INVESTIGATING THE TRUST PROBLEM 113 



least upon a partial monopoly within its field. It is not so 

 much interested from the economic standpoint in lowering 

 the cost of production as in lessening the output or increasing 

 the prices of its goods. The question of form thus becomes 

 a factor of the first importance in relation to the subject of 

 international trade. The value of the corporation as a form 

 for conducting large enterprises is emphasized upon almost 

 every page of the testimony and especially by such witnesses 

 as James B. Dill, John R. Dos Passos, and by such corporation 

 leaders as Schwab, Flint, Thurber, Stetson, Gary, and others. 

 The form which consolidated industry assumes is not only 

 important from a political standpoint, it is of large importance 

 from the standpoint of the investor. The process of consoli- 

 dation, the formation of a huge corporation out of many small 

 ones, gives a large opportunity for inside manipulation and for 

 the operation of the corporation for Wall street purposes. The 

 question of capitalization thus becomes one of public impor- 

 tance, since it is likely to affect the policy adopted by the cor- 

 poration itself. The witnesses before the commission gener- 

 ally agree that the inflated capitalization has no effect what- 

 ever on the prices of the goods sold. It is assumed that in all 

 cases the corporation obtains as much as possible for its ser- 

 vices. The increase in the amount of capital then will not 

 enable the corporation to demand or receive higher prices; 

 if it asks higher prices, it will sell less goods ; and if, as it is 

 assumed, it was obtaining the maximum revenue, an increase 

 in price means a lessening of profits. Still there is evidence 

 in the report of the commission to show that while the amount 

 of the capital issued does not affect its ability to put up prices, 

 it does materially affect the policy of the directors in the con- 

 duct of its business. The amount of capital then is an im- 

 portant factor in determining whether the corporation shall 

 be conducted for the purposes of economy in production or 

 for stock speculation. The question of watered stock, which 

 affects primarily the corporation in its relation to the investor, 

 thus becomes a question in which the public are vitally inter- 

 ested. This constitutes the economic basis upon which 

 legislation may be asked to prevent the evils that come from 

 a flagrant watering of stock. The form of the union, too, 



Vol. 3-8 



