smaller than in the latter. The loss arising from a temporary suspension of manufacture is very much larger, both absolutely and relatively, since it usually involves greater loss to machinery, more of a break in a complete organization of workingmen in different departments, which it may take much time to bring together again into harmonious working order, a break with a larger circle of customers who are more difficult to regain; and, in consequence, competition in these industries, if it becomes fierce, is likely to bring disaster to the industry as a whole.

From three to five millions of dollars are required to build and run satisfactorily a sugar refinery. In the whole United States, only some forty sugar refineries were in existence before the formation of the Sugar Trust in 1887. It was not easy for a sugar refiner who felt the pressure of competition to close his establishment for the time being and later to start up again. He might better for an interval carry on the business at a loss. Competition among the refiners finally became so fierce that some eighteen of them had gone into bankruptcy before combination into the Trust finally abated for the time the fury of the contest.

An industry which requires but small capital to carry it on, will encourage hundreds, or more likely thousands or tens of thousands, of individuals to engage in it. The great variety of circumstances surrounding them, and the great differences in individual skill of the numerous competitors make it likely that some few will be continually on the verge of bankruptcy, and that from time to time individuals will be falling over under the pressure of competition. The elimination of these least skilful or least fortunately situated competitors, whose manufacturing is carried on at the greatest cost, does not produce any wide-spread depression in business, but serves rather to elevate the general average of skill in the industry. While the individual unfortunates may perhaps be sympathized with in their misfortunes, their loss is, after all, a gain to industrial society, since thereby the plane of production is raised. It is the consideration mainly of industries of this type that has given rise to theories of normal price, a marginal price, etc., as a safe basis for economic reasoning, and many writers in speaking of competition think of this kind only. Attention will be called later to differences of

the two kinds of competition, or, rather, of competition among industries of these two kinds, in the effects on prices.

On the other hand, industries that must be conducted on a large scale with enormous capital naturally call into the business only a few highly skilled managers. The circumstances and skill of the different competitors may be so nearly equal that competition will eventuate, not in the elimination of some few while the majority are still making profits, but rather in a depression of the entire business, so that only the very few most skilful or best situated will be making any profit at all, while the others still struggling along may be losing money for a long period before they finally yield. Indeed, the result may well be that for a considerable length of time all will be running at a loss; and such competition among so many strong rivals often produces at the end shoddy goods, reckless financiering, and speculative methods in business which are a menace to business prosperity. Competition of this nature, resulting in a general depression of business, or in the bankruptcy of a large portion of those engaged in the industry, with the consequent losses to their creditors, is

not immediately at least an economic gain to society, although prices may be low, but is rather on the whole an industrial loss, although one must not forget that as yet it is in these struggles that captains of industry pass their cadetship. It is in this class of industries, in which the amount of fixed capital in the plants must of necessity be large, and the competition of necessity fierce, and generally turning upon price, that combination is not merely more likely to be found, but is probably more nearly justified, than in the case of those industries whose successful management requires investment of but a comparatively small capital.

CHAPTER II

THE WASTES OF COMPETITION

Contrary to the popular opinion, competitive prices are frequently, if not usually, high prices. In industries of the kind mentioned in the preceding chapter in which competition turns almost solely upon price, the competitive price will naturally be low; but in the other cases in which the cost of selling becomes an important factor in determining the price, competitive prices are certain to be high as compared with the cost of manufacture. So, too, if there is much loss from production on a small scale, prices will be high as compared with what they might be if carried on in great establishments, although this added cost may or may not be a matter of a competitive waste. One ought not to lose sight of the distinctions between production on a great scale and production under monopoly, and the wastes of competition as compared with those of production on a small scale. Both tend toward combination.