International Combinations.—From combines of national range and consolidations of national magnitude it is a natural step to agreements and amalgamations on an international scale. It has been estimated that there were in existence before 114 international associations, chiefly in the coal, ores, metal, transport, chemical, textile, pottery, paper and electrical indus tries. The object of the majority of these organizations was the regulation of competition, and especially the exclusion of foreign competition from the respective home markets of the participants and the division and demarcation of sales territories; but some of them regulated prices, credit terms and selling practices gen erally among their members and in a few cases there were arrange ments for the exchange of patents or knowledge of technical pro cesses. The outbreak of war in 1914 broke up most of these inter national groups, but since 1918 some have been re-formed and others are in process of formation or re-formation. Among these the International Rail Makers' Association is one of the earliest, having been first formed in 1884 by British, German and Belgian steel manufacturers for the purpose of dividing up export orders and securing the home market to the home manufacture. The association was re-constituted in 1926 under the name European Railmakers' Association. The pool formed by the French, German, Belgian and Luxembourg steel makers in 1926 provides for the allocation of output quotas among its members with penal ties for exceeding the quota and compensations for keeping below it. Associations existed before the war to regulate the interna tional relations of manufacturers engaged in the production of galvanized steel, tubes, pipes, rods, wire nails and enamel ware, and many of these have been or are being re-formed. A copper syndicate comprising producers responsible, it is said, for some 90% of the world output and intended to control prices and reduce the number of middlemen was formed at the end of 1926. Potash, electric lamps, explosives, glass bottles and gas mantles are the subject of other agreements among the principal manu facturers in the various countries. In addition to these interna tional associations, agreements, cartels, or combines there were built up before the World War a number of giant consolidations of wide scope. In petroleum, the world trade is largely dominated by two enormous groups, the Standard Oil group and the Royal Dutch Shell group. These, in collaboration, control something less than half the world's production, but a far greater proportion of international trade. In tobacco, the export trade of America and Great Britain is largely in the hands of the British-American To bacco Company.
Relative Extent and Trend of Combination.—The degree to which combination has supplanted competition as the ruling factor of business operations must not be exaggerated. Even in the most powerfully organized industries competition plays its part with fitfully recurring intensity; while there are still numer ous industries (e.g., coal, shipbuilding, textile manufacturing, as well as a host of minor industries) in which the concerted control of output or prices or the concerted direction of industrial policy has made relatively little headway. Under the influence of con ditions during the World War, not only were numbers of listless associations galvanized into great activity and enterprise, but many new associations were formed. Also, one effect of the excess
profits tax was to encourage the buying up of unprofitable busi nesses by prosperous concerns, for such purchases were in effect paid for by moneys which would otherwise have gone in excess profits duty to the revenue. For this and other reasons, the war period was one of unusual increase in the number of amalgama tions. Since the war, the impetus has been towards amalgamation rather than association; indeed trade associations have been through a difficult time, and several have dissolved. The tendency is still toward large-scale amalgamation, and the economic and financial system appears to furnish little incentive for a great consolidation to dissolve into its constituent elements. It is an old American aphorism that "you cannot unscramble eggs." The Advantages of Combination.—Great possibilities of industrial and commercial improvement lie beyond the confines of free competition, and are only to be realized by combination in one or other of its several forms; by informal consultation and co-operation, by formal association, or by actual amalgama tion. Only from the latter proceeds in full measure the advan tage that may follow from extending over a wide area the intelli gence and control of technicians and administrators of outstanding ability such as only a large undertaking can afford to retain; and only the consolidation can order with plenary powers the policy of the industrial block over which it exercises authority, and can acquire control of the sources of raw material and an influential interest in the means of transport ; but associations as well as consolidations can effect many improvements and econo mies along the whole line of manufacture and sale. By the con solidation, purchases of material and components can be made in gross instead of in detail, with the advantages of better selec tion, better terms and lower transport charges; middlemen can be side-stepped and, as already stated, the control over the sources of material can be acquired. The association is not entirely pow erless in these matters, for it can assist members to better buying by collecting and distributing information on the point. As regards manufacture, it is possible under combination to arrange for a standardizing of parts and sizes throughout the industry, whereby production can be greatly cheapened and the parts of one maker made interchangeable with those of another. Again it is possible to arrange that instead of every firm trying to cover the whole ground, each shall devote itself to some particular section, and install specialized equipment for its own section and for that only, in which case wasteful duplication can be avoided and specialized skill developed; or, where other conditions prevail, it is possible to bring equipment and inside organization throughout the industry to a uniformly high level. Further, whereas under free competition the firms in one district may be working over time while those in another district are on short time, it is pos sible through combination to maintain something like an equal dis tribution of work and to control orders so that the volume of work does not fluctuate so greatly from one period to another.