Industrial Combinations

From The Land We Love, V, no. I (May 1868), 25-34, edited by Joseph S. Stromberg.

Combinations for the prosecution of industrial pursuits are the characteristic of our age. They now enjoy almost universal favor, and are extending themselves, in old and new directions, every year. In the delight which is inspired by their efficiency for money-getting, people seem unsuspicious of the extensive changes and disasters which they are probably destined to introduce into modern society. The successive curses which have blighted the hopes of civilized man so often, have usually proceeded out from some institution, valued and approved, (because useful in its place) but unexpectedly prevented. The disposition to favor chartered corporations, so prevalent in the European family of nations, finds its explanation in their history. — Corporate rights were not unknown to the Roman Civil law. — But their value grew into its present appreciation in the federal ages. When the ancient order of the Roman world fell before the Gothic and Teutonic hordes, there was, for a time, a total prostration of civic rights, before the armed violence of the nomadic and military barbarians. For a time Western Europe was a chaos, “without form and void,” presenting no settled rights, or distinctive social order. At length, as the stormy and seething elements subsided, the feudal system was seen to emerge, the crude rudiments of which had, perhaps, been brought by the Teutons from the German forests. This was a military organization of society: in which the main feature was the tenure of the lands, not in fee simple, but as tenants for life, on condition of certain military service to be rendered to the noble land owner. The tie which connected the vassal with his immediate suzerain was thus made the most close and efficient, which existed in civil society. Each Barony thus became a sort of military clan, directed by the sovereign will of its lord, and practically irresponsible to king and constitution. For the vassal, there might be some rights and franchises, guaranteed to him by the compact of his fief, on condition of his homage and service: but for all those who did not belong to the military caste, for the artizan, the merchant, the citizens of towns, there was practically no right, and no protection. The neighboring feudal chieftains ware, as to them, irresponsible plunderers. The King, the nominal chief magistrate, was himself but the chief suzerain of the inferior laborers, wielding no other authority over them, but that of feudal compacts. It was, of course, vain to hope that a regal authority, resting only on a feudal basis, could be exercised to repress the excesses of the great feudatories. The consequence was, that plunder was the order of the day: and so far did the disorder proceed, that arts [end 25] and commerce were well nigh banished from many States of Western Europe.

The industrial classes at length began to find, in the 11th and 12th centuries, this expedient. Living as mainly in towns and cities, they combined to procure from the military barons who claimed authority over them, charters conferring certain stipulated immunities upon them, by the jealous preservation of which, a part of their rights and property at least, was secured from spoliation. — These charters were sometimes professions in the towns were bought with money, sometimes bestowed in return for some valued service: and sometimes extracted by the good right arms of the sturdy burghers, by hard blows. Kings, perceiving in these corporations, probable make-weights to counterpoise the power of the great feudatories, who were, practically, almost independent, soon found an interest in favoring these charter institutions, and in proposing themselves to the corporations as umpires and patrons. Thus was laid the foundation of the modem social order, before which feudalism has virtually disappeared from Europe and America.  Chief magistrates  protecting and employing the chartered communities against the feudal barons, found, in the former, elements of support which they were gradually enabled to consolidate their people, before little more than clusters independent and discordant fiefs, into true nations.

Corporate immunities sanctioned, by charter-stipulations, were thus, the very fountains of all the  rights and prosperity of the commonalty. It is not strange that  they were cherished as precious and admirable; and that the disposition to extend them, as a shield of protection against military violence, over every species of interest. The monastery, the dean and chapter of the diocese, the very parson and wardens of the parish, aspired to become corporations in law, and  to assert their chartered rights to their endowments, against greedy  barons. The different trades and organized into “guilds,”  governed within themselves, by strict by-laws, and guarding their common privileges with jealous public spirit.  Just as among the military caste, every tenure had assumed the form of a fief, so among the industrial classes, every franchise  sought the sanction of the  corporate charter.

