For an account of these bodies, which are to be found in almost every branch of industry in Great Britain and America, and in deed in all industrial countries, the reader should see the article ASSOCIATIONS, INDUSTRIAL. The economic effects of the limita tions upon competition effected by these associations, and the social and political problems to which the possibilities of abuse of their powers give rise, will be discussed at a later point in the present article.
(3) The Consolidation.—It frequently happens that two or more previously independent business concerns are permanently amalgamated into one large concern under more or less completely centralized direction and control. The consolidation may be a coalition of equals, or it may be the result of a powerful concern buying up one or more smaller rivals ; it may have been engineered by outstanding personalities within the industry, or it may be the result of operations promoted by outside financiers ; the previ ously independent businesses may continue to operate to all out ward appearance as though they were still independent, or some of them may disappear as separate entities, their goodwill and busi ness passing to more efficient establishments within the amalgama tion. According to their origin, scope, and manner of operation, distinguishing names have been given to these conglomerate bodies. The term "combine" is frequently used in Great Britain, generally to designate a merging of firms in the same line of business at the instance of some dominant concern or group among their number. The term "merger" is more usually used in the United States in much the same sense. The term "Kartell" is widely used to denote the specifically German type of joint selling organization. (See CARTEL.) The term "trust," as already mentioned, has particular application to the former American plan of assigning the stock of the associated enterprises to a body of trustees. There is no need, for present purposes, to examine more closely these differences in financial structure and control. The terminology is largely arbi trary, and the distinctions often without real significance.
Consolidations may, however, logically be divided into two dis tinct classes. The "vertical" consolidation results from a merg ing of firms engaged in the production of a commodity at suc cessive stages of manufacture; e.g., coal and iron mining, pig iron, iron and steel, and ships. The "horizontal" consolidation, on the other hand, results from the merging of firms engaged in the same line of business at the same stage of production, e.g., the firms en
gaged in the bleaching and dyeing industry or those engaged in the manufacture of cement.
A consolidation may attain such size and power that it repre sents within itself the greater part, locally, nationally, or maybe internationally, of the particular line of business in which it is en gaged, and is able within limits to control the output of the in dustry and dictate the prices at which its particular type of goods shall be sold. The phenomenon and the problem are only formid able where the consolidation is on at least a national scale.
Multiple Directorships; Banking Control.—Among a mis cellany of forms other than those already named, taken by the movement under discussion, two, which are of far greater import than might at first sight appear, call for specific mention. The first of these is the practice of one person holding directorships in a number of ostensibly competing firms or in firms engaged in mutual trade. Cases of persons holding a dozen directorships are common; and it is on record that as many as thirty-two director ships, including thirteen chairmanships and three positions of managing director, in businesses of the first order of magnitude concerned not only with manufacture but also with banking, ship ping, railways, and telegraphs. have been simultaneously held by one person. The same phenomenon appears in more systematic guise where arrangements for the collaboration of erstwhile com peting firms take the form known as "interlocking directorates" in which an interchange of shares is accompanied by arrangements whereby the directors of one concern sit upon the board of an other. Where these conditions obtain, it is evident that the idea of competition in its old crude sense must be modified. The second is the control exercised over a large part of the industrial field by the great banks. It is not suggested that the details of prices, out put, and marketing are matters with which the banks concern themselves, but their influence over the industrial and commercial policy of their clients is hardly in dispute, and that influence has its reflex upon the policy of its clients towards each other. (See BANKING.) Throughout any survey of tangible consolidations and trade associations these less tangible influences must be kept in mind if a comprehensive idea of the extent of trade combination is to be obtained.