NEW FASHIONS IN TRUSTS---MODERN COMPETITION
CHASE, STUART
New Fashions in Trusts--Modern Competition By Bmtt Chase FASHIONS to tracts change ss do fashions in skirts, although jt ta to Be noted that while the tatter ard aBetevtaUhg. the former art...
...Installment contracts, resident buyers, chain' stores as impersonal as weighing machines, house-to-house canvassers, high pressure mail order methods, boomers, boosters and yodellers for this and that, "endless chain" artists, the higher merchandising in a thousand forma...
...hV ekk fke only nation with excess plant capacity...
...Even the tdrmlnftlogy Baa Changed, and teday financial etiquette demande the ward ••mertet" to replace the antiquated "trust...
...Carzffa/.tw...
...A leader who would subordinate the interests of the membership to the interests ot a labor bank would eventually lead himself but dt leadership...
...An address delivered before the League for Industrial Democracy...
...I want to know the answer to three further questions...
...general organizer of the A. C. W., presided...
...Aa to dampening the militancy of trade unions...
...ThtckW ise for this assumption is largely the unavoidably business-like and conservative administration of the labor, hanks...
...for instance, tt the cotton ahl slik Industries, can manipulate stytte in their own direction...
...have, take...
...The analysis ot Mr...
...Let Col...
...Thirty companies control one-eighth petroleum reserves...
...textile manufacturer br distributor^ It is intolerable to see idle machines and Idle space eating their heads off in depreciation, interest, insurance, taxes add overhead generally...
...And more than yeli* aa* pieasahtriee are involved by idoddiesU...
...Those of us who work for a system based on use rather than profit must be ready ta shift our technique as industry shifts below us—dogma must have no place ih our thinking—but the doors are flung wide to those who have the courage, persistence and intelligence to substitute industrial planning for the present blind and purposeless anarchy...
...The heat bralfti...
...Thirty compahiea control ofii-third immediate bituminous deposits...
...w*h a* words i» order ta kna...
...Lurhher mill competed with lumber mill, railroad with railroad, shoe manufacturer with shoe manufacturer, wholesale grocer with wholesale grocer, drug store with drug store, it was i knack down and drag out tight, but at least you knew whom you were fighting- it was that short-changer Thomas th the next bibfck...
...Thus the whole horizontal competition scheme has been turtied upside down and Inside out...
...Me quotes Mr...
...The tact that obtrude* Itself most forcibly Is that despite thd growth of mergers, the dew competition is stlil running amuck like a feuB in a China shop, and still dominating what one suspects » by far the grief fraction ot our industrial lift, rf* merger IS safe from at least a part of its devastating Influence...
...as He terms it—and the phrase It a Happy One—gives birth inevitably to the new competition, the higher salesmanship, in fill its formsProduction hi relatively easy, distribution la the tough Job...
...I think it must be recognised that we are just on the threshold of the trust problem...
...First—Do mergers, new style, result In a. net social saving by reason ot operating economics which are always potential and often real...
...supply plants...
...It means placing a larger group" ot people in direct contact With the problem of bur complicated aocull arid economic life, . tt means thd Introduction dt denideracy ifith ihdttstry...
...All that I can nope to dd U to describe a few general tendencies, quote 4 few summary figures, and enumerate a few general conclusions, which, lacking an adequate body of underlying research,' can amount to little mora than reasonably intelligent speculation...
...Industrialism - Obef Built The reason for this hullabaloo is hot far to seek...
...forts...
...J. S. Pdtofsky, vice-president of the Amalgamated Batik, at the Saturday morning session, gave an outline of the Idea and progress of labor banning...
...Cheney, our banker, is worth careful attention...
...It is a consecration beside which those ot church seem feeble Indeed...
...It is an open question how long human bioiogji- can adapt Itself to such a regime...
...A great deal will depend upott the leadership UtB the policies that will be adopted By th* labor banks...
...RETRIAL ROCHESTER.—At a meeting held under the direction ot Local 202 of the Amalgamated Clothing Workers Of America and the Sacco-Vanzettl Conference Committee a resolution was passed demanding the Governor of Massachusetts grant a new trial to the framed labor leaders...
