 1899 by 7 factories, but later in the same year 8 more factories came in. The organization was made for a period of 65 years. The form is that of a corporation. The capital issued with the first organization was 3,345,000 francs, increased afterwards to 3,746,000, and later, when the last mills were taken in, to 5,550,000 francs. The basis of the capitalization was intended to be a capitalization of 10 times the profits, so that under normal circumstances dividends of 10 per cent might perhaps be anticipated.
The manufacturers themselves kept in their own hands four-fifths of the stock, putting only one-fifth on the market. The shares are substantially $20 each (100
1 La Société Générale des Papeteries du Limousin, Paris, La Société d'Economie Sociale, 1900.
francs), it being a result of French experience that in that country shares of that size are likely to hold their value and to be more readily sought in the market than larger ones. These united companies have about 80 per cent of the production of the Limousin group of paper factories.
The combination is managed by a general assembly of shareholders who choose an administrative council of not less than 7 or more than 12 members, which has full power in all details of management. This administrative council is composed of the former managers of the separate companies, so that the new organization gets the full benefit of their experience. Each one of these members of the council must own at least 250 shares of 100 francs each. It will be noted that this is a combination resembling closely the usual American one. The form is that of a corporation, but it is evidently not organized for speculative purposes, as so little stock was put on the market.
(e) Les syndicats professionnels.—A form of combination frequently found in France and established by law in 1884 for purposes entirely different seems to be taking on at times somė of the characteristics of a monopolistic combination. Under the law of March 21, 1884, it was provided that professional syndicates among individuals or establishments of the same or allied professions might be established freely for the purpose of protecting their economic, industrial, commercial, or agricultural interests. So also these syndicates in different lines of industry might form unions among themselves for similar purposes. It was not expected that they would acquire property beyond the amount that was necessary for suitable assembly rooms, libraries, rooms for professional instruction, and so on. It was expected that they would at times establish funds for mutual aid, for pensions to employees, for employment bureaus under certain circumstances, and that they would see particularly what measures of legislation might be considered desirable to further the interests of the industry in question, and might use whatever means were proper to secure such favorable legislation. Many such syndicates, probably thousands of them on a small scale, have been established throughout France, and in most cases naturally they are of the nature of agricultural associations, associations among industrial and commercial men of different classes for the special purposes set forth in the law.
On the other hand, in certain instances these associations, when they have been among employers particularly instead of among employees, and when the industries concerned have been manufacturing industries on a large scale, have succeeded in bringing into their syndicate practically all of the manufacturers in that line throughout France. If the number of manufacturers represented is comparatively small, it is natural that as they get together to consider questions of common interest, such as modifications of the tariff, regulations of shipping and freight rates, general rules for the conduct of business with reference to their employees, etc., they should also incidentally and informally consider the questions of the general condition of the business as affected by foreign trade, the difficulty of securing a market, depression in business resulting from too vigorous competition among themselves, conciliation and arbitration between the employers and their workmen, the work of women and children, provisions to secure the health and protection of workingmen, and similar questions which lead to understandings usually of an informal nature, which may nevertheless affect very materially at times prices, wages, and market conditions generally.
An illustration or two will perhaps bring out more fully the possibilties underlying such an organization. One of the most important of these organizations is the chambre syndicale des fabricants et des constructeurs de matériel pour chemins de fer et tramways (the syndicate of the manufacturers and builders of material for railways and tramways). There are in France 64 different establishments engaged in manufacturing material of the kinds mentioned. All of them belong to this syndicate. The different establishments are grouped, for the purposes of the syndicate, into 4 classes, each of which is represented on the council by 3 representatives. The first class consists of the builders of locomotives; the second, of the builders of freight and passenger cars; the third, of the manufacturers of springs, axles, and various kinds of iron and steel material for the building of cars; the fourth, of the foundries and forges. This council studies questions of common interest and presents reports at the annual meeting of all of the members and at other times whenever it is necessary. The council meets regularly once a month at least for the carrying on of its business. Reports of its meetings are kept, and any of the members can consult these reports. Each member pays an admission fee of 200 francs and an annual fee of 300 francs to pay the expenses of the organization.
1 See translation complete, Part II, Chap. IV.
The railways of France are all in the hands of five companies, which have built them and which manage them. As, however, under the law these railways will after a period of years fall into the hands of the State without further compensation, it is natural that they should be under careful Government supervision, and that the Government should have rather rigid regulations regarding the nature and quality, of the material furnished to the railways. This in itself sets a certain standard of work for these manufacturers of railway material which enables them the more readily to understand the nature of the business of one another. These manufacturers of railway materials, too, have practically only five railway customers; the tramways may be left out of consideration for the moment. The railways, considering their connection with the Government and the fear which the Government has of public opinion, are practically compelled to buy most of their material in France itself. In consequence, the manufacturers of materials, by acting together, are able at times to bring considerable pressure to bear upon the railways, and at times they doubtless secure higher prices than would be possible under other circumstances where the railways could readily secure material from abroad. In one comparatively late instance, when the railways did buy some American locomotives, the railway companies and the Government were very sharply criticised for the action. When special contracts are to be let by the railways there is little question that the members of this syndicate, as they meet for purposes of general interest, also at times talk over informally these contracts and make agreements that they will not underbid one another to any great extent, but that the contracts shall be taken at substantially a fixed rate by one and be distributed among the others.
