are framed that forbid men doing the things that prevent failures; recklessness, wastefulness, inefficiency in business are encouraged, and when failure results, as result it must, an easy way of escape from individual responsibility is provided by the bankruptcy law, which says to the man who has lost his own and his creditors' money and who, by his reckless methods, has caused far greater loss to men trying to do business on a sound basis, "You need not pay your debts, you are free to find other creditors and start in all over, to fail again—and as often as you please."

The time will come when the community will take at least as much care to prevent failures as fires, and when a failure does come it will sift to the bottom the question of responsibility.

It may yet be made a crime to sell goods below cost.

XIX

As a matter of law now, officers of corporations who knowingly sell the products of their company below cost run two risks.

In those states that have statutes against selling goods below cost to injure a competitor, they run the risk of prosecution.

So far, little attention has been paid to these statutes. It is such a common practice for one competitor to sell his goods at or below cost, even give away substantial quantities, to secure trade-especially in localities where some competitor has a foothold-that the average business man learns with surprise there is any law against so doing. But these laws may come to life; they may be invoked any day by a competitor who feels aggrieved, and when invoked they are apt to be enforced.

2. But there is a far wider and entirely different liability for selling goods below cost. It is the common

law liability of the agent who wastes the goods of his principal.

Every man knows that if a clerk in a shop wilfully destroys some of the goods he is liable to his employer for the full value.

If the clerk gives away goods he is also liable for the value. If he sells them at a price less than that fixed by his employer, he is liable for the difference.

If the clerk is told the cost, and told to get the best price he can over the cost, and he sells below cost, he is liable for the difference.

The average clerk in a country store, who has never studied law, knows all these things,-self-evident propositions of common sense and honesty.

It is not so commonly realized by officers of large corporations that the same propositions apply to them. The very magnitude of their transactions tends to make them feel they can do as they please with the products of their company.

Hence it is a common thing to hear officers of corporations say they are taking business below cost.

This may be necessary at times and under exceptional conditions, but the officer of a company who knowingly sells its products at less than cost runs the risk of a suit on behalf of the stockholders, and in such a suit he would be obliged to convince a court that each sale below cost was for the benefit of the company, and if the court should think otherwise he would have to make good the difference.

Under existing unscientific and vicious competitive conditions, it may seem necessary to sell goods below cost at periods, or in localities, or to particular parties; and so confused are our notions regarding what is right in commercial conduct that it is probable most courts would decide in favor of officials who answered that they were obliged to sell below cost because others were doing the same thing

-to meet competition; that is the principal excuse offered for all the tricky, vicious, wasteful things done in business, "I am doing only what others are doing."

That excuse will not hold forever; it is losing force rapidly.

Any day a wise court, in a suit on behalf of stockholders against officials for selling below cost and causing a large loss, may say, "Because officers of other companies were doing the same thing is no excuse for you; you cannot even introduce evidence to show that others did the same thing; the only question before the court is whether there was anything in the conditon of your own company which made it necessary to dispose of its assets at a large loss; it is no answer for you to say you wished to hold trade, extend trade, or do something else to your competitors; only the stockholders, the owners, have the right to say whether they wish to lose money doing the things you wished to do; as agents and employes, it is your duty first of all to conserve the assets of the company and not give them away in pursuance of a competitive policy you happen to think good because aggressive."

If these notions were firmly lodged in the minds of all representatives and officials, the seeming need for selling below cost, as a competitive device, would disappear, because they would be afraid to yield to it, and because they would see that in the long run it does not pay.

Selling below cost would happen only when other conditions compelled it, conditions such as,

Over-supply due to honest mistakes of judgment.

Under-demand due to conditions no one could foreseę, such as depressions, changes in styles, tastes, etc., discoveries, inventions, etc., etc., any one of which may suddenly affect the prosperity of an entire industry.

Conditions affecting the financial strength of the particular company to carry the goods.

Conditions of the goods themselves affecting their desirability.

But even these conditions could be controlled in large measure by scientific coöperation within an industry.

Scientific coöperation would mean the reduction of losses to a minimum by the development of more scientific forecasting in business, and scientific adjustment of supply to demand, or rather the scientific treatment and control to a maximum degree of both supply and demand.

Where the accumulated experience and the systematically classified knowledge of an entire industry is at the command of the smallest individual producer and where coöperative action compels the individual to be guided by the science of his industry, then will the losses of the individual be reduced to a minimum, and under no circumstances will the individual be permitted to say, "I am selling at a loss because the other fellow is," or to use the other phrase so commonly heard, and which is the battle cry of the old competition,

"I can stand it so long as you can."

CHAPTER XVII

THE TRUST PROBLEM-SEGREGATION VS. DISINTEGRATION

I

"What shall we do with the trusts?"

"Smash 'em," the man in the street cries.

"Regulate them," the more conservative citizen responds.

"Put them under government control," the politician suggests.

But if an independent competitor of one of the great trusts should be asked the question, if a thinking man, he would quickly answer:

"Compel them to make money."

"What!"

"I mean what I say; as an independent all I ask is that the big corporation be compelled by law to make money." "Why, what do you mean?"

"That if they make money I can. In fact, I can make money when they lose-if they don't lose too much."

"But they do make money."

"Yes and no-yes where they have a control-no where they compete with me or some other independent." "I don't understand-"

"Neither does the public-that's just the trouble. If the public did understand instead of crying for disintegration of the trusts, which is a senseless proposition, the cry