Now this tendency to favor incorporations, and to exalt chartered rights, has been inherited by us, in full force, after the state of  society, which presented the rational basis for these feelings, has  been totally displaced. Feudalism has long been dead. The organization of modem society is  no longer military, but civil. — The law, before which all classes in the State are equal, is in theory, supreme. The chief magistrate,  in enforcing the law, acts directly  upon individuals, and no longer of upon fiefs. The State itself  has become . the comprehensive ‘”guild,” whose charter, (the constitution and laws) extends abundant protection, if fairly executed, to each citizen, no matter what [26] his rank or pursuit. It is manifest that after this revolution of the social order, the ground for attaching the former value to the usage of incorporation, as the bulwark of individual rights, is all reversed. Yet the prejudice and the usage still continue! Thus, out of this mediaeval expedient of the commonalty, is now rapidly growing a new aristocracy, which is acquiring, by the perversion of an institution which should have passed away with the occasion for it, class privileges, and exclusive powers, more odious than the feudal-chartered corporations were justly valued as a protection of the weak against irresponsible baronial power. No such power now exists. These privileges have become, virtually, the expedients for arming favored individuals with powers of aggression against their fellows.

Is it demanded then, that society shall exist without corporate combinations? This question will foe asked, in a disdainful tone of incredulity, by an age inordinately devoted to material acquisition, and fully instructed in the advantages of combination. Men find that “union is strength.” The wondrous power evolved by large combinations of capital and labor, now especially that the material arts have furnished industry with so many appliances for expediting its work, which are at once costly and efficient, set men all agog, to extend this system more widely than ever before. There is no likelihood that the excesses of it will be surrendered. In the din and turmoil of successful avarice, the warning of history will be scouted by the interested few, who gather the spoils of the system, and neglected by the many, who are the victims of the abuse. The overthrow of the liberty of the 19th century, by this unsuspected cause, appears therefore inevitable. But it is none the less, the duty of philosophy to leave her warning on record.

There are only two cases which present any fair pretext in the constitution of free society for incorporating a part of the citizens with special privileges not common to them all. One is where the work or function to be performed demands more means than can be ever found in the possession of an individual. One man is not found rich enough to build a whole railroad. Yet rail-roads are useful. The other case is, where the perpetuity of the function requires the retention of the means and management under the same direction for more than the life-time of one man. The railroad again, may be an instance. The rich man who began one as an individual enterprise, might, in some cases, expend his natural life without more than completing it. Hence, the law creates the artificial person, which never dies, a corporation to retain and manage so enduring an interest.

Now, for the prosecution of such enterprises, there are but two alternatives. Either , chartered corporations of some citizens must be formed with special privileges, to execute them: or the State must execute them all herself, through her own [27] numerous officials; and thus make herself at once civil government, and the universal corporation. The Commonwealth which should act out this scheme would become, literally, the το πάν of human combinations, and her multifarious functions would cover all theforms of associated human action, except the family. The action of the British government, in recent times, does indeed approach this conception: for we see Parliament concerning itself, through its different classes of State officials, with every conceivable function, from teaching the population Christianity, down to draining the old marshy lands of the country. —The government, by thus making itself the only corporation, would, indeed, seem to guard effectually against partial class privileges. — But it would be only in seeming, The aggregate of business, money and power thus combined in the hands of government, would be too great for any administration except that of an omniscient mind.  It would result in boundless official mismanagement and peculation. And it would convert a free government into a species of Chinese despotism. Modern States, then, must have some corporate combinations of a part of the citizens, for executing these useful ends. – But obviously, the principle we have developed requires that they shall not be causelessly multiplied; that their privileges shall be jealously limited to such as will enable them for the useful works designed: that they shall be made to wear, as nearly as may be, the character of mere business firms; that the corporation, as an artificial person, shall have no privilege whatsoever, which does not  belong to every citizen, as a natural person,  by the constitution and laws.

Now, does the legislation of the American States regard these  necessary cautions? Does it not madly disdain them? Combinations protected and privileged by law are the order of the day for everything. The material spirit of the age deliberately postpones everything to money; and it is  enough for men to perceive that in the art of acquisition the old adage usually holds true, that “union is strength.” The old  prejudice in favor of chartered associations is loudly claimed, after  every condition of society has been reversed, which gave them legitimate value; with the view of wielding peculiar privileges for selfish ends. We have corporations for everything: corporations to teach the arts and sciences to young men; corporations to teach children; corporations to construct railroads and canals; corporations to carry parcels on the vehicles of these other corporations; corporations to navigate ships and steamers; corporations to manage the alleys and pigs of our villages; corporations to spin; to make clocks and watches; corporations to peg shoes; corporations to make a nail; corporations to lend money and play Shylock for the community; corporations to insure our lives; a corporation to paint bank-notes for other bubble corporations; corporations to shake carpets, and associated companies to wash the linen of the “great unwashed.” The picture [28] of the excess to which the institution is carried by American society would be extremely ludicrous, were it not too alarming. 

