5 8 J. A. HOBSON 



before permanent owners of large portions of the more profita- 

 ble businesses which they finance. A great trustmaker, 

 banker, or mine owner must find fields for the investment of 

 his profits, and, as he has the best opportunity for discrimi- 

 nating genuinely progressive from merely speculative invest- 

 ments, he is disposed more and more to secure himself against 

 misfortune by holding large shares in sound remunerative 

 businesses. 



In endeavoring to develop a public policy towards trusts 

 and great corporations it will be important for Americans to 

 make up their minds clearly about the economic supports of 

 these capitalist structures, and in particular to test one point 

 of economic theory. It is not difficult to ascertain that con- 

 trol of the best natural resources, railroad discrimination, and 

 the tariff have been important aids in originating and support- 

 ing trusts. But are these the only supports? If so, tariff re- 

 form, enforcement of federal and state control of railroads, 

 and some system of taxation of land values might suffice to 

 defend the consumer, the would be independent producer, 

 and the workers against any dangerous abuse of power. But 

 if, in addition to these supports, the mere advantage of a big 

 capital over a smaller capital, or, in other words, the operation 

 of the law of increasing returns, is an economy sufficient in it- 

 self to breed a trust, a more drastic policy than any which 

 America is yet prepared to face may be required. 



Few American economists, and no American statesmen, 

 have squarely faced the issue; those economists who have 

 faced it, differ in judgment. The point at issue is precisely 

 this. Every one admits that up to a certain point a business 

 with a large capital has usually a net advantage in competing 

 with a smaller business. It is evident that this is applicable 

 to the case of the great capitalist businesses which ripen into 

 trusts. But is there a limit to the economy of mere size, so 

 that, this limit being reached, any further advantages of size 

 are more than offset by waste, the business on the whole now 

 conforming to a law of diminishing returns? If so, is this 

 limit reached before the size of the business has enabled it to 

 attain monopoly? Upon the answer to this question much 

 depends. Professor Ely, often regarded as a socialist, holds 



