The

The work of the Interstate Commerce Commission in regulating railroads is often held up as demonstrating the practicability of successful government regulation of trusts. It has already been shown, however, that the regulation of trusts would be a much more complex task than the regulation of railroads. Moreover, with all due respect to the great intelligence and fairness with which the Interstate Commerce Commission has discharged its duties, we may yet question whether the ability of the Commission to regulate the railroads satisfactorily has been put to a final test. The Commission has thus far been concerned chiefly with the relationship of rates between different places. It has corrected many abuses in this respect, tho many still remain. As already stated, it has done very little to change the relation between the rates on different commodities, a relation which is often unreasonable. commission has never had to face the problem of reducing the general level of rates for all railroads or for any particular railroad. The enormous increase in the volume of traffic during recent years would have enabled the railroads to obtain altogether unreasonable profits under existing rates, had it not been for the coincidence of a great advance in the prices of commodities and in the costs of railroad operation. Had this not happened, the Commission would have been called upon to reduce rates in a wholesale manner and it would have found that task immensely complicated, besides encountering tremendous opposition from the railroads and the many who sympathize with them. The task recently and still before the Commission, of determining whether, or by how much, railroads shall be permitted to advance rates is a far easier task than that of compelling a general lowering of rates.

Government regulation of prices and profits of private concerns always involves a large element of waste, of duplication of energy and cost. It means that two sets of persons are concerning themselves with the same work. The managers and employees of the corporations must study cost accounts and conditions of demand in determining price policy. The officers and employees of the government must follow and do it all over again. Moreover, the fact that these two sets of persons have different motives in approaching their work means friction and litigation, and these spell further expense. To superimpose a vast governmental machinery upon the vast machinery of private business is an extravagance which should be avoided if it is possible to do so.

The policy of government regulation of industry may readily become a stepping stone to government ownership and socialism. The chances are strong that the government of the United States will take over the telegraphs and telephones in the near future and the railroads within less than half a century. The demand for government ownership of these as well as of municipal public utilities may come from various sources. If regulation by the government proves ineffective in securing reasonable rates and charges, the general public will demand government ownership. If regulation proves so effective as to leave only moderate returns to the stockholders of the corporations, the stockholders are likely to urge government purchase, which would at least assure them of a more In either case the excessive cost of a reason government regulation will be urged as a reason for government ownership. In the same way, if the gov

ernment undertakes detailed regulation of combinations in manufacturing, mining and trade, there is bound to be a strong movement for government ownership in these fields also.

Government ownership of this or that industry is not necessarily a bad thing. Even government ownership of a large proportion of the industries of the country, nay, even complete socialism, need not necessarily affright us. To discuss the merits of government ownership would take us too far afield. It is sufficient merely to point out that the people ought not to enter on the path of permitting and regulating combinations! without considering the advantages and disadvantages of this, the possible ultimate outcome, as well as those of the immediate policy itself. If it could be proved that combination is materially more economical than competition, we should doubtless be wise to say farewell to competition. Presumably in that case we ought to test thoroly the practicability of government regulation of private monopoly before proceeding further. The people would naturally first try the plan of government ownership, if at all, in limited fields, and compare the results with those under regulated monopoly before undertaking general government ownership. It is by no means improbable that the ultimate outcome would be socialism. The future is very likely to see either a régime of general competition, with, of course, some special exceptions, or a régime of universal communism. Clearly then we should be very sure of our ground before we take the first step toward possible communism. We should convince ourselves beyond all doubt that competition is impossible; or that, if possible, it is less efficient than monopoly, not

merely at certain times and in certain places, but generally and permanently, before we tolerate widespread combination in the field of business.

We have not referred here to the effects of regulation upon the trusts themselves. We have considered only the difficulties which the government would encounter in an attempt to regulate trusts. It is quite possible that regulation would largely destroy that very efficiency which is held up as the reason for permitting them to exist. / The discussion of this topic, however, belongs more properly with the next lecture, in which the alleged superior efficiency of trusts will be considered in detail.

CHAPTER IV

THE ALLEGED ADVANTAGES OF COMBINATION

In the preceding lecture we have tried to show that regulation of the prices and profits of trusts and pools would involve much difficulty. Nevertheless, if it could be shown that combinations controlling a large proportion of their respective industries were necessary to secure the highest economy and efficiency, and possessed other economic advantages, the proper course would be to permit such combinations, while subjecting them to regulation.

Claims of this sort are put forth with much vigor in behalf of the trusts. We are told by many that the trust is a natural evolution, that it is the last word in industrial progress, that to destroy it would be to turn the hands of the clock backward. Let us restrict monopolistic greed, they say; let us, if necessary, destroy the bad trusts; but let us not lose the advantages of good and efficient trusts. Some go further and descant on the evils, nay, the immorality, of competition, the superiority of peace over the sword in industry as in international politics. War is hell; competition is war, say they.

The claim that the trust possesses superior efficiency deserves thoro and fair consideration. The assertion that the desire for greater efficiency was the primary motive in the organization of the trusts, however, is not

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