The Problem of Industrial Monopoly 1

§ 3. Natural and capitalistic monopolies.

Monopoly has been called economic or natural when it rests on the owner ship of scarce natural agents, as mines, land, water-power, under the control of one man or one group of men who agree on a price. Economic monopoly is a result of private prop erty .that is undesigned by the government or by society. It is exceptional, considering the whole range of private prop erty, but it is important. The oil-wells embracing the main sources of the world's supply have largely come under one control. One corporation may control so many of the rich est iron-mines of the country as to be able to fix a price dif ferent from that which would result under competition. Coal-mines, especially those of some peculiar and limited kind, such as anthracite, appear to become easily an object of monop olization. Economic monopoly merges into political monopo lies, such as patents and franchises. Private property is a political institution designed to increase social welfare, and only rarely is property in any particular business a monopoly. Private control of any great natural resources might have been prevented in many cases had it been foreseen.

Monopoly is called capitalistic, or contractual, or organ ized, or commercial, or industrial, when it arises from the power under one control to dominate the market, to intimi date opposition, and to keep out or limit competition by the mere magnitude of ivvealth. These various kinds so merge into one another that they cannot always be distinguished in practice. A patent may help a capitalistic monopoly in get ting control of a market ; great wealth may enable a company to get control of rare natural resources.

§ 4. Monopoly and corporate organization. It is nec essary to distinguish from monopoly three other features appearing in some enterprises, that are readily and constantly confused with monopoly, viz.: large individual capital, large production, and corporate organization! Evidently any one of these four features may appear without the other; e. g., a person of large aggregate capital may have his investments distributed among a large number of small enterprises, such as farms, without a trace of corporate organization or monop oly, and numerous examples could be given of large produc tion, or of corporate organization, or of monopoly, without one or more of the other features.

But the presence of any one of these features is a favoring condition for the development of the others. Hence they are frequently found together, and of late this occurs increasingly. It is difficult to say in every, indeed in any, case which feature has been cause and which effect in this development ; but, on the whole, large production seems to have been primary. It 4 See Vol. I, p. 267, on capital; pp. 388-393, on large production.

See also references in preceding note 1 on monopoly.

self made possible by inventions, by better transportation, and by the widening of markets, it in turn helped to build up large individual fortunes, and then to create a need for the corpo rate form of organization. And monopoly power no doubt is more easily gained by large aggregations of capital in a cor poration having the advantages of large production.

In the frequent concurrence of these four features in a mod ern industry, probably the dominant role is taken by corpo. rate organization. It has been, often in a special sense, causal in that it has made possible and advantageous great aggrega tions of capital and large units of production, and thus has bestowed monopolistic power.

§ 5. Rise of the corporation concept. In the legal sys tems of primitive people and long afterwards, only natural persons had legal rights, could make contracts, have property, and carry on a business. But in a number of cases, very early, groups of men came to have certain interests in common and certain possessions. Gradually some such groups gained more or less of legal recognition, with certain political and economic rights as a body and not as individuals. Thus evolved the conception of a "corporation" (body) having men as "members," an artificial person, yet not the same as any one or as all the individuals together, and legally distinct from the individuals. A group of burghers obtaining a charter from the lord of the realm became a municipal corporation; a group of teachers, a collegium, became the corporation of a college or a university (a number of persons united into one association) ; a group of craftsmen became a gild corporation. Each corporation had certain rights, privileges, and immuni ties, and used a corporate seal as a signature. All of the early corporations had some economic features that were inci dental to the main purposes, which were political, ecclesias tical, educational and fraternal. Toward the end of the Middle Ages groups of traders obtained charters to act as corporations permanently for business purposes, such as for eign trade, colonization, and banking. These increased in the sixteenth and seventeenth centuries, and in the eighteenth century this form of organization was adopted also, and parliamentary charters obtained, by groups of men for building turnpikes and canals and for carrying on other kinds of business. The great era of the corporations did not begin, however, until well on in the second quarter of the nineteenth century. Then, both in Europe and in America, the corpo rate form of organization was extended to a greater number and to other kinds of enterprises.