The herald., 1898-12-21
Expansion, Trusts and Plethora

To the Editor OF the Los Angeles Herald:
1 am surprised there are no comments in
the press on the close relationship that the
three important questions of the day bear to
each. other. l refer to ~ expansions"
(2) "the trusts" (3) "the plethora of cap
ital"
Each Of these depends one on the other,
and the editor who ignores the interdepend-
ence utterly fails intelligently to compre-
hend his subject The trust" is the result
of plethora Of capital" but it no more
cures that plethora than an umbrella stops
the rain. The "trust' simply protects its
own particular industry from the flood Of
competitive capital. 1t naturally follows
that the more dangerous the flood the more
"trusts," and each new trust" means one
less outlet for the rising flood OF capital, and
the more fearfully it RACES and threatens to
engulf all 'non-trusted" enterprises.
The "trust" is the eXecutioner of the
money lender and the banker. The day is
fast approaching when the money lender
per Sc will no longer be the power he is at
present.
The line of reasoning is very simple: Take
a concrete case Eor the sake of planness.
When Rockefeller first went into refining
SOlHC Unity ySulo u6oJ iiC ihuuC SSi tuiii
percentage, say 20 per cent, on his invest
ment, and by borrowing money atSper cent
he could net II per cent on every dollar used.
When competition grew keener his profits
gradually shrunk, and as shown by the anti
trust investigation he was actually run
ming his refneries at loss just previous to
the formation of the Standard Oil trust
| In the second stage it is evident that the
only reason mpelling him to borrow would
be necessity to meet obligations, and not
because he could re-nvest it to profit. Such
condition is unsatisfactory to both Dor
rover and banker, but the latter, at any
rate, has the satisfaction Of knowing he has
| the whip hand.
Then comes the con onsolidation Of the com
peting units; the trust is born. All al
once profits leap from nothing, or less thar
nothing, to 10, 20, so per cent. 1t is pos
sible that in the formative stages of tht
trust" the banker, with his outside capital
may be called in to assist, but when tbs
trust has passed the peris of infancy i
springs at once into, not manhood, bu
| gianthood, if 1 may coin a word.
! The banker is brushed aside as useless anC
unworthy of notice. What need has az
owner of "trust" for borrowed money
Mr.. Rockefeller has an income now Of 800,
000,0O0, and he himself is seeking nvestmen
for his own capital, and certainly is not il
the mood Of assisting any banker by borrow
ing money he don't want.
He cannot re-invest his profits in his owl
business and enlarge its scope as the yer,
reason Of the trusts" existence was tn,
oyer-developed state, of the oil industry.
| The "trust >" on the nj her bo nd nravant
further ingress of capital within its gates
and, on the other hand, enormously in
creases the flow of surplus earnings from it
portals.
Where formerly there was tidal move
ment of capital, with its ebb and flood, i
now becomes that of an ever-rising river
flowing in the same direction always.
Is there any wonder that when So, 800 900,
900 over half of the industrial capital O.
! the United States has passed into tht