tant of the modern forms of economy in the steel industry. Blast furnaces of Jones & Laughlin are among the record-holders for size and efficiency.

Finally, it is obviously very difficult to judge of the advantages of combination in production and marketing by comparing the business of combinations with that of single plants in other industries. The differences in the subject matter of production and in the conditions would in most cases render such comparisons of little value.

In view of these difficulties, it is certain that detailed investigations regarding the relative efficiency of trusts and single plants, even if they covered the entire field of industry, would result only in disagreement among the people as to the conclusions to be drawn. It would probably be proved clearly enough that certain particular trusts were highly efficient. We might convince ourselves, not only that they were more efficient than the best of the predecessor concerns, or than the best of the present competing concerns, but also that they were more efficient even than such individual plants as might have come into existence in the absence of combination. In other industries, however, no such demonstration would be possible. The investigations would still leave doubt as to whether the trust in general was superior in efficiency to the separate plant.

But suppose, for purposes of argument, it should be demonstrated that in general the trust was more efficient than the individual plant. We should still have failed to show the superiority of the trust over the less extensive combination having no possibility of monopolistic power. That question could scarcely be attacked at all by statistical investigation of present or past conditions.

The basis for comparisons does not exist. In very few industries did combination on a limited scale precede monopolistic combination on a large scale. In still fewer industries have there existed, side by side, a combination controlling the greater part of the business and another combination or combinations having only a minor fraction of the business. Comparison between the trust in one industry and the smaller combination in another industry would usually lead to no definite conclusions.

The fact is that we have had comparatively little experience with combinations other than trusts and pools of a more or less monopolistic character. If the desire to secure increased efficiency had been the only motive of business men in forming combinations, we might have witnessed a large number of combinations having no controlling proportion of the business in their respective fields. But since the main object was to suppress competition, combinations of a more comprehensive character sprang at once out of the régime of separate plants.

There is no objection to further investigation regarding trust efficiency, provided it is not made an excuse for deferring action as to the dissolution of trusts. A wide-reaching investigation of trust efficiency would require not less than ten years. Every year that trusts are permitted to continue renders it more difficult to restore competition among their constituent concerns. The officers and managers year by year become more accustomed to working together; the organization year by year becomes more welded into an inseparable unit. The shock to business from breaking up combinations also will become more severe the longer it is deferred.

༥

X

Since there are thus no adequate existing data on which to base conclusions as to the advantages of trusts from the standpoint of efficiency, we are forced to fall back upon general reasoning. The theoretical advantages claimed for the trusts by their defenders naturally fall into three groups, -those attributable to mere magnitude, those attributable to combination of separate plants, and those attributable to the elimination of competition. The failure to make this obvious classification is the source of much fallacious thinking. Only advantages of the third class can properly be put forward as directly proving the desirability of trusts that possess a controlling proportion of the industry in which they are engaged.

The following are some of the advantages claimed for trusts which, so far as they exist at all, exist solely by reason of the magnitude of their business.

1. Command of the largest and most efficient units of production, buildings, power plants and machinery. 2. Command of large liquid capital and credit, enabling the concern to meet emergencies and to take advantage of special opportunities.

3. Command of superior administrative and technical ability.

4. Economy in the purchase of raw material and supplies in large quantities.

5. Distribution of administrative and other overhead expenses and of selling and advertising expenses over a large output, thus reducing unit costs.

6. Practicability of introducing efficient accounting systems too expensive for smaller concerns.

Any concern, if sufficiently large, can possess all such advantages. Magnitude of operation is purely a

It

relative term. In minor industries, only a concern which has the greater part of the entire business can be considered large. In great industries the concern which has only a small fraction of the business may possess millions of capital, a vast plant and an army of employees. No one would think of denying that large scale operation has advantages over small scale operation. It does not follow that an industrial combination controlling the major part of a business will, by reason of size alone, be more efficient than a less extensive combination or even than a single large plant. Effi ciency does not increase proportionately with size. has been learned by the experience of business men that when the individual plant passes beyond a certain size, it ceases to gain in efficiency. The same causes which make this true of the individual plant apply to the combination of plants as well. There may be advantages from combination as such or from monopoly as such, but the advantages of mere magnitude have their limits. Moreover, when size passes beyond a certain point, it may even lessen efficiency. [The unwieldiness of a vast organization, the difficulty of securing coöperation among its parts, the impossibility of personal oversight by the master mind, - these are disadvantages of excessive magnitude.

There may be some industries in which, from the standpoint of magnitude alone, the greatest efficiency would lie in a concern controlling virtually the entire business. There is little ground for believing that this is the case in the great majority of industries. At any rate it is utterly impossible, by general reasoning or by statistical investigation, to prove that it is so. Indeed, it would seem that in most industries a concern having

even as much as half of the total business would, in respect to those elements of efficiency now under consideration, have no superiority over a somewhat smaller

concern.

Another set of advantages claimed for trusts rests upon the fact of combination as such. These supposed advan¬ tages result from the assemblage of separate plants under a single control. They are not dependent on the elimination of competition. Among these are the following:

1. Use in all plants of the best methods and devices discovered in any one plant, comparative cost accounting rendering it possible to determine which are, in fact, the best.

2. Rivalry between the managers of different plants, stimulated by comparative cost accounts and other comparative data.

3. Saving in cross freights by shipping from the plant nearest to the desired destination.

4. Integration of industry - that is, the conduct of successive or related processes under a single management.

Combination undoubtedly does have its advantages. But combination, like magnitude, is a relative matter. In a minor industry a combination of even a few plants may mean the bringing together of the larger proportion of the business. In another industry a combination including a considerable number of plants may have but a fraction of the total business. Any combination of plants, however few, can obtain the advantages specified in some degree. Just as economies of magnitude do not increase proportionately with magnitude, so economies of combination do not increase proportionally with the number of plants combined. There is a limit beyond

G