In explaining the dangers which have been intimated, let us begin with that which is, in itself, least important; the pecuniary evils attending the abuse of this system. These may be quickly perceived by the answer to the following question: why do the persons who have capital and skill for a given business, prefer to pursue it under one of these powerful chartered associations, rather than as, each man for himself, individual adventurers? Obviously, because they know that they shall get more gain for the use of their capital and skill. Then of course, the rest of the people who employ them pay more for the service, than they would if served by individuals. The evasion is, that this does not follow; because the combination of many men and much means enables the association to carry on that business so much more skillfully and efficiently that thereby, the public is served more cheaply, and the association is better rewarded for its outlay. In most cases, this evasion is false. If there is an extensive improvement, which, on the one hand, costs many times as much as any one rich man possesses, and on the other hand, will, when completed, perform its appointed work as much more cheaply than any other possible agency, as its cost has exceeded them, in this case the plea may be good. Such is the truth as to some railroads, when compared with existing country roads.

But in a multitude of cases which claim to be similar, the advantage is utterly illusory: the public, after giving the chartered privileges, gives more for the service than it had paid before. And in all cases where the business is one within the scope of individual wealth, the plea carries falsehood on its face. Why does the money-lender prefer to lend through a bank? Money-lending is a function which may be, with equal facility, accommodated to any amount of capital, large or small! His motive is, that by the power of a banking corporation, he is enabled to get more usury than he can legally get as an individual. — So the Yankee manufacturing capitalist, who has means abundant to build one adequate cotton mill usually prefers not to do so as an individual adventurer, but to have a certain number of shares in some vast corporation owning a whole city of mills. Why? Because he aims at the power of a monopolist, to a certain extent. — A ship owner possesses plenty of money to build and sail a steamer between New York and Charleston. But he prefers to put in his money as member of a “Steamship Company.” Why? He has his eye on a monopoly of the coasting trade between the two ports: the meaning of which monopoly is, to oppress the trading public, and plunder them in the shape of measured freights, by excluding competition. But perhaps the most glaring instance of the plunder of a monopoly is that presented by the great “Express-forwarding Companies”: chartered associations preposterously created [29] to do the duties of “common carriers,” on the vehicles of other companies, designed by their very existence for the very same function, and which, if they are not fully competent to it, should be punished as delinquents. What reason on earth is there, that so humble and plain a function as the forwarding of parcels, and that too, where another agency had already been provided to execute it should be armed by law with the power to levy gains so immense on the business of the country?  See their pompous palaces in all our cities: their armies of sleek, pampered horses and officials; their share-holders dividing fabulous dividends, and rolling in wealth equal to that of a nation’s revenues. What is that exalted function, for the performance of which modem society rewards them so splendidly?  Only  that which was performed for our forefathers by sturdy, simple wagoners and ship-masters! Truly, we are a wise generation! This picture betrays the pecuniary results of this perverse system: as being, in the main, extortionate and wasteful, and forming a frightful and iniquitous tax on the productive industry of the country.

That these combinations for industrial pursuits are, in most cases inimical to public wealth, is very plain from these facts: that they uniformly employ more costly and wasteful means of administration, than individual enterprise would.  The monopolist power which they wield, to rake together large piles of money, surely tempts the successful manipulators and their families, and dependents, to wasteful luxuries of living; which are all unproductive consumption; and thus devour the public means, while they corrupt the morals of all concerned.

