-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 foresee, 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. 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

If

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

would be for segregation, which is the solution of the problem."

II

Everybody knows what disintegration means, it means dissolution-"smashing 'em," in the language of the street. The Standard Oil Company has been disintegrated into some thirty-five more or less-chiefly less-independent and supposedly competing companies.

The Tobacco Company has been disintegrated into fourteen more or less independent and-supposedly-competing units.

The net result to the public so far has been higher prices for many of the products of the one and no lower prices for any of the products of the other.

The net result to many small stockholders has been losses.

The net result to "insiders"-the men against whom public clamor was raised-has been golden opportunities for profit in the buying and selling of subsidiary stocks long before stockholders and the public could possibly form any accurate notions of their real value.

To illustrate when the Standard Oil Company of New Jersey-the trust-was dissolved by order of court the stockholders of that company received pro rata fractional interests in all the subsidiary companies, and for the first time thousands of men and women all over the country learned of the existence of those thirty-five companies. By no possibility could these scattered stockholders form accurate opinions regarding the values of the fractional shares issued to them; only the men in control of the industry were in a position to know. What has been the result? The stockholders and public have sold and bought in ignorance, losing both ways. Take the Standard Oil Company of In

diana, one of the subsidiary companies. It was capitalized at $1,000,000; the amount cut no figure so long as all its stock was held by the trust, but when the trust was dissolved its many stockholders received each his fractional pro rata share in the Indiana Company. There was a general impression the stock of this company was worth far more than par, but how much? Only the insiders could tell. As a result many stockholders who were in the dark sold their interests at less than a fifth of what the stock sold for inside a few weeks.

A few days ago the Indiana Company voted to increase its capital stock from one million dollars to thirty millions and to distribute the $29,000,000 to its stockholders as a stock dividend, and it now appears that the company is earning at least ten millions a year, or 33 1-3 per cent. on the new capitalization, but it is stated in the press the "Officers refuse to give any information on this point.” 1

1

Disintegration of trusts and large corporations simply because they are large is a senseless proposition, because both are here to stay in some form, both are evolutions, products of modern industrial conditions; like the labor unions, they are simply forms of coöperation and, rightly used, ought to be of value to the community as factors in production.

The Sherman law was passed in 1899. For more than ten years few attempts were made to enforce it against large corporations. Then, in response to popular clamor, due to many flagrant abuses, came a period of indiscriminate "trust-busting." Already there are signs of reaction; the Dendulum is swinging back; it is found the Sherman law

1Courts should provide in decrees of dissolution that before the plan of reorganization and redistribution of securities is announced, detailed information, verified by independent auditors, regarding each subsidiary company should be sent to all stockholders and published, so that no man would have an advantage in buying or selling the securities affected.