38 TWENTY-FIRST REPORT. 



problem, seems to take about the same position as Mr. Collier. The whole 

 trust movement, so we are told, can not be understood or appreciated unless 

 we look at its genesis, the competitive regime. The capitalistic monopoly has 

 emerged from the competitive regime because of the large amount of fixed 

 capital required in certain lines of modern industry, the fierceness of compe- 

 tition between corporations having these large fixed investments, and the 

 ability of the trusts to realize large savings impossible for an independent 

 concern to effect. But these trusts have their teeth pulled, so to speak, by 

 potential competition which will become actual when the profits of the 

 monopoly are above normal. In support of this he cites the case of the Sugar 

 Trust which has been compelled to face the competition of first, the Spreckles 

 interests, and later of the Arbuckles and Doscher interests. Now (1917) they 

 have learned their lesson and the price charged for sugar is sufficient to yield 

 a normal profit. 



These statements coming from three different men over a period of more 

 than a quarter century reveal quite conclusively that there has been and still 

 is a widespread belief in the efficacy of potential competition as the sole means 

 for safeguarding the interests of the public, even though monopoly according 

 to these writers is to be a permanent phenomenon in certain fields of industry. 

 The persistence of this belief is the more remarkable in view of the penetrat- 

 ing article written on the whole subject by Professor Bullock in 1901. He has 

 made a distinct contribution to the whole problem by proving that those 

 writers who insist that monopoly is inevitable in those fields of business where 

 a large amount of capital is necessary for the productive process and who then 

 insist that potential competition can be relied upon as a safeguard against 

 permanent monopoly are guilty of an inconsistency. They argue on the one 

 hand that monopoly is more efficient than business organized under competi- 

 tive conditions and then they would have the danger of monopoly removed by 

 apiiealing to potential competition to come in. This can not continue for any 

 length of time because potential competition can function most effectively in 

 businesses competitive in their nature. 



He has also shown that even if potential competition is to be the means by 

 which we are to regulate monopoly, the resvilts would be disastrous for two 

 reasons. First, potential competition would be able to distribute but a small 

 share of the alleged advantages of monopoly among consumers. Mr. Bullock 

 instances the case where a corporation having a monopoly can make and sell 

 a commodity for 80 cents ; but the potential competitor can not make it for 

 less than $1.00. Under such conditions all that potential competition can do 

 is to keep the price of the commodity from going higher than $1.00, for the 

 monopolist can raise the price of the commodity up to any figure less than 

 $1.00 and still keep the potential competitor out of business. Assuming that 

 the monopolist does charge $1.00 for the commodity and potential competition 



