112 SECTIONAL ADDRESSES. 



as the limiting case, and therefore monopolistic tendency as a description 

 of less complete organisation. The conditions now sought for under the 

 name of rational control are between these limits of pre-assumption, and 

 may therefore be regarded as a departure from whichever end of the 

 scale is pre-assumed as ' natural,' in the direction of the other ' extreme/ 

 Those whose ideal is the completest regulation of an industry as a whole 

 regard therefore the looser structure of the Cartel as not so completely 

 rational as the Trust, as a lower organisation ; while the still persistent 

 preference for competitive conditions regards the Trust as monopoly and 

 the Cartel as monopolist tendency. Comparing the method of Cournot 

 with that of Ricardo, the ' letting down ' of organisation with the 

 ' building up ' of monopoly, the idea of ' dissolution ' with that of 

 ' restriction,' we see ' rationalisation ' as the endeavour to find the range 

 between these limiting concepts of purposive leadership or industrial 

 administration. Otherwise stated, there are restrictions on organisation 

 as well as on production. Dismissal of the rationalising argument on the 

 ground that it is ' another word for restriction ' means that we are arguing 

 under one of the pre-assumptions, that which has historically had precedence 

 since Adam Smith. The farther from Scylla, the nearer to Charybdis, and 

 vice versa. The middle way is open to both dangers, and to the fears of 

 those who have become specialists in rock or whirlpool navigation. 



Reference may be made here to two recent contributions to the 

 problem of extension of control, which in different ways place it in 

 relation to the pre-assumption of independent competitive working. 



It has been shown by Dr. Thorp 1 that there is a great variety in methods 

 of industrial grouping, and that the ' power combines ' indicate only the 

 last stages of measures taken in a smaller degree to strengthen independent 

 positions. He shows that most businesses are operated by a single 

 establishment, only 7-4 per cent, of all establishments being in ' groups,' 

 though this means a very much larger proportion of the output. Besides 

 tho#e groups which he calls uniform, in which the grouped establishments 

 are of the same kind, and are ' horizontal,' and the vertical groups to which 

 reference has been made above, he finds that producers defend themselves, 

 on a small scale as well as on a large, by other forms of extension of 

 control. There is grouping of convergent processes, when the same 

 business makes complementary or auxiliary products — what may be called 

 ' lateral integration ' — so avoiding the risk that one product may be affected 

 on the market by misfit to products used in connection with it ; e.g. 

 bedsteads and mattresses may be grouped for production. And there is 

 divergent grouping when different products are made under one direction, 

 because of a fundamental common material or process ; e.g. because of 

 common process, wire and hempen ropes are sometimes produced together. 

 These four types of grouping show themselves in most cases on a small 

 scale, and are the origins of what, in the largest cases, is called the 

 ' rationalisation ' movement. In over 60 per cent, of all the groups 

 examined, there were not more than two establishments ; in 4-5 per cent. 



1 The Integration of Industrial Operation (Washington, 1924). 