...Professor Doctor Laidler, and gladly it I hive nailed myself tb Bis • ps-fcer crosses In the past, I capitulate Before this task, I dd hot know, rid* man knows—least - of all the merry rtlffer tBakers themselves—the essence at the story...
...nut bn* wonOefi Bo* much it is Strengthening the defense* of eapltiiism...
...itanufacturera compete with wholesalers by selling direct to the.retailer, and compete with the retailer by soiling direct to the consumer...
...The first channel Cheney calls "tntra-Ihdustrial Competition...
...Attempts were made te secure Ab th* plants in the .fasten* try whatever the conditio* ar character, ahd In that way to luntt ~ Competition...
...Now they kiss each other...
...Purchasing power haa hot been released fast enough to absorb the potential production within a vast margin...
...nor no individual industry...
...tfisutrance, and hanking marks the' beginnihg of a new chapter in American labor history...
...All the banks throughout the country have on deposit, exclusive of commercial funds...
...Second—What are the changes In the functioning of the business structure Itself which result in such a rush of mergers, near mergers and alleged mergers...
...While the insiders pay nothing, but with their series X voting and management shares, control the Whole enterprise and take the cream of the profit...
...j The ClaylOn Act Nottotthatanding In bther words...
...The tAMf - structure as ft stands funhaneli Heaven kifowt, no defense to the ffltimata bo«eumer...
...is tway ffom production, to proeeaaH more tn touch with final dietribotien) more intimately bound up with e*4> siimers' goods—bread, chain it ate* thermos bottles, electric remgeratsat typewriters, shirts arid collars, Bt cream, rayon, tobacco...
...From now on may God have paercy on your soul...
...halitosis conscious—ell In a desperate attempt to break down sales resistance before the consumer's bank account be com* s unconscious...
...there is not now any fegisia^ tlon covering the situation...
...Solidmahogany-oonecipua...
...Who aver heard of one lumber dealer doing anything else to another lumber dealer save pasting him Ih the eye...
...The gdod Coolidge can hardly sleep of nights for thinking up ways and means for making practical business even more practical...
...A series of vertical trusts, utilizing the last word in the technical arts, pro- 1 diicing a sound product, decentralize Ing, releasing purchasing power by paying high wages...
...Wholesalers and chain stores and groups of retailers compete with the manufacturer by starting .manufacturing plants of their own...
...On the other hand, as I read Ford's new book, "Today and Tomorrow," I see an organization as large as the Big Five packers combined, operating riot as a horizontal but as a vertical trust, which has made, is making, and I venture to say will continue to make, operating economics, short cuts, better and cleaner technical ways ot, doing things which Stagger the imagination...
...Who, however, knows what the future will tell...
...They may, like Ford, compete with the going transportation services by means of their own rail roads and steamship lines...
...k The fourth channel is Inter-Territorial Competition...
...FtoerrWar* Along My private opinion for whatever it may be worth la that nobody know* where he it going...
...This .Is done for the purpose ot segregating tha union, from tanking operations...
...His address, did net contain much of a controversial nature, being largely a recitation of facts and figures: As the purpose ana philosophy bt labor banking, Potofsfey gave the following: "Sidney Ulllman...
...A feib . Questions Which is all, doubtless, very distressing But before i, for' brie, do much viewing with alarm and writing to the newspapers...
...The National Lumber Dealers' Association arrives on the'scene with the Face Brick Association only half a lap behind...
...There is at present capacity to produce 100 per cent in excess of horrhai demand...
...The gSbd 61a swashbuckling horizontal trusts of the gay nineties—or, as Thomas Beers has it, of the Mauve Decade—the trusts to whoso undoing Senator La Poiiette dedicated His life, are tiring way to new forms, new | methods, hew techniques...
...of eonsollflatlon the consumer his more tb fear . thati has the competitor...
...What shaii be my final speculation covering these newer defenses eT capitalism...
...Retailers retaliate by organising a wholesale buying association, of their own...
...Mir* «ara operate to protect a group against certain competitive sasaafii...
...When the working people eome to the realization ot the necessity of njdrehaUing their savings through the channels of labor banks, ' Warren Stone may prove to be right...
...butter-and-egg-eonseieua...
