greater cooperation in limitation of competition than in the field of money and credit.

On this matter the conclusions of the Pujo Committee, which investigated the subject for the House of Representatives early in 1913, are highly pertinent. This report said:

"Far more dangerous than all that has happened to us in the past in the way of eliminating of competition in industry is the control of credit through the domination of these groups over banks and industries. It means

that there can be no hope of revived competition and no new ventures on a scale commensurate with the needs of modern commerce or that could live against combinations, without the consent of those who dominate these sources of credit. A banking house that has organized a great industrial or railway combination or that has offered its securities to the public, is represented on the board of directors and acts as its fiscal agent, thereby assumes a certain guardianship over that corporation.

"If competition is threatened it is manifestly the duty of the bankers, from their point of view of the protection of the stockholders as distinguished from the standpoint of the public, to prevent it if possible. If they control the sources of credit they can furnish such protection. It is this element in the situation that unless checked is likely to do more to prevent the restoration of competition than all other con

ditions combined. This power, standing between the trusts and the economic forces of competition, is the factor that is most to be dreaded and guarded against by the advocates of revived competition." *

This investigation of the concentration of control of money and credit no doubt disclosed a serious evil. But whether it was the result of a monopolizing purpose among leading financiers, or the natural consequence of a defective banking and currency system, is debatable. The findings of the Pujo Committee were in favor of the former view. On the other hand the statement of J. P. Morgan & Co., in the analysis of causes and conditions making for money and credit concentration, laid the result to the following: (1) that our antiquated banking system, forced reserves into New York automatically, thus causing undue concentration; (2) that the average demand for credit throughout the world's money markets determines interest rates, and not the banks of New York by combination; (3) that the panic of 1907 was not caused, as the committee intimated, by machinations of certain powerful men, but that these very men helped effectively to check and compose it by putting funds at the service of weaker members of the community; (4) that practically all the railway and industrial development of this country has taken place through the agency Pujo Committee's Report, H. R., 62nd Cong.

*

of the large banking houses, and that representation on boards of directors of railways and industrial corporations has been for the purpose not of control but of cooperation in the interests of the investors, to whom the banking houses have felt responsible through the securities sold them as clients. This function of trusteeship stands out as one of the distinguishing features in the services which the great banking institutions of New York and other centers render on behalf of investors, large and small. Concentration of money and credit has come partly as a normal growth in the progress of wealth, commerce, and industry; and partly as an abnormal growth under laws and banking conditions which business had long since outgrown. There is far more competition and far less combination than is commonly supposed.

>

CHAPTER VIII

PRICES UNDER THE TRUST REGIME

ONE of the avowed objects of centralizing

control in industry is to stabilize prices, to prevent that deadly sinking of price levels which eliminates profits. This arrest of decline in prices is accomplished by means of tipping the balance against supply and in favor of demand. To this end restriction of production is the direct path. In fact, this is one of the main aims in trust organization-to prevent such demoralization as comes from the tendency of production, under large-scale machine industry, from exceeding consumption. Most of the evils of gluts, "dumping," and price wars came from this tendency to over-supply of consumption goods in specific lines of production.

To

But this restriction does not stop here. stabilize price levels is one thing; to so utilize the advantage as to secure progressively higher prices is quite another. The course of wholesale prices, during the year from 1896 to 1913 illustrates the tendency not only to restore former levels, but to go far beyond them under the present state of industrial control.

1. Course of Wholesale Prices, 1890-1913 The following price diagram from the Bureau of Labor, Washington (March, 1913), con

trasts sharply the trends of wholesale prices of raw and manufactured goods, first under the competitive system (1891-1896), and then under the trust régime (1897-1913), when restriction of supply became a part of industrial policy in the alleged effort to give stability to prices. The Rise in prices beginning with 1897 cannot be entirely laid to combination. Part of the

advance was due to normal reaction from undue depression. But apart from this general condition the actual causes were chiefly (1) increase in gold production; (2) increase in population; (3) widening of the area of production and marketing in the world's trade.

The period in which these great industrial combinations had their growth was also one of vast extension in the scope of commerce, of the world's greatest human migrations from older to newer lands, and of increase in the wealth and population of nations.

The statistical returns on which this diagram is based show that the upward swing of commodity prices coincides largely with the period of greatest expansion in the trust movement. The depression became acute by 1893, and began its recovery after 1896. From that time forward, coinciding with the recovery of business in the latter year, trust financing proceeded on a colossal scale. Profits were measured by gains in prices in floating securities. Prices between 1896 and 1912 for raw materials rose