This tendency of the industrial syndicates seems to be on the increase. In consequence, although formed largely under the law, to begin with, in the interests of the laboring men, to establish relief bureaus and similar institutions, and for the furtherance of progressive legislation, they now seem to be used by some of the powerful manufacturers for purposes quite similar to those sought by the American capitalistic combinations.
A second syndicate of a similar kina is the chambre syndicale des constructeurs de navires et de machines marines (the syndicate of builders of ships and of marine engines). This syndicate has 12 members, which include all of the shipyards and similar establishments in France, with the exception of one lately established. It can readily be seen that, when the members of the syndicates are so few in numbers and the marine interests of the country are so largely in their hands, similar informal agreements regarding prices, bidding on contracts, and so on, would be much easier. The information that such informal agreements as a matter of fact do exist in these professional syndicates comes from members and officers of syndicates themselves and can not be doubted. It is not probable that such agreements are of so firm a nature or are so monopolistic in character that they can be considered violations of the penal code forbidding corners and monopolies (accaparement).
The combinations in France, numerous as they are on a small scale, are nevertheless so rare in the form of a great corporation that the promoter and his methods of work are matters of slight interest-practically of no interest. The considerations regarding allotment of stock, stock watering, and similar subjects that form so important a part of the discussion of this subject in the United States and in England have, therefore, practically no place here. So far as any promoter is needed to bring about these agreements, his pay will come either from some ordinary salary or fee or else from the advantage that he gets from the combination himself. Combinations seem to have been brought about largely by the men themselves directly interested without the aid of a promoter. Although in certain instances the lawyer whose business it is to prepare the agreements in such a way that no law will be violated takes also an active part in the promotion of the combination, his pay would regularly be, under the circumstances, a fee, and would be considered really as the reward of his professional work.
(a) Freight.—The advantages of the combinations of the form found in France are to a considerable extent the same as those found in the United States and in England, although in certain particulars they are less marked.
To begin with, there are no freight discriminations worthy of note given by the railroads or transportation companies to the combinations because they are large shippers. On the other hand, it is possible for the combinations to secure the
advantages of filling orders from the nearest plants. As has already been said in describing the form of organization of the Comptoir Métallurgique de Longwy, it is the custom for pig iron to be shipped to consumers from the plants most favorably situated, and in certain cases the plants whose situation is most favorable are in consequence given by the comptoir a somewhat higher rate for their product than are other members less favorably situated. Not only in their articles of agreement do they call attention to this means of saving, but the managing director and others in the iron business believe that this has, as a matter of fact, been a very important element in their success.
(1) Purchase of supplies and material.—The advantages found in other countries from having supplies purchased on a large scale by a single person or bureau representing a number of manufacturers are found here also. So ready a means of saving would not, of course, be overlooked by those syndicates whose organization is so complete that purchases can be made in this way. On the other hand, inasmuch as most of the combinations are of a very loose form, the management of the separate establishments being left largely independent, this advantage is not found to the same extent that it is in the other countries mentioned.
(c) Costs of selling.– Here, again, the advantage of saving comes to only the syndicates most completely organized. The sugar combination, from the fact that its agreement covers only the question of limitation of the product and, to a certain extent, incidentally the division of territory, while the management of the business is left entirely in the hands of each separate refiner, makes practically no saving from these sources. It may perhaps be understood that, inasmuch as the pressure of competition is somewhat relieved, so that they do not crowd so earnestįy into the generally recognized territory of one another as would be the case under unrestrained competition, a little is possibly saved in the cost of selling; but the amount is so trifling, if, indeed, it can be recognized at all, that it is not worthy of consideration. The same remark would of course apply, speaking generally, to the petroleum combination, and to others of similar nature. On the other hand, in the case of the pigiron syndicate at Longwy, all of the advantages of saving in the cost of selling are secured that are derived by a single corporation. All orders are sent to the central bureau, which fixes all prices and determines the time and manner of shipment. The bureau itself fixes all conditions of sale, of credit to the purchasers, and of all other matters that in any way affect it. A single corporation, owning all of the different plants, could manage the selling process scarcely more rigidly. The savings from this source are considered very material.
(d) Wages.—In the case of the comparatively few combinations which have taken the form of single corporations, as, for example, the paper combination of Limousin, the combination is in a position to affect wages. By virtue of the greater strength of the combinations, they can resist more easily a strike, and from the savings mentioned they may be in a position to increase wages somewhat if they desire. Such combinations in France, however, are so few and have been in existence so short a time that no direct effect can be traced.
