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What Shall We Substitute for Competition?

(Speech at the St. Andrew's Society banquet, November 30, 1895.)

Mr. President: Is competition dying out? If so, what shall we substitute for it? This question is now confronting the American people and particularly the people of this State, and as I will not have to deal with it in an official capacity I may discuss it from the same standpoint and with the same freedom that any other citizen could.

For centuries competition has been regarded as the regulator of wages and especially as the protection of the public against the extortions of monopoly. In all civilized countries, particularly in England and

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the United States, it has been the aim of government to prevent combinations that would in any way affect prices. In England, as well as in this country, the legislation and the decisions of the courts excepting our Federal courts, has been most strongly against trusts and other forms of combination that were thought to prevent free competition.

But about the middle of this century, with the extended use of steam and machinery, there appeared in Europe, as well as here, a tendency toward concentration, enlargement, and consolidation in civil affairs. Numerous little independent governments were united into great ones, and in the financial, commercial and manufacturing world small establishments gave way to great ones, and little railroads to great trunk lines. Everywhere individual effort is giving way to combined effort.

Notwithstanding the laws against trusts, the most of the States have passed laws under which corporations can be formed with ease, and this fact, making concentration of capital possible, gave a tremendous impetus to the new movement, and brought about conditions which would have been impossible under individual or mere partnership effort, so that now there is scarcely a field of enterprise but what is controlled by combinations.

Lists have been published giving the names of several hundred great trusts and combinations that arbitrarily fix prices, control output, and regulate wages. Especially has competition ceased in those lines in which the public is served directly. For instance in the matter of gas, electric lighting and street railway service. In nearly all of the large American cities consolidations have gone on until there is absolutely no competition. Take Chicago as an example: Years ago gas was selling in the central part of the city at a dollar a thousand, then the trust was formed by which all of the gas companies in the city were put under one control and gas was marked up to a dollar and a quarter, and no competition has existed since that time. In the street railway service there is absolutely no competition possible now, and as the elevated roads are passing into the control of the same people who own the surface roads, there can be no competition from that source. Everywhere there are signs that indicate that the era of competition which has existed for several centuries is drawing to a close, that we are entering upon new conditions. We may deplore the tendency, but cannot stop it. The forces of concentration, of consolidation and enlargement are so powerful and their sweep is so broad of and universal, that they constitute perhaps the most important feature of this marvelous century, and no counter force has in any way been

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able to check their progress. Legislatures, both national and State, have passed most stringent laws against trusts and consolidations, and the State courts have rendered decisions sustaining these laws and holding combinations to be illegal, but without avail. The movement has gone right on like a mighty river that is unconscious of what is said and done upon its banks. The State courts of New York declared the Sugar Trust to be illegal, but instead of subsiding it went ahead and held the national government by the throat until it secured its demands. The courts of Ohio held the Standard Oil Trust to be illegal but the trust is mightier than ever. The courts of Illinois held the Gas Trust, in the city of Chicago, to be illegal, but its power is undiminished.

These new conditions are not ephemeral, they are permanent in their character. First, because it will not be possible to dissolve the corporations and concentrations of this country and reduce matters to their former condition; and second because these great combinations and concentrations in themselves are beneficial. They can cheapen production and in many ways give to the world a degree of comfort and pleasure that would not be possible under former conditions. This is especially true as relates to transportation, telegraphing, etc. The question is how to give the public its share of this benefit, or if this cannot be done, then how to protect the public against extortion.

If it is true that the era of competition is drawing to a close, and that we have entered upon new conditions, and that these are permanent, then it is the business of government to recognize these conditions and legalize them, seeing to it at the same time that the public is protected. A government that stands with its face toward the past and cannot adjust itself to the new conditions that are constantly being evolved is not suited to this age.

What, then, shall we substitute for competition? We have tried by means of legislation and by means of the courts to stem this tide, to arrest this mighty tendency, and it has been in vain. We have been trying to kick back the waters with our feet and they have surrounded us and are rolling on apparently unconscious of our effort, and so far as can be seen these trusts and combinations do not bring with them, nor are they followed by any natural check or regulation. The process of combining simply goes on until a few men absolutely control a whole situation, and the public is at their mercy, while labor is helpless.

There being no natural regulator to which the public can look, it is obliged to look in the end toward government, and the question is: What can government do in the premises? It is the business of government to conserve and protect all interests; to conserve and protect

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the producer on the one hand, and the consumer on the other; to see it that each gets his rights and that neither is subjected to an injustice by the other. There is here presented for solution one of the most serious problems that has confronted civilized government for a long time, and no complete remedy is as yet in sight. We are still in a transition state and do not know exactly what the ultimate conditions will be, but the situation, has developed far enough to indicate that for a considerable time at least there will be no remedy except what government may furnish and it must be a remedy applicable to all cases of monopoly.

