labour the relations are sometimes friendly; more often they are not. Subdivision of labour is carried to an extreme point, labour-saving machinery is highly developed, and the majority of the workers are therefore semi-skilled operatives who toil endlessly at some small repetition process. The trust refuses to recognize any union containing people or leaders who are not its own employees. It may establish extensive schemes of welfare work and profit-sharing. But at the same time the conditions, especially of the lowerpaid labourers, are frequently very bad. An investigation into the causes of the 1919 steel strike showed that one-quarter of the Steel Corporation's employees were working 12 hours a day for seven days a week, that nearly three-quarters were getting wages below those necessary for the maintenance of a decent standard of living, and that black lists, detectives, and other devices were employed to fight any attempt at organization.

Difficulties and Limitations. The path of the trust it not all strewn with roses, and combinations have not always been unqualified successes. This is due to many causes. (1) America is such a big country that it is almost impossible for a trust to get control over all firms and sources cf supply. Scarcely any organization (except the meat ring and the tobacco trust) has been able to get a grip on the foreign market. In the steel trade international agreements have achieved some success, but in the oil industry Rockefeller has met with strenuous opposition from other oil interests. The governments of Great Britain and Germany defied the Standard group, the former by acquiring oilfields in Persia and then Mesopotamia, the latter by establishing an Imperial oil monopoly to break the Rockefeller grip in Germany.

(2) The mental strain of controlling a huge trust is so great that few men can do it successfully. Harriman ruled the American railways with a strong hand, but on his death there was no one capable of taking his place, and the trust slowly fell to pieces.

(3) If a trust tries to push its prices too high it causes a decline in the demand for its goods, and at the same time calls in new competitors and makes possible the importation of foreign goods. This happened in the steel industry, for independent producers grew at the expense of the Steel Corporation.

(4) Many trusts are over-capitalized at birth. Their plant is worth, say, $700,000,000, but they have to make profit for $1,100,000,000 of shares. Hence dividends tend to be low on common stock, and a depression smashes up the organization. Every trust, therefore, aims at "squeezing the water'' out of its stock by increasing its assets.

(5) The state has begun to deal more courageously with the trusts. For many years the Sherman Act lay unused, or was evaded by some change in trust organization. In 1903, however, the Bureau of Corporations was established to make enquiries into the organization and conduct of trusts with a view to legislation or court proceedings where necessary. In 1904 holding corporations were declared to be illegal. During Taft's presidency (1908-1912) the Oil and Tobacco Trusts were ordered to dissolve, and Dr. Wilson was elected President in 1912 partly because of his attitude on the trust question. As he declared, the earlier administrations had "roared against the trusts like any cooing dove."' In 1913 the National Cash Register Company was convicted under the Sherman Act, and proceedings were commenced against the Sugar and Steel Trusts. The tariff was amended

to permit more foreign competition, pig-iron and steel rails being placed on the free list.

In spite of these obstacles the trusts have since 1914 grown stronger, more numerous, and more prosperous. In 1918 the Steel Corporation had net earnings of $200,000,000 from which to pay its bond and share holders. Government policy has pursued two distinct tracks. On the one hand the Sherman Act was amended in 1918 by the passage of the Webb Act, which declared that trusts or associations formed for foreign trade, whether buying or selling, would not be regarded as illegal. On the other hand the grip which the ring of five big packing firms had secured over the food supply of the country frightened the nation, and led to investigation (1918). It was found that the "big five" had been manipulating the live stock markets, restricting national and international supplies, controlling the price of dressed meat and other foods, crushing competition, and securing special privileges from railroad and dock companies. The international ramifications were world-wide, and threatened to produce a meat trust which would control the supply of every nation. In January, 1921, the Senate passed a bill creating a Live Stock Commission to regulate the meat-packing industry. What effect this will have remains to be seen.

Trusts in Great Britain. It used to be the proud boast of Free Traders that Britain had no trusts. To-day that boast is forgotten. England was once the "classic home of competition,'' and until the eighties of last century competition was regarded as a thing ordained by providence. But in 1919 there were over 500 trusts or rings in existence in the country. The movement towards combination began about 1890, and until 1914 had made less progress and achieved far less success than in Germany or America. Its greatest expansion came with the War.

