peace is to be negligible, it must henceforth make the promotion of international good will and international prosperity conscious aims of its own commercial policy. This is all the more important at this time because the hatreds developed by the European war threaten to persist after the war is over in the form of retaliatory tariffs and international boycotts which are only too likely to lead to another titanic struggle so soon as the belligerents have partly recovered from this one. To these policies of international hostility, the United States should oppose a policy of international good will and friendliness. Only in this way can it hope to avoid being itself drawn into some future world war and at the same time contribute all that one nation may toward permanent world peace and world prosperity. For it the benefits to be derived from the peaceful prosecution of the many industries in which it already enjoys unquestioned preeminence so far exceed those that might result from fostering a few additional industries, that it must weigh carefully the selfish pleas of special interests for protection before enacting measures that are sure to be resented by other countries. Political In addition to these economic and international arguments Tariff against a continuance of the policy of protection by the Cause of United States, there are equally cogent national arguments of Corruption. a political character. The protective tariff of the United States has been the principal source of that pernicious alliance between business and politics which has threatened the very life of our democratic institutions. So long as the government protects special industries it is inevitable that those who are financially interested in those industries should attempt to frame party platforms, select candidates, and control legislation for their own private benefit. The simplest way to safeguard the government against these corrupting influences is to substitute for the policy of protecting the American producer in the domestic market the broader policy of fostering in all legitimate ways the sale of American products in all the markets of the world. The present outlook in the United States for further tariff Present reform in the direction of a tariff for revenue only appears Outlook. exceedingly bright. Though the tariff was by no means the most important issue in the campaign of 1916, which resulted in the re-election of President Wilson, it was an issue that was put forward insistently by the Republican candidate. The success of the Democrats can only be interpreted as an indorsement of their tariff as of their other policies. Before 1920, when the next presidential election will occur, the country should be so fully adjusted to the lower duties of the Underwood Tariff that the demand for a return to the higher rates of tariff taxation of the past should meet with an even more frigid reception than in the recent campaign. The uncertain element in the future is the commercial policies which European countries may adopt when the present war is over. If the trade restrictions, among the Allies, on the one hand, and among the Central Powers, on the other, which are now being urged are actually put in force, the United States may be led for a time to return itself to a narrow and selfish nationalist policy. Though the immediate future of American tariff policy is thus in doubt the more remote prospect already stands out clearly. The general trend for a country in the industrial position of the United States will almost certainly be away from, rather than toward, trade restrictions. Protection, as the term implies, is a policy for the weak rather than for the strong. As the United States becomes conscious of its industrial strength it is likely to tear down its protective barriers and enter the field of free international competition in the same confident spirit as did the United Kingdom half a century ago. REFERENCES FOR COLLATERAL READING *Bastable, The Theory of International Trade; Fawcett, Free Trade and Protection; Sumner, Lectures on the History of Protectionism in the United States; *Patten, The Economic Basis of Protection; Thompson, Protection of Home Industry; *Taussig, Principles of Economics, Chaps. XXXIV.-XXXVII.; Tariff History of the United States, Some Aspects of the Tariff Question, and State Papers and Speeches on the Tariff; Stanwood, American Tariff Controversies in the Nineteenth Century; Tarbell, The Tariff in Our Times. CHAPTER XXIII LEGAL AND NATURAL MONOPOLIES Problem. § 221. As explained in Chapter XIII. the essence of monop- Importance oly is such control over the supply of an economic good as of the will enable the monopolist to regulate its price. Monopolists Monopoly have it in their power, in greater or less degree, to compel the public to pay regularly and continuously for the commodities they control higher prices than are needed to cover the expenses of their production, including a fair wages-of-management. This power is not unlike the power to tax exercised by the state itself. By its means the favored few who control monopolistic enterprises derive monopoly profits at the expense of the many. The magnitude of these profits, which under a system of free, all-sided competition would be diffused throughout the community in the form of cheaper commodities, is one circumstance that lends an interest to the monopoly problem. Another and equally important circumstance is the manifest injustice involved in permitting a few persons to enjoy incomes from which the many are debarred. For these and other