The Washington times., 1901-07-07
Ci1cr1nlIon statement.
The Danger From Trusts.

our attention is attracted TO seri-
Ous and thoughtful paper on the sub
iect Of trusts, contributed to the Phil
adeIphia Record" by Mr. Frederic J.
Whiting. of the Boston United States
Investor" In it, this able writer on
financial and economic subjects takes
the ground that the general public is
afraid of the great combinations of in
dustrial capital for reasons which are
not good, and fail TO see the real dan
ger involved in their existence as at
present constituted and organized. At
the same time, he regards the problem
as one which Will solve itself.
Mr. Whiting appears thoroughly to
agree with NIr H. o. Havemeyer in
the latter's declaration that the pro
tective tariff is the mother of trusts.
He says that our ta.ifl policy has rad
a great deal 10 do with bringing about
the present trust movement, and that
protective tariffs were enacted by this
Government for the purpose Of sumu-
lating manufacturing in the United
States. but they did their work too well.
They aimed TO give domestic manu-
facturers complete control of the home
market For a long time the profits
from manufacturing were very large.
This was an incentive to the constant
investment of new money in the'inter-
est. and hence American manufactur-
ers, completely protected against for
eign competition, had 10 sustain
fierce competition at home. The bene-
fits from protection. says Mr.. Whit
ing, would have been greater even
than actually was the case had it not
been fer incompetent and wasteful
management on the part of our man
ufacturers. There was not that regard
for economy in the cost Of operating
the plant, nor that skill in meeting
trade needs, that were such marked
characteristics of foreign manufactur-
ers. The general intelligence Of Ameri-
can mill owners was not inferior to that
OF foreign manufacturers. The trouble
was that we relied on the tariff to make
good all our shortco. ..ings." And that
is what crank tariff statesmen Of The
Hoar and Grosvenor school are doing
today. On this point the paper under
NBA4Ad4lA5 q pa ~ mn
tells a story already weu known to
economists, but not yet understood by
the general business public. It reads
as follows:
I'VE come now to about the most important
factor in the evolution OI the trust problem
refer 20 the neglect 10 charge 10 depreciation.
This was q very widespread evil among manu-
facturers- Aided by the Government, they made
great deal OF money, but d rule they were
exceedingly careless ia providing for repairs and
renewals. They went on year after year divertlns
the last cent 0i their earnings 10 dividends,
spending the smallest amount possible on the
property They were often enough extTayagart
and wastetul IN their methods Of buying supplies,
Ci converting them INTO nnIahed pro1ucta ana
oi putting these On the market; but they drew
the line al putting aside traction OF their profits
each year for future needs. The result Taa that
their plants down, not only for want OF
repairs, but also because Of an inability 10 hsti-
tute and improved methods for old ones.
Each year saw new capital coming into every
line Of business, which was not slow 70 avail
itself OF the latest inventions and discoveries IN
mechanics. More and more plants were uniaY0r-
ably affected by such conditions a. time went on,
until the point vas reached beyond which the!
could not 60 without consequences Of the graves
nature"
The point was reached long ago, says
Mr. Whiting, when many plants were
Incapable of holding their own against
newer and better domestic establish
ments, and in competition with sharp
manufacturers. Then came the craze
Of trust consolidation, the principa! mo
tive OF the smaller concerns which en-
tered into the great combinations hav-
ing been to obtain fictitious prices,
based on fictitious valuations, for their
plants, that-in many cases were out
worn beyond the possibility Of profit
able operation. The net result Of this
movement has been an enormous over
capitalization which must bring conse-
quences Of a disastrous character. ex-
actly as happened in the outrageous
watering Of railway stocks prior TO the
panic OF 1883, when the water was
squeezed out with most Of the unhap-
py small investors, and some large ones
TO boot Mr.. Whiting looks for the
game thing TO occur in connection with
the trusts, and therein, he thinks, lies
their chief danger.