Knowledge that Transforms

In a paper referring to the mineral wealth of Wisconsin Dr. 0. G. Libby has shown that the lead and shot trade together attracted capital to that state, helped to fill its southern counties with population, and gave an impulse to industrial life which has never since been lost.' It might be observed in this connection that the lead resources of southern Missouri have produced here similar results, and, in the second place, that up to I852 or I853, when the building of railways caused a diversion eastward of a large part of the traffic, St. Louis received the principal commercial benefits of the lead business of the upper Mississippi region including southern Wisconsin and northwestern Illinois. The quest for furs was not the pioneer industry in Missouri as it was in other parts of the interior. The priority belongs to lead.2 This was due in part to the mineral wealth of the territory, and in part to the enterprise of John Law, and to the requirements of the Company of the West which made the search for precious metals a matter of great importance. Thus the beginning of mining in Missouri antedated the founding of the first trading post by about forty years. While the site of St. Louis, settled in I764, was chosen with reference to the needs of the fur trade, a number of factors combined to make this city one of the leading lead markets of the country. The concentration here of a large part of the western Indian trade was in itself one of the elements in the situation, for the trappers, who brought hither their furs, bought supplies, one of the most important of which was shot. While the bulk of the product of the upper Mississippi mines, for a number of years, had no other outlet than down river, it did not follow from this circumstance that this traffic would seek St. Louis rather than other places, such as Alton, Ill., which at one time made a vigorous effort to get it, or Ste. Genevieve, Mo., which was already a place of

The question of industrial combinations can be approached from many standpoints. The trust may be considered from the standpoint of its possible limitation of business opportunity. It can be considered in its relation to labor, to the railroads, to the tariff, to the banks, and to the investor. This institution can also be considered from the standpoint of its effect upon the prices of its products and from the standpoint of its efficiency as a form of business organization. It is from the last two standpoints that I propose to discuss the question. When the trusts were organized, most of them coming into existence during the five years beginning I898, two advantages were claimed for this form of business organization: first, that the trusts would maintain more stable prices than were possible under conditions of competition, and second, that they would result in raising the standard of business efficiency. The advantages of price-maintenance were urged from two standpoints: first, the benefit to the companies directly affected, and second, the benefit to the public. It has been urged, and I believe that there is general agreement on this proposition, that irregular prices, because of the element of uncertainty which they introduce into business calculations, are highly objectionable; and that any institution or agency which results in maintaining prices unchanged for long periods of time, raising or lowering the level as fundamental conditions change, must, so far as it accomplishes these results, be approved. From the standpoint of the public, it has been urged that the prices which such companies charge, because they are collected from every buyer and because the manufacturer's profits are not sacrificed in long-term contracts in every season of dull trade, will be fixed at a lower level than is possible under competitive conditions. In other words, the claim was made in defense of the trusts, that the prices of the necessaries of life, as well as of the materials and machinery of industry, would be lower as a

With a gathering such as this it is unnecessary to take much time in the preliminary presentation of a currency argument because most of us understand pretty well the failings of our present system. But because of the different ways of phrasing the trouble and because I want to establish a premise upon which to work I must take a little time to place before you my understanding of the economic cause of the failure of our present banking machinery. This is more necessary because I believe that any speaker for the negative does only half his work when he tears down the ideas of the supporter of any question, leaving only a mass of antagonistic argument without any suggested reconstruction. Under our present system by far the greatest part of our circulating medium is no longer a government promise to pay-a hand-to-hand, hard money. About.go per cent of our business is transacted by a comparatively new money, check transfer of bank credit. The volume of this new money is very elastic and the clearing-house reports show how closely it fluctuates in accord with business activity, or the money demand. Therefore we may justly claim that about go per cent of our circulating money is already almost ideally elastic. If we analyze the combined statement of our whole banking system we see at once that two items bear a distinct relation to each other: the loans, on the asset side, and the deposits, on the liability side. This is the endless chain of our banking machinery. Loans made, in the whole scheme, create deposits; and the expansion or contraction of one is followed by an expansion or contraction of the other. Now the important thing to remember in this connection is that when a bank, a group of banks, or a whole banking system comes before us for its last analysis, we find that a demand liability has been created in exchange for a comparatively

