106 SECTIONAL ADDRESSES. 



The foregoing considerations show that there is something to be said 

 for capitalist evolution in the alleviation of risks ; so that we cannot easily 

 separate the risk element from the simple purpose of leadership and wide 

 control. This desire for more extensive control is a feature merely of 

 active enterprise and ambition ; it has counterparts outside of industry. 

 But as distinguished from, for instance, the tendency of public Departments 

 to expand when they can, the mixture of risk with ambition is a special 

 industrial fact. 



The same is true, in a less degree, when the risks in question arise out 

 of bargaining, not out of competition. Great industrial influence may 

 be gained by the control of enterprises on different levels of production, 

 which were not therefore formerly competitive. This comes into being 

 as the last stage of the bargaining process, which is made closer by 

 long contracts, exclusive contracts, and agreements for exclusive trade. 

 Finally, the bargainers combine. There is something to be said historically 

 for the view that such combinations have been formed defensively, if it is 

 thought that horizontal combination on one level is exacting too high a 

 price from producers on another level. Thus horizontal combination 

 leads to vertical, and the former becomes split by the engagements of its 

 members to deliver their supplies, not to the market, but exclusively to 

 some further producers. The latter do not get their supplies by this 

 method ' at cost,' but they get them free of the special combination 

 profits on the earlier products. Thus a steelworks may buy up a coal 

 mine in order not to pay the profits of a coal combine. These are incidents 

 of industrial friction. But the permanent or rational aspects of this 

 policy are again not purely industrial ; they are more generally adminis- 

 trative, while having this industrial application. It is natural for any 

 great administration to consider the continuity of its relations with any 

 supply on which it depends. Thus when a public Department takes over 

 the service of education, it does not rely on the market to find a supply of 

 teachers property adapted to its requirements ; it sets about securing 

 them by its own arrangements. Analogies can be drawn also from 

 ecclesiastical and military administrations. It is in fact difficult in many 

 cases to say what is a single process, and how far unity of supervision must 

 extend. Apart therefore from temporary or accidental causes, many 

 administrations have to extend backwards or forwards from their main 

 purpose, and in industry this is called vertical integration. In some 

 industries the technical advantages are more obvious than in others ; 

 they appear to be greatest in the iron and steel trade. But broad con- 

 siderations of administrative supervision may lead to its application in 

 any case. 



This form of combination, like the former one, may be undertaken for 

 the simple purpose of leadership. But it creates this position only when 

 the main administration is itself already so large as to give that position ; 

 and it does not by itself create monopolistic influence. When it is 

 mixed with a large degree of horizontal control, it approximates to the 

 third great type of aggregated interests — the Concern. 



