be little doubt that the great increase in the price of all these products was at that time due chiefly to the increase in the price of raw material and the strong demand. The leadership of the market, however, seems to have enabled its managers to make the best use of its opportunities, for the margin as well as the price increased rapidly from the date of the combination. After the formation of the United States Steel Corporation, however, a new policy seems to have been adopted -that of seeking good profits, but not extraordinary ones. The steadiness of the margin, as shown in line E after the formation of the Steel Corporation, is quite noteworthy, as compared with the enormous fluctuations for the six or eight years preceding.

The organization of the new Carnegie Steel Company was effected about the middle of 1900, but this apparently produced little if any effect upon prices. Early in 1901, with an increase in the price of steel billets and of pig iron, came also a slight recovery in the price of steel rails and of steel beams. Rails had fallen in the latter part of 1899 and through the first part of 1900 from $35 a ton, where, with the exception of one month, they had been maintained for nearly a year, to $26. About the time of the organization of the United States Steel Corporation, in February, 1901, the price was raised to $28. From that time until almost two years after the outbreak of the European war there was no variation. Then there was a rise from $28 a ton, first to $33 and shortly after to $38.

This absolute maintenance of an unvarying price for steel rails, through a period which lasted fifteen full years regardless of fluctuations in the price of pig iron,

of coal, of ore, of wages, is perhaps the most striking manifestation of the steadiness of price that our history affords. During the brief period of strong demand and of increased prices in 1902 and the earlier part of 1903, when it would have been easily possible to increase the price of rails by several dollars a ton, no change was made; on the other hand, during the years 1903 and 1904, in the period of depression, when the demand was relatively small and the prices of other grades of iron and steel were falling, the price of steel rails remained unchanged. During the succeeding years of 1905, 1906, and the early part of 1907, with prices in all lines rapidly increasing, with the demand for not merely other kinds of steel but also for steel rails rapidly on the increase, in some instances the demand being greater than could be met for prompt delivery, the corporation still refused to increase the price, although its smaller rivals would have been glad of the opportunity; and again, after the crisis of 1907, throughout the period of depression of 1908 and further throughout the period of recovery of 1909, although the demand fell off to almost nothing after the crisis, and finally with a strong demand through 1909, the price was maintained at the unvarying rate.

Again, after the war broke out in 1914 and prices of all kinds of steel were promptly raised with prices higher than any since 1900, the price of steel rails was still held steadily down for a period of some year and a half when at length, following the tremendous increase in the prices of raw materials, the price of rails increased though not proportionately.

If one were to compare the margin between the price

of steel rails and of its normal raw material, pig iron or steel billets, it would appear that the marginal cost of manufacture plus the profits had at times increased with the fall in the price of raw material, and at other times had decreased rapidly, as the price of the material, iron and steel, had increased. However, it appears further that the producers were determined to allow the railroads to rely absolutely upon one fixed price, which it considered reasonable, regardless of demand or of other influences which might normally be expected to affect the prices.

Indeed, it is generally asserted that the suggestion of a fixed price known long in advance came from the railroads themselves. Inasmuch as the prices of rails are an extremely important factor in the construction and maintenance of way, it is very important that the railroads know what they can count upon as regards the price of rails. After careful consideration longterm contracts were made between the railroads and the different rail manufacturers of whom the Steel Corporation is the leader. Then, some time before these contracts ran out, they were renewed for another long period. The agreements were not then, as has been so often supposed, between the different manufacturers to maintain prices, but between separate manufacturers and the railroads. It was natural enough that the Steel Corporation should take the lead in these contracts. It was equally natural that the other manufacturers supplying the railroads should adopt the same price. They could not well increase the price and it would not pay them to lower it enough, at any rate, to start a trade war. The railroads then are perhaps

equally responsible with the manufacturers for the invariability in the price of rails for so long a period.

On the other hand, when one notes carefully the exact conditions under which steel rails have been produced since the organization of the Steel Corporation, it is seen that ordinary changes in price of iron and steel as a matter of fact need not affect materially the prices of steel rails. The United States Steel Corporation and practically all the other producers of steel rails own their mines, produce their own ore, furnish their own coal and coke, own ships and in one or two cases railways and, in fact, supply everything needed for the production of steel rails. Excepting, therefore, changes in wages or possibly in the price of some of the implements or means of production or transportation, such as railways and steamships, it can hardly be said that the cost of their material varies with the market prices of iron or steel. If they were to determine their prices of steel rails by the market price of pig iron or steel billets, such prices would not reflect changes really brought about by the conditions of production under which they are working.

The policy which the Steel Corporation has openly announced and which these charts show it has rigidly maintained-of a steady price which it considers reasonable-is, it will be noted, to a very considerable extent dependent upon this most important fact-that it controls also the mines which furnish it with practically all of its raw material.

After the panic of 1907 and during practically all of the year 1908, the United States Steel Corporation and the other large steel interests worked closely in har

mony, in order to prevent absolute demoralization in prices. During the last few months, however, of 1908 and the beginning of 1909 it was clear that the consumers of iron and steel were placing orders only for such material as they actually needed for immediate use, believing that the conditions existing were artificial, that the prices were being maintained unnaturally, and that they might break at any time. Beyond question many of the smaller manufacturers and quite possibly the Steel Corporation also, although they were openly maintaining prices, had been shading these prices in special instances. On February 18, 1909, a meeting of practically all the leading steel interests was held in New York City. After a careful discussion of the market conditions, it was decided to abandon all further attempts to hold prices. The next day Chairman Gary, speaking for the Steel Corporation and practically for the other interests as well, declared an open market. A scramble for orders began, all competing vigorously for new business. All the large steel interests with their magnificent selling organizations searched the country for orders. Structural materials of all kinds were reduced $6 to $7 a ton, steel bars $4 to $5, pipe $10 to $12, and other finished material in like proportion. The price of steel beams dropped to $32.03. The results showed no special advantage of the United States Steel Corporation. In spite of its efforts its percentage of output remained practically the same with on the whole a tendency to lessen.

The lower prices at once started orders, many of them of large size. This started immediately the iron mills. Prices began to increase; heavy orders were