...S Hi...
...Aldo Cursi...
...Capitalism is ilvini from dny to day, grabbing an it can get against tomorrow, but With fib seasoned philosophy or program bt constructive defense, extent Insofar a! it u stubbornly determined td aiio*v nobody else to have it program...
...Nation's Business," lets in a little light...
...Excess plant capacity has intensified the struggle for outlets...
...Already the .success of labor banks had produced a favorable impression on liberal thinking people...
...They nuUa blind, of...
...the most thought, the most moriey, concentrates on ways and means for sales Outlets, arid the See channels of the hew competition swell and grOw...
...Two companies control oae-allf iron ore deposits...
...Keir Hardie...
...4 MjHhicttl Meptttt . Senator Walsh recently introduced a resolution into the jgenaie calling upon the Federal Trade Commission, to make an exhaustive study of the Whole merger situation...
...rtWetftU U e*«U« t* gfte «Bo awfht te fete* Whatever lfbertiea 1 nag...
...which make* one wonder In irreligious moments whether we wouldn't all be better oft if we resigned the industrial system to a dozen Fords and let them run the works...
...Biit oho suspects, things being whit they are, Such a report will continue to be a purely mythical one for some years tb come...
...Today there is more of a spirit ot cooperation, ind It is sdhght by agreement td Stabiliie prices add to allot terrt- ' tory ahd consumers...
...And your roof develops into a bloody struggle .. between the National, RosyFingered Shingle, Sewer-Pipe Tile, Sun-Drenched Copper, Hulniujah Asphalt...
...Labor hat d right tb look to t&e future with much hope...
...There is, In fact, literally no end to the ways and means which learned counsel have devised for aiding and abetting the principle of hierger, while remaining safely beyond the lariat of the Clayton Act...
...Due to the steady excess of profit over wages in the past generation, the industrial plant of America has been very greatly over-built...
...had gone Into too many side-lines—from grape juicS to winter wheat—and as a consequence, were operating certain sections of their business wastefully and unprofltably...
...Labor seeks to assume . responsibility for management, to obtain greater security for its members, to extend its sphere of Influence in all directions, and to receive whatever benefits may coma tr»m accepting theee responsibilities.' Tata movement,' he further tali* us...
...The possi' bilities are vast...
...in adeptlnt such d pcttcy tha labor bank is introducing a new cede at ethics ihto the banking buatneen...
...The gist of Bis argument is a| follows: In the good Sid days competition used to run between businesses on the same horizontal plane...
...Warren Stohe...
...But of Ford's total payroll 5 percent aru craftsirieh- planners, designers, blue print men, inspectors, while the 95 percent are doing repetitive tasks which can be, "taught in a day...
...8trange it ie that meri ahduiti admit iht validity of the arguments for free discussion, but object tb their being "pushed to art extreme...
...So that tn the present era...
...The realtor boys haVe told you the wife ahd kiddy stuff together with an elegant site in "Applesauce Acres"— where Cosy Comfort KJihgs...
...or tt eBasf chance throws styles In their direction...
...It exhibits a growing tendency to become.a constructive and positive force...
...At an ultimate consumer you are sick of paying rent and want tb ihake yourself sicker by building n hduse of your o#n...
...Toddy in mergers and combinations, selection ot plants is made with regard ta strategic location and efficiency of operation...
...My generalization Is that you cantiot generalize about the economies of mergers or the economic lnevltablehess of mergers as a total phenomenon...
...But such relief still Miilkt small against the surrounditig pandemonium of high pressure salesmanship- national advertising, installment buying, and Florida land bboms...
...Four companies control one-half copper deposits...
...Then we have hew forms of mergers In the growth of so-called vertical trusts, where a large manufacturing compahy — such as Ford's — reaches back to control Its raw material and transportation and reaches out to control its distribution...
...pats large organizations In touch With industry...
...The fact that the purchasing power simply is hot available to keep the national industrial plant—considered as a whole—operating on such a basis worries no industrial business man...
...net sating, that, unless the reasons are good for ah extreme case, they are not good For any case.—J...
...It may prove tb be th* beginning « the march toward thl Sew ee&ai MaT...
