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XCITING to this generation shows itself in statutes that will not

is the problem of dealing work. He is a rare legislator who with the modern Trust. escapes the accusation of venality howThe subject can hardly be ever he votes on questions involving

said to be under discussion, money-making. Thus, corruption was for the public seem to have got beyond charged upon congressmen equally consideration and to be engaged in when the McKinley Tariff of 1890, which denunciation, as of thing that did not tax sugar at all, was passed, has been adjudicated and condemned. when the Wilson-Gorman Tariff was enHere and there journals like the New acted by a Democratic Congress, and York “Sun” and the “Evening Post," when the Dingley-Aldrich bill of the perceive that the question is not one- Republicans became a law. sided, that trusts are a natural industrial There has been much legislation in development not without advantages to recent years to restrain great corporasociety, but they make little impression tions and combinations from oppressing with their apologies upon a people con- the people, but none of it has solved vinced that trusts are an abomination the problem or resulted in an efficient and who are also inflamed with political statute. The Inter-state Commerce Law excitement.

of 1889 and the Anti-Trust Law of 1890, The problem has been made a political both Federal statutes, are found by the one, and every party is trying to avail courts to be inadequate to achieve their itself of this fact to secure for itself the professed purpose, or to be unconstitusupport of the general anti-monopoly tional and impracticable in some vital sentiment. It suffers, therefore, from provision. States like New York, all the exaggerations,

exaggerations, demagogery, Georgia, Illinois, Kansas and Texas, have falsities of fact and of theory, and passed laws to put down trusts, but these obscurities that always attend popular are found to stop enterprise, drive away campaigning. It suffers, also, in leg- foreign capital, and jeopardize both pubislative halls, not only from the same in- lic and private credit. Seeing these misfluences, but from the complications of carriages of legislation, the public easily log-rolling and jugglery incident to any convinces itself that such results were measure affecting trade and industrial contemplated and that the hand of selfinterests. It is not to the legislatures of interest and corruption has been at work the country that we can go for light to render the popular purpose futile. upon political issues, where men loụdly It is natural that, when legislators champion a popular cause with their are called upon to enact measures adlips while they entangle and defeat it versely affecting commerce and induswith their votes. The ordinary legis- try, they should become bewildered lator is usually between the devil of pri- with the complexity of the problem, vate moneyed interest and the deep sea of timid as to consequences, and hence, by proletariat popularity, and is tossed amendments and obscurities of language, with conflicting interests. His situation emit statutes that shall work as little

Copyright, 1897, by THE WERNER COMPANY. All rights reserved.

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change as possible, while seeming to men in a single lifetime should from be in the general interest. But a real poverty grow into the possessiou of scores trouble may also lie in the intricacy of of millions of dollars worth of property. a half-comprehended problem.

To the end of all time the people will Concerning this class of legislation, so kick at that phenomenon, even if they far as it has yet gone, it may not be un- are not able to tell why it is monstrous. fair to say of it, whether national or There is an instinct deep in the soul of state, that "owing to the emasculation every reflecting man, that such estates and restriction these statutes have expe- cannot be honestly accumulated, and that rienced at the hands of jurists, most of they are prima facie evidence that the them have practically become dead people have been defrauded to build letters.” Some of the difficulty, however, is inherent in the subject-matter. It is possible, of course, for men to These enactments aim to deal with new discover some natural wealth, as the conditions of life, the scope and nature of Kimberly diamond mines, a coal deposit, which are not yet clearly discerned. an Alaskan lake of petroleum or asphalt, For example, under the terms of the or a Comstock lode of the noble metals, Anti-Trust Law, it is immaterial whether that legitimately make them millionaires. the combination in restraint of trade is Some have become very rich, and deservmade by corporations or by individuals. edly so, by inventions that have greatly In point of fact, and this is material to increased the productiveness of labor, as the present argument, these combinations the sewing-machine, the telephone, the are usually made by incorporations. dynamo, the steam-engine. Some have But of this the law takes no notice. also become wealthy in a way not exNow here is a statute that distinctly im- posed to envy or denunciation, through pairs the right of free contract. How far enterprise, as by creating new outlets for can legislation carry such a restriction? traffic, or by introducing economies and Any formidable use of it would rev- stopping waste of administration, or by olutionize our system of government. finding mercantile uses for by-products.

