The times., 1899-10-26
THE STORY OF THE TRUST.

OR. Hadley. Of Yale, in scribuer's Na1a-iae.)
The name trust. which is popularity aD-
Piled TO al these large aEerc CATIONS 81
capital was somewhat accidental IN It's or
gin. It has. however an approprlateuess
which few persons realize. The managers
Of every consolidated enterprise whether
based on a contract. q trust agreement or
IN actual consolidation. are exercising
powers 70 benefit or iniUre the pubic.
which are analogous 60 those of trustee
IJ has been said that ali property Is.
in its wider sense. a trust In behalf % the
consumer. But where competition Is ac-
tive, the power Of using your business
methods to impose high prices is so far
limited that the chance for abuse Ot this
trust is greatly lesssued. 10 is only In the
case OF large combinations. with their dis
dictionary power for good or evil that
the character OF the trust repOsed by So
ciety IN the directors OF its business en-
terprise makes itself really and truly fe.L
with these trusts. as with every other
trust that deserves the name It Is hard
20 provide legislative machinery which
viii absolutely secure its fmfumeut The
ability 70 handle any trust is the result
OF long process Of legal and moral eIuea-
ton We cannot make a Law which shall
allow the right exercise Of a discretionary
power and prohibit its wrong exercise.
law In great many directions, which viii
hasten instead OF retard the educational
process. Thus far most Of our statutory
regulations have been ia the wrong dire
tiOn- We have attempted TO prohibit tha
inevitable, and have simply favored The
use OF uuderhanded and short-sightsd
methods OF doing things which must be
done openly If they are to b done we'll
But as long as it IS possible for a we'll
managed consolidation TO do better work
for ali parties than could have been done
under free competition 50 long We NAV
expect to see the movement in this direc-
tion continue. Where there IS a real econ
omy to be achieved. investors VIII try to
take advantage OF the opportunity. The
attempt to prohibit them from so doing is
likely 10 prove futile. There is no better
evidence Of the strength OF the geudencv
toward consolidation than is furnished by
the multitude OF unenforced laws and deci-
sions intended to prevent it. When rail-
roads were first introduced. peoples minds
revolted against the monopoly OF trans
portatl0n thereby involved Statutes were
devised TO make the track free for the use
OF different carriers. as the public highway
Is Tree to the owners Of different wagons
But the economy OF having all the trains
controlled by a single owner WIS so great
that people were forced 70 abandon their
precoaeeived notion Of public right 20 the
track They still, however, tried to insist
that the owners Of separate railroads should
compete with one another. and passed va
rious laws TO forbid the formation OF pools
and traffic associations. Some OF these at
tempts have been failures from the outset,
ctheTs have simply hastened the process OF
consolidation OF the competing interests
which put them beyond the reach OF the
special law; the few which have been ef-
tective have done a great deal OF harm
and almost no good The majority of
thinking men have come to the conclusion
that railroads are in some sense a natural
monopoly, and have eIassed them with
water works. gas works and other Quasi
public lines Of business. as an exception
to the general rule OF free competition.
But we are now beginning TO find that ths
same possibilities OF economy which first
showed themselves in these distribusive en-
terprises may be realized also Il productive
industry. They are felt TO a considerable
degree in all kig1s 0f enterprise involving
large plant, an4 there is every reason to
believe that the tendency toward cous0lfda-
tiou VIII be as Inevitable in manufacturing
as in transportation.
Apart from this legitimate increase in the
value OF trust securities. due to the nation
al extent Of industry which enables them 10
ind market among a larger circle Of in
vestCrs, there is an iHegitimate increase
due to the opportunities which they afford
for manipulation by inside rings. There
IS a passion in investments as IN
everything else. a large section Of the pub
lie buys the kind Of thing that others are
buying. Sometimes il has been land; some
times tt has been railroads; Just nov it is
inGustrials. In a year Of prosperity with
a slight tendency toward imitation prices
OF all kinds CT securities tend to rise. The
man VINO has bought 10 be IN fashion is
pleased with the increase in the nominal
value of his investment and buys more.
These who are connected with the manage
some or all of their holdings to great ad-
vantage. Before the inevitable crash comes
they have converted most Of their capital
into money; and the outside buyer is a
loser. Prior to the crisis Of 1873 the IA
vorite chance for these operations was
found in railroad enterprise: but railroad
traffic and railroad accounts are now so
much supervised thar the possibility OF
such transactions in this field is less than
it was thirty years ago. And what is OF
still more Importance, a series Of hard ex-
periences has made the investing public
quite shy of dishonest railroads. In ma
Eipulaung the stocks Of '-indust-iaIs." the
speeuIator finds these obstacles less serious.
The authorities have not learned 70 exsr-
else adequate supervision; the public has
not accustomed itself 10 use caution