The slow growth prior to 1914 was due to many causes. (1) The free trade policy deprived industry of any artificial protection. If a British trust could absorb all internal competition, it still dare not raise its prices too high or the consumer would soon find a stock of foreign wares at his service. (2) British industry enjoyed little natural protection. The cost of carrying goods from Belgium, France, Germany, or America was so small that it gave the British maker only a small advantage over his foreign rivals. Where a country is isolated, or the cost of transit to it is heavy, its industries enjoy an advantage which enables them to become trustified. (3) Some British industries are scattered and in many hands. The textile trades are mostly carried on in hundreds of moderate-sized factories, the capital cost of which is not very great. The 3,000 coal mines, owned by 1,700 companies, are situated in seven chief areas which lie in different parts of the country. Hence it was wellnigh impossible to get combination or harmony among so many rivals. The Rhine coal industry, on the other hand, is in the hands of a few men, whose mines lie near together; combination is therefore possible, and has been most successful. (4) Britain has no monopoly, or even any large supply, of any special raw material on which to build up a trust. Its raw material is chiefly obtained from abroad. At the same time, however, the need for securing access to these raw materials has been responsible for the development of vertical combinations, as we shall see in a moment. (5) Before 1914 Britain had a large reserve of capital available for investment in any industry which showed especially large profits. Should any particular trust succeed in pushing prices to a highly profitable level, some of this capital would be invested in new works for that branch of

production, and would undersell the trust in order to capture the trade. (6) A great part of British industry before the war was producing for foreign trade, and here it usually proved difficult to abolish competition. International agreements for sharing out and controlling the world's markets have been successful only where industry is in the hands of a few big producers, catering for a few big consumers-e.g., the armament industry.

For these reasons the trust movement could not gain a strong grip on British industry. Manufacturers were compelled to rely for their profits upon efficient management, up-to-date quality production, and low wages, rather than upon any advantage which a trust might give them. And yet instances of rings, kartells, and corporations were to be found, growing in number and in strength, in pre-war Britain.

Some Instances. In the early days of the gas and water companies rival concerns were permitted to exist in the same area, though usually they soon came to some agreement. From 1592-1844 the Newcastle coal-sellers maintained agreements restricting output and regulating prices, but this "vend" broke down when railways made it possible to bring coal from other From that time onwards the great bulk of British coal was sold under competitive conditions. In South Wales the late Lord Rhonnda succeeded in establishing a small but profitable trust, which has flourished because it controls a quality of coal which certain buyers insist on having-i.e., Cardiff coal.

areas.

66

By 1886 the success of the trust in America had begun to attract attention in England, and attention led to imitation. Agreements gradually became popular, but were not always effective. About 1900 the railway companies began to fix uniform fares and freights, with interchangeable tickets. Competition was no longer allowed to cause rate-cutting, and the only way in which a railway company could capture trade from its rivals was by giving a better and quicker service, with more luxurious passenger accommodation. Shipping rings or 'conferences" began in similar fashion to contrci freights and fares on most ocean routes. The chief feature of the shipping ring was its system of deferred rebates. A refund of 10 per cent. on the ordinary freight was made to those who used only the ring's steamers; but the money was not paid until six months after the cargo had been sent. If in the meantime the shipper had sent any goods by an outside line he ceased to be regarded as a "loyal" customer, and lost his rebate. The shipping world, however, has not stopped at the ring stage; as we shall see later, it has gone on to the trust.

Many rings formed in other industries failed. This was due to the fact that prices were fixed too high, thus calling in home and foreign competition, or was the result of disloyalty to the compact. An ingenious attempt was made in the nineties in Birmingham to check and punish violations of agreements. In 1892 the Birmingham Bedstead Alliance was established. It fixed the prices of bedsteads so as to give every maker, however small, a profit. It entered into an agreement with the trade unions to pay wages on a sliding scale proportionate to the prices of bedsteads, give a bonus of 10 per cent. on those wages, and employ only union labour. If any manufacturer broke his bond to the ring his workpeople were to strike, and be supported by a fund provided by the employers. This alliance of capital and labour against the consumer promised well; within eight years prices and wages doubled. Then came foreign competition and violation of the agreement by three of the biggest firms. The strike fund

was soon exhausted, and the Alliance broke up in a most undignified manner. So failed one effort to make the pool watertight. There were many such.

Of trusts proper there have been several. The Imperial Tobacco Company, with a capital of £17,500,000 (1914), is the result of many amalgamations, and controls the greater part of the British tobacco trade. Some branches of the textile industry are carried on by men who possess almost a monopoly of their trade because of their specialized skill and the excellence of their goods. Hence, free to some extent from outside competition, they have formed trusts by amalgamating formerly competing works-e.g., the Bradford Dyers' Association. In some cases such trusts have pursued chequered careers because of their over-capitalization and defective management. Few firms have been willing to hand over their management completely to the trust heads, and the resultant policy has lacked uniformity. Perhaps the two most successful trusts are those which control the British and even the world's thread trade and soap trade. The thread firm of Coats was established in 1826 at Paisley. By 1890 it had a share capital of £5,800,000. During 1895-6 Coats amalgamated with his four chief competitors, raised the capital of the firm by another £4,000,000, and obtained a controlling interest in many smaller companies. Then came the purchase of a big Belgian rival, and the establishment of factories in America and on the mainland of Europe. Thus a big world monopoly was built up; thanks to the comparative absence of competition prices could be raised; thanks to the efficient equipment and management the working costs were kept down; the planting of factories inside protected countries made possible the evasion of tariffs, and the whole organization has therefore paid 35 per cent. profit for many years past, while at the same time building up vast reserves. In 1920 these reserves had grown to £10,000,000, and were therefore capitalized, thus doubling the share capital of the company. In similar fashion Lever Bros., Ltd., grew to be the colossus of the soap world, with a share capital of £40,000,000 in 1917, and much more since then.