Again, the interference by law with But none of these natural sources of private contracts, not fraudulent, tends wealth ever made their discoverer or directly to government control of trade, inventor many times a millionaire and it was out of such control that the through their legitimate industrial apold despotic system of monopolies arose. plications. Handsome, but not gigantic, Once more, can the courts enforce laws estates have become accumulated by which seriously restrain the right of con- royalties and plain, pure trade. A new tract? Would not men go on and build function is required to raise a man above up a system of trade outside of the the plane of abundant competence and statutes, until, in the general acceptance make him a conspicuous plutocrat. That of such a system, the courts would be is the function of the “promoter,''—the paralyzed, either from inability to secure man who does the financing of jobs, the a conviction, or from dread of a business entrepreneur who handles other peoples' catastrophe ruinous to the country? In- inventions and property, either to exploit terference with the liberty of citizens to them, or the multitude which has need of do business as they may find it best, is a them. question both complicated and hazardous, In this process the first step is to inand very few know under what limita- corporate a company to control the new tions it is either wise or practicable. industry. We may well stop to ask

We are now confronted with two why this step is necessary. Why canquestions on which clearness of thought not the individual just as well manage is needed : First, are there any evils his own property and make all there is arising out of combinations and manipu- out of it? Simply because a private lations of capital that ought to be re- person has to transact business in a moved? Second, how is it practicable to more responsible way than a corporation. legislate their extirpation? Undoubt- He cannot double and quadruple his nomedly there are very serious and also re- inal capital by watered stock; he cannovable evils, but it is possible their not borrow money to depreciate his own real seat and nature are not rightly dis- estate, as a railroad does when it issues cerned. It is socially monstrous that bonds to make its stock worthless; he can

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not, without a charter, restrict his lia- honest. To take it merely by juggling bility for contracted debts to such with securities and changing their amount as he is willing to risk in bus- values, is not honest. John Ruskin has iness. If he commits a fraud he has somewhere said that no man was worth to pay the penalty with his purse and to the world $30,000 a year, because no his body, as a corporation does not. man has the capacity to earn it. The The only frauds a member of a cor- sum is arbitrary, but, double or treble it, poration is likely to be punished for if a man is entitled only to what he can are those he commits against the com- earn by real service rendered, then it pany. On account of these qualities would take a long life of exceptional conferred by a charter, it comes about ability and frugality to put by a million that there are few huge modern for- dollars. Nor are these great fortunes tunes, either in Anierica or Europe, originally made by speculation. The that have not been made by the manip- amassing of millions is done by a delibulation of corporate property.

There erate contrivance. is not an inventor of large estate who The anecdote is told of Jay Gould, that, does not owe the bulk of his wealth to when once solicited to embark in specuthe corporations to which he has trans- lation on the London Exchange, he ferred his patents. It was not mining in told the advocate of such a scheme this: the Comstock lode that made its owners “Your plan is very plausible. I have millionaires, but inside speculation in its only one objection to it. I never specusecurities. It was not dividends that late." He operated in stocks only when enriched the managers of Pacific Rail- he had a sure thing, or when he could roads, but plundering the roads and their control them. Take a very common creditors with impunity:

operation to illustrate one method. The There is no reason why a corporate managers of a solvent dividend-paying body cannot do business as honorably as railroad conclude to acquire by lease a a private individual.

