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the Steel Corporation in recent years has had less to do with the steadiness of demand for steel than the relatively continuous prosperity of the country. This is evidenced by the demoralization of prices during the last year or so.

If it were possible for trusts, when subjected to strict regulation by the government, to adjust supply accurately to demand, and to cause demand itself to be more steady, that fact would constitute an argument of considerable force in behalf of the policy of permitting trusts to exist subject to regulation. As already suggested, however, the task of the government in regulating prices for an industry subject to variable demand would be extraordinarily difficult. The efforts at doing so would probably prove far from successful in bringing about steadiness of production.

The argument with regard to the effect of competition in causing irregularity of consumption and of production is often extended further. It is urged that competition in modern industry tends to become so fierce as to destroy capital. So-called destructive competition, it is claimed, may bring even the most efficient concerns to bankruptcy. Such a result not only injures investors, but at least sometimes means actual waste of capital, and therefore, in the long run, injures consumers as well. Indeed, some believe that pools, tho possessing few advantages with respect to efficiency of production in other respects, are justifiable as means of preventing the losses of destructive competition.

The subject of destructive competition has been discussed in the second chapter with reference to its influence in driving concerns into combination. It was there shown that, in the great majority of manufactur

ing industries, competition is not likely to become as fierce as in transportation industries. The principle of increasing returns, which tends peculiarly to cause bitter competition, has comparatively little application in manufactures. The concern which finds current business unprofitable usually restricts its output or stops it altogether, looking to the time when the increase of demand will again render the business of the plant profitable. (It does not go on cutting prices until forced into bankruptcy.

Against these alleged advantages of monopolistic combination must be set the tendency of monopoly to lessen efficiency and retard industrial progress. It is generally recognized that the possession of a monopoly tends strongly toward stagnation. Competition is a powerful spur to efficiency. The competitor who would not go to the wall must be ever on the alert. Inventions of machinery and improvements in methods are essential to successful competition. Marked as has been the progress in the railroad business of the United States, there is much reason to believe that American railroads have made less progress during the last decade or two than most American manufacturing industries, and that this is due to the comparative absence of competition in the railroad business during recent years. The relative unprogressiveness of the largely monopolized telegraph business in this country, at least till recently, has often been commented on.

It can scarcely be proved that any of the leading trusts have been particularly lacking in progressiveness, that they have actually made fewer improvements in methods than have been made in industries where

competition was active. Comparisons on this point are virtually impossible. But the trusts have thus far been on the defensive both against potential competition and against public criticism. This defensive position has made them look closely to efficiency. Should the policy of permitting monopolistic combinations be adopted, there would be danger that the absence of competitive pressure would more than counterbalance any possible advantages from the elimination of competition.

Regulated monopoly is likely to be even less efficient than unregulated monopoly. The trust, if unrestricted in prices and profits, has at least a motive to do business as cheaply as possible. When, however, the trust anticipates that every reduction in costs may mean a reduction in prices, that profits resulting from increased efficiency may be wholly or largely taken from it by government regulation, even this motive tends to disappear. In the case of public service corporations various methods have been pursued, with more or less success, for securing a division of the advantages of increased efficiency between the public and the monopoly. Should the government enter upon the policy of regulating the prices and the profits of trusts, similar methods would have to be followed as far as possible. Because of the multifarious character of the different industries, however, it would be much harder to apply these methods successfully to trusts than to the limited number of public service enterprises.

Let us now bring together summarily, the results of this discussion of the trust problem. . We have tried to show that unregulated combination is dangerous to the public welfare.] Even if they could be deprived of the .

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weapons of unfair competition or of the advantages of natural monopoly, - a thing by no means easy, - trusts and pools would still probably possess a material degree of monopolistic power. It would be a dangerous experiment to remove the ban of the law from them without substituting effective machinery for regulation.

We have sought to show further that it is feasible to prevent by law. the more formal types and of contracts in restraint of trade. It may be impossible wholly to prevent informal understandings which in some degree restrict competition. These informal understandings, however, are far less effective in maintaining monopoly prices and charges than formal

combinations such as pools and trusts. te hawe It was pointed out that the difficulties of govern-1

ment regulation are exceedingly great.) The policy of permitting trusts to exist might result in the extension of trusts over almost the entire field of industry. It might also result in practically complete monopolization by each trust of its particular field. The determination of costs and of investment as a basis for the fixing of prices and profits over the multifarious field of industry would require immensely elaborate investigations and would involve extraordinarily difficult questions of judgment. Proper adjustment to the ever varying conditions of demand would be almost impossible. A vast governmental machinery for fixing prices and profits would have to be superimposed upon the machinery of private business. Government ownership on a vast scale or even complete socialism might readily be the outcome of this policy.

Finally, it has been shown that most of the alleged advantages of trusts in efficiency could probably be

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secured in quite as great measure through large individual plants and through smaller combinations not powerful enough to threaten monopoly.) While the suppression of competition itself may tend to bring about certain economies and other advantages, the importance of these is usually over-estimated, and there must be set against them not only the grave difficulties of regulation, but the tendency of monopoly and of régulation itself to lessen efficiency.

It may be granted that the data and the reasoning throughout this discussion have been not altogether conclusive. It cannot be expected that every one will agree with the points of view here taken. The burden of proof, however, rests upon the defenders of the trusts. They ask us to permit the trusts to exist, whether with or without regulation. In this they are asking a departure from what until very recently were universally considered the proper principles of law and of economics. Their argument is certainly no more conclusive than the argument of those who would suppress trusts.

To defend big business is easy. The advantages of large scale production are obvious. To identify big business and large scale production with the trust is quite another thing. The glamor of the huge corporation with its mighty plants, its splendid organization, its thoro accounting system, its integration of related processes, must not blind us. All these are essential to progress. To get them we might even be willing to pay the high price of surrendering competition. But we must be sure that they can be secured at no lower price before we tender such a compensation, or before we even enter on a path which may ultimately necessitate that compensation.

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