Integrations. The British iron and steel trade has passed into the hands of a few big companies, and hence created conditions favourable to trust methods. In some cases rival firms have combined; but the chief development has been towards integration. This has been done with a view to ensuring a constant supply of raw materials on the one hand, and a ready market for one's products on the other. For instance, Cammells (steel producers) in 1903 joined hands with Lairds (engineers and shipbuilders). Lysaght, of galvanized iron fame, began with rolling mills, but soon found it necessary to secure control over ore deposits, blast furnaces, and steelmaking plant. John Brown & Co., of Sheffield, built up, by amalgamation and absorption, a completely independent economic unit. It owns ore mines in Spain, coal mines in Yorkshire, limestone quarries in Derbyshire; it has coke ovens, blast furnaces, steel converters, and mills for producing any kind of heavy steel goods. It has control of factories engaged in making cannon, projectiles, small arms, and ammunition; it owns engineering and ship-building works at Clydebank, and has a strong interest in Harland and Wolff, shipbuilders, of Belfast. Hence it can turn out almost anything in the iron and steel lines, from pig-iron to a super-dreadnought or 50,000-ton liner.

Thus, to sum up, successful trust action before the War was limited to those industries where a monopoly of specialized skill existed (dyeing), where foreign competition was impossible (railways), where some special

product was concerned (Cardiff coal), where world competition could be crushed or conciliated (soap and thread), or where industry was in the hands of a few big units employing large capital (iron and steel).

British Trusts since 1914. The War gave British industry both natural and artificial protection, and in various other ways produced conditions highly favourable to the growth of trusts in number and strength. The Board of Trade encouraged the formation of associations, especially for pushing export trade after the War, and the government generally preferred to deal with organizations rather than with individual firms. Hence an official investigation into the growth of trusts reported in 1919 that it found "'in every important branch of industry an increasing tendency to the formation of trade associations and combinations, having for their purpose the restriction of competition and the control of prices. Many of the organizations (had) been created in the last few years.

The

The most important developments were in shipping and banking. P. & O. gradually absorbed most of the lines serving Asia and Australasia, buying them out by giving cash and big pieces of specially created stock. In the banking world amalgamation, which since 1891 had reduced the number of private banks from 37 to 6, and that of joint stock banks from 106 to 34, accelerated its pace in 1918. Giant banks fused; by 1919 85 per cent. of British bank deposits were controlled by five banks, and a committee which inquired into the matter in 1918 declared that something approaching a money trust might emerge at "a comparatively early date.' In 1918 25 explosives concerns amalgamated into one company with a capital of £18,000,000; 1919 saw Vickers, Ltd., cast its cloak over the production of rolling-stock, electrical machinery and equipment, and train brakes. Big London multiple stores absorbed provincial firms, one London theatrical group secured control over nine theatres, and in the Lancashire cotton industry scores of factories were amalgamated under one board cf directors. One big feature of these developments is the increased capital on which production has to pay dividends. Generally shareholders were given about one and a half or two shares in the new company for every one they held in the old one, and so if the abnormal profits of 1919 subside to smaller figures it may be found that many of the new trusts are unable to pay a satisfactory rate of profit on their capital.

British industry faces the post-war period organized in phalanxes. Internal competition has been limited, and giant groups of capital in Britain face similar big groups in other lands. Whether the future will see these rivals lock in deadly struggle or amicably come to terms the future will show.

German Trusts. Germany's economic progress after 1871 was rapid but uneven. She had her crises and severe depressions; she suffered at times from over-investment and the results of speculation. Though free from unrestrained foreign competition, she felt to the full the effects of internal rivalry. Hence there emerged a trust movement, but under different conditions and with different results from those of the United States. On the one hand the railways were state-owned, and so it was impossible for any trust to obtain discriminating rates as Rockefeller did. On the other hand, German law recognized agreements in restraint of trade, and allowed a ring to bring into court any member who violated the agreement. The trust, therefore, was not driven, as in America, to evasions of the law and