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(a) After deducting depreciation and replacement fund, balances at Dec. 31, 1916, as follows: Balances in various funds, $138,596,098; general
(b) Includes insurance and depreciation funds assets and purchased bonds available for future bond sinking fund requirements (securities
Employees' Deposits, etc.
Accrued int. & unpresented
Pfd. dividend payable
Undivided surplus of U. S. Steel
(a) In addition there are, $19,044,000 capital obligations of subsidiary companies authorized or created for capital expenditures made, held in treasury subject to sale, but not included in assets or liabilities.
Out of its funds it has also built large new steel manufacturing plants, especially at Gary, Indiana, the largest steel plant in the world. The tract contains about 9,000 acres, with some ten miles' frontage on Lake Michigan, and is immediately adjacent to five front lines of railways.
The best idea, perhaps, that one can obtain easily of the size and importance of the Steel Corporation's work is shown by giving the consolidated general balance-sheet of the Corporation and subsidiary companies of December 31, 1916.
The causes of the consolidation of the Steel Corporation were probably much the same as those of the other great consolidations. The Carnegie Company, besides making steel rails and the heavier kinds of steel, was planning to extend its field of operations into the manufacture of wire nails and similar products; while, on the other hand, the American Steel and Wire Company, the National Tube Company, and others, were finding it necessary to build their own furnaces for the production of iron ore and the basic steel for their more highly finished products. Moreover, several of these larger establishments had already purchased ore and coal properties and lake ore vessels so that they were rapidly becoming integrated companies which would no longer appear as purchasers of one another's products.
Again, from the financial viewpoint there were several important groups interested not only in these various manufacturing corporations, but also in the railroads, and a trade war among these large corporations would be certain to result in a depreciation of many of the securities and ultimately, quite probably, in the bankruptcy of some of them.
The movement toward consolidation in the years immediately preceding had been very rapid, and had been also apparently successful both as regards the profits that the companies were making and, what was perhaps of greater importance, as regards the real savings effected. Savings in
freight, in the better use of skilled executives, in the division of labor among the different plants, in the ability to close the more poorly situated plants concentrating the work to better advantage in those best situated-all these and other advantages were so apparent that consolidation of these many companies seemed a natural further step to take. By bringing together all of these companies there was doubtless more or less of a lessening of competition in some branches of the industry, although in no field did competition cease. Where it was least the Corporation controlled patents, giving it a legal monopoly. But probably of distinctly greater importance was the fact that through the integration of the various kinds of industries from the ore and coal mines to the highly finished products there was a greater opportunity of making savings than would otherwise have been possible.
At the beginning there was a large increase in stockholdings, and much was said with reference to the large amount of watered stock issued. In later years, it seems to be generally agreed that, owing in part to the increased demand for steel, which has affected vitally the value of the properties, but still more to the fact that the large amounts of ore and coal properties that had been secured have increased enormously in value, the actual cash value of the properties now held probably is equal to, or exceeds the value of the total capitalization.
The United States Government brought suit against the Steel Corporation in 1911. The case was tried in the district court of the United States for the district of New Jersey; and after the taking of voluminous evidence on both sides, and arguments by the ablest counsel, a decision was rendered (June 3, 1915) in favor of the Corporation. The most important point in the decision has to do with the question whether the size of a corporation or the percentage of its output in the market renders the combination illegal; or
whether the acts of the corporation itself as promotive of the public welfare, or antagonistic thereto, is to be considered the decisive point. On this point, the court, referring to the Standard Oil and Tobacco Companies cases previously decided, said:
"These cases may be taken to have established that only such combinations are within the Act (the Sherman AntiTrust Act) as by reason of intent or the inherent nature of the contemplated acts prejudice the public interests by unduly restricting competition or unduly obstructing the course of trade." And again: "It will be seen that this case is practically one of business facts. It will be seen that in location, facilities, capital, and basic supplies they show such past, present, and prospective competition as affords just grounds for concluding that the steel and iron business of this country is not being, and indeed, cannot be monopolized, that the real test of monopoly is not the size of that which is acquired, but the trade power of that which is not acquired." And further: "We dismiss once and for all the question of the mere volume or bigness of business. The question before us is not how much business was done, or how large the company that did it, the vital question is: 'How was the business, whether big or little, done? Was it, in the test of the Supreme Court, done without prejudicing the public interests, by unduly restricting or unduly obstructing trade? The question is one of undue restriction or obstruction, and not one of undue volume of trade." These statements put the case squarely on the issues, not of verbal quibbles, or of legal technicalities, but of the public interest as shown by the actual facts.
The case was appealed by the government, and is now pending in the United States Supreme Court. Upon its decision depends not merely to a considerable degree the welfare of the Corporation itself, but what is of far greater importance,