CHAPTER V

THE INFLUENCE OF THE "TRUSTS

AND OTHER PARA

SITES UPON INDUSTRIAL LIBERTY

I HAVE hitherto treated of the parasitic corporation in its relation to the management of the railway. It has played its part also in the construction of the railway-a part which, although prominent, I shall merely allude to here before proceeding to notice other parasitic growths which have lately come into prominence, especially in our cities. Mr. Adams, in an essay on "The Granger Movement," has forcibly described its function in the construction of the railways throughout the West. "It began," he says, 'high up in the wretched machinery of the construction company, with all its thimble-rig contrivances for transferring assets from the treasury of a corporation to the pockets of a ring. Thence it spread downward through the whole system of supplies and contracts and rolling-stock companies, until it might not unfairly be said that every thing had its price." As a constructive agent the parasite reached its climax in the building of the Union Pacific Railway, through the employment of the "Credit Mo

I

1 C. F. Adams, Jr., North American Review, April, 1875, p. 402.

bilier," and in the building of the Central Pacific and Southern Pacific railways, where it was employed for the usual purpose of diversion on an immense scale.

Besides the parasitic growths on the railway system, I will now notice some of those of the complex or hybrid kind which are unconnected with steam railway management; those, namely, that serve the purpose of appropriating to the "trust-manager" that large margin of profit which comes from the corporations furnishing light and locomotion in the large cities,— the gas corporations and "trusts," and the street railway corporations and "trusts."

There are circumstances which afford reason for inferring that there are members of the "Standard Oil Trust" who are in close interest and alliance with the gas "trusts." The "Standard Oil Trust," as we have seen, is in substantial control of all of the products of petroleum in this country. One of these products, benzine, is an important element in the manufacture of the kind of gas which the "trusts" furnish. This is a comparatively new kind, sometimes called water-gas, the result of certain late discoveries in the art of making hydrogen gas and carburetting it with the lighter products of petroleum. The gas thus made is much less costly than any heretofore manufactured by the use of coal and rosin. The normal tendency, through the cheapening of this new process, would be to give the advantage of the reduced cost to the consumer. If anything like the

old high prices are to be maintained, therefore, this can only be accomplished by rigorously stifling competition. By maintaining these old prices, or any thing like them, the profits arising from the furnishing of this new gas are very great. These facts have addressed themselves with great force to the cupidity of the organizers of "gas trusts," and have called into being the usual artifices for exterminating competition and securing a firm and permanent hold upon the profits. From the fact that the "Standard Oil Trust" controls the product of petroleum, and from the methods which the "gas trusts" employ, it is fair to infer that the scheme is inspired by the genius of the "Standard Oil Trust." Indeed, the dexterity in the employment of these methods is such as only experts understand, and the managers of the "Standard Oil Trust are undoubtedly such experts. They have the faculty of adapting artifices to circumstances, which is only derived from continuous practice. The managers of the "Gas Trust" have shown great versatility in suiting their schemes to the various conditions which they have to encounter in the different localities. Thus, they have adopted destructive competition in one city, diplo macy in another, and have combined the two in a third.

The first considerable effort was made in several of the seaboard cities, where they rather pursued the course of throttling, by destructive competition, the gas industry which they found opposing them.

They furnished gas to consumers often without much reference to cost of production. Meanwhile, they actively and aggressively pursued the work of destruction. The money for conducting this warfare was, of course, not derived from the resources of the company conducting it, but from the outside resources of the organizers, and the contest was relentlessly pursued until the opposition was absorbed into the monopoly, and given a share of the joint stock. The monopoly thereupon established its prices, which, although limited by legislative enactment, afforded large profits which have become permanent by practically exclusive control. It may be said that their mode of procedure is in general as follows: Where they find two or more gas companies in a city, they propose the erection of a "trust," with what they euphemistically call a new capitalization, a division of the stock, and usually new issue of bonds; and where this is resisted by any of the existing companies, they procure the control of such as they can by purchase of stock or agreement, and wage a destructive competition until they bring the recalcitrant companies to terms. It may be that in the progress of their competition they will proceed to buy up the depreciated stock of their adversaries. It is not unlikely, however, that, with their show of power for destructive competition, they often succeed in making terms without the resort to warfare.

In Chicago they began tentatively as early as

1886. They made themselves known in their "trust" capacity through the announcement that they were organizing for the purpose of securing to the citizens the "advantages of economic and harmonious management." The manner in which this laudable purpose was finally accomplished has been partly revealed by a suit which was instituted by the executors of Emanuel Hoffman of New York against the several Companies concerned in the organization of the "Trust." The relation of one of the Chicago companies, the "Chicago Gaslight and Coke Company," to the transaction illustrates the real purpose which actuated the organizers. The New York Times of November 20, 1887, in its editorial column, sets forth this relation in the following clear statement. It says:

"The Chicago Gaslight and Coke Company was incorporated nearly forty years ago with a capital of $100,000. Its earnings have been enormous. By the use of them and without the additional contribution of one dollar by the fortunate stockholders the capital was raised from $100,000 to $5,000,000, while very large annual dividends were declared. Statements showing the company's condition have been placed upon its books every month. On the 30th of August the books showed that the company's assets were $6,465,002 (for the most part real estate), while its liabilities were $5,469,052 (including issued capital stock to the amount of $4,984,200), and the surplus was declared to be $1,319,041. This statement closely resembled those of the preceding months of the year. The company had been making money. Regular