...It depends on management, the kind of product being manufactured, the level of the technical arts attained in the particular enterprise, in iahor saving machinery, In a hundred things...
...WlihM i. Donovan, aselatfnt to the AttonUy Ganerai of the United States, aaxtmaxlae the situation: "The edrtter combinaabni Were directed rhore against the competitof...
...ot sine* banking will sand* awtnnze dampened...
...On the whole the peforriiartce of Ford seems to he to be the most impressive exhibit-In the direction of per-, petuatlng private capitalism...
...It is announced that you are thinking of building...
...Instead of a holding company acting at trustee (hence the namd "trust") for the stocks of subsidiary operating corporations, and thus hushing up their naughty competitive squabbles, the hew fashion In mergers is for one operating company to buy the physical assets of a competitor, and of another, and of another, thus accomplishing the Same, result, without ever coming into conflict with the anti-trust laws...
...Th which pome answering yells and repriseli from.the Papptown map of vision...
...We have the growth of a whole new financial technique around the principle of issuing no - par-value common stocks, whereby the investing public ¦pays the total cost of the tangible assets acquired...
...That here ahd there ah ihdiistry, ar a Henry Ford, sttfti in, is hot confcltisive evidence tbtt aB the idmpsrii are being consolidated...
...but are often completely detehaelMt against other wider aspects ot th* new competition...
...Db you suppose that they grew from yearnings about co-operation, fraternity and service...
...Congress did regulate on the subject of mergers, in section 7 of the Clayton Act when It provided that iio corporation engaged In commerce should acquire all or any part of the capital of another corporation1 where the purpose or effect might be to "eliminate competition...
...Nowadays, you at^ii have to keep ah rye 1>n Thomas td be sure, but God knows where all the other" bricks are coming from...
...Alas, there can be no clear answer to these questions Until the federal Trade Commission, or some similar body, makes Its investigation...
...It is a matter largely ot leadership and strategy...
...Meanwhile manufacturers compete with raw material and supply houses by adopting the vertical trust technique and buying up their own natural resources, operating tixklr own raw material and...
...Instead of the old horizontal competition, suddenly wholesalers, who...
...But we find in practically all these recorded instances at the present day that the companies buy not the stock of etch other, but the PHYSICAL ASSETS, and that, of course,, takes the transaction out of section 7 of the Clayton Act...
...ROCHESTER DEMANDS SACCO-VANZEtT...
...the former art tapdlag ta elongation and expansion...
...B. [ - Tint then...
...Then, Indeed, i,might say something worth listening to...
...Cheney...
...This cdhipetitfon Actually shifts, population, makes and breaks tdhntlaU businesses, upsets buying habita, . Fifth and finally Cheney calls attention t* the growth* datogef ot International Industrial Competition...
...The Amalgamated Bank has made every effort to avoid making loaas for anti-social purposes ahd others that It considers Son-essential...
...Serenely Zinc and Tkr Asao*ciations...
...What Labor Banking Strives For LABOR banking waa a topic thaV, aroused much interest at the conference of the League for Industrial Democracy...
...sd lows mors or ieM reMltiaiaty thai »m a poAae»Aort«te ft* eadtry, nerve cagetlng and overaUmulattng to sheet ar^raged in it...
...davenport-cob" scious...
...This excess plant capacity presents a grave problem to the business man, whether he be coil operator...
...It is the drive Of a given industry hot only tgainst allied industries — lumber against brick—but against ail other industries whatsoever, in order to get a maximum slice of the national Income...
...You Cannot pick up a paper without readlag of some merger in business, and unless it appearl that the merger would result in RESTRAINT OF TRADE WITHIN THE DECISION OP THE STBBL CA«Bt_or unless it tt brought about by Stock acquisition which results in elimination of Competition between two companies.within the meaning ot Section 7 of the Clay-, ton Act...
...Start opening chain stores and begin tb compete with retailers...
...It Is looking for a way to use its economic power to Its own advantage...
...in inese premises it is naroiy the function bt these who do see the industrial system in its larger ahd mors human aspects to despair...
...What price I wool energer...
...It has exhibited a social-mlndedness that a heretofore, has been satdly lacking, its interest In education, co-operative houslnjt...