There are some tributary line that is not solvent. To do chartered institutions that do so, espe- this they guarantee a six per cent. divcially the national banks, whose opera- idend on the stock of the tributary road tions the government prescribes and to be paid out of the earnings of the scrutinizes. There are trust companies solvent road. The moment the transthat thrive and do not speculate, al- action comes to light in the market, the though these make their greatest profits stock of the main line sinks in value, as receivers and reorganizers of corpora- while that of the tributary line rises to tions. Well-established manufacturing or above par. In the process the mancompanies do an honest business, ipulators in advance "sell short” all though they are sometimes sold out by their holdings in the solvent company the sheriff. It is possible for men acting and buy all they can get of the poorer under charters to do business on the road. They even borrow all the money same lines as a private person; but in they can to carry their contracts on a fact some do not, and hence the individ- margin, and they do this work before ual acting by himself seldom accumu- announcing the deal. When the facts are lates so large a fortune as be bruited about, and these securities have gathered through the misuse of cor- settled to their changed values, the operporate powers.

ators deliver the stock they bought short, These facts are pretty widely under- and sell the stock they were long on, stood and they give rise to the convic- making money in both ways. There are tion that great wealth, such as, in these thousands of men, who, by thus violating days, overwhelms the imagination, are their trust, have found themselves in a the products of dishonesty. An ingen- few days richer by hundreds of thouuous man could not contemplate doing sands of dollars, and all they have done many things done in some lines of cor- is to change, by votes in directors' meetporate business without compunctions of ings, the relative values of securities enconscience. It is necessary to sophis- trusted to them. ticate him first. For to take money What has happened in the process to without rendering any return for it, the public? No wealth really has been without adding to the world's wealth or made. The world is not a penny richer. performing any useful service-is not Those who owned stock in the solvent

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road find themselves poorer by the fall was the inevitable result. . . . Railin its market value; those who sold out roads, unfortunately, seem to reverse the their holdings in the insolvent road have rule of 'the survival of the fittest' to parted with property which they would the 'survival of the unfittest.' They never have given up at the price, if they can be used for but one purpose, and had known the facts. What has been when they go into the hands of receivers, thus lost to them goes to make the for- they are to be run so long as the operattunes the managers of the deal have ing expenses can be paid." taken to themselves. In a word, their Under such an over-capitalization gains have been “ hocus pocussed” out there is only this alternative: the comof other men. Where else could it have panies must go into bankruptcy, or they come from? The men who have nego- must make enough on their passenger tiated these deals did not operate with and freight traffic to pay dividends and their own property; they were trustees interest on immense sums of money that for the company they wrecked; they never were furnished. Either they must dealt in the investments of people whom defraud the holders of stock and bonds, they impoverished. Surely it takes a or they must extort unfair remuneration sophisticated man to do this; doubly from the public which uses the road. sophisticated if on the next Sunday he Meanwhile, the ingenious promoters of passes the collection plate at a com- the scheme, always aware of the impend. munion service.

ing crash, manipulate the market and This is only one of the least gross get rid of their holdings by unloading filchings of corporate management, and them on ignorant investors. it is common,- very common. Add to The process now described is by no it the practice of declaring and with- means confined to transportation. Railholding dividends in order to trade in roads have been cited simply because stocks on 'change; the watering of stock, their affairs are better understood and or increasing the capitalization of a com- the facts are more authentic. The same pany beyond its power to earn interest thing goes on, as it has long gone on, and dividends; the paying of exorbitant in scores of different interests. To make and speculative prices for the good-will such management lucrative to the proof some concern that is to be bought out; moters, it seems necessary that the inand the methods by which money is terests in question, and this is importaken from small investors and piled into tant to bear in mind for several reasons, the estates of promoters are not hard to shall be susceptible of being monopounderstand.

lized. In these days a very large part of Says J. P. Meany, in a recent publica- our industry is carried on by corporation, after computing that $750,000,000 tions because these limit the liability of of the railroad stock in existence is du- the capitalists engaged in them to the plicated in the estimates of the total in- amount of their stock, or in some investment, “how much of the remainder stances, as banks, to twice that amount. was issued without cash consideration The investor is able to calculate in adit is impossible to ascertain, but it is vance just what he is willing to risk, within the bounds of safety to say that and, if the corporation becomes inof the $3,250,000,000 stock now out. solvent, he can have something restanding not more than $1,250,000,000 served to live upon.

