18 PATTERSON—THE PROBLEM OF THE TRUSTS.  [April2 
the minimum of cost can only be accomplished by securing a con- 
stant supply of raw material, by making promptly every alteration 
and improvement in plant and machinery which can effect greater 
economy in operation, by offering inducements to managers of 
superior administrative ability, by giving steady employment to 
workingmen at just wages, by accumulating a reserve fund available 
for extraordinary expenditures, by increasing the output so as to 
decrease the cost of production per unit, by expanding trade by 
creating new avenues for it, and by reducing the price to the con- 
sumer, while increasing the profit to the producer. To attain these 
cost-saving and profit-producing results, combinations of corpora- 
tions and of properties have been and are being effected, in some 
cases by the merger and consolidation of existing corporations, and 
in other cases by the organization of new corporations, to hold and 
acquire the properties to be consolidated, or to obtain a controlling 
interest in the shares of the corporations to be combined. 
For this there is needed the command of more capital than can 
be contributed by any one individual or by any group of individ- 
uals. Clear-sighted men saw that the prosperity of the country had 
not only made great fortunes for a comparatively small number of 
individuals, but had also aggregated in the deposits in the saving 
funds, in the accumulated reserves of the life insurance companies, 
and in the deposits in the banks and trust companies a fund of 
enormous and steadily increasing size, which must necessarily seek 
profitable investment, and which could be relied upon to make a 
market for the bonds and shares of corporations with a reasonably 
probable earning capacity, either by direct investment in those 
securities or by loaning funds for investment therein ; and the appeal 
was successfully made to these new reserves of loanable funds. 
Therefore, to-day the capital which is operating the railroads, min- 
ing the ore and running the mills of the country is not provided 
by the rich men of the country, but is the accumulation of the sav- 
ings of labor. 
The test of the investment value of an industrial security is its 
reasonable probability of a continued earning capacity adequate to 
the payment of fixed charges and dividends at a rate exceeding that 
yielded by securities of a higher grade; and that probability of 
continued earning capacity will be affected by the relation between 
the cost and the real value of the properties bought for combination 
by the moderation or extravagance of the compensation given to 
