ÆäÀÌÁö À̹ÌÁö
PDF
ePub

CHAPTER II.

Development of Monopolies in the United States.

Incubation of Trusts.

The history of private, capitalistic, business monopoly in the United States is coincident with our transition from an agricultural to a manufacturing and industrial nation. In the absence of an extensive manufacturing industry and of adequate transportation facilities, industrial combination was of no paramount importance up to the second half of the 19th century.

Special Privileges Not Favored in America.

In the early history of our country no small prejudice existed against privileged and monopolistic companies as a result of the experiences with such concerns in England. In connection with the ratification of the Federal Constitution the subject of mercantile monopolies came to the foreground. On motion of Samuel Adams the Massachusetts ratifying convention voted to recommend as an amendment "That Congress erect no company of merchants with exclusive advantages of commerce." Similar recommendations were adopted by the conventions of New York, New Hampshire, North Carolina and Rhode Island. However, when the matter was taken up in Congress, in August and September 1789 and again in 1793, it did not come to

a vote.

The popular and deep-rooted opposition to large-scale corporations with wide powers expressed itself again when on November 22, 1791 the legislature of New Jersey passed an act incorporating "The Society for Establishing Useful Manufac

tures." It was commonly known as the "S. U. M.", and was one of the pioneer industrial corporations of the United States. It was promoted by Alexander Hamilton, the Federal Secretary of the Treasury, contemporaneously with his famous Report on Manufactures, in which he advocated the encouragement of domestic industries so as to make the United States independent of other nations in this respect. The protests against the S. U. M., as a legal monopoly with objectionable exclusive privileges, on the part of small-scale producers, who believed their economic existence endangered, and the bitter press controversy which ensued, stirred up considerable excitement in those days. It also proved a strong factor in quickening the prejudice which had already existed previously and which, as stated above, was a result of the traditional antipathy to British monopolistic corporations. In the popular mind "corporations promoted the concentration of wealth and were distinctly dangerous to a democracy."

In course of time, as more experience with actual corporations accumulated, hostility and criticism grew less pronounced. They began to center more around sporadic cases of price agreements among Eastern manufacturers and similar artificial restraints of trade of a more local character among merchants.

Civil War Era Breeds Trusts.

One of the outstanding features of the great economic change which followed the civil war was the development of big business. The remarkable growth of railroad transportation, supplemented by the facilities of inland waterways in the Middle West and coastwise shipping along the Atlantic and Pacific seaboards, offered the means for business expansion over a wider territory. At the same time it was possible to localize and centralize manufacturing enterprises and to establish an efficient machinery for large-scale production and distribution under a centralized control. The increased use of machinery in manufacturing, stan

'Davies, J. S. Essays in the earlier history of American corporations,

1917.

dardized methods of production, uniform accounting methods and the installation of such technical facilities for speedy transaction of business as the telegraph, telephone and typewriter furnish, gave additional impetus to the tendency toward concentration of management and resulting enlargement of the size of the business unit.

American Business Adopts Corporate Forms.

In the history of the industrial combination movement in the United States the corporate form of business organization occupies an important place. The flexible form and perpetual life of the modern corporation, together with the advantages of jointstock ownership and limited liability, combined to make this form of business organization the most adaptable and suitable for largescale business enterprises. The corporation has become typical of organized industry in the United States. Primarily under this form of associated action, the modern American captain of industry has succeeded in building up those gigantic capitalistic business concerns, popularly known as "trusts," which constitute one of the most significant features of our industrial history during the past forty years.

The growth in the number of corporations and the magnitude of the business of the country conducted by corporations is indicated by the following figures. For the fiscal year ending June 30th, 1911, 270,202 corporations of all kinds paid a tax on net incomes aggregating $3,360,000,000. Their combined capital stock totaled $57,886,000,000 and their aggregate bonded and other indebtedness was $30,715,000,000.

Development of the Industrial Combination.

The evolution towards industrial combination in the United States is marked by a series of distinct stages. Its earliest forms consisted in price agreements among independent concerns. In the American railway business and in the anthracite coal mining industry arrangements of this nature were effected.

Division of territory, as in the case of American express com

panies, signified a further step. A third phase in the movement to restrict competition consisted in agreements to restrict the output rather than the price or the territory-in the form of the so-called "pool." Under this device the receipts were put into a common fund or pool. The whiskey pool attained a considerable degree of notoriety in its days.

A further phase of the concentration movement consisted in the formation of a central selling agency which served as a sort of clearing house for the members of the agreement, fixed prices, and prorated output. The Michigan Salt Association belonged to this category.

The aforenamed schemes, however, did not satisfy the aspirations of the pioneers of American "big business" organization. The instability of these arrangements, the absence of adequate power to prevent underselling, efforts covertly or openly to secure greater profits by exceeding the allotment, etc., only too often proved the weakness of these attempts at cooperative restriction of competition.

Industrial Organization Seeks Centralized Control.

A greater degree of centralized control over the individual establishments as well as over the whole combination was deemed desirable and in the "trust" form of industrial organization a vehicle was found which was believed to meet these requirements. The first industrial trust formed in the United States was the Standard Oil Company of Ohio (see also page 36) which represented a combination of thirty separate companies whose stocks were turned over to three trustees under a trust agreement in 1879. In 1882 the old agreement was superseded by a more elaborate one. It was a combination of oil refineries in Ohio, Pennsylvania and New York, whose stock was assigned to a board of nine trustees, in exchange for trust certificates. The entire management of the business was controlled by the trustees. The term "trust" has subsequently been used in a popular sense as a designation for all industrial combinations, even though their form of organization was not that of a trust in the strict meaning of the term.

« ÀÌÀü°è¼Ó »