For something over two decades we have had on the statute books of this country a law which forbade all combinations in restraint of interstate commerce. During the greater portion of this period, too, most of the states have had laws which distinctly forbade the formation of trusts and monopolies. Taken together, this legislation, not to mention the common law, would appear to cover fairly well the possible field of trust activity. What has been the result ? Occasionally one of these combinations has been driven from a state or obliged to dissolve, but sooner or later there was usually discovered an organization which, however different in outward appearance, still behaved in a manner most suspiciously like the old banished trust. In fact, not only were the old trusts not effectually broken up after the passage of this legislation, but new trusts were formed more rapidly than ever before. Thus we may fairly say that, up to last year, the trusts, after twenty years of laws which were supposed to annihilate them, had become more numerous, stronger, and more firmly intrenched than ever before. Last year, among others, two of the most prominent of these trusts were declared illegal and they are now being broken up into parts. Yet there are many who, in view both of past experience, and of the apparent opinion of the business world so far as reflected in the stock market quotations for securities of these trusts, are pessimistic enough to assert that this time too we shall obtain only another change of form. Moreover, there are still others who declare that even if the purpose of the law be at last attained, nevertheless the whole policy of annihilation which underlies our laws is wrong and should be reversed. In view of these circumstances is it not time

taken up and the vast natural resources of the nation have been tapped. We are entering a period of diminishing returns; and a period in which increasing attention will be directed toward small economies that were not considered worthy of notice a generation ago. "The cream has been skimmed off the pan of our natural resources." Also, factory legislation, laws as to hours of labor, and the activity of labor organizations are tending to raise the level of wages and to increase the expenses of operating a business. As a consequence, employers are being stimulated to adopt more efficient methods.

More than two decades have passed since the enactment of the Sherman Anti-Trust law, and during that time many different phases of experience under it have succeeded one another. The act has not been amended, although changes in its working have been brought about by legislation on related subjects. The measure has been enforced only sporadically and today the question is still urgent: What shall be done with the law ? So unsatisfactory has it been, to all appearance; so general has been the demand for something to take its place; so extensively have "trusts" and combinations of capital developed in spite of its existence, that future students of American economic history must inevitably be surprised at the apparent inability of Congress to do anything that would remedy what appears to be an intolerable situation, either by repealing an act which seems to have attained no object, or by correcting admitted defects in it. Before anything can be done toward changing the present status under the Anti-Trust law, it will be necessary, therefore, to understand why Congress does not act regarding it and what are the obstacles, apparently insuperable, that have so effectually blocked progress.

CLOSED SHOP I Demands on the part of the labor unions for the closed-shop form of organization have been one of the distinguishing characteristics of the labor movement in this country. Though the universality of the demand renders the question one of more than ordinary significance, discussions regarding the ethical and practical soundness of the principle have been so numerous and varied that there is little remaining to be said pro or con at the present ime. An explanation of the fundamental economic cause of the movement, however, is not so frequently attempted, and possibly there is still something that may be said bearing on this phase of the problem. Particularly is this true since considerable confusion seems to have arisen regarding the place and ends of the fight for the closed shop. The aim of the modern labor movement, taken as a whole, is obviously not the securing of any particular form of organization as such. Rather, it is simply the attainment of a power of control sufficient todemand recognition and to gain for the workman wages and conditions uch as are deemed necessary for his well-being. It is unquestionably true, however, that American unionism has persistently fought for the closed shop, and that that aim is constantly before the vast majority of trade unions today. It is so far true, in fact, that at times the object of gaining the closed shop has been forgotten, and it has been sought as a thing desirable in itself. The public, on the other hand, has almost universally condemned the movement. The reason for so doing is not always quite so clear. A very large number of people undoubtedly oppose it merely because it somehow goes against the spirit of that democracy of which we so loyally boast, to support anything which bears the taint of being "closed." Yet such a reason is scarcely one that will bear scrutiny, nor is it one which would, of itself, be very effective in the long run. The question therefore arises, on what