to the criticisms which such views evoke from writers who deny the existence of such a tendency. In favor of this proposition three general lines of argument may be distinguished: (a) the contention that a consolidated enterprise possesses advantages over independent companies in producing and marketing its goods; (b) the claim that mere mass of capital confers powers of destructive warfare so great as to deter possible competitors from entering the field; (c) the belief that modern competition between large rival establishments, representing heavy investments of fixed capital, is injurious to the public, ruinous to the producers, and in its final outcome self-destructive.

First in this list is the contention that a consolidated concern is a more efficient agent of production and exchange. It is claimed that a combination can effect a saving in no less than twenty different directions; and the economy arising from such sources is declared to be great enough to give the trust a control over the market based solely upon superior efficiency, and to make competition "hopeless." We can discuss only some of the more important savings that trusts are believed to realize. Of the twenty specific economies that have been enumerated, we shall take no notice of five which may be considered either doubtful or of minor importance. Six others will be relegated to a footnote, since it may be denied emphatically that they represent any substantial advantages which large independent companies cannot secure. Three more may be set aside for incidental

'These alleged advantages are: (1) combinations will prevent adulteration and improve products; (2) they will reduce losses from unwise extension of credits; (3) they will not suffer from stoppage of work by accidents in any one locality, or by labor troubles; (4) they need to carry smaller stocks of goods to meet demands of the market; (5) they may eliminate needless middlemen.

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These six items illustrate the necessity of discriminating sharply between large-scale production and monopoly. (1) It is said that combinations can specialize the machinery of the separate plants, thus saving the loss resulting from changing from one kind of work to another. But large independent concerns have often done the same thing. (2) Combinations can push trade in foreign markets. But large independent companies have been equally successful, or almost so. This claim provokes a smile from a Minneapolis miller. Such concerns as the Baldwin Locomotive Company deny that combination is necessary for this purpose. Rivals of the Standard Oil Company are now following the trust into European markets. The Industrial Commission concluded that foreign trade does not need a monopoly. (3) Trusts can conduct auxiliary or subsidiary industries. So do many independent enterprises. (4) Trusts utilize by-products. So do large independent establishments, while small establishments sometimes co-operate for this purpose. (5) Trusts can employ chemists, inventors, and other

discussion, in connection with the views of those who deny the tendency to monopoly. Of the remainder, three items relate to advantages in the manufacture and three to economies in the exchange of products.

With respect to advantages in the manufacture of products it is claimed that trusts, by filling orders from the nearest plant, can effect a great saving in cross-freights. When the monopolized product is of a bulky sort, the industry is already localized pretty thoroughly before combination takes place; and, since most of the former independent establishments were producing chiefly for their natural local constituencies, the trust can save little in cross-freights. When, however, the product is light, transportation charges become a matter of small moment. In either case the room for saving in cross-freights is not nearly as large as has been represented, while often it does not exist.

Then it is urged that a trust can draw upon all the patented devices of the constituent companies, and employ only those that are most efficient. But advantages accruing from this fact will in most cases prove to be of a temporary nature, as trusts that have tried to base a monopoly upon the control of all available patents have learned in the past and will learn in the future. Moreover a simple reform in our patent laws will make the best processes available for all producers at any time that the public finds such a measure to be necessary for protection against monopoly. Here then we find no natural law working resistlessly toward combination, but a man-made device which can be regulated as public policy may dictate.

Again, we are told that a trust can produce more cheaply than separate concerns, because all the plants utilized can be run at their full capacity; whereas, under competition, many establishments can be kept in operation but a part of the time. Two observations may be made concerning this claim. First, the extent of the economies thus realized in grossly exaggerated. In general, it may be denied that, whenever governmental interference has not produced

experts to improve methods. For years this has been done by many large companies not in combinations. (6) Trusts can insure their own plants. But independent concerns may co-operate in establishing factory insurance companies, and secure the lowest possible rates, as some of our textile trades have done.

These three advantages are: (1) combinations can specialize skill in management; (2) they can compare methods and costs of production in different plants (3) fixed charges decrease as the size of the enterprise increases.

unhealthy and abnormal conditions, competition has led to such absurdly excessive investments as is commonly assumed. We must concede, however, that under normal conditions some reduction can be made in the number of plants required to supply the market at ordinary times; but this does not dispose of the matter. If a trust is to be prepared for supplying the market promptly in times of rapidly increasing demand, it is necessary that some surplus productive capacity must exist in periods of stationary or decreasing demand.

The last three economies relate to advantages in buying materials or selling products. It is urged that a combination can purchase its raw materials more cheaply than separate concerns. This would probably be interesting news to many large companies not connected with trusts, and Professor Ely is undoubtedly right in remarking that all ability in bargaining is not controlled by combinations.