reasons the monopoly problem is one of the most important practical questions with which economics has to deal. In the following sections the principal types of monopolies that are found in the United States, the grounds on which they rest and the efforts that have been made to regulate and control them, are considered. Legal monopolies, as the simplest type, first merit attention. § 222. Legal monopolies, as already stated, may be either Public public or private. Public legal monopolies have been estab- Legal Monopolies. lished for a variety of reasons. In Norway, moral considerations have led the government to convert the liquor business into a public legal monopoly. The tobacco monopoly of France and the salt monopoly of Saxony are conducted for revenue. In Prussia the state has taken charge of the railway business, Merits of partly for revenue, but chiefly to insure reasonable and uniform rates to all shippers and ready control of transportation facilities in time of war or other public emergency. The chief public legal monopoly in the United States, the post-office, was undertaken with a view to facilitating and cheapening communication among different sections of the country, and these objects have always been made more prominent than considerations of revenue. As this enumeration suggests, the most common reasons for advocating and defending public legal monopolies are that the businesses under consideration require special regulation for the protection of public morals, or that they are natural monopolies in which the public has a vital interest and that that interest will be better cared for through public ownership and operation than through private ownership, even under public regulation. The United States Post-office is a good example of a public Post-office. legal monopoly which renders more efficient service than a private business organized for profit could possibly do. The two aspects in which its policy differs strikingly from that of businesses organized for private ends are that it undertakes, regardless of cost, to bring the mails within the easy reach of every inhabitant of the country, and that its charge for carrying mail matter is the same to all its patrons and invariable, irrespective of the distance within the country to be traversed. The educational and commercial value of these departures from ordinary business policy could not easily be exaggerated. Even if it could be proved that certain services, such as carrying the mails between the large centers of population, could be performed more cheaply if the business were in private hands, the advantage would still lie, in the opinion of most thoughtful persons, with the public monopoly. So general, in fact, is the approval of the Post-office in the United States that its success is commonly made the point of departure for arguments in favor of the public ownership and operation of a telegraph monopoly, a telephone monopoly and even a railroad monopoly. Opponents of government ownership and operation of these businesses, on their side, rarely take exception to the statement that the post-office has worked admirably, but confine themselves to pointing out the respects in which the telegraph, PRIVATE LEGAL MONOPOLIES 409 telephone and railway businesses differ from that of carrying the mails, and concluding that the argument from similarity is fallacious. The arguments for and against the policy of making such businesses public legal monopolies are considered in the next chapter. § 223. The development of private legal monopolies pre- Private sents one of the most interesting chapters in the history of Legal Monopolies English law. Reference has already been made to the prevalence of such monopolies in the days of Elizabeth and the United first Stuarts (Section 7). In 1602 in the case of Darcy v. Kingdom. Allen, an English court declared a patent granting the exclusive right to manufacture playing cards for a period of twentyone years unlawful. The Court held that, The Court held that, "All trades, as well mechanical as others, which prevent idleness (the bane of the Commonwealth) and exercise men and youth in labor for the maintenance of themselves and their families, and for the increase in their substance to serve the Queen when occasion shall require, are profitable for the Commonwealth; and therefore the grant to the plaintiff is against the common law and the benefit and the liberty of the subject." Notwithstanding this decision grants of monopolies continued to be made, and this led Parliament to intervene with the comprehensive Statute of Monopolies in 1624, which provided: “That all monopolies, and all commissions, grants, licenses, charters, letters patent, heretofore made or granted or benefits to be made or granted to any person or persons, bodies politic or corporate whatsoever, of or for the sole buying, selling, making or using of anything within this realm, or the dominion of Wales, or of any other monopolies . . . are altogether contrary to the laws of this realm, and so are and shall be utterly void and of none effect and in no wise to be put in use or execution." Exceptions were made of patents for new industries or inventions, which might be granted for twenty-one years, and of patents for new processes, which were limited to fourteen years. The monopolies of foreign trading companies were also exempted from the Act, as were the businesses of printing, of manufacturing saltpetre, gunpowder, ordnance and shot, and of alum mining. By later acts all of these exceptions were removed, except those in favor of patents for |