  2. Money is power. Have men  forgotten the maxim which our  wise fathers taught us, from the lessons of historical experience?  That “where power is, thither power tends.” Need we repeat here the proofs and illustrations of this almost self-evident postulate? As long as man’s heart is what it is, this centripetal tendency must exist. Our fathers taught that in order that a republican equality of rights may exist among the * citizens, no great inequality of  wealth must be encouraged among them. Hence they felt that, in order to perpetuate republican government, they must needs abolish the rights of primogeniture,  and thus provide for the redistribution of property, and its equal division among the citizens. But we insanely create an aristocracy of active capital, equipped moreover with organizations and armies of trained officials and servants, tenfold more dangerous to the common liberties than a landed aristocracy. We arm them, under the pretext of facilitating industrial pursuits, with,  the power of getting at once immense wealth and influence. — Must not the natural arrogance of wealth suggest the lust for more power? The power of organization already possessed, is employed by them, first to enlarge their advantages and opportunities for getting more inordinate gains in and the pursuits for which they were [30] incorporated. It is for this purpose they at first enter the arena of political manoeuvre, and measure their strength with party leaders and factions. Will not their success in this object suggest the thought of using their power also for further ends? The experience of the States with these associations has just now passed through this stage, and is approaching the next The seniors among us can well remember how a mongrel corporation, in Philadelphia, once challenged the whole force of the government of the United States, in the attempt to evade the surrender of its financial monopoly, and almost came off conquerors. Contemporaries are not strangers to the influences which powerful railroad corporations exert every winter, at Albany, corrupting and controlling the government of the great State of New York. There is a corporation in Maryland, whose revenues and resources are far larger, and whose employes are more numerous and devoted than those of the Commonwealth. In the provisional government of Virginia, this corporation of another State has actually wielded a power equal, or superior to, that of the true people of that once powerful and jealous Common- wealth. It is now no longer a strange thing to hear shrewd men explaining the action of legislative bodies, by the outside influences of powerful corporations. And, for a reason which will be unfolded anon, corporations may be expected to employ, for controlling rulers and legislators whom they wish to use, much more corrupt means, than their sense of decency would allow them to employ in support of individual applications. Thus the virtue of the government is contaminated, while its powers are perverted.

The eager longing of this age is for republican equality before the law. The people had suffered so much in the 17th and 19th centuries from the tyranny of kings and landed nobles, and had seen the evils of the old privileged classes so painfully, that their passion in the early part of this century has been for the abolition of feudal privileges, and equality before the law. Their craving is destined to be disappointed, through their own shortsightedness; and the enemy by which the great popular movement of the age is destined to be overthrown, is corporation. Out of these associations will be developed a new oligarchy, a hundred-fold more ruthless and insatiable, as it is a hundred-fold less respectable and venerable, than the landed aristocracy which the spirit of the age has swept away. The forms of the American commonwealths are extravagantly democratic; but already the true spirit of their government is that of oligarchy. Thus do extremes meet and generate each other. The assurance of this calamitous disappointment of the hopes and labors of a whole century is to be seen in this &ct: that deceivers and deceived alike, monopolists and victims, are so devoted to mere material good, as to disdain an admonition drawn from higher considerations. The whole force of our argument, [31] and of all similar ones, better uttered by others, will undoubtedly be neutralized by the single assertion that these associations seem to present a more ready way to make money.

3. One prime motive of business men for preferring corporate to individual enterprise is, that the laws of these privileged associations authorize them to make the industrial adventure, and incur pecuniary obligations, without making their own property responsible therefor. Only the capital stock of the association is bound for the debts of the association: the corporators, acting in their combined capacity, may deliberately incur liabilities far beyond the assets of the association, and yet, under the plea of the distinction between their corporate, and their personal possession, may retain their wealth, while their just creditors demand their dues in vain. So licentious and flagrant has the legislation of many States become, that not content with incorporating these privileged plunderers by special act, in almost countless cases, they have even enacted general laws, by a sweeping clause enabling any persons to associate themselves into a firm or co-partnership, for the ostensible purpose of pursuing any business; to which firm the simple form of advertising gives this odious privilege of contracting debts without becoming responsible for their payment. The excuse is, in part, that the law requires them to advertise their capital stock; so that the business public is informed of the extent to which the firm is bound: and if they trust them farther, the fault is their own. The answer is, that if the privilege is unjust, as will be shown, the excuse is wholly inadequate. How audacious is the sophism, that the wrong of a transgressor may be made right by its publication be- forehand? Besides, the legal person in these quasi corporations, to which the responsibility for debt is limited, being purely artificial, when its visible assets are exhausted, there is nothing else against which the creditors can have their just resort. There is no actual person: stat nominis umbra. — Whence it is plain that this publication is not a fair and adequate protection of the business public.

