224 



SCIENCE. 



[Vol. 711., No. 162 



there is nothing to pay fixed charges, and it means 

 ruin to the investors. In the latter case the points 

 which have no competition are made to pay 

 something toward the fixed charges, while the 

 others do not. This is discrimination. 



Wholesale discrimination, and wholesale sacrifice 

 of interest, are both misfortunes to the community. 

 The customers cannot endure the former ; the in- 

 vestors cannot endure the latter : the community 

 cannot afford to tolerate either. In each case 

 competition is carried to the point where it en- 

 courages the unfittest rather than the fittest. 

 Under a system of discrimination, it is the more 

 unscrupulous man who gets the low rates. Under 

 a system of cut-throat competition, it is the black- 

 mailer who reaps the advantage. Capital is in- 

 vested, not for the sake of its earning- power, but 

 for the sake of speculative manipulation and 

 fraudulent contracts. 



Both these points have been to some extent recog- 

 nized by the public authorities. The doctrine of 

 the 'reserved police power of the state,' awkwardly 

 as it has been sometimes defined, is part of the 

 law of the land, and is unquestionably sound in 

 principle. It is clearly recognized under this doc- 

 trine that there are many cases where competition 

 either does not exist, or, at any rate, does not pro- 

 tect against abuses of industrial power, and that 

 in such cases the state is justified in interfering. 

 Of late, the interferences have been more and 

 more directed against cases of discrimination as 

 such, rather than extortion. For the protection 

 of the investor, less has been actually established ; 

 but the events of the last five years have shown so 

 clearly the danger of free competition of capital 

 in the hands of irresponsible managers, that the 

 necessity of some such protection is beginning to 

 be quite generally admitted. 



Most of the actual limitation of competition has 

 been done without the aid of the law, and to a 

 large extent in defiance of the law. A pooling 

 contract, or, in fact, almost any combination 

 of capitalists or laborers which may have the ef- 

 fect of limiting competition, has been placed on 

 the same level with a gambling contract. It was 

 void from the beginning : the law could not en- 

 force it. Whatever may be thought of the desir- 

 ableness of such combinations, there can be no 

 doubt that this state of the law made them worse 

 than they otherwise would have been. A com- 

 bination to which the law will not lend its aid, 

 almost necessarily pursues a short-sighted policy. 

 The worst features of the system of combination 

 are intensified. 



That such combinations will exist, whatever 

 our laws on the subject, has become quite obvious. 

 That unregulated coni]>etition sometimes produces 



the worst results, is also obvious. Why not allow 

 voluntary regulation of such competition within 

 certain limits, and hold the combination respon- 

 sible for abuses which may arise? An open, 

 responsible, perhaps incorporated combination of 

 capital or labor is in many respects better to deal 

 with than a secret and lawless one. Such pub- 

 licity would increase the power of combinations 

 for good ; while the chance for evil, whether by a 

 • corner' or a ' boycott,' would be greatly dimin- 

 ished by responsibility. There is a clearly per- 

 ceptible movement of public opinion in this direc- 

 tion. How far it will carry us remains to be seen. 

 In England they have gone much farther than we 

 have, and the results seem to be good. On the 

 continent they have gone much further than in 

 England. As far as concerns railroad policy, it is 

 safe to say that the continental states have adopted 

 the principle that the only way to prevent the 

 abuse of free competition is to recognize combi- 

 nation, and hold each combination responsible for 

 what it does. 



The successive points may be summed up as 

 follows : — 



1. The present century has witnessed a rapid 

 concentration of industrial power in a few hands. 



2. Where power has been thus concentrated, 

 responsibility has been lessened ; where contract is 

 nominally free, the stronger party can shift the 

 responsibility upon the weaker. 



8. An individual dealing with a large concern 

 cannot rely on free competition to protect him. 

 Sometimes it does not exist, and sometimes it 

 can not. 



And the practical conclusion is, that it is a 

 great deal more important to put the responsibil- 

 ity upon the shoulders of the men who have the 

 power, than to insist upon a nominal freedom 

 which does not correspond to the facts. 



This paper is not intended as a plea for exten- 

 sion of government activity. Such extension is 

 threatened from every quarter, and it involves the 

 most serious dangers, both political and moral. 

 To argue in favor of unrestricted freedom of 

 contract is simply to court such danger. Allow 

 the employer to exempt himself from responsi- 

 bility, and you drive the community into a system 

 of factory inspection. Allow the railroad to make 

 arbitrary differences in its charges, and you fur- 

 nish the most powerful argument in faiftn oi 

 state railroad ownership. To try to preserve 

 freedom by chafing at the restrictions of public 

 policy is simply suicidal. 



For a nation to enjoy political liberty, it was 

 necessary for its members to resign some of their 

 former lawless independence : the alternative was 

 despotism. To enjoy industrial liberty, it will l« 