With private partis full paid stock.” The result of such nerships this is not so. Here a man has baseless capitalization is bankruptcy to to give up his last cent to his creditors. the overloaded companies, and a menace Equity would seem to demand that the of insolvency to their competitors. As same liability should follow a man into “ Poor's Manual” said a dozen years ago: a corporation, which is, after all, nothing “The stoppage or reduction of dividends else than a form of partnership. Why on these great lines created profound is it that a legislative provision should apprehension and distrust as to the value confer upon a company a right to conof all railroad properties. The earnings tract debts that it need not pay, when an of other great trunk lines suffered in like individual is permitted no such immunmanner, if not to the same extent. Aity? The usual answers to this question general disruption of the relations pre- are, first, that a corporation, since its viously existing between the companies capital and its liabilities are known to the world, only enjoys a corresponding themselves, wish something for nothing, credit, and society is protected against but who are not “let in on the ground it in everything but its own imprudence or floor.” We have the failed whiskey, bad judgment. This argument amounts cordage, rubber, gas, and kindred trusts, to but little, since those who do business as well as railroads in receivers' hands, with a corporation do not know, until for examples. too late, when it has transcended the Those great combinations that suc safety line of debt, and, further, in point ceed in floating vast amounts of watered of fact, the credit of individuals is more stock rest, as a rule, upon some pubcircumscribed than that of a chartered lic franchise, or some patent, or upon body. A second argument is that the some production limited as to its sources. limited liability of the investor greatly They control railways and street trampromotes enterprise, thus creating new ways, telegraphs and gas works, which taxable wealth, new conveniences and have for their basis rights of way and developments, and new demands for construction granted by law; they conlabor. Hence it is good public policy. trol telephones, electric lights, and

Under this system, which is constantly motors, as they once did sewing maexpanding to embrace new interests, chines, founded upon patents; they conthere is a large field of corporate activity trol oil and anthracite because the areas that is sound. As has already been of production are restricted, whiskey and stated, our banks and financial institu- sugar because the distilleries and refintions are exceptionally safe. Our large eries are few, and because, as objects of textile mills, our great printing houses, heavy taxation, the government pressure many of our factories, indeed most of the unites them in interest; they control corporations engaged in production, are tobacco for a like reason; and for obnormal and without offense. They do vious reasons, as the fewness of the not over-capitalize and then issue bonds factories and plants necessary to supply to kill the stock. If they desired to do the market, they control the producso, they have not sufficient credit; their tion of cordage, biscuit, matches, wire, securities are not listed on stock ex- etc. In nearly every case the ingredichanges to become the shuttle-cocks of ents of extortion and dishonor are misspeculators; they as yet are incapable of use of corporate powers, monopoly, and combining all industries of their class indebtedness for which there is no value into one trust; if they are very lucrative received. new capital seeks the same sort of invest- Not long since a certain trust was summent, in order to share the profits, and moned into a United States Court to the fear of this restrains industrial cor- answer why it should not be put into porations from trifling with their credit. the hands of receivers. The petitioners

There is a line where safe methods averred that the plants turned into the begin to disappear. It is the line of trust had only a capital of $5,000,000, practical monopolization. Monopoly in- against which the trustees had issued flames the imagination of avarice. There certificates for $30,000,000. This treare no bounds to its speculative profits. mendous increase of capitalization was The absolute control of a product or a defended on the ground that heavy convenience seems capable of unre- premiums were paid for good-will, and stricted extortion. As a matter of fact, the court held that this was legitithese dreams are seldom realized, because mate. If what has gone for good-will, the insatiate greed of monopoly promo- as it may be called, in the consolidation ters leads them to miscalculations that of the great trusts, as in oil, coal, sugar, end in bankruptcy; or, what is worse, tobacco, gas, cordage, whiskey, brewerthese promoters are in such eager haste ies, electric contrivances, street railways, to awake in the morning millionaires, telegraphs, etc., were computed, it would that they do not care whether their probably be found that of them, as of schemes are sound or not. They expect railways, hardly forty cents on a dolto complete their deal and clean out lar has ever been paid up on their stock before the crash comes, leaving a bank- and that they too have a billion of dolrupt concern in the hands of their misled lars on the market either in worthless dupes. Their reliance is on the credul- securities or in securities that must be ity and greed of those who, equally with kept profitable by an unnecessary mulct

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