4. Public Commissions as Business Umpires

If it be true that combinations and natural law follow the same main line of progressive betterment for the wage-earner, how does it work out for the investor and the consumer?

When the wage relation breaks down, strikes ensue and the community is penalized if not terrorized by boycotts primary and secondary. Public investigations are invoked, and the political powers effect a surrender or compromise. That looks like a piece of bad bargaining on the part of capitalism. But is it not simply an acquiescence to the principle that in a case of doubt public powers wisely cast their deciding vote on the side of the less favored party in controversy? This very tendency of public opinion, acting through government, to function as umpire where organization meets counter-organization is a new thing in the bargaining process, and it generally works out to the cost of the consumer and the investor.

There is no better instance of this than the Anthracite Coal Strike award of 1904, as a case of charging up against the investor and the consumer the enhanced costs resulting from the arbitration. Probably the only way of escape from this loss of control of the bargaining machinery is for the trust to anticipate the demands of labor for betterment in conditions and wages.

The best managed combinations have the least possible controversy with their employes.

How near this equilibrium comes to being a combination of employer and employe against the consumer is a fair question. If the facts warrant that conclusion, the consuming public is apt to demand publicity of profits as a means of self-protection-a case in which the bargaining advantage of business management tends to become trusteed in some form of administrative commission. About the time of the Chicago Convention on Trusts (1899) publicity was the first commandment of the anti-trust decalogue. Now it is seldom mentioned as a remedy, and nowhere as a cure-all. The knowledge that was supposed to be wanted by the investor and consumer has not proved to be corrective, except as it found expression in the self-interest of investors or in the regulative control of a governmental commission with powers to insure fair competition among private corporations and to make rates for public utility.

Of these two lines of remedial policy in the regulation of the American trusts, the older is the publicity of corporate accounts. The other, the later, and now the vogue, is supervision by commission. Publicity of accounting has much more to be said for it than has yet been given to its credit. It has worked fairly well in the control of insurance companies both in Great Britain and America. It is far less complex as

a regulative program, and its extension of supervisory authority stops short of impairing private responsibility for corporate results. It involves no radical departure in policy; and, if properly applied, it may afford adequate protection to the public. "The publicity required," declares an eminent insurance specialist, "is of the simple, straightforward, intelligent type, covering essential matters, so that the public may judge.'

In both of these lines of development the bargaining power has already passed in its final form to the political powers. This extension of public powers is differently interpreted. To some it means incapacity in self-governing industry. But the more scientific view is the truer that it is only a division of labor in which government, whose business it is to decide controversies, extends its services over into the field of free enterprise. This is not because its decisions are more nearly ideally just; but, as the cricket umpire explained to the novice, that some sort of a decision may be rendered promptly, “so that the game may go on." This is why government by commission has come to play so large a rôle in the complex conditions of modern trade and industry. Where one sort of umpiring proves unequal to its task it is set aside for another. Commissions will be needed until the

* Miles M. Dawson, address, published in the Annals of the American Academy of Political and Social Science, March 29, 1912.

administrative arm of government, as contrasted with the other three divisions, comes to stand on an equality with them. Then we may have the four corner stones of a complete system of governmental control in the executive, the judiciary, the legislative, and the administrative.

5. The Old Game Under New Rules

The solution of the American trust problem cannot be found in governmental repression within abnormally restricted limits of economic freedom. It lies rather (1) in the discovery of the maximum legal limits within which free enterprise may safely be assured to the employment of capital and labor in the service of the market; (2) in the observance of reasonable "rules of the game as defined in jurally sound codes of competitive relationships. On these bases economic law will settle all questions of forms and size of the business corporation.

This solution lays down two general principles, free enterprise and fair competition. With the former there must be no legalized monopoly apart from public control. With the latter we keep the via media of economic experience. Together they comprise the best in American and European commercial experience, and are in line with sound economic development. As in politics, so too in economics-the remedy for the abuses of freedom is more freedom, not always of the same kind but always of a more responsi

ble kind. Here is the union of what George W. Alger calls The Old Law and the New Order.* To summarize, the requirements of a trust solution must at least

(1) Insure the maintenance of a superior type of economic responsibility in trust management; (2) Sufficiently safeguard the interests of the community - the creator of corporations and the consumer of its products;

(3) Define the limits within which trade and industry in the exercise of their legal privileges and economic practices shall have regard to the principles of public welfare;

(4) Recognize within the scope of their relations the necessity of the state as umpire to define and enforce the standards of fair and unfair competition.

Recent amendments to the Sherman Act embody this code of fair dealing among rivals big and little, with a view to strengthening competitive conditions and abolishing the monopolistic abuses in enterprises devoted wholly to private profit.

As

The principle is recognized here that prevention of the abuses of competition is necessary to forestall the tendency toward monopoly. destructive competition killed off rivals, leaving the field to competitors with the best staying powers, so interposition of positive checks be

*

The Old Law and the New Order, G. W. Alger. Houghton Mifflin Company, Cambridge. Ch. VIII.