of its railroads, — at least the more important lines which competitors may have occasion to use, would not materially lessen the efficiency of the integration secured by that corporation. Nor would there be any serious difficulty in effectively regulating the charges of such railroads if left in the control of the Steel Corporation. At any rate, the element of transportation in the steel industry is not a factor necessitating or justifying a combination of steel manufacturing plants of sufficient size to possess any approach to monopoly power.

2. It is contended further that competition means large waste in selling expenses, due to the endeavor of business concerns to wrest trade from one another through solicitation and advertising. This is doubtless true in some industries, but it is by no means equally true in all. Where the products of an industry are standard in character, are in steady demand, and are marketed through large middlemen or to large individual consumers, even the most vigorous competition in pushing the sale of goods involves no very great expense. In the case of certain other industries, heavy selling and advertising expenses are considered necessary by business men merely for the purpose of stimulating demand and regardless of competition. Concerns which have virtually a monopoly often spend great sums in advertising their wares. However, it must be admitted that in a good many industries, competition in selling does mean some economic waste. The advantage of eliminating such waste can properly be set against the disadvantages of monopolistic control.

However, needless expense in selling goods is likely sooner or later to be reduced by informal understandings

not amounting to monopolistic agreements. As the competing concerns become larger and more efficient in production, their managers are likely to see the absurdity of trying to get all the trade away from one another.

3. Finally, it is contended that uncontrolled competition results in irregularity of consumption and consequently in irregularity of the operation of plants, which tends to increase costs as well as to injure the working classes and to disturb business generally. The most common illustration used to support this contention is that of the steel industry. It is urged that when by reason of active competition, prices are particularly low, the consumers of iron and steel and their cruder products buy excessive quantities and so discount their future needs as subsequently to result in very light demand. The plants in the industry, after being worked to their utmost capacity, may have to drop a large part of their force or even close altogether. Such irregularity in production is uneconomical.

It has

been maintained that the greater steadiness of prices since the organization of the United States Steel Corporation not only has tended to cheapen production but has been beneficial to consumers and to business generally.

It may well be questioned whether competition is as important a factor in causing irregularity of consumption of steel products as is sometimes supposed. The consumption of many of the more important products of iron and steel is necessarily variable. Those products are used primarily in the creation of new capital goods. The desire of men to invest in new capital goods varies greatly with the general conditions of prosperity or depression in business. The policy of

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.

A

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.