...sauerkraut - conscious, walnut-conscious...
...Tha Purple {Quarts Building Stone FraT ternity lands la an aeroplane...
...And Ford has only the haziest ideas as to the working of his system beyond the confines of his own back yard: he has never pushed it to a clean-cut national industrial synthesis...
...Here originate the holy crusades, backed by million-: dollar publicity funds, to make America shoe-conscious...
...atTeentedta, anderataJulinga, divtaasa of territory, spheres of influence, whej not...
...The new competition, he - Says, operates through Ave main channels...
...America...
...The policy ot any siich nation mast be to try and heap its machines turning over by SutSfHhg abroad what- cannot be absorbed by falling purchasing power, at - w*&.^a*^Sft^sJe...
...A comparison of the total resources of all labor banks' with the resources of the National City Bank, tor instance, will disclose the fact that so far labor banks are not a large factor in the financial world...
...It has made stupendous progress...
...one of the fathers of the movement In this counter, in a speech before the Academy of Political Science, summarizes its purpose and philosophy thus: 'Labor's interest In banking is a product of the post-war attitude of organized labor toward the general problems of industry and of political and social iife .' . . . Organized labor today, Mr...
...Enough that distribution pressure has proved powerful enough to -sink the competitive traditions ot a hundred year*, ahd build powerful trade associations— themselves oft the border Uhe of merfei-S—tor the purpose of grabbing purchasing power away from alternative commodities...
...Senator Walsh heips us by clearing the ground...
...lb other words, the shift Hi merger...
...Pptbsky continued, "it has often been assumed by tome students «f the labor movement that tie revolutionary spirit of the unions who 4nfc*> ttt lee...
...He outlines the great changes, which, have come over the day by day perform- | ances ot American business in the last generation, particularly lit fBC lilt decade, and how competition has at once expanded, widely and fbreed the deHen, OK Drake's Address veiopnieht of . mergers te relieve Ihe pressure...
...to Hake the Nation Conscious The third Channel Cheney terms "tnter-indhstflal Competition...
...at announced, of because amoething else waa kicking them harder than they found time tb kick each other...
...Guided properly, we mfty IdaK forward to a sound system ot cooperation based en conservative mArikgement and Inspired with an ideal that will tend to.bring about both con,hdence and inspiration of- the large masses in labor control, ih itself thl movement it a treat booh tb labor power, an educational process for the diffusion of ideas for a beAer world...
...who wit flrdt tet introduce the limited dividend Idea, as Well as the idea, of aharins profits with depositors, think* thai ih ten years the American wbrkihf men, by savin* and earefuBy investing thttr etvtfiik, ez\« collecthrely become and at taw denU ihaat Bnanakl pW*ri eA.^'^rMt This may seem a bit over-enthuiastic...
...Here the trade association becomee even mora important...
...The Nejjo^ , 1 Competition Aa to the second question, a re*, cent article by a prominent banker in the...
...On the other hand, it haa extended leans to credit anions, sound and Wett-fOnctioning cooperative and Other Institutions of a Social character...
...Great as la my lbve ana devotion tb that paragon of program makers...
...are vertically removed train retailers...
...If a union Is genuinely radical and socially minded there la no reason why the additional strength that Comes to it from ownership and control of banks should influence it to be otherwise...
...Ifi his resolution, however...
...This "aiitrlbdtive pressure...
...It la of great Significance...
...The object of the old type of consolidation waa to mb oft competition...
...I lid translating Cheney accurately hut treeiy.J The skies are full ot strange hew thunderbolts—group advertising, trade association drives...
...aims at the acquisition of the knowledge of management by theee targe groups...
...The individual business man has no conception of a national economic synthesis to begin with, and if he did have it, it would still be his pleasure and duty to get on His toes, go Into conference, pump up his blood pressure, and heman enough purchasing power In his direction to keep all his machines busy...
...Eight compdhles cbntrBl three-« fourths anthracite deposits...
...HllLman says, 'Is looking, beyond the formula of a fair day's pay for a fair day's work...
...Adeduiteiy te analyze' and explain the chthging fashions hi trusts and mergers |inee the beginning ot the cdhtury would require untold research, and Heaven Alone knows how many fat VOiurhes...
