The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1899-03-14
THE ORGANIZATION OF TRUSTS.

1t must be well understood that the or
ganization Of what are called trusts is not
prompted so much by the desire to control
certain branches Of trade as for purely
speculative purposes. That is. the combina-
tons are not made so much by men already
in business for the purpose of controlling
production and closing the avenues of COM
petition as by outsiders who. as promoters,
make business Of collecting the loose ends
Of a particular industry into one concern
under single management, to which. for
the want OF a better name. the general
term trust is applied. There is nothing new
in the movement, since long ago il found
much favor in England. where the combina-
tons were known by the much less offensive
name of industrials. There, as here, il is
simply the promoter working at his voca-
ton.
In the formation of what may be called
trusts by men and companies in given
industry the only purpose is to check what
is or may be ruinous competition and to put
the whole production and marketing of an
industry under a general management.
Their purpose is to promote their business.
With those who are the promoters Of what
may be called industrials the prime object
is the floating of the shares of the combina-
ton, no consideration being given to the fu-
ture operation Of the concerns which they
unite. They announce that a given class
of producers have been combined into an
organization with an immense capital. The
promoters bring about an agreement be-
tween those in the business to put their
plants into a pool. They then go into the
market to sell shares by seeking to make
a showing which will induce those who have
money to invest in them. The skillful pro-
moter is able to show that the properties
under individual management have made
inviting profits. If the individual has made
monsy the promoter can easily demonstrate
that an association controlling a product
can make larger profits, but he does not
refer TO the increased capitalization upon
which future profits must be earned. In
vestors in the majority of cases do not in
vestigate beyond the prospectus, and the
result is that shares are sold to two or three
times the earning value of the plants. The
subsequent dividends will be small, and, be-
cause OF their inflated capitalization. the
so-called trusts cannot earn money to pay
interest on bonds, while new concerns built
upon a cash basis become successful COM
petitors. This has been the result not only
I'm Great Britain. but in this country. the
purchase of the larger breweries in the
United States a few years ago by British
investors being illustration OF promot-
ers' combination and of the general loss of
the larger part of those who put money
into the enterprise. In this instance the
investors paid twice fair income-earning
value of the properties. As part of it was in
the form of bonds the stocks soon had little
or no value, but the promoters Of the
scheme and those who sold the plants prob
ably made a few good-sized fortunes out of
the transaction.
In the very nature Of things, similar re-
suits must come from most of these COM
binations which are made by promoters.
The property will be capitalized for two or
three times its earning capacity. and the
mass of investors will lose the money they
may put into it's stocks.