Why called trusts CHAPTER XVII THE TENDENCY TOWARD GREAT W E have noted four great forces which belong to the Industrial Revolution, using the term in its broadest sense. These four are the invention of machinery, the growth of capital, the growth of banking and credit, and the formation of corporations. The great possibilities of these four forces were not grasped at once. But in recent times the tendency has been to form larger and larger corporations which carry on great industries by the aid of vast capital and credit. These great corporations are often called trusts, although they are not trusts in the proper sense of the term. In the United States before 1890, if several individuals or corporations desired to combine, they sometimes formed a trust in the older sense of the term; that is, they turned over their property to certain trustees who were to manage it for the owners, but in such a way that the firms would coöperate instead of compete against each other. In 1890 a law was passed by Congress called the Sherman Act, which forbade any contracts or agreements in restraint of trade. After the passing of this law, men in the same line of business who wanted to unite proceeded to form one great corporation instead of making agreements and appointing trustees. The name 66 99 trust is still applied to these great corpora tions. Some corporations have grown to be very large Methods simply because they have kept up with the growth of of growth the country and added new customers. Telegraph and telephone companies naturally add to their subscribers as population increases. In the past thirty years1885 to 1915-the gross earnings of the Bell system have increased from $10,033,600 to $239,909,649. Sears, Roebuck & Co. have built up their great mail order business, which now has over 6,000,000 customers and does a business of over $150,000,000 a year. A second method of forming great organizations has been by combining several industries or corporations which are already in existence. Several firms making cloth or mowing machines or flour may find it more profitable to combine than to compete with each other. The American Woolen Co., the International Harvester Co., the U. S. Steel Corporation are examples. More over, such firms as these are likely to expand by getting control of raw materials and the means of transporting them. For example, the U. S. Steel Corporation not only includes steel mills, but owns iron, coal, and limestone mines; steamers and railways for carrying ore; iron furnaces, and other plants. The Harvester Co. owns forests and mines, cuts its own lumber, and makes some of its own steel. In the United States, railroads first showed the tend- Railroads ency to combine on a large scale. Early railroads were short. In 1850 no single line was 500 miles long. Within the last fifteen years the important railroads of the whole country have been so far consolidated and brought into groups that nearly two-thirds of the whole mileage belongs to eight groups. Manufacturing Manufacturing shows in recent years the same tendency as the railroads; the number of establishments does not increase in any such proportion as our population. In fact in many industries it remains constant or decreases. But the size of the establishments, the value of the products, the average capital, and the average number of men employed show great increase. AGRICULTURAL IMPLEMENTS Wage Causes for rapid growth earners. The growth of great corporations evidently means the arrival of a great power. It may be compared with the formation of great cities and nations, which introduced a new power as compared with the older organizations by tribes and clans. They represent union and coöperation on a larger scale than the small firm. Many specific causes for the rapid growth of great corporations have been stated. Some belong on the manufacturing side, others on the selling or marketing side of the business. We may illustrate each of these. ical use of machinery The great corporation with its large capital is able Economto do more and more by machinery. In the iron and steel business ore is shoveled into cars by the steam shovel, taken by rail to Lake Superior, loaded into steamers and brought to Chicago or Lake Erie points. Here two men with an engine and steam shovel, which seizes six tons at a time, unload two steamers a day. In the process of steel making the fused iron is turned into the Bessemer converters, the liquid steel is poured into ingots, these are placed on rolls which send them back and forth between huge cylindrical rollers which gradually fashion them into steel rails or plates,—and the huge masses are handled by machinery throughout. Enormous magnets pick up great steel plates, weighing tons, as easily as one picks up a nail with an ordinary magnet. A few men move the levers which control the whole series of operations. To build and use such expensive machinery is the most economical way to handle the steel. In fact, one sees that it is practically the only way. But it evidently would not pay unless the machines could be kept working. Indeed in the steel plants some are kept going twenty-four hours a day. This means that the firm must use enough ore and sell enough rails to keep the machines busy. If the machine does the work of a thousand men, a firm must give it work to do. To have it idle is like paying Less skilled labor Use of byproducts Elimina tion of competition a thousand men wages when they are not at work. It takes a large firm to buy such machinery and to sell the great amount of produce which such machinery turns out. He Another gain in a large plant is by subdividing the process, and hiring cheaper labor for certain parts. When each butcher killed and dressed his own beef, he needed to be a fairly skilled man. He must not make a mis-stroke with his knife in removing the hide. must be strong to lift the heavy cuts. But by dividing the work, only one man need work upon that part of the hide which needs the most skill. A large number of operations can be performed by unskilled men, by boys, and by women and girls, at much lower wages, while enough machinery can be used to keep the speed of all at its highest point. Another advantage claimed for the great establishments is the use of "by-products." Soap factories and glue factories spring up beside great slaughtering plants. Cement works utilize the slag from iron furOther advantages are that the great industries can buy in large quantities, can maintain a staff of experts, and do not have so great office expenses in proportion as does a small plant. naces. On the selling side, the great motive for forming combinations has been the desire to get rid of competition. A railroad or steel plant must invest a large sum at the outset. Its expenses are nearly as great for a small business as for a large. Hence it is almost necessary for it to do a large business if it is not to fail. This leads to intense competition, to expensive advertising, and sometimes even to selling goods at a loss in order to keep customers. If competing companies can combine, they can eliminate waste due to |