combinations or corporations in which these great financial leaders were interested. At the same time, it must be admitted, the power of the Money Trust is by no means sufficient wholly to prevent new capital from entering into competition with the trusts.

Some take the position that the mere aggregation of great capital in the trust will implant such fear in the hearts of would-be competitors that they will keep out of the way. They urge that the great resources of the trust alone will enable it to survive losses of competition better than the smaller concern. With this view also I find myself unable to agree. The losses of a trust from competition reach a greater volume of business than those of the independent concern; proportionally they may be equally heavy. Only if the trust is more efficient than its competitors, or if it can use unfair methods of attacking them, is it able to drive them to the wall without itself suffering equally.

But does theory justify us in thinking that the trust will find it necessary to fight to the last ditch in order to rid itself of the competitors which are likely to spring up from time to time? Will not the same motives which led the group of competing concerns to combine at the outset appeal as well to the new competitors? It is by no means true, as some trust promoters would have us believe, that before the trusts were formed, destructive competition was causing intolerable losses. Usually the leading concerns were by no means in danger of the sheriff. They united because they saw the prospect of still greater gains than they were making. They felt it was more profitable to join in gouging the consumer than to try to get business away from one another. Will not the new concerns that rise up to

plague the trusts find it convenient to do likewise after a reasonable period of competitive struggle?

We are not justified, on theoretical grounds, in anticipating any other history for the trust than that which has so often actually taken place in the past. The career of many, if not most, trusts has shown a wave movement. First, fairly complete elimination of com-petition and extortionate prices. Then an inroad of competition followed by moderate or low prices. Next the absorption of competitors, and high prices once more. What theoretic reason is there to believe that in the long run the average of prices under these fluctuations will be no higher than had there been no combination at all? What reason to suppose that during the periods of active competition the prices will go far below a profitable level? Can the trust induce its competitor to enter the sheltering arms of monopoly only after both have long been losing heavily?

Capital and talent may be ever ready to begin competition with the trusts. They are usually quite as ready to join with the trusts to keep up prices. Often the sole object of the new competitor is to break his way into the monopoly. It may not even be necessary for the combination to pay a very high price in order to buy him up. It may not be necessary to buy him up at all. He may simply agree with the trust to work in harmony, to follow its leadership.

But, it will be urged, the trusts will be able, by reason of their superior economy and efficiency, to secure profits, on the average, in excess of the normal competitive rate, and still charge prices at least as low as would be possible under a régime of general competition. Anticipating for a moment what will be discussed more

fully in another lecture, we may note that superiority of the trusts in efficiency has been by many greatly overestimated. The trust may be more efficient than its smaller competitors as they actually exist today or than the separate plants that preceded the trust. That proves little. The things compared are not properly comparable. In most industries the trust possesses little superiority over large individual plants, or combinations of a less comprehensive character, such as would have arisen in the absence of the trust.

But even if the trust were the most efficient possible business unit, it does not follow that, in the absence of regulation of prices and profits by the government, the people could expect to share in the benefit of that efficiency. On the contrary, the efficiency itself might result to the injury of the public. It is by no means clear that the self-interest of trust managers would under such circumstances lead them to maintain prices uniformly low in order to keep competitors from entering the field. Might they not rather keep prices high as long as possible, relying on their ability to destroy competitors by underselling, whenever they arose ? Might not the known ability of the trust to undersell without loss create such a fear that competition for long periods would not dare to raise its head? Superior efficiency of trusts may be an argument in favor of the policy of tolerating combinations subject to government regulation, but hardly in favor of a policy of laissez faire.

Experience and theory thus unite at least to warn us of the possible danger of trusts and pools. We cannot feel sure that the restriction of unfair competitive methods and the removal of special monopolistic privileges would rob them of power to mulct the con

sumer. Moreover, we have not yet been shown that it is possible to eradicate unfair competitive methods and special privileges. The government has been trying to put a stop to railroad discriminations for more than twenty years. It has reduced them greatly, but it has not wholly eliminated them. The task of preventing unfair methods of marketing goods would be even harder. It is easy to talk about prohibiting price discrimination, for example. Actually to prevent it would require elaborate administrative machinery. Price discrimination is practised more or less in almost every branch of industry and trade. Small concerns having no thought of monopoly often discriminate in prices. In some cases the practice is excusable if not desirable. The government would have grave difficulty in determining just where to draw the line. Indeed, to prove the fact of discrimination would often be virtually impossible, because of differences in the grade of goods sold, in the quantities sold to different purchasers, and in the costs of sale and delivery.

Difficult also would it be in many cases to deprive combinations of special monopoly privileges. For example, take patent rights. The patent possessed by a concern standing alone may give it only a limited degree of monopoly power. By combining with other concerns having patents for related machinery or processes the monopoly may become complete. We may

prevent such combination by law. But if we permit it, how can we then deprive the combination of the added power which the pooling of patents gives? The only remedy for monopoly in that case would be regulation of the prices of the products. Again, a number of separate concerns having each part of a limited natural

resource may unite so that they together control the entire resource or the greater part of it. This gives them an advantage over competitors that did not exist before. The combination might have been prevented, but if it is permitted, the advantage thereby acquired with respect to the natural resource cannot be taken away save by the difficult method of government regulation of prices.

The restriction of unfair competitive methods and of special monopoly privileges would be a proper enough adjunct of the policy of prohibiting combinations, or of the policy of regulating their prices and profits. But standing alone it is not a sufficient safeguard against monopoly.

The solution of the trust problem, therefore, must be found either in prohibition or in regulation, not in laissez faire. Those who ask us to remove the ban of law from trusts and pools without substituting the controlling hand of government over prices are asking a departure from a policy that is as old as Anglo-Saxon civilization. They are asking us to leap into the dark. The results, tho conceivably not disastrous, might yet be extremely disastrous. The great majority of the American people have no desire to risk the experiment. I for one believe that they are right in refusing to do so.