120 COMMERCE AND EXCHANGE 



Elimination of Intermediate Markets 



We now turn to a different type of buying and selling center, 

 namely, that group of intermediate markets lying between different 

 stages of manufacture and on which the finished product of one 

 establishment is transferred to another to be further elaborated. 



From the beginning of the factory system in America there have 

 been fewer of these intermediate markets than in Europe. In the 

 older countries the introducers of machinery found already in exist- 

 ence a strong household and shop manufacture, including the pre- 

 parers of materials, those expert in the various intermediate pro- 

 cesses, and the finishers. The factory system took possession of one 

 process at a time, and thus independent concerns grew up, each 

 engaged in but one stage of manufacture, and between these there 

 continued to exist many of the intermediate markets. In America 

 the projectors of the first factories usually found the entire field open 

 and the products imported; consequently they were obliged to pro- 

 vide simultaneously for all stages of production. Hence we find, 

 for example, as a characteristic difference between the American and 

 European textile industry, that here the several processes of scouring 

 and combing, or throwing and spinning, weaving and finishing are 

 more often all controlled by one cotton, worsted, or silk concern than 

 in Europe. 



Just as it began to be realized that there were disadvantages in 

 the American system, particularly in the adjustment of production 

 to a rapid succession of styles, the trust movement made itself felt 

 and stimulated the process of combination in all branches of indus- 

 try. The organization of consolidated corporations has had many 

 effects. It has made profits for the organizers through what Mr. 

 Lawson calls " made dollars." It has given us a highly centralized 

 type of business administration to experiment with. It has sub- 

 stituted a system of delegated authority for individual initiative. It 

 has eliminated some competition, substituting therefor emulation 

 and the comparison of records, and it has changed the form in which 

 competition manifests itself. It has secured certain economies of 

 production on a large scale. But among its various effects there is 

 one which has not been sufficiently noticed, and that is the elimina- 

 tion of intermediate markets. Complex manufacturing corpora- 

 tions have been constructed involving not only former competitors, 

 but businesses bound together in the sequence of production, capable 

 of manipulating materials from their first appearance as economic 

 goods until they are ready for the ultimate consumer, without at 

 any time making them the object of purchase or sale. This linking 

 together of processes in great corporations has coerced the inde- 

 pendents to similar consolidation through the fear of the monopoly 



