904 4 REPORT— 1890. 
possible in America which are not possible in England; in fact, the area of a local 
monopoly there is often greater than that of the whole of England. <A local coal 
combination, for instance, means quite a different thing there from what it does in 
England, and is more powerful every way. 
Again, partly, but not solely, because they are so much in the hands of a few 
wealthy and daring men, railways, both collectively and individually, are a far 
greater power in America than in England. America is the home of the popular 
saying that, if the State does not keep a tight hand on the railways, the railways 
will keep a tight hand on the State; and many individual railways have, in spite 
of recent legislation, a power over the industries within their territories such as 
no English railway ever had: for the distances are great, and the all-liberating 
power of the free ocean befriends America but little. 
It is this change of area that is characteristic of the modern movement. In 
Adam Smith’s time England was full of trade combinations, chiefly of an informal 
kind, indeed, and confined to very narrow areas; but very powerful within those 
areas, and very cruel. Even at the present day, the cruellest of all combinations 
in England are, probably, in the trades that buy up small things, such as fish, and 
dairy and garden produce, in detail, and sell them in retail; both producers and 
consumers being, from a business point of view, weak relatively to the intermediate 
dealers. But even in these trades there is a steady increase in the areas over 
which such combinations and partial monopolies extend themselves. New facilities 
of transport and communication tell so far on the side of the consumer, that they 
diminish the intensity of the pressure which a combination can exert; but, at the 
same time, they increase the extension of that pressure, partly by compelling, and 
partly by assisting, the combination to spread itself out more widely. And in 
England, as in other Western countries, more is heard every year of new and 
ambitious combinations ; and of course many of them remain always secret. 
But it is chiefly from America that a cry has been coming with constantly 
increasing force for the last fifteen years or more, that in manufactures free com- 
petition favours the growth of large firms with large capitals and expensive plants ; 
that such firms, if driven into a corner, will bid for custom at any sacrifice; that, 
rather than not sell their goods at all, they will sell them at the Prime Cost— 
z.e., the actual outlay required for them, which is sometimes very little; that, 
when there is not enough work for all, these manufacturers will turn their bidding 
recklessly against one another, and will lower prices so far that the weaker of them 
will be killed out, and all of them injured ; so that when trade revives they will be 
able, even without any combination among themselves, to put up prices to a high 
level; that these intense fluctuations injure both the public and the producers ; 
and the producers, being themselves comparatively few in number, are irresistibly 
drawn to some of those many kinds of combinations to which, nowadays, the name 
Trust is commonly, though not quite accurately, applied; and that, in short, com- 
petition burns so furiously as to smother itself in its own smoke. Itisa Committee 
of the American Congress that reports that ‘combination grows out of, and is the 
natural development of, competition, and that in many cases it is the only means 
left to the competitors to escape absolute ruin,’ 
The subject is one on which it would be rash to speak confidently. We of 
this generation, being hurried along in a whirl of change, cannot measure accu- 
rately the forces at work, and it is probable that the best guesses we can make 
will move the smiles of future generations; they will wonder how we could 
have so much over-estimated the strength of some, and under-estimated the strength 
of othere. But my task is to try to explain what it is that economists of this gene- 
ration are thinking about competition in relation to combination; and I must 
endeavour to reproduce their guesses, hazardous though this may be. 
§ 7. To begin with, I think that it is the better opinion that popular rumour, 
going now as eyer to extremes, has exaggerated some features of the movement 
towards combination and monopoly, even in America. For instance, though it is 
said that there are a hundred commodities the sale of which in America is partly 
controlled by some sort of combination, many of these combinations turn out to be 
of small proportions, and others to be weak and loose, Again, the typical instances 
