704 



TUTSIS. 



TRT'STS. Tlie advantages to be derived from the 



principle* of co-operation have iii recent times im- 

 pressed many changes on industrial methods, but e 



inure striking than that 'xliil>ilrd liy tlie treat 

 i-t.s" that have come into exigence within a lew 

 years last past. That individuals may unite their 

 property and exertions Cur their common bttwil has 

 always been recognized by our practice and our laws, 

 although when they assume to act with corporate 

 unity the authorization of the laws is a nOQKUUed 

 necessity. Partnerships are tlie outgrowth of Midi 

 pur|w>ses and in more advanced conditions of social 

 integration a legal corporation makes its appearance, 

 while it is re-, rved for a still more advanced state of 

 industrial organization i to cxhihit co-operative primps 

 embracing Ixith individuals and corporations. The 

 stages of this process present the most interesting 

 social phenomena. (See CO-OPEIIATION and ('<>u 

 po RATION.) 



Trusts in the sense of the term liere used have 

 existed in Europe for many years, but it was re- 

 served for their tninsfer to the fertile American mind 

 to produce their most striking effects. The n< 

 of bringing a series of railroads constituting parts ol a 

 particular system of transportation under a common 

 management induced the formation of large "syndi- 

 cates for their control. The attempt that had been 

 made toeonn.vt their operations by oon tracts imposing 

 restrictions upon their management OTOUBimiing their 

 interests proving not to be effectual, proprietary com- 

 binations, aided by the functions of syndicates, were 

 the result. This object was accomplished by uniting 

 in the hands of a limited number of persons the 

 major stock interest of each of the roads desired to be 

 brought under a common management. Where the 

 members of the syndicate were the owners of the 

 stock interest that enabled them to assume manage- 

 ment of the system the ea-e was simply a combina- 

 tion among stockholders of a number roads to ex- 

 ercise the rights they possess as stockholders to secure 

 Midi management of such roads as might best suit 

 their ideas of their interests. The idea, thus developed 

 in its application to transportation, passed into the 

 field of production. 



The immense oil industry of this country attracted 

 the attention of the large operators at first in its hear- 

 ing on oil transportation, and afterwards extended to 

 the production and refining of oil. (See I'KTUOI.KI M 

 1'II'K lam.) So vast an enterprise demanded more 

 than could be accomplished by the union ol a limited 

 number of capitalists having personal confidence in 

 eaeh other, and took a more enlarged form. The con- 

 trol of Yast amounts of property consisting of oil 

 wells, refineries, and means ol transportation were to 

 be centred for their management in tlie hands of a few 

 men with the largest powers of control over the con- 

 duct of the business that it was possible to communi- 

 cate. If the management was to embrace all the 

 owners of the property, the vast extent ol the business 

 would demand that so large a number ol' managers 

 should \H- included a? to defeat that unity of purpose 

 and action that is essential to the highest succi 

 was thus necessary that, while the o\vner>lii;> of the 

 property managed should be in the hands of many 

 person*, the control should be in llie hands' of a very 

 limited numlicr. To bring aUmt this result the' man 

 agement had to be separated from the proprietary in- 

 terest. Such a relation contained the e.--i-iitial prin- 

 ciples of a trust according to which the title nnd con- 

 trol of property is in one while the beneficial hiterest 

 is in the hands of another. 



In the organisation of the Standard Oil Trust in 

 these conditions were complied with by an ar- 

 rangement by which the pro|Hrrty to be managed was 

 transferred to certain persons termed trustees, but for 

 the benefit of the actual owners whose interests were 

 represented by trust certiBcates issued by the trustees 

 and which were designed to be merchantable property 



capable of being bought and sold in the market The 

 design appear.- to have Ix-en to place in the hands of 

 the trustees property of partnershi ps. and the stock 

 of incorporated companies engaged, in the business 

 proposed to in' carried on by (lie trust. The ol ; 

 this arrangement was to enable the trustees to have 

 the direct management of (he property employed in 

 the business by private companies and the indirect 

 control of that held by corporations by having tin; 

 right to choose directors for its management. This 

 plan embraced several important features; it involved 

 personal eonlidenee in the trustees, who were intrusted 

 with the largest powers of control over the property 

 in trust capable of being communicated to persons 

 standing in a fiduciary relation to it.- owners ; it placed 

 the vast industry in the hands of a limited number of 



{icrsons whose skill and integrity weic approved by a 

 arge numU'r ol interested persons qualified to under- 

 stand the requirements of tlie business and the char- 

 acter of the men to whom it was intrusted. A more 

 vigorous application of the principle of co-operation 

 cannot be co'iceivcd. 



The iuitnen.-e success of the Standard Oil Trust in 

 embracing within its control almost the cut ire oil interest 

 of the country attracted the attention of operators in 

 other fields, and induced in l!<s4 the formation of the 

 Cotton-Seed Oil Trust that has developed into a vast 

 industry. Many other trusts have followed (li< 

 amples, the most notable being the Sugar Trust. 



It is supposed by many that these great trist- are 

 in their constitution and operation out of harmony 

 with the principle of our legal system. Others em- 

 phasize their conflict with competition, which seems 

 to impress their minds as being the leading if not the 

 only principle of the industrial system. A v> : 

 era! feeling prevails outside of the owners of the 

 certificates that the power.- placed in the hands of the 

 trustees are too great lor any class of men to exercise, 

 whether they use them well or ill. 



An intelligent view of trusts must distinguish among 

 them and recognize very marked differences in 

 structure and operation. Those trusts that deal with 

 trade alone, independent of production and transporta- 

 tion, cannot in the nature of things have any other 

 object than to stifle competition by direct action upon 

 that principle. Such an attempt when accomplished 

 by co-operation is condemned by our laws, in harmony 

 with the principle of industry that the destruction of 

 competition is not the proper function of co-operation. 

 To aggregate capital for the purpose of trade is cer- 

 tainly legitimate, and to secure such aggregation of 

 capital by uniting the means and exertions of a num- 

 IKT of persons has always been rcirardcd as confonn- 

 ablt to lioth political and economic laws, as i- apparent 

 from the universal recognition of partnerships which 

 are an instance of this class. While co operation has 

 a legitimate place in the operations of trade, it is an 

 abuse of that function to employ it as means of stifling 

 competition, and it is true that, whenever two or more 

 persons unite for the purpose of trade, there is an 

 nnliiect interference with competition, for had they 

 traded separately there would have been competition 

 lict ween them, but if this is not the intended e(l''-e' 

 but an incidental consequence merely, (he combination 

 is not improper. An attempt to stifle competition in 

 trade is then a wrong, whether committed by individuals 

 tnuling together or by companies, whether organized 

 on the principles of trusts or otherwise. 



That tru-ts for such improper purposes have been 

 cieated and have brought a bad name upon trusts in 

 general is certainly true, and without doubt trusts 

 organized for legitimate purposes have engaged in 

 s'idi transactions, but the <piesti..i> presented in such 

 cases is not that of the legitimacy of Iru-ts. but of the 

 lawfulness of their conduct. The scarcity ufoouimod- 

 ities of general neccs ity i-* a social evil, and it takes 

 no great penetration to discover that there are appro 

 priatc social means for preventing such an evil horn 



