CONCENTRATION OF INDUSTRY 55 



stable in their composition, have been formed controlling 

 nearly all the roads between Chicago and the coast, and from 

 Chicago stretching out their tentacles through those great 

 mining and agricultural states which are destined in the early 

 future to become the center of industry and population in the 

 United States. 



This railroad concentration which is proceeding apace all 

 over the continent is not merely an instinctive movement for 

 self-protection and monopoly on the part of the railroad man- 

 agers. It represents the first fruits of that domination of the 

 financier over industry which is the second distinctive char- 

 acteristic of American capitalism. Everywhere advancing, 

 this active control of the financier over industry in general has 

 proceeded further in America than elsewhere, partly because 

 conditions are more favorable to bold speculative coups, partly 

 because business life there has evolved and brought to the 

 front a bolder and more imaginative type of financier. 



The naive theory of capitalism provides no place for the 

 financier, save as banker or insurance broker. Investors, as 

 business men recognizing the uses of large capital, pool their 

 capital for some purpose which they deem profitable, elect 

 their directors, and delegate to them certain powers of control ; 

 the directors appoint the management, and exercise a general 

 control over the conduct of the business subject to the su- 

 preme control of the body of shareholders. Such is the 

 democratic theory of capitalism. In practice the formation 

 and control of these great capitalist corporations is very differ- 

 ent, and that difference mainly consists in the injection of the 

 power of the financier into the system of modern capitalist 

 industry. He performs two functions, both of them necessary 

 in the existing order. The first is the formation and reforma- 

 tion of corporations and the merging of smaller into larger 

 corporations. In his capacity of dealer in profitable "notions," 

 he takes the initiative in the capitalist movement, directing 

 the flow of industrial energy into profitable channels. Even 

 when the idea emanates from an industrial specialist, a busi- 

 ness man in the narrower sense, it can only fructify in the 

 hands of the financier, who, as promoter, contractor, and un- 

 derwriter, carries it from the world of ideas into the world of 



