(Average for 1890 to 1899-100.0.]

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1690 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900 1901 1902 1903 1904 1905, 1906 1907 1908 1909 1910 1911 1912 1913

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from a basis of 84 to 148, or seventy-six per cent. By 1900 raw materials were 33.6 higher than the average for the preceding twenty-two years, and manufactured commodities were 17.7 per cent higher, making an average for all commodities of 20.9 per cent. Owing to this fact, that the general price movement was mainly upward it is difficult to refute the claim that the trusts were among the contributory causes of advancing prices. But they were not alone; favoring conditions were general. During the depression of 1893 to 1897 there occurred one of those general exhaustions of reserves both visible and invisible. Universal economy in consumption of manufactured products left the reserves of the world's stock bare and depleted. Of this situation the combinations took advantage. The rapid advance of prices which followed in many commodities when business revived was also aided much by the great elasticity of demand sure to develop with the return of better times. Not until near 1900 were the supplies replenished fully enough in many staple lines of industry to build up a secondary line of supply.

2. The Retardation of Rate of Supply

Trust control of the market comes through command of the situation on the supply side. This is its line of attack of the price problem. A pertinent criticism of this aspect of trust

policy is advanced by Prof. J. A. Hobson.* According to his view the growth of trusts, cartels, and various orders and degrees of combination in many highly organized trades in England and North America can only be interpreted as restraints upon supply of goods. Their raison d'etre is the maintenance of prices on a profitable basis by limitation of output. For in no other way can profitable prices be maintained. The tendency toward over-production has been the invariable plea for the utility of these organizations. They must, therefore, be understood as instruments for keeping the rate of supply of goods in the industries where they operate lower than it would have been had they not existed. Though there are other economies of combination, this is the main and essential result to regulate, i. e., to retard, the rate of production.

If it be true that the trust system of industry, by its price maintenance policy, secures stability of values by control of supply, we have to that extent removed from the business field the automatic capacity of the market for adjustment to higher and lower levels. In other words, the free play of economic forces being limited in scope, those transitions to different levels by which production under the competitive system alternately stimulates or checks the operations of demand, are made to recur less fre* Gold, Prices, and Wages, p. 113.

quently, if also less violently. Demand under such a system of control tends to become stationary rather than elastic. Prices vary, but within narrower limits. Instead of inducing increased demand by lowering quotations, the whole structure of the market rests on the basis of a more or less uniform price-level. There is little or no power, under hard-and-fast price schedules in industry, to invoke the elasticity of demand to increase trade. All or most of the potency of industry to bring about trade revival, by a readjustment of production to lower levels of cost to the consumer, are sacrificed on the altar of restriction of output. Time and changed conditions must be relied upon to generate from the demand side a corrective to any wide variation from the normal balance between supply and demand.*

3. Stabilizing Wholesale Prices

Prices viewed from the demand side of the market have no doubt become more generally stabilized under the trust régime. This is true even in international as contrasted with domestic trade. The valorization of Brazilian coffee (1908-1914) illustrates the way in which worldwide scope is given to control of prices. There a big crop threatened (1908-1909), by unprofit

* How these underlying changes tend to render unstable the static equilibrium, is described by C. N. Fay in his Big Business and Government, ch. XVII.

ably low prices, to bankrupt a country's main industry if not to provoke political revolution. To avoid these, a banking syndicate bought 8,000,000 bags of coffee in one season to hold for sales to be spread equally over a period of several years following. The result was that, aided by smaller crops, for most of this selling period prices rose from eight to twelve and fourteen cents a pound.

Among manufactured commodities the problem is also world-wide. In commenting on the failure of quotations to drop as usual in dull trade periods, The Ironmonger of Birmingham, England, remarks that the modern system of price-maintaining combinations has hindered a prompt readjustment of prices in the iron and steel products made from billets, blooms, and bars which had declined 25 per cent. The same persistence is shown in the American price of steel rails which for the past twelve years have sold more or less regularly at $28 a ton.

More of the stability in the prices of raw materials has come from the absorption of main bodies of natural resources into fewer hands, say since 1900, than from any other source. Rivalry for possession of ore deposits, for consolidation of timber areas and the centralizing of coal deposits, waterpower sites, etc., under great syndicates and trust subsidiaries—these are matters of common knowledge. And they

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