Trusts

Industrial States.

It must be accepted that there exists a tendency to form great consolidations representing whole branches of industry, and that such consolidations, could they be success fully organized, would have it in their power to effect great im provements in the lay-out and organization of the industry and to cut out much of the friction, waste, and overlapping which is often due to competition.

It has at the same time to be borne in mind that, as these con solidations cam, into being, the old accepted basis and operating principle of industry would undergo a radical change, being com pletely revolutionized. Industries would have become corporate bodies with monopolistic powers, in each of which a central intel ligence would direct policy and ordain what supplies and prices should he. A consolidation representing the greater part of an industry, with command or influence over the sources of material and the channels of the distributing trade, would be a close cor poration from which would-be intruders could be excluded.

It is clear that, if this stage was reached, governmental control of the industry would be inevitable, for no government can toler ate within its jurisdiction such a powerful rival. Were the leading industries all to become controlled by various powerful combina tions the natural outcome would seem to be the formation of a corporative state such as that organized in Italy by Mussolini.

Effects of Combinations: General.

It is in the nature of things not possible to prove conclusively the effect of combination upon the well being and prosperity of an industry or upon the volume of its output or the prices charged to customers. It is, obviously, possible to trace, in very many cases, the course of prices and profits before and after the forming of a particular con solidation or association, but from such surveys there is always lacking a knowledge of what prices and profits would have been had no combination been formed. Further, it does not follow that an increased level of prices and profits, if proved, is of necessity an evil. There have undoubtedly been, and will yet be, cases of indus tries working for long periods at less than their proper remunera tion, and, from the social standpoint, it may be advantageous that an industry so placed should improve its position even at the ex pense of the rest. The idea that the state of an industry under competitive conditions is an ideal standard from which to measure departures is not tenable in all cases.

Effect upon Output.

The output of an industry depends upon the sales of its products, and these sales are largely condi tioned by the prices at which the goods are sold. In general, and with very many qualifications and exceptions, the effect of com bination upon output is a reflex of its effect upon price. So much are price and output recognized as interdependent that trade asso ciations have a choice of two ways of "stabilizing" the industry, one being the fixing of prices and the other the regulating of out put. In the article ASSOCIATIONS, INDUSTRIAL, an account is given

of the system under which certain associations regulate the output of the whole of their members by allotting to each a fixed percent age of the total production, whatever that total may be, with pen alties for exceeding the quota and compensations for falling short of it. It is held by the promoters of such "pooling" associations that the effect of the system is not to diminish output. It is ex plained that, under the system, the total output is neither fixed nor even regulated: but is free to expand or contract in accordance with the total demand. It is difficult, however, to accept this view without some reservations. Since those who increase their output beyond the average are penalized, and those who fall below the average are rewarded, it would appear that the aggregate output must tend to be less than it would have been in the absence of any "pool." Yet such statements as "there has never been a time when we have failed to supply the utmost demand of the market" are doubtless made in good faith and have a certain truth. What hap pens is that, under the influence of the penalties and rewards, prices rise, and though the whole demand at the increased price may be met, it is a demand depressed to some extent by the greater costliness of the article. This appears in every way likely to be the immediate effect of the pool system ; but against it may be set the consideration that. in the long run, the gains of steady and equalized production in the various works composing the in dustry and the greater efficiency due to the removal of obstacles to the interchange of knowledge may accrue to the public in the shape of lower prices, whereupon sales may recover and output increase. Effect upon Quality.—It has been contended, and with some truth, that the fixing of a uniform price at which all establishments in a given branch of industry shall sell their products does not mean an end of competition but rather a change-over from com petition in price to competition in quality. Differences in price are more evident than differences in quality, and are apt to affect the judgment more. The difference between II and 19/– in the price of an article is a plain matter of five per cent : the difference of five per cent in quality is less easily discernible. The immediate effect of the standard uniform price for various makes of the same article is undoubtedly to turn attention at once to differences other than price, and it may be accepted as usually the case that the establishment of uniform prices is followed by a tendency to improvement in designs and quality and hence in value.