provisions which deprive him and his fellow shareholders of all effective power over the directors for a period of years, buys the stock knowing his own risk.

It is not intended, of course, to overlook the fact that too great power given to the shareholders, or too close a knowledge of the interior management of a corporation by the shareholders, may easily result in injury to the interests of the great majority of them. It is not desirable for a corporation to have its competitors know the details of its management. If any shareholder were at liberty to examine the books of the corporation at any time, or if the directors were compelled to give to the shareholders the privilege of examining closely the details of their management, it would be a comparatively easy matter for the manager of a rival company to buy a few shares of stock in order that the lawful and proper secrets of the corporation might become his. It would also be possible for an individual shareholder practically to levy blackmail upon the corporation, which it will promptly, however unwillingly pay, in order to prevent proper secrets of management from becoming public property. While one may readily grant that these dangers to the real welfare of a corporation exist if too great power is given to the shareholder, one must not overlook the fact that the other extreme is no less dangerous.

It would be very desirable if more careful study were made of the forms of organization, as shown in the charter and by-laws of corporations. Intending investors would in many cases by such study be prevented from putting their money into corporations organized evidently for the purposes of speculation, or for the special

advantage of the directors and officers against the interests of the shareholders.

So, too, if more attention were paid to this feature of corporation organization and management, there would soon be some decided improvement in our corporation laws. Although many improvements have been made in several of our states within the last decade much that is desirable still remains to be done.

Of course these statements regarding Trusts apply to all large corporations, but the opportunities for speculation against the interests of the shareholders and of the public are so much greater in the case of the very large corporations, which have some monopolistic power, that the offense becomes almost a different kind.

Consideration of the dangers to the industrial community from the great corporations when improperly organized or controlled ought not, of course, to lead us to overlook the fact that modern industrial development has been largely dependent upon the corporate form of industrial organization with limited liability of stockholders. Moreover, there seems no reason to doubt that the great combination is another normal step in industrial progress akin to the invention of the steam engine or the electric telegraph. As in the early days accidents from the new machines were more common than now while the efficiency was vastly less, so we may all anticipate in the near future a rapid lessening of the evils connected with the great corporations and a decided increase in their efficiency. Indeed this stage of development has already been reached. Evils are lessening, benefits increasing.

CHAPTER IX

I

PRICES

F IN any industrial combination the economies which are made by saving the wastes of competition

can be secured, it is evident that, it is possible, without the profits being lessened, to put prices of the finished product below former competitive rates; or, on the other hand, to put prices for raw material above those common before. Or again, if, as a result of the combination, there comes an increased output from the demands of the export trade or from an added demand that might come from lowered cost, the price paid for raw material might through either of these influences be raised somewhat. What may be done if a certain degree of monopoly can be held, has already been discussed at considerable length in the chapter on Monopoly. What may be done is, however, but one consideration. It is, perhaps, of more importance to show what has been done, in order that we may be better able to judge the present industrial situation, to note the ways in which the leaders of the industrial combinations have really used their power, to see whether experience has in any respect changed their earlier policies, and to consider what changes in legislation or what new measures of legislation, if any, may be needed in order to adapt these combinations to our present industrial conditions. It will, perhaps, be best to

give as careful a statistical representation as possible of the prices over a series of years in several lines of industry where the statistics can be gathered, and thus to test the effects of the industrial combinations upon prices. While the effects can thus be shown here upon only a few articles, it is believed that they are sufficiently typical, so that they represent fairly well the actual effects of combination up to date. Similar studies of many other articles show, in the main, the same general results. From a theoretical discussion we can judge, perhaps, somewhat more accurately what the effect is likely to be in the future.

The actual effects of the industrial combinations upon prices form certainly one of the best tests of their usefulness or disadvantage to society. The popular impression seems to have been earlier that these combinations very greatly increase prices to the consumers. On the other hand, the Trust managers and their advocates are in the habit of claiming that, owing to economies of management, the Trusts lower prices to consumers, while at the same time they increase the wages of their employees.

It is, of course, comparatively easy by the selection of statistics at certain chosen periods to show either of these results. It has, in consequence, seemed wisest to secure as far as possible average monthly or yearly prices of the leading raw materials and finished products of several of the larger combinations for a series of years, and to plat these on charts in such a way that the relations at all times between the two can be most readily seen. In some cases it has been practicable to compare European prices with American, in order that

the influence of the Trust itself might more clearly be brought out. In certain cases there are combinations both in this country and in Europe. In that event it is no less instructive to make the comparison.

The differential or "margin" between the price of the raw materials and that of the finished product should show, other things equal, the cost of manufacture plus the profit. Unless one is somewhat guarded, however, one is likely to reach false conclusions, if this assumption is made without qualification. In nearly all processes of manufacture there is a considerable element of waste raw material. As the price of the raw material increases, the value of this waste is also correspondingly increased. In consequence, in order that the profits may be the same, the margin between the price of the raw material and that of the finished product should generally increase slightly with the increase in price of the raw material. Again, when the raw material has to be held in large quantities, so that it involves the investment of considerable capital, it can be readily seen that the interest charge for carrying this raw material is not a little increased as the price of the raw material rises. This, of course, is a factor of less importance than the other, but nevertheless is worthy of consideration. Moreover, in some cases the complexity of the processes of manufacture and the number of materials to be considered are so great that it is not possible to calculate this margin with accuracy. In all the cases noted, however, it is believed that the method followed has real significance and that the conclusions reached are valid within the limits indicated.

On most of the charts, in order to show the direct