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competition—which does not enter into the problem when the monopoly is legal in its nature.

He may find it best to secure the greatest returns possible for only a short time, knowing that, if he follows that course, competitors will comparatively soon force him to lower his prices. Perhaps the best example of a temporary monopoly following this plan is to be found in the case of the Wire Nail Pool, which existed in the years 1895-96. The Pool was enabled to increase the prices rapidly from $1.45 per hundred to $1.80, to $2.15, to $2.65, to $2.85—where it held them six months—to $3, for two months, and finally to $3.15, where it held them six months more before the break came. By the end of that time, after some eighteen months of monopoly, competitors had succeeded in providing facilities for manufacture, so that the Pool was broken, and prices fell back to a competitive rate, although not quite so low as they had been before the organization of the Pool. Indeed, in this case, the boldness of the Pool managers in pushing prices so very high doubtless extended the time of their monopoly. Competitors enough to break the Pool would have arisen sooner, had not each one anticipated its speedy collapse on account of its high prices promising enormous profits. Each believed that some one else must very soon enter the field.

On the other hand, it may be that the so-called capitalistic monopoly may consider it wiser to attempt to secure its returns permanently. In that case, while it may perhaps keep prices somewhat above former competitive rates, it must keep them low enough so that the temptation for competitors to enter the field will not be great, and it must be able to put them without absolute loss lower than it would be possible for an ordinary rival to manufacture and sell.

It would probably be granted by all that an organization controlling for the time being 90 per cent. of the output of any product, by putting its prices down, can compel its few rivals to follow; while, on the other hand, it may put prices up above former competitive rates, and can still for a considerable length of time, largely control sales, inasmuch as the other sources of supply cannot fill the demand and moreover are glad to take the higher prices without much cutting to increase their sales. If its competitors, controlling only 10 per cent. of the output, put prices up, they will make practically no sales, inasmuch as the combination can supply on short notice the entire market; while, on the other hand, if they put prices down below the market rate, the combination will not be compelled to follow in all places, inasmuch as the competitors cannot supply the entire market. It need meet their prices only in their own localities. In fact, it is not infrequently the case that the small competitor, owing to the fear of customers that he may not be able to supply their orders, will be compelled to sell very generally at something below the market rate as fixed by the combination. Testimony, given before the Industrial Commission, as has been previously stated, seems to show that some of the competitors of the American Sugar Refining Company have during the past year, for a considerable part of the time, been compelled to sell at one-sixteenth of a cent per pound below the market rate.

On the other hand it may be noted that a small manufacturer, when, by competition, rates are driven below cost, can compel his monopolistic rival to suffer large losses. By going into the large markets and offering goods at low rates but delivering very few, he may at times compel his rival to sell very large quantities at a loss, so that his total losses will be vastly greater than those of the small man.

Now, will experience justify the contention that mere possession of great capital will give substantially no monopolistic power permanent in its nature, unless some element of legal or natural monopoly or some special favor, such as comes from the tariff or from discriminating rates on railroads, be also secured? Of course this question cannot be settled absolutely on a basis of fact; but certain advantages come from the possession of large capital which clearly under our present system of laws tend toward monopoly. So far experience seems to justify the belief that monopoly within certain limits (i. e., monopoly as the word is at present used, meaning unified control enough to hold competitors well in check, as evidenced by the power to put prices higher than former competitive rates while still excluding nearly all competitors), as has been intimated, may be secured simply by the possession of large capital. This power to get higher rates depends generally upon the ability to put goods on the market without loss at lower rates, if need be, than those charged by its rivals.

And yet the experiences of the United States Steel Corporation and of the American Sugar Refining Co., seem to show that in the case of well equipped competition it is, as a practical matter, not wise policy and probably not even possible to kill competition entirely. A strong competitor with only one plant, if that is well equipped, could still hold the field in its own locality even though it could not follow its greater rival into all its extensive territory. While the combination might still largely dominate the great market its so-called monopoly could hardly be exclusive.

A large combination, controlling from 75 per cent. upward of the output, with its manufacturing plants favorably located in different sections of the country, would certainly have a decided advantage in freight rates, especially if its products were bulky, over any competitor who would set up in business, unless that competitor were to enter the contest with substantially equal capital. If such a rival entered the field, there would be in operation manufacturing plants which, on the whole, could readily supply one-half more product than the country needed. It may readily be granted that if capital were on hand to be invested in such large amounts, the new organization could force the old combination to sell at former competitive rates or lower. Those, however, who take the position that potential competition will prevent prices from going at all above former competitive rates, overlook the fact that new capital is not at all likely to be invested under such circumstances, unless the profits of the combination are put very high indeed. The reason for this is perfectly evident. It is absolutely certain that, if competition of that kind is tried, prices will be forced down not merely to the normal competitive rates among small manufacturers, but far below that, and those investing their capital for purposes of competition are certain to make, instead of the high profits of the existing combination, very low profits or none at all.

The same situation exists, regarding the advantages of a large organization with branches in different parts of the country, in the possibility of its lowering prices to cost or lower in special localities, for the sake of forcing out its smaller rivals, while keeping prices elsewhere above competitive rates among small manufacturers. This power of destructive competition alone, which may depend solely upon its large capital shrewdly invested, is sufficient to enable it to crush out any small rival. And yet numerous small rivals each in a different locality and each striving only to hold its own small field will cut so deeply into the profits of the great combination that they will materially affect its hold on the market. These facts combined with restrictive legislation have led most of the great combinations to abandon largely the practice of mere destructive competition. On the other hand, if a rival powerful enough to meet the cuts of the great combination in substantially all markets were to enter the contest, it would be with the absolute certainty that, instead of securing high prices and the consequent high profits of the existing combination, the result must inevitably be a competition so fierce that prices would be forced below usual competitive rates, and profits would entirely disappear. If it be suggested that such competition might be started with the idea of selling out to the combination, the fact still remains that this enlarged combination, organized with the certainty that it would possess plants sufficient to supply considerably

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