So far as the professional syndicates are concerned, they have in a od many instances succeeded in establishing in connection with their workingmen relief funds of various sorts. They have also been partly instrumental, at any rate, in securing certain kinds of factory legislation regarding the working of women and children, which is to be considered an effect upon the wage-earning class. Of course, however, these professional syndicates are not to be considered in any way as industrial combinations of the class taken up for this study unless through the informal agreements of the kind mentioned in the preceding section they begin to secure directly some monopolistic control of the market. In those instances, where this has presumably been accomplished to a slight extent, they naturally have not, as combinations, had any effect whatever on labor.
When one considers the more usual form of industrial combination in France, that of an association which from the central selling bureau or other agency controls the amount of output and arranges for a uniform selling price, the situation is different again from that of the preceding cases. There the management of the separate establishments is regularly left entirely to those establishments, and the testimony is practically universal that the combination as such has no effect upon the wageearners or the amount of wages paid. On the other hand, it becomes, of course, evident that if, through these combinations, higher dividends can be paid or larger rates of profit made, the separate establishments are in a position to deal somewhat more liberally with the wage-earners than would be the case if the syndicate did not exist.
1 La Société Générale des Papeteries du Limousin.
In certain special instances these members of the combinations have, as a matter of fact, done a great deal for their workingmen, and claim great credit for such action. For example, the Raffinerie Say, perhaps the leading sugar-refining company in France, and one of the most important members of the so-called sugar combination, has done a great deal for the improvement of the condition of the workingmen. This establishment, founded in 1832, is one of the long-established firms which, as is so common in Europe, has remained for successive generations in the same family, and which thus has assumed relations with its workingmen more intimate, perhaps, than is usual with ordinary corporations. With the aid of the employers, and to a considerable extent under their direction, the employees of this company have established societies for mutual aid, pension funds for disabled or superannuated employees, funds for insurance against accidents, a savings-bank fund for sick and wounded employees, etc., several of which institutions have received large gifts in money from the employers. The company made for exhibition in the section of social economy in the Paris Exposition of 1900 an exhibit showing the results of these different establishments over a series of years, together with the effects upon the workingmen as regards the stability of their employment, the changes in their rates of wages, premiums granted to workingmen, and such matters. In this way were shown relations existing between the employers and employees over a series of years.
The company, of course, would deny any direct relationship between these gifts of theirs to their employees and the sugar combination so far as it controls the annual output, and the only connection that anyone could find would be this: That if profits have been made more secure through the action of the combination, the company could afford to be more liberal with its employees. Most, however, if not all of these special institutions, which have tended to improve the relationship between employers and employees, were established before the sugar combination was made, so that no connection can be traced. On the whole, then, it is perhaps just to say that, owing to the fact that the different members of the industrial combinations in France regularly control entirely the management of their own establishments, the combinations can not be said to have any direct effect upon wages paid to employees.
The chief purpose of combination in France has doubtless been so to restrict competition that prices could be improved. Sometimes this may be said to be in the nature of an absolute increase; more frequently, perhaps, in the relative increase between the cost of production and the price of selling, and at times merely an increased stability of price. There is no doubt that this purpose of affecting the price has, in individual instances at any rate, been accomplished either directly or indirectly. In the case of the sugar combination, as was stated earlier, no agreements whatever are made regarding prices, but it is none the less certain that agreements regarding limitation of the output indirectly affect the price, and that the chief purpose of restrictions upon the output were to secure prices that should be both higher, as compared with the cost, than before, and also more steady. In the opinion of the well-informed people in France both these results have been attained.
In the example that has already been cited of the paper manufacturers of Limousin, an increase in prices seems to have been secured. During the period of free competition, before the combination was formed, owing partly to competition and partly to improved methods of manufacture, there had been a decrease in price in recent years from 30 francs per hundred kilos to 13 francs. Soon after the combination was made the price was advanced to about 14 francs per hundred kilos, and this advance in price is ascribed directly to the monopolistic power of the combination. On the other hand, the competition of the other paper manufacturers in different parts of France, as well as international competition, is so great that there seems no likelihood of any considerable advance being made. In spite of the protection of a duty of 10 francs per hundred kilos on the product, foreign competition, especially of Germany, Austria, and Italy, is very menacing:
On the whole, the best information regarding the effects of these combinations upon prices, and, for that matter, upon nearly everything else connected with industrial combinations in France, is to be had in connection with the Comptoir de Longwy. This bureau has secured so much of a monopolistic power that it has been able to dictate very completely conditions of sale and in many cases, beyond question, to fix prices somewhat arbitrarily.
As regards conditions of sale, the bureau regularly makes a contract to receive the amount of its invoices in negotiable paper, or in a draft upon a bankable place within thirty days from the end of the month of shipment, without any discount. In case