CHAPTER XI. INDUSTRY AND LAISSEZ FAIRE

About the time the Sherman Anti-trust law was being passed, in 1890, Henry D. Lloyd was writing his book Wealth Against Commonwealth, in which occurred a memorable passage:

    A small number of men are obtaining the power to forbid any but 
    themselves to supply the people with fire in nearly every form known 
    to modern life and industry, from matches to locomotives and 
    electricity. They control our hard coal and much of the soft, and 
    stoves, furnaces, and steam and hot-water heaters; the governors on 
    steam-boilers and the boilers; gas and gas-fixtures; natural gas and 
    gas-pipes; electric lighting, and all the appurtenances. You cannot 
    free yourself by changing from electricity to gas, or from the gas 
    of the city to the gas of the fields. If you fly from kerosene to 
    candles, you are still under the ban.

To understand the dangers of the monopolies which Lloyd feared and denounced, it is necessary to know the principal features in the development of American industry from the close of the Civil War to 1890.

It will be remembered that the consolidation of small railroad lines into large systems was accompanied by such advantages to the companies and to the travelling public, as to demonstrate that combination was the inevitable order of the day. The similar integration of small industrial and commercial enterprises took place more slowly between 1870 and 1890, but the process was no less inevitable on that account. The census of 1890 indicated that the production of manufactured articles had greatly increased since 1870; more capital was engaged; the product was more valuable; and more workmen were employed. Nevertheless the number of establishments which were in operation had shown a considerable decline in many industries. An army of 100,000 employees represented the expansion of the wage-earning force in the iron and steel works, for example, and $270,000,000 the increase in the value of their products; yet the number of establishments engaged showed a shrinkage of nearly fourteen per cent. The workers in the textile mills grew from 275,000 to 512,000, and the capital outlay from $300,000,000 to $750,000,000, but the number of factories declined from 4,790 to 4,114. A cartoon in Puck on January 26, 1881, remarked that "the telegraph companies have been consolidated, which in simple language means that Mr. Jay Gould controls every wire in the United States over which a telegram can be sent."

Some of the reasons for the prevalent tendency toward combination were not hard to discover. In the first place, although industrial organizations fought one another with the utmost bitterness, it was in the nature of things for them to combine if threatened by any common foe. Moreover, production on a large scale made possible savings and improvements that were outside the grasp of more modest enterprises; buying and selling large quantities of goods commanded opportunities for profit; waste products could be made use of and costly scientific investigations conducted in order to discover improved methods, overcome difficulties and open new avenues of activity; large salaries and important positions could be offered to men of executive capacity; and expensive equipment could be purchased and utilized.[1] An effective force which tended to drive industries to combine was the cut-throat competition which prevailed. Herbert Croly in his stimulating book The Promise of American Life vividly describes the bitter, warlike character of industrial competition after 1865. Competition was battle to the knife and tomahawk. The leaders were constantly seeking bigger operations, to which the bigger risks only added zest. A company might be making unbelievable profits one year and "skirting" bankruptcy the next. Exciting as all this was, however, the desire for adventure was not as powerful as the desire for profits, and cut-throat competition in industry led as naturally to combination, as rate-wars on the railroads led to pooling agreements.