And finally we come to economies in advertising and in soliciting business, where the wastes of competition are certainly serious and the room for improvement correspondingly great. Those who deny the tendency to monopoly generally admit that a trust can have a material advantage here, while those who affirm the existence of such a tendency evidently realize that their case is strongest at this point. Yet an opportunity for saving in these departments does not always exist, and the extent of the economy is easily exaggerated in other cases. Mr. Nettleton is right when he says: "But to whatever extent the trust-organizers have counted on practically canceling expenditure for these two items, on the ground that buyers will be obliged to come to the sole manufacturers, they are likely to be surprised. Those trusts that have tried this experiment have discovered that demand for commodities falls off with remarkable rapidity as soon as effort in pushing sales is materially reduced."

The result of our discussion up to this point would seem to be that any advantages of a monopoly over independent concerns of a large size are but slight, except in the single matter of effecting sales. We must also take into account certain counteracting forces, upon which some writers rest their belief that competition will ultimately prevail.

The second argument advanced to prove the tendency to monopoly is the claim that mere mass of capital confers such powers of destructive warfare as to deter possible competitors from entering the industry, at least until prices have long been held above the

competitive rate. It is said that a large combination can lower prices below the cost of production in any locality where a small rival concern is established, thus driving it out of the field. If on the other hand a large rival company attempts to compete in all markets, this will mean an investment of capital in excess of the needs of trade, with a consequent depression of business and loss to all concerned. Without doubt the destructive competition waged by combinations is an important consideration, and it may well enough reinforce monopoly where other attendant circumstances favor consolidation. But a monopoly based solely upon this power would be, confessedly, a temporary affair; for probably no one would claim that all capitalists would be intimidated permanently by such circumstances. This argument therefore may be used properly enough to strengthen the conclusions drawn from the alleged economies in production; but it does not of itself establish the existence of a permanent tendency to monopoly.

It should not be forgotten, furthermore, that this argument depends upon the fact that combinations at present are allowed to employ the weapons of discriminating prices and other tactics, which violate everyone's sense of fair play although they may be difficult to suppress.

The final reason for the belief that combinations must ultimately prevail is found in the character of modern competition in those industries which require heavy investments of fixed capital. Under such conditions the difficulty of withdrawing specialized investments and the losses that are entailed by a suspension of production make competition so intense that prices may be forced far below a profitable level without decreasing the output; and industrial depression inevitably follows. For such constant fluctuations in prices, combination is considered the natural and inevitable remedy. Some writers allege, furthermore, that it "is not possible to have competition without competitors, and, if there be competitors, one must prevail," so that monopoly "is the inevitable fruit of competition."

Competition cannot be proved a failure until it is given a trial. The evils from which many economists would seek refuge in industrial combinations are greatly increased by unwise laws which have now outlived any usefulness that originally they may have possessed. If unhealthful conditions produced by our own interference with the course of business are ever removed, competition will probably develop

no evils which could not be borne, as vastly preferable to monopoly, public or private. Indeed, even as things are, the shortcomings of the competitive system are exaggerated; and attempted monopoly is more likely in the end to increase, rather than mitigate, those periodic fluctuations from which industry suffers.

See also 279. Some Advantages of Concentration.

C. The Modern Industrial and Commercial City 259. THE FACTS CONCERNING THE GROWTH OF CITIES

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The United States has seen a constantly increasing proportion of urban as compared with rural population. This is due partly to the fact that even with the same rate of growth in urban and rural communities, there would be an increasing proportion of urban population. Were there no movement from country to city, no disturbing effect from international migration, and no difference between urban and rural communities with respect to the natural increase from excess of births over deaths, there would still be, in a growing population, a constant passage of certain communities from the rural to the urban class. The smaller towns, maintaining a rate of growth uniform with that of the country as a whole, would one by one pass the limit of 2,500 inhabitants fixed for the urban population, and thus the proportion of urban population would increase gradually from census to census. As a matter of fact, however, in the United States the urban communities have a much higher rate of growth than the rural communities, and the rapid increase in the proportion of urban population is due largely to the difference in the rate of growth.

The various censuses since 1790 have not been taken on a uniform basis with respect to the proportion between urban and rural population, but the following tables furnish clear evidence of the more rapid growth of urban population.

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It is a familiar fact that, in some cases, the municipal boundaries give only an inadequate idea of the population grouped about one Adapted from Thirteenth Census of the United States, 1910, I, 53-54 'Adapted from Thirteenth Census of the United States, 1910, I, 73-75.