The other plea is this: that it is an encouragement of enterprise, to enable some adventurous men to make experiment of efforts which may result in general advantage, without risking more than a definite part of their means. Were the privilege only granted to new and untried enterprises, this plea might be a little more plausible. But we see it extended to a thousand lines of business, as old as civilized society; in which, if any where, any man who is fit to meddle with them, can ascertain the prospects beforehand. — But the more full answer is, that such encouragement ought not to be given. It is neither for the financial nor moral advantage of society. The proper encouragement for enterprises which promise general advantage, and yet are hazardous because of novelty, is a cautious system of bounties, paid at the common expense. In all other cases, business adventure, [32] more reckless than a prudent regard for the adventurer’s own private estate will justify, is mischievous, and only mischievous, and should be repressed, instead of stimulated. The interests of commerce loudly demand just the guarantee against reckless enterprise which is presented by the jeopardy of the adventurer’s own estate. The thirst for adventure is always in excess: it is one of the keenest and most active propensities of the human heart. — When an ill-considered enterprise is carried on to disastrous results, if the adventurer is protected, other men are plundered of the means expended in the abortive experiment. He who made the blunder should pay the cost. — Otherwise it is iniquity: it is a radical injustice, which no considerations of policy can justify.

This suggests the moral effects of all these special privileges to business enterprises. These are deplorable in every aspect. The system, as we have seen, fosters recklessness, which is always akin to, and almost always gives occasion to dishonesty. It familiarizes the minds of all parties to results, which we have shown, are essential iniquities. The legalized plunderer, if he has a conscience, lives self-degraded by the retention of wealth which, he feels, belongs to his injured fellow men: they are tempted by the natural sense of indignation, to meditate redress by similar means; for has not the law itself, the very exponent of justice, countenanced them? Hence, in part, that growing absence of commercial integrity, that frightful dissolution of moral principle, of which we hear so much complaint, and which, we are told, has rendered the commercial marts of America like dens of wolves ravening for mammon.

4. One more evil influence of this system upon the virtue of society remains to be explained. Business combinations acting through officials have now been carried so far, that scarcely anything is done by men in their individual capacity. Do you want a parcel carried, by sea or land? It is not done for you by any individual ship-master, or carrier, acting under the moral restraints of a personal conscience and responsibility; but by an Express or Navigation “Company.” Do you buy a pair of shoes? You do not get them from the shop of a shoe-maker: but of some “shoe-company,” in Yankee land. Do you need a handful of nails? Some Iron company must be invoked to produce them. Do you wish your person transported? You commit it to a railroad company. So it is, to the end of the chapter. Now it was remarked by Sir Edward Coke, that “corporations have no souls,” and the proposition is true in another sense than that of the legal abstraction which he meant to ex- press. They have no moral sense: no conscience. Their own legal personality is artificial; and the moral responsibility of their acts is so sub-divided among the actual persons who compose the body, that it is felt no where. The executive hand of the body is a set of hired officials. These also divest themselves of moral [33] responsibility for the official acts: for are not these the acts of the corporation, which employs them as inanimate tools? The only influence which personal conscience has in them is to produce official fidelity to the interests of the corporation. Thus, the business code of all these associations has come to be as utterly heartless as though the world recognized no God, or right, or hell. Every shrewd man understands perfectly, when he has dealings with them, that they are to be expected to treat him no more justly than actual necessity, or selfish policy may dictate. The man who should hope for more at their hands, would be laughed at as a soft fool!

Thus this system of privileged combinations is an ingenious artifice, (as efficacious for the purpose as though invented for it,) for banishing conscience and hearty integrity out of the world. But our duty to God sets this interest of virtue in the first place. The very existence and well-being of society depends on its virtue. Or has the “cuteness”’ of this Yankee age exploded this, as a delusion of the dark ages? At all events, we find that Madison, Calhoun, Jackson, Washington, and Solomon believed it to be true. Hence the true statesman will, for this high and solemn consideration, always prefer individual to corporate action, where he is not driven to the latter by absolute necessity.

The crowning objection then, to this prevalent system is, that it is unfavorable to the virtue of society. It swells the volume of that flood of dishonesty, which threatens to dissolve the very foundations of the age, and plunge it into another chaos of barbarism. And this is the chief influence, by which the system manifests itself to the thoughtful mind, as the appointed destroyer of the constitutional free governments, and of the civilization of the 19th century. A little reflection, following out the hints given above, will convince the reader, that without the influences of this system at the North, the recent revolution, by which that people have destroyed the constitution of the United States could not have occurred. — Hitherto, the agency of the industrial combinations has been to promote, by manifold influences, political centralization. This is Act I. of the tragedy. [34]

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