In some of the best governed cities of Europe and in a few of this country there exists municipal ownership of water service, gas service, electric light service, and street railway service. This is being tried in Europe with great success; in this country the experiment has not been on a scale sufficiently broad to effectually test it, except in so far as relates to furnishing water by large cities to their inhabitants. This is a complete and pronounced success. But municipal ownership could apply only to a few cases of monopoly and would not apply to the great number of trusts and combinations which do not deal so directly with municipalities and against which the public must be protected. And no matter what may be said in favor of a municipal ownership of gas and street railways, our people, in most cases, are not ready to make the experiment, although public sentiment moves rapidly in this country and one cannot tell what will take place in the near future.

Lately I heard a very wealthy man of wide experience in municipal and in railroad affairs declare himself strongly in favor of governmental ownership of railroads, not because it could operate them more economically than private individuals could, but he favored it because it would stop the dishonest management and the favoritism now so common; and second, he thought if the government owned the railroads and the municipalities themselves furnished gas and owned the street railways, it would take away from the State and national legislatures the powerful lobbies which now corrupt legislation in every direction, and would take away from our city councils the corrupting influence which seems to be destroying our government. But while governmental ownership is being discussed by thoughtful men, governmental control or regulation is being tried. For example, we have the State of Illinois a commission which has the power to determine what shall constitute reasonable freight and passenger rates and charges for storing grain in public elevators; and what shall constitute reasonable accommodations to be furnished by the railroads to the

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public. This commission stands between the public and the great carrying interests of this State, so that if all of the railroads of the State were under one management it could determine what shall constitute fair rates and in that way prevent extortion. It is true that its actions can be reviewed in the courts for the purpose of ascertaining whether it has acted reasonably or not and it may be that in many cases this Board would be under the control of the railroads. But assuming that it were, whenever the public was aroused and demanded a revision it would in most cases get a fair hearing. It would be entirely feasible to put the street railways and the elevated railways of our State under the control of this same Board, so that the public would have a tribunal to go to for the purpose of having any complaint relating to the accommodations furnished, or to excessive charges, considered and adjusted.

In Massachusetts they have a State board, which has the power to fix the price of gas in every city in the State. It is required to make an examination of the value of the plant, the cost of making gas and the various facts that should be considered, and it then fixes a price for gas which shall produce simply a fair income on the investment and conduct of the business. This is intended as a protection of the public. On the other hand the law aims to protect the company against blackmail by city councils, and provides that no new company shall be cartered to go into the gas business unless, in the judgment of the Board, the public interests require it.

Here again it may be said that the gas companies would soon control the Board and there is much force in the suggestion. So far but few complaints of this character have been made in Massachusetts. It is claimed that the Board appointed was of so high a character that it was free from suspicion of this kind.

I cite these examples only as illustrating just how far governmental regulation has gone in some cases of monopoly that now exist and I ask can the same remedy be applied in all cases? I will not discuss, I do not even offer governmental regulation as an absolute remedy, I am simply calling attention to the fact that the era of competition seems to be drawing to a close in our country and that governmental regulation, weak as it may be, seems to be the only practicable remedy or protector of the public that is yet visible. It is true that many efforts at governmental regulation have been farcical and almost added insult to injury. At present we have only political organizations, which divide the people almost equally. They stand for little or nothing and leave the trusts a clear field in which to plunder the public. But whether governmental regulation succeeds or not, this question

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must receive the serious attention and consideration of all patriotic men, for it is vital to the country that it should be decided right; a wrong decision of it will in the end injure all concerned.

It will come up in some form in every session of the Legislature. It arose in different forms during the last session. Some bills were passed to legalize the present gas monopoly of Chicago. I was fully aware of the fact that there was not and had not been for many years any competition, therefore the attempted consolidation of all the companies here might as well be legalized, and had the bills created any substitute for competition, had they had any provision for the protection of the public, they would have met with my approval; but as they simply attempted to place this great city at the mercy of a gigantic corporation for all time to come, with respect to gas and street railway service, I was obliged to withhold my approval.

These questions will come up again and unless the public sees to it that any new legislation on this subject shall adequately protect all interests, some measure will be passed in the interest of one side or the other out of which will grow injustice and wrong.

The American people have met all the great problems of the past and they must meet this one. By their industry, their intelligence, their enterprise and their love of freedom they have made this land the wonder and the hope of man. To-day we stand at the entrance of a new field. A new condition faces us, and if we are true to ourselves, true to the great principles of popular government we shall enter upon a new career of glory and brighten the light which our republic is shedding over the nations of the earth.

(Note. — More recent developments have satisfied me that the attempt to regulate is futile, and will not solve the problem.)