...The article la entitled the "New Competition," and the author knows what he is talking about...
...The second channel is "Stef-Commodlty Competition...
...Something has got to be done, outlets have got to be found to keep the machine operating on an economical balanced load basis...
...What proportion ot the going economic structure Is Interpenetrated with the merger principle...
...The trade aasociaUon is one such effort, niit aa we have jieca it ohV intensified competiton from sniksnt hnd wider viewpoint...
...The reduotio ad absurdum in national economics is utterly irrelevant from the standpoint of practical business And as we all know, we would ail starve to death lnstanter If practical business were not in full control...
...Where the Control Lies But that this drift his by 66 miens brdkeh the control of the older type Is evidenced by a recent report of the Federal Trade Commission where A tt announced that: SIX companies control ene-mlrd Americkh water powkr...
...The ctcriajige oT ploagantrjto between, any, Cafiiorriia and Florida, comes under thl* t-ther.t head...
...A. F. Myers, special assistant to tha Attorney General at follows: "Notwithstanding all the years ot legislation Oh the trust problem and all the years of legislation in enforcing^ ahti-trust laws...
...Some of the most aggressive and costly strikes In ita history were fought since the inauguration of the'bank...
...Tan embattled Fealtore of Tapptown call OH high Heaven to witness the virtues of that enterprising community as against the degenerating Papptown...
...And form a trade association wherein all lumber dealers may get together to crucify the brick men and the stone men...
...There Is little merit' to this assumption, aa may be proved in the case of the Amalgamated...
...In conclusion, Potofsky said: "It tt difficult to predict the course at labor banking because it is stlB in an expert-1 mehttl Stage...
...And that will be nothing short of a transfer fit financial power from Wail Street te labor.' Cbneernthg Investment policy, Pbtotaky Said: "The policy of the' Amalgamated Banks with respect tb loans Is conservative, safety being the basic consideration, it has organized an advisory board bt business men ot many years' experience who assist the officers in passing on commercial loans...
...silk-conscious, rayon-conscious...
...Mb: describes certain new forms which mergers are taking and enumerates specific examples...
...The packets had spread themselves out too thin...
...The majority at one6 of the Senate and of the Federal Trade Commission has a clearer conception of its duties than in the unhe$py day* of the meat investigation...
...I wish I n}i£ht come before you with a copy of that report in my hand...
...Do ^rou suppose that ail these active trade associations which have been springing up like mushrooma in the past few years—the old trade associations never did anything but hold an annual banquet to which each brother brought his own chemist...
...Installing safety and health, machinery and welfare work generally, and operating on a 40-hour week or less, presents a sort i of tidy, standardized, functional tjtopla that might keep the spirit of re- ( volt and uhrest quiet for decades...
...All one can dd IS to hazard certain etude generalisations, j Size and Efficiency When I was working for the Federal Trade Commission in its examination of the so-called beet trust, I had It very clearly borne in upon me—in the face of certain, emotional preconception—that sheer size was no earnest of efficient operation...
...How fares competition today...
...Increases in the technical arts only tend to aggravate the difficulty...
...A substantial portion ot theee savings are work, ingmen'i money...
...It la proof of a new idealism and tendency, that will rbot thl unions th the everyday life Of the community ad no other tendency has st> far done...
...The ear* lier combinations dealt with the basic Supplies ot industry—raw . materials, prime manufacturing, Peesent day combinations for tha most part deal with the immediate necessities of life...
...Over ten billion dollars...
...Third—Despite all the smoke, how much Bre actually remains...
...The Righto Salesmanship To coma hack tb Mr...
...v 4 That which passes for thrift 4t pretent is often nothing different from soul - dimtroyini parsimony...
...The spellbinders of success ahd personality, and yo« - hive - It - in - you - send-notriohey - but - clip - tire - coupon have driven their lesson home...
...8. Mjll...
...they make eonosrtad efforts, te get bnt ot It And theee eftorhi firinly take the form of merfera...
...I will not Insult the intelligence of the readers by answering such a question...
...The Amalgamated banks have made it, a rule hot to extend any loans to clothing manufacturers...
Vol. 3 • July 1926 • No. 26
