THE MEANING OF CORPORATIONS AND TRUSTS. 295 



products are sold at prices that are fair to producers and to con- 

 sumers alike. 



When any industry falls into the deplorable condition brought 

 by extreme competition, what recourse is there but for the pro- 

 ducers to meet and endeavor to agree upon a course that will per- 

 mit the attainment of remunerative prices by all ; that will lead to 

 the production of only so much output as, according to their com- 

 bined judgment, can be absorbed without strain to either producer 

 or consumer, to the abandonment of needless and excessive expend- 

 iture for solicitation, and to the sale of products only to reputable 

 merchants of sound credit ? Such conferences have led to compacts 

 of various kinds, that usually have been but of short duration. 

 The temptation to extend sales by a stealthy cut from the agreed 

 price is too strong to be resisted, and the abandonment of the 

 agreement quickly follows. Then more binding compacts are 

 made some providing a penalty for the cutting of agreed prices ; 

 some providing for a division of territory in which sales can be 

 made by competing establishments ; some providing for the dis- 

 tribution of the total sales of a product in certain percentages be- 

 tween different establishments. All such compacts are combina- 

 tions in a greater or less degree of different establishments, any of 

 which may be owned by an individual, a firm, or a corporation, 

 and, with indefiniteness of meaning, have variously been desig- 

 nated as trusts. 



They are, however, but the embryo of the trust properly so 

 called, which is a complete amalgamation of different interests in 

 the same industry. Stock is issued covering an appraised valua- 

 tion of the several properties to be combined, and distributed in 

 proportion to the owners of these properties, who surrender it to 

 trustees, receiving in return therefor trust certificates issued by 

 these trustees, who become the actual directors of the organiza- 

 tion. By such a combination competition between its constituent 

 members is removed. The concentration of management permits 

 economy of administration, the organization, as a whole, obtain- 

 ing the benefit of appliances and methods that before were peculiar 

 to but one or a few of its constituent elements. The interests of 

 the various producers are placed as a trust in the hands of the 

 men whose mental grasp, practical knowledge, and executive 

 ability enable them to direct to most efficient results the efforts 

 of a great number of workers, to adopt and use to greatest advan- 

 tage the best appliances, to obtain large quantities of the requisite 

 material upon the most favorable terms, to perceive and meet the 

 conditions of a varying market. And thus it is that the formation 

 of a trust is a uniting of the conditions that permit the attainment 

 in the highest degree of the advantages gained in smaller degree 

 by the first industrial differentiation which marked the beginning 



