Mr. Dooley’s Philosophy

Contents:
Author: John Bates Clark

Show Summary

How to Regulate Trusts (1900)

BY PROFESSOR JOHN BATES CLARK

THE principle of monopoly itself is not perilous for that investor whose capital is in the monopoly, but it is intolerable for every one else. It is safe to say that our people will ultimately find or make a way to destroy any genuine monopolistic power that is in private hands; and it is nearly safe to say that, if we do nothing beyond protecting the investor, the trusts will acquire too much of this power and will become less and less endurable. The restrictions that now hold them in check are not likely of themselves to grow stronger as time advances, while the trusts are likely to grow much stronger. Monopoly power that is increasing and restrictions that are diminishing in force point to a time when something positive will certainly have to be done in defense of property rights, if not of personal liberty. The measures that it is possible to take are not many.

First, we may prosecute with more intelligence the effort to break up the trusts into smaller corporations. It has, for example, been suggested that no corporation should be permitted to have more than a certain amount of capital. But if a maximum of capital were fixed for all industries, the difficulty would be that an amount which is too small for prosecuting one type of business would be sufficient to enable a company to monopolize another. A more effective policy would allow capital to vary in different kinds of business, but would so restrict the output of each corporation that no one could produce more than a certain proportion of the whole output of goods of the kind that it makes. If no corporation were allowed to produce more than one-fourth of the goods of a certain kind that were produced in a whole country, we should be sure of having at least four establishments in each department of industry. We should, however, be much less sure that the four competitors might not find a way to act in harmony and to secure the benefit of monopoly under the outward form of competition. Moreover, this forcible regulating of the growth of business establishments is wholly out of harmony with our historical practice and our principles.

Secondly, we might abolish customs duties on all articles manufactured by the trusts. We might in this way appeal to the foreign producer to become the protector of the American consumer. There is no denying the efficacy of such a measure. It is idle to say that, because trusts exist in free-trade countries, our present tariff is not effective in promoting them. Trusts have very little power in free-trade countries. In England there is very little popular objection to them, because in that country they have developed a certain power for good and very little for evil. If interests like those which now resist a very small infringement of our protective system, in spite of the fact that the honor and the welfare of the whole country require it, could be so completely overcome as to allow the sweeping away of a great body of duties, many things would happen: the whole industrial life of the country would be translated to a new plane, and it would be found that the trust problem, for the time being, would be far less troublesome. But the policy of protection will not yield easily; and, indeed, the system as a whole ought not to be swept away too ruthlessly. Moreover, it may be said that if, in the remote future, trusts should become international in scope, even a free-trade policy would no longer be adequate for the protection of the public.

Thirdly, it is conceivable that we might introduce an elaborate system of price regulation. We might accept monopoly as inevitable, but prescribe, in a minute and detailed way, at what rates goods should be sold. On the supposition that this difficult policy were carried out in a spirit of complete honesty,—on the supposition that the officials of the law remained incorruptible, though placed in positions that offered the maximum inducement for corruption,—there would still remain for determination the question as to what principle they should follow in regulating prices. Customary prices have afforded a standard, where the purpose of the law has been to prevent an individual producer from being extortionate; and a price may be adjudged reasonable, if it is the one that prevails among competitors; but such a standard as this is, of course, not available in the case of monopoly. The only available guide for the legal regulation of prices would be the cost of goods; and it would be incumbent on the officers of the law to ascertain the cost in every instance and to guarantee to the producer a fair profit in addition to it. The first objection to such elaborate price regulation is the obvious technical impossibility of it, but from an economic point of view the fatal objection to it is that it would paralyze improvements. Why should a trust ever discard old machinery and spend its accumulations in getting better appliances, if it would still be allowed to make only the profit it is now making? Arguments on this point are, however, rendered unnecessary, not merely by the impossibility of carrying out such a policy, but by the impossibility of securing from the public any serious consideration of it.

Fourthly, we may put all monopolized industries into the hands of the state and thus, within a very extensive field, carry out the program of the socialists. To a casual observer, this looks easier than the other policy; and it will certainly find more and more advocates, as the powers of trusts increase. There is, moreover, no doubt that this measure would abolish certain evils that are inherent in private monopoly. Even if it did not succeed in giving the public cheap goods, it might save the people from the necessity of buying goods that were made dear by private producers’ grasping policy. But this measure must stand or fall with the general cause of socialism; and, while so extensive a subject as that is not here to be discussed, it is safe to say that the judgment of the people is against it. It is perhaps safe to add that, if it were once tried, the result that would prevent a repetition of the trial would be the slow but sure reduction of the productive power of the individual worker. With every inclination to make wages rise, the state would be baffled in its efforts by increasing population and by the check on improvements of method and on the accumulation of capital. The sources of gain for labor would dwindle till the "iron law" would begin to assert itself, and a state that would gladly make workers rich would then be unable to keep them out of misery.

Is there no further recourse? There is one; and it has the advantage of being in harmony with the spirit of our people, with the principles of common law and also with the economic tendencies that have made our present state a tolerable one. It is to give to potential competition greater effectiveness—that is, to give a fair field and no favor to the man who is disposed to become an independent producer, leaving him wholly at the mercy of fair competition but shielding him from that which is unfair. Let the trust crush him, if he cannot produce goods as cheaply as it can; but let him bring the trust to terms, if he can produce them more cheaply. This puts the trust in a position where its security will depend, not on its power to destroy competitors unfairly, but on its power to meet them fairly.

John Bates Clark, Trusts, in Political Science Quarterly, June, 1900 (Boston, etc.), XV, 187–190.

Contents:

Related Resources

None available for this document.

Download Options


Title: Mr. Dooley’s Philosophy

Select an option:

*Note: A download may not start for up to 60 seconds.

Email Options


Title: Mr. Dooley’s Philosophy

Select an option:

Email addres:

*Note: It may take up to 60 seconds for for the email to be generated.

Chicago: John Bates Clark, "How to Regulate Trusts (1900)," Mr. Dooley’s Philosophy in American History Told by Contemporaries, ed. Albert Bushnell Hart (New York: The Macmillan Company, 1903), Original Sources, accessed May 28, 2022, http://www.originalsources.com/Document.aspx?DocID=6LDLRG6E6SM4ZAL.

MLA: Clark, John Bates. "How to Regulate Trusts (1900)." Mr. Dooley’s Philosophy, Vol. XV, in American History Told by Contemporaries, edited by Albert Bushnell Hart, Vol. 4, New York, The Macmillan Company, 1903, Original Sources. 28 May. 2022. http://www.originalsources.com/Document.aspx?DocID=6LDLRG6E6SM4ZAL.

Harvard: Clark, JB, 'How to Regulate Trusts (1900)' in Mr. Dooley’s Philosophy. cited in 1903, American History Told by Contemporaries, ed. , The Macmillan Company, New York. Original Sources, retrieved 28 May 2022, from http://www.originalsources.com/Document.aspx?DocID=6LDLRG6E6SM4ZAL.