more than the normal demand of the country at remunerative rates for a period of years, would, in all probability, make low profits on the total capital invested. If it attempted to make high ones, its prices would need to be put so high that still other competitors would enter the lists, and in course of time a reorganization must take place which must result in great loss of capital. This ultimate result will make the first strong would-be competitors wary. The various experiences of the American Sugar Refining Company in its earlier competitive struggles with Spreckles and later with Arbuckle seem fully to justify the above conclusions.

This same line of argument applies to practically all of the advantages that are to be secured by a large industrial plant. The only difference between the large business and the capitalistic monopoly is, after all, one of size and power which come from capital. A large manufacturing establishment which does not supply more than 10 per cent. of the output of the country may, perhaps, as regards the division of labor in the manufacturing plant itself, be able to manufacture as cheaply as a great combination which controls 90 per cent. of the output. On the other hand, in many lines of industry, it does not have the same facilities for marketing its product, owing to increased cost of transportation and a relative increase in the cost of advertising. Its power of competition is also smaller, since it cannot so readily make cuts in special localities against small competitors while keeping up its prices elsewhere, and since, also, supplying so small a part of the market, it cannot get its prices even temporarily above normal

competitive rates. Neither can it secure the numerous other advantages of a great combination which have already been cited.

This element of fear on the part of the small would-be competitor, who knows that he can be crushed out, is the influence which keeps him from investing his capital until the combination is securing considerably more for its product than competitive rates among small manufacturers. The certainty which keeps the large wouldbe competitor out, even when prices are considerably above such competitive rates, is that after he has entered the business the existing combination must force the competitive fighting so hard that profits will entirely disappear during the contest; and the knowledge that if a combination with the competitor is made, it must be with so large a capital and so much surplus productive capacity that even for a goodly time in the future the profits must be comparatively low, or more probably non-existent; while the endeavor to make profits would push prices up again which might tempt in new rivals.

The only kinds of competition that are likely to prove effective, if any does, are either that from another great combination in a collateral line of work or that from numerous smaller institutions each selling primarily in a special field or in a special locality. For example, a great steel combination might effectively add to its plants some tin-plate mills or wire mills or extend its work into any of the numerous branches of that industry. This movement has already begun in various lines of industry, both in the way of competition and of combinations which attempt to include all steps

of manufacture from the mine to the highly finished product. Such combinations will probably extend still further; but this fact does not change the principles laid down. It simply points to larger consolidations.

It will thus be seen that we may make properly a distinction between merely large capital and capital large enough to give an organization a virtual monopoly if it cares to exercise its power; otherwise to assure it an industrial leadership that may often exert an influence toward steadying the market that may prove in times of crisis helpful to an entire industry. The competitors of both the United States Steel Corporation and of the International Harvester Company have testified strongly to their fairness and their helpfulness in such emergencies.

It also seems certain that the sources of savings of a great combination, added to this fear of the attacks by great capital, are sufficient, in spite of potential competition, to enable a large combination to secure permanently under existing laws profits considerably above those which could be secured under a competitive system of smaller men, although not so high as might readily be secured by a legal monopoly or by a natural monopoly. This fact seems to justify the use of the expression "capitalistic monopoly," although of course one may readily concede that the power of monopoly in this case is not so complete as in the others.

One may note still further that experience seems to show that these larger combinations in the earlier days of the Trust movement frequently pushed their prices so far above usual competitive rates that other capital entered the field and pushed prices from time

to time back to, or often below, former competitive rates. In later years the policy seems to have changed in many instances and the "capitalistic monopolist" has apparently found it wiser not to attempt to make his monopoly complete, but rather to remain content with market leadership and fairly steady high profits, without attempting to crush his well-equipped competitors. For more than nine of the first twelve years of its existence, the American Sugar Refining Company (with capital stock not a little watered, if one judges on the basis of cost of reproduction and running cash capital) was able to keep its margin between raw and refined sugar considerably above the former competitive margin, and paid dividends of 7 per cent. on its preferred stock and 12 on its common stock, while laying up a surplus. These facts seem to show that its large capital did secure more than former competitive prices, and that it had certain monopolistic power. The nature of competition between larger competitors as compared with that among small rivals is considered at length in the chapter on Prices; but in this case it is well illustrated. After its earlier experiences new competitors kept arising from time to time and hostile legislation and court action checked the company's aggressiveness. Its proportion of the total output of refined sugar lessened. In 1907 it fell below 50 per cent. and has since declined still further until in the year 1915 its proportion was only 34 per cent. These facts show how practically impossible it is under present conditions in the United States to secure monopoly that is permanent without a patent or a legal monopoly.

The assertion made that the Sugar Combination also

received special favors from the railroads was long denied, but aside from that, the undeniable facts regarding the increase in the margin between raw and refined sugar, in the earlier years, as shown in the chapter on Prices, furnish sufficient cause for the high dividends. As late, however, as 1907 the company pleaded guilty to receiving rebates on railroads and paid a fine of $50,000. A somewhat similar assertion may be made regarding the Standard Oil Company. It was doubtless true that in earlier years it received great favors from the railroads. It is possible that it has received special favors from the railroads at times since, but though there was an apparent case or two of such favors in the form of rate discriminations they were advantages, perfectly legal in character coming directly from its large capital, which enabled it so to locate refineries and supply markets that it has an advantage over its competitors in certain territories. The other advantages claimed for the capitalistic monopoly, in crushing competitors by local cuts in prices, in transportation, and in other ways that until lately have been perfectly legal and normal in their nature, however unjust they may be, certainly seem in themselves sufficient to explain part at any rate of its high profits.

Similar experiences are found in the cases of other combinations of lesser note; and yet it ought to be repeated that in many cases, especially in earlier years, combinations have overreached and have paid the penalty of trying to secure exorbitant profits. More experience is needed to teach most of them the art of permanent monopoly so self-controlled that it is content with strong market leadership without ex